Another EMC resource

from EMC Standards

EMC Techniques for Heatsinks

Helping you solve your EMC problems

9 Bracken View, Brocton, Stafford ST17 0TF T:+44 (0) 1785 660247 E:info@emcstandards.co.uk
 (0&7HFKQLTXHVIRU+HDWVLQNV
&ŝƌƐƚƉƵďůŝƐŚĞĚŝŶdŚĞD:ŽƵƌŶĂů͕/ƐƐƵĞϴϵ͕:ƵůLJϮϬϭϬ͕ƉƉϯϭͲϯϴ

(XU,QJ.HLWK$UPVWURQJ&(QJ),(76HQLRU0,((($&*,
SKRQHID[  NHLWKDUPVWURQJ#FKHUU\FORXJKFRP

Contents
 &RQWUROOLQJVWUD\KHDWVLQNFXUUHQWV
 5HWXUQLQJVWUD\KHDWVLQNFXUUHQWVWRWKHSRZHUUDLOV
 8VLQJD3&%SODQHDVDKHDWVLQN
 +HDWVLQNUHVRQDQFHV
 6RPHXVHIXOWULFNV
 +HDWSLSHV
 5)ERQGLQJKHDWVLQNVWRUHGXFHHPLVVLRQV
 &RPELQLQJVKLHOGLQJZLWKKHDWVLQNLQJ
 5HIHUHQFHV


 &RQWUROOLQJVWUD\KHDWVLQNFXUUHQWV
+HDWVLQNVFDQEHDVLJQLILFDQWFDXVHRIHPLVVLRQVWKDWFDQFDXVH³,QWHUQDO(0,´SUREOHPV VHH6HFWLRQLQ
3DUW  RI >@  DQGRU ³([WHUQDO (0,´ SUREOHPV LQFOXGLQJ IDLOXUH WR FRPSO\ ZLWK UHJXODWRU\ RU FXVWRPHU
HPLVVLRQVOLPLWV
$VRSHUDWLQJIUHTXHQFLHVULVHDQG,&VDQGSRZHUWUDQVLVWRUVVZLWFKHYHUIDVWHUWKHLUKHDWVLQNVDUHEHFRPLQJ
PRUH LPSRUWDQW DV D FDXVH RI HPLVVLRQV 7KLV LV HVSHFLDOO\ VR EHFDXVH WKH XSSHU IUHTXHQFLHV DUH QRZ VR
KLJK WKDW WKH\ DUH PRUH OLNHO\ WR H[FLWH HOHFWULFDO UHVRQDQFHV LQ HYHQ TXLWH VPDOO KHDWVLQN DVVHPEOLHV
5HVRQDQFHFDQLQFUHDVHDKHDWVLQN¶VHPLVVLRQVE\DVPXFKDVG%
$Q,&RUWUDQVLVWRUILWWHGZLWKDKHDWVLQNKDVDVLJQLILFDQWVWUD\FDSDFLWDQFHWRWKDWKHDWVLQNDVVNHWFKHGLQ
)LJXUHEHFDXVHWKHUPDOLQWHUIDFHZDVKHUVDUHWKLQDQGKDYHKLJKYDOXHVRIGLHOHFWULFFRQVWDQW HU 

6WUD\&
6WUD\&
6WUD\&
6WUD\&

)LJXUH([DPSOHRIWUDQVLVWRUVRQDKHDWVLQN

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 6RPHWLPHVWKHKHDWVLQNWDEVRIGHYLFHVDUHERQGHGGLUHFWO\WRDKHDWVLQN6XFKGHYLFHVPLJKWKDYHLQWHUQDO
HOHFWULFDOLVRODWLRQPHDQLQJWKH\KDYHWKHUPDOZDVKHUVLQVLGHWKDWVWLOOFDXVHVWUD\FDSDFLWDQFHFRXSOLQJ
6RPHWLPHVGHYLFHKHDWVLQNWDEVDUHGLUHFWO\FRQQHFWHGWRDGUDLQRUFROOHFWRUVRWKHKHDWVLQNH[SHULHQFHV
WKHLUIXOOYROWDJHH[FXUVLRQVDQGLV³OLYH´ DQGRIWHQGDQJHURXVDVZHOO 
:KHQWKHYROWDJHVRIWKH,&RUSRZHUWUDQVLVWRUIOXFWXDWHWKLVVWUD\FDSDFLWDQFH RUGLUHFWFRQQHFWLRQ LQMHFWV
VWUD\ FXUUHQWV LQWR FRQGXFWLYH KHDWVLQNV VR UHWXUQLQJ WKHVH VWUD\ FXUUHQWV WR WKHLU VRXUFHV ± WKH SRZHU
VXSSOLHVWKDWSRZHUWKH,&VRUWUDQVLVWRUV±LVYHU\LPSRUWDQWIRUFRQWUROOLQJ(0&HPLVVLRQV
3DUWRI>@GLVFXVVHVKRZIXQGDPHQWDOLWLVWRJRRG(0&GHVLJQ WKDWVDYHVWLPHDQGFRVWDQGUHGXFHVILHOG
IDLOXUHVDQGZDUUDQW\UHWXUQV WRFRQWUROWKHIORZRIUHWXUQFXUUHQWVLQFOXGLQJUHWXUQFXUUHQWVFDXVHGE\VWUD\
FDSDFLWLYHDQGLQGXFWLYHFRXSOLQJ±VXFKDVRFFXUVZLWKKHDWVLQNV
&HUDPLF RU SODVWLF KHDWVLQNV HJ ³&HUDP&RRO´ ³&RRO3RO\´  DUH QRW FRQGXFWLYH DQG VR FDUU\ QR VWUD\
FXUUHQWV7KH\GRQRWQHHGWKHUPDOLQVXODWLQJZDVKHUVVRFDQVRPHWLPHVKDYHEHWWHUKHDWGLVVLSDWLRQWKDQ
PHWDODVZHOODVKDYLQJQR(0&HPLVVLRQV6RPHW\SHVFDQKDYHPHWDOOLVHGHWFKHGVXUIDFHVOLNHDVLQJOH
OD\HUSULQWHGFLUFXLWERDUG 3&% DOORZLQJGLUHFWERQGLQJRIGHYLFHVRULJLQDOO\GHVLJQHGIRUWKHSRZHU/('
DUUD\V IRU QHZ /('OLJKWLQJ SURGXFWV EXW XVHIXO DV D FRVWVDYLQJ PHDVXUH LQ D ZLGH YDULHW\ RI RWKHU
HOHFWURQLFSURGXFWV
,WPD\ZHOOEHWKDWWKHEHVWZD\WRSUHYHQWHPLVVLRQVIURPKHDWVLQNVIURPFDXVLQJLQWHUQDORUH[WHUQDO(0,
SUREOHPVRUIDLOXUHWRFRPSO\ZLWKVSHFLILHGHPLVVLRQVOLPLWVLVWRXVHDFHUDPLFRUSODVWLFKHDWVLQN
+RZHYHU GHYLFH KHDWVLQN µWDEV¶ ZLOO VWLOO HPLW DQG DOWKRXJK XVXDOO\ QHJOLJLEOH WKH\ FDQ VRPHWLPHV FDXVH
VHULRXV HPLVVLRQV SUREOHPV IRU FHUWDLQ W\SHV RI GHVLJQV VR VRPH RI WKH IROORZLQJ WHFKQLTXHV PD\ VWLOO EH
UHTXLUHGHYHQZKHQFHUDPLFRUSODVWLFKHDWVLQNVDUHXVHG
7KH EHVW ZRUVW"  H[DPSOH RI WKLV WKDW , KDYH VHHQ ZDV D VPDOO ORZFRVW LQYHUWHU WR GULYH D FROGFDWKRGH
IOXRUHVFHQWODPSIURPD9VXSSO\7KH3&%ZDVRQO\DERXWPPVTXDUHPRVWRILWWDNHQXSE\WKHEDVH
RIWKHODPS$VLQJOH7SRZHUWUDQVLVWRUGLGDOOWKHKDUGZRUNRIVZLWFKLQJWKHIO\EDFNVWHSXSYROWDJH
FRQYHUWHUDWDERXWN+]VZLWFKLQJVRTXLFNO\WKDWDKHDWVLQNZDVQRWUHTXLUHGKHOSLQJWRVDYHFRVW
,WVFRQGXFWHGHPLVVLRQVZHUHPRUHWKDQG%DERYHWKH&ODVV%OLPLWOLQHDOOWKHZD\XSWRDIHZ0+]:H
GLVFRYHUHGTXLFNO\WKDWWKH\ZHUHDOOGXHWRWKHHPLVVLRQVIURPWKHWLQ\KHDWVLQNWDERIWKH72VZLWFKLQJ
GHYLFH7KH72ZDVVWDQGLQJXSYHUWLFDOO\IURPWKHWLQ\3&%VRLWVKHDWVLQNWDEZDVDVIDUDZD\IURP
WKH 3&%¶V 9 SODQH DV LW FRXOG EH ± QRW WKDW LW ZDV D YHU\ ODUJH 9 SODQH DQ\ZD\ JLYHQ WKH VL]H RI WKH
SURGXFW
,WZDVDKXJHVXUSULVHWRVHHVXFKKLJKOHYHOVRIHPLVVLRQVDWVXFKORZIUHTXHQFLHVIURPVXFKDVPDOOVWUD\
FDSDFLWDQFH DV FRXOG EH SRVVLEO\ EH FDXVHG E\ D 72 GHYLFH HVSHFLDOO\ DV WKHUH ZDV QR ZD\ WKDW LW
FRXOGKDYHEHHQH[SHULHQFLQJDVWUXFWXUDOUHVRQDQFHDWVXFKIUHTXHQFLHV
7KLVVWRU\KDVDKDSS\HQGLQJZLWKWKHSUREOHPEHLQJFRPSOHWHO\VROYHG HPLVVLRQVUHGXFHGE\RYHUG% 
VLPSO\E\FRQWUROOLQJWKHVWUD\FXUUHQWSDWKXVLQJWKHWHFKQLTXHVGHVFULEHGEHORZIRUDQHJOLJLEOHDGGLWLRQDO
FRVW

 5HWXUQLQJVWUD\KHDWVLQNFXUUHQWVWRWKHSRZHUUDLOV
7KHKHDWVLQNFXUUHQWVDUHVRXUFHGIURPERWKSRZHUUDLOVIHHGLQJWKH,&RUSRZHUVZLWFKLQJGHYLFHVRWKH\
PXVWWREHUHWXUQHGWRWKHVDPHSRZHUUDLOVZLWKDQLPSHGDQFHWKDWLVPXFKORZHUWKDQIUHHVSDFH : 
LGHDOO\:DWDOOIUHTXHQFLHVXSWRWKHKLJKHVWIUHTXHQF\RIFRQFHUQ f0$; 
7KLV LV FDOOHG ³5)ERQGLQJ´ DQG WKH LQGXFWDQFH /  RI WKH UHWXUQ FXUUHQW ORRS WKDW LV FUHDWHG PXVW EH 
Sf0$; f0$;LQ0+]JLYHV/LQ—+ DQGWRSUHYHQWUHVRQDQFHWKHORRS¶VODUJHVWGLPHQVLRQ 'GLDJRQDORU
GLDPHWHU PXVWEHf0$; f0$;LQ0+]JLYHV'LQPHWUHV 
*HQHUDOO\ ZH DYRLG HDUWKHGJURXQGHG KHDWVLQNV EHFDXVH WKH\ XVXDOO\ KDYH VR PDQ\ SRVVLEOH ORZ
LPSHGDQFH SDWKV IRU WKH KHDWVLQN¶V VWUD\ UHWXUQ FXUUHQW WKDW LW LV GLIILFXOW WR HQVXUH LW PRVWO\ IORZV LQ WKH
VPDOOHVWORFDOORRS
'HVLJQHUVRIWHQLPDJLQHWKDWDQ\WKLQJFDOOHGHDUWKJURXQGRUFKDVVLVLVVRPHVRUWRIPDJLFDOLQILQLWHVLQNIRU
HOHFWULFDO FXUUHQW ZLWK D QHJOLJLEOH LPSHGDQFH IRU FXUUHQWV RI DQ\ VL]H XS WR WHQV RI *+] 7KLV YHU\
ZLGHVSUHDG EHOLHI LQ D VRUW RI HOHFWURQLF IDLU\WDOH DOPRVW FHUWDLQO\ FRVWV PDQXIDFWXUHUV RI HOHFWURQLF
SURGXFWV DQG RI DOO WKH DSSOLFDWLRQV WKDW XVH WKHP ELOOLRQV RI GROODUV LQ SURMHFW GHOD\V DQG ZDUUDQW\ FRVWV
ZRUOGZLGHHYHU\\HDU DQGFRVWVWKHLUFXVWRPHUVDWOHDVWDVPXFKLQGRZQWLPH 
:KDWUHDOO\PDWWHUVIRU(0&DQGVLJQDOLQWHJULW\DUHWKHORRSVLQZKLFKFXUUHQWVIORZ>@LQFOXGLQJDOORIWKH
VWUD\FXUUHQWVDQGLIWKRVHORRSVGRQRWLQFOXGHWKHHDUWKJURXQGRUFKDVVLVWKHQFRQQHFWLQJWRWKHHDUWK
JURXQG RU FKDVVLV VLPSO\ DGGV DQ H[WUD SDWK IRU FRPPRQPRGH FXUUHQWV ZLWK WKHLU SRZHUIXO ³DFFLGHQWDO
DQWHQQD´ HIIHFWV &RQQHFWLQJ WR WKH VDIHW\ HDUWK RU JURXQG V\VWHP XVXDOO\ PDNHV PRVW (0 SKHQRPHQD
ZRUVHIRUHPLVVLRQVDQGLPPXQLW\ZKLFKLVZK\DYHU\KLJKO\UHVSHFWHG(0&HQJLQHHURQFHGHVFULEHGWKH
VDIHW\HDUWKLQJJURXQGLQJV\VWHPDVDQ³,QWHUIHUHQFH'LVWULEXWLRQ1HWZRUN´

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
:KHUH D KHDWVLQN must IRUP SDUW RI D PHWDO FKDVVLV RU HQFORVXUH QRW D JRRG LGHD LQ JHQHUDO  HLWKHU XVH
VKLHOGHG KHDWVLQN ZDVKHUV WR GLYHUW PRVW RI WKH VWUD\ FXUUHQW DZD\ IURP WKH KHDWVLQN  VHH ODWHU  DQGRU
VKLHOGWKHSURGXFW VHHODWHU 
:HXVXDOO\UHWXUQWKHVWUD\KHDWVLQNFXUUHQWWRMXVWoneRIWKHSRZHUUDLOVDVVKRZQLQ)LJXUHDQGUHO\RQ
JRRGSRZHUGHFRXSOLQJRQWKH3&%WRFDUU\WKHUHWXUQFXUUHQWIURPLWWRWKHRWKHUUDLOZLWK:XSWR f0$;
)RUGLJLWDODQGPL[HGWHFKQRORJ\,&VWKLVJHQHUDOO\UHTXLUHVERWKSRZHUUDLOVWREH3&%SODQHVWKDWPDLQWDLQ
D YHU\ ORZ LPSHGDQFH XS WR DW OHDVW WKH KLJKHVW IUHTXHQF\ RI FRQFHUQ DV GHVFULEHG LQ 3DUW  RI >@ DQG
&KDSWHURI>@

9 /LYHKHDWVLQN
7DNHDOOVDIHW\
)URP SUHFDXWLRQV
$&'&
UHFWLILHU

8QUHJXODWHG 'HFDS
VWRUDJH
FDSDFLWRU 6WUD\&

7KHDUURZVVKRZ
WKHUHWXUQSDWKV
WDNHQE\WKHVWUD\
KHDWVLQNFXUUHQWV

9± 5)ERQGHGWR
DSRZHUUDLO

3URWHFWLYHHDUWK VDIHW\JURXQG

)LJXUH([DPSOHRIDQRIIOLQHVZLWFKPRGHFRQYHUWHUZLWKGLUHFW5)ERQGLQJ
'LUHFWO\FRQQHFWLQJDKHDWVLQNWRDSRZHUVXSSO\DWDKD]DUGRXVYROWDJHIRUH[DPSOHWKHUHFWLILHGPDLQVLQ
DQ RIIOLQH VZLWFKPRGH SRZHU FRQYHUWHU FDQ LQFUHDVH VDIHW\ ULVNV WR XQDFFHSWDEOH OHYHOV 2I FRXUVH ,&V
DQG WUDQVLVWRUV SRZHUHG IURP ³6DIHW\ ([WUD /RZ 9ROWDJH´ 6(/9  FDQ XVH GLUHFW 5)ERQGLQJ IRU WKHLU
KHDWVLQNVZLWKRXWFUHDWLQJVDIHW\KD]DUGV
:KHUHSRZHUGHYLFHVKDYHWKHLUGUDLQVRUFROOHFWRUVFRQQHFWHGGLUHFWO\WRDKHDWVLQNLWPD\QRWEHSRVVLEOH
WRFRQQHFWWKHKHDWVLQNGLUHFWO\WRDSRZHUUDLOZLWKRXWVWRSSLQJWKHFLUFXLWIURPRSHUDWLQJ
,Q HLWKHU RI WKH DERYH VLWXDWLRQV LQVWHDG RI D GLUHFW FRQQHFWLRQ WR WKH SRZHU UDLO
DVHULHVFDSDFLWRUPD\EHXVHG7KHSUREOHPZLWKDFDSDFLWRULVDFKLHYLQJDORZHQRXJKLPSHGDQFHLQWKH
UHWXUQ SDWK RYHU D ZLGH UDQJH RI IUHTXHQFLHV :KHUH WKH HPLVVLRQV DUH RQO\ WURXEOHVRPH RYHU D QDUURZ
UDQJHRIIUHTXHQFLHVLWPD\EHSUDFWLFDOWRXVHDVHULHVFDSDFLWRUDQGFKRRVHLWVW\SHDQGYDOXHVRWKDWVR
WKDW LW VHULHVUHVRQDWHV ZLWK WKH LQGXFWDQFH LQKHUHQW LQ WKH FXUUHQW UHWXUQ SDWK DW WKH IUHTXHQF\ RI WKH
KHDWVLQN¶VKLJKHVWHPLVVLRQV
6XFK GHVLJQV FDQ HDVLO\ EH RSWLPLVHG ³WXQHG´  DW DQ RUGLQDU\ HOHFWURQLFV WHVWEHQFK E\ SLFNLQJ XS WKH
KHDWVLQN¶V(DQG+ILHOGHPLVVLRQVZLWKFORVHILHOGSUREHV VHH3DUWVDQGRI>@ ±WKHUHLVQRQHHGWRYLVLW
DQ(0&WHVWODERUDWRU\
([LVWLQJPHWDOSDUWVVXFKDVKHDWVLQNPRXQWLQJFRPSRQHQWVDUHRIWHQSUHVVHGLQWRVHUYLFHLQWKHKHDWVLQN
UHWXUQFXUUHQW¶V5)ERQGLQJSDWK6XUIDFHVIRUPLQJSDUWRIWKHFXUUHQWSDWKVKRXOGEHFRQGXFWLYHO\SODWHGRU
SDVVLYDWHGWRSUHYHQWR[LGDWLRQRYHUWLPHHVSHFLDOO\DOXPLQLXPDQGPLOGVWHHO7KHPHWDOVDQGSODWLQJXVHG
RQPDWLQJSDUWVVKRXOGEHFKRVHQIRUORZJDOYDQLFFRUURVLRQDWWKHLUMXQFWLRQV±WKHLPSRUWDQFHGHSHQGLQJ
RQWKHLUH[SRVXUHWRFRQGHQVDWLRQDQGRWKHUZHWQHVVLQWKHLUHQYLURQPHQW
%HZDUHRIPDQXIDFWXULQJUHVLGXHVRUFRDWLQJVRQPHWDOSDUWV HVSHFLDOO\DQRGLVLQJRUSRO\PHUSDVVLYDWLRQ 
$QRGLVLQJ LV RIWHQ XVHG EHFDXVH LW KDV PXFK KLJKHU WKHUPDO HPLVVLYLW\ WKDQ SODLQ R[LGLVHG DOXPLQLXP 
LQVWHDGRI DQGVRPDNHVIRUVPDOOHUKHDWVLQNVEXWLWPDNHV5)ERQGLQJYHU\GLIILFXOW7LQSODWLQJLVTXLWH
JRRG HPLVVLYLW\RI DQGPDNHV5)ERQGLQJYHU\HDV\WRGR
%HFDXVHPHWDOSODWHUVVRPHWLPHVDSSO\LQVXODWLQJSRO\PHUSDVVLYDWLRQFRDWLQJVZKHQWKH\DUHQRWVSHFLILHG

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
RU UHTXHVWHG DQG VRPHWLPHV LQ GLUHFW FRQWUDYHQWLRQ RI LQVWUXFWLRQV , VWURQJO\ UHFRPPHQG FKHFNLQJ WKH
FRQGXFWLYLW\ RI DOO 5)ERQGLQJ VXUIDFHV DW *RRGV 5HFHLYLQJ EHIRUH DFFHSWLQJ DQ\ EDWFK RI SDUWV XVLQJ D
VLPSOHµEX]]HU¶WHVWHUZLWKORZFRQWDFWSUHVVXUHVIRUWKHSUREHV HJVWULSVRI³IDEULFRYHUIRDP´FRQGXFWLYH
(0&JDVNHW 

 8VLQJD3&%SODQHDVDKHDWVLQN
)RU FRVWHIIHFWLYH (0& PRVW FLUFXLWV QHHG WR XVH 3&% OD\HUV GHGLFDWHG WR 9 DQG SRZHU SODQHV RYHU
PRVWDOORIWKHLUDUHDV8VLQJDSODQHDVDKHDWVLQNLQMHFWVVWUD\FXUUHQWVIURPGHYLFHVGLUHFWO\LQWRWKDWSODQH
VR DVORQJDVLWLVRQHRIWKHUDLOVWKDWVXSSOLHVWKHGHYLFHV WKHUHLVQRQHHGIRUDQ\5)ERQGLQJ
7KLV UHTXLUHV PRXQWLQJ WKH GHYLFHV VR WKDW WKH\ DUH LQ WKHUPDO FRQWDFW ZLWK WKH SODQH YLD WKHUPDO JUHDVH
DQGRUDQLQVXODWLQJWKHUPDOZDVKHU6RPHGHYLFHVDUHGHVLJQHGIRUWKHLUKHDWVLQNWDEVWREHVROGHUHGWRDQ
DUHDRI3&%FRSSHUWRDFWDVDKHDWVLQN,IWKLVFRSSHUDUHDPXVWEHLVRODWHGIURPWKH9RUSRZHUUDLOVWKHQ
LWQHHGV5)ERQGLQJWRWKHPDVGHVFULEHGLQ6HFWLRQDERYH
:KHUH WKH 3&% SODQH WKDW LV WR EH XVHG DV D KHDWVLQN LV DQ LQWHUQDO OD\HU )LJXUH  VKRZV WKH WZR PDLQ
WHFKQLTXHV HLWKHU PDFKLQH DQ DSHUWXUH LQ WKH ERDUG PDWHULDO WR DOORZ GLUHFW DFFHVV WR WKH SODQH RU XVH D
VPDOO SODQH RQ WKH FRPSRQHQW VLGH DQG LI QHFHVVDU\  WKHUPDOO\ERQG LW WR D ODUJHU LQWHUQDO 3&% KHDWVLQN
SODQHZLWKGR]HQVRIYLDKROHVVSUHDGDOORYHULWVDUHD±RIWHQFDOOHG³WKHUPDOYLDV´

'HYLFHVROGHUHGWRERDUGVLWVLQ
UHFHVVWKHUPDOJOXHRUZDVKHU
FRQGXFWVKHDWLQWRWKHLQQHUSODQH
&XWRXW LQXSSHUOD\HUV
H[SRVHVLQQHUSODQH

'HYLFHVROGHUHGWRERDUGVLWVRQ
FRPSRQHQWVLGHSODQHWKHUPDOJOXH
RUZDVKHUFRQGXFWVKHDWLQWRSODQH

&RPSRQHQWVLGH
SODQH 0XOWLSOH³WKHUPDOYLDV´FRQGXFWKHDWLQWRWKHLQQHU
SODQHLWVPXFKODUJHUDUHDGLVVLSDWHVKHDWEHWWHU

)LJXUH([DPSOHVRIXVLQJD3&%SODQHDVDKHDWVLQN
7KH WKHUPDO GLVVLSDWLRQ RI D 3&% SODQH FDQ EH LPSURYHG E\ XVLQJ WKLFNHU FRSSHU SODWLQJ 6RPH 3&%
PDQXIDFWXUHUVFDQSODWHXSWKHQRUPDO³òR]´HWFKHGFRSSHUIRLOWRDVPXFKDV³R]´DQG,KDYHUHFHQWO\
EHHQRIIHUHGDVPXFKDVR]IURPRQH&KLQHVH3&%PDQXIDFWXUHU
3ODQHFKDVVLV ERQGLQJ ZLWK PDQ\ VKRUW PHWDO PRXQWLQJ SLOODUV FDQ KHOS GLVVLSDWH WKH KHDW DV ZHOO DV
SURYLGLQJPDQ\RWKHULPSRUWDQW(0&EHQHILWV VHH3DUWRI>@&KDSWHURI>@DQG>@ 
6RPH 3&% PDQXIDFWXUHUV FDQ ODPLQDWH PHWDO VKHHWV RU SODWHV LQ WKH 3&% DQG 5)ERQG WKHP WR D 9 RU
SRZHU SODQH 7KHVH VKHHWV RU SODWHV FDQ EH H[WHQGHG EH\RQG WKH 3&% WR IRUP D EUDFNHW WKDW FDQ EH
FODPSHG WR D FKDVVLV RU KHDWVLQN WR KHOS GLVVLSDWH WKH KHDW IURP WKH 3&%¶V GHYLFHV ,I D 3&% XVHV
HPEHGGHGSODWHVDVKHDWVLQNVEXWWKH\DUHLVRODWHGIURPWKH9RUSRZHUSODQHVWKH\QHHG5)ERQGLQJDV
GHVFULEHGLQ6HFWLRQDERYH
$OWKRXJKHPEHGGLQJPHWDOSODWHVLQFUHDVHVWKHEDUHERDUGFRVWGRQ¶WIRUJHWWKDWZKDWUHDOO\PDWWHUVLVWKH
overall cost of manufactureQRWWKH%20FRVW>@6RPHPDQXIDFWXUHUVRIKLJKIUHTXHQF\IOXRUHVFHQWODPS
EDOODVWVXVHWKLVH[SHQVLYH3&%PHWKRGWRUHGXFHWKHRYHUDOOFRVWRIWKHLUSURGXFWVDQGLPSURYHSURILWDELOLW\
E\UHGXFLQJWKHWLPHFRVWRIDVVHPEO\DQGLPSURYLQJ\LHOGV

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 +HDWVLQNUHVRQDQFHV
:KHUH D KHDWVLQN LV QRW LWVHOI D 3&% SODQH WKDW SRZHUV WKH KHDWVXQN GHYLFHV DV GLVFXVVHG LQ VHFWLRQ 
DERYHLWVKRXOGEH5)ERQGHGWRVXFKDSODQHRUDWOHDVWWRDSRZHUUDLOWKDWVXSSOLHVWKHGHYLFHV
,IWKHLPSHGDQFHRIWKH5)ERQGLQJLVLQDGHTXDWHWKHKHDWVLQNVWUD\UHWXUQFXUUHQWIORZLQJLQLWZLOOFDXVHWKH
KHDWVLQNWRVXIIHUDVLJQLILFDQWdV/dtPDNLQJLWUDGLDWHPRUHDVDQµDFFLGHQWDODQWHQQD¶
,IWKHKHDWVLQNKDVDUHVRQDQWIUHTXHQF\FORVHWRDVLJQDOIUHTXHQF\ RURQHRILWVKDUPRQLFV LWVHPLVVLRQV
FDQLQFUHDVHE\G%RUPRUHEHFDXVHLWLVQRZDµWXQHG¶DFFLGHQWDODQWHQQD VHH3DUWRI>@ 
5HVRQDQFHHIIHFWVRQO\EHFRPHVLJQLILFDQWZKHQWKHORQJHVWKHDWVLQNGLPHQVLRQ ' H[FHHGVf0$; f0$;LQ
0+]JLYHV'LQPHWUHVf0$;LQ*+]JLYHV'LQPLOOLPHWUHV 
7KH ORZHVW UHVRQDQFH IUHTXHQF\ f5(6   ' ZKHUH ' LV WKH ORQJHVW µWKUHHGLPHQVLRQDO¶ GLDJRQDO
'LQPHWUHVJLYHV f5(6LQ0+]'LQPLOOLPHWUHVJLYHV*+] )RUH[DPSOHHJDPPFXEHKHDWVLQNFRXOG
KDYHLWVILUVW ORZHVW UHVRQDQFHDWDURXQG*+]VRFRXOGFDXVHELJSUREOHPVIRUQHDUE\*36DQWHQQDV
$FFXUDWHDQDO\VLVUHTXLUHVFRPSXWHUDLGHGVLPXODWLRQWDNLQJLQWRDFFRXQW
D  WKHKHDWVLQN¶VJHRPHWU\VKDSH
E  W\SHVRIVHPLFRQGXFWRUVDQGWKHLUORFDWLRQV
F  WKHSUR[LPLW\RI9SODQHVDQGFKDVVLV
G  DQ\5)ERQGLQJ
6TXDUH RUFXEHVKDSHG KHDWVLQNV WHQG WR KDYH WKHKLJKHVW UHVRQDQW IUHTXHQFLHVVRDUH JRRG RQO\ LI WKHLU
ORZHVWUHVRQDQWIUHTXHQF\LVZHOODERYHWKHKLJKHVWIUHTXHQF\RIFRQFHUQ%XWVXFKV\PPHWULFDOO\VKDSHG
KHDWVLQNV KDYH D KLJKHU JDLQ WKHLU ³4´  DW WKHLU UHVRQDQW IUHTXHQF\ DQG FDQ LQFUHDVH HPLVVLRQV LI WKHLU
UHVRQDQFHV DUH QRW ZHOO DERYH WKH KLJKHVW IUHTXHQF\ RI FRQFHUQ ± LQ ZKLFK FDVH PDNH WKHP UHFWDQJXODU
DQG DYRLG VLPSOH UDWLRV RI OHQJWKZLGWKKHLJKW VXFK DV   HWF  7KH ³*ROGHQ 0HDQ´ DSSUR[LPDWHO\
 LVDJRRGFKRLFHZKHQWKHUHDUHQRVLJQLILFDQWFRQVWUDLQWV)LJXUH'VXPPDULVHVWKHVHYHU\EDVLF
JXLGHOLQHV

/RQJDQGWKLQ
5HFWDQJXODU
6TXDUH :LWKOHQJWKZLGWKKHLJKW
RUFXEH UDWLRVWKDWDUHQRWVLPSOH
PXOWLSOHVRIHDFKRWKHU

%HVW± LILWVUHVRQDQW
IUHTXHQFLHVDUH!f0$;
%HVW± LILWVUHVRQDQW %DG± LIDQ\
IUHTXHQFLHVDUHf0$; OHQJWKZLGWK
KHLJKWUDWLRV!

)LJXUH+HDWVLQNVKDSHV YLHZHGIURPDERYH 
:KHUHKHDWVLQNUHVRQDQFHVFRXOGOLHZLWKLQ RUQHDUWR WKHIUHTXHQF\UDQJHFRQFHUQHGWKHEHVWSODFHIRU
WKH,&RUSRZHUWUDQVLVWRULVJHQHUDOO\LQWKHFHQWUHRIWKHKHDWVLQN¶VEDVH±XVXDOO\WKHEHVWSRVLWLRQIRUJRRG
WKHUPDOSHUIRUPDQFHWRR
(GJHORFDWLRQVFDXVHJUHDWHUUHVRQDQWJDLQDQGVRFDXVHKLJKHUOHYHOVRIHPLVVLRQV
9HUWLFDOILQVUHGXFHWKHUHVRQDQWJDLQIRUWKHGLUHFWLRQLQZKLFKWKH\UXQVRLWLVXVXDOO\EHVWIRUWKHILQVWR
UXQDORQJWKHORQJHVWKHDWVLQNGLPHQVLRQ)LQVUXQQLQJSHUSHQGLFXODUWRDUHVRQDQWGLPHQVLRQLQFUHDVHLWV

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
UHVRQDQWJDLQZKLFKLVQRWGHVLUDEOH)LJXUHVDQGVNHWFKWKHVHGHVLJQJXLGHOLQHV

*RRGVLWH
IRUGHYLFH

3RRUVLWHV
IRUGHYLFHV

*RRGRULHQWDWLRQRIILQV
DORQJORQJHVWD[LV

)LJXUH6RPHVNHWFKHVRIKHDWVLQNV

3RRUVLWHV
IRUGHYLFH

*RRGVLWH
IRUGHYLFH

%DG RULHQWDWLRQRIILQV
DFURVVORQJHVWD[LV

)LJXUH0RUHVNHWFKHVRIKHDWVLQNV
9HUWLFDOSLQVLQFUHDVHWKHUHVRQDQWJDLQRIDOOUHVRQDQWGLPHQVLRQVZKLFKLVDSLW\EHFDXVH³SLQ´KHDWVLQNV
DUHRIWHQPRUHHIILFLHQWWKDQILQQHGW\SHV

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 *RRGVLWH
IRUGHYLFH
*RRGRULHQWDWLRQRIILQV
DORQJORQJHVWD[LV

3RRUVLWH
IRUGHYLFH

)LJXUH<HWPRUHVNHWFKHVRIKHDWVLQNV

%DG RULHQWDWLRQRIILQV
DFURVVWKHORQJHVWD[LV

)LJXUH(YHQPRUHVNHWFKHVRIKHDWVLQNV

 6RPHXVHIXOWULFNV
8VHWKLFNDOXPLQLXPR[LGHRUJHOZDVKHUVWRUHGXFHWKHGHYLFHWRKHDWVLQNFDSDFLWDQFHWRUHGXFHWKHVWUD\
FXUUHQWZLWKRXWLQFUHDVLQJWKHWKHUPDOUHVLVWDQFHWRRPXFK
8VHVPDOOHUKHDWVLQNVWRPDNHWKHLUILUVWUHVRQDQWIUHTXHQF\KLJKHUWKDQf0$;E\VRPHFRPELQDWLRQRI
D  ,QFUHDVLQJWKHDLUIORZUDWH HJXVLQJIDQVWREORZWKHDLULQVWHDGRIUHO\LQJRQFRQYHFWLRQ 
E  8VHOLTXLGLQVWHDGRIDLUIRUFRROLQJ
F  8VHKHDWVLQNVZLWKHPEHGGHGKHDWODQHV DW\SHRIKHDWSLSH LQWKHLUEDVHVWRVSUHDGWKHGHYLFH
KHDWXQLIRUPO\DOORYHUWKHEDVHRIWKHKHDWVLQN
G  8VHVKLHOGHGWKHUPDOZDVKHUV WZRLQVXODWLQJOD\HUVZLWKDPHWDOVKLHOGLQEHWZHHQ ZLWKWKHVKLHOG
OD\HU5)ERQGHGWRDSRZHUUDLO VHH)LJXUHVDQG 

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
6KLHOGHGZDVKHUVDUHQHYHUSHUIHFWVRZKHQXVLQJWKHPZLWKDVDIHW\HDUWKHGJURXQGHGKHDWVLQNWKHUHZLOO
VWLOOEHVRPHVWUD\FXUUHQWLQWKHKHDWVLQNWKDWZLOOQHHGUHF\FOLQJEDFNWRWKHSRZHUUDLORIWKHGHYLFHWKDW
FDXVHG LW LQ WKH ILUVW SODFH ,I QRZKHUH HOVH LW VKRXOG EH UHFLUFXODWHG E\ < FDSDFLWRUV DW WKH SRZHU LQSXW
FRQQHFWLRQ

+HDWVLQN5)ERQGHGWRSRZHUUDLOHDUWKRUFKDVVLV
0XOWLSOHFRQQHFWLRQVDUHEHWWHU

6KLHOGHGLQVXODWLQJ
WKHUPDOZDVKHU

Internal VKLHOG
FRQQHFWHGWRD
SRZHUUDLO

3&%

)LJXUH([DPSOHRIXVLQJVKLHOGHGWKHUPDOZDVKHUV

9 7KHDUURZVVKRZ
WKHUHWXUQSDWKV
WDNHQE\WKHVWUD\
)URP FXUUHQWV
$&'&
UHFWLILHU
6KLHOGHG
'HFDS WKHUPDO
8QUHJXODWHG ZDVKHU
VWRUDJH
FDSDFLWRU 6WUD\&
6WUD\&

(DUWKLQJWKHKHDWVLQN 9±
UHOLHVRQ<FDSDFLWRUV
LQWKHPDLQVILOWHUWR 5)ERQGWRUDLO
UHWXUQWKHUHPDLQLQJ
VWUD\FXUUHQWWRWKH 3URWHFWLYHHDUWK VDIHW\JURXQG
SRZHUUDLOV

)LJXUH:KHUHWKHVWUD\FXUUHQWIORZVZKHQXVLQJDVKLHOGHGWKHUPDOZDVKHU

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 +HDWSLSHV
+HDW SLSHV XVH D VPDOO SDUW WR FROOHFW WKH KHDW IURP D GHYLFH DQG EHFDXVH LW LV VPDOO LW KDV YHU\ KLJK
UHVRQDQWIUHTXHQFLHVLGHDOO\PXFKKLJKHUWKDQ f0$;%XWWKHOHQJWKRIWKHKHDWSLSHSOXVWKHODUJHDUHDRI
KHDWGLVVLSDWHUDWLWVIDUHQGPDNHLWVUHVRQDQWIUHTXHQFLHVYHU\ORZRYHUDOO
,W PD\ EH SRVVLEOH WR ILW D FOLSRQ IHUULWH VOHHYHFODPS WR WKH SLSH FORVH WR WKH FROOHFWRU WR KHOS UHGXFH
HPLVVLRQVIURPWKHSLSHLWVHOIDQGLWVGLVVLSDWHUDVVKRZQLQ)LJXUHVDQG

)LWDIHUULWH"

7KHUPDFRUHIRUD 7KHUPDFRUHIRUD;HRQ70
SURFHVVLQJPRGXOH SURFHVVRU
)LJXUH([DPSOHVRIKHDWSLSHV

$LUIORZJXLGH )DQ

)LWDIHUULWHKHUH"

5HFHVVIRU
+HDWFROOHFWRUPDNHV WKHUPDOLQWHUIDFH
)LQQHG WKHUPDOFRQWDFWZLWK&38 PDWHULDO
KHDWVLQN QHHGV5)ERQGLQJWR5)
5HIHUHQFH3ODQH

)LJXUH$3HQWLXP,,,700RELOH0RGXOHKHDWH[FKDQJHU

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 5)ERQGLQJKHDWVLQNVWRUHGXFHHPLVVLRQV
:KHQ KHDWVLQNLQJ5) DQG GLJLWDO ,&VD ORZ ERQGLQJ LQGXFWDQFH LV LPSRUWDQW± DV PHQWLRQHG HDUOLHU ±DQG
DOVRWRSUHYHQWWKH³KHDWVLQNSOXV5)ERQGLQJ´VWUXFWXUHIURPUHVRQDWLQJEHORZf0$;
7KHUDGLDWHGHPLVVLRQVIURPDKHDWVLQNLQFUHDVHVZLWKWKHERQGLQJQHWZRUNLQGXFWDQFHWRWKHSRZHURI
DSSUR[ VRIRUDWUDQVLVWRUUXQQLQJDW0+]DVLQJOHVKRUWERQGWRWKHFORVHVWSRLQWRQLWVSRZHUUDLOLV
XVXDOO\ DGHTXDWH %XW IRU KLJKHU IUHTXHQFLHV HYHQO\ GLVWULEXWHG ERQGV DUH LPSRUWDQW DV WKH\ FDQ KDYH
PXFKORZHUHPLVVLRQVWKDQLIWKH\DUHSRRUO\GLVWULEXWHGEXWDFKLHYHWKHVDPHRYHUDOOLQGXFWDQFH
,QWHO UHFRPPHQGV 5)ERQG VSDFLQJV  f ZKHUH f LV WKH UG KDUPRQLF RI WKH SURFHVVRU FRUH FORFN
IUHTXHQF\ , UHFRPPHQG  f0$; LQVWHDG f DQG f0$; LQ 0+] JLYHV ERQGVSDFLQJV LQ PHWUHV *+] JLYHV
WKHPLQPP 
' ILHOG VROYHUV FDQ TXLFNO\ UHYHDO SUREOHPV ZLWK KHDWVLQN ERQGLQJ DQG DOVR KHOS WR ILQG WKHLU VROXWLRQV
TXLFNO\)LJXUHVKRZVDVLPXODWLRQRIWKHHPLVVLRQVIURPDQH[DPSOHµIORDWLQJ¶KHDWVLQNYHU\NLQGO\GRQH
IRU PH E\ 3DXO 'X[EXU\ XVLQJ )/2(0& ZKLFK LV QRZ FDOOHG 0LFURVWULSHV DQG VXSSOLHG E\ &67
ZZZFVWFRP 

7KLVVKRZVWKHILHOGVLQRQHSODQH
DW*+]EXWWKHVLPXODWRU
FDOFXODWHVDOOIUHTXHQFLHVLQDOO
WKUHHGLPHQVLRQV

7KLVVLPXODWLRQLVRIWKH
KHDWVLQNLQIUHHVSDFH±
SUR[LPLW\WRHQFORVXUH
ZLOOKDYHDQHIIHFW

)LJXUH7KHHOHFWULFQHDUILHOGVDURXQGWKHµIORDWLQJ¶KHDWVLQNDWLWVUHVRQDQWIUHTXHQF\
2QHRIWKHFRPPRQRXWSXWIRUPDWVIURP'ILHOGVROYHUVOLNH0LFURVWULSHVLVDWKUHHGLPHQVLRQDOYLHZRIWKH
ILHOGVDURXQGDQREMHFWFRORXUHGWRUHSUHVHQWLQWHQVLW\DQGIOXFWXDWLQJDVWKHVLPXODWHGIUHTXHQF\LVUDPSHG
WKURXJKWKHVHOHFWHGUDQJH7KHUHVXOWLQJFRORXUDQLPDWLRQVDUHYHU\DWWUDFWLYHDQGKHOSGHVLJQHUVTXLFNO\
JHWDQRYHUYLHZRIZKHWKHUWKH\PLJKWKDYHSUREOHPVDWDQ\IUHTXHQF\
$ ³FXWWLQJ SODQH´ FDQ EH FKRVHQ DW DQ\ DQJOH WR YLHZ WKH ' DQLPDWLRQ LQ ' IRU PRUH SUHFLVH
REVHUYDWLRQVDQGPHDVXUHPHQWVDQGWKLVLVZKDWKDVEHHQXVHGWRFUHDWH)LJXUHZKLFKKDVDOVRFKRVHQ
WKHYLGHRIUDPHFRUUHVSRQGLQJWRWKHILUVWUHVRQDQWIUHTXHQF\WKDWDSSHDUHG
,Q)LJXUHWKHKHDWVLQNLVDVVXPHGWREHIORDWLQJDERYHDQ5)5HIHUHQFH3ODQHZLWKWKHWKLQZLUHFHQWUHG
XQGHU LW EHLQJ D VRXUFH RI 5) FXUUHQW %HFDXVH QRWKLQJ HOVH LV QHDUE\ WKH HOHFWULF QHDUILHOGV DURXQG WKH
KHDWVLQNDUHV\PPHWULFDO,QWKHIDUILHOG VHH3DUWRI>@ WKHVHFRPSOH[QHDUILHOGVZLOOEHFRPHDVLPSOH
H[SDQGLQJVSKHULFDOVKHOO

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 7KLVVKRZVWKHILHOGVLQRQHSODQH
DW*+]EXWWKHVLPXODWRU
FDOFXODWHVDOOIUHTXHQFLHVLQDOO
WKUHHGLPHQVLRQV

7KLVVLPXODWLRQLVRIWKH
KHDWVLQNLQIUHHVSDFH±
SUR[LPLW\WRHQFORVXUH
ZLOOKDYHDQHIIHFW

)LJXUH7KH)LJZLWKKHDWVLQN5)ERQGHGGLUHFWO\WR5HIHUHQFH3ODQHDWHDFKFRUQHU
)LJXUHVKRZVWKHVDPHKHDWVLQNDV)LJXUHDWWKHVDPHIUHTXHQF\EXWWKLVWLPHZLWK]HUR:ERQGVWR
WKH 5) 5HIHUHQFH 3ODQH DW HDFK RI LWV IRXU FRUQHUV 7KH QHDUILHOGV DUH QRZ QRWLFHDEO\ FORVHU WR WKH 5)
5HIHUHQFH 3ODQH ± LQGLFDWLQJ ORZHU IDUILHOG HPLVVLRQV ± EXW RI FRXUVH IURP WKLV RQH YLGHR IUDPH ZH GRQ¶W
NQRZZKHWKHUWKHHPLVVLRQVKDYHQRZZRUVHQHGDWDGLIIHUHQWIUHTXHQF\
0LFURVWULSHVFDQDOVRSORWWKHILHOGVWUHQJWKDWDVSHFLILHGPHDVXULQJSRLQWDQG)LJXUHVKRZVDQXPEHURI
VXFKJUDSKVSORWWHGRQWKHVDPHD[LVIRUGLIIHUHQWFRPELQDWLRQVRIKHDWVLQNERQGLQJ

)ORDWLQJ
JURXQGVRQHDWHDFKFRUQHU
JURXQGVRQHDWHDFKFRUQHU
DQGLQWKHPLGGOHRIHDFKVLGH
JURXQGVDVDERYHZLWK
DGGLWLRQDOHTXLVSDFHGERQGV

7KLVVLPXODWHVWKH
KHDWVLQNLQIUHHVSDFH±
SUR[LPLW\WRHQFORVXUH
ZLOOKDYHDQHIIHFW

          
)UHTXHQF\ *+]

)LJXUH9DULDWLRQVLQ(ILHOGHPLVVLRQVDVKHDWVLQN5)ERQGLQJLVYDULHG

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 7KHYHUWLFDOD[LVRI)LJXUHVKRZVWKHIDUILHOGHPLVVLRQVDWDVSHFLILHGSRLQWEXWQRWHWKDWLWXVHVDOLQHDU
VFDOHZKHUHDVPRVWHPLVVLRQVPHDVXUHPHQWVXVHDG% LHORJDULWKPLF VFDOH ,¶PVXUHWKDWG%VFDOLQJLVD
GLVSOD\RSWLRQ ,WVKRZVWKDWWKHIORDWLQJKHDWVLQNKDGKLJKHPLVVLRQVDWORZIUHTXHQFLHVGHFOLQLQJDV
IUHTXHQF\LQFUHDVHGXQWLOSHDNLQJXSDJDLQDWLWVILUVWUHVRQDQFHRI*+]
'LUHFWERQGLQJDWDOOIRXUFRUQHUVKDGDYHU\GUDPDWLFHIIHFWLQUHGXFLQJWKHHPLVVLRQVEHORZ0+]EXW
UHGXFHGWKHUHVRQDQFHIUHTXHQF\IURPWR*+]'LUHFWERQGLQJDWDOOIRXUFRUQHUVSOXVLQWKHPLGGOH
RIHDFKVLGHRIWKHKHDWVLQN±PDNLQJHTXDOO\VSDFHG5)ERQGVLQDOO±UHGXFHGWKHHPLVVLRQVVLJQLILFDQWO\
XSWR*+]DQGFDXVHGWKHUHVRQDQWIUHTXHQF\WRLQFUHDVHWR*+]
,QFUHDVLQJWKHQXPEHURIHTXDOO\VSDFHGERQGVWRUHGXFHGWKHHPLVVLRQVVLJQLILFDQWO\DOOWKHZD\XSWR
*+] ZLWK WKH ILUVW UHVRQDQFH QRZ VKLIWHG IXUWKHU XS WR *+] 7KH OHYHO RI HPLVVLRQV DW IUHTXHQFLHV
EHORZ*+]LVQRZYHU\ORZLQGHHG
)LJXUHH[SHULPHQWVZLWKYDU\LQJWKHERQGUHVLVWDQFHVWDUWLQJZLWKWKHGLUHFWFRUQHUERQGLQJRI)LJXUH
DQGWKHQLQFUHDVLQJWKHERQGUHVLVWDQFH

ERQGVHDFK:
(DFKERQG:
(DFKERQG:
(DFKERQG:
(DFKERQG:

+HDWVLQNVLPXODWHGLQIUHH
VSDFH± SUR[LPLW\WRHQFORVXUH
ZLOOKDYHDQHIIHFW

          
)UHTXHQF\ *+]

)LJXUH9DULDWLRQVLQ(ILHOGHPLVVLRQVDVWKH5)ERQGLQJUHVLVWDQFHLVYDULHG
)LJXUHVKRZVWKDWDOORIWKHUHVLVWDQFHYDOXHVXVHGGDPSHQHGGRZQWKHILUVWUHVRQDQFHEXWWKHKLJKHU
WKH UHVLVWDQFH WKH ZRUVH WKH HPLVVLRQV EHFDPH DW ORZ IUHTXHQFLHV 5HVLVWLYH ERQGLQJ PLJKW EH D XVHIXO
WHFKQLTXH ZKHQ LW ZDV QRW SUDFWLFDO WR REWDLQ D ILUVW ORZHVW  UHVRQDQFH DERYH WKH KLJKHVW IUHTXHQF\ RI
FRQFHUQ ± FHUWDLQ SURGXFW GHVLJQV PD\ KDYH WR WUDGH RII EHWZHHQ HPLVVLRQ OHYHOV DW UHVRQDQW IUHTXHQFLHV
DQGWKHOHYHOVDWORZIUHTXHQFLHV
3DXOFUHDWHGWKHDERYHIRXUJUDSKLFVDQGPDGHWKHPHDVXUHPHQWVDQGHPDLOHGWKHPWRPHZKLOH,ZDV
FUHDWLQJ WKH (0& WUDLQLQJ FRXUVH WKLV DUWLFOH LV EDVHG XSRQ RYHU D FRXSOH RI KRXUV RQH HYHQLQJ ,PDJLQH
KRZORQJLWZRXOGKDYHWDNHQWRJDLQWKLVNLQGRILQVLJKWE\PDNLQJSURWRW\SHVDQGWHVWLQJWKHP
0RGHUQHOHFWURQLFGHVLJQLVVRFRPSOH[DQGIDVWSDFHGWKDWLWUHTXLUHVWKHXVHRIILHOGVROYHUVWRVDYHWLPH
DQGFRVWGXULQJ GHVLJQDQG GHYHORSPHQW GHOLYHULQJ SURGXFWV WR FXVWRPHUV ZLWK OHVV ULVN RI WLPHWRPDUNHW
GHOD\VDQGFRQVHTXHQWO\ORZHUFRUSRUDWHILQDQFLDOULVNV
)LJXUH  SURPSWV WKH TXHVWLRQ RI ZKHWKHU ZH FRXOG XVH ³VRIWIHUULWH 5) VXSSUHVVRU EHDGV´ WR RXU
DGYDQWDJHE\FKRRVLQJIHUULWHVWKDWKDYHKLJK UHVLVWLYH LPSHGDQFHVDERYH*+]WRGDPSHQGRZQWKHILUVW
UHVRQDQFH ZKLOVW KDYLQJ ORZ LPSHGDQFHV EHORZ *+] VR DV WR PLQLPLVH WKH HPLVVLRQV DW WKH ORZHU
IUHTXHQFLHV EXW,GLGQ¶WDVN3DXOWRWU\WKLVIRUPHEHFDXVH,IHOW,KDGDOUHDG\H[FHHGHGZKDW,FRXOGDVNDV
DIDYRXU 

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 &RPELQLQJVKLHOGLQJZLWKKHDWVLQNLQJ
6KLHOGLQJRIWHQUHVWULFWVDLUIORZDQGZKHQGHYLFHVKDYHVLJQLILFDQWSRZHUGLVVLSDWLRQFDQFDXVHRYHUKHDWLQJ
%XWVKLHOGLQJDQGKHDWVLQNLQJFDQEHFRPELQHGRQ3&%VDQGLQHQFORVXUHVDVWKHH[DPSOHVLQ)LJXUHV
DQGVKRZ

)LJXUH([DPSOHRI3OD\VWDWLRQZKLFKXVHVD3&%VL]HGVKLHOGDVLWVKHDWVLQN

'HYLFHVPRXQWHGRQWKHUHDUZDOO
RIDZHOOVKLHOGHGHQFORVXUH

1RDSHUWXUHVRUMRLQWV
LQWKLVPHWDOZDOO

&RXOGILWDQ
H[WHUQDOILQQHG
KHDWVLQNWRWKH
UHDUVKLHOGZDOO

3&%

3&%9SODQHQHHGVPXOWLSOHORZLPSHGDQFH
FRQQHFWLRQVWRWKHLQVLGHRIWKHHQFORVXUH¶V
ZDOODOODORQJWKLVUHDUHGJH DWOHDVW
)LJXUH([DPSOHRIFRPELQLQJVKLHOGLQJDQGKHDWVLQNLQJIRUDQHQFORVXUH

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
7KHVWUD\5)FXUUHQWVIORZLQJRQWKHLQVLGHVXUIDFHRIWKHUHDUSDQHORIWKHH[DPSOHLQ)LJXUHFDQEHYHU\
LQWHQVHDVWKH\UHWXUQYLDWKHHGJHRIWKH3&%%HFDXVHWKHVHFXUUHQWVDUHVRLQWHQVHLWLVEHVWWRHQVXUH
WKDW WKHUH DUH QR VSOLWV MRLQWV RU RWKHU DSHUWXUHV LQ WKH UHDU SDQHO HVSHFLDOO\ QRW DURXQG WKH ,&V DQG
EHWZHHQWKHPDQGWKH5)ERQGLQJWRWKH9SODQHDWWKH3&%¶VHGJH
*RRG VKLHOGLQJ HIIHFWLYHQHVV LV UHTXLUHG IRU )LJXUH ¶V RYHUDOO HQFORVXUH EHFDXVH WKHUH DUH PDQ\ RWKHU
SRVVLEOH SDWKV IRU WKH VWUD\ KHDWVLQN FXUUHQWV WKDW FDQ KDYH ORZ LPSHGDQFHV ± HVSHFLDOO\ DW WKHLU VHULHV
UHVRQDQWIUHTXHQFLHVRULIWKHGHVLUHGUHWXUQSDWKKDVDQ\SDUDOOHOUHVRQDQFHV
)RUWKLVUHDVRQLWLVLPSRUWDQWWRFRQQHFWWKH9SODQHWRWKHUHDUSDQHOLQDZD\WKDWHQVXUHVDYHU\VKRUW
DQGYHU\ORZLPSHGDQFHQRQUHVRQDQWSDWKXSWRf0$;2QHZD\WRGRWKLVLVWRFRQWLQXHWKH9SODQHULJKWWR
WKHUHDUHGJHRIWKH3&%WKHQXVHWKH³HGJHSODWLQJ´WHFKQLTXHWRSURYLGHDFRQWLQXRXV9FRQQHFWLRQDOO
DORQJWKHUHDUHGJHRIWKH3&%7KHUHDUSDQHOPXVWKDYHDKLJKFRQGXFWLYLW\SODWHGVXUIDFHDQGFRQQHFWWR
WKHHGJHSODWHG9VWULSRQWKH3&%XVLQJDFRQWLQXRXVVWULSRIFRQGXFWLYH(0&JDVNHWDOODORQJWKHSODWHG
9HGJHRIWKH3&%
7KH SODWLQJ RI WKH 3&% HGJH LQVLGH VXUIDFH RU WKH UHDU SDQHO DQG WKH JDVNHW PDWHULDO PXVW DOO EH
JDOYDQLFDOO\FRPSDWLEOHJLYHQWKHDQWLFLSDWHGOLIHF\FOHHQYLURQPHQWWKDWWKHSURGXFWZLOOEHXVHGLQ
,WVKRXOGEHHQRXJKIRUWKH3&%¶VIL[LQJVWRSUHVVWKHERDUG¶VUHDUHGJHILUPO\LQWRWKHJDVNHWDORQJLWVHQWLUH
OHQJWKEXWDFRXSOHRUWKUHHPHWDOIL[LQJEUDFNHWVEHWZHHQWKH3&% DQGLWV9SODQH DQGWKHUHDUSDQHO
ZRXOGQ¶WJRDPLVV WDNLQJDSSURSULDWHSUHFDXWLRQVDJDLQVWJDOYDQLFFRUURVLRQDVEHIRUH 
1RWHYHU\3&%PDQXIDFWXUHUFDQGRHGJHSODWLQJSURSHUO\KRZHYHUDQGZKHUHWKHUHLVVRPHJRRGUHDVRQ
ZK\VXFKPDQXIDFWXUHUVFDQQRWEHXVHGDOWHUQDWLYHPHDQVRIDFKLHYLQJDUHOLDEOHORZLPSHGDQFH5)ERQG
DOODORQJWKHUHDUHGJHRIWKH3&%VKRXOGEHIRXQG5HPHPEHUWKDWLWLVWKHRYHUDOOFRVWRIPDQXIDFWXUHWKDW
reallyPDWWHUVQRWWKHEDUHERDUGFRVW>@

6WUD\&
'HYLFHUHIHUHQFHGWRUHFWLILHGPDLQV
6WUD\&
'HYLFHUHIHUHQFHGWRUHFWLILHGPDLQV
6WUD\&
5HDUVKLHOG
'HYLFHUHIHUHQFHGWR9 ZDOOXVHG
6WUD\& DVKHDWVLQN
'HYLFHUHIHUHQFHGWR9
6WUD\&
'HYLFHUHIHUHQFHGWR9

6HULHVFDSDFLWRU5)ERQGWR
UHFWLILHGPDLQV5HIHUHQFH
0XOWLSOH5)ERQGVWR
3&%¶V9SODQH5HIHUHQFH

)LJXUH:KHUHWKHVWUD\KHDWVLQNFXUUHQWVIORZLQ)LJXUH
)RU WKH H[DPSOH VKRZQ LQ )LJXUH  )LJXUH  VKRZV WKDW WKH KHDWVXQN ,&V VXSSOLHG E\ SRZHU UDLOV
UHIHUHQFHGIURPWKH9SODQHKDYHWKHLUVWUD\FXUUHQWVUHWXUQHGGLUHFWO\WRWKDWSODQH
7KH ,&V WKDW DUH SRZHUHG IURP WKH $& PDLQV YLD WKH EULGJH UHFWLILHU W\SLFDOO\ WKH RIIOLQH PDLQV VZLWFKHU 
KDYH WKHLU VWUD\ FXUUHQWV SDVV WKURXJK WKH 9 SODQH WR WKH VDIHW\UDWHG DQG LGHDOO\  WKLUGSDUW\ VDIHW\
DJHQF\DSSURYHG FDSDFLWRUVWKDWFRQQHFWWRWKHLUKD]DUGRXVYROWDJHUDLOV
,WLVRIFRXUVHLPSRUWDQWWRHQVXUHWKDWWKHVHFDSDFLWRUVGRQ¶WLQFUHDVHWKHOHDNDJHFXUUHQWE\WRRPXFKDQG
FDXVHVDIHW\KD]DUGV HJLIDVDIHW\HDUWKJURXQGZLUHEUHDNV RUDIDLOXUHWRFRPSO\ZLWKWKHUHOHYDQWVDIHW\
VWDQGDUGV
)LJXUHVKRZVKRZWRFRPELQHVKLHOGLQJZLWKKHDWVLQNLQJIRUD3&%PRXQWHGSDUWDORQJWKHOLQHVRIWKH
3OD\6WDWLRQLQ)LJXUH7KHUHDUHPDQ\GLIIHUHQWZD\VRIFUHDWLQJWKHVKLHOGLQJZDOODURXQGWKH,&IURP

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
VROGHUHGLQSDUWVWRFRQGXFWLYHO\JOXHGJDVNHWV SRVVLEO\HYHQIRUPLQSODFHFRQGXFWLYHHODVWRPHUIRUDYHU\
VNLQQ\,& WRSDUWVWKDWDUHKHOGLQSODFHE\FOLSVRIKRXVLQJVDQGPDNHFRQWDFWE\SUHVVXUHDORQH
,W LV LPSRUWDQW IRU WKH PHWDO KHDWVLQN SDUW WR PDNH D UHOLDEOH HOHFWULFDO FRQWDFW ZLWK WKH VKLHOGLQJ ZDOO DOO
DURXQGRYHUWKHOLIHRIWKHSURGXFWVRR[LGDWLRQJDOYDQLFDQGIUHWWLQJFRUURVLRQDWDOOWKHFRQWDFWVXUIDFHV
ZLOODOOQHHGWREHWDNHQLQWRDFFRXQW

+HDWVLQN
7KHUPDOZDVKHU HJJHOSDG

3&%
9 RUSRZHU SODQH

$FRQGXFWLYHµSLFWXUHIUDPH¶JDVNHWDOODURXQGWKH,&
7KHFRQWDFWSRLQWVDQGYLDVWRWKH5HIHUHQFH3ODQHLQWKH3&%PXVW
EH VSDFHGfPD[ DSDUWDQGXQLIRUPO\VSDFHGDOODURXQGWKH
SHULPHWHU
0LJKWEHDEOHWRXVHVWLFNRQFRQGXFWLYHJDVNHWRUDEHDGRI
FRQGXFWLYHJOXHDVWKHSLFWXUHIUDPH
7KHKHDWVLQN¶VERWWRPVXUIDFHPXVWPDNHDUHOLDEOHORZUHVLVWDQFH
FRUURVLRQSURRIHGFRQWDFWWRWKHFRQGXFWLYHSLFWXUHIUDPHJDVNHW
)LJXUH([DPSOHRIFRPELQLQJVKLHOGLQJDQGKHDWVLQNLQJIRUDQ,&RQD3&%

$Q,QWHOGHVLJQHG
KHDWVLQNERQGLQJSDUW
IRUWKHSLQ3HQWLXP,9Œ

$SODWHGPHWDOVWDPSLQJ
XVLQJVSULQJVWHHORU
EHU\OOLXPFRSSHU

)LJXUH$KHDWVLQNERQGLQJSDUWGHVLJQHGE\,QWHOIRUWKHSLQ3HQWLXP,9Œ

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI
 )LJXUHVKRZVDJRRGH[DPSOHRIDSDUWGHVLJQHGDVVXJJHVWHGE\)LJXUH7KHSDUWLVVWDPSHGIURPD
VXLWDEOHVSULQJ\PHWDODQGSODWHGZLWKDKLJKFRQGXFWLYLW\PHWDO HJEULJKWDFLGWLQ LIQHFHVVDU\,WLVSLFN
DQGSODFHGRYHUWKH,&DQGUHIORZVROGHUHGWRWKH3&%DWWKHVDPHWLPHDVDOOWKHRWKHUFRPSRQHQWVWKHQ
WKHKHDWVLQNLVSUHVVHGGRZQRQWRSPDNLQJFRQWDFWZLWKWKHVSULQJILQJHUVLQFRUSRUDWHGLQWRWKHSDUW
$VPHQWLRQHGHDUOLHUWKHPHWDOEDVHRIWKHKHDWVLQNVKRXOGKDYHDKLJKFRQGXFWLYLW\SODWLQJSDVVLYDWLRQZLWK
D PHWDO WKDW LV JDOYDQLFDOO\ FRPSDWLEOH ZLWK WKH SDUW JLYHQ WKH DQWLFLSDWHG OLIHF\FOH HQYLURQPHQW RI WKH
SURGXFW LW LV XVHG LQ $ PHFKDQLFDO FOLS RU RWKHU PHWKRG RI UHWHQWLRQ ZLOO EH QHHGHG WR NHHS WKH KHDWVLQN
SUHVVHGILUPO\GRZQRQWRWKHSDUW
,WLVHDV\WRGHVLJQVXFKSDUWV\RXUVHOIDQGKDYHWKHPPDGHDQGSODWHGDWORZFRVW

 5HIHUHQFHV
>@ ³7KH3K\VLFDO%DVLVRI(0&´.HLWK$UPVWURQJ7KH(0&-RXUQDOLQIRXU3DUWV,VVXHVDQG
1RYHPEHU-DQXDU\0DUFKDQG0D\ZZZWKHHPFMRXUQDOFRP
>@ ³'HVLJQ7HFKQLTXHVIRU(0&´.HLWK$UPVWURQJIURPWKHDUFKLYHVDWZZZWKHHPFMRXUQDOFRP
 3DUW  &LUFXLWGHVLJQ GLJLWDODQDORJXHVZLWFKPRGHFRPP¶V DQGFKRRVLQJFRPSRQHQWV-DQ 
0DUFK
 3DUW  &DEOHVDQGFRQQHFWRUV0D\DQG-XO\
 3DUW  )LOWHULQJDQGVXSSUHVVLQJWUDQVLHQWV6HSWDQG1RYDQG-DQ
 3DUW  6KLHOGLQJ VFUHHQLQJ 0DUFK0D\DQG-XO\
 3DUW  3&%OD\RXW LQFOXGLQJWUDQVPLVVLRQOLQHV 6HSWDQG1RY
 3DUW  (6'HOHFWURPHFKDQLFDOGHYLFHVSRZHUIDFWRUFRUUHFWLRQYROWDJHIOXFWXDWLRQVLPPXQLW\WR
SRZHUTXDOLW\LVVXHV-DQ0DUFK0D\DQG-XO\
>@ ³(0&IRU3ULQWHG&LUFXLW%RDUGV±EDVLFDQGDGYDQFHGGHVLJQDQGOD\RXWWHFKQLTXHV´.HLWK
$UPVWURQJ1XWZRRG8.)HEUXDU\,6%1 SHUIHFWERXQG RU
 VSLUDOERXQG ZZZHPFDFDGHP\RUJERRNVDVS
>@ ³(0&7HVWLQJ´7LP:LOOLDPVDQG.HLWK$UPVWURQJIURPWKHDUFKLYHVDWZZZWKHHPFMRXUQDOFRP
3DUW 5DGLDWHGHPLVVLRQV)HE
3DUW &RQGXFWHGHPLVVLRQV$SU
3DUW )DVWWUDQVLHQWEXUVWVXUJHHOHFWURVWDWLFGLVFKDUJH-XQH
3DUW 5DGLDWHGLPPXQLW\$XJDQG2FW
3DUW &RQGXFWHGLPPXQLW\2FWDQG-DQ
3DUW /RZIUHTXHQF\PDJQHWLFILHOGVHPLVVLRQVDQGLPPXQLW\SOXVPDLQVGLSVGURSRXWV
LQWHUUXSWLRQVVDJVEURZQRXWVDQGVZHOOV-DQDQG0DUFK
3DUW +DUPRQLFVDQGIOLFNHUHPLVVLRQV0DUFK
>@ ³'HVLJQLQJ,2VVRWKH\ZLOOQRWVXIIHUIURPµJURXQGORRS¶FXUUHQWVLQFDEOHVFUHHQV VKLHOGV ´.HLWK
$UPVWURQJ7KH(0&-RXUQDO,VVXH-XO\SS
>@ ³%20FRVWDQGSURILWDELOLW\´.HLWK$UPVWURQJ7KH(0&-RXUQDO0D\IURPWKHDUFKLYHVDW
ZZZWKHHPFMRXUQDOFRP

(0&7HFKQLTXHVIRU+HDWVLQNV  3DJHRI