You are on page 1of 72

,'6 'HYHORSPHQW %LEOLRJUDSK\ 

&RQFHSWV RI FLWL]HQVKLS D UHYLHZ

(PPD -RQHV DQG -RKQ *DYHQWD

)HEUXDU\ 

DITUDUVU@PA9@W@GPQH@IUTUV9D@T 7vtuTr7I (S@ @IBG6I9

7KLV ELEOLRJUDSK\ ZDV SUHSDUHG IRU WKH 'HYHORSPHQW 5HVHDUFK &HQWUH RQ &LWL]HQVKLS 3DUWLFLSDWLRQ DQG $FFRXQWDELOLW\ D UHVHDUFK QHWZRUN FRRUGLQDWHG LQ WKH 8. E\ WKH ,QVWLWXWH RI 'HYHORSPHQW 6WXGLHV ,'6  LQ %DQJODGHVK E\ WKH %DQJODGHVK ,QVWLWXWH RI 'HYHORSPHQW 6WXGLHV %,'6  LQ %UD]LO E\ WKH &HQWUR %UDVLOHLUR GH $QiOLVH H 3ODQHMDPHQWR &(%5$3  LQ ,QGLD E\ WKH 6RFLHW\ IRU 3DUWLFLSDWRU\ 5HVHDUFK LQ $VLD 35,$  LQ 0H[LFR E\ WKH ,QVWLWXWR GH ,QYHVWLJDFLRQHV 6RFLDOHV RI WKH 8QLYHUVLGDG 1DFLRQDO $XWyQRPD GH 0p[LFR ,,681$0  LQ 1LJHULD E\ WKH 7KHDWUH IRU 'HYHORSPHQW &HQWUH RI $KPDGX %HOOR 8QLYHUVLW\ 7)'& DQG LQ 6RXWK $IULFD E\ WKH &HQWUH IRU 6RXWKHUQ $IULFDQ 6WXGLHV  6FKRRO RI *RYHUQPHQW RI WKH 8QLYHUVLW\ RI WKH :HVWHUQ &DSH 8:&  )XQGLQJ ZDV SURYLGHG E\ WKH 8. 'HSDUWPHQW IRU ,QWHUQDWLRQDO 'HYHORSPHQW )RU IXUWKHU LQIRUPDWLRQ VHH ZZZLGVDFXNGUFFLWL]HQ

Dvrs9rryrTqvr!! DT7I '$'%##"

LL

&RQWHQWV
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

LLL

LY

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

$FNQRZOHGJHPHQWV :H ZRXOG OLNH WR WKDQN $OH[ 6KDQNODQG $QGUHD &RUQZDOO 3HWHU +RXW]DJHU 6DOO\$QQH :D\ 0HODQLH 6SHLJKW DQG $ODVWDLU 6FRWW9LOOLHUV IRU UHDGLQJ DQG FRPPHQWLQJ RQ HDUOLHU GUDIWV RI WKLV SDSHU

YL

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

 :KDW LV FLWL]HQVKLS"
 'LIIHUHQW WUDGLWLRQV LQ FLWL]HQVKLS WKRXJKW

'LVFXVVLRQV RI FLWL]HQVKLS RIWHQ VWDUW E\ RXWOLQLQJ WKH OLEHUDO FRPPXQLWDULDQ DQG FLYLF UHSXEOLFDQ DSSURDFKHV $V ZLWK PRVW FDWHJRULVDWLRQV WKHVH SHUVSHFWLYHV DUH JURXSV RI LGHDV ZLWK FRPPRQ VWUXFWXULQJ GLPHQVLRQV UDWKHU WKDQ FDWHJRULHV LQWR ZKLFK SDUWLFXODU LGHDV DURXQG FLWL]HQVKLS FDQ EH VORWWHG QHDWO\ ,W

LV KRZHYHU XVHIXO WR JLYH EULHI VXPPDULHV RI WKH GRPLQDQW HOHPHQWV RI WKHVH SHUVSHFWLYHV DV D URXWH WR XQGHUVWDQGLQJ VRPH RI WKH GLYHUJHQW WKLQNLQJ DURXQG FLWL]HQVKLS 7KH VXPPDULHV RI VFKRROV RI WKRXJKW LQ WKLV VHFWLRQ DUH GUDZQ RQ WKURXJKRXW WKH OLWHUDWXUH UHYLHZ ZLWK FULWLFDO UHVSRQVHV WR DVSHFWV RI HDUOLHU WKLQNLQJ OHDGLQJ RQ WR FRQWHPSRUDU\ WKHRULHV ZKLFK FUHDWLYHO\ V\QWKHVLVH WKHP
&LWL]HQVKLS LQ OLEHUDO WKRXJKW

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


5DZOV    +H DOVR DUJXHG WKDW LQ RUGHU WR DFKLHYH UDWLRQDO FRQVHQVXV LQ WKH SROLWLFDO DUHQD UHOLJLRXV DQG SKLORVRSKLFDO PDWWHUV RQ ZKLFK DJUHHPHQW FDQQRW EH UHDFKHG VKRXOG QRW EH LQFOXGHG LQ SXEOLF GHEDWH DQG WKDW QR GHILQLWLRQ RI WKH JRRG OLIH VKRXOG EH LPSRVHG RQ SHRSOH LQ WKHLU SULYDWH OLYHV 9RHW    +H WKXV GUHZ D VKDUS GLVWLQFWLRQ EHWZHHQ FLWL]HQVKLS DV SROLWLFDO LGHQWLW\ DQG RWKHU LGHQWLWLHV DWWDFKPHQWV DQG OR\DOWLHV ,VLQ DQG :RRG   
&LWL]HQVKLS LQ FRPPXQLWDULDQ WKRXJKW

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
&LWL]HQVKLS LQ FLYLF UHSXEOLFDQ WKRXJKW

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
 /LQNLQJ GLIIHUHQW DSSURDFKHV WR FLWL]HQVKLS

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
&LWL]HQVKLS SDUWLFLSDWLRQ DV D ULJKW

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


HQDEOLQJ FLWL]HQV WR UHDOLVH WKHLU SROLWLFDO DQG FLYLO ULJKWV SDUWLFLSDWLRQ DV D ULJKW FDQ EH VHHQ DV D SRVLWLYH IUHHGRP ZKLFK HQDEOHV FLWL]HQV WR UHDOLVH WKHLU VRFLDO ULJKWV VHH )HUJXVRQ  'I,'  9RHW  /LVWHU D 
&LWL]HQVKLS DV DJHQF\

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
5HFRJQLWLRQ RI FLWL]HQVKLS DV DJHQF\

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
&LWL]HQVKLS DV SDUWLFLSDWLRQ DQG GHPRFUDWLF JRYHUQDQFH

:LWK WKH ULVH RI WKH JRRG JRYHUQDQFH DJHQGD WKH UHFDVWLQJ RI FLWL]HQVKLS SDUWLFLSDWLRQ DV DQ H[SUHVVLRQ RI FLWL]HQVKLS ULJKWV DQG KXPDQ DJHQF\ KDV PHW ZLWK WKH JURZLQJ FRQFHUQ QRW RQO\ IRU FLWL]HQ YRLFH EXW DOVR IRU LQIOXHQFH DQG DFFRXQWDELOLW\ *DYHQWD DQG 9DOGHUUDPD    IRU H[DPSOH GHILQH FLWL]HQVKLS SDUWLFLSDWLRQ DV LQYROYLQJ WKH GLUHFW ZD\V LQ ZKLFK FLWL]HQV LQIOXHQFH DQG H[HUFLVH FRQWURO LQ JRYHUQDQFH $V WKLV VXJJHVWV UHFHQW WKLQNLQJ DURXQG FLWL]HQVKLS SDUWLFLSDWLRQ HPSKDVLVHV WKH GLUHFW LQWHUYHQWLRQ RI FLWL]HQV LQ SXEOLF DFWLYLWLHV DQG WKH DFFRXQWDELOLW\ RI WKH VWDWH DQG RWKHU UHVSRQVLEOH LQVWLWXWLRQV WR FLWL]HQV *RHW] DQG *DYHQWD  'I,'  3ULRU HW DO  %DUQHV  &RUQZDOO  %ODLU  1HZHOO   ,Q FRQWUDVW WR FLYLF UHSXEOLFDQ WKRXJKW WKLV LQVHUWV D UHODWLRQDO G\QDPLF LQWR FLWL]HQVKLS SODFLQJ REOLJDWLRQV RQ ERWK FLWL]HQV DQG WKH VWDWH WKURXJK SDUWLFLSDWRU\ GHPRFUDWLF V\VWHPV $V D VWXG\ E\ WKH &RPPRQZHDOWK )RXQGDWLRQ   DUJXHV ,Q WKH SDVW WKH UHODWLRQVKLS EHWZHHQ WKH VWDWH DQG FLWL]HQV KDV WHQGHG WR EH PHGLDWHG DQG DFKLHYHG RU WKRXJKW WR EH WKURXJK WKH LQWHUPHGLDULHV HOHFWHG UHSUHVHQWDWLYHV DQG SROLWLFDO SDUW\ VWUXFWXUHV %XW WKLV DVSHFW RI SDUWLFLSDWLRQ LQ JRYHUQDQFH IRU D JRRG VRFLHW\ UHTXLUHV GLUHFW FRQQHFWLRQ EHWZHHQ FLWL]HQV DQG WKH VWDWH 7KH FRQQHFWLRQ EHWZHHQ WKH FLWL]HQ DQG WKH VWDWH PXVW EH EDVHG RQ SDUWLFLSDWLRQ DQG LQFOXVLRQ ,Q WXUQ WKLV HQWDLOV LQVWLWXWLRQDO UHIRUPV WKDW HQDEOH GHPRFUDWLF SDUWLFLSDWLRQ WKURXJK WKH SURGXFWLRQ RI QHZ IRUPV RI UHODWLRQVKLS EHWZHHQ FLYLO VRFLHW\ DQG WKH VWDWH *DYHQWD DQG 9DOGHUUDPD   %ODLU  DVVHUWV WKDW D GHFHQWUDOLVHG V\VWHP RI JRYHUQDQFH HQDEOHV FLWL]HQV WR HQJDJH LQ WKH GHFLVLRQPDNLQJ SURFHVVHV ZKLFK DIIHFW WKHLU OLYHV DQG HQFRXUDJHV JRYHUQPHQWV WR LQFUHDVH WKHLU DFFRXQWDELOLW\ WKURXJK GLUHFW PHFKDQLVPV RI FLWL]HQ RYHUVLJKW ,QGHHG DV &RUQZDOO DQG *DYHQWD   SURSRVH ZKHQ FLWL]HQV SHUFHLYH WKHPVHOYHV DV DFWRUV LQ JRYHUQDQFH UDWKHU WKDQ SDVVLYH EHQHILFLDULHV RI VHUYLFHV DQG SROLF\ WKH\ PD\ EH PRUH DEOH WR DVVHUW WKHLU FLWL]HQVKLS WKURXJK DFWLYHO\ VHHNLQJ JUHDWHU DFFRXQWDELOLW\ DV ZHOO DV WKURXJK SDUWLFLSDWLRQ LQ WKH VKDSLQJ RI SROLFLHV WKDW DIIHFW WKHLU OLYHV

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
 5LJKWV LQ FODVVLFDO OLEHUDO WKRXJKW

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

7KRVH PRVW GLVDGYDQWDJHG LQ UHODWLRQV RI SRZHU DQG UHVRXUFHV DUH WKRVH OHDVW OLNHO\ WR EH FRQVFLRXV RI DQG DEOH WR DVVHUW WKHLU FODLPV WR ULJKWV /LVWHU   <RXQJ   'R\DO DQG *RXJK    $V 3ODQW  DUJXHV QHJDWLYH IUHHGRPV DUH LQWHQGHG WR SURWHFW LQGLYLGXDO DXWRQRP\ WR HQDEOH LQGLYLGXDOV WR SXUVXH WKHLU RZQ HQGV ZKLFK FDQQRW EH VHSDUDWHG IURP WKH DELOLW\ WR GR VR FLWHG LQ /LVWHU   
 6RFLDO ULJKWV LQFRUSRUDWLQJ SRVLWLYH IUHHGRPV LQWR FLWL]HQVKLS

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
 7KH LQGLYLVLELOLW\ RI VRFLDO SROLWLFDO DQG FLYLO FLWL]HQVKLS ULJKWV

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


EHWZHHQ GLIIHUHQW IRUPV RI ULJKWV DQG REOLJDWLRQV DQG KRZ WKDW EDODQFH DIIHFWV VRFLDO UHODWLRQV RI SRZHU DQG FDSDELOLWLHV WR WDNH DFWLRQ DV D FLWL]HQ
 5LJKWV DQG QHHGV

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
 &KDOOHQJHV WR XQLYHUVDO GHILQLWLRQV RI FLWL]HQVKLS ULJKWV

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
 &LWL]HQVKLS DV WKH ULJKW WR KDYH ULJKWV

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
 ,QFRUSRUDWLQJ ULJKWV ZLWKLQ FLYLF UHSXEOLFDQLVP JURXS ULJKWV

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
 ,QFRUSRUDWLQJ JURXS ULJKWV ZLWKLQ D OLEHUDO FLWL]HQVKLS IUDPHZRUN

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


EHWZHHQ WKH GHVLUH WR IRUPXODWH JHQHUDOLVLQJ SULQFLSOHV DQG WKH QHHG WR DSSO\ WKHVH SULQFLSOHV ZLWKLQ SDUWLFXODU FRQWH[WV &RZDQ HW DO   
 *URXS ULJKWV VRFLDO PHPEHUVKLS DQG UHFRJQLWLRQ

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



 &LWL]HQVKLS DV XQLYHUVDO LGHQWLW\ DV SDUWLFXODU

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
 &LWL]HQVKLS DQG LGHQWLW\ DV HQWDQJOHG VHWV RI VXEMHFW SRVLWLRQV

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
 ,QFOXVLRQV DQG H[FOXVLRQV RI FLWL]HQVKLS

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



FRQFHLYHG DV PDOHZKLWHDEOHERGLHG DQG WR WDNH DFWLRQ WR HQDEOH PLQRULW\ JURXSV WR SDUWLFLSDWH LQ VRFLDO SROLWLFDO DQG FLYLF OLIH GHILQLQJ DQG FODLPLQJ WKHLU ULJKWV WR EHFRPH HTXDO DFWLYH FLWL]HQV
 0XOWLSOH DQG LQWHUORFNLQJ H[FOXVLRQV

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
 6WUXJJOHV IRU UHFRJQLWLRQ DQG UHGLVWULEXWLRQ

.DEHHUV SRLQW KLJKOLJKWV D SDUDGR[ RYHU WKH FDOOV IRU ULJKWV WR LQFOXVLRQ DQG UHGLVWULEXWLRQ VHHQ LQ PDQ\ FLWL]HQVKLS VWUXJJOHV $V (OOLVRQ   DUJXHV WKH VWUXJJOHV RI PDUJLQDOLVHG JURXSV RIWHQ H[SUHVV D GHPDQG IRU LQFOXVLRQ ZKLOH VLPXOWDQHRXVO\ FKDOOHQJLQJ WKH QDWXUH RI ZKDW LW PHDQV WR EH LQFOXGHG WKDW LV WKH EDVLV RI VRFLDO PHPEHUVKLS WKH SULQFLSOHV LQIRUPLQJ UHVRXUFH DOORFDWLRQV DQG WKH PHDQV RI DFFHVV WR UHVRXUFHV WKHPVHOYHV


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
 &LWL]HQVKLS DV D PDVWHU SROLWLFDO LGHQWLW\

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
 0XOWLSOH FLWL]HQVKLS

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
 7KH VFDOHV RI FLWL]HQVKLS %H\RQG WKH QDWLRQVWDWH

,Q ERWK OLEHUDO DQG FLYLF UHSXEOLFDQ WKRXJKW WKH QDWLRQVWDWH LV WKH VSDWLDO IUDPH RI UHIHUHQFH IRU FLWL]HQVKLS (OOLVRQ  +HDWHU  )DON   ,Q WKH FRQWHPSRUDU\ FRQWH[W RI JOREDOLVDWLRQ ORFDOLVDWLRQ DQG KHLJKWHQHG FRQVFLRXVQHVV RI FLWL]HQV EHORQJLQJ WR GLIIHUHQW JURXSV ZLWKLQ DQG EH\RQG VWDWHV KRZHYHU WKHUH LV LQFUHDVLQJ UHFRJQLWLRQ RI WKH QHHG WR FRQFHSWXDOLVH FLWL]HQVKLS DW WKH PDQ\ GLIIHUHQW VFDOHV LQ ZKLFK SHRSOHV OLYHV DUH SOD\HG RXW +HDWHU  (OOLVRQ  0F(ZDQ   7R WKLV HQG ,VLQ DQG :RRG  DQG 9RHW  DUJXH WKDW FLWL]HQVKLS VKRXOG EH XQGHUVWRRG DV DQ HQVHPEOH RI GLIIHUHQW IRUPV RI EHORQJLQJ WR GLIIHUHQW JURXSV RI ZKLFK QDWLRQDO LGHQWLW\ LV EXW RQH :LWKLQ WKLV IRUPXODWLRQ QDWLRQDO FLWL]HQVKLS LV D IRUP RI JURXS LGHQWLW\ DQG SUDFWLFH DW WKH OHYHO RI WKH QDWLRQVWDWH 3ODFLQJ FLWL]HQ DFWLRQ DW WKH FHQWUH RI WKH GHILQLWLRQ RI FLWL]HQVKLS &RUQZDOO DQG *DYHQWD   VWDWH WKDW JRLQJ EH\RQG QDWLRQDOLVW FRQFHSWLRQV WR XQGHUVWDQG FLWL]HQVKLS DV D UHVSRQVLELOLW\ DWWDLQHG WKURXJK FROOHFWLYH DFWLRQ DQG GHPRFUDWLF JRYHUQDQFH ZLWK ULJKWV DFFUXLQJ IURP WKLV HQJDJHPHQW HQDEOHV FLWL]HQV WR GHILQH WKH VSDFHV DQG VFDOHV RI WKHLU FLWL]HQVKLS DV LW PDNHV VHQVH WR WKHP VHH DOVR 'I,'  &RPPRQZHDOWK )RXQGDWLRQ   7KH GHOLQNDJH RI FLWL]HQVKLS IURP WKH QDWLRQVWDWH ZKLFK WKLV LPSOLHV KDV EHHQ RI SDUWLFXODU FRQFHUQ WR WKRVH HQJDJHG LQ DGYRFDF\ IRU WKH FLWL]HQVKLS ULJKWV RI WKH


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
*OREDO FLWL]HQVKLS

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
&LWL]HQVKLS DQG ORFDO JRYHUQDQFH

+LVWRULFDOO\ WKH ORFDO KDV EHHQ FRQVLGHUHG D NH\ VLWH IRU GHPRFUDF\ EXLOGLQJ DQG FLWL]HQ SDUWLFLSDWLRQ ,W KDV EHHQ DW WKLV OHYHO WKDW SHRSOH XVXDOO\ FRPH LQWR FRQWDFW ZLWK SROLWLFLDQV RU SXEOLF RIILFLDOV UHFHLYH VHUYLFHV DQG EHQHILWV IURP WKH VWDWH DQG RUJDQLVH WRJHWKHU LQ FRPPXQLWLHV /RZQGHV    &LWL]HQVKLS ZDV WKRXJKW WR GHULYH ODUJHO\ IURP FRPPXQLW\ LGHQWLILFDWLRQ DQG PHPEHUVKLS FLYLF DFWLRQ DQG SROLWLFDO SDUWLFLSDWLRQ ZHUH WKRXJKW WR EH FRQFHQWUDWHG DW WKH ORFDO OHYHO DQG ORFDO JRYHUQDQFH SURYLGHG D OHDUQLQJ JURXQG IRU EURDGHU XQGHUVWDQGLQJV DQG IRUPV RI FLWL]HQVKLS /RZQGHV  



$W WKH VDPH WLPH /RZQGHV  UDLVHV TXHVWLRQV RYHU WKH DVVXPSWLRQ WKDW GHFHQWUDOLVHG JRYHUQDQFH HQKDQFHV WKH UHODWLRQVKLS EHWZHHQ LQGLYLGXDOV FRPPXQLW\ DQG JRYHUQPHQW ZKLFK KH WHUPV WKH FLWL]HQVKLS WULDQJOH  +H DUJXHV WKDW WKH SRWHQWLDO IRU GHFHQWUDOLVHG JRYHUQDQFH WR HQKDQFH FLWL]HQ SDUWLFLSDWLRQ DQG FDSDELOLWLHV GHSHQGV RQ WKH GHVLJQ DQG FXOWXUH RI PXQLFLSDO LQVWLWXWLRQV DQG WKH DXWRQRP\ DQG DXWKRULW\ RI ORFDO JRYHUQPHQW YLVj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
&LWL]HQVKLS LQ WKH SULYDWH GRPDLQ

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
 $UHQDV RI FLWL]HQ SDUWLFLSDWLRQ

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mR %UHWDV   DLP WR RSHQ XS JRYHUQPHQW VSDFHV WR FLWL]HQV WR HQDEOH WKHP WR WDNH SDUW LQ VWDWH GHFLVLRQPDNLQJ SURFHVVHV ,Q VRPH FRXQWULHV PHFKDQLVPV VXFK DV ORFDO UDGLR $QDQWKSXU DQG *DQHVK 3UDVDG   VWUHHW WKHDWUH DQG FLWL]HQ YLGHR ZKHUH FLWL]HQV SURGXFH YLGHRV WR DUWLFXODWH LVVXHV RI LPSRUWDQFH WR WKHP DQG WKHQ UHSOD\ WKHP DW SXEOLF PHHWLQJV KDYH



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
/HDUQLQJ IURP H[SHULHQFHV RI FRPPXQLW\ SDUWLFLSDWLRQ

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
3DUWLFLSDWRU\ DUHQDV DV XQXVXDO VRFLDO VSDFHV

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
 &LWL]HQVKLS SDUWLFLSDWLRQ LQ VSDFHV VHSDUDWH IURP WKH VWDWH

,Q FRQWUDVW WR PXFK ZULWLQJ RQ FLWL]HQVKLS SDUWLFLSDWLRQ WKHUH LV D UDGLFDO ERG\ RI WKRXJKW ZKLFK VKLIWV WKH WHUUDLQ DZD\ IURP SDUWLFLSDWLRQ ZLWK WKH VWDWH WR DQ XQGHUVWDQGLQJ RI FLWL]HQ SDUWLFLSDWLRQ DV FROOHFWLYH DFWLRQ ZLWKLQ DUHQDV VHSDUDWH IURP WKH VWDWH VHH 6FK|QZlOGHU  /DFODX DQG 0RXIIH   RU DJDLQVW WKH VWDWH 'U\]HN  3DKO   %RWK 'U\]HN  DQG 6FK|QZl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
 9RLFH LQIOXHQFH DQG UHVSRQVLYHQHVV

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
 +RUL]RQWDO DFFRXQWDELOLWLHV DQG UHVSRQVLELOLWLHV

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
 7KH UHODWLRQVKLS EHWZHHQ ULJKWV DQG DFFRXQWDELOLWLHV LQ GHYHORSPHQW WKRXJKW

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


 &RQFOXVLRQV OHDUQLQJ DERXW FLWL]HQVKLS IURP FLWL]HQV WKHPVHOYHV 9HU\ OLWWOH LV NQRZQ DERXW WKH UHDOLWLHV RI KRZ GLIIHUHQW SHRSOH XQGHUVWDQG WKHPVHOYHV DV FLWL]HQV DQG WKH ZD\V LQ ZKLFK WKLV LPSDFWV RQ WKH GLIIHUHQW GLPHQVLRQV RI WKHLU OLYHV (TXDOO\ OLWWOH LV NQRZQ DERXW KRZ ULJKWV ODQJXDJHV DUH DFWXDOO\ XVHG LQ VLWXDWHG VWUXJJOHV E\ GLIIHUHQW LQGLYLGXDOV DQG JURXSV DQG WR ZKDW HIIHFW 7KLV OLWHUDWXUH UHYLHZ KDV RXWOLQHG D YDULHW\ RI SHUVSHFWLYHV RQ WKH UHODWLRQVKLS EHWZHHQ FLWL]HQVKLS ULJKWV SDUWLFLSDWLRQ DQG DFFRXQWDELOLW\ $V WKH WHQVLRQV EHWZHHQ WKHVH GLIIHUHQW SHUVSHFWLYHV KLJKOLJKW KRZHYHU XQGHUVWDQGLQJ KRZ FLWL]HQVKLS ULJKWV DQG DFFRXQWDELOLWLHV DUH SOD\HG RXW LQ SUDFWLFH IRU GLIIHUHQW SHRSOH LQ GLIIHUHQW FRQWH[WV LQ WKH GLIIHUHQW GRPDLQV RI WKHLU OLYHV UHTXLUHV OHDUQLQJ IURP FLWL]HQV WKHPVHOYHV 'HYHORSLQJ XQGHUVWDQGLQJ RI FLWL]HQVKLS E\ LGHQWLI\LQJ WKH H[SHULHQFHV DQG NQRZOHGJHV RI FLWL]HQV WKHPVHOYHV DV D FHQWUDO FRQFHUQ SRLQWV WR WKH QHHG WR XVH PHWKRGRORJLHV ZKLFK HQDEOH SHRSOH WR DUWLFXODWH WKHLU UHDOLWLHV DQG SURSRVH VWUDWHJLHV IRU FKDQJH %H\RQG ZRUNLQJ WR RSHQ IRUPDO VSDFHV IRU WKH LQFOXVLRQ RI WKRVH ZKRVH YRLFHV DUH UDUHO\ KHDUG D YDULHW\ RI SDUWLFLSDWRU\ PHWKRGV IRU DFWLRQ UHVHDUFK RQ FLWL]HQVKLS DUH EHJLQQLQJ WR HPHUJH 7KH XVH RI VXFK PHWKRGV LQ DQDO\VLV ZLWK GLIIHUHQW LQGLYLGXDOV DQG JURXSV KROGV JUHDW SRWHQWLDO IRU JDLQLQJ D EHWWHU XQGHUVWDQGLQJ RI WKH UHDOLWLHV RI FLWL]HQVKLS IRU GLIIHUHQW SHRSOH LQ GLIIHUHQW FRQWH[WV 0RUHRYHU WKURXJK RSHQLQJ VSDFHV IRU FLWL]HQV WR H[SUHVV WKH SRVVLELOLWLHV DQG FKDOOHQJHV ZKLFK FLWL]HQVKLS SUHVHQWV WR WKHP VXFK DQDO\VLV PLJKW FDWDO\VH SURFHVVHV RI UHIOHFWLRQ DQG DFWLRQ IRU FKDQJH RQ WKH SDUW RI ERWK FLWL]HQV DQG WKH RUJDQLVDWLRQV ZKLFK DIIHFW WKHLU OLYHV ,W LV KRSHG WKDW WKH UHYLHZ RI OLWHUDWXUH SURYLGHG LQ WKLV SDSHU ERWK SRLQWV WR GLUHFWLRQV IRU IXUWKHU UHVHDUFK DQG KLJKOLJKWV WKH QHHG WR HQULFK DQG EURDGHQ WKH GHEDWH WKURXJK WKH LQFOXVLRQ RI FLWL]HQV RZQ NQRZOHGJHV H[SHULHQFHV DQG VWUDWHJLHV IRU FKDQJH



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



&RZDQ - 'HPERXU 0% DQG :LOVRQ 5 HGV   ,QWURGXFWLRQ LQ &XOWXUH DQG 5LJKWV &DPEULGJH &DPEULGJH 8QLYHUVLW\ 3UHVV &UDZOH\ +  /LYLQJ XS WR WKH HPSRZHUPHQW FODLP WKH SRWHQWLDO RI 35$ LQ , *XLMW DQG 0 .DXO 6KDK HGV  7KH 0\WK RI &RPPXQLW\ JHQGHU LVVXHV LQ SDUWLFLSDWRU\ GHYHORSPHQW /RQGRQ ,QWHUPHGLDWH 7HFKQRORJ\ 3XEOLFDWLRQV 'DVJXSWD 3  :HOOEHLQJ DQG WKH H[WHQW RI LWV UHDOLVDWLRQ LQ SRRU FRXQWULHV 7KH (FRQRPLF -RXUQDO 5R\DO (FRQRPLF 6RFLHW\ &RQIHUHQFH 3DSHUV %ULVWRO 8QLYHUVLW\ RI %ULVWRO 'H 6RXVD 6DQWRV %  3DUWLFLSDWLYH EXGJHWLQJ LQ 3RUWH $OHJUH WRZDUGV D UHGLVWULEXWLYH GHPRFUDF\ 3ROLWLFV DQG 6RFLHW\ 9RO  1R   'HPERXU 0%  +XPDQ 5LJKWV 7DON DQG $QWKURSRORJLFDO $PELYDOHQFH WKH SDUWLFXODU FRQWH[WV RI XQLYHUVDO FODLPV LQ 2 +DUULV HG  ,QVLGH DQG 2XWVLGH WKH /DZ /RQGRQ 5RXWOHGJH 'HSDUWPHQW IRU ,QWHUQDWLRQDO 'HYHORSPHQW 8.  ,QWHUQDWLRQDO 'HYHORSPHQW 7DUJHWV /RQGRQ 'I,'  5HDOLVLQJ +XPDQ 5LJKWV IRU 3RRU 3HRSOH /RQGRQ 'I,' 'RQQHOO\ -  8QLYHUVDO +XPDQ 5LJKWV LQ 7KHRU\ DQG 3UDFWLFH 1HZ <RUN &RUQHOO 8QLYHUVLW\ 3UHVV  +XPDQ ULJKWV GHPRFUDF\ DQG GHYHORSPHQW +XPDQ 5LJKWV 4XDUWHUO\ 9RO   'R\DO / DQG *RXJK ,  $ 7KHRU\ RI +XPDQ 1HHG %DVLQJVWRNH 0DFPLOODQ 'U\]HN -6  3ROLWLFDO LQFOXVLRQ DQG WKH G\QDPLFV RI GHPRFUDWL]DWLRQ $PHULFDQ 3ROLWLFDO 6FLHQFH 5HYLHZ 9RO  1R   (GUDOLQ -6  7KH QHZ ORFDO JRYHUQDQFH DQG FDSDFLW\ EXLOGLQJ D VWUDWHJLF DSSURDFK H[DPSOHV IURP $IULFD $VLD DQG /DWLQ $PHULFD 5HJLRQDO 'HYHORSPHQW 6WXGLHV 9RO  :LQWHU (OOLVRQ 1  7RZDUGV D QHZ VRFLDO SROLWLFV FLWL]HQVKLS DQG UHIOH[LYLW\ LQ ODWH PRGHUQLW\ 6RFLRORJ\ 9RO  1R    %H\RQG XQLYHUVDOLVP DQG SDUWLFXODULVP UHWKLQNLQJ FRQWHPSRUDU\ ZHOIDUH WKHRU\ &ULWLFDO 6RFLDO 3ROLF\ 9RO  1R   (QJOH 0HUU\ 6  *HWWLQJ -XVWLFH DQG *HWWLQJ (YHQ OHJDO FRQVFLRXVQHVV DPRQJ ZRUNLQJ FODVV $PHULFDQV /RQGRQ DQG &KLFDJR 8QLYHUVLW\ RI &KLFDJR 3UHVV )DON 5  7KH 'HFOLQH RI &LWL]HQVKLS LQ DQ (UD RI *OREDOLVDWLRQ ZZZWUDQVQDWLRQDORUJIRUXP PHHWIDONBFLWL]HQKWPO )HUJXVRQ &  *OREDO 6RFLDO 3ROLF\ 3ULQFLSOHV KXPDQ ULJKWV DQG VRFLDO MXVWLFH /RQGRQ 'I,' )RZHUDNHU - DQG /DQGHUV 7  ,QGLYLGXDO ULJKWV DQG VRFLDO PRYHPHQWV D FRPSDUDWLYH DQG VWDWLVWLFDO LQTXLU\ %ULWLVK -RXUQDO RI 3ROLWLFDO 6FLHQFH 9RO   )UDVHU 1  8QUXO\ 3UDFWLFHV SRZHU GLVFRXUVH DQG JHQGHU LQ FRQWHPSRUDU\ VRFLDO WKHRU\ 0LQQHDSROLV 8QLYHUVLW\ RI 0LQQHVRWD 3UHVV D -XVWLFH ,QWHUUXSWXV FULWLFDO UHIOHFWLRQV RQ WKH SRVWVRFLDOLVW FRQGLWLRQ 1HZ <RUN 5RXWOHGJH E $ UHMRLQGHU WR ,ULV <RXQJ 1HZ /HIW 5HYLHZ   *DYHQWD - DQG 9DOGHUUDPD &  3DUWLFLSDWLRQ FLWL]HQVKLS DQG ORFDO JRYHUQDQFH EDFNJURXQG SDSHU IRU ZRUNVKRS RQ 6WUHQJWKHQLQJ 3DUWLFLSDWLRQ LQ /RFDO *RYHUQDQFH PLPHR ,QVWLWXWH RI 'HYHORSPHQW 6WXGLHV %ULJKWRQ  -XQH  ZZZLGVDFXNSDUWLFLS


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pHQQH GH 6RFLRORJLH ;;;,,  0DUVKDOO 7+  &LWL]HQVKLS DQG 6RFLDO &ODVV &DPEULGJH &DPEULGJH 8QLYHUVLW\ 3UHVV 0F(ZDQ &  (QJHQGHULQJ FLWL]HQVKLS JHQGHUHG VSDFHV RI GHPRFUDF\ LQ 6RXWK $IULFD 3ROLWLFDO *HRJUDSK\ 9RO  1R   0HHNRVKD + DQG 'RZVH /  (QDEOLQJ FLWL]HQVKLS JHQGHU GLVDELOLW\ DQG FLWL]HQVKLS LQ $XVWUDOLD )HPLQLVW 5HYLHZ 9RO  



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mR %UHWDV 35  3DUWLFLSDWLYH EXGJHWLQJ LQ %HOR +RUL]RQWH GHPRFUDWLVDWLRQ DQG FLWL]HQVKLS (QYLURQPHQW DQG 8UEDQLVDWLRQ 9RO  1R   3DUU\ * 0RVHU * DQG 'D\ 1  3ROLWLFDO 3DUWLFLSDWLRQ $QG 'HPRFUDF\ LQ %ULWDLQ &DPEULGJH &DPEULGJH 8QLYHUVLW\ 3UHVV 3DWHPDQ &  7KH 'LVRUGHU RI :RPHQ &DPEULGJH 3ROLW\ 3UHVV


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|QZl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jYLV RWKHU VWDWHV <HW LQ D ZHOOIXQFWLRQLQJ GHPRFUDWLF VRFLHW\ VKH DUJXHV WKH GHPDQGV RI OHJLWLPDF\ HFRQRPLF ZHOIDUH DQG FROOHFWLYH LGHQWLW\ PD\ LGHDOO\ H[LVW LQ VRPH IRUP RI HTXLOLEULXP



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

%R\WH +  %XLOGLQJ WKH &RPPRQZHDOWK FLWL]HQVKLS DV SXEOLF ZRUN LQ / 6ROWDQ DQG . (ONLQ HGV  &LWL]HQ &RPSHWHQFH DQG 'HPRFUDWLF ,QVWLWXWLRQV 3HQQV\OYDQLD 3HQQV\OYDQLD 6WDWH 8QLYHUVLW\ +DUU\ %R\WHV &RPPRQZHDOWK GHPRFUDF\ LV D YLVLRQ RI SDUWLFLSDWRU\ GHPRFUDF\ LQ ZKLFK FLWL]HQVKLS LV WKH SUDFWLFH RI SXEOLF ZRUN E\ ZKLFK KH PHDQV WKH FUHDWLRQ E\ FLWL]HQV RI SXEOLF JRRGV DQG VHUYLFHV +H DUJXHV WKDW YRWLQJ SURWHVWLQJ DQG FRPSODLQLQJ DUH QRW VXIILFLHQW QHLWKHU DUH GHOLEHUDWLQJ EHLQJ UHVSRQVLEOH FDULQJ QRU YROXQWHHULQJ 2QO\ WKURXJK SXEOLF ZRUN WRJHWKHU ZLOO ZH EH DEOH WR FUHDWH D QHZ GHPRFUDF\ WKDW UHJHQHUDWHV WKH VHQVH WKDW ZH WKH SHRSOH DUH DXWKRUV RI RXU FRPPRQ IDWH 7KXV KH DUJXHV WKDW ZKLOH FRPPXQLWDULDQ GHPRFUDF\ SHUKDSV HTXLYDOHQW WR RWKHU QRWLRQV RI SDUWLFLSDWRU\ GHPRFUDF\ LQWURGXFHV WKH SXUVXLW RI WKH FRPPRQ JRRG DQG WKH FUHDWLRQ RI D FLYLO VRFLHW\ WR WKH PLQLPDOLVW EXQGOH RI ULJKWV DQG SUDFWLFHV ZKLFK GHILQHV OLEHUDO GHPRFUDF\ WKDW WKH FRPPRQZHDOWK LV VRPHWKLQJ ULFKHU 3XEOLF ZRUN VKLIWV WKH IRFXV WR D PXFK ULFKHU FRQFHSWLRQ RI FLYLF DJHQF\ WR D PXFK EURDGHU XQGHUVWDQGLQJ RI FLWL]HQ FRPSHWHQFH DQG WR D PXFK PRUH YLEUDQW YLHZ RI GHPRFUDF\ LWVHOI 7KH JRYHUQPHQW EHFRPHV D FDWDO\VHU RI FLYLF HQHUJLHV UDWKHU WKDQ UHSODFLQJ WKHP DQG LV WUXO\ SRSXODU 3XEOLF LQVWLWXWLRQV DUH OHVV SURIHVVLRQDOLVHG VHUYLFH RUJDQLVDWLRQV IRU FLWL]HQV DQG PRUH LQVWLWXWLRQV PDLQWDLQHG E\ FLWL]HQV 7KH WDVN KH DUJXHV LV WR FRQVWUXFW WKH IRUPV RI DVVRFLDWLRQ H[FKDQJH RI H[SHULHQFH FRPPXQLFDWLRQ DQG DFWLRQ WKDW FDQ JHQHUDWH D EURDG DQG WUDQVIRUPDWLYH PRYHPHQW IRU FRPPRQZHDOWK GHPRFUDF\

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


+H DUJXHV WKDW FLYLO VRFLHW\ DV GLVWLQFW IURP SROLWLFDO VRFLHW\ KDV WDNHQ WKH OHDG LQ UHYLYLQJ KXPDQ ULJKWV GLVFRXUVHV DV WKH ULJKW WR KDYH ULJKWV DQG PDNLQJ FODLPV IRU H[SDQGLQJ ULJKWV )DON  +HOG   $ FRQWH[W LV WKHUHIRUH EHLQJ FUHDWHG LQ ZKLFK SHRSOH DFW LQ FROODERUDWLRQ H[FKDQJH RSLQLRQV DQG GHYHORS WKH FLYLF FRPSHWHQFLHV DQG WUXVW UHTXLUHG IRU H[HUFLVLQJ LQIOXHQFH RQ SROLWLFDO DQG SXEOLF LQVWLWXWLRQV DQG LW LV WKH UHODWLRQV HVWDEOLVKHG E\ LQWHUQDWLRQDO FLYLO VRFLHW\ WKDW FDUU\ DQG JLYH SROLWLFDO ZHLJKW WR WKH XQLYHUVDOLVW GLPHQVLRQ RI KXPDQ ULJKWV GLVFRXUVHV ,W LV WKXV DUJXHG WKDW LW LV RQO\ LI WKH YDULRXV HOHPHQWV RI WKH FLWL]HQVKLS SULQFLSOH DUH GLVDJJUHJDWHG DQG UHLQVWLWXWLRQDOLVHG DW YDULRXV OHYHOV RI JRYHUQDQFH ORFDO QDWLRQDO DQG VXSUDQDWLRQDO  ZLWK GLIIHUHQW SRZHUV DUWLFXODWLQJ DQG EDFNLQJ WKHP XS WKDW WKH\ ZLOO EH DEOH WR FRXQWHU WKH IODZV LQ HDFK DQG IXQFWLRQ SURGXFWLYHO\ DV FRXQWHUSRZHUV &RKHQ FRQFOXGHV E\ DUJXLQJ WKDW XQGHUVWDQGLQJ FLWL]HQVKLS DV PXOWLSOH OHYHOV RI EHORQJLQJ HQDEOHV FLWL]HQVKLS WR EH WHPSHUHG ZLWK WKH GHPDQGV RI MXVWLFH

&RPPRQZHDOWK )RXQGDWLRQ DQG &,9,&86  &LWL]HQV DQG *RYHUQDQFH /RQGRQ &RPPRQZHDOWK )RXQGDWLRQ 7KLV UHSRUW VXPPDULVHV WKH ILQGLQJV RI UHVHDUFK ZKLFK H[SORUHG KRZ FLWL]HQV LQ GLIIHUHQW &RPPRQZHDOWK FRXQWULHV SHUFHLYH WKHLU FLWL]HQVKLS 7KH IUDPLQJ TXHVWLRQV RI WKH UHVHDUFK ZHUH :KDW LV D JRRG VRFLHW\" ,Q VXFK D VRFLHW\ ZKDW UROHV DUH EHVW SOD\HG E\ FLWL]HQV DQG ZKLFK DUH EHVW SOD\HG E\ VWDWH LQVWLWXWLRQV DQG RWKHU VHFWRUV" :KDW ZRXOG HQDEOH FLWL]HQV WR SOD\ WKHLU UROHV PRUH HIIHFWLYHO\ LQ WKH GHYHORSPHQW RI VXFK D VRFLHW\ LQ WKH IXWXUH" 1RWLQJ DQ LQHYLWDEOH GHJUHH RI GLIIHUHQFH DFURVV SHRSOH WKH VWXG\ IRXQG WKDW WKH H[SHFWDWLRQV RI FLWL]HQV DUH  EDVLF QHHGV RI FLWL]HQV  DVVRFLDWLRQ ZLWK RWKHU SHRSOH UHVSHFW IRU FXOWXUH DQG KHULWDJH FRRSHUDWLRQ FDULQJ DQG VKDULQJ LQ WKH FRPPXQLW\VRFLHW\  DQG  SDUWLFLSDWLRQ LQ WKH JRYHUQDQFH RI VRFLHW\ HTXDO ULJKWV DQG MXVWLFH UHVSRQVLYH DQG LQFOXVLYH JRYHUQDQFH  3HUFHSWLRQV RI WKH VWDWH UROH GHPRFUDWLF VWURQJ FDSDEOH RI VWDQGLQJ XS WR JOREDO IRUFHV DQG HIILFLHQW LQ WKH XVH RI SXEOLF UHVRXUFHV  SURYLGHU RI EDVLF VHUYLFHV DQG VHFXULW\ LQ OLYHOLKRRGV  IDFLOLWDWRU RI WKH DFWLRQV RI FLWL]HQV LQ EXLOGLQJ DQG PDLQWDLQLQJ D JRRG VRFLHW\  SURPRWHU RI ULJKWV DQG MXVWLFH DQG LQFOXVLRQ RI FLWL]HQV LQ WKH SURFHVV RI JRYHUQDQFH WKURXJK WUDQVSDUHQF\ YROXQWDU\ GLVFORVXUH RI LQIRUPDWLRQ DFFRXQWDELOLW\ WR FLWL]HQV GHYROXWLRQ RI GHFLVLRQPDNLQJ SRZHU DQG UHVRXUFHV DERXW ORFDOLVHG LVVXHV WR ORFDO ERGLHV $ VHQVH RI RZQHUVKLS RI WKHLU GHPRFUDFLHV 3HUFHSWLRQV RI FLWL]HQV UROHV  DFWLYH FLWL]HQVKLS UHIOH[LYLW\ REOLJDWLRQV WR VWDWHRWKHU FLWL]HQV PRWLYDWLRQ   FROOHFWLYH FLWL]HQ DFWLRQ XQLW\ SRZHU LQ QXPEHUV RUJDQLVDWLRQ PXWXDO FDSDFLW\ EXLOGLQJ FRQILGHQFH   HQJDJHG FLWL]HQV SOD\LQJ UROHV LQ ZLGHU SXEOLF DUHQDV VHHNLQJ LQIRUPDWLRQ GHPDQGLQJ DFFRXQWDELOLW\ SHUVHYHUDQFH JULW DQG FRXUDJH LQVSLUDWLRQ OHDGHUVKLS VKDULQJ HQDEOH DQLPDWH DQG IDFLOLWDWH RWKHU FLWL]HQV WR SDUWLFLSDWH DQG HQJDJH 



,W FRQFOXGHV ZLWK D GLVFXVVLRQ RI GHVLUHG YLVLRQV  D VWURQJ VWDWH DQG VWURQJ FLYLO VRFLHW\  GHHSHQHG GHPRFUDF\ DQG GHPRFUDWLF FXOWXUH  DQ HQODUJHG UROH IRU FLWL]HQV  GLUHFW FRQQHFWLRQ EHWZHHQ FLWL]HQV DQG VWDWH EDVHG RQ SDUWLFLSDWLRQ DQG LQFOXVLRQ  FRFRQVWUXFWLRQ RI VWURQJ DVVRFLDWLRQDO OLIH LQ FLYLO VRFLHW\ VWUHQJWKHQHG LQWHUIDFH EHWZHHQ FLWL]HQV DQG LQWHUPHGLDULHV OLNH 1*2V WUDGH XQLRQV DQG LQIRUPDO LQVWLWXWLRQV 

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


 ,QFOXVLRQ EXLOGLQJ VRFLDOO\ LQFOXVLYH VRFLHWLHV EDVHG RQ YDOXHV RI HTXDOLW\ DQG QRQGLVFULPLQDWLRQ WKURXJK GHYHORSPHQW ZKLFK SURPRWHV DOO KXPDQ ULJKWV IRU DOO SHRSOH  )XOILOOLQJ REOLJDWLRQV VWUHQJWKHQLQJ LQVWLWXWLRQV DQG SROLFLHV ZKLFK HQVXUH WKDW REOLJDWLRQV WR SURWHFW DQG SURPRWH WKH UHDOLVDWLRQ RI DOO KXPDQ ULJKWV DUH IXOILOOHG E\ VWDWHV DQG RWKHU GXW\ EHDUHUV

'RQQHOO\ -  +XPDQ ULJKWV GHPRFUDF\ DQG GHYHORSPHQW +XPDQ 5LJKWV 4XDUWHUO\   'RQQHOO\ DUJXHV WKDW KXPDQ ULJKWV DUH EDVHG RQ WKH QRWLRQ RI QDWXUDO ULJKWV D PHWDSK\VLFDO DEVWUDFWLRQ DQG EDVHG RQ OHJDO SRVLWLYLVP %XW KH DVNV ZKDW GRHV LW PHDQ WR EH LQYROYHG LQ GHFLVLRQPDNLQJ WR FODLP ULJKWV WKURXJK OHJDO PHFKDQLVPV DQG WR DVVHUW D ULJKW WR DFFRXQWDELOLW\" 'HPRFUDWLF WKHRULHV KH DVVHUWV DUH RIWHQ GLVWLQJXLVKHG E\ WKHLU UHOLDQFH RQ SURFHGXUDO DQG VXEVWDQWLYH WHVWV LQ PDNLQJ WKLV GHWHUPLQDWLRQ 'RQQHOO\ GUDZV RQ 5RVVHDX WR DUJXH DJDLQVW SURFHGXUDO ZLOO RI DOO ZKLFK RIWHQ H[SUHVVHV WKH LQWHUHVWV RI RQO\ SDUWLFXODU LQGLYLGXDOV DQG JURXSV DQG LQVWHDG DUJXHV IRU D JHQHUDO ZLOO WKH UHIOHFWLYH UDWLRQDO LQWHUHVW RI WKH ZKROH SHRSOH ZKLFK LV QRW WKH VDPH DV DJJUHJDWHG SUHIHUHQFHV +H DVVHUWV WKDW GHPRFUDF\ DLPV WR HPSRZHU SHRSOH <HW KXPDQ ULJKWV DLP WR HPSRZHU LQGLYLGXDOV WKXV OLPLWLQJ UDWKHU WKDQ HPSRZHULQJ WKH SHRSOH DQG WKHLU JRYHUQPHQW %H\RQG ZKR RXJKW WR UXOH KXPDQ ULJKWV DUH FRQFHUQHG ZLWK KRZ WKH SHRSOH RU DQ\ RWKHU JURXS UXOH DQG ZKDW WKH\ GR LQ VR UXOLQJ +H WKXV DUJXHV WKDW LW LV RQO\ LI D VRYHUHLJQ SHRSOH ZLOOV UHVSHFW IRU KXPDQ ULJKWV DQG WKXV FRQVWUDLQV LWV RZQ LQWHUHVWV DQG DFWLRQV ZLOO GHPRFUDF\ FRQWULEXWH WR UHDOLVLQJ KXPDQ ULJKWV

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



+H DUJXHV WKDW WR SXVK EH\RQG WKH XQLYHUVDOLVWSDUWLFXODULVW GLYLGH ZH VKRXOG PRYH WRZDUGV DFFHSWDQFH RI D GHOLEHUDWLYH SROLWLFV DFFRPSDQLHG E\ D SROLWLFV RI SUHVHQFH $ GHOLEHUDWLYH DSSURDFK WR VRFLDO SROLF\ LQYROYLQJ DOO VRFLDO JURXSV WR SDUWLFLSDWH LQ IRUPLQJ DQG SXUVXLQJ SROLF\ SURSRVDOV WKURXJK DFFHVV WR GHOLEHUDWLYH LQVWLWXWLRQV LV OLNHO\ WR KROG RXW SURPLVH RI D JUHDWHU GHJUHH RI VRFLDO HTXDOLW\ WKDQ WUDGLWLRQDO XQLYHUVDOLVW ZHOIDUH LGHDOV KDYH PDQDJHG WR DFKLHYH

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



*RHW] $0 DQG *DYHQWD -  )URP FRQVXOWDWLRQ WR LQIOXHQFH EULQJLQJ FLWL]HQ YRLFH DQG FOLHQW IRFXV LQWR VHUYLFH GHOLYHU\ ,'6 :RUNLQJ 3DSHU  %ULJKWRQ ,QVWLWXWH RI 'HYHORSPHQW 6WXGLHV %DVHG RQ D ZLGH UDQJH RI FDVHVWXGLHV WKDW GHPRQVWUDWH GLIIHUHQW PHFKDQLVPV IRU FLWL]HQ HQJDJHPHQW WKLV SDSHU LGHQWLILHV WKH FRQGLWLRQV IRU HQKDQFLQJ WKH HIIHFWLYHQHVV RI FLWL]HQV HIIRUWV WR WUDQVIRUP YRLFH DQG FRQVXOWDWLRQ LQWR UHDO LQIOXHQFH &HQWUDO WR WKLV LV WKH LGHQWLILFDWLRQ RI SXEOLF VHFWRU UHIRUPV ZKLFK SURGXFH JUHDWHU UHVSRQVLYHQHVV DQG DFFRXQWDELOLW\ WR SRRU FOLHQWV 7KH FKDUDFWHULVWLFV IRXQG WR EH PRVW LPSRUWDQW ZHUH  OHJDO VWDQGLQJ RU IRUPDO UHFRJQLWLRQ RI QRQJRYHUQPHQWDO REVHUYHUV ZLWKLQ SROLF\ PDNLQJ DUHQDV  FRQWLQXRXV SUHVHQFH IRU WKHVH REVHUYHUV WKURXJKRXW WKH SURFHVV RI WKH DJHQF\V ZRUN  VWUXFWXUHG DFFHVV IRU FLWL]HQV WR WKH IORZ RI RIILFLDO GRFXPHQWDU\ LQIRUPDWLRQ  HLWKHU WKH ULJKW RI REVHUYHUV WR LVVXH GLVVHQWLQJ UHSRUWV GLUHFWO\ WR OHJLVODWLYH ERGLHV RU WKH ULJKW RI VHUYLFH XVHUV WR GHPDQG D IRUPDO LQYHVWLJDWLRQ DQG VHHN OHJDO UHGUHVV IRU SRRU RU QRQGHOLYHU\ RI VHUYLFHV 7KH SDSHU PDLQWDLQV WKDW WKH H[WHQW WR ZKLFK FLWL]HQV LQIOXHQFH WKH GHVLJQ DQG GHOLYHU\ RI SXEOLF VHUYLFHV DQG WKH H[WHQW WR ZKLFK VWDWHV DUH FDSDEOH RI UHVSRQGLQJ ZLOO GHSHQG XSRQ WKH LQWHUDFWLRQ RI WKUHH IDFWRUV )LUVW WKH VRFLRFXOWXUDO DQG HFRQRPLF SRZHU RI WKH FOLHQW JURXS LQ TXHVWLRQ 6HFRQG WKH QDWXUH RI WKH SROLWLFDO V\VWHP DQG WKH RUJDQLVDWLRQ RI SROLWLFDO FRPSHWLWLRQ 7KLUG WKH QDWXUH DQG SRZHU RI WKH VWDWH DQG LWV EXUHDXFUDFLHV

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



0DQVEULGJH -  2Q WKH ,GHD WKDW 3DUWLFLSDWLRQ 0DNHV %HWWHU &LWL]HQV LQ 6 (ONLQ DQG . 6ROWDQ HGV  &LWL]HQ &RPSHWHQFH DQG 'HPRFUDWLF ,QVWLWXWLRQV 8QLYHUVLW\ 3DUN 7KH 3HQQV\OYDQLD 6WDWH 8QLYHUVLW\ 3UHVV  )RFXVVLQJ SDUWLFXODUO\ RQ :HVWHUQ QLQHWHHQWK FHQWXU\ SROLWLFDO SKLORVRSK\ 0DQVEULGJH DQDO\VHV WKH KLVWRU\ DQG GHYHORSPHQW RI WKH LGHD WKDW SDUWLFLSDWLRQ PDNHV EHWWHU FLWL]HQV ,Q WKH QLQHWHHQWK FHQWXU\ 7RFTXHYLOOH DQG 0LOO SURSRVHG WKDW SDUWLFLSDWLRQ FUHDWHG JRRG FLWL]HQ FKDUDFWHU 7RFTXHYLOOH DUJXHG WKDW FHQWUDOLVHG SRZHU WDNHV DZD\ FLWL]HQV RZQ SRZHU DQG WKXV FUHDWHV DSDWK\ \HW WKDW GLUHFW SDUWLFLSDWLRQ LQ GHPRFUDWLF GHFLVLRQPDNLQJ ZLWK RWKHUV PDNHV EHWWHU FLWL]HQV EHFDXVH LW KDV DQ LPSDFW RQ WKH VHOI RI HQODUJLQJ RQHV LQWHUHVWV WKH HGXFDWLYH IXQFWLRQ 7RFTXHYLOOH FRQFHSWXDOLVHG WKDW LQGLYLGXDO VHOILQWHUHVW LV WKH FHQWUDO PRWLYDWLRQ EHKLQG FLWL]HQV SDUWLFLSDWLRQ LQ SXEOLF DIIDLUV KH DUJXHV WKDW VHOILQWHUHVW EHFRPHV FRPPRQ LQWHUHVW WKURXJK FLWL]HQV SHUFHLYLQJ WKDW WKH IRUWXQH RI WKH SXEOLF LV KLV RZQ LH HQOLJKWHQHG VHOI LQWHUHVW ,Q WKH VHFRQG SRLQW 0DQVEULGJH DUJXHV KH VXJJHVWV WKDW SDUWLFLSDWLRQ HQJHQGHUV D VHQVH RI RZQHUVKLS DQG LWV DWWHQGDQW UHVSRQVLELOLWLHV LQ FLWL]HQV 0LOO ZHQW IXUWKHU WR DUJXH IRU FLWL]HQ SDUWLFLSDWLRQ RYHU JRYHUQPHQWOHG SUDFWLFHV HYHQ ZKHUH WKH TXDOLW\ RI VHUYLFHV VXIIHUV EHFDXVH RI WKH SRVLWLYH GHYHORSPHQWDO LPSDFW RI SDUWLFLSDWLRQ :KLOH VXFK SURSRVLWLRQV RI WKH OLQNDJH EHWZHHQ SDUWLFLSDWLRQ DQG SHRSOHV VHQVH DQG SUDFWLFH RI FLWL]HQVKLS UHPDLQHG VWURQJ RYHU WKH ILUVW WZRWKLUGV RI WKH WZHQWLHWK FHQWXU\ E\ WKH WZHQW\ILUVW FHQWXU\ 0DQVEULGJH DUJXHV SDUWLFLSDWLRQ ZDV LQFUHDVLQJO\ VHHQ DV D PHDQV WR WKH HQG RI SROLF\ FUHDWLRQ DQG VHOI SURWHFWLRQ ,Q WKH V FULWLFLVPV RI H[LVWLQJ IRUPV RI GHPRFUDF\ SURPRWHG D UHYLWDOLVDWLRQ RI SDUWLFLSDWLRQ SDUWLFXODUO\ ZLWK .DXIPDQQ FRLQLQJ WKH WHUP SDUWLFLSDWRU\ GHPRFUDF\ DQG IHPLQLVW FDOOV IRU UHFRJQLWLRQ WKDW WKH SHUVRQDO LV WKH SROLWLFDO 0DQVEULGJH DUJXHV KRZHYHU WKDW WKH OLQN EHWZHHQ SDUWLFLSDWLRQ DQG SHRSOHV VHQVH DQG SUDFWLFH RI FLWL]HQVKLS LV GLIILFXOW WR SURYH FHUWDLQO\ FRQWH[WXDO DQG FORVHO\ FRQQHFWHG WR WKH IRUP DQG UROH RI SDUWLFLSDWLRQ

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

0HHNRVKD + DQG 'RZVH /  (QDEOLQJ FLWL]HQVKLS JHQGHU GLVDELOLW\ DQG FLWL]HQVKLS LQ $XVWUDOLD )HPLQLVW 5HYLHZ 9RO   0HHNRVKD DQG 'RZVHV GLVFXVVLRQ FHQWUHV DURXQG WKH FLWL]HQVKLS RI SHRSOH ZLWK SK\VLFDO DQG PHQWDO GLVDELOLWLHV LQ $XVWUDOLD 7KH\ DUJXH WKDW FRQWHPSRUDU\ GLVFRXUVHV DURXQG FLWL]HQVKLS DUH PRUH WKDQ D OHJDO FRQFHSW WKH\ DUH D GHVLUDEOH DFWLYLW\ ZLWKLQ WKH FRQWH[W RI JHQHUDWLQJ QDWLRQDOLVW LGHQWLWLHV +RZHYHU WKHVH GLVFRXUVHV DUH WURXEOLQJ IRU PDQ\ SRVLWLRQHG RQ WKH PDUJLQV ZKR EHFDXVH RI WKHLU JHQGHU UDFH HWKQLFLW\ FODVV RU GLVDELOLW\ GR QRW IHHO DWWDFKPHQW WR WKH QRWLRQ RI DQ $XVWUDOLDQ LGHQWLW\ 3HRSOH ZLWK GLVDELOLWLHV H[SHULHQFH D VHQVH RI FRPPXQLW\ PRVW ZLGHO\ ZKHQ WDNLQJ DFWLRQ DJDLQVW RSSUHVVLRQ \HW GHVSLWH WKH DWWHPSWV E\ VRPH SHRSOH ZLWK GLVDELOLWLHV WR DUWLFXODWH D FXOWXUH RI GLVDELOLW\ VKDUHG VWLJPDWLVDWLRQ FDQ EH D OLPLWHG EDVLV IRU WKH GHYHORSPHQW RI FRPPXQLW\ 7KH\ DUJXH WKDW DFWLYH FLWL]HQVKLS FDOOV RQ PHPEHUV RI D FROOHFWLYLW\ WR WDNH VHULRXVO\ WKHLU UHVSRQVLELOLWLHV LQ DGGLWLRQ WR PDNLQJ FODLPV UHJDUGLQJ WKHLU ULJKWV 7KHVH FDOOV WKH\ DUJXH UDLVH GLIILFXOW LVVXHV IRU WKRVH KDYLQJ FRPSHWLQJ RU GLIIHUHQW FRPPXQLWLHV RU WKRVH KDYLQJ QR REYLRXV FRPPXQLW\ RI LQWHUHVWV DV LV RIWHQ WKH FDVH IRU SHRSOH ZLWK GLVDELOLWLHV OLYLQJ LQ UHODWLYH LVRODWLRQ LQFOXGLQJ WKRVH ZKR KDYH EHHQ GHLQVWLWXWLRQDOLVHG $ FRQWHPSRUDU\ $XVWUDOLDQ SRVWHU WR SURPRWH DFWLYH FLWL]HQVKLS ZKLFK GLVSOD\V ORWV RI VKRHV IURP WKH PDQ\ GLIIHUHQW FXOWXUHV ZLWKLQ $XVWUDOLD ZRUNV DV D YLVLELOLVDWLRQ RI WKH H[FOXVLRQ RI WKRVH ZKRVH ERGLHV OLPLW WKH SRVVLELOLW\ RI DFWLYLW\ ,W SUHVHQWV DQ LQFOXVLYLW\ RQ WKH EDVLV RI FXOWXUH ZKLOH H[FOXVLRQ RQ WKH EDVLV RI SK\VLFDOLW\ D SUREOHP RI DFWLYH FLWL]HQVKLS LV WKXV DQ LPSOLFDWLRQ RI DFWLYH PRELOH ERGLHV &XUUHQW FULWLTXHV RI VXFK GLVFRXUVHV H[DPLQH WKH FRQFHSW RI D QRUPDO IXQFWLRQLQJ FLWL]HQ DQG WKH LQVWLWXWLRQV WKDW DVVXPH VXFK D FLWL]HQ DV WKH QRUP



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

1HZHOO 3  (QYLURQPHQWDO 1*2V DQG *OREDOLVDWLRQ WKH JRYHUQDQFH RI 71&V LQ 5 &RKHQ DQG 6 5DL HGV  *OREDO 6RFLDO 0RYHPHQWV /RQGRQ $WKRQH 3UHVV  1HZHOOV GLVFXVVLRQ LV IUDPHG E\ WKH FULVLV RI JRYHUQDQFH FUHDWHG E\ JOREDOLVDWLRQ DQG WKH DVVRFLDWHG UHWUHDW RI WKH QDWLRQVWDWH ,Q WKLV FRQWH[W WKH WUDGLWLRQDO PHFKDQLVPV IRU UHJXODWLQJ DQG RYHUVLJKW RI FRUSRUDWH DFWLYLWLHV IDOO DZD\ ,Q WKH YDFXXP OHIW E\ WKLV UHWUHDW RI JRYHUQPHQW FRQWURO RYHU FRPSDQLHV HQYLURQPHQWDO DFWLYLWLHV HQYLURQPHQWDO 1*2V KDYH WKURXJK D ZLGHVSHFWUXP RI FRQIURQWDWLRQDO DQG FR RSHUDWLYH VWUDWHJLHV EHHQ WDUJHWLQJ FRPSDQLHV GLUHFWO\ +LV GLVFXVVLRQ FHQWUHV RQ WKH QHZ IRUPV RI UHODWLRQVKLSV EHLQJ IRUPHG E\ WKLV G\QDPLF



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



WKH LQYROYHPHQW RI DOO SDUWLFLSDQWV ZKLFK PD\ SURPSW LQGLYLGXDOV WR TXHVWLRQ WKHLU FLWL]HQVKLS ULJKWV DQG H[LW WKH FRPPXQLW\  WKH FRPPXQLW\ FDQQRW OLYH XS WR WKH PDWHULDO H[SHFWDWLRQV WKDW PHPEHUV KDYH IRU LW ZKLFK PD\ SURPSW SHRSOH WR TXHVWLRQ ZK\ WKH\ VKRXOG UHVSRQVLEO\ JLYH WLPH HQHUJ\ RU UHVRXUFHV WR WKH FRPPXQLW\

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


6FK|QZlOGHU *  1HZ GHPRFUDWLF VSDFHV DW WKH JUDVVURRWV" 3RSXODU SDUWLFLSDWLRQ LQ /DWLQ $PHULFDQ ORFDO JRYHUQPHQWV 'HYHORSPHQW DQG &KDQJH 9RO   6FK|QZl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



GLIIHUHQFHV EHWZHHQ SDUWLFXODU LQGLYLGXDOV GLIIHUHQFHV ZKLFK LW LV FODLPHG PDNH D PRUDO GLIIHUHQFH 1HJDWLYH VHOHFWLYLVP IDYRXUV WKH WDUJHWLQJ RI VHUYLFHV RQ WKH EDVLV RI LQGLYLGXDO PHDQV ZKLOH SRVLWLYH VHOHFWLYLVP DLPV WR SURYLGH DGGLWLRQDO VHUYLFHV DQG UHVRXUFHV IRU FHUWDLQ GLVDGYDQWDJHG JURXSV ZLWKRXW UHIHUHQFH WR WKHLU PHDQV 7KH\ DUJXH IRU D VRFLDO SROLF\ WKDW  HPERGLHV VSHFLILF XQLYHUVDOLVP SURWHFWV VRFLDO ULJKWV DJDLQVW WDUJHWLQJ H[SOLFLW DQG GLVJXLVHG   ZKHQ UHTXLUHG DEDQGRQV JHQHUDO XQLYHUVDOLVP IRU YDULRXV IRUPV RI SRVLWLYH VHOHFWLYLVP  DW YDULRXV SRLQWV JRHV EH\RQG OLPLWDWLRQV RI VHOHFWLYLVP WR LQFRUSRUDWH HOHPHQWV RI SDUWLFXODULVP VLQFH WKHUH DUH RFFDVLRQV ZKHQ LW LV OHJLWLPDWH WR YDU\ VWDQGDUGV EHWZHHQ LQGLYLGXDOV DQG JURXSV DQG  VKLIWV WKH EDODQFH IURP LQVWLWXWLRQDO WR QRQLQVWLWXWLRQDO GHFHQWUDOLVHG GHOLYHU\ DQG HPSRZHULQJ VXEMHFWV PRGHOV RI ZHOIDUH GHOLYHU\ :KLOH DUJXLQJ WKDW HDFK HOHPHQW QHFHVVDULO\ LQWHUSHQHWUDWHV WKH RWKHUV 7KRPSVRQ DQG +RJJHWW DVVHUW WKDW UHODWLYLVP EHFRPHV SDUDGR[LFDO LQ PDNLQJ WZR FODLPV  WKDW WKHUH DUH QR XQLYHUVDO EXW RQO\ ORFDO YDOXHV YDOXHV UHODWLYH WR D SDUWLFXODU FRPPXQLW\ RU WUDGLWLRQ HWF DQG  SULQFLSOHV RI MXVWLFH VKRXOG UHIOHFW ORFDO YDOXHV %XW WKH\ DVN ZKDW LV WKH VWDWXV RI D FODLP" ,W VHHPV DV LI LW PXVW LWVHOI EH D XQLYHUVDO YDOXH IRU DW D WKHRUHWLFDO OHYHO LW ZRXOG EH LQFRKHUHQW WR VD\ WKDW IRU XV UHODWLYLVP LV YDOLG EXW IRU RWKHU FRPPXQLWLHV LW PD\ EH RWKHUZLVH 7KLV LV EHFDXVH UHODWLYLVP LV LQWHQGHG DSSURSULDWHO\ WR OHJLVODWH IRU D GLIIHUHQW VHW RI FRPPXQLWLHV DQG QRW MXVW WR GHVFULEH RXU RZQ ORFDO VHW RI DWWLWXGHV RQ WKHVH PDWWHUV 7R HQGRUVH WKH ULJKW RI FRPPXQLWLHV WR GR WKHLU RZQ WKLQJ LH WR EH LQWROHUDQW RI RWKHUV ZRXOG EH WR JLYH OLFHQVH WR WKRVH ZKR ZRXOG GHVWUR\ WKH VWDWH RI PXWXDO WROHUDWLRQ WKDW UHODWLYLVP LQWHQGV WR VXSSRUW

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

9RHW 5  )HPLQLVP DQG &LWL]HQVKLS /RQGRQ 6DJH 9RHW DUJXHV WKDW OLEHUW\ DQG SDUWLFLSDWLRQ DUH UHODWHG IRU WZR UHDVRQV RQH LQKHUHQW DQG RQH LQVWUXPHQWDO )LUVW SDUWLFLSDWLRQ LQ GHFLVLRQPDNLQJ LV LQ LWVHOI DQ LPSRUWDQW DQG KLJKO\ UHJDUGHG OLEHUW\ ,W LV RQH RI WKH PRVW SURIRXQG ZD\V LQ ZKLFK ZH UHDOLVH RXUVHOYHV DV KXPDQ DQG WKHUHIRUH DFWLQJ EHLQJV 6HFRQG SDUWLFLSDWLRQ IRUPV SDUW RI D ODUJHU VWUXFWXUH RI OLEHUWLHV EHFDXVH WKH H[WHQW WR ZKLFK WKLV OLEHUW\ LV DFFRUGHG DQG H[HUFLVHG ZLOO XVXDOO\ DIIHFW WKH H[WHQW WR ZKLFK OLEHUW\ LV DYDLODEOH LQ RWKHU DUHDV RI VRFLDO OLIH :KDW LV QHFHVVDU\ IRU WKLV SRVLWLYH OLEHUW\ DV SDUWLFLSDWLRQ LV D SXEOLF VSDFH ZKHUH FLWL]HQV FDQ DFW WRJHWKHU YLVLEO\ IRU DQ DXGLHQFH ZKHUH WKH\ FDQ UHDOLVH WKHPVHOYHV DV LQGLYLGXDOV RU PHPEHUV RI D JURXS ,W LV H[DFWO\ WKLV NLQG RI OLEHUW\ WKDW LV HVVHQWLDO IRU FLWL]HQVKLS DQG LW LV H[DFWO\ WKLV NLQG RI OLEHUW\ VKH DUJXHV WKDW ZRPHQ ODFN 7KXV VKH DVVHUWV LW LV DW WKH OHYHO RI SDUWLFLSDWLRQ WKDW ZH VHH WKH PDMRU GLVWLQFWLRQV EHWZHHQ PDOH FLWL]HQV DQG IHPDOH FLWL]HQV QRW DW WKH OHYHO RI ULJKWV



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



You might also like