Citation
Proximate and ultimate causes of brood reduction in Brown pelicans (Pelecanus occidentalis)

Material Information

Title:
Proximate and ultimate causes of brood reduction in Brown pelicans (Pelecanus occidentalis)
Creator:
Ploger, Bonnie Jean
Publication Date:
Language:
English
Physical Description:
xiv, 193 leaves : ill. ; 29 cm.

Subjects

Subjects / Keywords:
Animal nesting ( jstor )
Bird nesting ( jstor )
Chicks ( jstor )
Clutches ( jstor )
Death ( jstor )
Eggs ( jstor )
Food ( jstor )
Hatching ( jstor )
Pelicans ( jstor )
Siblings ( jstor )
Dissertations, Academic -- Zoology -- UF
Zoology thesis Ph. D
Genre:
bibliography ( marcgt )
non-fiction ( marcgt )

Notes

Thesis:
Thesis (Ph. D.)--University of Florida, 1992.
Bibliography:
Includes bibliographical references (leaves 179-191).
General Note:
Typescript.
General Note:
Vita.
Statement of Responsibility:
by Bonnie Jean Ploger.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
Copyright [name of dissertation author]. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
029759083 ( ALEPH )
29374017 ( OCLC )

Downloads

This item has the following downloads:


Full Text
PROXIMATE AND ULTIMATE CAUSES OF BROOD REDUCTION IN BROWN
PELICANS (PELECANUS OCCIDENTALIS)
BY
BONNIE JEAN PLOGER
A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
1992


ACKNOWLEDGEMENTS
I thank Jane Brockmann for her tremendous support
through all phases of my research. Jane has been a
wonderful advisor, treating me simultaneously as a
colleague, student and friend. Thanks also go to Peter
Feinsinger for his friendship, inspired teaching and helpful
criticisms of research proposals. I also thank Peter
Feinsinger, along with Carol Aubspurger, for getting me
excited about "siblicide" and "brood-reduction" in plants.
In addition to Peter, I also thank Marty Crump and Mike
Collopy for their ideas and advice during the planning of my
research. I wish that they had remained in Florida and thus
been able to remain on my committee.
I thank Jack Kaufmann, Doug Levey and John Sivinski for
generously coming on board as committee members at the 11th
hour. I thank them for their helpful comments on earlier
drafts of the dissertation. Doug Levey provided
particularly detailed comments on drafts of the
dissertation, for which I am grateful. I thank Lou
Guillette for all his ideas and advice about my project on
embryonic development in cattle egrets. I also thank Lou
for remaining on my committee after I changed projects and
strayed far from developmental biology.
11


Doug Mock has acted as an unofficial outside member of
my committee through periodic idea-full conversations and
through detailed critiques of my grant proposals. Doug also
provided valuable comments on earlier drafts of Chapter 2.
I thank Doug whole-heartedly for his continuing support.
Thanks also go to Trish Schwagmeyer for her suggestions and
ideas about the design of my research on brown pelicans.
Several people provided me with information on brown
pelicans that was either hard to obtain or unpublished. I
am grateful to D. Pinzn and Hugh Drummond for sending me
their unpublished manuscript. I thank Jim Rodgers for
providing hard-to-find references. Stephen Nesbitt provided
me with an annual performance report on brown pelicans in
nesting in Florida. He also provided helpful tips about
colony locations. I thank Carolina Murcia providing
information about a Panamanian pelican colony. I am also
indebted to Mark Shields for not only providing me with
unpublished data from his North Carolina population, but
also allowing me to collect blood from some of his birds for
a post-doctoral project.
The National Audubon Society provided invaluable
support during my 1990 brown pelican research. Special
thanks go to Rich Paul, manager of the Tampa Bay
Sanctuaries, for his generous support throughout the 1990
research season.. Rich not only provided me with permission
to work in the colonies, but also to stay in a cabin on one
in


of the islands. I am particularly grateful to Rich for
loaning me a boat, and continuing to let me use it even
after I sank it. I also thank the Gardenier Mining Company
for permission to work on their islands and for providing
parking for research vehicles. Pam Phelps and Steve McGehee
provided outstanding assistance while living in primitive
conditions and working extremely long hours. I also thank
them both for their continued friendship.
I thank Jim Johnson, Refuge Manager of the Lower
Suwannee National Wildlife Refuge of the U.S. Fish and
Wildlife Service, for permission to work on Seahorse Key in
1989. Thanks also go to Frank Maturo for facilitating my
use of the biological station on the island, and to Chuck
Haven, Henry Coulter and especially K. C. Brown for
maintenance of the boats and research station. I thank
Laurie Eberhardt and Jane Brockmann for keeping track of
events in key focal nests on a few days when I needed
several hours on break. I also thank my mother, Eleanore
Ploger, for assisting with some data entry while enduring
extreme heat and humidity. Thanks also go to my brother,
Jim Ploger, for working on Jane Brockmann's horseshoe crabs
for a week so that I could continue my pelican observations
uninterrupted.
A total of 11 months of continuous observations created
a tremendous mountain of data. I thank Joan Binkley, Ron
Clouse, James ("J. P.") Jouver, and Mark Stowe for helping
IV


me with this arduous task. Thanks go to Mark Stowe for the
use of his computer, printer and modem for an extended
period. I also thank Ming Lee Prospero for assistance with
manuscript preparation and the literature search.
Financial support in 1990 was provided by an Elizabeth
Adams Fellowship from Mount Holyoke College and awards from
the Frank M. Chapman Memorial Fund and the Joseph Henry Fund
of Sigma Xi Grants-in-Aid of Research. The Department of
Zoology at the University of Florida provided me with a
research assistantship, use of a boat, and housing at the
Seahorse Key Biological Station for the 1989 season. Thanks
again go to H. J. Brockmann for providing supplemental
financial support in the 1989 season. Financial support in
both years was also provided by the University of Florida
Foundation. I also thank my husband, Don Allan, for
providing additional financial support during this period
when we were still engaged to be married.
En route to my work with brown pelicans, I conducted a
variety of research projects. I wish to thank all those who
assisted me during these earlier projects. My first
potential dissertation project involved communal roosting
behavior of Heleconius butterflies. I thank Lincoln Brower,
Tom Emmel, and Allan Masters for their helpful advice on
this project. Peter May introduced me to good field sites
in Florida. I also thank Larry Gilbert for showing me his
Costa Rica field site and discussing the details of
v


Heleconius biology. I did not stay with this project. The
lure to work with creatures with feathered rather than
scaled wings was too great.
My second potential dissertation project investigated
the proximate causes of hatching asynchrony in cattle
egrets. Numerous people helped me with this two-year study.
This project required placing floating blinds in willow-
swamps. The following people helped to build and/or launch
two floating platforms: Rich Buchholz, Kazuo Horikoshi,
Carlos Martinez del Rio, Paul Andreadis, Doug Levey, Laurie
Eberhardt, Alan Pounds, Jane Brockmann, Mike Miamoto, Mark
Stowe and Cathy Sehley. One of my experiments required
construction of 30 artificial cattle egret nests. I thank
Vas Demas, Laurie Eberhardt, Peter Martin, Cathy Langtimm,
Paul and Debbie Andreadis, John Scott Foster, Alehondro
Grehal, Rob and Linda Garrett, Brent and Sylvia Palmer, and
Mark Stowe for participating in a "nest fest" and building
artificial nests. Martha Groom, Bob Podolsky, Carlos
Martinez Del Rio, Paul Andreadis, Linda Fink, Doug Mock and
Jane Brockmann all provided valuable comments on various
drafts of my cattle egret research proposal. Lou Guillette,
Vince Demarco, Brent Palmer and Vicki McDonald provided
helpful advice about embryonic development. Laurence
Alexander provided information about potential colony
sites.I also thank Peter Frederick, Marilyn Spalding, Ken
Meyer, Naomi Edelson and other members of the "Wading Bird"
vi


group for valuable suggestions about the research design.
The cattle egret project would have been impossible
without assistance in the field. Russ Sanderson was
tremendously enthusiastic about splashing hip-deep in
alligator-infested water at 4:00 a.m. every morning. I also
thank Ken Kroel, Use Barube, Cathy Sahley and Pam Wexler-
Rubin for enduring difficult field conditions and a
stressed and sometimes testy supervisor.
Financial support for cattle egret project was provided
by an Animal Behavior Research Grant, a Herbert and Betty
Carnes Research Fund Award from the American Ornithologists 1
Union, an E. Alexander Bergstrom Memorial Research Fund
Award from the Association of Field Ornithologists, a
Florida Ornithological Society Research Grant, a Grant-in-
Aid of Research from Sigma Xi and a Zoology Department
Research Assistantship.
Several people deserve thanks both for their friendship
and for their helpful comments about my research. These
people include: Rich Buccholtz, Laurie Eberhardt, Bob
Podolsky, Martha Groom and Dustin Penn. I also thank other
members of Jane Brockmann's "Behavior Group" for their
ideas.
Special thanks go to Mark Stowe for his friendship,
helpful criticisms of drafts of grant proposals, fruitful
discussions of research ideas, and his inventive electronic
wizardry. Mark has been a great help from the beginning of
Vll


my work in Florida. Special thanks also go to Abby Palmer
and Jane Morris for their wonderful emotional support.
I can not thank my husband, Don Allan, enough for all
of his logistic support in 1990, assistance with manuscript
preparation, and tremendous emotional support throughout all
phases of my pelican research. Don has kept me healthy and
happy through a highly stressed period of my life.
Finally, I want to express my deepest gratitude to my
parents, Eleanore and William Ploger, and to my brother Jim
Ploger, for all of their support and encouragement. We have
shared many wonderful hours exploring backroads and
wilderness areas. I thank them for stimulating and
supporting my interest in natural history which brings me
such joy.
vm


Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
PROXIMATE AND ULTIMATE CAUSES OF BROOD REDUCTION IN BROWN
PELICANS (PELECANUS OCCIDENTALIS)
By
BONNIE JEAN PLOGER
December, 1992
Chairman: Dr. H. Jane Brockmann
Major Department: Zoology
Brown pelican (Pelecanus occidentalis) parents produce
more offspring than they usually raise to independence
because brood-members that hatch last starve or are killed
by their older siblings. This pattern is puzzling because
offspring are produced that seem to provide no reproductive
value to their parents. But these "marginal" offspring
(most likely to be brood-reduction victims) may contribute
reproductive value by surviving as replacements for senior
siblings that die unexpectedly. Marginal offspring may also
have value as additional survivors during periods of food
abundance. I found that brood reduction by starvation and
siblicide was common. Eggs also failed to hatch and chicks
fell from nests and were killed by strange adults and
IX


neighboring nestlings. Some second-hatched ("B-") chicks
replaced dead first-hatched ("A-") chicks and others
survived along with their seniors. All third-hatched ("C-")
chicks died.
Food shortages probably were not a proximate cause of
siblicidal aggression, except possibly when broods were 13-
17 days old. Fighting during the first week of life was
independent of nestling growth and food supplies, and
probably served to establish a dominance hierarchy. When
broods were 13-17 days old, fighting rates were best
predicted by the difference in the rate of bill growth of A-
chicks relative to their B-siblings. But when broods were
17-21 days old, fighting rates were best predicted by
accelerated B-chick growth, as could be expected if fast
growing B-chicks threatened the dominance of A-chicks.
All adaptive explanations for brood reduction assume
that parents deliver a fixed amount of food and so survivors
gain extra food after the death of a sibling. I tested this
assumption by removing or adding a chick to three-chick
broods. Parents delivered similar amounts to enlarged,
control and reduced broods during the first 6 days post
treatment. By 9 days post-treatment, parents brought less
food to reduced than to control broods. Seniors did not
gain more food in reduced broods during these periods. A
feeding hierarchy was evident, with A-chicks gaining more
food than their B-siblings who gained more than their C-
x


siblings. The fitness interests of parents may conflict
with those of one senior but not with the other senior
offspring.
xi


TABLE OF CONTENTS
ACKNOWLEDGEMENTS ii
ABSTRACT viii
CHAPTERS
1 GENERAL INTRODUCTION 1
2 ROLE OF JUNIOR SIBLINGS IN RESOURCE TRACKING AND AS
INSURANCE FOR SENIOR LOSS 10
Introduction 10
Methods 15
Study Site 15
General Procedure 16
Focal Nests 19
Visual Census Nests 20
Measures of Hatching Success 21
Measures of Fledging Success 22
Determining Hatching Dates 22
Reproductive Value of Junior Siblings 24
Analyses of Fates Based on Chick Ranks 25
Analyses of Fates Independent of Chick Ranks 26
Causes of Chick Mortality 26
Supplemental Census Nests 33
Estimating Effects of Colony Disturbance 36
Statistical Analyses 37
Results 38
Survival 3 8
Reproductive Value of Junior Siblings 43
For What Causes of Senior Death do Juniors Provide
Insurance? 46
Comparisons of Food-dependent and Food-independent
Mortality 46
Timing of Food-dependent Deaths 48
Discussion 49
Survival 50
Partitioning the Reproductive Value of Junior
Chicks 52
For What Causes of Senior Death do Juniors Provide
Insurance? 57
Brood Reduction in Pelican Species 62
Xll


3 HUNGER AS A PROXIMATE CAUSE OF FIGHTING
73
Introduction 73
Methods 78
Study Site 78
Observation and Censusing Methods 79
Nest Observations 80
Feeding Behavior 81
Fighting Behavior 82
Analyses 87
Results 92
Discussion 95
The Food-amount Hypothesis 95
Energetic Costs of Fighting 99
Size Hierarchies and Sibling Rivalry Reduction 101
Sibling Aggression in Related Species 102
4 EFFECT OF BROOD SIZE MANIPULATIONS ON FOOD DELIVERIES
AND APPORTIONMENT TO SENIOR SIBLINGS 114
Introduction 114
Methods 119
Study Site 119
Brood-size Manipulations 119
Census and Observation Methods 123
Feeding Behavior 125
Fighting Behavior 127
Animal Care Considerations 127
Results 128
Discussion 131
Do Seniors Gain a Food Bonus from Brood Reduction? . 133
Proximate Costs of Maintaining C-chicks 139
Parent-offspring Conflict 142
5 SUMMARY AND CONCLUSIONS 148
Parent-Offspring Conflict and Food-Dependent Fighting.. 151
Brood Reduction as a Product of Parent-Offspring
Conflict 154
APPENDICES
A DETERMINING CHICK AGES 165
B DETERMINING CLUTCH SIZES 172
C WHY DO OLDER CHICKS AND ADULTS ATTACK NESTLINGS? 173
D NEST TAKEOVERS 177
LIST OF REFERENCES 179
xiii


BIOGRAPHICAL SKETCH
192
xiv


CHAPTER 1
GENERAL INTRODUCTION
Many organisms produce more offspring than they usually
rear to independence because they abort, eat or neglect some
of their offspring, or allow siblings to kill (and sometimes
eat) each other. Abortion of embryos is common in many
plant species (see reviews in Buchholz 1922, Lloyd 1980,
Stephenson and Bertin 1983, Haig 1986, 1987, Sutherland 1986
and Mazer 1987) and in some mammals (reviews in Diamond
1987, Stearns 1987). Parents may consume their progeny in
some insects (e.g. Wilson 1971, Masuko 1986, Bartlett 1987),
fish (e.g. Salfert and Moodie 1984, FitzGerald 1992) and
amphibians (Simon 1984). In species that provide their
offspring with food, partial brood loss is often due to
starvation of some offspring through parental neglect or
sibling competition, as is widespread in birds (Lack 1968,
Howe 1976, O'Connor 1978, more recent reviews in Clark and
Wilson 1981, Mock 1984a). Parents in many taxa including
insects (e.g. Eickwort 1973), fish (e.g. Springer 1948,
Gilmore et al. 1983, Valerio and Barlow 1986, review in
Dominey and Blumer 1984), amphibians (review in Simon 1984),
and birds (Ingram 1959, Bortolotti et al. 1991) tolerate
cannibalistic sibling competition (reviewed in Polis 1984).
Noncannibalistic siblicide is more common than cannibalistic
1


2
siblicide in birds (review in Mock et al. 1990) and mammals
(e.g. 01 Gara 1969, Fraser 1990, Frank et al. 1991).
These phenomena pose a problem for evolutionary
biologists: why do parents "waste" their time and resources
to produce offspring that they fail to provision with
parentally controlled resources? That this is common in a
wide variety of disparate taxa suggests that the production
of doomed offspring probably conferred enhanced fitness to
at least some of the participants (parents and/or some
offspring) in the past, and may continue to enhance fitness
in the present. Alternatively, such "brood reduction" (the
overproduction and subsequent elimination of some offspring)
could be a negative consequence of selection acting on some
other factor such as large clutch size, per se. or hatching
asynchrony (e.g. Clark and Wilson 1981). My dissertation
focuses on the proximate and ultimate causes of brood
reduction in brown pelicans (Pelecanus occidentalis). For
convenience, I refer to those brood-members most likely to
be the victims of brood reduction as "marginal" offspring
(Mock and Parker 1986) because their survival chances are
marginal and typically contingent on the death of a sibling
or unusually abundant food.
Four major hypotheses have been proposed to explain how
the production of "marginal" offspring may be beneficial to
parents (reviewed in Forbes 1990, 1991). First, "marginal"
offspring may be used as food for parents or offspring. This


3
is the "exploitation hypothesis" of Hrdy (1979), described
earlier by Ingram (1959) and called the "ice-box hypothesis"
by Alexander (1974). An obvious prediction of this
hypothesis is that cannibalism of offspring or siblings
occurs routinely (or at least during food shortages).
Second, "marginal" offspring may enable parents to select
offspring with the highest fitness expectations. I call
this the "progeny-choice hypothesis" (Forbes 1991). This
hypothesis was first called developmental selection by
Buchholz (1922) and also the "selective-abortion hypothesis"
by Kozlowski and Stearns (1989). The progeny-choice
hypothesis argues that offspring differ in quality and that
the brood-members that are eliminated are those that are
genetically or developmentally "inferior" to their siblings.
Elimination of these "inferior" siblings is predicted to
occur very early in the developmental period, as soon as
differences in offspring quality are detectable (Kozlowski
and Stearns 1989). Third, "marginal" offspring may function
as insurance for partial brood loss, serving as replacements
for siblings that die unexpectedly from accidental causes or
congenital defects. This is the "insurance hypothesis" of
Dorward (1962), reviewed by Forbes (1990, 1991). This
hypothesis predicts that accidents or congenital defects are
frequent causes of partial brood loss. For example, under
this hypothesis, hatching failure in birds is predicted to
be more common in brood-reducing species than in species


4
that do not produce "marginal" offspring (Anderson 1990).
Fourth, "marginal" offspring may enable parents to maximize
their reproductive success from a given clutch when
resources are unpredictable by laying as many eggs as they
could raise in a good year and reducing the brood if
resources turn out to be scarce. This is the "resource
tracking hypothesis" formulated by Lack (1947), usually
called the "brood reduction hypothesis" since Ricklefs
(1968). More recently, this hypothesis has been called the
"resource availability hypothesis" and "resource tracking"
by Forbes (1990 and 1991, respectively), and the "bet
hedging hypothesis" by Kozlowski and Stearns (1989). In the
dissertation, I will follow Forbes' (1991) and refer to this
as the resource-tracking hypothesis. These hypotheses are
not mutually exclusive, and indeed all may operate
simultaneously (Forbes 1991). But clearly, a key to
determining whether any or all of these hypotheses are valid
is to examine causes and patterns of egg and nestling
mortality.
Brown pelicans typically lay three eggs which hatch
asynchronously (Schreiber 1979). Nestling mortality is
biased toward last-hatched members of the brood (Schreiber
1979), who are frequently attacked by their elder siblings
(Pinzn and Drummond in press) and typically die of
starvation and siblicide (see Chapter 2). Parents generally
remove dead offspring by tossing them from the nest (unpub.


5
data). Cannibalism is rare and occurred in only one of the
122 nests that I kept under close observation during this
study. In this one nest, the parent ate its youngest
offspring after it died and the second-hatched chick ate a
dead nonsibling that had been experimentally added earlier
to enlarge the brood. The rarity of cannibalism makes the
exploitation hypothesis an unlikely explanation for brood
reduction in brown pelicans and I will not consider it
further. This leaves the progeny-choice, insurance and
resource-tracking hypotheses as possible explanations. In
Chapter 2 of this dissertation, I evaluate the insurance and
resource-tracking hypotheses for brown pelicans. I examine
in detail the role of the last-hatched member of brown
pelican broods as insurance for senior loss and as survivors
along with their senior siblings. This chapter also
includes some discussion of the validity of the progeny-
choice hypothesis for siblicidal pelican broods.
The resource-tracking hypothesis assumes that partial
brood losses increase directly with food scarcity. Where
siblicide is a major cause of brood reduction, as in brown
pelicans (see Chapter 2), the frequency of siblicide should
increase during periods of food shortage. One way that
siblicide could increase with food depletion is if sibling
aggression is proximately controlled by food supply, with
decreases in food to nestlings causing increased aggression
among brood-members. In brown pelicans, where older


6
siblings attack their juniors (Pinzn and Drummond in
press), the intensity of sibling aggression varies among
nests (Chapter 3). In Chapter 3, I investigate whether this
variation in sibling aggression depends on food supply, as
might be expected if the resource-tracking hypothesis is
operating.
The progeny-choice, insurance and resource-tracking
hypotheses all argue that the survival chances of young that
did not die increase when brood size decreases (O'Connor
1978) because the remaining young obtain more food after the
death of their competitor. This will only happen if parents
deliver the same amount of food to the brood before and
after brood reduction. These hypotheses consider the
fitness of both parents and surviving offspring to increase
similarly with brood reduction. But this need not be the
case. As Hamilton (1964) first argued, the fitness
interests of parents and offspring may differ. Indeed,
conflict is likely to be more common than congruence of
parent and offspring interests, because, as Trivers1 (1974)
development of Hamilton's idea clarified, selection should
favor offspring that seek more investment from their parents
than their parents are selected to give. This insight
spawned many theoretical analyses of parent-offspring
conflict (see Godfray and Parker 1991 for review), including
many on parent-offspring conflict over brood size (O'Connor
1978, Godfray 1986, Lazarus and Inglis 1986, Parker and Mock


7
1987, Godfray and Harper 1990, Godfray and Parker 1991,
1992). These models predict parent-offspring conflict over
brood reduction. O'Connor's (1978) model predicted that the
threshold beyond which parents and senior offspring benefit
from brood reduction is lower for offspring than for
parents, creating conditions in which "siblings would gain
in net fitness by eliminating one young, albeit at the
expense of adult fitness" (O'Connor 1978:88). Thus, rather
than an adaptation favoring the fitness of both parents and
offspring, brood reduction may be the result of senior
siblings achieving their optimum to the detriment of
parents.
In Chapter 4, I explore some of the costs and benefits
to parents and offspring of eliminating the third-hatched
chick. Hypotheses proposing an adaptive value to brood
reduction all assume that senior survival increases
following brood reduction because seniors gain more food
following elimination of a competitor. Thus, parents and
seniors are assumed to benefit from brood reduction. But
this is possible only if parents do not decrease food
supplies following brood reduction. I experimentally
altered brood sizes to determine if parents fed reduced,
control and enlarged broods at the same level, as predicted.
I also determined if senior offspring gained more food in
reduced broods. Other outcomes would result if brood
reduction serves the interests of only the parents or the


8
offspring, or results from some compromise of parent
offspring conflict.
Natural selection favors parents whose behavior
maximizes their lifetime reproductive success. From this,
Lack (1947) argued that selection would favor parental
behavior that maximizes the number of surviving offspring
produced from each individual clutch. The overproduction of
eggs and subsequent reduction in brood sizes through
starvation (and sometimes siblicide) seem paradoxical
because parents produce more offspring than they are able
(or willing) to raise, thereby wasting resources that could
otherwise be invested in the remaining offspring to enhance
their fitness prospects. The exploitation, progeny-choice,
insurance and resource-tracking hypotheses are all attempts
to explain how parents who practice brood reduction could
still be maximizing their short-term reproductive success
during a single breeding attempt. What these hypotheses
overlook is the potential for conflict over parental
investment among current offspring and between parents and
current offspring as parents attempt to balance tradeoffs
between their interests in current versus future offspring
in a way that maximizes lifetime reproductive success
(Williams 1966). My dissertation attempts to identify where
the interests of parents and offspring may conflict in
broods of brown pelicans and to lay the groundwork for


9
determining whose interests are being represented by brood
reduction, those of the parents or those of the offspring.


CHAPTER 2
ROLE OF JUNIOR SIBLINGS IN RESOURCE TRACKING AND AS
INSURANCE FOR SENIOR LOSS
Introduction
In many bird species, females lay more eggs than pairs
typically are able or willing to feed sufficiently. Among
species that hatch asynchronously, it is the youngest brood
members that usually die, typically of starvation or from
beatings delivered by siblings (siblicide). Two major
hypotheses, the "resource-tracking" and "insurance
offspring" hypotheses, provide testable explanations for how
parents may benefit from producing offspring that are
usually doomed to die (see Forbes 1991 for additional
hypotheses). Mock and Parker (1986) pointed out that these
usually doomed "marginal" offspring may contribute to the
reproductive value of their parents in two ways. First,
"marginal" offspring may provide "extra-chick value" by
surviving along with their siblings when food is plentiful.
When food is scarce, "marginal" chicks starve quickly, which
presumably benefits surviving siblings who gain the
"marginal" chick's food share ("resource-tracking
hypothesis," Lack 1947, 1954, 1968). Under the resource
tracking hypothesis, "marginal" chicks are "extra" in the
10


11
sense that they represent a bonus unit of reproductive
success to parents when food is abundant. Second,
"marginal" offspring may provide "insurance value" as
replacements for senior siblings that die (the "insurance
offspring" hypothesis, Dorward 1962). Although originally
stated as a separate hypothesis, the insurance hypothesis is
actually a special case of the resource-tracking hypothesis
(Anderson 1990). Insurance operates when parents are faced
with unpredictable brood size (e.g. unpredictable levels of
hatching failure) and predictable resource shortages after
hatching. Resource-tracking operates when brood sizes are
predictable and resources are unpredictable. In both
situations, brood sizes are matched to current food supplies
(Forbes 1990). The insurance hypothesis is usually invoked
for the extreme case of obligate siblicide, in which the
youngest brood members have only "insurance value" (Mock and
Parker 1986) because they never survive along with their
seniors. The resource-tracking hypothesis is usually
invoked when partial brood loss is less frequent and the
youngest chick survives along with its siblings when
conditions are favorable, thereby providing its parents with
an "extra" unit of reproductive success (Mock and Parker
1986). In facultative brood reducers with intermediate
levels of junior chick mortality, parents may derive
additional reproductive success through both routes, with


12
last-hatched chicks contributing both "extra-chick" and
"insurance" value to their parents (Mock and Parker 1986).
The purpose of this study is to evaluate some of the
selective pressures that contribute to the laying of "extra"
eggs by brown pelicans (Pelecanus occidentalis) I used
three approaches to examine the importance of junior chicks
as "extra" survivors and as insurance against senior chick
loss. First, I examined the exact causes of nestling
mortality to evaluate two predictions: (1) if junior chicks
serve primarily as "extra" survivors when food is abundant,
then junior chick mortality should be food-dependent (e.g.
starvation and siblicide); (2) if juniors serve primarily as
insurance against senior death, then senior chick mortality
should be due to food-independent causes such as hatching
failure, deaths of hatchlings (Dorward 1962, O'Connor 1978,
Stinson 1979, Mock 1984a, Magrath 1990), predation (Nisbet
1975, Nisbet and Cohen 1975, Mock and Parker 1986, Drummond
1986), or ectoparasites (Bryant and Tatner 1990). Second, I
compared the reproductive value of junior chicks as
additional survivors and as replacements for senior siblings
that died. The junior chick's value as an "extra" survivor
was measured as that component of its survivorship that was
independent of its siblings' survival. The junior chick's
insurance value was measured as that component of its
survivorship that depended on the fate of its senior
siblings (Mock and Parker 1986, Ploger and Mock unpub. MS).


13
I could not use this direct approach for last-hatched chicks
in three-chick broods, because all of the last-hatched
nestlings died during my study. Instead, I used a third
approach, which was to inspect the order and timing of last-
hatched versus senior deaths. To have potential insurance
value, a last-hatched chick would need to survive into the
period of peak mortality risk to seniors.
Brown pelicans lay more eggs than they ordinarily
fledge; clutch sizes average three eggs which typically
yield one or two fledglings (Blus and Keahey 1978, Schreiber
1979). Nestling mortality has been generally attributed to
starvation, based on reports of light-weight nestlings
(Schreiber 1976, Keith 1978) and correlations between
fledging success and fish supplies (Anderson et al. 1977,
1982) or regurgitation frequencies (Schreiber 1979). All
past work with this species has relied on circumstantial
evidence from censusing nests to assign causes of mortality.
Such evidence is not sufficient and may lead to false
estimates of the relative frequencies of food-dependent
versus food-independent deaths. For example, Schreiber
(1976) attributed the selective mortality of last-hatched
brood members to starvation whenever a chick failed to grow
between the last censusing visits prior to the chick's
disappearance. But a thin chick that vanished between
censusing visits might not have starved to death. Instead,
such a chick might have been recovering when it was taken by


14
a predator, or might have died from beatings delivered by
siblings, as described for the first time for brown pelicans
by Pinzn and Drummond (in press). Pinzn and Drummond also
relied primarily on nest censusing to identify causes of
death, although they directly observed siblicidal aggression
in some nests. They attributed death to siblicidal
expulsion whenever a chick's body was found outside of the
nest. But some such chicks might have been accidently
knocked from the nest and subsequently attacked by
neighbors, or have fallen accidently from tree nests and
been injured by the fall. These alternative explanations
are quite possible for brown pelicans, as I will discuss.
I also present observations of infanticidal attacks
initiated by unrelated adults and chicks against brown
pelican nestlings. This chapter presents a detailed
examination of the causes of mortality of nestling brown
pelicans based on continuous observations of a large sample
of nests.
Pinzn and Drummond (in press) present the first
discussion and evidence that brown pelicans may be
facultative brood reducers, producing three-egg clutches and
selectively eliminating some chicks during food shortages.
But in three-chick broods of brown pelicans, the youngest
virtually always dies whereas survival of the second-hatched
is highly variable (Schreiber 1976). Thus, brood reduction
in brown pelicans may be obligate among last-hatched young


15
and facultative among those hatching second in the brood.
As a result, these chicks are likely to differ in their
roles as insurance or "extra" chicks. In addition, the
nature of the insurance value may differ between second and
third-hatched chicks. In most obligately brood-reducing
species, the insurance value of marginal chicks is
restricted to the first week or less of the nestling period
(Anderson 1990, Mock et al. 1990) and so covers only egg
failure and hatchling losses such as those caused by
developmental abnormalities. In contrast, facultative
brood-reducers like brown pelicans may retain all brood
members until food-supplies become limiting (perhaps later
in the nestling period). Thus, the insurance value of a
marginal chick can remain in effect for longer and may cover
a wider range of risks to the seniors than in obligate
brood-reducers (Mock and Parker 1986).
Methods
Study Site
In 1990, I studied brown pelicans nesting on Bird and
Sunken Islands, two spoil islands connected by a sandbar
that together are known as Alafia Banks in Hillsborough Bay,
near Tampa, Florida. Approximately 850-900 brown pelicans
nested on the islands in 1990. They nested primarily on top
of the canopy in black mangrove (Avicennia aerminans). red


16
mangrove (Rhizoohora mangle), and Brazilian pepper (Schinus
terebinthifolius). (See Lewis and Lewis 1978 for a detailed
description of vegetation on these islands.)
General Procedure
I censused a total of 107 nests from 15 March through 4
August to determine clutch sizes, hatching success and
fledging success. I separated these nests into three groups
according to the censusing methods used. The "focal nest"
group consisted of 27 nests that were continuously observed
with a spotting scope and binoculars from dawn to dusk
during the first 20 days of nestling life (see Focal Nests,
below, for details). The "visual census" group consisted of
51 nests that were adjacent to focal nests but were not
continuously observed or monitored for nestling growth (see
Visual Census nests, below, for details). The "growth nest"
group consisted of 29 nests containing chicks that were
weighed and measured every 4-12 days (see Handling schedule,
below, for details) but were never kept under continuous
observation.
Timing of census initiation. Censusing of 76 nests
began during the incubation period. Clutch sizes for these
nests were known precisely (see Appendix B for clutch-size
determination criteria). Hereafter, for convenience,
clutches that definitely contained two or three eggs will be
represented symbolically as C/2 and C/3, respectively.


17
Censusing of the 31 remaining nests began after hatching.
Clutch sizes were not known for these nests. The initial
brood size (number of chicks that hatched) was known
precisely for four of these 31 nests and for 65 of the nests
for which clutch sizes were also known. The initial brood
size was considered to be known if the number of nestlings
was first counted within 5 days after the first (A-) chick
hatched. Hereafter, broods that initially contained two or
three chicks (regardless of clutch size) will be represented
as B/2 and B/3, respectively.
Markina. In focal and growth nests, I individually
marked each chick to facilitate distinguishing A-chicks from
second-hatched (B-) and third-hatched (C-) chicks. All
newly hatched chicks aged 0 (day of hatching) to 4 days were
marked according to their hatching order with yellow and
black indelible marker pens. Older chicks were marked with
blue and yellow acrylic paint on their backs and heads, plus
the same color flagging tape squares glued with contact
cement flat onto the back and head. Paint and flagging had
to be reapplied frequently as the combination of water, fish
oils and guano acted as a solvent for both oil- and water-
based paints and glues.
Handling schedule. All chicks in focal and growth
nests were handled regularly to refresh their color-marks,
assess their physical condition, and monitor their growth.
I measured bill length (length of exposed culmen) to the


18
nearest mm with a clear plastic ruler. I weighed nestlings
with 100 g, 2.5 kg and 5 kg spring scales. All chicks in
focal and growth nests were handled, weighed and measured
every 2-4 days until the brood's A- chick was (on average)
29 days old (range 25-31 days). Thereafter, all members of
the brood were handled a minimum of once a week when the
brood's A-chick was from 30 through 40 days old, and at
least every 10-12 days when A-chicks were 40 through 70 days
old.
Definition of fledaina. All nests were censused until
all brood-members had died or until the A-chick reached age
70 days (see Determining Hatching Dates, below, for details
about aging chicks). I discontinued censusing after 70
days. After this age, chicks were difficult to catch
because they made 3-10 m flights between perches in the
vicinity of the nest (unpub. data). These short flights
began once the juvenile plumage had developed. I therefore
operationally defined "fledging" as occurring at 70 days,
the average age by which eight chicks had developed their
brown juvenile plumage (range=57-82 days) in 1989 at
Seahorse Key (see Supplemental Census Nests, below). Pinzn
and Drummond (in press) used the same operational definition
of fledging for the population of brown pelicans that they
studied in Mexico. The first sustained flight was not
achieved until a mean age of 81.3 days (2.14) for seven
chicks at Seahorse Key in 1989. Sustained flight occurred


19
at an average age of 76 days over the 4 years of Schreiber's
1976 study, and at age 75 days in the chicks observed by
Pinzn and Drummond (in press).
Focal Nests
"Focal nests" were observed from two blinds, one on
Sunken Island and the other on Bird Island. Nests were
located from 1-33 m from the Bird Island blind and from 28-
42 m from the Sunken Island blind. Hatching peaked in focal
nests on Sunken Island about a month earlier than on Bird
Island. Therefore, observers (BJP plus an assistant) were
able to watch focal nests on Sunken Island from hatching
until chicks were at least 20 days old, then move to Bird
Island to watch another set of focal nests beginning at
hatching. We observed focal nests on Sunken Island from 2
April through 9 May and on Bird Island from 11 May through 8
July 1990. Focal nests on both islands were observed
continuously during daylight hours On Sunken Island,
observers alternated approximately 7-hour observation
periods, usually trading off around 1300. But during the 1
week of peak nestling activity, both observers were present
in the same blind throughout each day. On Bird Island,
observers alternated daily dawn to dusk observation periods.
Pelicans nesting on Alafia Banks initiated clutches
from the middle of February through the end of May, 1990.
Thus, on a given day the subcolony under observation might


20
have contained nests in the incubation through late nestling
stages. On any one day, we closely observed up to 16 focal
nests in a visual arc of 70-80' for a total of 27 focal
nests over the season.
Nests became part of the focal group as soon as their
broods were completed (i.e. no further eggs hatched). To
keep chicks individually marked and to measure nestling
growth, I visited focal nests following the schedule
described earlier (see Handling schedule in General
Procedure, above). In addition to visiting focal nests
periodically, I also kept focal nests under continuous
daylight observation until A-chicks reached the age of 20
days, by which time most younger siblings had already died.
When A-chicks were 20 through 30 days old, focal nests were
simply censused visually at least once each day and visited
every 2-4 days to monitor growth. Focal nests of these ages
were not kept under continuous observation. After A-chicks
reached a minimum of 30 days old, observations from the
blind were discontinued. But I continued to measure and
weigh chicks in these nests every 7-12 days depending on A-
chick age (see General Procedure, Handling schedule, above)
until all brood members had died or reached age 70 days.
Visual Census Nests
Nests in the "visual census" group were observed
opportunistically from the Sunken Island and Bird Island


21
blinds. In contrast focal nests whose contents were under
continuous observation, the number of eggs and chicks in
visual census nests were counted only 1-3 times per day.
Nestlings in visual census nests were never handled and so
remained unmarked and were not measured for growth.
Measures of Hatching Success
To calculate hatching success in all broods,
independent of brood size, I used the 65 nests for which I
knew both the clutch size and the initial brood size. These
nests included 19 focal, 24 visual census and 22 growth
nests. This calculation of hatching success included nests
in which all chicks failed to hatch.
Last-laid eggs may have value as replacements for older
eggs that fail to hatch. To assess this possibility, I
calculated hatching success a second time, restricting the
analysis to only those nests of known clutch and initial
brood sizes that also hatched at least one chick. Because I
also wanted to assess fledging success in the same sample, I
restricted this analysis further to include only nests in
which I also knew how many chicks fledged. A total of 45
nests met these criteria (17 focal, 7 visual census and 21
growth nests). In four of these nests, all of the chicks
died on the same day because the parents abandoned the brood
within a few days of brood completion. This left 41 broods
that were not abandoned, for which clutch sizes, initial


22
brood sizes and fledging success were known and in which at
least one chick hatched. These nests were used to compare
hatching failure in 21 C/2 versus 19 C/3 clutches. Because
eggs were not marked, I could not assess the relationship,
if any, between laying order and egg failure. Thus, I could
not determine if last-laid eggs ever replaced earlier-laid
eggs that failed to hatch. But low rates of hatching
failure would suggest that last-laid eggs have little egg-
insurance value, whereas high rates of hatching failure
would suggest the potential for last-laid eggs to replace
senior eggs that failed to hatch.
Measures of Fledging Success
I calculated fledging success per clutch from the 71
nests for which I knew both the clutch size and the number
of chicks that fledged. This sample included 18 focal, 29
visual census and 24 growth nests. These nests were also
used to calculate clutch sizes.
I also calculated fledging success per brood. For this
analysis, I used the 45 nests in which at least one chick
hatched and for which I was able to determine the initial
brood size and number of chicks that fledged..
Determining Hatching Dates
Eggs hatched asynchronously within clutches, with the
A-chick hatching 1.3 (0.6) days (for three B/2) and 1.1 (


23
0.7) days (for 16 B/3 broods) before the B-chick. B-chicks
hatched 1.6 (0.6) days before their C-siblings (N = 16
broods). These data were from pairs of chicks whose
hatching dates were known precisely. Whenever possible, I
determined the age and hatching order of siblings from
direct knowledge of hatching dates determined during daily
censuses (N = 41). This is the "known-age" group. I used a
growth curve for culmen lengths of 62 known-age chicks (r^ =
0.945, N=204 observations, Appendix A) to estimate the ages
and hatching order of an additional 51 "estimated-age"
chicks that were found in the first 10 days of life but
whose hatching dates were not known precisely. Schreiber
(1976) and Pinzn and Drummond (in press) also found a
correlation between age and culmen length. Chick ages when
first estimated had to be < 10 days to be included in the
estimated-age group, because after this age, culmen lengths
often reflected nutritional condition and would have
produced biased age estimates (Appendix A). In three
additional broods (eight chicks total) less than 10 days
old, culmens were not measured and ages were estimated from
skin colors and plumage development by comparing them to
known-age chicks (Appendix A). I thus determined the ranks
of a total of 100 chicks.
Thirty-two of the 62 known-age chicks that were used in
the regression were from nests that were later manipulated
for experiments (see Chapter 4) that may have affected chick


24
fates. These 32 nests were omitted from all analyses of
fledging success and causes of mortality.
Reproductive Value of Junior Siblings
I calculated the reproductive value of nestlings as the
total number of chicks that fledged divided by the total
that hatched. When chick ranks were known, I calculated
the reproductive value of chicks of each rank separately. I
partitioned the reproductive value of junior chicks of each
rank (B- and C-) and brood size (B/2 and B/3) into "extra
chick" (RVe) and insurance (RVi) components (following
methods of Mock and Parker 1986, modified by Beissinger and
Waltman 1991 and Ploger and Mock unpublished MS). Thus, RVe
for B-chicks = the number of B-chicks that fledged along
with their seniors, divided by the total number of B-chicks
that hatched. The RVi for B-chicks = the number of B-chicks
that fledged after replacing a senior that died, divided by
the total number of B-chicks that hatched. Analogous
calculations were made for C-chicks. I could not calculate
RVe and RVi to include eggs that failed to hatch because I
did not know the order in which eggs were laid (see Measures
of Hatching Success, above, for details and discussion of
estimating egg-loss insurance).


25
Analyses of Fates Based on Chick Ranks
Known-age and estimated-age chicks were pooled for all
analyses of chicks according to rank. The assignment of
chick ranks thus reflect relative sizes of siblings when
less than 10 days old. I was able to determine the initial
brood size and the fates (lived or died of various causes;
see Causes of chick mortality, below) of all brood members
according to their size ranks for 14 B/3 and 20 B/2 broods.
These broods were used to compare the frequencies of food-
independent and food-dependent mortality for chicks of
different ranks (see Causes of Chick Mortality, below). I
also used these broods to analyze the reproductive values of
chicks according to their size ranks. Of the B/3 broods
used in these analyses, nine were focal nests and five were
growth nests. Of the B/2 broods used in these analyses, 11
were focal nests, 8 were growth nests, and 1 was a visual
census nest.
In an additional seven B/3 and 14 B/4 nests, chick
ranks were assigned according to relative sizes and plumage
development when chicks were more than 10 days old. These
"estimated-rank" chicks were used only when pooled with
chicks of known ranks to compare the fledging success among
chick ranks.


26
Analyses of Fates Independent of Chick Ranks
Restricting analyses to chicks whose ranks were known
would not have adequately represented all of the different
types of food-independent, food-dependent and unknown causes
of death that I observed in 1990 (see Causes of Chick
Mortality, below). For this reason, in addition to using
the 100 chicks whose ranks were known, I also determined the
fates of 72 "unranked" chicks. These "unranked" chicks were
added to the census sample when too old to determine
accurate hatching order and ages. Eight chicks of known
rank and two of the unranked chicks died when their nests
were abandoned. For fates analyses, I omitted these six
nests and all nests that were abandoned before hatching an
egg. I listed the fates of the remaining 177 eggs that
hatched 162 chicks (92 ranked and 70 unranked chicks).
These chicks hatched from the 81 nests for which I was able
to determine the fate of at least one egg or chick.
Causes of Chick Mortality
I separated causes of mortality into deaths due to
food-independent, deaths due to food-dependent and deaths
due to unknown causes. Food-independent deaths included
chicks that "died as hatchlings," "fell accidentally," were
"killed by invader chicks or adults," or died from an
"unknown accident" (see definitions in Food-independent


27
deaths, below). Food-dependent deaths included victims of
"siblicide," victims of "starvation" and chicks that died of
"starvation &/or siblicide" (see definitions in Food-
dependent deaths, below). "Unknown causes" of mortality-
included deaths that could not be classified as either food-
independent or food-dependent.
Food-independent deaths. Food-independent deaths
included nestling deaths that were unlikely to be related to
food conditions within their nest. The most obvious cases
of food-independent deaths were those in which a nestling
was "killed by invader chicks or adults" (also referred to
as "infanticide"). I defined an "invader" to be a chick or
adult that moved its head and/or body into a nest that was
not its own. Invader chicks included recently fledged
young. Invader adults included birds at least 1 year old
that had subadult or adult plumage (see Schreiber et al.
1989 for plumages of subadults versus adults). Invaders
often attacked the chicks whose residence they invaded (see
Appendix C for discussion of why some pelicans invade nests
and attack residents). An "attack" involved one or more
"blows" delivered by one individual (the "attacker") against
another individual (the "victim"). To be counted, "blows"
had to be forceful enough to move the victim's head or neck
when struck. A chick that was "killed by an invader" was
one that (1) was seen being tossed (N = 3) or knocked (N =
1) from the nest by an invader or (2) was attacked by an


28
invader within 1 (N = 2) to 3 (N = 1) days of the victim's
death if the victim was not attacked by a sibling during
this period.
Another type of food-independent death occurred when a
chick "fell accidently." A chick was classified as dying
when it "fell accidently" only if an observer saw the fall,
the fall was not directly preceded by a sibling's attack,
and the fall involved an alert chick able to crawl or walk.
I also included in this category one chick that died after
its wing became inextricably entangled in branches near its
nest. Chicks that fell accidently did not include extremely
weak chicks that fell or became entangled in branches during
convulsions.
I classified as "unknown accidents" deaths involving
chicks older than 16 days that died at least 3 days after
the death of their siblings, and that continued to gain mass
prior to death. These deaths could not have been food-
dependent because the victims were gaining mass rather than
starving and because there were no siblings in the nest to
cause siblicide. These chicks were old enough to (1) stand
(and potentially fall from the nest) and (2) be left
unattended for hours (and potentially be attacked by
neighbors). Thus, these chicks either died because they
fell accidently or were killed by an invader, but I could
not determine which type of food-independent mortality was
the exact cause of death.


29
A final category of food-independent deaths included
chicks that "died as hatchlings." I classified a chick as
having "died as a hatchling" if (1) the victim died when < 2
days old (N = 5), when chicks still had reserves of yolk,.or
(2) the victim died when more than 2 days but < 5 days old
and it was well-fed (N = 1). To be classified as having died
as a hatchling, there also had to be no evidence of fighting
among siblings prior to the victim's death. I considered
the chicks that I classified as having died as hatchlings to
be victims of food-independent deaths because evidence
suggested that these chicks were not attacked by their
siblings and did not experience food shortages before their
deaths. I assumed that these chicks were killed accidently
by parents that crushed chicks or flipped them from the nest
when parents departed suddenly. Several lines of evidence
support this assumption. First, chicks < 5 days old were
small enough to die of these causes. Second, I found one
chick that may have been crushed to death. Third, I have
seen hatchlings flipped off a parent's foot-webs to the edge
of the nest when parents moved to a perch (N = 3). The
discovery of live, healthy-looking hatchlings on the ground
(N = 2) suggests that chicks were sometimes flipped
completely out of the nest. Additional reasons for chicks
to have died as hatchlings include deaths due to
developmental abnormalities and improper incubation, which
are both likely to be food-independent sources of mortality.


30
One additional 3-day old chick was classified as having died
as a hatchling even though I did not know whether or not
this chick had received food. I included this chick because
it vanished from a nest in which the chicks were not brooded
properly because there was a deep pit in the center of the
nest. This chick probably died from exposure during
improper brooding.
Food-dependent deaths. I defined food-dependent deaths
to be nestling deaths that were probably related to
insufficient food being delivered to broods. The most
obviously food-dependent deaths involved chicks that died of
"starvation." I defined a chick's death as caused by
"starvation" if it was "emaciated" when last handled, and it
had not been attacked by another pelican (invader or
sibling) for 4 days preceding its death (N = 11).
"Emaciated" chicks were those which had at least two of the
following characteristics: (1) loose skin on the breast,
abdomen and/or back (areas with considerable tonus in well-
fed individuals); (2) an abdomen that felt flaccid when
palpated, or looked flat or concave when viewed laterally;
(3) very liquid, yellow feces; (4) listlessness and skin
temperature that felt cold to my touch; and (5) failure to
gain mass since my last visit to weigh the chick. Chicks
may have become emaciated and died from endoparasitic
infections or pesticide contamination rather than from
starvation. But endoparasitic infections are probably


31
lethal only to chicks that are already starving. Similarly,
pesticides stored in fats have greater effects when fats are
mobilized in response to starvation. Mortality from
endoparasitic infections and pesticide contamination were
not separated from starvation, and thus were assumed to be
food-dependent.
Another type of food-dependent death was "siblicide,"
which I defined to include the following cases. First,
siblicide included chicks that were seen being knocked from
the nest by a sibling (N = 2). Second, siblicide included
chicks whose siblings permanently drove their victims out of
the nest into the surrounding branches (N = 2). These
victims, prevented by their siblings from returning to the
nest, wandered around in the canopy until they succumbed to
starvation, exposure and the attacks of neighbors whose
nests they wandered near. Third, siblicide included chicks
whose deaths were not directly observed, but that received
at least 25 blows from their siblings (and none from
invaders) in the last 2 days of life (N = 13). I considered
siblicide to be a food-dependent cause of death because
sibling attacks limited the victim's access to food. The
victim's of repeated sibling attacks sometimes became so
intimidated that they remained in a submissive posture (see
Chapter 3) during an entire bout of feeding activity and so
failed to participate in feeding. Another reason for
considering siblicide to be food-dependent is that the


32
frequency and intensity of sibling fights may depend on food
supplies in chicks more than a week old (see Chapter 3).
Some deaths were clearly food-dependent but I could not
determine whether the death was caused by (1) starvation in
the absence of nestling aggression, (2) siblicidal attacks,
or (3) the combined effects of nestling aggression and
starvation. These deaths were classified as being due to
"starvation &/or siblicide." To be classified as
"starvation &/or siblicide," deaths had to meet at least one
of the following conditions. First, starvation &/or
siblicide included emaciated chicks that received less than
25 blows in nests where some sibling fighting (and no
invader attacks) occurred in the victim's last 4 days of
life (N = 5). Second, starvation &/or siblicide included
single deaths that occurred more than 5 days and <.16 days
after the A-chicks hatched in nests for which information on
sibling fights and nestling condition was not available for
the last 4 days of nestling life (N = 9). Deaths meeting
the latter criteria were considered to be food-independent
because chicks < 16 days were (1) too young to fall
accidently because they could not yet crawl from the nest,
and (2) still constantly attended by parents and so not
subject to invader attacks. I also classified one death of
a chick < 5 days old as being due to starvation &/or
siblicide because there was evidence of fighting in the nest
prior to the victim's death.


33
Unknown causes of death. Chicks whose deaths could not
be classified as either food-dependent or food-independent
were considered to have died of "unknown causes of death,"
unless the deaths were due to parental "abandonment." I
assumed that a clutch had been abandoned if eggs were
present on one visit, and damaged or gone on the next. I
assumed that a brood had been abandoned if all the chicks
were found dead or missing on the same day, five or fewer
days after the A-chick had hatched. Abandoned nests were
excluded from all analyses except where otherwise indicated.
Supplemental Census Nests
General procedure. I determined fates for eggs and
unmarked nestlings in 78 nests that I observed from 22 March
through 29 August 1989 on Seahorse Key, part of the Cedar
Keys National Wildlife Refuge, Levy County, Florida. I
censused these nests visually each day from a lighthouse
tower located within 6-10 m of the nests, which were 3-12 m
high in mixed hardwoods. Fates of chicks in nests on
Seahorse Key were determined by scanning the colony through
a spotting scope continuously from dawn to dusk for 4-6 hour
periods, with short breaks between, for a total of 11-16
hour/day.
As in 1990 on Alafia Banks, I classified 1989 deaths on
Seahorse Key as being food-independent, food-dependent, or
involving unknown causes. I defined food-independent


34
mortality and unknown causes of death using the 1990
criteria. Food-dependent deaths included siblicide (same
criteria as in 1990) and deaths that could have been due to
starvation &/or siblicide. I could not separate starvation
deaths from starvation &/or siblicide because I did not
handle chicks in 1989. The criteria used in 1989 for
placing a death into the starvation &/or siblicide category
were the same as those used in 1990, except that I defined
emaciation differently in 1989 because I did not handle
chicks. In 1989, a chick was classified as "emaciated" if
it got no food for the last 3 days of life and edema (common
in starving chicks) could be seen with a spotting scope. I
also classified as emaciated any chick whose bill was as
short or shorter than half the length of the bill of its
largest sibling. I compared the relative lengths of brood-
members' bills when the profiles of at least two chicks were
visible simultaneously through a spotting scope.
Measures of 1989 hatching success. I used two measures
of hatching success to compare 1989 Seahorse Key broods
versus 1990 Alafia Bank broods. First, I calculated
hatching success in all clutches, regardless of clutch size
and including nests in which all chicks failed to hatch.
For this analysis, I used the 54 Seahorse Key nests for
which I knew both the clutch and initial brood sizes (see
Measures of Hatching Success, above, for 1990 Alafia Bank
sample sizes used in hatching success analyses). Second, I


35
calculated hatching success in nests that hatched at least
one chick and that were not abandoned in the first days of
nestling life. Thirteen C/2 and 20 C/3 nests with known
clutch and initial brood sizes fit these criteria in the
Seahorse Key sample. These nests were used to compare
hatching failure by clutch size on Seahorse Key and Alafia
Banks.
Measures of 1989 fledaina success. I calculated
Seahorse Key clutch sizes and fledging success per clutch
from the 53 nests for which I knew both the clutch size and
the number of chicks that fledged. Fledging success per
brood was calculated from the 36 Seahorse Key nests that
hatched at least one chick and for which I knew both the
initial brood size and number of chicks that fledged (see
Measures of Fledging Success, above, for Alafia Bank sample
sizes used in clutch size and fledging success analyses).
Analyses of Fates in 1989. Because nestlings were not
marked in 1989, I could not positively identify individuals
according to their hatching ranks. 1989 chicks are
therefore usually referred to as "unranked" chicks (but see
following paragraph). I determined the fates of 105 eggs
that hatched 94 chicks from the 44 nests that were not
abandoned and for which I was able to determine the fate of
at least one egg or chick. These nests were used for
analyses comparing fates regardless of chick ranks.


36
For analyses of fledging success according to chick
ranks, I estimated chick ranks in 16 B/3 and 15 B/2 broods.
These chicks are referred to as having "estimated ranks".
Ranks were initially determined by noting hatching dates and
skin colors of chicks within their first week of life. I
then tracked changes in the body sizes, culmen lengths and
plumage development by visually comparing each nestling to
its siblings every day until all chicks had died or fledged.
Size differences and ranks could not always be determined
until nestlings were more than 10 days old. Therefore, I
could not detect early reversals in dominance or size using
this method of rank estimation.
Estimating Effects of Colony Disturbance
To determine whether our activities in the colony
adversely affected nestling survival in 1990, I used a boat
to count nestlings and nests in subcolonies of the Alafia
Banks colony that faced different levels of researcher
disturbance. I compared subcolonies that contained focal
and growth nests ("highly" disturbed, visited every 2-4 days
during the first 30 days, as described earlier) to
subcolonies that we never entered ("never" disturbed) or
walked past while walking along the beach ("moderately"
disturbed). To determine productivity in each subcolony, I
used Schreiber's (1979) methods, described as follows.
Every 2 weeks throughout the nesting season, I counted the


37
number of nests and nestlings that were visible from the
boat in each subcolony. At the end of the season, I
determined for each subcolony which of these repeated
censuses had the largest number of nests. This count was
the "maximum number of nests" for each subcolony. I also
determined which of the repeated censuses in a subcolony had
the largest number of nestlings prior to the first
observation of fledging in that subcolony. This was the
"maximum number of nestlings" in a subcolony. I compared
the productivity of each subcolony by comparing each
subcolony's maximum number of nestlings per maximum number
of nests (called "maximum nestlings/maximum nests").
Statistical Analyses
Statistical analyses were performed using Statview SE+
Graphics (Feldman et al. 1988) on a Macintosh SE computer.
All statistical tests were 2-tailed unless otherwise stated.
Row-by-column (R X C) G-tests of independence were used to
compare survival frequencies among chick ranks whenever 20%
of cells had expected frequencies of five or more. Whenever
an R X C G-test was significant, I conducted 2X2 G-tests
between pairs of sibling ranks. For these pairwise
comparisons, I kept experimentwise error at P < 0.05 by
using critical values of the chi-square distribution based
on Sidak's multiplicative inequality (Sokal and Rohlf 1981).
When 20% of expected cell frequencies were less than five, I


38
cast data into 2X2 tables and performed Fisher exact tests
using the expanded tables of Finney et al. (1963).
Differences were considered significant when P< 0.05.
P-values are presented for all statistical tests including
those that were nonsignificant, except for nonsignificant
results of Fisher Exact Tests. I could not provide P-values
for nonsignificant Fisher Exact Tests because P-values
higher than 0.05 for 1-tailed and 0.1 for 2-tailed tests
were not given in statistical tables for 2X2 contingency
tables (Finney et al. 1963). Means are presented +. 1 SD.
Results
Survival
Clutch sizes and hatching success were similar in both
years of this study (Table 2-1). Fledging success, although
low in both years, was lowest in 1990 (Table 2-1). The
productivity of 1990 nests, as measured by the maximum
number of nestlings per maximum nests, was significantly
associated with degree of researcher disturbance, with
productivity increasing with disturbance (Table 2-2,
Kruskal-Wallis test H = 5.357, P < 0.03). Thus, researcher
activities were probably not responsible for the low
fledging success in 1990. The productivity values that I
obtained in 1990 fell in the range of those obtained over an
8 year period (0.33-1.79 fledglings per total nest per year)


39
on nearby islands by Schreiber (1979). That highly
disturbed nests were more productive than less disturbed
nests could have occurred because I was more familiar with
the location and brood sizes of focal nests. Thus, my
counts of total numbers of nestlings and nests might have
been higher (and more accurate) in the highly disturbed
relative to less disturbed subcolonies. In addition, our
activities in the highly disturbed colonies may have
decreased opportunities for nest takeovers and stick thefts,
which often contribute to partial and complete losses of
clutches and broods (see below).
Nest failures. Nest abandonment was a common cause of
nest failure, affecting 24% (19/78) of clutches (nests
containing eggs) and no broods (nests hatching some chicks)
in 1989 and 13% of clutches and 4% (4/107) of broods in the
nests observed in 1990. Clutch abandonment in 1990 was
probably underestimated because I did not begin observations
in this year until most nests were in the last week of the
incubation period. By contrast, I began the 1989
observations when the birds were building the first nests.
These abandonments appeared to be spontaneous, as contrasted
with one additional clutch that was abandoned in 1989, and
five clutches and two broods abandoned in 1990 following
human activities in the colony. An additional 9% (7/78) and
2% (2/107) of clutches were lost in 1989 and 1990,
respectively, when the incubating parent was driven from its


40
nest by a courting pair or single male that attacked the
resident, tossed out its eggs and took over its nest (a
"takeover," discussed in Appendix D). As with abandonments,
the frequency of clutch takeovers was probably
underestimated in 1990. In 1989, 8% (6/78) of all clutches
were either abandoned or victims of takeovers, but the exact
cause could not be determined.
Survival of chicks according to size ranks. To assess
the value of the youngest brood members as insurance or as
"extra" chicks requires examining the frequency and causes
of single losses of eggs and chicks, as contrasted with the
simultaneous loss of all nestlings due to nest abandonment
and clutch takeovers. I therefore excluded abandonments and
clutch takeovers, and examined the frequency of deaths from
all other causes combined.
In 1990 B/2 nests of chicks with known ranks, I found
that B-chicks died more often than A-chicks, but not
significantly so (Table 2-3, 1-tailed Fisher exact test
against expectation that the youngest do not die more often
than their seniors, P > 0.05 for 4/20 surviving A-chicks
versus 0/20 surviving B-chicks). When I added 11 B/2 broods
with chicks of estimated ranks to these 20 known-rank
broods, I found that B-chicks died significantly more often
than did their A-siblings (1-tailed G-test, G = 4.55, df =
1, P = 0.05 for 8/31 surviving A-chicks versus 2/31
surviving B-chicks). Similarly, in 1989 B/2 broods for


41
which I estimated chick ranks, B-chicks died significantly
more often than did A-chicks (1-tailed G-test, G = 9.11, df
= 1, P = 0.005 for 10/16 surviving A-chicks versus 2/16
surviving B-chicks).
In 1989 B/3 nests, survival was significantly
associated with chick rank (1-tailed G-test, G = 31.78, df =
2, P < 0.001 for 13/15 surviving A-chicks versus 3/15
surviving B-chicks versus 0/15 surviving C-chicks).
Pairwise comparisons revealed that A-chicks survived
significantly more often than did their B-siblings (G =
14.66, experimentwise error set at P < 0.05, df = 2 for one
of three comparisons). Similarly, A-chicks survived
significantly more often than their C-siblings (G = 29.27,
experimentwise error set at P < 0.05, df = 2 for one of
three comparisons). Survival of B-chicks was not
significantly better than that of C-chicks (G = 4.49,
experimentwise error P > 0.05, df = 2 for one of three
comparisons).
In 1990 B/3 nests, C-chicks died more often than did
their A-siblings, but not significantly so when only chicks
of known rank were included (Table 2-3, 1-tailed Fisher
exact test, P < 0.05). When chicks of estimated ranks were
added to the analysis, this relationship was significant (1-
tailed Fisher exact test, P = 0.05 for 6/20 surviving A-
chicks versus 0/20 surviving C-chicks). A- and B-chicks in
1990 B/3 nests survived with similarly low frequency when I


42
considered only broods with chicks of known ranks (Table 2-
3). When I added six broods with chicks of estimated ranks,
differences in survival were still not significant (1-tailed
Fisher exact test, P > 0.05 for 6/20 surviving A-chicks
versus 2/20 surviving B-chicks).
The preceding 1990 analyses provide estimates of the
effect of hatching rank on chick survival. But two B-chicks
grew larger than their A-siblings within the first 10 days
of life in 1990 B/3 nests. By gaining size-superiority,
these chicks may have gained a survival advantage. To
evaluate the effect of size-superiority (rather than
hatching rank) on chick survival, I re-classified the larger
B-chicks as "A-"chicks, and the smaller A-chicks as a
"B-"chicks in these two nests. When I compared B/3 chicks
according to their size-superiority at 10 days of age, I
found that "A-"chicks survived significantly more often than
did "B-"chicks (1-tailed Fisher exact test, P = 0.05 for
7/20 surviving "A-"chicks versus 1/20 surviving "B-"chicks).
Such size reversals within the first 10 days did not occur
in 1990 B/2 nests and did not involve any 1990 C-chicks.
Thus, preceding analyses involving 1990 B/2 broods and B/3
C-chicks that included chicks with estimated ranks reflect
the effects of chick size superiority.


43
Reproductive Value of Junior Siblings
Hatching failure was low in my study, affecting only 8%
to 12% of all eggs from C/2 and C/3 clutches that hatched at
least one egg (Table 2-4). I observed only two C/4 nests,
one in 1989 that hatched three and fledged one chick, and
the other in 1990 that hatched four chicks that died as
nestlings. Because hatching failure was so low, I assessed
mortality of successfully hatched chicks to partition the
reproductive value of junior chicks into "extra-chick" and
insurance components.
Two chicks fledged from 12% of all B/2 nests (N = 16
broods) and 20% of B/3 nests (N = 15 broods) in 1989. Thus,
junior chicks in B/2 and B/3 nests had some "extra-chick"
value in 1989 (Table 2-5). I could not partition the
reproductive values of 1989 chicks of different ranks into
insurance and "extra-chick" components because chicks were
not ranked in that year. No B/3 nests fledged three chicks
in either year. The total reproductive value of chicks
averaged over all ranks was similar for B/2 and B/3 nests
within each year (Table 2-5).
In 1990, the only chicks to survive were those whose
siblings all died (Table 2-5). The total reproductive value
(proportion of survivors of each rank) of A- and B-chicks
from B/3 nests was identical, and about three-fourths that
of A-chicks in B/2 nests (Table 2-5). When I partitioned


44
the reproductive value of B-chicks in 1990 B/3 broods into
"extra-chick" and insurance components, I found that the
entire reproductive vale of these chicks lay in their
insurance value. Similar analysis for the last-hatched
nestlings in B/2 and B/3 broods was impossible because they
all died.
B-chicks survived better in B/3 than in B/2 nests in
1990 (Table 2-5). But the only B-chicks to survive in B/3
nests in 1990 were those whose A-siblings died. Thus, in
1990 the reproductive value of these chicks lay entirely in
their value as insurance against the demise of their
seniors. B-chicks in B/3 nests replaced their seniors quite
often; 38% of the B-chicks outlived their seniors and two of
these (15% of all B-chicks) fledged (Table 2-5). Most (83%)
of the B-chicks died during the first 24 days of the
nestling period (defined as beginning with the A-chick's
hatching, Figure 2-1). This was the period in which 77% of
the A-chicks died (Figure 2-1). Overall mortality peaked
during the same period for both A- and B-chicks (U = 63.5, P
= 0.40 for 13 ranks-certain A-chicks vs. 12 ranks-certain
B-chicks). Deaths occurred an average of 16.2 ( 12.3) days
into the nestling period for A-chicks and after 22.8 (
18.9) days for B-chicks
Although all C-chicks died in 1990, 23% of them lived
longer than one of their seniors (Table 2-5). Mortality of
seniors peaked during the same period as that of C-chicks,


45
averaging 19.5 (16.1) and 16.6 (10.1) days for seniors
and C-chicks, respectively (U = 275.5, P = 0.80 for 24
seniors vs. 15 C-chicks plus 9 unranked chicks that were
first to die in their nests). In this analysis, unranked
chicks that were first to die were included (Figure 2-1)
because the comparison of interest is whether these chicks
lived long enough to be present during the period of peak
risk to their seniors. By including these unranked first
deaths as C-chicks, the time of death would be
underestimated in the event that some of these first deaths
actually involved seniors.
In B/2 nests, although all of the B-chicks eventually
died in 1990, 15% of them still outlived their seniors, one
of which did not die until it was 69 days old (Table 2-5).
B-chick mortality peaked during the same period as that of
A-chicks (Figure 2-1), with B-chicks dying an average of
21.0 (14.2) days and A-chicks dying 19.4 (12.2) days
into the nestling period (U = 102.5, P = 0.80 for 11 A-
chicks and 15 B-chicks plus 5 unranked chicks that were the
first to die, see above discussion for B/3 C-chicks for an
explanation of why unranked chicks were included in this
analysis). Both chicks survived together for a maximum of
36 days into the nestling period of B/2 broods.


46
For What Causes of Senior Death do Juniors Provide
Insurance?.
Juniors replaced A-chicks that died of food-
independent, food-dependent and unknown causes. Of the five
A-chicks that were outlived by their juniors in B/3 nests,
three were survived by both their B- and C-siblings. Two of
these A-chicks died as hatchlings, while the remaining one
died either of starvation and/or siblicide. The two A-
chicks that were survived by the B-chick alone probably fell
from their nests, although the exact causes of death were
not certain, and were classified as unknown. In B/2 nests,
of the three A-chicks that died before their juniors, one
died as a hatchling, one was killed by its B-sibling, and
one died of unknown causes.
Comparisons of Food-dependent and Food-independent Mortality
When chicks of all ranks from broods of all sizes were
considered together, food-dependent causes of death were
more common than food-independent deaths in both 1989 and
1990 (Table 2-6). Overall, siblicide was the most common
source of death from known causes in 1990, affecting 10% of
all 162 chicks observed (Table 2-6). Food-independent
deaths affected 12% of all 94 chicks observed in 1989 and
15% of those observed in 1990 (Table 2-6). Infanticide
(which affected 4% of all chicks observed in both 1989 and


47
1990, Table 2-6) was the most common of the food-independent
deaths that affected chicks older than hatchlings.
Infanticidal attacks were probably not an artifact of
frequent colony disturbance. While using a boat offshore to
census parts of the island that we never entered, I observed
birds in subadult (N = 4) and adult (N = 1) plumage
attacking downy young, and also saw two adults grappling in
apparent takeover attempts (N = 2).
Both food-dependent and food-independent deaths
occurred among chicks of all ranks in 1990 (Table 2-3). But
the relative importance of these sources of mortality varied
with chick ranks and brood sizes. A-chicks in B/2 and B/3
nests died of food-independent and food-dependent causes
with similar frequency (Table 2-3, Binomial test for four
food-dependent versus four food-independent A-chick deaths
in B/2 nests, P = 1.0, and Binomial test for two food-
dependent versus six food-independent A-chick deaths in B/3
nests, P = 0.40). Food-dependent and food-independent
deaths also affected a similar number of B-chicks in B/3
nests (Table 2-3, Binomial test for three food-dependent
versus two food-independent B-chick deaths, P = 1.0). By
contrast, in B/2 nests, B-chicks died significantly more
often of food-dependent than of food-independent causes
(Table 2-3, Binomial test for 10 food-dependent versus one
food-independent death, P = 0.01). C-chicks also died more
often of food-dependent causes, but not significantly so


48
(Table 2-3, Binomial test for six food-dependent versus two
food-independent C-chick deaths, P = 0.30), although the
difference was significant when I omitted C-chicks that died
as hatchlings (Table 2-3, Binomial test for six food-
dependent versus no food-dependent C-chick deaths, P =
0.03 ) .
Timing of Food-dependent Deaths
In 1990, most starvation and siblicide of junior chicks
(B and C chicks in B/3 nests and B-chicks in B/2 nests)
occurred when these chicks were 10 to 20 days old (Figure 2-
1). The mean age of food-dependent deaths was 16.6 (2.5)
days for eight B-chicks in B/2 nests, 18.0 (2.6) days for
three B-chicks in B/3 nests, and 13.3 (7.6) for eight C-
chicks (including two unranked chicks that were first to
die). Last-hatched chicks in B/2 and B/3 nests died at
similar ages from food-dependent causes (U = 20, ni = 8 C-
chicks, n2 = 8 B-chicks from B/2 nests, P = 0.20).
In the few 1990 broods in which two chicks died of
food-dependent causes, juniors died an average of 5.4 days
(7.5, N = 3 C-chicks in B/3 broods and 4 B-chicks in B/2
broods) before their seniors (Wilcoxon signed-rank test, 5/6
juniors died before their senior siblings, P = 0.07). No
B/3 brood lost all members to food-dependent causes in 1990.
Siblicides in 1990 occurred an average of 19.4 ( 9.4)
days into the nestling period, whereas starvation deaths


49
were delayed until 23.7 (+8.9) days into this period
(Figure 2-1). These differences were not significant (U =
11.5, P = 0.10, ni = 5 siblicides and n2 = 9 starvation
deaths of chicks of all ranks whose fates were known, from
B/2 and B/3 broods).
Discussion
This study provides a mix of evidence for and against
both the resource-tracking and insurance hypotheses.
Starvation and siblicide were common and concentrated on the
last-hatched brood-members, as predicted by the resource
tracking hypothesis (Lack 1954, OConnor 1978, Mock 1984a,
Drummond 1987, Magrath 1990). As predicted by the insurance
hypothesis (Dorward 1962, Stinson 1979, Nisbet and Cohen
1975, Mock and Parker 1986, Bryant and Tatner 1990), seniors
faced a high risk of dying from food-independent causes
including hatching failure, accidental deaths and
infanticide. Furthermore, both B- and C-chicks frequently
replaced seniors that died from such causes. Survival was
associated with nestling size-ranks, as predicted by both
hypotheses. But this association was not significant when I
restricted analyses to chicks of known hatching ranks (see
Survival, below).
B-chicks provided only insurance value in 1990, but in
1989, some B-chicks in B/2 and B/3 nests survived along with
their siblings. Thus, the reproductive value of B-chicks


50
was divided between their value as "extra" chicks and as
insurance against senior death. No C-chicks survived.
Thus, their potential for having "extra" chick and insurance
value could not be evaluated in this study.
Survival
Both the insurance and the resource-tracking hypotheses
predict that nestling survival will be higher for first-
hatched than for last-hatched siblings. As predicted, A-
chicks survived more often than did B-chicks in B/2 broods
in both 1989 and 1990, at least when I included chicks with
estimated ranks. In B/3 broods, A-chicks survived more
frequently than their C-siblings in both 1989 and 1990 when
I included chicks with estimated ranks. A-chicks in B/3
broods survived more frequently than their B-siblings only
in 1989. Inclusion of chicks with estimated ranks may have
caused me to miss some early size reversals and thus to
underestimate B-chick survival relative to that of A-chicks.
But restricting my 1990 analysis to chicks of known ranks
may have underestimated A-chick survival relative to that of
B- and C-chicks. This is because mortality was so high for
chicks of all ranks in 1990 that sample sizes may have been
too small to reject the null even if A-chicks did survive
more frequently than their juniors in the Alafia banks
population. Because of small sample sizes for chicks of


51
known hatching ranks, the importance of hatching rank to
chick survival was not clear from my study.
But chicks that gained size superiority over their
siblings clearly gained a survival advantage. Evidence for
this was provided by analyses that included chicks of
estimated ranks because these chick ranks were based on size
differences after the first 10 days of life. Thus, largest
("A-") chicks survived more frequently than did their
smaller ("B-") siblings in 1989 B/3 broods and in B/2 broods
in both years. These "A-" chicks also survived more often
than their smallest ("C-") siblings in both years. In 1990,
"A-"chicks also survived more often than their "B-" siblings
in B/3 broods when I re-classified chicks according to their
relative sizes at age 10 days in two nests where the B-
chicks grew larger than their A-siblings.
Results in the literature also indicate that survival
is associated with chick size and/or hatching order.
Schreiber (1976) reported that all A-chicks survived in the
4 years of his study, whereas B-chick survival varied among
years and C-chicks virtually always died. Similar annual
variation is likely in my Alafia banks site, which was
located about 30 miles from Schreiber's (1976) study colony.
Pinzn and Drummond (in press) also found that nestling
survival was highest among A-chicks and lowest among C-
chicks in a Mexican population of brown pelicans.


52
Partitioning the Reproductive Value of Junior Chicks
Assuming hatching success was independent of laying
order, as in white pelicans (O'Malley and Evans 1980), only
8-12% of A-eggs in C/2 and C/3 nests failed to hatch in 1989
and 1990 (Table 2-4) Clearly, some "extra" eggs had value
in replacing unhatched clutch-mates. But the replacement
value of junior chicks was primarily for loss of senior
chicks rather than eggs. Cash and Evans (1986) came to the
same conclusion for white pelicans, which had a higher
hatching failure rate of 15-18%. In contrast, Pinzn and
Drummond (in press) concluded that the primary advantage of
laying second and third eggs in their brown pelican
population was as insurance for hatching failure, which
affected 15-32% of the eggs. But junior eggs also replaced
7% of all A-chicks in B/2 and B/3 nests (Pinzn and Drummond
in press). Pinzn and Drummond's estimates of hatching
failure slightly overestimate the values for which juniors
could serve as insurance, because they included cases of
total clutch loss and eggs lost due to researcher
disturbance. Their higher hatching failure rates may be
because some of their nests were on the ground. Ground
nests may experience greater overheating and consequent
partial clutch loss than occurs in tree nests (Anderson
1990). The relative importance of junior chicks as
insurance for egg loss rather than chick loss may be greater


53
in ground-nesting than tree-nesting populations of brown
pelicans.
The pattern of B-chick deaths in B/3 broods was
consistent with their having value both as insurance and as
"extra-chicks." Some B-chicks replaced A-chicks that died,
so serving as insurance for A-chick death. In addition,
most B-chicks lived into the period when A-chicks faced a
high probability of dying, suggesting that they were at
least available as potential replacements in the event of A-
chick death. B-chicks clearly had value as "extra" chicks
in 1989 when 36% of B/3 broods fledged two chicks (Table 2-
5). Although no B-chicks provided "extra-chick" value in
1990, one B-chick almost fledged with its A-sibling in that
year (Figure 2-1). These data suggest that there may be
considerable variation the "extra-chick" value of B-chicks
among years and colonies. Schreiber's (1976) data also show
high annual variance in the survival of B-chicks when their
A-siblings also lived; the frequency with which both A- and
B-chicks survived ranged from 0-100% of B/3 broods per year,
with 11 B-chicks surviving out of the total of 16 broods
censused in the 4 years of his study. B-chicks in
Schreiber's (1976) study apparently provided no insurance
value; all A-chicks fledged.
No C-chicks fledged in this study. Thus, the C-chicks
in my study provided no reproductive value to their parents.
This is probably typical for C-chicks in most populations.


54
For example, Schreiber observed broods fledging all three
young in only 6% of the 16 B/3 nests that he monitored for
growth from 1969-1972 (Schreiber 1976) and in only 4% of all
nests that he observed from 1969-1976 (Schreiber 1979).
Three-chick survival was also low in a North Carolina
colony, where only 13% of 38 B/3 broods fledged all young
(M. Shields, pers. comm.). Similarly, in Mexico none of 11
B/3 nests fledged three chicks (Pinzn and Drummond in
press) When combined with my data, these results suggest
that C-chick survival is rare, but that C-chicks do
occasionally provide "extra-chick" value by surviving along
with their siblings in some years. Brood reduction
generally fitted an obligate pattern for C-chicks. By
contrast, in one Panamanian colony, C-chicks survived along
with their siblings in 19% of all B/3 nests observed
(Montgomery and Martinez 1984). This population fed on fish
that were predictably abundant because of upwelling that
reliably occurred during the breeding season. C-chicks in
this population may have "extra-chick" value more frequently
than in the other populations discussed, which rely on less
predictable food supplies.
Whether C-chicks ever provide insurance value awaits
future study. No C-chicks survived as replacements for dead
A-chicks in the populations studied by Schreiber in 1976 and
by Pinzn and Drummond (in press). But the remaining
studies mentioned in the preceding paragraph did not provide


55
sufficient information to determine whether C-chicks ever
survived as replacements for A-chicks that died. The timing
of C-chick deaths in my study suggests that they could have
served as insurance against the death of a senior (A- or B-)
sibling. In general, when juniors provide "insurance,"
seniors should refrain from killing their siblings and
parents should avoid starving their youngest offspring until
after the survival of the eldest seems secure (Mock et al.
1990). Elimination of the youngest chick should quickly
follow after this, because food consumed by the doomed
youngest would be wasted and the costs of killing it may
increase as the youngest grows larger (Mock et al. 1990).
These patterns were observed for C-chicks in B/3 broods,
with most C-chicks living into the period of peak senior
mortality 17-20 days after the A-chick hatched, and dying
quickly of starvation or siblicide if their seniors survived
this risk period. That some C-chicks outlived their A-
siblings before dying further suggests that C-chicks may
have potential insurance value as replacements for lost
seniors.
Alternatively, C-chicks may not make a significant
contribution to their parents' lifetime reproductive
success, either as "extra" or as insurance chicks. The
presence of C-chicks may reflect selection pressures in the
recent past (e.g. Boag and Grant 1981) rather than current
adaptive value. For example, C-chicks may have insurance


56
value in ground-nesting populations where hatching failure
due to overheating may be more common (Anderson 1990) C-
chicks may no longer have this value in tree-nesting
populations such as Schreiber (1976) and I studied. The
production of C-eggs could also be a recent response to
pesticide-induced egg-failures (see below).
In the B/2 broods that I studied, the youngest chick
had value as an "extra" survivor, with both chicks living in
25% of B/2 nests in 1989 (Table 2-5). Similarly, Schreiber
(1976) found that both survived in 62% of the 21 two-chick
broods that he monitored in his 4 year study, and Pinzn
and Drummond (in press) observed both chicks surviving in
19% of the 16 broods that they observed. B-chicks in B/2
nests may also have insurance value in some years, as
suggested by my 1990 data showing that some B-chicks lived
longer than their A-siblings in 1990 and many lived into the
period of peak A-chick mortality. Indeed, one B-chick
fledged after its A-sibling died in the 16 B/2 nests that
Pinzn and Drummond (in press) observed.
To properly assess the value of junior chicks as
insurance versus "extra" chicks will require long-term study
of a single population. The relative frequency with which
junior chicks survived as "extra" versus insurance chicks
could be totalled over each parent's lifetime. This could
lead to insight into the relative importance of these two
types of reproductive value. Similarly, the total value of


57
junior chicks could be evaluated by examining how much A-
versus B- and C-chicks contribute to the lifetime
reproductive success of their parents. If junior chicks
make a negligible contribution to the lifetime reproductive
success of their parents, then this would suggest that the
resource-tracking and insurance hypotheses do not explain
the production of junior chicks in this species.
For What Causes of Senior Death do Juniors Provide
Insurance?
The low incidence of hatching failure, the coincidence
of the peak periods of mortality for all chick ranks and the
delay of this mortality until about a week after the
hatchling period (Figure 2-1) suggests that in both brood
sizes, B- and C-chicks served as insurance for seniors dying
of causes other than egg or hatchling failure. Thus,
juniors probably served primarily as replacements of seniors
dying of infanticide, accidental deaths or food-dependent
causes. I saw no evidence of predation in this study.
I had expected that the insurance value of junior
chicks would be restricted to replacing seniors that died of
food-independent causes, because the size-based competitive
superiority of seniors should ensure that their younger
siblings would precede them in succumbing to starvation or
siblicide during food shortages. But the similarity in the
timing of food-dependent deaths of C-chicks and their


58
seniors suggests that C-chicks had at least some potential
for replacing a senior that died of such causes. Indeed, in
the few cases where juniors actually outlived a senior,
although most replaced A-chicks that died as hatchlings or
of unknown causes, one B- and C-chick in a B/3 brood and one
B-chick in a B/2 brood replaced an A-chick that died of
food-dependent causes. This suggests that juniors may
sometimes serve as insurance against a defective (Mock
1984a, Mock and Parker 1986, Mock et. al. 1990) or
competitively inferior (Cash and Evans 1986, Drummond 1986)
senior by dominating an inferior senior and reversing the
usual feeding advantages so that the subordinated senior
would starve or be killed by its dominant junior in the
event of a food shortage. The subordination of an A-chick
by its B-sibling could also occur if the B-chick was
unusually well-developed (a "superchick," Mock 1984a).
Dominance reversals with losers dying of food-dependent
causes also would be expected if the production and
subsequent elimination of "extra" offspring is a parental
ploy to selectively raise the fittest genotypes (Buchholz
1922, called "progeny choice" by Kozlowski and Stearns 1989)
by allowing siblings to eliminate inferior competitors
(Simmons 1988). In synchronously hatching species, this
could allow parents to sort out the "best" among offspring
with relatively similar competitive abilities, although at
potentially high costs in energy (Mock and Ploger 1987) and


59
risk to surviving offspring. In asynchronously hatching
species, the progeny-choice hypothesis is effectively the
same as producing an "extra" chick as insurance for an
inferior senior, because reversals are likely only if a
junior is sufficiently superior that it is able to overcome
its age and size disadvantage. Thus, the progeny-choice
hypothesis becomes a special case of the insurance
hypothesis when hatching is asynchronous. Alternatively,
even potentially superior seniors may die of food-dependent
causes in the first few days after hatching if there is a
temporary food shortage during this period when young chicks
are vulnerable to starvation after using up their yolk
reserves. A junior may provide insurance for early senior
starvation (Forbes 1990) if the food shortage that kills the
senior occurs when the junior is still an egg (Nelson
1978:895) or hatchling with sufficient yolk reserves to
survive the brief shortage. In brown pelican broods, the 0-
2 day intervals between hatching of A- and B-chicks is too
short to facilitate this type of insurance, although the
hatching of C-chicks up to 5 days after their A-siblings
suggests that C-chicks could potentially provide such
insurance at least for A-chicks.
In other populations of brown pelicans, juniors may
have insurance value that covers other causes of senior
mortality. For example, predation may be a significant
source of partial brood loss in some brown pelican


60
populations. Most reports of nest predation against brown
pelicans involve abandoned eggs or nestlings taken by avian
predators, including fish crows, Corvus ossifracrus
(Schreiber and Risebrough 1972, Ploger pers. obs.), common
ravens, £. corax, western gulls, Larus occidentalis (Keith
1978) and Heerman's gulls, L. heermanni (Keith 1978, Pinzn
and Drummond in press). But western gulls and ravens also
take eggs from nests while a parent is in attendance (Keith
1978), and black vultures (Coraovos atratus) take downy
nestlings that are left unattended for extended periods (C.
Murcia pers. comm.), as is usual among these young which are
old enough to thermoregulate (Bartholomew and Dawson 1954).
Predation by vultures could cause partial brood loss,
although vultures usually took the entire broods of very
young chicks (C. Murcia pers. comm.). The only predation of
brown pelican eggs that I observed occurred when parents
temporarily abandoned a nest to bathe and were absent from
the nest for only 1-2 minutes. This usually resulted in
fish crows taking the entire clutch, but sometimes only one
egg was killed before the parent returned, and the remaining
eggs survived (Ploger unpub. data).
Brown pelican nestlings are also subject to tick
infestations (King et al. 1977a, b, Keith 1978, M. Shields
pers. comm.), endoparasitic infections (Courtney and
Forrester 1974) and death from exposure to temperature
extremes (Keith 1978). Heavy tick infestations usually lead


61
to total brood failure from parental abandonment, which may
occur throughout an entire colony (King et al. 1977a) or
sub-colony (M. Shields pers. comm.). Thus, tick infestation
is not a likely source of mortality for which youngest
chicks could serve as insurance. The value of juniors as
replacements for seniors with endoparasitic infections is
likely to be indistinguishable from their value as
replacements for apparently inferior, starving seniors.
This is because endoparasitic infections are probably lethal
only to starving chicks, whose exact cause of death (from
infection, starvation or their combined effects) can not be
determined. Temperature extremes are most likely to lead to
death of junior rather than senior nestlings, particularly
during the period when nestlings are first left unattended,
when seniors are able to thermoregulate but juniors may
still need protection from temperature extremes. If the
youngest brown pelican brood members are insurance for
losses of senior chicks, they are probably insurance for
losses due to senior inferiority, infanticide and/or
predation.
Partial clutch loss could also be due to egg shell
thinning. I saw no evidence of shell thinning in the 2
years of my study. However, the presence of "extra" eggs
may be due to recent past selective pressures (e.g. Boag and
Grant 1981) rather than current selection acting to maintain
larger clutch sizes. If there were within nest variance in


62
shell thinning due to pesticide contamination, then the
"extra" egg might have had value as replacement for a thin-
shelled sibling. This replacement value might have been
important in the 1960's and 1970's when, prior to its ban,
DDT contamination was common (reviewed by Anderson and Gress
1983). This is not a likely explanation of my results
because C/3 clutches have been the norm in Florida since the
1920's (Bent 1922). Furthermore, when examined in 1969 and
1970, Florida eggs experienced only moderate levels of
pesticide contamination and egg shell thinning, with only 0-
3% of all eggs breaking during incubation (Schreiber and
Risebrough 1972).
BrQQd Reduction in, Pelican SBfiglSS
The occurrence of facultative brood reduction of B-
chicks along with obligate C-chick deaths in broods of brown
pelicans contrasts with the pattern seen in most other
pelican species. The pelican species for which the most
complete information is available all have modal clutch
sizes of two eggs and are obliaatelv siblicidal: American
white pelican, Pelecanus erythrorhvnchos (Johnson and Sloan
1978, Knopf 1981, Cash and Evans 1986), white pelican,
Pelecanus onocrotalus (Vesey-Fitzgerald 1957, Cooper 1980),
and pink-backed pelican Pelecanus rufescens (Din and
Eltringham 1974). Drummond (1987) speculated that in
Australian pelicans, Pelecanus conspicillatus. which also


63
usually lay two-egg clutches (Vestjens 1977), brood
reduction might be facultative, but further information is
needed for this species. Virtually nothing is known about
whether partial brood loss is obligate or facultative in the
initially three-chick broods of Philippine pelican
(Pelecanus ohiliooensis. Neelakantan 1949) and the Dalmatian
pelican (Pelecanus crisous. Dementiev and Gladkov 1966,
Cramp and Simmons 1977, Crivelli and Vizi 1981).
Death occurs in the first week of life in most
obligately siblicidal species (Mock et al. 1990). But the
timing of obligate siblicide in pelican species varies
considerably, occurring within the first 3 days in white
pelicans (Cooper 1980), ranging from the first 3-10 days
(Johnson and Sloan 1978, Cash and Evans 1986) through the
first 3 weeks in American white pelicans (Knopf 1981), and
peaking in the 8-9th week in pink-backed pelicans (Din and
Eltringham 1974). The apparently obligate deaths of brown
pelican C-chicks occurred at an intermediate age relative to
those of their congeners, peaking in the second week of life
in this study and in the third week in a Mexican population
(Pinzn and Drummond in press). These differences in the
timing of obligate brood reduction could arise if the
youngest chicks serve as insurance for different causes of
senior mortality that come into effect at different points
in the nestling period. The rapid siblicide of white
pelican B-chicks suggests that they serve primarily as


64
insurance for egg loss or death as hatchlings of inferior A-
chicks. In contrast, the occurrence of siblicide later in
the nestling period may be because junior chicks are
insurance primarily for predation (Nisbet 1975, Nisbet and
Cohen 1975, Mock and Parker 1986, Bryant and Tatner 1990),
accidental deaths and infanticide (this study) or other
deaths that peak after the first week of nestling life.
The role of the youngest chick as insurance or as an
"extra" chick has been evaluated only for American white
pelicans, whose last-hatched chicks serve primarily as
insurance against hatching failure and early death of the A-
chick (Cash and Evans 1986). For other species, the
division of reproductive value into "extra-chick" and
insurance elements awaits further study. Because Dalmatian
and Philippine pelicans may have brood sizes similar to
brown pelicans, the question arises of whether junior chicks
have both insurance and "extra" chick value, as apparently
is the case for brown pelican B-chicks in B/3 broods.
Direct experimental tests of the insurance value of junior
chicks have been carried out only for white pelicans (Cash
and Evans 1986). Similar experiments on brown pelicans and
other species with C/3 clutches are necessary to clarify the
value of C-chicks.


65
Table 2-1. Comparison of clutch sizes, hatching success and
fledging success (mean SD) of brown pelican nests at Seahorse
Key in 1989 and at Alafia Banks in 1990.
1989 1990
Mean
N
Mean
Na
t
P
Clutch size
2.4+ 0.7
53
2.5 + 0.6
71
--
Hatchlings/clutch
1.6+1.2
54
1.7+1.2
65
-0.305
Fledglings/clutch
0.6 + 0.7
53
0.3+0.4
71
3.488
<0.001
Fledglings/brood
0.9+0.6
36
0.3.+ 0.5
45
4.467
<0.001
aSamples included nests that were abandoned during incubation
or hatching. See text for discussion of nest abandonment.


66
Table 2-2. Brown pelican productivity (maximum
nestlings/maximum nests) in subcolonies that were highly
(High), moderately (Mod.) or never (None) disturbed by
researcher activities.
Site
Disturbance
level
Maximum
nests
Max. nestlings
Max. nests
Bird Island focal nests
High
34
0.90
Sunken Island focal nests
High
38
0.87
Sunken Island growth nests
High
105
0.63
Bird Island Cove
Mod.
112
0.39
Sunken Island South
Mod.
135
0.38
Sunken Island Extension
None
106
0.32
Sunken Island North
None
223
0.37
Note: see Methods for definitions of maximum nests and maximum
nestlings/maximum nests.


67
Table 2-3. Fates of hatchlings of known ranks from two- and three-chick
broods in 1990.
Chicks in
Three-chick broods
Chicks
Two-chick
in
broods
Chick Rank
A
B
C
A
B
Lived
Food-Dependent Deaths
2(14%)
2(14%)
0 (0%)
4(20%)
0 (0%)
Starvation
1 (7%)
1 (7%)
3 (21%)
2(10%)
1 (5%)
Siblicide
0 (0%)
2(14%)
1 (7%)
1 (5%)
4(20%)
Starvation &/or Siblicide
1L7%1.
0 (0%)
2(14%)
1 (5%)
5(25%)
Total Food-Dependent Death
2(14%)
3(21%)
6(43%)
4(20%)
10(50%)
Food-Independent Deaths
Died as Hatchling
2(14%)
0 (0%)
2(14%)
1 (5%)
0 (0%)
Fell Accidently
0 (0%)
0 (0%)
0 (0%)
1 (5%)
1 (5%)
Killed by Invader Chick
0 (0%)
0 (0%)
0 (0%)
1 (5%)
0 (0%)
Killed by Invader Adult
3(21%)
1 (7%)
0 (0%)
0 (0%)
0 (0%)
Unknown Accident
1 (7%)
1 (7%)
0 (0%)
1 (5%)
0 (0%)
Total Food-Independent Death
6(43%)
2(14%)
2(14%)
4(20%)
1 (5%)
Unknown Causes of Death
4(29%)
7(50%)
6(43%)
8(40%)
9(45%)
N
14
14
14
20
20
Note: Abandoned nests are not included in samples presented in this and
all remaining tables and figures in this chapter.


68
Table 2-4. Hatching success and chick survival (to 70 days) in
nests for which clutch and brood sizes and fledging success
could be determined. Includes only nests hatching at least one
chick.
Clutch
size
Total
clutches
% eggs
hatched
Fledglings
per
clutch
a. 1989
C/2
13
92%
0.69
C/3
20
88%a
1.00
b. 1990
C/2
21
90%
0.29
C/3
19
89%a
0.42
aIncludes one brood in which only one egg hatched


69
Table 2-5. Brown pelican nestling survival and reproductive values (RVe =
"extra-chick" component, RVi = "insurance" component, Total RV = RVe + RVi)
Junior chicks that fledged along with their seniors were called "extra"
chicks. Junior chicks that "replaced" a senior chick were those that lived
longer than a senior sibling. N = total number of chicks in each brood-size
and chick-rank category that fledged or died.
Initial
brood Chick
size rank
Number of
"extra"
chicks that
fledged
Number of chicks
that replaced a
senior chick and:
fledged died
Total
chicks
that
fledged
N
RVe
RVi
Total
RV
B/2
Ba
2
7
a. 1989
7
2
16
0.12
7
7
B/2
Combined
--


12
32


0.38
B/3
B or Cb
3
7
7
3
15
0.20
7
7
B/3
Combined


--
16
45
--
0.36
B/2
A
b. 1990
4
20
0.20
B/2
B
0
0
3C
0
20
0
0
0
B/2
Combined



4
40


0.10
B/3
A
--

2
14

--
0.14
B/3
B
0
2
3d
2
14
0
0.14
0.14
B/3
C
0
0
3d
0
14
0
0
0
B/3
Combined
--
--
4
42


0.10
Note :
RVe = (the number of
"extra"
chicks of a
particular junior
rank
(B or
C) / N chicks of that rank). RVi = (the number of juniors of a particular
rank that fledged after replacing a senior that died / N chicks of that
rank). Total RV = (the number of juniors of a particular rank that
fledged / N chicks of that rank).
a
Chicks were not marked in 1989 so data are presented only for two nests that
fledged both chicks and therefore had surviving B-chicks.
b
Data are presented only for three nests that fledged two chicks and
therefore had surviving B-chicks (or C-chicks if there were reversals),
c
One of these chicks died when 69 days old.
dT
In one reversal, the B- and C-chicks may have died on the same day, 3-5
days after the A-chick died.


70
Table 2-6. Fates of eggs and chicks in all nests in which at
least one chick hatched, including nests with unknown chick
ranks, clutches and/or brood sizes. These eggs and chicks came
from 44 nests in 1989 and 81 nests in 1990.
1989
1990
Lived
37
33
Never Hatched
11
15
Food-Dependent Deaths:
Starvation
0a
11
Siblicide
16
17
Starvation &/or Siblicide
15.
15
Total Food-Dependent Deaths
31
43
Food-Independent Deaths:
Died as Hatchling
4
8
Fell Accidently
1
3
Infanticide
Killed by Invader Chick
0
2
Killed by Invader Adult
4
5
Unknown Accident
__2
Total Food-Independent Deaths
11
24
Deaths from Unknown Causes
15
62
N
105
177
Starvation deaths could not be separated from Starvation &/or
Siblicide in 1989 because chicks were not handled in 1989.


Figure 2-1. Frequency of mortality through the nestling
period (defined as beginning with hatching of the A-chick)
for A-, B- and C-chicks in B/3, and A- and B-chicks in B/2
broods in 1990. The graphs for C-chicks and B/2 B-chicks
include chicks of these ranks, plus unranked 1990 chicks
that were the first to die in B/3 and B/2 broods,
respectively. Only chicks from broods hatching all eggs
were included. Numbers above bars indicate for each time
period the number of A-chicks that died before their juniors
(A-chick graphs), or the number of B-chicks or C-chicks that
died after a senior sibling (B- and C-chick graphs,
respectively).


Frequency
72
B/3 Nests
Food-independent deaths
Food-dependent deaths
All deaths
B/2 Nests
Days in nestling period


CHAPTER 3
HUNGER AS A PROXIMATE CAUSE OF FIGHTING
Introduction
Fierce fighting among nestlings is common in a variety
of avian taxa (reviews in O'Connor 1978, Stinson 1979, Mock
et al. 1990). In "obligately" siblicidal species, death is
the virtually inevitable result of nestling aggression (Mock
et al. 1990). In "facultatively" siblicidal species, the
lethality of sibling fighting varies and may depend on food
supplies to the brood (Mock et al. 1990).
The ultimate cause of both obligate and facultative
siblicide is presumably food insufficiency (Mock 1984a, Mock
et al. 1987, 1990, Drummond and Garcia Chevelas 1989);
nestlings fight to eliminate competitors when food proves
inadequate for the full brood. Obligate siblicide is
usually explained as a way of eliminating a brood-member
because food is certain to become inadequate for raising the
full brood when nestlings become older (Stinson 1979, Mock
et al. 1990). Facultative siblicide usually is explained as
a form of resource tracking, whereby parents attempt to
match brood size to unpredictable resources by producing an
extra chick that survives if food is abundant but is
eliminated if food becomes scarce (Lack 1947, 1954, called
73


74
"Lack's brood reduction hypothesis" by Ricklefs 1968).
Theoretically, unpredictable food supplies ultimately favor
facultative siblicide (Mock et al. 1990) in species where
nestling starvation is brood-size dependent. When such
species face food shortages routinely, selection should lead
to reductions in clutch (rather than brood) size to match
resources. But routine shortages can favor overproduction
followed by obligate siblicide when the designated victim
has some value as a potential replacement for a sibling that
dies (Dorward 1962, reviews in Stinson 1979, Anderson 1990,
see also Chapter 2).
Most species accomplish brood reduction without overt
nestling aggression (see reviews in Howe 1976, Clark and
Wilson 1981). Several conditions must be met for the
evolution of siblicidal aggression to be favored. First,
nestlings must possess potentially lethal weaponry. Second,
they must experience spatial confinement that precludes
escape from sibling attacks. Third, nestlings must engage
in competition for food that is provisioned in small units
that can be defended easily through aggression (Mock et al.
1990). Siblicidal species are also characterized by
competitive disparities among siblings. These disparities,
which are usually initiated by hatching asynchrony, may
function to reduce siblicidal aggression (Drummond and
Garcia Chvelas 1989, Hahn 1981, Fujioka 1985, Mock and
Ploger 1987, but see Hussell 1972, Clark and Wilson 1981;


75
Magrath 1990 reviewed causes of hatching asynchrony). Large
size disparities, however, may be a consequence rather than
cause of nestling aggression (Mock et al. 1990).
The degree of nestling aggression varies among broods
within and between populations of facultatively siblicidal
species (Mock et al. 1990). The degree of within-brood
aggression can not be predicted by simply determining that a
species possesses all of the attributes (e.g. weaponry,
monopolizably delivered food) that favor siblicide. To
explain the variance in nestling aggression requires
examination of its proximate causes.
One frequently invoked hypothesis is that hunger is the
proximate mechanism that triggers fighting ("food-amount
hypothesis," Ingram 1959, Lack 1966, Procter 1975, Nelson
1978:565, Poole 1979, 1982, Braun and Hunt 1983, Fujioka
1985). This intuitive hypothesis derives from the
hypothesis that food limitation is the ultimate selective
pressure favoring siblicide (Drummond and Garcia Chvelas
1989, Mock et al. 1987, 1990). Most evidence for the food-
amount hypothesis is correlational. This evidence includes
(1) a temporal association between fighting and meals, (2) a
disinclination of recently fed chicks to attack, and (3) an
association between junior chick death with reduced parental
feeding rates during protracted inclement weather (see
review in Mock et al. 1987). There is also an inverse
relationship between parental feeding rates and sibling


76
aggression in oystercatchers (Haematoous ostraleous. Safriel
1981), ospreys (Pandion haliaetus. Poole 1979, 1982,
summarized in Mock et al. 1990) and some other raptors
(Newton 1977).
The best evidence that hunger triggers fighting comes
from an experimental study of blue-footed boobies (Sula
nebouxii. Drummond and Garcia Chvelas 1989). Brood
reduction in this species usually occurs shortly after the
senior chick's mass drops about 20% below that expected at
its current age in a good year (Drummond et al. 1986) .
Senior nestlings whose necks were taped to prevent
swallowing pecked their siblings over three times more often
than before taping or after tapes were removed (Drummond and
Garcia Chvelas 1989). Rates of such aggressive pecking
rose most steeply when senior mass dropped to 20% below
potential. Similarly, experimental food deprivation also
seemed to cause elevated fighting among south polar skua
chicks (Catharacta maccormicki. Procter 1975), although
design problems caused inconclusive results. In the only
other experimental test of the food-amount hypothesis,
sibling fighting was not correlated with food ingestion in
broods of great egrets (Casmerodius albus. Mock et al.
1987). Provisioned broods in field experiments fought
slightly more than unprovisioned controls, and captive
broods fed high amounts fought more than did broods
receiving low food allotments. Experimental provisioning of


77
great blue herons (Ardea herodias) foster-parented by great
egrets also failed to depress fighting rates relative to
unprovisioned broods (Mock 1984b). In addition, field
observations of great egrets, great blue herons and cattle
egrets (Bubulcus ibis) failed to show increased aggression
with decreased food (results of various studies summarized
in Mock et al. 1987).
Although fighting occurred independently of food
amounts in these ardeid species, mortality, including
siblicide, was correlated with food shortage (Mock et al.
1987). A possible proximate mechanism to explain this
correlation in the absence of food-dependent fighting is
that the victim becomes more vulnerable to aggression during
food shortages even though levels of aggression are
invariant (Mock 1984b, Mock et al. 1990, Drummond and Garcia
Chvelas 1989). There are two ways that victim
vulnerability could be enhanced during food shortages.
First, parents may be absent more often on foraging trips
and thus, may rarely be able to suppress (fortuitously or
deliberately) nestling aggression (Newton 1977). Second,
competitive disparities among chicks may be exacerbated
during food scarcity, leading to malnourishment of the
younger one which thus succumbs more easily to the physical
abuse (Spellerberg 1971, Meyburg 1974, Edwards and Collopy
1983, Mock et al. 1987). Food abundance is also unlikely to
exert proximate control on nestling aggression in obligately


78
siblicidal species. In these species, fatal aggression is
the rule even during periods of food abundance (Mock et al.
1990) .
I investigated the food-amount hypothesis as a
proximate explanation for aggression among nestling brown
pelicans (Pelecanus occidentalis). Brown pelicans hatch
their eggs asynchronously. Death is obligate for the last-
hatched members of three-chick broods and is facultative for
second-hatched chicks (Chapter 2). Nestlings frequently
fight (Pinzn and Drummond in press) and these attacks often
contribute to the death of junior brood-members (Chapter 2,
Pinzn and Drummond in press). For the food-amount
hypothesis to be a possible explanation for nestling
aggression in this species, there should be an inverse
relationship between nestling aggression and amount of food
consumed and growth of at least some brood members.
Methods
Study Site
I observed brown pelicans nesting in the canopy of
mangroves and other trees growing on Bird and Sunken
Islands, together known as Alafia Banks, in Hillsborough
Bay, Tampa, Florida (see Chapter 2 for further description
of the study site).


79
Observation and Censusing Methods
Observations were made with spotting scope and
binoculars from two blinds, one on Bird Island 1-33 m from
observation nests, and the other on Sunken island, 28-42 m
from observation nests. Two observers participated in
continuous daylight vigils on alternate days from 15 March
through 8 July 1990. Both observers were present
simultaneously during the 2 weeks of peak nestling activity.
A daily maximum of 16 focal nests were monitored
simultaneously in a visual arc of 70-80. These focal nests
included broods used in other studies (see Chapters 2 and
4), as well as the 13 nests used in this study. I used only
two-chick broods in this study, including 10 broods from
two-egg clutches and three broods that initially contained
three chicks but were reduced to two chicks by the age when
they were used for the analyses presented in this study.
Because the pelicans initiated clutches from the middle
of February through the end of May, 1990, on any given day
the subcolony under observation often consisted of a mix of
nests containing eggs through old nestlings. Upon brood
completion, we added nests to the focal group for continuous
daylight observation until A-chicks reached age 20 days,
after which nests were retired and only censused visually
each day to determine chick fates. Nests were censused and
growth was monitored until all residents had died or reached


80
age 70, my operational definition of fledging (see Chapter
2) .
We marked hatchling (0-4 day old) chicks according to
hatching order with yellow and black indelible pens. Older
chicks received blue and yellow acrylic paint and same color
flagging tape squares glued with contact cement on their
backs and heads. Paint and flagging were reapplied
frequently (see Chapter 2). Chicks were weighed (to the
nearest g with spring scales) and the length of the culmen
was measured (to the nearest mm with a clear plastic ruler)
every 2-4 days until the brood's first-hatched (A-) chick
was (on average) 29 days old (range 25-31 days), a minimum
of once a week when A-age was between 30-40 days, and at
least every 10-12 days thereafter. Ages and hatching orders
of chicks were determined by direct observation of newly
hatched chicks whenever possible. For other chicks, ages
were estimated from a regression of culmen length on age of
known-age nestlings (see Chapter 2 and Appendix A for more
details).
Nest Observations
Focal nests were scanned in order following a pre-set
sequence. We continued to scan nests until we detected
feeding or fighting behavior (see below), at which point we
began to monitor all activities in the nest until we
terminated observations because all feeding and fighting


81
behavior at the target nest had ceased. After termination
of observations at a target nest, we resumed scanning of
nests starting with the next nest in the sequence. When
fighting was occurring in one nest while feeding was
occurring at another, we selected the nest with fighting as
our target for behavioral observations. If two or more
nests both had feeding or both had fighting behavior
occurring during a scan, we chose to watch whichever nest
was next in the scan sequence.
Feeding Behavior
Parents regurgitated fish onto the nest floor during
the first week of nestling life ("indirect" feeding, Pinzn
and Drummond in press and Ploger, unpub. data). They
gradually shifted to making deliveries directly as the
chicks got older (Pinzn and Drummond in press and Ploger,
unpub. data). When chicks fed "directly", they reached into
their parent's pouch to obtain food. "Feeding behavior"
included all direct and indirect deliveries of food to
nestlings, plus all cases in which parents opened their
bills over young chicks or had older chicks thrusting deep
into the base of the pouch without any evidence of food
being delivered. A period of feeding activity was defined
as ending when the parent began a nonfeeding activity
without resuming feeding activity within 1 minute. I
defined nonfeeding activities to include preening, wing-


82
flapping, nest-cleaning (tossing fish bones, skin, sticks
and various unidentifiable scraps from the nest), adjusting
sticks in the nest, adopting a "resting" posture in which
the parent held its closed bill out of reach of its chicks
(postures shown in figures 16, 18, and 19 of Schreiber
1977), nest relief behavior (Schreiber 1977), displaying to
or snapping at a neighbor, hopping to a perch or flying
away.
I estimated the amount of food delivered to chicks by
recording the longest linear dimensions of food boluses
swallowed by each chick. To estimate bolus sizes, I
expressed the length of the bulge in a chick's neck as a
percentage of the parent's bill length (based on Mock 1985,
units = "food-units"). Because parents sometimes blocked
the observer's view, prohibiting determination of whether
food deliveries had occurred, my data must be considered
minimum estimates of the amounts of food obtained by
nestlings.
Fighting Behavior
I counted as "fights" all cases where one chick
delivered at least one blow (see below) to the body of
another chick with enough force to move the victim's head
when struck. An individual fight continued until one of the
chicks adopted a "submissive" posture (sensu Pinzn and
Drummond in press, see definitions below), or no further


83
blows were delivered for at least 30 seconds. A total of
1646 fights were observed in 1990 in all of the nests used
in this and related studies (see Chapters 2 and 4 for
descriptions of these related studies).
Fights involved two types of blows, "Bites" and
"Shakes" (defined below) The first blow of a fight was a
Bite in 1255 fights and a Shake in 310 fights (of the
1565/1646 fights in 1990 for which we could identify the
type of blow that was delivered first). When Biting, the
attacker reached toward the head or body of its adversary,
closed its mandibles over some part of the victim's anatomy
such that the sharp nail at the tip of the upper mandible
depressed the victim's skin and then immediately released
its hold. Bites were delivered to the head and neck with
such speed and force that the victim's head was pushed
backward by the force. Bites to the back also pushed the
body away from the blow, but this movement was often small
because blows usually pushed the victim's body into the nest
floor which damped some of the movement. Bites were often
directed toward the eyes or base of the skull. Shakes
occurred when the attacker grasped its victim's head in a
scissor grip and forced the victim's head to strike against
the victim's body or the nest fabric. The attacker then
pulled the victim's head away from the object that it
struck. This was often followed by the attacker once again
slamming the victim's head against its body or the nest


84
floor. When several Shakes occurred in a continuous series,
the attacker did not relinquish its hold on the victim
between blows.
Fights occasionally resulted in puncture wounds to the
head and neck, but breaks in the skin were rare. The most
common evidence of injury was that after being beaten
repeatedly, the victim's skin often became puffed out in odd
shapes along its back, sides and neck, possibly from air-
sacs that had been broken during sibling attacks. Some
chicks near death had 5-10 small puncture wounds on their
abdomens or breasts. These wounds could not have been
caused by sibling bites, because victims almost always kept
their breasts pressed to the nest fabric during fights. But
a victim's breast might be punctured when an attacker
directed powerful blows to the victim's back, walked or sat
on the victim, or otherwise shoved the victim's body
forcefully into the often sharp sticks of the nest.
Nineteen percent of all fights observed in 1990 ended
in submissive postures (described below) that were visible
to the observer. Some additional fights also may have ended
in submissive postures that were not detectable because the
loser was hidden from the observer by the nest rim or the
body of a family member. Submissive postures included:
Crouch (N = 44 fights), Curl Neck (N = 105 fights), Turn Low
(N = 75 fights), Duck (N = 53 fights), Reverse Head (N = 1
fight), Lie Flat (N = 4 fights), and Hang Head (N = 36


85
fights). An additional submissive posture, Lie Back, was
observed one time in a population of brown pelicans that I
observed in 1989 as part of another study (study presented
in Chapter 2). A chick in the Crouch position (Figure 3-lA)
squatted on its heels with the back raised off the nest
floor at a 20-60 angle from horizontal while its throat was
pressed against its neck in such a way that the bill was
pressed against the abdomen, parallel to the angle of the
back. When in the Curl Neck posture (Figure 3-lB), a chick
lay with its abdomen pressed to the nest floor, its back
horizontal, the dorsal surface of its neck lying on its
shoulders and its throat resting on its breast such that the
bill was pressed against the front of the neck and breast
approximately perpendicular to the nest floor. If the bill
was not perpendicular to the nest floor, it was within 10
of perpendicular, such that the tip of the bill was
posterior to the forehead (position shown in Figure 3-lB).
The position of the body of chicks in the Turn Low, Duck,
Lie Back, Reverse Head and Lie Flat postures were all the
same as was just described for the Curl Neck position (see
Figure 3-1, B-G). These postures were distinguished by the
position of the chick's bill, head and neck. When adopting
the Turn Low posture (Figure 3-1C), a chick turned its head
to one side of its body while keeping the dorsal surface of
its neck pressed to its shoulders, its throat pressed to its
side just below its wing, and its bill pressed along its


86
side with the tip pointing posteriorly at a 0-45 angle to
the horizontal plane. In the Duck posture (Figure 3-lD), a
chick curled its head under its body such that the ventral
surface of the posteriorly pointing bill was pressed against
the abdomen and the dorsal surfaces of the bill and head
were pressed against the nest fabric. This posture
effectively shielded a chick's face from sibling attacks,
but left its nape exposed. When in the Lie Back posture
(Figure 3-lE), a chick pressed one cheek against its back
between its wings while its bill, resting on the back,
jutted out to the side horizontally, while being held
approximately perpendicular to the medial plane. A chick
adopting the Reverse Head position (Figure 3-IF) placed its
throat and the ventral surface of its neck and posteriorly
pointing bill against its back between the wings. In the
Lie Flat position (Figure 3-1G), a chick lay with the
lateral surface of its neck and head pressed against the
nest fabric while the dorsal surfaces of the distal and
medial halves of the neck remained folded against one-
another, and the throat pressed against the ventral surface
of the neck. The Hang Head posture (Figure 3-1H) was
defined by a chick hanging its head over the rim of the nest
or the edge of its perch such that the tip of the bill hung
parallel to or below the chick's feet. Body positions
during the Hang Head ranged from those described for the
Crouch to the Curl Neck postures.


Full Text
136
1986), snow buntings (Plectrophenax hvoerboreus. Hussell
1972), red-winged blackbirds (Aaelaius ohoeniceus.
Cronmiller and Thompson 1980), and house sparrows (Passer
domesticus. Hegner and Wingfield 1987). In an additional
paper not covered in the reviews mentioned earlier, the
duration of feeding bouts decreased with decreasing brood
size in ring doves (Streotooelia risoria, ten Cate and
Hilbers 1991). If delivery rates reflected actual amounts
of food delivered, then eight of these 11 studies do not
provide support for the assumption that parents feed similar
amounts to broods before and after brood reduction. These
results suggest that food amounts to seniors may not
generally increase following brood reduction. To determine
if this is so will require comparing food delivered to
chicks according to their hatching ranks as well as brood-
size treatments.
Two lines of evidence suggest that senior chicks might
actually receive less food following brood reduction.
First, in broods of cattle egrets (Bubulcus ibis), senior
chicks received less food in reduced than control broods
(Mock and Lamey 1991). Second, when I analyzed food
consumed by brown pelican nestlings according to their
hatching rank, I found that B-chicks received significantly
less food in reduced than in control broods during the first
9 days post-treatment. This result suggested the hypothesis
that the effect of C-chick loss might differ for A- and B-


49
were delayed until 23.7 (+8.9) days into this period
(Figure 2-1). These differences were not significant (U =
11.5, P = 0.10, ni = 5 siblicides and n2 = 9 starvation
deaths of chicks of all ranks whose fates were known, from
B/2 and B/3 broods).
Discussion
This study provides a mix of evidence for and against
both the resource-tracking and insurance hypotheses.
Starvation and siblicide were common and concentrated on the
last-hatched brood-members, as predicted by the resource
tracking hypothesis (Lack 1954, OConnor 1978, Mock 1984a,
Drummond 1987, Magrath 1990). As predicted by the insurance
hypothesis (Dorward 1962, Stinson 1979, Nisbet and Cohen
1975, Mock and Parker 1986, Bryant and Tatner 1990), seniors
faced a high risk of dying from food-independent causes
including hatching failure, accidental deaths and
infanticide. Furthermore, both B- and C-chicks frequently
replaced seniors that died from such causes. Survival was
associated with nestling size-ranks, as predicted by both
hypotheses. But this association was not significant when I
restricted analyses to chicks of known hatching ranks (see
Survival, below).
B-chicks provided only insurance value in 1990, but in
1989, some B-chicks in B/2 and B/3 nests survived along with
their siblings. Thus, the reproductive value of B-chicks


145
Table 4-1. Percent of total food to the brood that was
consumed by A-, B- and junior chicks ("Jr-chicks"). Shares
to Jr-chicks were amounts consumed by C-chicks in three-
chick (B/3) broods, and amounts consumed collectively by C-
and D-chicks in four-chick (B/4) broods. Shares were based
on totals consumed during the first 6 and 9 days post-
treatment.
Nest
I.D.
Percent of
A-chicks B-
food consumed by:
chicks Jr-chicks
a.
B/3 broods
6
days
post-treatment
Ia
27%
62%
11%
2
45%
41%
14%
3
49%
43%
8%
4
38%
36%
26%
5
44%
41%
15%
b.
B/3 broods
9
days
post-treatment
Ia
34%
59%
7%
2
36%
48%
16%
3
49%
45%
6%
c.
B/4 broods
6
days
post-treatment
6
50%
33%
17%
7
42%
31%
27%
8
35%
36%
29%
9
48%
47%
5%
10
71%
29%
0%
aln this nest, the B-chick had grown larger than the A-chick
by the time that the nest was treated.


68
Table 2-4. Hatching success and chick survival (to 70 days) in
nests for which clutch and brood sizes and fledging success
could be determined. Includes only nests hatching at least one
chick.
Clutch
size
Total
clutches
% eggs
hatched
Fledglings
per
clutch
a. 1989
C/2
13
92%
0.69
C/3
20
88%a
1.00
b. 1990
C/2
21
90%
0.29
C/3
19
89%a
0.42
aIncludes one brood in which only one egg hatched


58
seniors suggests that C-chicks had at least some potential
for replacing a senior that died of such causes. Indeed, in
the few cases where juniors actually outlived a senior,
although most replaced A-chicks that died as hatchlings or
of unknown causes, one B- and C-chick in a B/3 brood and one
B-chick in a B/2 brood replaced an A-chick that died of
food-dependent causes. This suggests that juniors may
sometimes serve as insurance against a defective (Mock
1984a, Mock and Parker 1986, Mock et. al. 1990) or
competitively inferior (Cash and Evans 1986, Drummond 1986)
senior by dominating an inferior senior and reversing the
usual feeding advantages so that the subordinated senior
would starve or be killed by its dominant junior in the
event of a food shortage. The subordination of an A-chick
by its B-sibling could also occur if the B-chick was
unusually well-developed (a "superchick," Mock 1984a).
Dominance reversals with losers dying of food-dependent
causes also would be expected if the production and
subsequent elimination of "extra" offspring is a parental
ploy to selectively raise the fittest genotypes (Buchholz
1922, called "progeny choice" by Kozlowski and Stearns 1989)
by allowing siblings to eliminate inferior competitors
(Simmons 1988). In synchronously hatching species, this
could allow parents to sort out the "best" among offspring
with relatively similar competitive abilities, although at
potentially high costs in energy (Mock and Ploger 1987) and


APPENDIX C
WHY DO OLDER CHICKS AND ADULTS ATTACK NESTLINGS?
Nestlings entered neighboring nests when seeking to
steal food and when escaping attacks by siblings or invaders
on their own nests. But nestlings also invaded for no
obvious reason. One possible explanation is that by joining
a neighbor, a chick may decrease its chances of being
attacked by invading adults or larger chicks. A chick with
no surviving siblings could benefit from joining a neighbor
if the risks it faces and/or consequences of being attacked
by the resident chick(s) and adults are lower than those it
would face from attacks by invading adults or larger chicks
if it remained on its own nest. Similarly, a chick that
joins another may be less likely to be killed by a predator
(Evans 1984), although I know of no nest predators of
eastern brown pelicans that take young as large as those
that are able to wander to other nests. There may also be
thermal advantages to associating with another chick
(Bartholomew and Dawson 1954, Evans 1984), which may make
invading a worthwhile strategy as long as the risk of being
attacked by a resident is low. The extent of chick
movements among neighboring nests was limited by the
structure of the tree canopy that contained the nests in
this study. Such wandering is much more extensive among
173


152
In O'Connor's view, sibling aggression in two-chick
broods (where second-hatched ("B-") chicks are the potential
victims) represents conflict between parents and their
first-hatched offspring ("A-chicks"). Brown pelican A-
chicks gained a disproportionate share of the total food
delivered to broods (Chapter 4 and Pinzn and Drummond in
press). When I experimentally manipulated brood sizes, I
found that A-chicks secured similar amounts of food in
broods of all sizes, even in broods that received less total
food than others (Chapter 4). These results, indicating a
feeding advantage for A-chicks, suggest two possibilities.
First, there may be congruence rather than conflict between
the fitness interests of parents and A-chicks over the
allocation of parental investment among current offspring.
Alternatively, A-chicks might have secured a feeding
advantage despite parental efforts to distribute food more
equally among all offspring.
Rather than being the outcome of conflict between
parents and their A-chicks, sibling aggression in brown
pelican broods might be the result of A-chicks trying to
maintain their (parentally initiated) feeding advantage and
B-chicks trying to wrest dominance from their A-siblings to
gain a feeding advantage. The nature of the relationship
between fighting rates and chick growth that I found in
brown pelican broods (Chapter 3) lends support to this
hypothesis. The association of increased fighting with


104
Table 3-1. Averages ( SD) per brood of the number of fights,
number of blows and average blows/fight during each summary
interval. Summary intervals are 4-day periods when A-chicks
were 6 through 10 (N = 7 broods), 11 through 15 (N = 7 broods),
13 through 17 (N = 5 broods) and 17 through 21 days old (N = 6
broods). Sample sizes in these summary intervals are the same
in Tables 3-1 through 3-4. See methods for further explanation.
Summary
Interval
Number of
fights
Number of
blows
Average
blows/fight
6 through 10 days
14.4+11.8
214.1+300.8
10.2+10.4
11 through 15 days
11.9+11.2
64.4+54.0
6.5 + 4.9
13 through 17 days
29.818.6
243.4+187.6
7.5+3.0
17 through 21 days
26.8+17.7
196.7+137.3
1.2+2.5
Note: Results of significance tests are reported in text.


186
Masuko, K. 1986. Larval hemolymph feeding: a
nondestructive parental cannibalism in the primitive
ant Amblyaone silvestrii Wheeler (Hymenoptera:
Formicidae). Behav. Ecol. Sociobiol., 19, 249-255.
Mazer, S. J. 1987. Maternal investment and male
reproductive success in angiosperms: Parent-offspring
conflict or sexual selection? Biol. J. Linn. Soc., 30,
115-133.
Meyburg, B. -U. 1974. Sibling aggression and mortality
among nestling eagles. Ibis, 116, 224-228.
Mock, D. W. 1984a. Infanticide, siblicide and avian
nestling mortality. In: Infanticide: Comparative and
Evolutionary Perspectives (Ed. by G. Hausfater & S. B.
Hrdy), pp. 3-30. New York: Aldine Publ. Co.
Mock, D. W. 1984b. Siblicide aggression and resource
monopolization in birds. Science, 225, 731-733.
Mock, D. W. 1985. Siblicidal brood reduction: the prey-
size hypothesis. Am. Nat., 125, 327-343.
Mock, D. W. & Lamey, T. C. 1991. The role of brood size in
regulating egret sibling aggression. Am. Nat., 138,
1015-1026.
Mock, D. W. & Parker, G. A. 1986. Advantages and
disadvantages of egret and heron brood reduction.
Evolution, 40, 459-470.
Mock, D. W. & Ploger, B. J. 1987. Parental manipulation of
optimal hatch asynchrony in cattle egrets: an
experimental study. Anim. Behav., 35, 150-160.
Mock, D. W., Drummond, H. & Stinson, C. H. 1990. Avian
siblicide. Amer. Sci., 78, 438-449.
Mock, D. W., Lamey, T. C. & Ploger, B. J. 1987. Proximate
and ultimate roles of food amount in regulating egret
sibling aggression. Ecology, 68, 1760-1772.
Montgomery, G. G. & Martnez, M. L. 1984. Timing of brown
pelican nesting on Taboga Island in relation to
upwelling in the Bay of Panama. Colonial Waterbirds,
7, 10-21.
Neelakantan, K. K. 1949. A south Indian pelicanry. J.
Bombay Nat. Hist. Soc., 48, 565-566.


156
period during which the treatments remained in effect
(Chapter 4).
Stronger evidence against the assumption was provided
by my comparison of reduced versus control broods 9 days
post-treatment. During this period, parents decreased
deliveries to experimentally reduced broods. Thus, A- and
B-chicks did not gain additional food following the
elimination of their junior ("C-") sibling. Although
clearly able to deliver more food to reduced broods, parents
exercised restraint by withholding food from these broods.
Such restraint may optimize life-time reproductive success
of parents, as seems likely for at least one Pelecaniform,
the South African gannet (Sula capensis. Jarvis 1974). In
this species, and also in the rook (Corvus fruailecrus.
Rpskaft 1985), unusually high investment in one season
depressed parental reproduction in the following season.
Parental restraint is likely to foster conflict between
parents (who favor decreased investment in current
offspring) and their current offspring (who favor increased
investment; Trivers 1974). In the small sample of species
for which data on feeding have been reported, parents
generally decrease food supplied to chicks in reduced
relative to control or enlarged broods (reviewed in Chapter
4). This raises the possibility that food to one or both
seniors might actually decrease following brood reduction.
This possibility remains untested. But if a senior suffers


85
fights). An additional submissive posture, Lie Back, was
observed one time in a population of brown pelicans that I
observed in 1989 as part of another study (study presented
in Chapter 2). A chick in the Crouch position (Figure 3-lA)
squatted on its heels with the back raised off the nest
floor at a 20-60 angle from horizontal while its throat was
pressed against its neck in such a way that the bill was
pressed against the abdomen, parallel to the angle of the
back. When in the Curl Neck posture (Figure 3-lB), a chick
lay with its abdomen pressed to the nest floor, its back
horizontal, the dorsal surface of its neck lying on its
shoulders and its throat resting on its breast such that the
bill was pressed against the front of the neck and breast
approximately perpendicular to the nest floor. If the bill
was not perpendicular to the nest floor, it was within 10
of perpendicular, such that the tip of the bill was
posterior to the forehead (position shown in Figure 3-lB).
The position of the body of chicks in the Turn Low, Duck,
Lie Back, Reverse Head and Lie Flat postures were all the
same as was just described for the Curl Neck position (see
Figure 3-1, B-G). These postures were distinguished by the
position of the chick's bill, head and neck. When adopting
the Turn Low posture (Figure 3-1C), a chick turned its head
to one side of its body while keeping the dorsal surface of
its neck pressed to its shoulders, its throat pressed to its
side just below its wing, and its bill pressed along its


11
sense that they represent a bonus unit of reproductive
success to parents when food is abundant. Second,
"marginal" offspring may provide "insurance value" as
replacements for senior siblings that die (the "insurance
offspring" hypothesis, Dorward 1962). Although originally
stated as a separate hypothesis, the insurance hypothesis is
actually a special case of the resource-tracking hypothesis
(Anderson 1990). Insurance operates when parents are faced
with unpredictable brood size (e.g. unpredictable levels of
hatching failure) and predictable resource shortages after
hatching. Resource-tracking operates when brood sizes are
predictable and resources are unpredictable. In both
situations, brood sizes are matched to current food supplies
(Forbes 1990). The insurance hypothesis is usually invoked
for the extreme case of obligate siblicide, in which the
youngest brood members have only "insurance value" (Mock and
Parker 1986) because they never survive along with their
seniors. The resource-tracking hypothesis is usually
invoked when partial brood loss is less frequent and the
youngest chick survives along with its siblings when
conditions are favorable, thereby providing its parents with
an "extra" unit of reproductive success (Mock and Parker
1986). In facultative brood reducers with intermediate
levels of junior chick mortality, parents may derive
additional reproductive success through both routes, with


LIST OF REFERENCES
Abacus Concepts. 1992. Statview. Version 4.0. Berkeley:
Abacus Concepts Inc.
Alexander, R. D. 1974. The evolution of social behavior.
Ann. Rev. Ecol. Syst., 5, 325-383.
Anderson, D. J. 1990. Evolution of obligate siblicide in
boobies. 1. A test of the insurance-egg hypothesis.
Am. Nat., 135, 334-350.
Anderson, D. W. & Gress, F. 1983. Status of a northern
population of California brown pelicans. Condor, 85,
79-88.
Anderson, D. W. Gress, F. & Mais, K. F. 1982. Brown
pelicans: influence of food supply on reproduction.
Oikos, 39, 23-31.
Anderson, D. W., Jurek, R. M., & Keith, J. O. 1977. The
status of brown pelicans at Anacapa Island in 1975.
Calif. Fish Game, 63, 4-10.
Bartholomew, G. A., Jr. & Dawson, W. R. 1954. Temperature
regulation in young pelicans, herons, and gulls.
Ecology, 35, 466-472.
Bartlett, J. 1987. Filial cannibalism in burying beetles.
Behav. Ecol. Sociobiol., 21, 179-183.
Beissenger, S. R. 1990. Experimental brood manipulations
and the monoparental threshold in snail kites. Am.
Nat., 136, 20-38.
Beissinger, S. R. & Waltman, J. R. 1991. Extraordinary
clutch size and hatching asynchrony of a neotropical
parrot. Auk, 108, 863-871.
Bent, A. C. 1922. Life Histories of North American Petrels
and Pelicans and Their Allies. New York: Dover
Publications, Inc.
Blus, L. J. Sc Keahey, J. A. 1978. Variation in
reproductivity with age in the brown pelican. Auk, 95,
128-134.
179


187
Nelson, J. B. 1978. The Sulidae: Gannets and Boobies.
Oxford: Oxford University Press.
Newton, I. 1977. Breeding strategies in birds of prey.
Living Bird, 16, 51-92.
Nisbet, I. C. T. 1975. Selective effects of predation in a
tern colony. Condor, 77, 221-226.
Nisbet, I. C. T. & Cohen., M. 1975. Asynchronous hatching
in common and roseate terns, Sterna hirundo and £..
douaallii. Ibis, 117, 374-379.
O'Connor, R. J. 1978. Brood reduction in birds: selection
for fratricide, infanticide and suicide? Anim. Behav.,
26, 79-96.
O'Connor, R. J. 1984. The Growth and Development of Birds.
New York: John Wiley & Sons.
O'Gara, B. W. 1969. Unique aspects of reproduction in the
female pronghorn, Antilocapra americana. Amer. J.
Anat., 125, 217-232.
O'Malley, J. B. E. & Evans, R. M. 1980. Variations in
measurements among white pelican eggs and their use as
a hatch date predictor. Can. J. Zool., 58, 603-608.
Parker, G. A. & McNair, M. R. 1978. Models of parent
offspring conflict. I. Momogamy. Anim. Behav., 26, 97-
110 .
Parker, G. A. & Mock, D. W. 1987. Parent-offspring
conflict over clutch size. Evol. Ecol., 1, 161-174.
Parker, G. A., Mock, D. W. & Lamey, T. C. 1989. How
selfish should stronger sibs be? Am. Nat., 133, 846-
868.
Patterson, C. B., Erckmann, W. J., & Orians, G. H. 1980.
An experimental study of parental investment and
polygyny in male blackbirds. Am. Nat., 116, 757-769.
Pinzn, D. Sc Drummond, H. In press. Brown pelican
siblicide and the prey-size hypothesis. Behav. Ecol.
Sociobiol.
Ploger, B. J. & Mock, D. W. 1986. Role of sibling
aggression in food distribution to nestling cattle
egrets (Bubulcus ibis). Auk, 103, 768-776.


117
But evidence from experiments used to test a related
hypothesis suggests that parents do not ignore changes in
brood sizes when determining how much food to deliver. In
the majority of bird species whose broods have been
experimentally enlarged, parents successfully raised the
enlarged broods (reviews in Lessells 1986, Ydenberg and
Bertram 1989, VanderWerf 1992), presumably because parents
delivered extra food to these broods. These results suggest
that parental feeding is sensitive to brood size, implying
that perhaps parents also decrease food supplied to reduced
broods. If so, then senior offspring would not gain
additional food following brood reduction. In such a
situation, the proximate benefits of brood reduction may
differ for parents and offspring. Brood reduction may have
little impact on the resources provided to seniors but may
potentially enhance parental fitness by decreasing
investment in the current brood and increasing parental
ability to raise future broods in this long-lived species.
These differences in proximate benefits between parents and
offspring suggest the potential for parent-offspring
conflict over brood reduction, as was predicted by several
models (reviewed in Godfray and Parker 1991) .
I manipulated the sizes of brown pelican (Pelecanus
occidentalis) broods to estimate whose interests were being
served by brood reduction in this siblicidal species. I
compared food deliveries and survival of senior siblings in


75
Magrath 1990 reviewed causes of hatching asynchrony). Large
size disparities, however, may be a consequence rather than
cause of nestling aggression (Mock et al. 1990).
The degree of nestling aggression varies among broods
within and between populations of facultatively siblicidal
species (Mock et al. 1990). The degree of within-brood
aggression can not be predicted by simply determining that a
species possesses all of the attributes (e.g. weaponry,
monopolizably delivered food) that favor siblicide. To
explain the variance in nestling aggression requires
examination of its proximate causes.
One frequently invoked hypothesis is that hunger is the
proximate mechanism that triggers fighting ("food-amount
hypothesis," Ingram 1959, Lack 1966, Procter 1975, Nelson
1978:565, Poole 1979, 1982, Braun and Hunt 1983, Fujioka
1985). This intuitive hypothesis derives from the
hypothesis that food limitation is the ultimate selective
pressure favoring siblicide (Drummond and Garcia Chvelas
1989, Mock et al. 1987, 1990). Most evidence for the food-
amount hypothesis is correlational. This evidence includes
(1) a temporal association between fighting and meals, (2) a
disinclination of recently fed chicks to attack, and (3) an
association between junior chick death with reduced parental
feeding rates during protracted inclement weather (see
review in Mock et al. 1987). There is also an inverse
relationship between parental feeding rates and sibling


Total blows in summary interval
109
500
400
300
200
100
0
Figure 3-2. Relationship between the total number of blows
delivered and the culmen-growth differential between A- and
B-chicks during the summary interval when A-chicks were 13
through 17 days old. See Table 3-3 for regression results.
See Methods for definitions of variables in this and all
following figures in this chapter.
0.5 1 1.5 2
Culmen-growth differential (mm/d)


I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor of/Philpsophy.
^John Sivinski
^ Assistant Professor of
Entomology and Nematology
This dissertation was submitted to the Graduate Faculty
of the Department of Zoology in the College of Liberal Arts
and Sciences and to the Graduate School and was accepted as
partial fulfillment of the requirements for the degree of
Doctor of Philosophy.
December, 1992
Dean, Graduate School



PAGE 1

352;,0$7( $1' 8/7,0$7( &$86(6 2) %522' 5('8&7,21 ,1 %52:1 3(/,&$16 3(/(&$186 2&&,'(17$/,6f %< %211,( -($1 3/2*(5 $ ',66(57$7,21 35(6(17(' 72 7+( *5$'8$7( 6&+22/ 2) 7+( 81,9(56,7< 2) )/25,'$ ,1 3$57,$/ )8/),//0(17 2) 7+( 5(48,5(0(176 )25 7+( '(*5(( 2) '2&725 2) 3+,/2623+< 81,9(56,7< 2) )/25,'$

PAGE 2

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

PAGE 3

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

PAGE 4

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nV KRUVHVKRH FUDEV IRU D ZHHN VR WKDW FRXOG FRQWLQXH P\ SHOLFDQ REVHUYDWLRQV XQLQWHUUXSWHG $ WRWDO RI PRQWKV RI FRQWLQXRXV REVHUYDWLRQV FUHDWHG D WUHPHQGRXV PRXQWDLQ RI GDWD WKDQN -RDQ %LQNOH\ 5RQ &ORXVH -DPHV 3f -RXYHU DQG 0DUN 6WRZH IRU KHOSLQJ ,9

PAGE 5

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

PAGE 6

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

PAGE 7

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nV %HKDYLRU *URXS IRU WKHLU LGHDV 6SHFLDO WKDQNV JR WR 0DUN 6WRZH IRU KLV IULHQGVKLS KHOSIXO FULWLFLVPV RI GUDIWV RI JUDQW SURSRVDOV IUXLWIXO GLVFXVVLRQV RI UHVHDUFK LGHDV DQG KLV LQYHQWLYH HOHFWURQLF ZL]DUGU\ 0DUN KDV EHHQ D JUHDW KHOS IURP WKH EHJLQQLQJ RI 9OO

PAGE 8

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

PAGE 9

$EVWUDFW RI 'LVVHUWDWLRQ 3UHVHQWHG WR WKH *UDGXDWH 6FKRRO RI WKH 8QLYHUVLW\ RI )ORULGD LQ 3DUWLDO )XOILOOPHQW RI WKH 5HTXLUHPHQWV IRU WKH 'HJUHH RI 'RFWRU RI 3KLORVRSK\ 352;,0$7( $1' 8/7,0$7( &$86(6 2) %522' 5('8&7,21 ,1 %52:1 3(/,&$16 3(/(&$186 2&&,'(17$/,6f %\ %211,( -($1 3/2*(5 'HFHPEHU &KDLUPDQ 'U + -DQH %URFNPDQQ 0DMRU 'HSDUWPHQW =RRORJ\ %URZQ SHOLFDQ 3HOHFDQXV RFFLGHQWDOLVf SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ XVXDOO\ UDLVH WR LQGHSHQGHQFH EHFDXVH EURRGPHPEHUV WKDW KDWFK ODVW VWDUYH RU DUH NLOOHG E\ WKHLU ROGHU VLEOLQJV 7KLV SDWWHUQ LV SX]]OLQJ EHFDXVH RIIVSULQJ DUH SURGXFHG WKDW VHHP WR SURYLGH QR UHSURGXFWLYH YDOXH WR WKHLU SDUHQWV %XW WKHVH PDUJLQDO RIIVSULQJ PRVW OLNHO\ WR EH EURRGUHGXFWLRQ YLFWLPVf PD\ FRQWULEXWH UHSURGXFWLYH YDOXH E\ VXUYLYLQJ DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLH XQH[SHFWHGO\ 0DUJLQDO RIIVSULQJ PD\ DOVR KDYH YDOXH DV DGGLWLRQDO VXUYLYRUV GXULQJ SHULRGV RI IRRG DEXQGDQFH IRXQG WKDW EURRG UHGXFWLRQ E\ VWDUYDWLRQ DQG VLEOLFLGH ZDV FRPPRQ (JJV DOVR IDLOHG WR KDWFK DQG FKLFNV IHOO IURP QHVWV DQG ZHUH NLOOHG E\ VWUDQJH DGXOWV DQG ,;

PAGE 10

QHLJKERULQJ QHVWOLQJV 6RPH VHFRQGKDWFKHG %f FKLFNV UHSODFHG GHDG ILUVWKDWFKHG $f FKLFNV DQG RWKHUV VXUYLYHG DORQJ ZLWK WKHLU VHQLRUV $OO WKLUGKDWFKHG &f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n JURZLQJ %FKLFNV WKUHDWHQHG WKH GRPLQDQFH RI $FKLFNV $OO DGDSWLYH H[SODQDWLRQV IRU EURRG UHGXFWLRQ DVVXPH WKDW SDUHQWV GHOLYHU D IL[HG DPRXQW RI IRRG DQG VR VXUYLYRUV JDLQ H[WUD IRRG DIWHU WKH GHDWK RI D VLEOLQJ WHVWHG WKLV DVVXPSWLRQ E\ UHPRYLQJ RU DGGLQJ D FKLFN WR WKUHHFKLFN EURRGV 3DUHQWV GHOLYHUHG VLPLODU DPRXQWV WR HQODUJHG FRQWURO DQG UHGXFHG EURRGV GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW %\ GD\V SRVWWUHDWPHQW SDUHQWV EURXJKW OHVV IRRG WR UHGXFHG WKDQ WR FRQWURO EURRGV 6HQLRUV GLG QRW JDLQ PRUH IRRG LQ UHGXFHG EURRGV GXULQJ WKHVH SHULRGV $ IHHGLQJ KLHUDUFK\ ZDV HYLGHQW ZLWK $FKLFNV JDLQLQJ PRUH IRRG WKDQ WKHLU %VLEOLQJV ZKR JDLQHG PRUH WKDQ WKHLU & [

PAGE 11

VLEOLQJV 7KH ILWQHVV LQWHUHVWV RI SDUHQWV PD\ FRQIOLFW ZLWK WKRVH RI RQH VHQLRU EXW QRW ZLWK WKH RWKHU VHQLRU RIIVSULQJ [L

PAGE 12

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

PAGE 13

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

PAGE 14

%,2*5$3+,&$/ 6.(7&+ [LY

PAGE 15

&+$37(5 *(1(5$/ ,1752'8&7,21 0DQ\ RUJDQLVPV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ XVXDOO\ UHDU WR LQGHSHQGHQFH EHFDXVH WKH\ DERUW HDW RU QHJOHFW VRPH RI WKHLU RIIVSULQJ RU DOORZ VLEOLQJV WR NLOO DQG VRPHWLPHV HDWf HDFK RWKHU $ERUWLRQ RI HPEU\RV LV FRPPRQ LQ PDQ\ SODQW VSHFLHV VHH UHYLHZV LQ %XFKKRO] /OR\G 6WHSKHQVRQ DQG %HUWLQ +DLJ 6XWKHUODQG DQG 0D]HU f DQG LQ VRPH PDPPDOV UHYLHZV LQ 'LDPRQG 6WHDUQV f 3DUHQWV PD\ FRQVXPH WKHLU SURJHQ\ LQ VRPH LQVHFWV HJ :LOVRQ 0DVXNR %DUWOHWW f ILVK HJ 6DOIHUW DQG 0RRGLH )LW]*HUDOG f DQG DPSKLELDQV 6LPRQ f ,Q VSHFLHV WKDW SURYLGH WKHLU RIIVSULQJ ZLWK IRRG SDUWLDO EURRG ORVV LV RIWHQ GXH WR VWDUYDWLRQ RI VRPH RIIVSULQJ WKURXJK SDUHQWDO QHJOHFW RU VLEOLQJ FRPSHWLWLRQ DV LV ZLGHVSUHDG LQ ELUGV /DFN +RZH 2n&RQQRU PRUH UHFHQW UHYLHZV LQ &ODUN DQG :LOVRQ 0RFN Df 3DUHQWV LQ PDQ\ WD[D LQFOXGLQJ LQVHFWV HJ (LFNZRUW f ILVK HJ 6SULQJHU *LOPRUH HW DO 9DOHULR DQG %DUORZ UHYLHZ LQ 'RPLQH\ DQG %OXPHU f DPSKLELDQV UHYLHZ LQ 6LPRQ f DQG ELUGV ,QJUDP %RUWRORWWL HW DO f WROHUDWH FDQQLEDOLVWLF VLEOLQJ FRPSHWLWLRQ UHYLHZHG LQ 3ROLV f 1RQFDQQLEDOLVWLF VLEOLFLGH LV PRUH FRPPRQ WKDQ FDQQLEDOLVWLF

PAGE 16

VLEOLFLGH LQ ELUGV UHYLHZ LQ 0RFN HW DO f DQG PDPPDOV HJ *DUD )UDVHU )UDQN HW DO f 7KHVH SKHQRPHQD SRVH D SUREOHP IRU HYROXWLRQDU\ ELRORJLVWV ZK\ GR SDUHQWV ZDVWH WKHLU WLPH DQG UHVRXUFHV WR SURGXFH RIIVSULQJ WKDW WKH\ IDLO WR SURYLVLRQ ZLWK SDUHQWDOO\ FRQWUROOHG UHVRXUFHV" 7KDW WKLV LV FRPPRQ LQ D ZLGH YDULHW\ RI GLVSDUDWH WD[D VXJJHVWV WKDW WKH SURGXFWLRQ RI GRRPHG RIIVSULQJ SUREDEO\ FRQIHUUHG HQKDQFHG ILWQHVV WR DW OHDVW VRPH RI WKH SDUWLFLSDQWV SDUHQWV DQGRU VRPH RIIVSULQJf LQ WKH SDVW DQG PD\ FRQWLQXH WR HQKDQFH ILWQHVV LQ WKH SUHVHQW $OWHUQDWLYHO\ VXFK EURRG UHGXFWLRQ WKH RYHUSURGXFWLRQ DQG VXEVHTXHQW HOLPLQDWLRQ RI VRPH RIIVSULQJf FRXOG EH D QHJDWLYH FRQVHTXHQFH RI VHOHFWLRQ DFWLQJ RQ VRPH RWKHU IDFWRU VXFK DV ODUJH FOXWFK VL]H SHU VH RU KDWFKLQJ DV\QFKURQ\ HJ &ODUN DQG :LOVRQ f 0\ GLVVHUWDWLRQ IRFXVHV RQ WKH SUR[LPDWH DQG XOWLPDWH FDXVHV RI EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf )RU FRQYHQLHQFH UHIHU WR WKRVH EURRGPHPEHUV PRVW OLNHO\ WR EH WKH YLFWLPV RI EURRG UHGXFWLRQ DV PDUJLQDO RIIVSULQJ 0RFN DQG 3DUNHU f EHFDXVH WKHLU VXUYLYDO FKDQFHV DUH PDUJLQDO DQG W\SLFDOO\ FRQWLQJHQW RQ WKH GHDWK RI D VLEOLQJ RU XQXVXDOO\ DEXQGDQW IRRG )RXU PDMRU K\SRWKHVHV KDYH EHHQ SURSRVHG WR H[SODLQ KRZ WKH SURGXFWLRQ RI PDUJLQDO RIIVSULQJ PD\ EH EHQHILFLDO WR SDUHQWV UHYLHZHG LQ )RUEHV f )LUVW PDUJLQDO RIIVSULQJ PD\ EH XVHG DV IRRG IRU SDUHQWV RU RIIVSULQJ 7KLV

PAGE 17

LV WKH H[SORLWDWLRQ K\SRWKHVLV RI +UG\ f GHVFULEHG HDUOLHU E\ ,QJUDP f DQG FDOOHG WKH LFHER[ K\SRWKHVLV E\ $OH[DQGHU f $Q REYLRXV SUHGLFWLRQ RI WKLV K\SRWKHVLV LV WKDW FDQQLEDOLVP RI RIIVSULQJ RU VLEOLQJV RFFXUV URXWLQHO\ RU DW OHDVW GXULQJ IRRG VKRUWDJHVf 6HFRQG PDUJLQDO RIIVSULQJ PD\ HQDEOH SDUHQWV WR VHOHFW RIIVSULQJ ZLWK WKH KLJKHVW ILWQHVV H[SHFWDWLRQV FDOO WKLV WKH SURJHQ\FKRLFH K\SRWKHVLV )RUEHV f 7KLV K\SRWKHVLV ZDV ILUVW FDOOHG GHYHORSPHQWDO VHOHFWLRQ E\ %XFKKRO] f DQG DOVR WKH VHOHFWLYHDERUWLRQ K\SRWKHVLV E\ .R]ORZVNL DQG 6WHDUQV f 7KH SURJHQ\FKRLFH K\SRWKHVLV DUJXHV WKDW RIIVSULQJ GLIIHU LQ TXDOLW\ DQG WKDW WKH EURRGPHPEHUV WKDW DUH HOLPLQDWHG DUH WKRVH WKDW DUH JHQHWLFDOO\ RU GHYHORSPHQWDOO\ LQIHULRU WR WKHLU VLEOLQJV (OLPLQDWLRQ RI WKHVH LQIHULRU VLEOLQJV LV SUHGLFWHG WR RFFXU YHU\ HDUO\ LQ WKH GHYHORSPHQWDO SHULRG DV VRRQ DV GLIIHUHQFHV LQ RIIVSULQJ TXDOLW\ DUH GHWHFWDEOH .R]ORZVNL DQG 6WHDUQV f 7KLUG PDUJLQDO RIIVSULQJ PD\ IXQFWLRQ DV LQVXUDQFH IRU SDUWLDO EURRG ORVV VHUYLQJ DV UHSODFHPHQWV IRU VLEOLQJV WKDW GLH XQH[SHFWHGO\ IURP DFFLGHQWDO FDXVHV RU FRQJHQLWDO GHIHFWV 7KLV LV WKH LQVXUDQFH K\SRWKHVLV RI 'RUZDUG f UHYLHZHG E\ )RUEHV f 7KLV K\SRWKHVLV SUHGLFWV WKDW DFFLGHQWV RU FRQJHQLWDO GHIHFWV DUH IUHTXHQW FDXVHV RI SDUWLDO EURRG ORVV )RU H[DPSOH XQGHU WKLV K\SRWKHVLV KDWFKLQJ IDLOXUH LQ ELUGV LV SUHGLFWHG WR EH PRUH FRPPRQ LQ EURRGUHGXFLQJ VSHFLHV WKDQ LQ VSHFLHV

PAGE 18

WKDW GR QRW SURGXFH PDUJLQDO RIIVSULQJ $QGHUVRQ f )RXUWK PDUJLQDO RIIVSULQJ PD\ HQDEOH SDUHQWV WR PD[LPL]H WKHLU UHSURGXFWLYH VXFFHVV IURP D JLYHQ FOXWFK ZKHQ UHVRXUFHV DUH XQSUHGLFWDEOH E\ OD\LQJ DV PDQ\ HJJV DV WKH\ FRXOG UDLVH LQ D JRRG \HDU DQG UHGXFLQJ WKH EURRG LI UHVRXUFHV WXUQ RXW WR EH VFDUFH 7KLV LV WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV IRUPXODWHG E\ /DFN f XVXDOO\ FDOOHG WKH EURRG UHGXFWLRQ K\SRWKHVLV VLQFH 5LFNOHIV f 0RUH UHFHQWO\ WKLV K\SRWKHVLV KDV EHHQ FDOOHG WKH UHVRXUFH DYDLODELOLW\ K\SRWKHVLV DQG UHVRXUFH WUDFNLQJ E\ )RUEHV DQG UHVSHFWLYHO\f DQG WKH EHWn KHGJLQJ K\SRWKHVLV E\ .R]ORZVNL DQG 6WHDUQV f ,Q WKH GLVVHUWDWLRQ ZLOO IROORZ )RUEHVn f DQG UHIHU WR WKLV DV WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV 7KHVH K\SRWKHVHV DUH QRW PXWXDOO\ H[FOXVLYH DQG LQGHHG DOO PD\ RSHUDWH VLPXOWDQHRXVO\ )RUEHV f %XW FOHDUO\ D NH\ WR GHWHUPLQLQJ ZKHWKHU DQ\ RU DOO RI WKHVH K\SRWKHVHV DUH YDOLG LV WR H[DPLQH FDXVHV DQG SDWWHUQV RI HJJ DQG QHVWOLQJ PRUWDOLW\ %URZQ SHOLFDQV W\SLFDOO\ OD\ WKUHH HJJV ZKLFK KDWFK DV\QFKURQRXVO\ 6FKUHLEHU f 1HVWOLQJ PRUWDOLW\ LV ELDVHG WRZDUG ODVWKDWFKHG PHPEHUV RI WKH EURRG 6FKUHLEHU f ZKR DUH IUHTXHQWO\ DWWDFNHG E\ WKHLU HOGHU VLEOLQJV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG W\SLFDOO\ GLH RI VWDUYDWLRQ DQG VLEOLFLGH VHH &KDSWHU f 3DUHQWV JHQHUDOO\ UHPRYH GHDG RIIVSULQJ E\ WRVVLQJ WKHP IURP WKH QHVW XQSXE

PAGE 19

GDWDf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f WKH IUHTXHQF\ RI VLEOLFLGH VKRXOG LQFUHDVH GXULQJ SHULRGV RI IRRG VKRUWDJH 2QH ZD\ WKDW VLEOLFLGH FRXOG LQFUHDVH ZLWK IRRG GHSOHWLRQ LV LI VLEOLQJ DJJUHVVLRQ LV SUR[LPDWHO\ FRQWUROOHG E\ IRRG VXSSO\ ZLWK GHFUHDVHV LQ IRRG WR QHVWOLQJV FDXVLQJ LQFUHDVHG DJJUHVVLRQ DPRQJ EURRGPHPEHUV ,Q EURZQ SHOLFDQV ZKHUH ROGHU

PAGE 20

VLEOLQJV DWWDFN WKHLU MXQLRUV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf WKH LQWHQVLW\ RI VLEOLQJ DJJUHVVLRQ YDULHV DPRQJ QHVWV &KDSWHU f ,Q &KDSWHU LQYHVWLJDWH ZKHWKHU WKLV YDULDWLRQ LQ VLEOLQJ DJJUHVVLRQ GHSHQGV RQ IRRG VXSSO\ DV PLJKW EH H[SHFWHG LI WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV LV RSHUDWLQJ 7KH SURJHQ\FKRLFH LQVXUDQFH DQG UHVRXUFHWUDFNLQJ K\SRWKHVHV DOO DUJXH WKDW WKH VXUYLYDO FKDQFHV RI \RXQJ WKDW GLG QRW GLH LQFUHDVH ZKHQ EURRG VL]H GHFUHDVHV 2n&RQQRU f EHFDXVH WKH UHPDLQLQJ \RXQJ REWDLQ PRUH IRRG DIWHU WKH GHDWK RI WKHLU FRPSHWLWRU 7KLV ZLOO RQO\ KDSSHQ LI SDUHQWV GHOLYHU WKH VDPH DPRXQW RI IRRG WR WKH EURRG EHIRUH DQG DIWHU EURRG UHGXFWLRQ 7KHVH K\SRWKHVHV FRQVLGHU WKH ILWQHVV RI ERWK SDUHQWV DQG VXUYLYLQJ RIIVSULQJ WR LQFUHDVH VLPLODUO\ ZLWK EURRG UHGXFWLRQ %XW WKLV QHHG QRW EH WKH FDVH $V +DPLOWRQ f ILUVW DUJXHG WKH ILWQHVV LQWHUHVWV RI SDUHQWV DQG RIIVSULQJ PD\ GLIIHU ,QGHHG FRQIOLFW LV OLNHO\ WR EH PRUH FRPPRQ WKDQ FRQJUXHQFH RI SDUHQW DQG RIIVSULQJ LQWHUHVWV EHFDXVH DV 7ULYHUV f GHYHORSPHQW RI +DPLOWRQnV LGHD FODULILHG VHOHFWLRQ VKRXOG IDYRU RIIVSULQJ WKDW VHHN PRUH LQYHVWPHQW IURP WKHLU SDUHQWV WKDQ WKHLU SDUHQWV DUH VHOHFWHG WR JLYH 7KLV LQVLJKW VSDZQHG PDQ\ WKHRUHWLFDO DQDO\VHV RI SDUHQWRIIVSULQJ FRQIOLFW VHH *RGIUD\ DQG 3DUNHU IRU UHYLHZf LQFOXGLQJ PDQ\ RQ SDUHQWRIIVSULQJ FRQIOLFW RYHU EURRG VL]H 2n&RQQRU *RGIUD\ /D]DUXV DQG ,QJOLV 3DUNHU DQG 0RFN

PAGE 21

*RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f 7KHVH PRGHOV SUHGLFW SDUHQWRIIVSULQJ FRQIOLFW RYHU EURRG UHGXFWLRQ 2n&RQQRUnV f PRGHO SUHGLFWHG WKDW WKH WKUHVKROG EH\RQG ZKLFK SDUHQWV DQG VHQLRU RIIVSULQJ EHQHILW IURP EURRG UHGXFWLRQ LV ORZHU IRU RIIVSULQJ WKDQ IRU SDUHQWV FUHDWLQJ FRQGLWLRQV LQ ZKLFK VLEOLQJV ZRXOG JDLQ LQ QHW ILWQHVV E\ HOLPLQDWLQJ RQH \RXQJ DOEHLW DW WKH H[SHQVH RI DGXOW ILWQHVV 2n&RQQRU f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

PAGE 22

RIIVSULQJ RU UHVXOWV IURP VRPH FRPSURPLVH RI SDUHQWn RIIVSULQJ FRQIOLFW 1DWXUDO VHOHFWLRQ IDYRUV SDUHQWV ZKRVH EHKDYLRU PD[LPL]HV WKHLU OLIHWLPH UHSURGXFWLYH VXFFHVV )URP WKLV /DFN f DUJXHG WKDW VHOHFWLRQ ZRXOG IDYRU SDUHQWDO EHKDYLRU WKDW PD[LPL]HV WKH QXPEHU RI VXUYLYLQJ RIIVSULQJ SURGXFHG IURP HDFK LQGLYLGXDO FOXWFK 7KH RYHUSURGXFWLRQ RI HJJV DQG VXEVHTXHQW UHGXFWLRQ LQ EURRG VL]HV WKURXJK VWDUYDWLRQ DQG VRPHWLPHV VLEOLFLGHf VHHP SDUDGR[LFDO EHFDXVH SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ DUH DEOH RU ZLOOLQJf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f 0\ GLVVHUWDWLRQ DWWHPSWV WR LGHQWLI\ ZKHUH WKH LQWHUHVWV RI SDUHQWV DQG RIIVSULQJ PD\ FRQIOLFW LQ EURRGV RI EURZQ SHOLFDQV DQG WR OD\ WKH JURXQGZRUN IRU

PAGE 23

GHWHUPLQLQJ ZKRVH LQWHUHVWV DUH EHLQJ UHSUHVHQWHG E\ EURRG UHGXFWLRQ WKRVH RI WKH SDUHQWV RU WKRVH RI WKH RIIVSULQJ

PAGE 24

&+$37(5 52/( 2) -81,25 6,%/,1*6 ,1 5(6285&( 75$&.,1* $1' $6 ,1685$1&( )25 6(1,25 /266 ,QWURGXFWLRQ ,Q PDQ\ ELUG VSHFLHV IHPDOHV OD\ PRUH HJJV WKDQ SDLUV W\SLFDOO\ DUH DEOH RU ZLOOLQJ WR IHHG VXIILFLHQWO\ $PRQJ VSHFLHV WKDW KDWFK DV\QFKURQRXVO\ LW LV WKH \RXQJHVW EURRG PHPEHUV WKDW XVXDOO\ GLH W\SLFDOO\ RI VWDUYDWLRQ RU IURP EHDWLQJV GHOLYHUHG E\ VLEOLQJV VLEOLFLGHf 7ZR PDMRU K\SRWKHVHV WKH UHVRXUFHWUDFNLQJ DQG LQVXUDQFHn RIIVSULQJ K\SRWKHVHV SURYLGH WHVWDEOH H[SODQDWLRQV IRU KRZ SDUHQWV PD\ EHQHILW IURP SURGXFLQJ RIIVSULQJ WKDW DUH XVXDOO\ GRRPHG WR GLH VHH )RUEHV IRU DGGLWLRQDO K\SRWKHVHVf 0RFN DQG 3DUNHU f SRLQWHG RXW WKDW WKHVH XVXDOO\ GRRPHG PDUJLQDO RIIVSULQJ PD\ FRQWULEXWH WR WKH UHSURGXFWLYH YDOXH RI WKHLU SDUHQWV LQ WZR ZD\V )LUVW PDUJLQDO RIIVSULQJ PD\ SURYLGH H[WUDFKLFN YDOXH E\ VXUYLYLQJ DORQJ ZLWK WKHLU VLEOLQJV ZKHQ IRRG LV SOHQWLIXO :KHQ IRRG LV VFDUFH PDUJLQDO FKLFNV VWDUYH TXLFNO\ ZKLFK SUHVXPDEO\ EHQHILWV VXUYLYLQJ VLEOLQJV ZKR JDLQ WKH PDUJLQDO FKLFNnV IRRG VKDUH UHVRXUFHWUDFNLQJ K\SRWKHVLV /DFN f 8QGHU WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV PDUJLQDO FKLFNV DUH H[WUD LQ WKH

PAGE 25

VHQVH WKDW WKH\ UHSUHVHQW D ERQXV XQLW RI UHSURGXFWLYH VXFFHVV WR SDUHQWV ZKHQ IRRG LV DEXQGDQW 6HFRQG PDUJLQDO RIIVSULQJ PD\ SURYLGH LQVXUDQFH YDOXH DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLH WKH LQVXUDQFHn RIIVSULQJ K\SRWKHVLV 'RUZDUG f $OWKRXJK RULJLQDOO\ VWDWHG DV D VHSDUDWH K\SRWKHVLV WKH LQVXUDQFH K\SRWKHVLV LV DFWXDOO\ D VSHFLDO FDVH RI WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV $QGHUVRQ f ,QVXUDQFH RSHUDWHV ZKHQ SDUHQWV DUH IDFHG ZLWK XQSUHGLFWDEOH EURRG VL]H HJ XQSUHGLFWDEOH OHYHOV RI KDWFKLQJ IDLOXUHf DQG SUHGLFWDEOH UHVRXUFH VKRUWDJHV DIWHU KDWFKLQJ 5HVRXUFHWUDFNLQJ RSHUDWHV ZKHQ EURRG VL]HV DUH SUHGLFWDEOH DQG UHVRXUFHV DUH XQSUHGLFWDEOH ,Q ERWK VLWXDWLRQV EURRG VL]HV DUH PDWFKHG WR FXUUHQW IRRG VXSSOLHV )RUEHV f 7KH LQVXUDQFH K\SRWKHVLV LV XVXDOO\ LQYRNHG IRU WKH H[WUHPH FDVH RI REOLJDWH VLEOLFLGH LQ ZKLFK WKH \RXQJHVW EURRG PHPEHUV KDYH RQO\ LQVXUDQFH YDOXH 0RFN DQG 3DUNHU f EHFDXVH WKH\ QHYHU VXUYLYH DORQJ ZLWK WKHLU VHQLRUV 7KH UHVRXUFHWUDFNLQJ K\SRWKHVLV LV XVXDOO\ LQYRNHG ZKHQ SDUWLDO EURRG ORVV LV OHVV IUHTXHQW DQG WKH \RXQJHVW FKLFN VXUYLYHV DORQJ ZLWK LWV VLEOLQJV ZKHQ FRQGLWLRQV DUH IDYRUDEOH WKHUHE\ SURYLGLQJ LWV SDUHQWV ZLWK DQ H[WUD XQLW RI UHSURGXFWLYH VXFFHVV 0RFN DQG 3DUNHU f ,Q IDFXOWDWLYH EURRG UHGXFHUV ZLWK LQWHUPHGLDWH OHYHOV RI MXQLRU FKLFN PRUWDOLW\ SDUHQWV PD\ GHULYH DGGLWLRQDO UHSURGXFWLYH VXFFHVV WKURXJK ERWK URXWHV ZLWK

PAGE 26

ODVWKDWFKHG FKLFNV FRQWULEXWLQJ ERWK H[WUDFKLFN DQG LQVXUDQFH YDOXH WR WKHLU SDUHQWV 0RFN DQG 3DUNHU f 7KH SXUSRVH RI WKLV VWXG\ LV WR HYDOXDWH VRPH RI WKH VHOHFWLYH SUHVVXUHV WKDW FRQWULEXWH WR WKH OD\LQJ RI H[WUD HJJV E\ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf XVHG WKUHH DSSURDFKHV WR H[DPLQH WKH LPSRUWDQFH RI MXQLRU FKLFNV DV H[WUD VXUYLYRUV DQG DV LQVXUDQFH DJDLQVW VHQLRU FKLFN ORVV )LUVW H[DPLQHG WKH H[DFW FDXVHV RI QHVWOLQJ PRUWDOLW\ WR HYDOXDWH WZR SUHGLFWLRQV f LI MXQLRU FKLFNV VHUYH SULPDULO\ DV H[WUD VXUYLYRUV ZKHQ IRRG LV DEXQGDQW WKHQ MXQLRU FKLFN PRUWDOLW\ VKRXOG EH IRRGGHSHQGHQW HJ VWDUYDWLRQ DQG VLEOLFLGHf f LI MXQLRUV VHUYH SULPDULO\ DV LQVXUDQFH DJDLQVW VHQLRU GHDWK WKHQ VHQLRU FKLFN PRUWDOLW\ VKRXOG EH GXH WR IRRGLQGHSHQGHQW FDXVHV VXFK DV KDWFKLQJ IDLOXUH GHDWKV RI KDWFKOLQJV 'RUZDUG 2n&RQQRU 6WLQVRQ 0RFN D 0DJUDWK f SUHGDWLRQ 1LVEHW 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU 'UXPPRQG f RU HFWRSDUDVLWHV %U\DQW DQG 7DWQHU f 6HFRQG FRPSDUHG WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV DV DGGLWLRQDO VXUYLYRUV DQG DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLHG 7KH MXQLRU FKLFNnV YDOXH DV DQ H[WUD VXUYLYRU ZDV PHDVXUHG DV WKDW FRPSRQHQW RI LWV VXUYLYRUVKLS WKDW ZDV LQGHSHQGHQW RI LWV VLEOLQJVn VXUYLYDO 7KH MXQLRU FKLFNnV LQVXUDQFH YDOXH ZDV PHDVXUHG DV WKDW FRPSRQHQW RI LWV VXUYLYRUVKLS WKDW GHSHQGHG RQ WKH IDWH RI LWV VHQLRU VLEOLQJV 0RFN DQG 3DUNHU 3ORJHU DQG 0RFN XQSXE 06f

PAGE 27

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f 1HVWOLQJ PRUWDOLW\ KDV EHHQ JHQHUDOO\ DWWULEXWHG WR VWDUYDWLRQ EDVHG RQ UHSRUWV RI OLJKWZHLJKW QHVWOLQJV 6FKUHLEHU .HLWK f DQG FRUUHODWLRQV EHWZHHQ IOHGJLQJ VXFFHVV DQG ILVK VXSSOLHV $QGHUVRQ HW DO f RU UHJXUJLWDWLRQ IUHTXHQFLHV 6FKUHLEHU f $OO SDVW ZRUN ZLWK WKLV VSHFLHV KDV UHOLHG RQ FLUFXPVWDQWLDO HYLGHQFH IURP FHQVXVLQJ QHVWV WR DVVLJQ FDXVHV RI PRUWDOLW\ 6XFK HYLGHQFH LV QRW VXIILFLHQW DQG PD\ OHDG WR IDOVH HVWLPDWHV RI WKH UHODWLYH IUHTXHQFLHV RI IRRGGHSHQGHQW YHUVXV IRRGLQGHSHQGHQW GHDWKV )RU H[DPSOH 6FKUHLEHU f DWWULEXWHG WKH VHOHFWLYH PRUWDOLW\ RI ODVWKDWFKHG EURRG PHPEHUV WR VWDUYDWLRQ ZKHQHYHU D FKLFN IDLOHG WR JURZ EHWZHHQ WKH ODVW FHQVXVLQJ YLVLWV SULRU WR WKH FKLFNnV GLVDSSHDUDQFH %XW D WKLQ FKLFN WKDW YDQLVKHG EHWZHHQ FHQVXVLQJ YLVLWV PLJKW QRW KDYH VWDUYHG WR GHDWK ,QVWHDG VXFK D FKLFN PLJKW KDYH EHHQ UHFRYHULQJ ZKHQ LW ZDV WDNHQ E\

PAGE 28

D SUHGDWRU RU PLJKW KDYH GLHG IURP EHDWLQJV GHOLYHUHG E\ VLEOLQJV DV GHVFULEHG IRU WKH ILUVW WLPH IRU EURZQ SHOLFDQV E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 3LQ]Q DQG 'UXPPRQG DOVR UHOLHG SULPDULO\ RQ QHVW FHQVXVLQJ WR LGHQWLI\ FDXVHV RI GHDWK DOWKRXJK WKH\ GLUHFWO\ REVHUYHG VLEOLFLGDO DJJUHVVLRQ LQ VRPH QHVWV 7KH\ DWWULEXWHG GHDWK WR VLEOLFLGDO H[SXOVLRQ ZKHQHYHU D FKLFNn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f SUHVHQW WKH ILUVW GLVFXVVLRQ DQG HYLGHQFH WKDW EURZQ SHOLFDQV PD\ EH IDFXOWDWLYH EURRG UHGXFHUV SURGXFLQJ WKUHHHJJ FOXWFKHV DQG VHOHFWLYHO\ HOLPLQDWLQJ VRPH FKLFNV GXULQJ IRRG VKRUWDJHV %XW LQ WKUHHFKLFN EURRGV RI EURZQ SHOLFDQV WKH \RXQJHVW YLUWXDOO\ DOZD\V GLHV ZKHUHDV VXUYLYDO RI WKH VHFRQGKDWFKHG LV KLJKO\ YDULDEOH 6FKUHLEHU f 7KXV EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV PD\ EH REOLJDWH DPRQJ ODVWKDWFKHG \RXQJ

PAGE 29

DQG IDFXOWDWLYH DPRQJ WKRVH KDWFKLQJ VHFRQG LQ WKH EURRG $V D UHVXOW WKHVH FKLFNV DUH OLNHO\ WR GLIIHU LQ WKHLU UROHV DV LQVXUDQFH RU H[WUD FKLFNV ,Q DGGLWLRQ WKH QDWXUH RI WKH LQVXUDQFH YDOXH PD\ GLIIHU EHWZHHQ VHFRQG DQG WKLUGKDWFKHG FKLFNV ,Q PRVW REOLJDWHO\ EURRGUHGXFLQJ VSHFLHV WKH LQVXUDQFH YDOXH RI PDUJLQDO FKLFNV LV UHVWULFWHG WR WKH ILUVW ZHHN RU OHVV RI WKH QHVWOLQJ SHULRG $QGHUVRQ 0RFN HW DO f DQG VR FRYHUV RQO\ HJJ IDLOXUH DQG KDWFKOLQJ ORVVHV VXFK DV WKRVH FDXVHG E\ GHYHORSPHQWDO DEQRUPDOLWLHV ,Q FRQWUDVW IDFXOWDWLYH EURRGUHGXFHUV OLNH EURZQ SHOLFDQV PD\ UHWDLQ DOO EURRG PHPEHUV XQWLO IRRGVXSSOLHV EHFRPH OLPLWLQJ SHUKDSV ODWHU LQ WKH QHVWOLQJ SHULRGf 7KXV WKH LQVXUDQFH YDOXH RI D PDUJLQDO FKLFN FDQ UHPDLQ LQ HIIHFW IRU ORQJHU DQG PD\ FRYHU D ZLGHU UDQJH RI ULVNV WR WKH VHQLRUV WKDQ LQ REOLJDWH EURRGUHGXFHUV 0RFN DQG 3DUNHU f 0HWKRGV 6WXG\ 6LWH ,Q VWXGLHG EURZQ SHOLFDQV QHVWLQJ RQ %LUG DQG 6XQNHQ ,VODQGV WZR VSRLO LVODQGV FRQQHFWHG E\ D VDQGEDU WKDW WRJHWKHU DUH NQRZQ DV $ODILD %DQNV LQ +LOOVERURXJK %D\ QHDU 7DPSD )ORULGD $SSUR[LPDWHO\ EURZQ SHOLFDQV QHVWHG RQ WKH LVODQGV LQ 7KH\ QHVWHG SULPDULO\ RQ WRS RI WKH FDQRS\ LQ EODFN PDQJURYH $YLFHQQLD DHUPLQDQVf UHG

PAGE 30

PDQJURYH 5KL]RRKRUD PDQJOHf DQG %UD]LOLDQ SHSSHU 6FKLQXV WHUHELQWKLIROLXVf 6HH /HZLV DQG /HZLV IRU D GHWDLOHG GHVFULSWLRQ RI YHJHWDWLRQ RQ WKHVH LVODQGVf *HQHUDO 3URFHGXUH FHQVXVHG D WRWDO RI QHVWV IURP 0DUFK WKURXJK $XJXVW WR GHWHUPLQH FOXWFK VL]HV KDWFKLQJ VXFFHVV DQG IOHGJLQJ VXFFHVV VHSDUDWHG WKHVH QHVWV LQWR WKUHH JURXSV DFFRUGLQJ WR WKH FHQVXVLQJ PHWKRGV XVHG 7KH IRFDO QHVW JURXS FRQVLVWHG RI QHVWV WKDW ZHUH FRQWLQXRXVO\ REVHUYHG ZLWK D VSRWWLQJ VFRSH DQG ELQRFXODUV IURP GDZQ WR GXVN GXULQJ WKH ILUVW GD\V RI QHVWOLQJ OLIH VHH )RFDO 1HVWV EHORZ IRU GHWDLOVf 7KH YLVXDO FHQVXV JURXS FRQVLVWHG RI QHVWV WKDW ZHUH DGMDFHQW WR IRFDO QHVWV EXW ZHUH QRW FRQWLQXRXVO\ REVHUYHG RU PRQLWRUHG IRU QHVWOLQJ JURZWK VHH 9LVXDO &HQVXV QHVWV EHORZ IRU GHWDLOVf 7KH JURZWK QHVW JURXS FRQVLVWHG RI QHVWV FRQWDLQLQJ FKLFNV WKDW ZHUH ZHLJKHG DQG PHDVXUHG HYHU\ GD\V VHH +DQGOLQJ VFKHGXOH EHORZ IRU GHWDLOVf EXW ZHUH QHYHU NHSW XQGHU FRQWLQXRXV REVHUYDWLRQ 7LPLQJ RI FHQVXV LQLWLDWLRQ &HQVXVLQJ RI QHVWV EHJDQ GXULQJ WKH LQFXEDWLRQ SHULRG &OXWFK VL]HV IRU WKHVH QHVWV ZHUH NQRZQ SUHFLVHO\ VHH $SSHQGL[ % IRU FOXWFKVL]H GHWHUPLQDWLRQ FULWHULDf +HUHDIWHU IRU FRQYHQLHQFH FOXWFKHV WKDW GHILQLWHO\ FRQWDLQHG WZR RU WKUHH HJJV ZLOO EH UHSUHVHQWHG V\PEROLFDOO\ DV & DQG & UHVSHFWLYHO\

PAGE 31

&HQVXVLQJ RI WKH UHPDLQLQJ QHVWV EHJDQ DIWHU KDWFKLQJ &OXWFK VL]HV ZHUH QRW NQRZQ IRU WKHVH QHVWV 7KH LQLWLDO EURRG VL]H QXPEHU RI FKLFNV WKDW KDWFKHGf ZDV NQRZQ SUHFLVHO\ IRU IRXU RI WKHVH QHVWV DQG IRU RI WKH QHVWV IRU ZKLFK FOXWFK VL]HV ZHUH DOVR NQRZQ 7KH LQLWLDO EURRG VL]H ZDV FRQVLGHUHG WR EH NQRZQ LI WKH QXPEHU RI QHVWOLQJV ZDV ILUVW FRXQWHG ZLWKLQ GD\V DIWHU WKH ILUVW $f FKLFN KDWFKHG +HUHDIWHU EURRGV WKDW LQLWLDOO\ FRQWDLQHG WZR RU WKUHH FKLFNV UHJDUGOHVV RI FOXWFK VL]Hf ZLOO EH UHSUHVHQWHG DV % DQG % UHVSHFWLYHO\ 0DUNLQD ,Q IRFDO DQG JURZWK QHVWV LQGLYLGXDOO\ PDUNHG HDFK FKLFN WR IDFLOLWDWH GLVWLQJXLVKLQJ $FKLFNV IURP VHFRQGKDWFKHG %f DQG WKLUGKDWFKHG &f FKLFNV $OO QHZO\ KDWFKHG FKLFNV DJHG GD\ RI KDWFKLQJf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f WR WKH

PAGE 32

QHDUHVW PP ZLWK D FOHDU SODVWLF UXOHU ZHLJKHG QHVWOLQJV ZLWK J NJ DQG NJ VSULQJ VFDOHV $OO FKLFNV LQ IRFDO DQG JURZWK QHVWV ZHUH KDQGOHG ZHLJKHG DQG PHDVXUHG HYHU\ GD\V XQWLO WKH EURRGnV $ FKLFN ZDV RQ DYHUDJHf GD\V ROG UDQJH GD\Vf 7KHUHDIWHU DOO PHPEHUV RI WKH EURRG ZHUH KDQGOHG D PLQLPXP RI RQFH D ZHHN ZKHQ WKH EURRGnV $FKLFN ZDV IURP WKURXJK GD\V ROG DQG DW OHDVW HYHU\ GD\V ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 'HILQLWLRQ RI IOHGDLQD $OO QHVWV ZHUH FHQVXVHG XQWLO DOO EURRGPHPEHUV KDG GLHG RU XQWLO WKH $FKLFN UHDFKHG DJH GD\V VHH 'HWHUPLQLQJ +DWFKLQJ 'DWHV EHORZ IRU GHWDLOV DERXW DJLQJ FKLFNVf GLVFRQWLQXHG FHQVXVLQJ DIWHU GD\V $IWHU WKLV DJH FKLFNV ZHUH GLIILFXOW WR FDWFK EHFDXVH WKH\ PDGH P IOLJKWV EHWZHHQ SHUFKHV LQ WKH YLFLQLW\ RI WKH QHVW XQSXE GDWDf 7KHVH VKRUW IOLJKWV EHJDQ RQFH WKH MXYHQLOH SOXPDJH KDG GHYHORSHG WKHUHIRUH RSHUDWLRQDOO\ GHILQHG IOHGJLQJ DV RFFXUULQJ DW GD\V WKH DYHUDJH DJH E\ ZKLFK HLJKW FKLFNV KDG GHYHORSHG WKHLU EURZQ MXYHQLOH SOXPDJH UDQJH GD\Vf LQ DW 6HDKRUVH .H\ VHH 6XSSOHPHQWDO &HQVXV 1HVWV EHORZf 3LQ]Q DQG 'UXPPRQG LQ SUHVVf XVHG WKH VDPH RSHUDWLRQDO GHILQLWLRQ RI IOHGJLQJ IRU WKH SRSXODWLRQ RI EURZQ SHOLFDQV WKDW WKH\ VWXGLHG LQ 0H[LFR 7KH ILUVW VXVWDLQHG IOLJKW ZDV QRW DFKLHYHG XQWLO D PHDQ DJH RI GD\V sf IRU VHYHQ FKLFNV DW 6HDKRUVH .H\ LQ 6XVWDLQHG IOLJKW RFFXUUHG

PAGE 33

DW DQ DYHUDJH DJH RI GD\V RYHU WKH \HDUV RI 6FKUHLEHUnV VWXG\ DQG DW DJH GD\V LQ WKH FKLFNV REVHUYHG E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf )RFDO 1HVWV )RFDO QHVWV ZHUH REVHUYHG IURP WZR EOLQGV RQH RQ 6XQNHQ ,VODQG DQG WKH RWKHU RQ %LUG ,VODQG 1HVWV ZHUH ORFDWHG IURP P IURP WKH %LUG ,VODQG EOLQG DQG IURP P IURP WKH 6XQNHQ ,VODQG EOLQG +DWFKLQJ SHDNHG LQ IRFDO QHVWV RQ 6XQNHQ ,VODQG DERXW D PRQWK HDUOLHU WKDQ RQ %LUG ,VODQG 7KHUHIRUH REVHUYHUV %-3 SOXV DQ DVVLVWDQWf ZHUH DEOH WR ZDWFK IRFDO QHVWV RQ 6XQNHQ ,VODQG IURP KDWFKLQJ XQWLO FKLFNV ZHUH DW OHDVW GD\V ROG WKHQ PRYH WR %LUG ,VODQG WR ZDWFK DQRWKHU VHW RI IRFDO QHVWV EHJLQQLQJ DW KDWFKLQJ :H REVHUYHG IRFDO QHVWV RQ 6XQNHQ ,VODQG IURP $SULO WKURXJK 0D\ DQG RQ %LUG ,VODQG IURP 0D\ WKURXJK -XO\ )RFDO QHVWV RQ ERWK LVODQGV ZHUH REVHUYHG FRQWLQXRXVO\ GXULQJ GD\OLJKW KRXUV 2Q 6XQNHQ ,VODQG REVHUYHUV DOWHUQDWHG DSSUR[LPDWHO\ KRXU REVHUYDWLRQ SHULRGV XVXDOO\ WUDGLQJ RII DURXQG %XW GXULQJ WKH ZHHN RI SHDN QHVWOLQJ DFWLYLW\ ERWK REVHUYHUV ZHUH SUHVHQW LQ WKH VDPH EOLQG WKURXJKRXW HDFK GD\ 2Q %LUG ,VODQG REVHUYHUV DOWHUQDWHG GDLO\ GDZQ WR GXVN REVHUYDWLRQ SHULRGV 3HOLFDQV QHVWLQJ RQ $ODILD %DQNV LQLWLDWHG FOXWFKHV IURP WKH PLGGOH RI )HEUXDU\ WKURXJK WKH HQG RI 0D\ 7KXV RQ D JLYHQ GD\ WKH VXEFRORQ\ XQGHU REVHUYDWLRQ PLJKW

PAGE 34

KDYH FRQWDLQHG QHVWV LQ WKH LQFXEDWLRQ WKURXJK ODWH QHVWOLQJ VWDJHV 2Q DQ\ RQH GD\ ZH FORVHO\ REVHUYHG XS WR IRFDO QHVWV LQ D YLVXDO DUF RI rn IRU D WRWDO RI IRFDO QHVWV RYHU WKH VHDVRQ 1HVWV EHFDPH SDUW RI WKH IRFDO JURXS DV VRRQ DV WKHLU EURRGV ZHUH FRPSOHWHG LH QR IXUWKHU HJJV KDWFKHGf 7R NHHS FKLFNV LQGLYLGXDOO\ PDUNHG DQG WR PHDVXUH QHVWOLQJ JURZWK YLVLWHG IRFDO QHVWV IROORZLQJ WKH VFKHGXOH GHVFULEHG HDUOLHU VHH +DQGOLQJ VFKHGXOH LQ *HQHUDO 3URFHGXUH DERYHf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f XQWLO DOO EURRG PHPEHUV KDG GLHG RU UHDFKHG DJH GD\V 9LVXDO &HQVXV 1HVWV 1HVWV LQ WKH YLVXDO FHQVXV JURXS ZHUH REVHUYHG RSSRUWXQLVWLFDOO\ IURP WKH 6XQNHQ ,VODQG DQG %LUG ,VODQG

PAGE 35

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f ,Q IRXU RI WKHVH QHVWV DOO RI WKH FKLFNV GLHG RQ WKH VDPH GD\ EHFDXVH WKH SDUHQWV DEDQGRQHG WKH EURRG ZLWKLQ D IHZ GD\V RI EURRG FRPSOHWLRQ 7KLV OHIW EURRGV WKDW ZHUH QRW DEDQGRQHG IRU ZKLFK FOXWFK VL]HV LQLWLDO

PAGE 36

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sf GD\V IRU WKUHH %f DQG s

PAGE 37

f GD\V IRU % EURRGVf EHIRUH WKH %FKLFN %FKLFNV KDWFKHG sf GD\V EHIRUH WKHLU &VLEOLQJV 1 EURRGVf 7KHVH GDWD ZHUH IURP SDLUV RI FKLFNV ZKRVH KDWFKLQJ GDWHV ZHUH NQRZQ SUHFLVHO\ :KHQHYHU SRVVLEOH GHWHUPLQHG WKH DJH DQG KDWFKLQJ RUGHU RI VLEOLQJV IURP GLUHFW NQRZOHGJH RI KDWFKLQJ GDWHV GHWHUPLQHG GXULQJ GDLO\ FHQVXVHV 1 f 7KLV LV WKH NQRZQDJH JURXS XVHG D JURZWK FXUYH IRU FXOPHQ OHQJWKV RI NQRZQDJH FKLFNV UA 1 REVHUYDWLRQV $SSHQGL[ $f WR HVWLPDWH WKH DJHV DQG KDWFKLQJ RUGHU RI DQ DGGLWLRQDO HVWLPDWHGDJH FKLFNV WKDW ZHUH IRXQG LQ WKH ILUVW GD\V RI OLIH EXW ZKRVH KDWFKLQJ GDWHV ZHUH QRW NQRZQ SUHFLVHO\ 6FKUHLEHU f DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DOVR IRXQG D FRUUHODWLRQ EHWZHHQ DJH DQG FXOPHQ OHQJWK &KLFN DJHV ZKHQ ILUVW HVWLPDWHG KDG WR EH GD\V WR EH LQFOXGHG LQ WKH HVWLPDWHGDJH JURXS EHFDXVH DIWHU WKLV DJH FXOPHQ OHQJWKV RIWHQ UHIOHFWHG QXWULWLRQDO FRQGLWLRQ DQG ZRXOG KDYH SURGXFHG ELDVHG DJH HVWLPDWHV $SSHQGL[ $f ,Q WKUHH DGGLWLRQDO EURRGV HLJKW FKLFNV WRWDOf OHVV WKDQ GD\V ROG FXOPHQV ZHUH QRW PHDVXUHG DQG DJHV ZHUH HVWLPDWHG IURP VNLQ FRORUV DQG SOXPDJH GHYHORSPHQW E\ FRPSDULQJ WKHP WR NQRZQDJH FKLFNV $SSHQGL[ $f WKXV GHWHUPLQHG WKH UDQNV RI D WRWDO RI FKLFNV 7KLUW\WZR RI WKH NQRZQDJH FKLFNV WKDW ZHUH XVHG LQ WKH UHJUHVVLRQ ZHUH IURP QHVWV WKDW ZHUH ODWHU PDQLSXODWHG IRU H[SHULPHQWV VHH &KDSWHU f WKDW PD\ KDYH DIIHFWHG FKLFN

PAGE 38

IDWHV 7KHVH QHVWV ZHUH RPLWWHG IURP DOO DQDO\VHV RI IOHGJLQJ VXFFHVV DQG FDXVHV RI PRUWDOLW\ 5HSURGXFWLYH 9DOXH RI -XQLRU 6LEOLQJV FDOFXODWHG WKH UHSURGXFWLYH YDOXH RI QHVWOLQJV DV WKH WRWDO QXPEHU RI FKLFNV WKDW IOHGJHG GLYLGHG E\ WKH WRWDO WKDW KDWFKHG :KHQ FKLFN UDQNV ZHUH NQRZQ FDOFXODWHG WKH UHSURGXFWLYH YDOXH RI FKLFNV RI HDFK UDQN VHSDUDWHO\ SDUWLWLRQHG WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV RI HDFK UDQN % DQG &f DQG EURRG VL]H % DQG %f LQWR H[WUDn FKLFN 59Hf DQG LQVXUDQFH 59Lf FRPSRQHQWV IROORZLQJ PHWKRGV RI 0RFN DQG 3DUNHU PRGLILHG E\ %HLVVLQJHU DQG :DOWPDQ DQG 3ORJHU DQG 0RFN XQSXEOLVKHG 06f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f

PAGE 39

$QDO\VHV RI )DWHV %DVHG RQ &KLFN 5DQNV .QRZQDJH DQG HVWLPDWHGDJH FKLFNV ZHUH SRROHG IRU DOO DQDO\VHV RI FKLFNV DFFRUGLQJ WR UDQN 7KH DVVLJQPHQW RI FKLFN UDQNV WKXV UHIOHFW UHODWLYH VL]HV RI VLEOLQJV ZKHQ OHVV WKDQ GD\V ROG ZDV DEOH WR GHWHUPLQH WKH LQLWLDO EURRG VL]H DQG WKH IDWHV OLYHG RU GLHG RI YDULRXV FDXVHV VHH &DXVHV RI FKLFN PRUWDOLW\ EHORZf RI DOO EURRG PHPEHUV DFFRUGLQJ WR WKHLU VL]H UDQNV IRU % DQG % EURRGV 7KHVH EURRGV ZHUH XVHG WR FRPSDUH WKH IUHTXHQFLHV RI IRRG LQGHSHQGHQW DQG IRRGGHSHQGHQW PRUWDOLW\ IRU FKLFNV RI GLIIHUHQW UDQNV VHH &DXVHV RI &KLFN 0RUWDOLW\ EHORZf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

PAGE 40

$QDO\VHV RI )DWHV ,QGHSHQGHQW RI &KLFN 5DQNV 5HVWULFWLQJ DQDO\VHV WR FKLFNV ZKRVH UDQNV ZHUH NQRZQ ZRXOG QRW KDYH DGHTXDWHO\ UHSUHVHQWHG DOO RI WKH GLIIHUHQW W\SHV RI IRRGLQGHSHQGHQW IRRGGHSHQGHQW DQG XQNQRZQ FDXVHV RI GHDWK WKDW REVHUYHG LQ VHH &DXVHV RI &KLFN 0RUWDOLW\ EHORZf )RU WKLV UHDVRQ LQ DGGLWLRQ WR XVLQJ WKH FKLFNV ZKRVH UDQNV ZHUH NQRZQ DOVR GHWHUPLQHG WKH IDWHV RI XQUDQNHG FKLFNV 7KHVH XQUDQNHG FKLFNV ZHUH DGGHG WR WKH FHQVXV VDPSOH ZKHQ WRR ROG WR GHWHUPLQH DFFXUDWH KDWFKLQJ RUGHU DQG DJHV (LJKW FKLFNV RI NQRZQ UDQN DQG WZR RI WKH XQUDQNHG FKLFNV GLHG ZKHQ WKHLU QHVWV ZHUH DEDQGRQHG )RU IDWHV DQDO\VHV RPLWWHG WKHVH VL[ QHVWV DQG DOO QHVWV WKDW ZHUH DEDQGRQHG EHIRUH KDWFKLQJ DQ HJJ OLVWHG WKH IDWHV RI WKH UHPDLQLQJ HJJV WKDW KDWFKHG FKLFNV UDQNHG DQG XQUDQNHG FKLFNVf 7KHVH FKLFNV KDWFKHG IURP WKH QHVWV IRU ZKLFK ZDV DEOH WR GHWHUPLQH WKH IDWH RI DW OHDVW RQH HJJ RU FKLFN &DXVHV RI &KLFN 0RUWDOLW\ VHSDUDWHG FDXVHV RI PRUWDOLW\ LQWR GHDWKV GXH WR IRRGLQGHSHQGHQW GHDWKV GXH WR IRRGGHSHQGHQW DQG GHDWKV GXH WR XQNQRZQ FDXVHV )RRGLQGHSHQGHQW GHDWKV LQFOXGHG FKLFNV WKDW GLHG DV KDWFKOLQJV IHOO DFFLGHQWDOO\ ZHUH NLOOHG E\ LQYDGHU FKLFNV RU DGXOWV RU GLHG IURP DQ XQNQRZQ DFFLGHQW VHH GHILQLWLRQV LQ )RRGLQGHSHQGHQW

PAGE 41

GHDWKV EHORZf )RRGGHSHQGHQW GHDWKV LQFOXGHG YLFWLPV RI VLEOLFLGH YLFWLPV RI VWDUYDWLRQ DQG FKLFNV WKDW GLHG RI VWDUYDWLRQ tRU VLEOLFLGH VHH GHILQLWLRQV LQ )RRG GHSHQGHQW GHDWKV EHORZf 8QNQRZQ FDXVHV RI PRUWDOLW\ LQFOXGHG GHDWKV WKDW FRXOG QRW EH FODVVLILHG DV HLWKHU IRRG LQGHSHQGHQW RU IRRGGHSHQGHQW )RRGLQGHSHQGHQW GHDWKV )RRGLQGHSHQGHQW GHDWKV LQFOXGHG QHVWOLQJ GHDWKV WKDW ZHUH XQOLNHO\ WR EH UHODWHG WR IRRG FRQGLWLRQV ZLWKLQ WKHLU QHVW 7KH PRVW REYLRXV FDVHV RI IRRGLQGHSHQGHQW GHDWKV ZHUH WKRVH LQ ZKLFK D QHVWOLQJ ZDV NLOOHG E\ LQYDGHU FKLFNV RU DGXOWV DOVR UHIHUUHG WR DV LQIDQWLFLGHf GHILQHG DQ LQYDGHU WR EH D FKLFN RU DGXOW WKDW PRYHG LWV KHDG DQGRU ERG\ LQWR D QHVW WKDW ZDV QRW LWV RZQ ,QYDGHU FKLFNV LQFOXGHG UHFHQWO\ IOHGJHG \RXQJ ,QYDGHU DGXOWV LQFOXGHG ELUGV DW OHDVW \HDU ROG WKDW KDG VXEDGXOW RU DGXOW SOXPDJH VHH 6FKUHLEHU HW DO IRU SOXPDJHV RI VXEDGXOWV YHUVXV DGXOWVf ,QYDGHUV RIWHQ DWWDFNHG WKH FKLFNV ZKRVH UHVLGHQFH WKH\ LQYDGHG VHH $SSHQGL[ & IRU GLVFXVVLRQ RI ZK\ VRPH SHOLFDQV LQYDGH QHVWV DQG DWWDFN UHVLGHQWVf $Q DWWDFN LQYROYHG RQH RU PRUH EORZV GHOLYHUHG E\ RQH LQGLYLGXDO WKH DWWDFNHUf DJDLQVW DQRWKHU LQGLYLGXDO WKH YLFWLPf 7R EH FRXQWHG EORZV KDG WR EH IRUFHIXO HQRXJK WR PRYH WKH YLFWLPnV KHDG RU QHFN ZKHQ VWUXFN $ FKLFN WKDW ZDV NLOOHG E\ DQ LQYDGHU ZDV RQH WKDW f ZDV VHHQ EHLQJ WRVVHG 1 f RU NQRFNHG 1 f IURP WKH QHVW E\ DQ LQYDGHU RU f ZDV DWWDFNHG E\ DQ

PAGE 42

LQYDGHU ZLWKLQ 1 f WR 1 f GD\V RI WKH YLFWLPnV GHDWK LI WKH YLFWLP ZDV QRW DWWDFNHG E\ D VLEOLQJ GXULQJ WKLV SHULRG $QRWKHU W\SH RI IRRGLQGHSHQGHQW GHDWK RFFXUUHG ZKHQ D FKLFN IHOO DFFLGHQWO\ $ FKLFN ZDV FODVVLILHG DV G\LQJ ZKHQ LW IHOO DFFLGHQWO\ RQO\ LI DQ REVHUYHU VDZ WKH IDOO WKH IDOO ZDV QRW GLUHFWO\ SUHFHGHG E\ D VLEOLQJn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f VWDQG DQG SRWHQWLDOO\ IDOO IURP WKH QHVWf DQG f EH OHIW XQDWWHQGHG IRU KRXUV DQG SRWHQWLDOO\ EH DWWDFNHG E\ QHLJKERUVf 7KXV WKHVH FKLFNV HLWKHU GLHG EHFDXVH WKH\ IHOO DFFLGHQWO\ RU ZHUH NLOOHG E\ DQ LQYDGHU EXW FRXOG QRW GHWHUPLQH ZKLFK W\SH RI IRRGLQGHSHQGHQW PRUWDOLW\ ZDV WKH H[DFW FDXVH RI GHDWK

PAGE 43

$ ILQDO FDWHJRU\ RI IRRGLQGHSHQGHQW GHDWKV LQFOXGHG FKLFNV WKDW GLHG DV KDWFKOLQJV FODVVLILHG D FKLFN DV KDYLQJ GLHG DV D KDWFKOLQJ LI f WKH YLFWLP GLHG ZKHQ GD\V ROG 1 f ZKHQ FKLFNV VWLOO KDG UHVHUYHV RI \RONRU f WKH YLFWLP GLHG ZKHQ PRUH WKDQ GD\V EXW GD\V ROG DQG LW ZDV ZHOOIHG 1 f 7R EH FODVVLILHG DV KDYLQJ GLHG DV D KDWFKOLQJ WKHUH DOVR KDG WR EH QR HYLGHQFH RI ILJKWLQJ DPRQJ VLEOLQJV SULRU WR WKH YLFWLPnV GHDWK FRQVLGHUHG WKH FKLFNV WKDW FODVVLILHG DV KDYLQJ GLHG DV KDWFKOLQJV WR EH YLFWLPV RI IRRGLQGHSHQGHQW GHDWKV EHFDXVH HYLGHQFH VXJJHVWHG WKDW WKHVH FKLFNV ZHUH QRW DWWDFNHG E\ WKHLU VLEOLQJV DQG GLG QRW H[SHULHQFH IRRG VKRUWDJHV EHIRUH WKHLU GHDWKV DVVXPHG WKDW WKHVH FKLFNV ZHUH NLOOHG DFFLGHQWO\ E\ SDUHQWV WKDW FUXVKHG FKLFNV RU IOLSSHG WKHP IURP WKH QHVW ZKHQ SDUHQWV GHSDUWHG VXGGHQO\ 6HYHUDO OLQHV RI HYLGHQFH VXSSRUW WKLV DVVXPSWLRQ )LUVW FKLFNV GD\V ROG ZHUH VPDOO HQRXJK WR GLH RI WKHVH FDXVHV 6HFRQG IRXQG RQH FKLFN WKDW PD\ KDYH EHHQ FUXVKHG WR GHDWK 7KLUG KDYH VHHQ KDWFKOLQJV IOLSSHG RII D SDUHQWnV IRRWZHEV WR WKH HGJH RI WKH QHVW ZKHQ SDUHQWV PRYHG WR D SHUFK 1 f 7KH GLVFRYHU\ RI OLYH KHDOWK\ORRNLQJ KDWFKOLQJV RQ WKH JURXQG 1 f VXJJHVWV WKDW FKLFNV ZHUH VRPHWLPHV IOLSSHG FRPSOHWHO\ RXW RI WKH QHVW $GGLWLRQDO UHDVRQV IRU FKLFNV WR KDYH GLHG DV KDWFKOLQJV LQFOXGH GHDWKV GXH WR GHYHORSPHQWDO DEQRUPDOLWLHV DQG LPSURSHU LQFXEDWLRQ ZKLFK DUH ERWK OLNHO\ WR EH IRRGLQGHSHQGHQW VRXUFHV RI PRUWDOLW\

PAGE 44

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nV GHDWK DV FDXVHG E\ VWDUYDWLRQ LI LW ZDV HPDFLDWHG ZKHQ ODVW KDQGOHG DQG LW KDG QRW EHHQ DWWDFNHG E\ DQRWKHU SHOLFDQ LQYDGHU RU VLEOLQJf IRU GD\V SUHFHGLQJ LWV GHDWK 1 f (PDFLDWHG FKLFNV ZHUH WKRVH ZKLFK KDG DW OHDVW WZR RI WKH IROORZLQJ FKDUDFWHULVWLFV f ORRVH VNLQ RQ WKH EUHDVW DEGRPHQ DQGRU EDFN DUHDV ZLWK FRQVLGHUDEOH WRQXV LQ ZHOO IHG LQGLYLGXDOVf f DQ DEGRPHQ WKDW IHOW IODFFLG ZKHQ SDOSDWHG RU ORRNHG IODW RU FRQFDYH ZKHQ YLHZHG ODWHUDOO\ f YHU\ OLTXLG \HOORZ IHFHV f OLVWOHVVQHVV DQG VNLQ WHPSHUDWXUH WKDW IHOW FROG WR P\ WRXFK DQG f IDLOXUH WR JDLQ PDVV VLQFH P\ ODVW YLVLW WR ZHLJK WKH FKLFN &KLFNV PD\ KDYH EHFRPH HPDFLDWHG DQG GLHG IURP HQGRSDUDVLWLF LQIHFWLRQV RU SHVWLFLGH FRQWDPLQDWLRQ UDWKHU WKDQ IURP VWDUYDWLRQ %XW HQGRSDUDVLWLF LQIHFWLRQV DUH SUREDEO\

PAGE 45

OHWKDO RQO\ WR FKLFNV WKDW DUH DOUHDG\ VWDUYLQJ 6LPLODUO\ SHVWLFLGHV VWRUHG LQ IDWV KDYH JUHDWHU HIIHFWV ZKHQ IDWV DUH PRELOL]HG LQ UHVSRQVH WR VWDUYDWLRQ 0RUWDOLW\ IURP HQGRSDUDVLWLF LQIHFWLRQV DQG SHVWLFLGH FRQWDPLQDWLRQ ZHUH QRW VHSDUDWHG IURP VWDUYDWLRQ DQG WKXV ZHUH DVVXPHG WR EH IRRGGHSHQGHQW $QRWKHU W\SH RI IRRGGHSHQGHQW GHDWK ZDV VLEOLFLGH ZKLFK GHILQHG WR LQFOXGH WKH IROORZLQJ FDVHV )LUVW VLEOLFLGH LQFOXGHG FKLFNV WKDW ZHUH VHHQ EHLQJ NQRFNHG IURP WKH QHVW E\ D VLEOLQJ 1 f 6HFRQG VLEOLFLGH LQFOXGHG FKLFNV ZKRVH VLEOLQJV SHUPDQHQWO\ GURYH WKHLU YLFWLPV RXW RI WKH QHVW LQWR WKH VXUURXQGLQJ EUDQFKHV 1 f 7KHVH YLFWLPV SUHYHQWHG E\ WKHLU VLEOLQJV IURP UHWXUQLQJ WR WKH QHVW ZDQGHUHG DURXQG LQ WKH FDQRS\ XQWLO WKH\ VXFFXPEHG WR VWDUYDWLRQ H[SRVXUH DQG WKH DWWDFNV RI QHLJKERUV ZKRVH QHVWV WKH\ ZDQGHUHG QHDU 7KLUG VLEOLFLGH LQFOXGHG FKLFNV ZKRVH GHDWKV ZHUH QRW GLUHFWO\ REVHUYHG EXW WKDW UHFHLYHG DW OHDVW EORZV IURP WKHLU VLEOLQJV DQG QRQH IURP LQYDGHUVf LQ WKH ODVW GD\V RI OLIH 1 f FRQVLGHUHG VLEOLFLGH WR EH D IRRGGHSHQGHQW FDXVH RI GHDWK EHFDXVH VLEOLQJ DWWDFNV OLPLWHG WKH YLFWLPnV DFFHVV WR IRRG 7KH YLFWLPnV RI UHSHDWHG VLEOLQJ DWWDFNV VRPHWLPHV EHFDPH VR LQWLPLGDWHG WKDW WKH\ UHPDLQHG LQ D VXEPLVVLYH SRVWXUH VHH &KDSWHU f GXULQJ DQ HQWLUH ERXW RI IHHGLQJ DFWLYLW\ DQG VR IDLOHG WR SDUWLFLSDWH LQ IHHGLQJ $QRWKHU UHDVRQ IRU FRQVLGHULQJ VLEOLFLGH WR EH IRRGGHSHQGHQW LV WKDW WKH

PAGE 46

IUHTXHQF\ DQG LQWHQVLW\ RI VLEOLQJ ILJKWV PD\ GHSHQG RQ IRRG VXSSOLHV LQ FKLFNV PRUH WKDQ D ZHHN ROG VHH &KDSWHU f 6RPH GHDWKV ZHUH FOHDUO\ IRRGGHSHQGHQW EXW FRXOG QRW GHWHUPLQH ZKHWKHU WKH GHDWK ZDV FDXVHG E\ f VWDUYDWLRQ LQ WKH DEVHQFH RI QHVWOLQJ DJJUHVVLRQ f VLEOLFLGDO DWWDFNV RU f WKH FRPELQHG HIIHFWV RI QHVWOLQJ DJJUHVVLRQ DQG VWDUYDWLRQ 7KHVH GHDWKV ZHUH FODVVLILHG DV EHLQJ GXH WR VWDUYDWLRQ tRU VLEOLFLGH 7R EH FODVVLILHG DV VWDUYDWLRQ tRU VLEOLFLGH GHDWKV KDG WR PHHW DW OHDVW RQH RI WKH IROORZLQJ FRQGLWLRQV )LUVW VWDUYDWLRQ tRU VLEOLFLGH LQFOXGHG HPDFLDWHG FKLFNV WKDW UHFHLYHG OHVV WKDQ EORZV LQ QHVWV ZKHUH VRPH VLEOLQJ ILJKWLQJ DQG QR LQYDGHU DWWDFNVf RFFXUUHG LQ WKH YLFWLPnV ODVW GD\V RI OLIH 1 f 6HFRQG VWDUYDWLRQ tRU VLEOLFLGH LQFOXGHG VLQJOH GHDWKV WKDW RFFXUUHG PRUH WKDQ GD\V DQG GD\V DIWHU WKH $FKLFNV KDWFKHG LQ QHVWV IRU ZKLFK LQIRUPDWLRQ RQ VLEOLQJ ILJKWV DQG QHVWOLQJ FRQGLWLRQ ZDV QRW DYDLODEOH IRU WKH ODVW GD\V RI QHVWOLQJ OLIH 1 f 'HDWKV PHHWLQJ WKH ODWWHU FULWHULD ZHUH FRQVLGHUHG WR EH IRRGLQGHSHQGHQW EHFDXVH FKLFNV GD\V ZHUH f WRR \RXQJ WR IDOO DFFLGHQWO\ EHFDXVH WKH\ FRXOG QRW \HW FUDZO IURP WKH QHVW DQG f VWLOO FRQVWDQWO\ DWWHQGHG E\ SDUHQWV DQG VR QRW VXEMHFW WR LQYDGHU DWWDFNV DOVR FODVVLILHG RQH GHDWK RI D FKLFN GD\V ROG DV EHLQJ GXH WR VWDUYDWLRQ tRU VLEOLFLGH EHFDXVH WKHUH ZDV HYLGHQFH RI ILJKWLQJ LQ WKH QHVW SULRU WR WKH YLFWLPnV GHDWK

PAGE 47

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

PAGE 48

PRUWDOLW\ DQG XQNQRZQ FDXVHV RI GHDWK XVLQJ WKH FULWHULD )RRGGHSHQGHQW GHDWKV LQFOXGHG VLEOLFLGH VDPH FULWHULD DV LQ f DQG GHDWKV WKDW FRXOG KDYH EHHQ GXH WR VWDUYDWLRQ tRU VLEOLFLGH FRXOG QRW VHSDUDWH VWDUYDWLRQ GHDWKV IURP VWDUYDWLRQ tRU VLEOLFLGH EHFDXVH GLG QRW KDQGOH FKLFNV LQ 7KH FULWHULD XVHG LQ IRU SODFLQJ D GHDWK LQWR WKH VWDUYDWLRQ tRU VLEOLFLGH FDWHJRU\ ZHUH WKH VDPH DV WKRVH XVHG LQ H[FHSW WKDW GHILQHG HPDFLDWLRQ GLIIHUHQWO\ LQ EHFDXVH GLG QRW KDQGOH FKLFNV ,Q D FKLFN ZDV FODVVLILHG DV HPDFLDWHG LI LW JRW QR IRRG IRU WKH ODVW GD\V RI OLIH DQG HGHPD FRPPRQ LQ VWDUYLQJ FKLFNVf FRXOG EH VHHQ ZLWK D VSRWWLQJ VFRSH DOVR FODVVLILHG DV HPDFLDWHG DQ\ FKLFN ZKRVH ELOO ZDV DV VKRUW RU VKRUWHU WKDQ KDOI WKH OHQJWK RI WKH ELOO RI LWV ODUJHVW VLEOLQJ FRPSDUHG WKH UHODWLYH OHQJWKV RI EURRG PHPEHUVn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f 6HFRQG ,

PAGE 49

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f $QDO\VHV RI )DWHV LQ %HFDXVH QHVWOLQJV ZHUH QRW PDUNHG LQ FRXOG QRW SRVLWLYHO\ LGHQWLI\ LQGLYLGXDOV DFFRUGLQJ WR WKHLU KDWFKLQJ UDQNV FKLFNV DUH WKHUHIRUH XVXDOO\ UHIHUUHG WR DV XQUDQNHG FKLFNV EXW VHH IROORZLQJ SDUDJUDSKf GHWHUPLQHG WKH IDWHV RI HJJV WKDW KDWFKHG FKLFNV IURP WKH QHVWV WKDW ZHUH QRW DEDQGRQHG DQG IRU ZKLFK ZDV DEOH WR GHWHUPLQH WKH IDWH RI DW OHDVW RQH HJJ RU FKLFN 7KHVH QHVWV ZHUH XVHG IRU DQDO\VHV FRPSDULQJ IDWHV UHJDUGOHVV RI FKLFN UDQNV

PAGE 50

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f WR VXEFRORQLHV WKDW ZH QHYHU HQWHUHG QHYHU GLVWXUEHGf RU ZDONHG SDVW ZKLOH ZDONLQJ DORQJ WKH EHDFK PRGHUDWHO\ GLVWXUEHGf 7R GHWHUPLQH SURGXFWLYLW\ LQ HDFK VXEFRORQ\ XVHG 6FKUHLEHUnV f PHWKRGV GHVFULEHG DV IROORZV (YHU\ ZHHNV WKURXJKRXW WKH QHVWLQJ VHDVRQ FRXQWHG WKH

PAGE 51

QXPEHU RI QHVWV DQG QHVWOLQJV WKDW ZHUH YLVLEOH IURP WKH ERDW LQ HDFK VXEFRORQ\ $W WKH HQG RI WKH VHDVRQ GHWHUPLQHG IRU HDFK VXEFRORQ\ ZKLFK RI WKHVH UHSHDWHG FHQVXVHV KDG WKH ODUJHVW QXPEHU RI QHVWV 7KLV FRXQW ZDV WKH PD[LPXP QXPEHU RI QHVWV IRU HDFK VXEFRORQ\ DOVR GHWHUPLQHG ZKLFK RI WKH UHSHDWHG FHQVXVHV LQ D VXEFRORQ\ KDG WKH ODUJHVW QXPEHU RI QHVWOLQJV SULRU WR WKH ILUVW REVHUYDWLRQ RI IOHGJLQJ LQ WKDW VXEFRORQ\ 7KLV ZDV WKH PD[LPXP QXPEHU RI QHVWOLQJV LQ D VXEFRORQ\ FRPSDUHG WKH SURGXFWLYLW\ RI HDFK VXEFRORQ\ E\ FRPSDULQJ HDFK VXEFRORQ\nV PD[LPXP QXPEHU RI QHVWOLQJV SHU PD[LPXP QXPEHU RI QHVWV FDOOHG PD[LPXP QHVWOLQJVPD[LPXP QHVWVf 6WDWLVWLFDO $QDO\VHV 6WDWLVWLFDO DQDO\VHV ZHUH SHUIRUPHG XVLQJ 6WDWYLHZ 6( *UDSKLFV )HOGPDQ HW DO f RQ D 0DFLQWRVK 6( FRPSXWHU $OO VWDWLVWLFDO WHVWV ZHUH WDLOHG XQOHVV RWKHUZLVH VWDWHG 5RZE\FROXPQ 5 ; &f *WHVWV RI LQGHSHQGHQFH ZHUH XVHG WR FRPSDUH VXUYLYDO IUHTXHQFLHV DPRQJ FKLFN UDQNV ZKHQHYHU b RI FHOOV KDG H[SHFWHG IUHTXHQFLHV RI ILYH RU PRUH :KHQHYHU DQ 5 ; & *WHVW ZDV VLJQLILFDQW FRQGXFWHG ; *WHVWV EHWZHHQ SDLUV RI VLEOLQJ UDQNV )RU WKHVH SDLUZLVH FRPSDULVRQV NHSW H[SHULPHQWZLVH HUURU DW 3 E\ XVLQJ FULWLFDO YDOXHV RI WKH FKLVTXDUH GLVWULEXWLRQ EDVHG RQ 6LGDNnV PXOWLSOLFDWLYH LQHTXDOLW\ 6RNDO DQG 5RKOI f :KHQ b RI H[SHFWHG FHOO IUHTXHQFLHV ZHUH OHVV WKDQ ILYH ,

PAGE 52

FDVW GDWD LQWR ; WDEOHV DQG SHUIRUPHG )LVKHU H[DFW WHVWV XVLQJ WKH H[SDQGHG WDEOHV RI )LQQH\ HW DO f 'LIIHUHQFHV ZHUH FRQVLGHUHG VLJQLILFDQW ZKHQ 3 3YDOXHV DUH SUHVHQWHG IRU DOO VWDWLVWLFDO WHVWV LQFOXGLQJ WKRVH WKDW ZHUH QRQVLJQLILFDQW H[FHSW IRU QRQVLJQLILFDQW UHVXOWV RI )LVKHU ([DFW 7HVWV FRXOG QRW SURYLGH 3YDOXHV IRU QRQVLJQLILFDQW )LVKHU ([DFW 7HVWV EHFDXVH 3YDOXHV KLJKHU WKDQ IRU WDLOHG DQG IRU WDLOHG WHVWV ZHUH QRW JLYHQ LQ VWDWLVWLFDO WDEOHV IRU ; FRQWLQJHQF\ WDEOHV )LQQH\ HW DO f 0HDQV DUH SUHVHQWHG 6' 5HVXOWV 6XUYLYDO &OXWFK VL]HV DQG KDWFKLQJ VXFFHVV ZHUH VLPLODU LQ ERWK \HDUV RI WKLV VWXG\ 7DEOH f )OHGJLQJ VXFFHVV DOWKRXJK ORZ LQ ERWK \HDUV ZDV ORZHVW LQ 7DEOH f 7KH SURGXFWLYLW\ RI QHVWV DV PHDVXUHG E\ WKH PD[LPXP QXPEHU RI QHVWOLQJV SHU PD[LPXP QHVWV ZDV VLJQLILFDQWO\ DVVRFLDWHG ZLWK GHJUHH RI UHVHDUFKHU GLVWXUEDQFH ZLWK SURGXFWLYLW\ LQFUHDVLQJ ZLWK GLVWXUEDQFH 7DEOH .UXVNDO:DOOLV WHVW + 3 f 7KXV UHVHDUFKHU DFWLYLWLHV ZHUH SUREDEO\ QRW UHVSRQVLEOH IRU WKH ORZ IOHGJLQJ VXFFHVV LQ 7KH SURGXFWLYLW\ YDOXHV WKDW REWDLQHG LQ IHOO LQ WKH UDQJH RI WKRVH REWDLQHG RYHU DQ \HDU SHULRG IOHGJOLQJV SHU WRWDO QHVW SHU \HDUf

PAGE 53

RQ QHDUE\ LVODQGV E\ 6FKUHLEHU f 7KDW KLJKO\ GLVWXUEHG QHVWV ZHUH PRUH SURGXFWLYH WKDQ OHVV GLVWXUEHG QHVWV FRXOG KDYH RFFXUUHG EHFDXVH ZDV PRUH IDPLOLDU ZLWK WKH ORFDWLRQ DQG EURRG VL]HV RI IRFDO QHVWV 7KXV P\ FRXQWV RI WRWDO QXPEHUV RI QHVWOLQJV DQG QHVWV PLJKW KDYH EHHQ KLJKHU DQG PRUH DFFXUDWHf LQ WKH KLJKO\ GLVWXUEHG UHODWLYH WR OHVV GLVWXUEHG VXEFRORQLHV ,Q DGGLWLRQ RXU DFWLYLWLHV LQ WKH KLJKO\ GLVWXUEHG FRORQLHV PD\ KDYH GHFUHDVHG RSSRUWXQLWLHV IRU QHVW WDNHRYHUV DQG VWLFN WKHIWV ZKLFK RIWHQ FRQWULEXWH WR SDUWLDO DQG FRPSOHWH ORVVHV RI FOXWFKHV DQG EURRGV VHH EHORZf 1HVW IDLOXUHV 1HVW DEDQGRQPHQW ZDV D FRPPRQ FDXVH RI QHVW IDLOXUH DIIHFWLQJ b f RI FOXWFKHV QHVWV FRQWDLQLQJ HJJVf DQG QR EURRGV QHVWV KDWFKLQJ VRPH FKLFNVf LQ DQG b RI FOXWFKHV DQG b f RI EURRGV LQ WKH QHVWV REVHUYHG LQ &OXWFK DEDQGRQPHQW LQ ZDV SUREDEO\ XQGHUHVWLPDWHG EHFDXVH GLG QRW EHJLQ REVHUYDWLRQV LQ WKLV \HDU XQWLO PRVW QHVWV ZHUH LQ WKH ODVW ZHHN RI WKH LQFXEDWLRQ SHULRG %\ FRQWUDVW EHJDQ WKH REVHUYDWLRQV ZKHQ WKH ELUGV ZHUH EXLOGLQJ WKH ILUVW QHVWV 7KHVH DEDQGRQPHQWV DSSHDUHG WR EH VSRQWDQHRXV DV FRQWUDVWHG ZLWK RQH DGGLWLRQDO FOXWFK WKDW ZDV DEDQGRQHG LQ DQG ILYH FOXWFKHV DQG WZR EURRGV DEDQGRQHG LQ IROORZLQJ KXPDQ DFWLYLWLHV LQ WKH FRORQ\ $Q DGGLWLRQDO b f DQG b f RI FOXWFKHV ZHUH ORVW LQ DQG UHVSHFWLYHO\ ZKHQ WKH LQFXEDWLQJ SDUHQW ZDV GULYHQ IURP LWV

PAGE 54

QHVW E\ D FRXUWLQJ SDLU RU VLQJOH PDOH WKDW DWWDFNHG WKH UHVLGHQW WRVVHG RXW LWV HJJV DQG WRRN RYHU LWV QHVW D WDNHRYHU GLVFXVVHG LQ $SSHQGL[ 'f $V ZLWK DEDQGRQPHQWV WKH IUHTXHQF\ RI FOXWFK WDNHRYHUV ZDV SUREDEO\ XQGHUHVWLPDWHG LQ ,Q b f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f :KHQ DGGHG % EURRGV ZLWK FKLFNV RI HVWLPDWHG UDQNV WR WKHVH NQRZQUDQN EURRGV IRXQG WKDW %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG WKHLU $VLEOLQJV WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 6LPLODUO\ LQ % EURRGV IRU

PAGE 55

ZKLFK HVWLPDWHG FKLFN UDQNV %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG $FKLFNV WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf ,Q % QHVWV VXUYLYDO ZDV VLJQLILFDQWO\ DVVRFLDWHG ZLWK FKLFN UDQN WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNV YHUVXV VXUYLYLQJ &FKLFNVf 3DLUZLVH FRPSDULVRQV UHYHDOHG WKDW $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG WKHLU %VLEOLQJV H[SHULPHQWZLVH HUURU VHW DW 3 GI IRU RQH RI WKUHH FRPSDULVRQVf 6LPLODUO\ $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ WKHLU &VLEOLQJV H[SHULPHQWZLVH HUURU VHW DW 3 GI IRU RQH RI WKUHH FRPSDULVRQVf 6XUYLYDO RI %FKLFNV ZDV QRW VLJQLILFDQWO\ EHWWHU WKDQ WKDW RI &FKLFNV H[SHULPHQWZLVH HUURU 3 GI IRU RQH RI WKUHH FRPSDULVRQVf ,Q % QHVWV &FKLFNV GLHG PRUH RIWHQ WKDQ GLG WKHLU $VLEOLQJV EXW QRW VLJQLILFDQWO\ VR ZKHQ RQO\ FKLFNV RI NQRZQ UDQN ZHUH LQFOXGHG 7DEOH WDLOHG )LVKHU H[DFW WHVW 3 f :KHQ FKLFNV RI HVWLPDWHG UDQNV ZHUH DGGHG WR WKH DQDO\VLV WKLV UHODWLRQVKLS ZDV VLJQLILFDQW WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $ FKLFNV YHUVXV VXUYLYLQJ &FKLFNVf $ DQG %FKLFNV LQ % QHVWV VXUYLYHG ZLWK VLPLODUO\ ORZ IUHTXHQF\ ZKHQ ,

PAGE 56

FRQVLGHUHG RQO\ EURRGV ZLWK FKLFNV RI NQRZQ UDQNV 7DEOH f :KHQ DGGHG VL[ EURRGV ZLWK FKLFNV RI HVWLPDWHG UDQNV GLIIHUHQFHV LQ VXUYLYDO ZHUH VWLOO QRW VLJQLILFDQW WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 7KH SUHFHGLQJ DQDO\VHV SURYLGH HVWLPDWHV RI WKH HIIHFW RI KDWFKLQJ UDQN RQ FKLFN VXUYLYDO %XW WZR %FKLFNV JUHZ ODUJHU WKDQ WKHLU $VLEOLQJV ZLWKLQ WKH ILUVW GD\V RI OLIH LQ % QHVWV %\ JDLQLQJ VL]HVXSHULRULW\ WKHVH FKLFNV PD\ KDYH JDLQHG D VXUYLYDO DGYDQWDJH 7R HYDOXDWH WKH HIIHFW RI VL]HVXSHULRULW\ UDWKHU WKDQ KDWFKLQJ UDQNf RQ FKLFN VXUYLYDO UHFODVVLILHG WKH ODUJHU %FKLFNV DV $FKLFNV DQG WKH VPDOOHU $FKLFNV DV D %FKLFNV LQ WKHVH WZR QHVWV :KHQ FRPSDUHG % FKLFNV DFFRUGLQJ WR WKHLU VL]HVXSHULRULW\ DW GD\V RI DJH IRXQG WKDW $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG %FKLFNV WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 6XFK VL]H UHYHUVDOV ZLWKLQ WKH ILUVW GD\V GLG QRW RFFXU LQ % QHVWV DQG GLG QRW LQYROYH DQ\ &FKLFNV 7KXV SUHFHGLQJ DQDO\VHV LQYROYLQJ % EURRGV DQG % &FKLFNV WKDW LQFOXGHG FKLFNV ZLWK HVWLPDWHG UDQNV UHIOHFW WKH HIIHFWV RI FKLFN VL]H VXSHULRULW\

PAGE 57

5HSURGXFWLYH 9DOXH RI -XQLRU 6LEOLQJV +DWFKLQJ IDLOXUH ZDV ORZ LQ P\ VWXG\ DIIHFWLQJ RQO\ b WR b RI DOO HJJV IURP & DQG & FOXWFKHV WKDW KDWFKHG DW OHDVW RQH HJJ 7DEOH f REVHUYHG RQO\ WZR & QHVWV RQH LQ WKDW KDWFKHG WKUHH DQG IOHGJHG RQH FKLFN DQG WKH RWKHU LQ WKDW KDWFKHG IRXU FKLFNV WKDW GLHG DV QHVWOLQJV %HFDXVH KDWFKLQJ IDLOXUH ZDV VR ORZ DVVHVVHG PRUWDOLW\ RI VXFFHVVIXOO\ KDWFKHG FKLFNV WR SDUWLWLRQ WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV LQWR H[WUDFKLFN DQG LQVXUDQFH FRPSRQHQWV 7ZR FKLFNV IOHGJHG IURP b RI DOO % QHVWV 1 EURRGVf DQG b RI % QHVWV 1 EURRGVf LQ 7KXV MXQLRU FKLFNV LQ % DQG % QHVWV KDG VRPH H[WUDFKLFN YDOXH LQ 7DEOH f FRXOG QRW SDUWLWLRQ WKH UHSURGXFWLYH YDOXHV RI FKLFNV RI GLIIHUHQW UDQNV LQWR LQVXUDQFH DQG H[WUDFKLFN FRPSRQHQWV EHFDXVH FKLFNV ZHUH QRW UDQNHG LQ WKDW \HDU 1R % QHVWV IOHGJHG WKUHH FKLFNV LQ HLWKHU \HDU 7KH WRWDO UHSURGXFWLYH YDOXH RI FKLFNV DYHUDJHG RYHU DOO UDQNV ZDV VLPLODU IRU % DQG % QHVWV ZLWKLQ HDFK \HDU 7DEOH f ,Q WKH RQO\ FKLFNV WR VXUYLYH ZHUH WKRVH ZKRVH VLEOLQJV DOO GLHG 7DEOH f 7KH WRWDO UHSURGXFWLYH YDOXH SURSRUWLRQ RI VXUYLYRUV RI HDFK UDQNf RI $ DQG %FKLFNV IURP % QHVWV ZDV LGHQWLFDO DQG DERXW WKUHHIRXUWKV WKDW RI $FKLFNV LQ % QHVWV 7DEOH f :KHQ SDUWLWLRQHG

PAGE 58

WKH UHSURGXFWLYH YDOXH RI %FKLFNV LQ % EURRGV LQWR H[WUDFKLFN DQG LQVXUDQFH FRPSRQHQWV IRXQG WKDW WKH HQWLUH UHSURGXFWLYH YDOH RI WKHVH FKLFNV OD\ LQ WKHLU LQVXUDQFH YDOXH 6LPLODU DQDO\VLV IRU WKH ODVWKDWFKHG QHVWOLQJV LQ % DQG % EURRGV ZDV LPSRVVLEOH EHFDXVH WKH\ DOO GLHG %FKLFNV VXUYLYHG EHWWHU LQ % WKDQ LQ % QHVWV LQ 7DEOH f %XW WKH RQO\ %FKLFNV WR VXUYLYH LQ % QHVWV LQ ZHUH WKRVH ZKRVH $VLEOLQJV GLHG 7KXV LQ WKH UHSURGXFWLYH YDOXH RI WKHVH FKLFNV OD\ HQWLUHO\ LQ WKHLU YDOXH DV LQVXUDQFH DJDLQVW WKH GHPLVH RI WKHLU VHQLRUV %FKLFNV LQ % QHVWV UHSODFHG WKHLU VHQLRUV TXLWH RIWHQ b RI WKH %FKLFNV RXWOLYHG WKHLU VHQLRUV DQG WZR RI WKHVH b RI DOO %FKLFNVf IOHGJHG 7DEOH f 0RVW bf RI WKH %FKLFNV GLHG GXULQJ WKH ILUVW GD\V RI WKH QHVWOLQJ SHULRG GHILQHG DV EHJLQQLQJ ZLWK WKH $FKLFNnV KDWFKLQJ )LJXUH f 7KLV ZDV WKH SHULRG LQ ZKLFK b RI WKH $FKLFNV GLHG )LJXUH f 2YHUDOO PRUWDOLW\ SHDNHG GXULQJ WKH VDPH SHULRG IRU ERWK $ DQG %FKLFNV 8 3 IRU UDQNVFHUWDLQ $FKLFNV YV UDQNVFHUWDLQ %FKLFNVf 'HDWKV RFFXUUHG DQ DYHUDJH RI s f GD\V LQWR WKH QHVWOLQJ SHULRG IRU $FKLFNV DQG DIWHU s f GD\V IRU %FKLFNV $OWKRXJK DOO &FKLFNV GLHG LQ b RI WKHP OLYHG ORQJHU WKDQ RQH RI WKHLU VHQLRUV 7DEOH f 0RUWDOLW\ RI VHQLRUV SHDNHG GXULQJ WKH VDPH SHULRG DV WKDW RI &FKLFNV

PAGE 59

DYHUDJLQJ sf DQG sf GD\V IRU VHQLRUV DQG &FKLFNV UHVSHFWLYHO\ 8 3 IRU VHQLRUV YV &FKLFNV SOXV XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLH LQ WKHLU QHVWVf ,Q WKLV DQDO\VLV XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLH ZHUH LQFOXGHG )LJXUH f EHFDXVH WKH FRPSDULVRQ RI LQWHUHVW LV ZKHWKHU WKHVH FKLFNV OLYHG ORQJ HQRXJK WR EH SUHVHQW GXULQJ WKH SHULRG RI SHDN ULVN WR WKHLU VHQLRUV %\ LQFOXGLQJ WKHVH XQUDQNHG ILUVW GHDWKV DV &FKLFNV WKH WLPH RI GHDWK ZRXOG EH XQGHUHVWLPDWHG LQ WKH HYHQW WKDW VRPH RI WKHVH ILUVW GHDWKV DFWXDOO\ LQYROYHG VHQLRUV ,Q % QHVWV DOWKRXJK DOO RI WKH %FKLFNV HYHQWXDOO\ GLHG LQ b RI WKHP VWLOO RXWOLYHG WKHLU VHQLRUV RQH RI ZKLFK GLG QRW GLH XQWLO LW ZDV GD\V ROG 7DEOH f %FKLFN PRUWDOLW\ SHDNHG GXULQJ WKH VDPH SHULRG DV WKDW RI $FKLFNV )LJXUH f ZLWK %FKLFNV G\LQJ DQ DYHUDJH RI sf GD\V DQG $FKLFNV G\LQJ sf GD\V LQWR WKH QHVWOLQJ SHULRG 8 3 IRU $ FKLFNV DQG %FKLFNV SOXV XQUDQNHG FKLFNV WKDW ZHUH WKH ILUVW WR GLH VHH DERYH GLVFXVVLRQ IRU % &FKLFNV IRU DQ H[SODQDWLRQ RI ZK\ XQUDQNHG FKLFNV ZHUH LQFOXGHG LQ WKLV DQDO\VLVf %RWK FKLFNV VXUYLYHG WRJHWKHU IRU D PD[LPXP RI GD\V LQWR WKH QHVWOLQJ SHULRG RI % EURRGV

PAGE 60

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f 2YHUDOO VLEOLFLGH ZDV WKH PRVW FRPPRQ VRXUFH RI GHDWK IURP NQRZQ FDXVHV LQ DIIHFWLQJ b RI DOO FKLFNV REVHUYHG 7DEOH f )RRGLQGHSHQGHQW GHDWKV DIIHFWHG b RI DOO FKLFNV REVHUYHG LQ DQG b RI WKRVH REVHUYHG LQ 7DEOH f ,QIDQWLFLGH ZKLFK DIIHFWHG b RI DOO FKLFNV REVHUYHG LQ ERWK DQG

PAGE 61

7DEOH f ZDV WKH PRVW FRPPRQ RI WKH IRRGLQGHSHQGHQW GHDWKV WKDW DIIHFWHG FKLFNV ROGHU WKDQ KDWFKOLQJV ,QIDQWLFLGDO DWWDFNV ZHUH SUREDEO\ QRW DQ DUWLIDFW RI IUHTXHQW FRORQ\ GLVWXUEDQFH :KLOH XVLQJ D ERDW RIIVKRUH WR FHQVXV SDUWV RI WKH LVODQG WKDW ZH QHYHU HQWHUHG REVHUYHG ELUGV LQ VXEDGXOW 1 f DQG DGXOW 1 f SOXPDJH DWWDFNLQJ GRZQ\ \RXQJ DQG DOVR VDZ WZR DGXOWV JUDSSOLQJ LQ DSSDUHQW WDNHRYHU DWWHPSWV 1 f %RWK IRRGGHSHQGHQW DQG IRRGLQGHSHQGHQW GHDWKV RFFXUUHG DPRQJ FKLFNV RI DOO UDQNV LQ 7DEOH f %XW WKH UHODWLYH LPSRUWDQFH RI WKHVH VRXUFHV RI PRUWDOLW\ YDULHG ZLWK FKLFN UDQNV DQG EURRG VL]HV $FKLFNV LQ % DQG % QHVWV GLHG RI IRRGLQGHSHQGHQW DQG IRRGGHSHQGHQW FDXVHV ZLWK VLPLODU IUHTXHQF\ 7DEOH %LQRPLDO WHVW IRU IRXU IRRGGHSHQGHQW YHUVXV IRXU IRRGLQGHSHQGHQW $FKLFN GHDWKV LQ % QHVWV 3 DQG %LQRPLDO WHVW IRU WZR IRRG GHSHQGHQW YHUVXV VL[ IRRGLQGHSHQGHQW $FKLFN GHDWKV LQ % QHVWV 3 f )RRGGHSHQGHQW DQG IRRGLQGHSHQGHQW GHDWKV DOVR DIIHFWHG D VLPLODU QXPEHU RI %FKLFNV LQ % QHVWV 7DEOH %LQRPLDO WHVW IRU WKUHH IRRGGHSHQGHQW YHUVXV WZR IRRGLQGHSHQGHQW %FKLFN GHDWKV 3 f %\ FRQWUDVW LQ % QHVWV %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ RI IRRGGHSHQGHQW WKDQ RI IRRGLQGHSHQGHQW FDXVHV 7DEOH %LQRPLDO WHVW IRU IRRGGHSHQGHQW YHUVXV RQH IRRGLQGHSHQGHQW GHDWK 3 f &FKLFNV DOVR GLHG PRUH RIWHQ RI IRRGGHSHQGHQW FDXVHV EXW QRW VLJQLILFDQWO\ VR

PAGE 62

7DEOH %LQRPLDO WHVW IRU VL[ IRRGGHSHQGHQW YHUVXV WZR IRRGLQGHSHQGHQW &FKLFN GHDWKV 3 f DOWKRXJK WKH GLIIHUHQFH ZDV VLJQLILFDQW ZKHQ RPLWWHG &FKLFNV WKDW GLHG DV KDWFKOLQJV 7DEOH %LQRPLDO WHVW IRU VL[ IRRG GHSHQGHQW YHUVXV QR IRRGGHSHQGHQW &FKLFN GHDWKV 3 f 7LPLQJ RI )RRGGHSHQGHQW 'HDWKV ,Q PRVW VWDUYDWLRQ DQG VLEOLFLGH RI MXQLRU FKLFNV % DQG & FKLFNV LQ % QHVWV DQG %FKLFNV LQ % QHVWVf RFFXUUHG ZKHQ WKHVH FKLFNV ZHUH WR GD\V ROG )LJXUH f 7KH PHDQ DJH RI IRRGGHSHQGHQW GHDWKV ZDV sf GD\V IRU HLJKW %FKLFNV LQ % QHVWV sf GD\V IRU WKUHH %FKLFNV LQ % QHVWV DQG sf IRU HLJKW & FKLFNV LQFOXGLQJ WZR XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLHf /DVWKDWFKHG FKLFNV LQ % DQG % QHVWV GLHG DW VLPLODU DJHV IURP IRRGGHSHQGHQW FDXVHV 8 QL & FKLFNV Q %FKLFNV IURP % QHVWV 3 f ,Q WKH IHZ EURRGV LQ ZKLFK WZR FKLFNV GLHG RI IRRGGHSHQGHQW FDXVHV MXQLRUV GLHG DQ DYHUDJH RI GD\V s 1 &FKLFNV LQ % EURRGV DQG %FKLFNV LQ % EURRGVf EHIRUH WKHLU VHQLRUV :LOFR[RQ VLJQHGUDQN WHVW MXQLRUV GLHG EHIRUH WKHLU VHQLRU VLEOLQJV 3 f 1R % EURRG ORVW DOO PHPEHUV WR IRRGGHSHQGHQW FDXVHV LQ 6LEOLFLGHV LQ RFFXUUHG DQ DYHUDJH RI s f GD\V LQWR WKH QHVWOLQJ SHULRG ZKHUHDV VWDUYDWLRQ GHDWKV

PAGE 63

ZHUH GHOD\HG XQWLO f GD\V LQWR WKLV SHULRG )LJXUH f 7KHVH GLIIHUHQFHV ZHUH QRW VLJQLILFDQW 8 3 QL VLEOLFLGHV DQG Q VWDUYDWLRQ GHDWKV RI FKLFNV RI DOO UDQNV ZKRVH IDWHV ZHUH NQRZQ IURP % DQG % EURRGVf 'LVFXVVLRQ 7KLV VWXG\ SURYLGHV D PL[ RI HYLGHQFH IRU DQG DJDLQVW ERWK WKH UHVRXUFHWUDFNLQJ DQG LQVXUDQFH K\SRWKHVHV 6WDUYDWLRQ DQG VLEOLFLGH ZHUH FRPPRQ DQG FRQFHQWUDWHG RQ WKH ODVWKDWFKHG EURRGPHPEHUV DV SUHGLFWHG E\ WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV /DFN 2f&RQQRU 0RFN D 'UXPPRQG 0DJUDWK f $V SUHGLFWHG E\ WKH LQVXUDQFH K\SRWKHVLV 'RUZDUG 6WLQVRQ 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU %U\DQW DQG 7DWQHU f VHQLRUV IDFHG D KLJK ULVN RI G\LQJ IURP IRRGLQGHSHQGHQW FDXVHV LQFOXGLQJ KDWFKLQJ IDLOXUH DFFLGHQWDO GHDWKV DQG LQIDQWLFLGH )XUWKHUPRUH ERWK % DQG &FKLFNV IUHTXHQWO\ UHSODFHG VHQLRUV WKDW GLHG IURP VXFK FDXVHV 6XUYLYDO ZDV DVVRFLDWHG ZLWK QHVWOLQJ VL]HUDQNV DV SUHGLFWHG E\ ERWK K\SRWKHVHV %XW WKLV DVVRFLDWLRQ ZDV QRW VLJQLILFDQW ZKHQ UHVWULFWHG DQDO\VHV WR FKLFNV RI NQRZQ KDWFKLQJ UDQNV VHH 6XUYLYDO EHORZf %FKLFNV SURYLGHG RQO\ LQVXUDQFH YDOXH LQ EXW LQ VRPH %FKLFNV LQ % DQG % QHVWV VXUYLYHG DORQJ ZLWK WKHLU VLEOLQJV 7KXV WKH UHSURGXFWLYH YDOXH RI %FKLFNV

PAGE 64

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

PAGE 65

NQRZQ KDWFKLQJ UDQNV WKH LPSRUWDQFH RI KDWFKLQJ UDQN WR FKLFN VXUYLYDO ZDV QRW FOHDU IURP P\ VWXG\ %XW FKLFNV WKDW JDLQHG VL]H VXSHULRULW\ RYHU WKHLU VLEOLQJV FOHDUO\ JDLQHG D VXUYLYDO DGYDQWDJH (YLGHQFH IRU WKLV ZDV SURYLGHG E\ DQDO\VHV WKDW LQFOXGHG FKLFNV RI HVWLPDWHG UDQNV EHFDXVH WKHVH FKLFN UDQNV ZHUH EDVHG RQ VL]H GLIIHUHQFHV DIWHU WKH ILUVW GD\V RI OLIH 7KXV ODUJHVW $f FKLFNV VXUYLYHG PRUH IUHTXHQWO\ WKDQ GLG WKHLU VPDOOHU %f VLEOLQJV LQ % EURRGV DQG LQ % EURRGV LQ ERWK \HDUV 7KHVH $ FKLFNV DOVR VXUYLYHG PRUH RIWHQ WKDQ WKHLU VPDOOHVW &f VLEOLQJV LQ ERWK \HDUV ,Q $FKLFNV DOVR VXUYLYHG PRUH RIWHQ WKDQ WKHLU % VLEOLQJV LQ % EURRGV ZKHQ UHFODVVLILHG FKLFNV DFFRUGLQJ WR WKHLU UHODWLYH VL]HV DW DJH GD\V LQ WZR QHVWV ZKHUH WKH % FKLFNV JUHZ ODUJHU WKDQ WKHLU $VLEOLQJV 5HVXOWV LQ WKH OLWHUDWXUH DOVR LQGLFDWH WKDW VXUYLYDO LV DVVRFLDWHG ZLWK FKLFN VL]H DQGRU KDWFKLQJ RUGHU 6FKUHLEHU f UHSRUWHG WKDW DOO $FKLFNV VXUYLYHG LQ WKH \HDUV RI KLV VWXG\ ZKHUHDV %FKLFN VXUYLYDO YDULHG DPRQJ \HDUV DQG &FKLFNV YLUWXDOO\ DOZD\V GLHG 6LPLODU DQQXDO YDULDWLRQ LV OLNHO\ LQ P\ $ODILD EDQNV VLWH ZKLFK ZDV ORFDWHG DERXW PLOHV IURP 6FKUHLEHUnV f VWXG\ FRORQ\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DOVR IRXQG WKDW QHVWOLQJ VXUYLYDO ZDV KLJKHVW DPRQJ $FKLFNV DQG ORZHVW DPRQJ & FKLFNV LQ D 0H[LFDQ SRSXODWLRQ RI EURZQ SHOLFDQV

PAGE 66

3DUWLWLRQLQJ WKH 5HSURGXFWLYH 9DOXH RI -XQLRU &KLFNV $VVXPLQJ KDWFKLQJ VXFFHVV ZDV LQGHSHQGHQW RI OD\LQJ RUGHU DV LQ ZKLWH SHOLFDQV 2n0DOOH\ DQG (YDQV f RQO\ b RI $HJJV LQ & DQG & QHVWV IDLOHG WR KDWFK LQ DQG 7DEOH f &OHDUO\ VRPH H[WUD HJJV KDG YDOXH LQ UHSODFLQJ XQKDWFKHG FOXWFKPDWHV %XW WKH UHSODFHPHQW YDOXH RI MXQLRU FKLFNV ZDV SULPDULO\ IRU ORVV RI VHQLRU FKLFNV UDWKHU WKDQ HJJV &DVK DQG (YDQV f FDPH WR WKH VDPH FRQFOXVLRQ IRU ZKLWH SHOLFDQV ZKLFK KDG D KLJKHU KDWFKLQJ IDLOXUH UDWH RI b ,Q FRQWUDVW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf FRQFOXGHG WKDW WKH SULPDU\ DGYDQWDJH RI OD\LQJ VHFRQG DQG WKLUG HJJV LQ WKHLU EURZQ SHOLFDQ SRSXODWLRQ ZDV DV LQVXUDQFH IRU KDWFKLQJ IDLOXUH ZKLFK DIIHFWHG b RI WKH HJJV %XW MXQLRU HJJV DOVR UHSODFHG b RI DOO $FKLFNV LQ % DQG % QHVWV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 3LQ]Q DQG 'UXPPRQGnV HVWLPDWHV RI KDWFKLQJ IDLOXUH VOLJKWO\ RYHUHVWLPDWH WKH YDOXHV IRU ZKLFK MXQLRUV FRXOG VHUYH DV LQVXUDQFH EHFDXVH WKH\ LQFOXGHG FDVHV RI WRWDO FOXWFK ORVV DQG HJJV ORVW GXH WR UHVHDUFKHU GLVWXUEDQFH 7KHLU KLJKHU KDWFKLQJ IDLOXUH UDWHV PD\ EH EHFDXVH VRPH RI WKHLU QHVWV ZHUH RQ WKH JURXQG *URXQG QHVWV PD\ H[SHULHQFH JUHDWHU RYHUKHDWLQJ DQG FRQVHTXHQW SDUWLDO FOXWFK ORVV WKDQ RFFXUV LQ WUHH QHVWV $QGHUVRQ f 7KH UHODWLYH LPSRUWDQFH RI MXQLRU FKLFNV DV LQVXUDQFH IRU HJJ ORVV UDWKHU WKDQ FKLFN ORVV PD\ EH JUHDWHU

PAGE 67

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b RI % EURRGV IOHGJHG WZR FKLFNV 7DEOH f $OWKRXJK QR %FKLFNV SURYLGHG H[WUDFKLFN YDOXH LQ RQH %FKLFN DOPRVW IOHGJHG ZLWK LWV $VLEOLQJ LQ WKDW \HDU )LJXUH f 7KHVH GDWD VXJJHVW WKDW WKHUH PD\ EH FRQVLGHUDEOH YDULDWLRQ WKH H[WUDFKLFN YDOXH RI %FKLFNV DPRQJ \HDUV DQG FRORQLHV 6FKUHLEHUnV f GDWD DOVR VKRZ KLJK DQQXDO YDULDQFH LQ WKH VXUYLYDO RI %FKLFNV ZKHQ WKHLU $VLEOLQJV DOVR OLYHG WKH IUHTXHQF\ ZLWK ZKLFK ERWK $ DQG %FKLFNV VXUYLYHG UDQJHG IURP b RI % EURRGV SHU \HDU ZLWK %FKLFNV VXUYLYLQJ RXW RI WKH WRWDO RI EURRGV FHQVXVHG LQ WKH \HDUV RI KLV VWXG\ %FKLFNV LQ 6FKUHLEHUnV f VWXG\ DSSDUHQWO\ SURYLGHG QR LQVXUDQFH YDOXH DOO $FKLFNV IOHGJHG 1R &FKLFNV IOHGJHG LQ WKLV VWXG\ 7KXV WKH &FKLFNV LQ P\ VWXG\ SURYLGHG QR UHSURGXFWLYH YDOXH WR WKHLU SDUHQWV 7KLV LV SUREDEO\ W\SLFDO IRU &FKLFNV LQ PRVW SRSXODWLRQV

PAGE 68

)RU H[DPSOH 6FKUHLEHU REVHUYHG EURRGV IOHGJLQJ DOO WKUHH \RXQJ LQ RQO\ b RI WKH % QHVWV WKDW KH PRQLWRUHG IRU JURZWK IURP 6FKUHLEHU f DQG LQ RQO\ b RI DOO QHVWV WKDW KH REVHUYHG IURP 6FKUHLEHU f 7KUHHFKLFN VXUYLYDO ZDV DOVR ORZ LQ D 1RUWK &DUROLQD FRORQ\ ZKHUH RQO\ b RI % EURRGV IOHGJHG DOO \RXQJ 0 6KLHOGV SHUV FRPPf 6LPLODUO\ LQ 0H[LFR QRQH RI % QHVWV IOHGJHG WKUHH FKLFNV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf :KHQ FRPELQHG ZLWK P\ GDWD WKHVH UHVXOWV VXJJHVW WKDW &FKLFN VXUYLYDO LV UDUH EXW WKDW &FKLFNV GR RFFDVLRQDOO\ SURYLGH H[WUDFKLFN YDOXH E\ VXUYLYLQJ DORQJ ZLWK WKHLU VLEOLQJV LQ VRPH \HDUV %URRG UHGXFWLRQ JHQHUDOO\ ILWWHG DQ REOLJDWH SDWWHUQ IRU &FKLFNV %\ FRQWUDVW LQ RQH 3DQDPDQLDQ FRORQ\ &FKLFNV VXUYLYHG DORQJ ZLWK WKHLU VLEOLQJV LQ b RI DOO % QHVWV REVHUYHG 0RQWJRPHU\ DQG 0DUWLQH] f 7KLV SRSXODWLRQ IHG RQ ILVK WKDW ZHUH SUHGLFWDEO\ DEXQGDQW EHFDXVH RI XSZHOOLQJ WKDW UHOLDEO\ RFFXUUHG GXULQJ WKH EUHHGLQJ VHDVRQ &FKLFNV LQ WKLV SRSXODWLRQ PD\ KDYH H[WUDFKLFN YDOXH PRUH IUHTXHQWO\ WKDQ LQ WKH RWKHU SRSXODWLRQV GLVFXVVHG ZKLFK UHO\ RQ OHVV SUHGLFWDEOH IRRG VXSSOLHV :KHWKHU &FKLFNV HYHU SURYLGH LQVXUDQFH YDOXH DZDLWV IXWXUH VWXG\ 1R &FKLFNV VXUYLYHG DV UHSODFHPHQWV IRU GHDG $FKLFNV LQ WKH SRSXODWLRQV VWXGLHG E\ 6FKUHLEHU LQ DQG E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf %XW WKH UHPDLQLQJ VWXGLHV PHQWLRQHG LQ WKH SUHFHGLQJ SDUDJUDSK GLG QRW SURYLGH

PAGE 69

VXIILFLHQW LQIRUPDWLRQ WR GHWHUPLQH ZKHWKHU &FKLFNV HYHU VXUYLYHG DV UHSODFHPHQWV IRU $FKLFNV WKDW GLHG 7KH WLPLQJ RI &FKLFN GHDWKV LQ P\ VWXG\ VXJJHVWV WKDW WKH\ FRXOG KDYH VHUYHG DV LQVXUDQFH DJDLQVW WKH GHDWK RI D VHQLRU $ RU %f VLEOLQJ ,Q JHQHUDO ZKHQ MXQLRUV SURYLGH LQVXUDQFH VHQLRUV VKRXOG UHIUDLQ IURP NLOOLQJ WKHLU VLEOLQJV DQG SDUHQWV VKRXOG DYRLG VWDUYLQJ WKHLU \RXQJHVW RIIVSULQJ XQWLO DIWHU WKH VXUYLYDO RI WKH HOGHVW VHHPV VHFXUH 0RFN HW DO f (OLPLQDWLRQ RI WKH \RXQJHVW FKLFN VKRXOG TXLFNO\ IROORZ DIWHU WKLV EHFDXVH IRRG FRQVXPHG E\ WKH GRRPHG \RXQJHVW ZRXOG EH ZDVWHG DQG WKH FRVWV RI NLOOLQJ LW PD\ LQFUHDVH DV WKH \RXQJHVW JURZV ODUJHU 0RFN HW DO f 7KHVH SDWWHUQV ZHUH REVHUYHG IRU &FKLFNV LQ % EURRGV ZLWK PRVW &FKLFNV OLYLQJ LQWR WKH SHULRG RI SHDN VHQLRU PRUWDOLW\ GD\V DIWHU WKH $FKLFN KDWFKHG DQG G\LQJ TXLFNO\ RI VWDUYDWLRQ RU VLEOLFLGH LI WKHLU VHQLRUV VXUYLYHG WKLV ULVN SHULRG 7KDW VRPH &FKLFNV RXWOLYHG WKHLU $ VLEOLQJV EHIRUH G\LQJ IXUWKHU VXJJHVWV WKDW &FKLFNV PD\ KDYH SRWHQWLDO LQVXUDQFH YDOXH DV UHSODFHPHQWV IRU ORVW VHQLRUV $OWHUQDWLYHO\ &FKLFNV PD\ QRW PDNH D VLJQLILFDQW FRQWULEXWLRQ WR WKHLU SDUHQWVn OLIHWLPH UHSURGXFWLYH VXFFHVV HLWKHU DV H[WUD RU DV LQVXUDQFH FKLFNV 7KH SUHVHQFH RI &FKLFNV PD\ UHIOHFW VHOHFWLRQ SUHVVXUHV LQ WKH UHFHQW SDVW HJ %RDJ DQG *UDQW f UDWKHU WKDQ FXUUHQW DGDSWLYH YDOXH )RU H[DPSOH &FKLFNV PD\ KDYH LQVXUDQFH

PAGE 70

YDOXH LQ JURXQGQHVWLQJ SRSXODWLRQV ZKHUH KDWFKLQJ IDLOXUH GXH WR RYHUKHDWLQJ PD\ EH PRUH FRPPRQ $QGHUVRQ f & FKLFNV PD\ QR ORQJHU KDYH WKLV YDOXH LQ WUHHQHVWLQJ SRSXODWLRQV VXFK DV 6FKUHLEHU f DQG VWXGLHG 7KH SURGXFWLRQ RI &HJJV FRXOG DOVR EH D UHFHQW UHVSRQVH WR SHVWLFLGHLQGXFHG HJJIDLOXUHV VHH EHORZf ,Q WKH % EURRGV WKDW VWXGLHG WKH \RXQJHVW FKLFN KDG YDOXH DV DQ H[WUD VXUYLYRU ZLWK ERWK FKLFNV OLYLQJ LQ b RI % QHVWV LQ 7DEOH f 6LPLODUO\ 6FKUHLEHU f IRXQG WKDW ERWK VXUYLYHG LQ b RI WKH WZRFKLFN EURRGV WKDW KH PRQLWRUHG LQ KLV \HDU VWXG\ DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf REVHUYHG ERWK FKLFNV VXUYLYLQJ LQ b RI WKH EURRGV WKDW WKH\ REVHUYHG %FKLFNV LQ % QHVWV PD\ DOVR KDYH LQVXUDQFH YDOXH LQ VRPH \HDUV DV VXJJHVWHG E\ P\ GDWD VKRZLQJ WKDW VRPH %FKLFNV OLYHG ORQJHU WKDQ WKHLU $VLEOLQJV LQ DQG PDQ\ OLYHG LQWR WKH SHULRG RI SHDN $FKLFN PRUWDOLW\ ,QGHHG RQH %FKLFN IOHGJHG DIWHU LWV $VLEOLQJ GLHG LQ WKH % QHVWV WKDW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf REVHUYHG 7R SURSHUO\ DVVHVV WKH YDOXH RI MXQLRU FKLFNV DV LQVXUDQFH YHUVXV H[WUD FKLFNV ZLOO UHTXLUH ORQJWHUP VWXG\ RI D VLQJOH SRSXODWLRQ 7KH UHODWLYH IUHTXHQF\ ZLWK ZKLFK MXQLRU FKLFNV VXUYLYHG DV H[WUD YHUVXV LQVXUDQFH FKLFNV FRXOG EH WRWDOOHG RYHU HDFK SDUHQWnV OLIHWLPH 7KLV FRXOG OHDG WR LQVLJKW LQWR WKH UHODWLYH LPSRUWDQFH RI WKHVH WZR W\SHV RI UHSURGXFWLYH YDOXH 6LPLODUO\ WKH WRWDO YDOXH RI

PAGE 71

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f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

PAGE 72

VHQLRUV VXJJHVWV WKDW &FKLFNV KDG DW OHDVW VRPH SRWHQWLDO IRU UHSODFLQJ D VHQLRU WKDW GLHG RI VXFK FDXVHV ,QGHHG LQ WKH IHZ FDVHV ZKHUH MXQLRUV DFWXDOO\ RXWOLYHG D VHQLRU DOWKRXJK PRVW UHSODFHG $FKLFNV WKDW GLHG DV KDWFKOLQJV RU RI XQNQRZQ FDXVHV RQH % DQG &FKLFN LQ D % EURRG DQG RQH %FKLFN LQ D % EURRG UHSODFHG DQ $FKLFN WKDW GLHG RI IRRGGHSHQGHQW FDXVHV 7KLV VXJJHVWV WKDW MXQLRUV PD\ VRPHWLPHV VHUYH DV LQVXUDQFH DJDLQVW D GHIHFWLYH 0RFN D 0RFN DQG 3DUNHU 0RFN HW DO f RU FRPSHWLWLYHO\ LQIHULRU &DVK DQG (YDQV 'UXPPRQG f VHQLRU E\ GRPLQDWLQJ DQ LQIHULRU VHQLRU DQG UHYHUVLQJ WKH XVXDO IHHGLQJ DGYDQWDJHV VR WKDW WKH VXERUGLQDWHG VHQLRU ZRXOG VWDUYH RU EH NLOOHG E\ LWV GRPLQDQW MXQLRU LQ WKH HYHQW RI D IRRG VKRUWDJH 7KH VXERUGLQDWLRQ RI DQ $FKLFN E\ LWV %VLEOLQJ FRXOG DOVR RFFXU LI WKH %FKLFN ZDV XQXVXDOO\ ZHOOGHYHORSHG D VXSHUFKLFN 0RFN Df 'RPLQDQFH UHYHUVDOV ZLWK ORVHUV G\LQJ RI IRRGGHSHQGHQW FDXVHV DOVR ZRXOG EH H[SHFWHG LI WKH SURGXFWLRQ DQG VXEVHTXHQW HOLPLQDWLRQ RI H[WUD RIIVSULQJ LV D SDUHQWDO SOR\ WR VHOHFWLYHO\ UDLVH WKH ILWWHVW JHQRW\SHV %XFKKRO] FDOOHG SURJHQ\ FKRLFH E\ .R]ORZVNL DQG 6WHDUQV f E\ DOORZLQJ VLEOLQJV WR HOLPLQDWH LQIHULRU FRPSHWLWRUV 6LPPRQV f ,Q V\QFKURQRXVO\ KDWFKLQJ VSHFLHV WKLV FRXOG DOORZ SDUHQWV WR VRUW RXW WKH EHVW DPRQJ RIIVSULQJ ZLWK UHODWLYHO\ VLPLODU FRPSHWLWLYH DELOLWLHV DOWKRXJK DW SRWHQWLDOO\ KLJK FRVWV LQ HQHUJ\ 0RFN DQG 3ORJHU f DQG

PAGE 73

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f LI WKH IRRG VKRUWDJH WKDW NLOOV WKH VHQLRU RFFXUV ZKHQ WKH MXQLRU LV VWLOO DQ HJJ 1HOVRQ f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

PAGE 74

SRSXODWLRQV 0RVW UHSRUWV RI QHVW SUHGDWLRQ DJDLQVW EURZQ SHOLFDQV LQYROYH DEDQGRQHG HJJV RU QHVWOLQJV WDNHQ E\ DYLDQ SUHGDWRUV LQFOXGLQJ ILVK FURZV &RUYXV RVVLIUDFUXV 6FKUHLEHU DQG 5LVHEURXJK 3ORJHU SHUV REVf FRPPRQ UDYHQV e FRUD[ ZHVWHUQ JXOOV /DUXV RFFLGHQWDOLV .HLWK f DQG +HHUPDQnV JXOOV / KHHUPDQQL .HLWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf %XW ZHVWHUQ JXOOV DQG UDYHQV DOVR WDNH HJJV IURP QHVWV ZKLOH D SDUHQW LV LQ DWWHQGDQFH .HLWK f DQG EODFN YXOWXUHV &RUDRYRV DWUDWXVf WDNH GRZQ\ QHVWOLQJV WKDW DUH OHIW XQDWWHQGHG IRU H[WHQGHG SHULRGV & 0XUFLD SHUV FRPPf DV LV XVXDO DPRQJ WKHVH \RXQJ ZKLFK DUH ROG HQRXJK WR WKHUPRUHJXODWH %DUWKRORPHZ DQG 'DZVRQ f 3UHGDWLRQ E\ YXOWXUHV FRXOG FDXVH SDUWLDO EURRG ORVV DOWKRXJK YXOWXUHV XVXDOO\ WRRN WKH HQWLUH EURRGV RI YHU\ \RXQJ FKLFNV & 0XUFLD SHUV FRPPf 7KH RQO\ SUHGDWLRQ RI EURZQ SHOLFDQ HJJV WKDW REVHUYHG RFFXUUHG ZKHQ SDUHQWV WHPSRUDULO\ DEDQGRQHG D QHVW WR EDWKH DQG ZHUH DEVHQW IURP WKH QHVW IRU RQO\ PLQXWHV 7KLV XVXDOO\ UHVXOWHG LQ ILVK FURZV WDNLQJ WKH HQWLUH FOXWFK EXW VRPHWLPHV RQO\ RQH HJJ ZDV NLOOHG EHIRUH WKH SDUHQW UHWXUQHG DQG WKH UHPDLQLQJ HJJV VXUYLYHG 3ORJHU XQSXE GDWDf %URZQ SHOLFDQ QHVWOLQJV DUH DOVR VXEMHFW WR WLFN LQIHVWDWLRQV .LQJ HW DO D E .HLWK 0 6KLHOGV SHUV FRPPf HQGRSDUDVLWLF LQIHFWLRQV &RXUWQH\ DQG )RUUHVWHU f DQG GHDWK IURP H[SRVXUH WR WHPSHUDWXUH H[WUHPHV .HLWK f +HDY\ WLFN LQIHVWDWLRQV XVXDOO\ OHDG

PAGE 75

WR WRWDO EURRG IDLOXUH IURP SDUHQWDO DEDQGRQPHQW ZKLFK PD\ RFFXU WKURXJKRXW DQ HQWLUH FRORQ\ .LQJ HW DO Df RU VXEFRORQ\ 0 6KLHOGV SHUV FRPPf 7KXV WLFN LQIHVWDWLRQ LV QRW D OLNHO\ VRXUFH RI PRUWDOLW\ IRU ZKLFK \RXQJHVW FKLFNV FRXOG VHUYH DV LQVXUDQFH 7KH YDOXH RI MXQLRUV DV UHSODFHPHQWV IRU VHQLRUV ZLWK HQGRSDUDVLWLF LQIHFWLRQV LV OLNHO\ WR EH LQGLVWLQJXLVKDEOH IURP WKHLU YDOXH DV UHSODFHPHQWV IRU DSSDUHQWO\ LQIHULRU VWDUYLQJ VHQLRUV 7KLV LV EHFDXVH HQGRSDUDVLWLF LQIHFWLRQV DUH SUREDEO\ OHWKDO RQO\ WR VWDUYLQJ FKLFNV ZKRVH H[DFW FDXVH RI GHDWK IURP LQIHFWLRQ VWDUYDWLRQ RU WKHLU FRPELQHG HIIHFWVf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f UDWKHU WKDQ FXUUHQW VHOHFWLRQ DFWLQJ WR PDLQWDLQ ODUJHU FOXWFK VL]HV ,I WKHUH ZHUH ZLWKLQ QHVW YDULDQFH LQ

PAGE 76

VKHOO WKLQQLQJ GXH WR SHVWLFLGH FRQWDPLQDWLRQ WKHQ WKH H[WUD HJJ PLJKW KDYH KDG YDOXH DV UHSODFHPHQW IRU D WKLQ VKHOOHG VLEOLQJ 7KLV UHSODFHPHQW YDOXH PLJKW KDYH EHHQ LPSRUWDQW LQ WKH nV DQG nV ZKHQ SULRU WR LWV EDQ ''7 FRQWDPLQDWLRQ ZDV FRPPRQ UHYLHZHG E\ $QGHUVRQ DQG *UHVV f 7KLV LV QRW D OLNHO\ H[SODQDWLRQ RI P\ UHVXOWV EHFDXVH & FOXWFKHV KDYH EHHQ WKH QRUP LQ )ORULGD VLQFH WKH nV %HQW f )XUWKHUPRUH ZKHQ H[DPLQHG LQ DQG )ORULGD HJJV H[SHULHQFHG RQO\ PRGHUDWH OHYHOV RI SHVWLFLGH FRQWDPLQDWLRQ DQG HJJ VKHOO WKLQQLQJ ZLWK RQO\ b RI DOO HJJV EUHDNLQJ GXULQJ LQFXEDWLRQ 6FKUHLEHU DQG 5LVHEURXJK f %U44G 5HGXFWLRQ LQ 3HOLFDQ 6%ILJO66 7KH RFFXUUHQFH RI IDFXOWDWLYH EURRG UHGXFWLRQ RI % FKLFNV DORQJ ZLWK REOLJDWH &FKLFN GHDWKV LQ EURRGV RI EURZQ SHOLFDQV FRQWUDVWV ZLWK WKH SDWWHUQ VHHQ LQ PRVW RWKHU SHOLFDQ VSHFLHV 7KH SHOLFDQ VSHFLHV IRU ZKLFK WKH PRVW FRPSOHWH LQIRUPDWLRQ LV DYDLODEOH DOO KDYH PRGDO FOXWFK VL]HV RI WZR HJJV DQG DUH REOLDDWHOY VLEOLFLGDO $PHULFDQ ZKLWH SHOLFDQ 3HOHFDQXV HU\WKURUKYQFKRV -RKQVRQ DQG 6ORDQ .QRSI &DVK DQG (YDQV f ZKLWH SHOLFDQ 3HOHFDQXV RQRFURWDOXV 9HVH\)LW]JHUDOG &RRSHU f DQG SLQNEDFNHG SHOLFDQ 3HOHFDQXV UXIHVFHQV 'LQ DQG (OWULQJKDP f 'UXPPRQG f VSHFXODWHG WKDW LQ $XVWUDOLDQ SHOLFDQV 3HOHFDQXV FRQVSLFLOODWXV ZKLFK DOVR

PAGE 77

XVXDOO\ OD\ WZRHJJ FOXWFKHV 9HVWMHQV f EURRG UHGXFWLRQ PLJKW EH IDFXOWDWLYH EXW IXUWKHU LQIRUPDWLRQ LV QHHGHG IRU WKLV VSHFLHV 9LUWXDOO\ QRWKLQJ LV NQRZQ DERXW ZKHWKHU SDUWLDO EURRG ORVV LV REOLJDWH RU IDFXOWDWLYH LQ WKH LQLWLDOO\ WKUHHFKLFN EURRGV RI 3KLOLSSLQH SHOLFDQ 3HOHFDQXV RKLOLRRHQVLV 1HHODNDQWDQ f DQG WKH 'DOPDWLDQ SHOLFDQ 3HOHFDQXV FULVRXV 'HPHQWLHY DQG *ODGNRY &UDPS DQG 6LPPRQV &ULYHOOL DQG 9L]L f 'HDWK RFFXUV LQ WKH ILUVW ZHHN RI OLIH LQ PRVW REOLJDWHO\ VLEOLFLGDO VSHFLHV 0RFN HW DO f %XW WKH WLPLQJ RI REOLJDWH VLEOLFLGH LQ SHOLFDQ VSHFLHV YDULHV FRQVLGHUDEO\ RFFXUULQJ ZLWKLQ WKH ILUVW GD\V LQ ZKLWH SHOLFDQV &RRSHU f UDQJLQJ IURP WKH ILUVW GD\V -RKQVRQ DQG 6ORDQ &DVK DQG (YDQV f WKURXJK WKH ILUVW ZHHNV LQ $PHULFDQ ZKLWH SHOLFDQV .QRSI f DQG SHDNLQJ LQ WKH WK ZHHN LQ SLQNEDFNHG SHOLFDQV 'LQ DQG (OWULQJKDP f 7KH DSSDUHQWO\ REOLJDWH GHDWKV RI EURZQ SHOLFDQ &FKLFNV RFFXUUHG DW DQ LQWHUPHGLDWH DJH UHODWLYH WR WKRVH RI WKHLU FRQJHQHUV SHDNLQJ LQ WKH VHFRQG ZHHN RI OLIH LQ WKLV VWXG\ DQG LQ WKH WKLUG ZHHN LQ D 0H[LFDQ SRSXODWLRQ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 7KHVH GLIIHUHQFHV LQ WKH WLPLQJ RI REOLJDWH EURRG UHGXFWLRQ FRXOG DULVH LI WKH \RXQJHVW FKLFNV VHUYH DV LQVXUDQFH IRU GLIIHUHQW FDXVHV RI VHQLRU PRUWDOLW\ WKDW FRPH LQWR HIIHFW DW GLIIHUHQW SRLQWV LQ WKH QHVWOLQJ SHULRG 7KH UDSLG VLEOLFLGH RI ZKLWH SHOLFDQ %FKLFNV VXJJHVWV WKDW WKH\ VHUYH SULPDULO\ DV

PAGE 78

LQVXUDQFH IRU HJJ ORVV RU GHDWK DV KDWFKOLQJV RI LQIHULRU $ FKLFNV ,Q FRQWUDVW WKH RFFXUUHQFH RI VLEOLFLGH ODWHU LQ WKH QHVWOLQJ SHULRG PD\ EH EHFDXVH MXQLRU FKLFNV DUH LQVXUDQFH SULPDULO\ IRU SUHGDWLRQ 1LVEHW 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU %U\DQW DQG 7DWQHU f DFFLGHQWDO GHDWKV DQG LQIDQWLFLGH WKLV VWXG\f RU RWKHU GHDWKV WKDW SHDN DIWHU WKH ILUVW ZHHN RI QHVWOLQJ OLIH 7KH UROH RI WKH \RXQJHVW FKLFN DV LQVXUDQFH RU DV DQ H[WUD FKLFN KDV EHHQ HYDOXDWHG RQO\ IRU $PHULFDQ ZKLWH SHOLFDQV ZKRVH ODVWKDWFKHG FKLFNV VHUYH SULPDULO\ DV LQVXUDQFH DJDLQVW KDWFKLQJ IDLOXUH DQG HDUO\ GHDWK RI WKH $ FKLFN &DVK DQG (YDQV f )RU RWKHU VSHFLHV WKH GLYLVLRQ RI UHSURGXFWLYH YDOXH LQWR H[WUDFKLFN DQG LQVXUDQFH HOHPHQWV DZDLWV IXUWKHU VWXG\ %HFDXVH 'DOPDWLDQ DQG 3KLOLSSLQH SHOLFDQV PD\ KDYH EURRG VL]HV VLPLODU WR EURZQ SHOLFDQV WKH TXHVWLRQ DULVHV RI ZKHWKHU MXQLRU FKLFNV KDYH ERWK LQVXUDQFH DQG H[WUD FKLFN YDOXH DV DSSDUHQWO\ LV WKH FDVH IRU EURZQ SHOLFDQ %FKLFNV LQ % EURRGV 'LUHFW H[SHULPHQWDO WHVWV RI WKH LQVXUDQFH YDOXH RI MXQLRU FKLFNV KDYH EHHQ FDUULHG RXW RQO\ IRU ZKLWH SHOLFDQV &DVK DQG (YDQV f 6LPLODU H[SHULPHQWV RQ EURZQ SHOLFDQV DQG RWKHU VSHFLHV ZLWK & FOXWFKHV DUH QHFHVVDU\ WR FODULI\ WKH YDOXH RI &FKLFNV

PAGE 79

7DEOH &RPSDULVRQ RI FOXWFK VL]HV KDWFKLQJ VXFFHVV DQG IOHGJLQJ VXFFHVV PHDQ s 6'f RI EURZQ SHOLFDQ QHVWV DW 6HDKRUVH .H\ LQ DQG DW $ODILD %DQNV LQ 0HDQ 1 0HDQ 1D W 3 &OXWFK VL]H +DWFKOLQJVFOXWFK )OHGJOLQJVFOXWFK )OHGJOLQJVEURRG D6DPSOHV LQFOXGHG QHVWV WKDW ZHUH DEDQGRQHG GXULQJ LQFXEDWLRQ RU KDWFKLQJ 6HH WH[W IRU GLVFXVVLRQ RI QHVW DEDQGRQPHQW

PAGE 80

7DEOH %URZQ SHOLFDQ SURGXFWLYLW\ PD[LPXP QHVWOLQJVPD[LPXP QHVWVf LQ VXEFRORQLHV WKDW ZHUH KLJKO\ +LJKf PRGHUDWHO\ 0RGf RU QHYHU 1RQHf GLVWXUEHG E\ UHVHDUFKHU DFWLYLWLHV 6LWH 'LVWXUEDQFH OHYHO 0D[LPXP QHVWV 0D[ QHVWOLQJV 0D[ QHVWV %LUG ,VODQG IRFDO QHVWV +LJK 6XQNHQ ,VODQG IRFDO QHVWV +LJK 6XQNHQ ,VODQG JURZWK QHVWV +LJK %LUG ,VODQG &RYH 0RG 6XQNHQ ,VODQG 6RXWK 0RG 6XQNHQ ,VODQG ([WHQVLRQ 1RQH 6XQNHQ ,VODQG 1RUWK 1RQH 1RWH VHH 0HWKRGV IRU GHILQLWLRQV RI PD[LPXP QHVWV DQG PD[LPXP QHVWOLQJVPD[LPXP QHVWV

PAGE 81

7DEOH )DWHV RI KDWFKOLQJV RI NQRZQ UDQNV IURP WZR DQG WKUHHFKLFN EURRGV LQ &KLFNV LQ 7KUHHFKLFN EURRGV &KLFNV 7ZRFKLFN LQ EURRGV &KLFN 5DQN $ % & $ % /LYHG )RRG'HSHQGHQW 'HDWKV bf bf bf bf bf 6WDUYDWLRQ bf bf bf bf bf 6LEOLFLGH bf bf bf bf bf 6WDUYDWLRQ tRU 6LEOLFLGH f§/b bf bf bf bf 7RWDO )RRG'HSHQGHQW 'HDWK bf bf bf bf bf )RRG,QGHSHQGHQW 'HDWKV 'LHG DV +DWFKOLQJ bf bf bf bf bf )HOO $FFLGHQWO\ bf bf bf bf bf .LOOHG E\ ,QYDGHU &KLFN bf bf bf bf bf .LOOHG E\ ,QYDGHU $GXOW bf bf bf bf bf 8QNQRZQ $FFLGHQW bf bf bf bf bf 7RWDO )RRG,QGHSHQGHQW 'HDWK bf bf bf bf bf 8QNQRZQ &DXVHV RI 'HDWK bf bf bf bf bf 1 1RWH $EDQGRQHG QHVWV DUH QRW LQFOXGHG LQ VDPSOHV SUHVHQWHG LQ WKLV DQG DOO UHPDLQLQJ WDEOHV DQG ILJXUHV LQ WKLV FKDSWHU

PAGE 82

7DEOH +DWFKLQJ VXFFHVV DQG FKLFN VXUYLYDO WR GD\Vf LQ QHVWV IRU ZKLFK FOXWFK DQG EURRG VL]HV DQG IOHGJLQJ VXFFHVV FRXOG EH GHWHUPLQHG ,QFOXGHV RQO\ QHVWV KDWFKLQJ DW OHDVW RQH FKLFN &OXWFK VL]H 7RWDO FOXWFKHV b HJJV KDWFKHG )OHGJOLQJV SHU FOXWFK D & b & bD E & b & bD D,QFOXGHV RQH EURRG LQ ZKLFK RQO\ RQH HJJ KDWFKHG

PAGE 83

7DEOH %URZQ SHOLFDQ QHVWOLQJ VXUYLYDO DQG UHSURGXFWLYH YDOXHV 59H H[WUDFKLFN FRPSRQHQW 59L LQVXUDQFH FRPSRQHQW 7RWDO 59 59H 59Lf -XQLRU FKLFNV WKDW IOHGJHG DORQJ ZLWK WKHLU VHQLRUV ZHUH FDOOHG H[WUD FKLFNV -XQLRU FKLFNV WKDW UHSODFHG D VHQLRU FKLFN ZHUH WKRVH WKDW OLYHG ORQJHU WKDQ D VHQLRU VLEOLQJ 1 WRWDO QXPEHU RI FKLFNV LQ HDFK EURRGVL]H DQG FKLFNUDQN FDWHJRU\ WKDW IOHGJHG RU GLHG ,QLWLDO EURRG &KLFN VL]H UDQN 1XPEHU RI H[WUD FKLFNV WKDW IOHGJHG 1XPEHU RI FKLFNV WKDW UHSODFHG D VHQLRU FKLFN DQG IOHGJHG GLHG 7RWDO FKLFNV WKDW IOHGJHG 1 59H 59L 7RWDO 59 % %D D % &RPELQHG f§ f§ f§ f§ % % RU &E % &RPELQHG f§ f§ % $ E % % & % &RPELQHG f§ f§ f§ f§ f§ % $ f§ f§ % % G % & G % &RPELQHG f§ f§ 1RWH 59H WKH QXPEHU RI H[WUD FKLFNV RI D SDUWLFXODU MXQLRU UDQN % RU &f 1 FKLFNV RI WKDW UDQNf 59L WKH QXPEHU RI MXQLRUV RI D SDUWLFXODU UDQN WKDW IOHGJHG DIWHU UHSODFLQJ D VHQLRU WKDW GLHG 1 FKLFNV RI WKDW UDQNf 7RWDO 59 WKH QXPEHU RI MXQLRUV RI D SDUWLFXODU UDQN WKDW IOHGJHG 1 FKLFNV RI WKDW UDQNf D &KLFNV ZHUH QRW PDUNHG LQ VR GDWD DUH SUHVHQWHG RQO\ IRU WZR QHVWV WKDW IOHGJHG ERWK FKLFNV DQG WKHUHIRUH KDG VXUYLYLQJ %FKLFNV E 'DWD DUH SUHVHQWHG RQO\ IRU WKUHH QHVWV WKDW IOHGJHG WZR FKLFNV DQG WKHUHIRUH KDG VXUYLYLQJ %FKLFNV RU &FKLFNV LI WKHUH ZHUH UHYHUVDOVf F 2QH RI WKHVH FKLFNV GLHG ZKHQ GD\V ROG G7 ,Q RQH UHYHUVDO WKH % DQG &FKLFNV PD\ KDYH GLHG RQ WKH VDPH GD\ GD\V DIWHU WKH $FKLFN GLHG

PAGE 84

7DEOH )DWHV RI HJJV DQG FKLFNV LQ DOO QHVWV LQ ZKLFK DW OHDVW RQH FKLFN KDWFKHG LQFOXGLQJ QHVWV ZLWK XQNQRZQ FKLFN UDQNV FOXWFKHV DQGRU EURRG VL]HV 7KHVH HJJV DQG FKLFNV FDPH IURP QHVWV LQ DQG QHVWV LQ /LYHG 1HYHU +DWFKHG )RRG'HSHQGHQW 'HDWKV 6WDUYDWLRQ D 6LEOLFLGH 6WDUYDWLRQ tRU 6LEOLFLGH 7RWDO )RRG'HSHQGHQW 'HDWKV )RRG,QGHSHQGHQW 'HDWKV 'LHG DV +DWFKOLQJ )HOO $FFLGHQWO\ ,QIDQWLFLGH .LOOHG E\ ,QYDGHU &KLFN .LOOHG E\ ,QYDGHU $GXOW 8QNQRZQ $FFLGHQW BB 7RWDO )RRG,QGHSHQGHQW 'HDWKV 'HDWKV IURP 8QNQRZQ &DXVHV 1 6WDUYDWLRQ GHDWKV FRXOG QRW EH VHSDUDWHG IURP 6WDUYDWLRQ tRU 6LEOLFLGH LQ EHFDXVH FKLFNV ZHUH QRW KDQGOHG LQ

PAGE 85

)LJXUH )UHTXHQF\ RI PRUWDOLW\ WKURXJK WKH QHVWOLQJ SHULRG GHILQHG DV EHJLQQLQJ ZLWK KDWFKLQJ RI WKH $FKLFNf IRU $ % DQG &FKLFNV LQ % DQG $ DQG %FKLFNV LQ % EURRGV LQ 7KH JUDSKV IRU &FKLFNV DQG % %FKLFNV LQFOXGH FKLFNV RI WKHVH UDQNV SOXV XQUDQNHG FKLFNV WKDW ZHUH WKH ILUVW WR GLH LQ % DQG % EURRGV UHVSHFWLYHO\ 2QO\ FKLFNV IURP EURRGV KDWFKLQJ DOO HJJV ZHUH LQFOXGHG 1XPEHUV DERYH EDUV LQGLFDWH IRU HDFK WLPH SHULRG WKH QXPEHU RI $FKLFNV WKDW GLHG EHIRUH WKHLU MXQLRUV $FKLFN JUDSKVf RU WKH QXPEHU RI %FKLFNV RU &FKLFNV WKDW GLHG DIWHU D VHQLRU VLEOLQJ % DQG &FKLFN JUDSKV UHVSHFWLYHO\f

PAGE 86

)UHTXHQF\ % 1HVWV ‘ )RRGLQGHSHQGHQW GHDWKV ’ )RRGGHSHQGHQW GHDWKV ’ $OO GHDWKV % 1HVWV 'D\V LQ QHVWOLQJ SHULRG

PAGE 87

&+$37(5 +81*(5 $6 $ 352;,0$7( &$86( 2) ),*+7,1* ,QWURGXFWLRQ )LHUFH ILJKWLQJ DPRQJ QHVWOLQJV LV FRPPRQ LQ D YDULHW\ RI DYLDQ WD[D UHYLHZV LQ 2n&RQQRU 6WLQVRQ 0RFN HW DO f ,Q REOLJDWHO\ VLEOLFLGDO VSHFLHV GHDWK LV WKH YLUWXDOO\ LQHYLWDEOH UHVXOW RI QHVWOLQJ DJJUHVVLRQ 0RFN HW DO f ,Q IDFXOWDWLYHO\ VLEOLFLGDO VSHFLHV WKH OHWKDOLW\ RI VLEOLQJ ILJKWLQJ YDULHV DQG PD\ GHSHQG RQ IRRG VXSSOLHV WR WKH EURRG 0RFN HW DO f 7KH XOWLPDWH FDXVH RI ERWK REOLJDWH DQG IDFXOWDWLYH VLEOLFLGH LV SUHVXPDEO\ IRRG LQVXIILFLHQF\ 0RFN D 0RFN HW DO 'UXPPRQG DQG *DUFLD &KHYHODV f QHVWOLQJV ILJKW WR HOLPLQDWH FRPSHWLWRUV ZKHQ IRRG SURYHV LQDGHTXDWH IRU WKH IXOO EURRG 2EOLJDWH VLEOLFLGH LV XVXDOO\ H[SODLQHG DV D ZD\ RI HOLPLQDWLQJ D EURRGPHPEHU EHFDXVH IRRG LV FHUWDLQ WR EHFRPH LQDGHTXDWH IRU UDLVLQJ WKH IXOO EURRG ZKHQ QHVWOLQJV EHFRPH ROGHU 6WLQVRQ 0RFN HW DO f )DFXOWDWLYH VLEOLFLGH XVXDOO\ LV H[SODLQHG DV D IRUP RI UHVRXUFH WUDFNLQJ ZKHUHE\ SDUHQWV DWWHPSW WR PDWFK EURRG VL]H WR XQSUHGLFWDEOH UHVRXUFHV E\ SURGXFLQJ DQ H[WUD FKLFN WKDW VXUYLYHV LI IRRG LV DEXQGDQW EXW LV HOLPLQDWHG LI IRRG EHFRPHV VFDUFH /DFN FDOOHG

PAGE 88

/DFNnV EURRG UHGXFWLRQ K\SRWKHVLV E\ 5LFNOHIV f 7KHRUHWLFDOO\ XQSUHGLFWDEOH IRRG VXSSOLHV XOWLPDWHO\ IDYRU IDFXOWDWLYH VLEOLFLGH 0RFN HW DO f LQ VSHFLHV ZKHUH QHVWOLQJ VWDUYDWLRQ LV EURRGVL]H GHSHQGHQW :KHQ VXFK VSHFLHV IDFH IRRG VKRUWDJHV URXWLQHO\ VHOHFWLRQ VKRXOG OHDG WR UHGXFWLRQV LQ FOXWFK UDWKHU WKDQ EURRGf VL]H WR PDWFK UHVRXUFHV %XW URXWLQH VKRUWDJHV FDQ IDYRU RYHUSURGXFWLRQ IROORZHG E\ REOLJDWH VLEOLFLGH ZKHQ WKH GHVLJQDWHG YLFWLP KDV VRPH YDOXH DV D SRWHQWLDO UHSODFHPHQW IRU D VLEOLQJ WKDW GLHV 'RUZDUG UHYLHZV LQ 6WLQVRQ $QGHUVRQ VHH DOVR &KDSWHU f 0RVW VSHFLHV DFFRPSOLVK EURRG UHGXFWLRQ ZLWKRXW RYHUW QHVWOLQJ DJJUHVVLRQ VHH UHYLHZV LQ +RZH &ODUN DQG :LOVRQ f 6HYHUDO FRQGLWLRQV PXVW EH PHW IRU WKH HYROXWLRQ RI VLEOLFLGDO DJJUHVVLRQ WR EH IDYRUHG )LUVW QHVWOLQJV PXVW SRVVHVV SRWHQWLDOO\ OHWKDO ZHDSRQU\ 6HFRQG WKH\ PXVW H[SHULHQFH VSDWLDO FRQILQHPHQW WKDW SUHFOXGHV HVFDSH IURP VLEOLQJ DWWDFNV 7KLUG QHVWOLQJV PXVW HQJDJH LQ FRPSHWLWLRQ IRU IRRG WKDW LV SURYLVLRQHG LQ VPDOO XQLWV WKDW FDQ EH GHIHQGHG HDVLO\ WKURXJK DJJUHVVLRQ 0RFN HW DO f 6LEOLFLGDO VSHFLHV DUH DOVR FKDUDFWHUL]HG E\ FRPSHWLWLYH GLVSDULWLHV DPRQJ VLEOLQJV 7KHVH GLVSDULWLHV ZKLFK DUH XVXDOO\ LQLWLDWHG E\ KDWFKLQJ DV\QFKURQ\ PD\ IXQFWLRQ WR UHGXFH VLEOLFLGDO DJJUHVVLRQ 'UXPPRQG DQG *DUFLD &K£YHODV +DKQ )XMLRND 0RFN DQG 3ORJHU EXW VHH +XVVHOO &ODUN DQG :LOVRQ

PAGE 89

0DJUDWK UHYLHZHG FDXVHV RI KDWFKLQJ DV\QFKURQ\f /DUJH VL]H GLVSDULWLHV KRZHYHU PD\ EH D FRQVHTXHQFH UDWKHU WKDQ FDXVH RI QHVWOLQJ DJJUHVVLRQ 0RFN HW DO f 7KH GHJUHH RI QHVWOLQJ DJJUHVVLRQ YDULHV DPRQJ EURRGV ZLWKLQ DQG EHWZHHQ SRSXODWLRQV RI IDFXOWDWLYHO\ VLEOLFLGDO VSHFLHV 0RFN HW DO f 7KH GHJUHH RI ZLWKLQEURRG DJJUHVVLRQ FDQ QRW EH SUHGLFWHG E\ VLPSO\ GHWHUPLQLQJ WKDW D VSHFLHV SRVVHVVHV DOO RI WKH DWWULEXWHV HJ ZHDSRQU\ PRQRSROL]DEO\ GHOLYHUHG IRRGf WKDW IDYRU VLEOLFLGH 7R H[SODLQ WKH YDULDQFH LQ QHVWOLQJ DJJUHVVLRQ UHTXLUHV H[DPLQDWLRQ RI LWV SUR[LPDWH FDXVHV 2QH IUHTXHQWO\ LQYRNHG K\SRWKHVLV LV WKDW KXQJHU LV WKH SUR[LPDWH PHFKDQLVP WKDW WULJJHUV ILJKWLQJ IRRGDPRXQW K\SRWKHVLV ,QJUDP /DFN 3URFWHU 1HOVRQ 3RROH %UDXQ DQG +XQW )XMLRND f 7KLV LQWXLWLYH K\SRWKHVLV GHULYHV IURP WKH K\SRWKHVLV WKDW IRRG OLPLWDWLRQ LV WKH XOWLPDWH VHOHFWLYH SUHVVXUH IDYRULQJ VLEOLFLGH 'UXPPRQG DQG *DUFLD &K£YHODV 0RFN HW DO f 0RVW HYLGHQFH IRU WKH IRRG DPRXQW K\SRWKHVLV LV FRUUHODWLRQDO 7KLV HYLGHQFH LQFOXGHV f D WHPSRUDO DVVRFLDWLRQ EHWZHHQ ILJKWLQJ DQG PHDOV f D GLVLQFOLQDWLRQ RI UHFHQWO\ IHG FKLFNV WR DWWDFN DQG f DQ DVVRFLDWLRQ EHWZHHQ MXQLRU FKLFN GHDWK ZLWK UHGXFHG SDUHQWDO IHHGLQJ UDWHV GXULQJ SURWUDFWHG LQFOHPHQW ZHDWKHU VHH UHYLHZ LQ 0RFN HW DO f 7KHUH LV DOVR DQ LQYHUVH UHODWLRQVKLS EHWZHHQ SDUHQWDO IHHGLQJ UDWHV DQG VLEOLQJ

PAGE 90

DJJUHVVLRQ LQ R\VWHUFDWFKHUV +DHPDWRRXV RVWUDOHRXV 6DIULHO f RVSUH\V 3DQGLRQ KDOLDHWXV 3RROH VXPPDUL]HG LQ 0RFN HW DO f DQG VRPH RWKHU UDSWRUV 1HZWRQ f 7KH EHVW HYLGHQFH WKDW KXQJHU WULJJHUV ILJKWLQJ FRPHV IURP DQ H[SHULPHQWDO VWXG\ RI EOXHIRRWHG ERRELHV 6XOD QHERX[LL 'UXPPRQG DQG *DUFLD &K£YHODV f %URRG UHGXFWLRQ LQ WKLV VSHFLHV XVXDOO\ RFFXUV VKRUWO\ DIWHU WKH VHQLRU FKLFNnV PDVV GURSV DERXW b EHORZ WKDW H[SHFWHG DW LWV FXUUHQW DJH LQ D JRRG \HDU 'UXPPRQG HW DO f 6HQLRU QHVWOLQJV ZKRVH QHFNV ZHUH WDSHG WR SUHYHQW VZDOORZLQJ SHFNHG WKHLU VLEOLQJV RYHU WKUHH WLPHV PRUH RIWHQ WKDQ EHIRUH WDSLQJ RU DIWHU WDSHV ZHUH UHPRYHG 'UXPPRQG DQG *DUFLD &K£YHODV f 5DWHV RI VXFK DJJUHVVLYH SHFNLQJ URVH PRVW VWHHSO\ ZKHQ VHQLRU PDVV GURSSHG WR b EHORZ SRWHQWLDO 6LPLODUO\ H[SHULPHQWDO IRRG GHSULYDWLRQ DOVR VHHPHG WR FDXVH HOHYDWHG ILJKWLQJ DPRQJ VRXWK SRODU VNXD FKLFNV &DWKDUDFWD PDFFRUPLFNL 3URFWHU f DOWKRXJK GHVLJQ SUREOHPV FDXVHG LQFRQFOXVLYH UHVXOWV ,Q WKH RQO\ RWKHU H[SHULPHQWDO WHVW RI WKH IRRGDPRXQW K\SRWKHVLV VLEOLQJ ILJKWLQJ ZDV QRW FRUUHODWHG ZLWK IRRG LQJHVWLRQ LQ EURRGV RI JUHDW HJUHWV &DVPHURGLXV DOEXV 0RFN HW DO f 3URYLVLRQHG EURRGV LQ ILHOG H[SHULPHQWV IRXJKW VOLJKWO\ PRUH WKDQ XQSURYLVLRQHG FRQWUROV DQG FDSWLYH EURRGV IHG KLJK DPRXQWV IRXJKW PRUH WKDQ GLG EURRGV UHFHLYLQJ ORZ IRRG DOORWPHQWV ([SHULPHQWDO SURYLVLRQLQJ RI

PAGE 91

JUHDW EOXH KHURQV $UGHD KHURGLDVf IRVWHUSDUHQWHG E\ JUHDW HJUHWV DOVR IDLOHG WR GHSUHVV ILJKWLQJ UDWHV UHODWLYH WR XQSURYLVLRQHG EURRGV 0RFN Ef ,Q DGGLWLRQ ILHOG REVHUYDWLRQV RI JUHDW HJUHWV JUHDW EOXH KHURQV DQG FDWWOH HJUHWV %XEXOFXV LELVf IDLOHG WR VKRZ LQFUHDVHG DJJUHVVLRQ ZLWK GHFUHDVHG IRRG UHVXOWV RI YDULRXV VWXGLHV VXPPDUL]HG LQ 0RFN HW DO f $OWKRXJK ILJKWLQJ RFFXUUHG LQGHSHQGHQWO\ RI IRRG DPRXQWV LQ WKHVH DUGHLG VSHFLHV PRUWDOLW\ LQFOXGLQJ VLEOLFLGH ZDV FRUUHODWHG ZLWK IRRG VKRUWDJH 0RFN HW DO f $ SRVVLEOH SUR[LPDWH PHFKDQLVP WR H[SODLQ WKLV FRUUHODWLRQ LQ WKH DEVHQFH RI IRRGGHSHQGHQW ILJKWLQJ LV WKDW WKH YLFWLP EHFRPHV PRUH YXOQHUDEOH WR DJJUHVVLRQ GXULQJ IRRG VKRUWDJHV HYHQ WKRXJK OHYHOV RI DJJUHVVLRQ DUH LQYDULDQW 0RFN E 0RFN HW DO 'UXPPRQG DQG *DUFLD &K£YHODV f 7KHUH DUH WZR ZD\V WKDW YLFWLP YXOQHUDELOLW\ FRXOG EH HQKDQFHG GXULQJ IRRG VKRUWDJHV )LUVW SDUHQWV PD\ EH DEVHQW PRUH RIWHQ RQ IRUDJLQJ WULSV DQG WKXV PD\ UDUHO\ EH DEOH WR VXSSUHVV IRUWXLWRXVO\ RU GHOLEHUDWHO\f QHVWOLQJ DJJUHVVLRQ 1HZWRQ f 6HFRQG FRPSHWLWLYH GLVSDULWLHV DPRQJ FKLFNV PD\ EH H[DFHUEDWHG GXULQJ IRRG VFDUFLW\ OHDGLQJ WR PDOQRXULVKPHQW RI WKH \RXQJHU RQH ZKLFK WKXV VXFFXPEV PRUH HDVLO\ WR WKH SK\VLFDO DEXVH 6SHOOHUEHUJ 0H\EXUJ (GZDUGV DQG &ROORS\ 0RFN HW DO f )RRG DEXQGDQFH LV DOVR XQOLNHO\ WR H[HUW SUR[LPDWH FRQWURO RQ QHVWOLQJ DJJUHVVLRQ LQ REOLJDWHO\

PAGE 92

VLEOLFLGDO VSHFLHV ,Q WKHVH VSHFLHV IDWDO DJJUHVVLRQ LV WKH UXOH HYHQ GXULQJ SHULRGV RI IRRG DEXQGDQFH 0RFN HW DO f LQYHVWLJDWHG WKH IRRGDPRXQW K\SRWKHVLV DV D SUR[LPDWH H[SODQDWLRQ IRU DJJUHVVLRQ DPRQJ QHVWOLQJ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf %URZQ SHOLFDQV KDWFK WKHLU HJJV DV\QFKURQRXVO\ 'HDWK LV REOLJDWH IRU WKH ODVW KDWFKHG PHPEHUV RI WKUHHFKLFN EURRGV DQG LV IDFXOWDWLYH IRU VHFRQGKDWFKHG FKLFNV &KDSWHU f 1HVWOLQJV IUHTXHQWO\ ILJKW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG WKHVH DWWDFNV RIWHQ FRQWULEXWH WR WKH GHDWK RI MXQLRU EURRGPHPEHUV &KDSWHU 3LQ]Q DQG 'UXPPRQG LQ SUHVVf )RU WKH IRRGDPRXQW K\SRWKHVLV WR EH D SRVVLEOH H[SODQDWLRQ IRU QHVWOLQJ DJJUHVVLRQ LQ WKLV VSHFLHV WKHUH VKRXOG EH DQ LQYHUVH UHODWLRQVKLS EHWZHHQ QHVWOLQJ DJJUHVVLRQ DQG DPRXQW RI IRRG FRQVXPHG DQG JURZWK RI DW OHDVW VRPH EURRG PHPEHUV 0HWKRGV 6WXG\ 6LWH REVHUYHG EURZQ SHOLFDQV QHVWLQJ LQ WKH FDQRS\ RI PDQJURYHV DQG RWKHU WUHHV JURZLQJ RQ %LUG DQG 6XQNHQ ,VODQGV WRJHWKHU NQRZQ DV $ODILD %DQNV LQ +LOOVERURXJK %D\ 7DPSD )ORULGD VHH &KDSWHU IRU IXUWKHU GHVFULSWLRQ RI WKH VWXG\ VLWHf

PAGE 93

2EVHUYDWLRQ DQG &HQVXVLQJ 0HWKRGV 2EVHUYDWLRQV ZHUH PDGH ZLWK VSRWWLQJ VFRSH DQG ELQRFXODUV IURP WZR EOLQGV RQH RQ %LUG ,VODQG P IURP REVHUYDWLRQ QHVWV DQG WKH RWKHU RQ 6XQNHQ LVODQG P IURP REVHUYDWLRQ QHVWV 7ZR REVHUYHUV SDUWLFLSDWHG LQ FRQWLQXRXV GD\OLJKW YLJLOV RQ DOWHUQDWH GD\V IURP 0DUFK WKURXJK -XO\ %RWK REVHUYHUV ZHUH SUHVHQW VLPXOWDQHRXVO\ GXULQJ WKH ZHHNV RI SHDN QHVWOLQJ DFWLYLW\ $ GDLO\ PD[LPXP RI IRFDO QHVWV ZHUH PRQLWRUHG VLPXOWDQHRXVO\ LQ D YLVXDO DUF RI r 7KHVH IRFDO QHVWV LQFOXGHG EURRGV XVHG LQ RWKHU VWXGLHV VHH &KDSWHUV DQG f DV ZHOO DV WKH QHVWV XVHG LQ WKLV VWXG\ XVHG RQO\ WZRFKLFN EURRGV LQ WKLV VWXG\ LQFOXGLQJ EURRGV IURP WZRHJJ FOXWFKHV DQG WKUHH EURRGV WKDW LQLWLDOO\ FRQWDLQHG WKUHH FKLFNV EXW ZHUH UHGXFHG WR WZR FKLFNV E\ WKH DJH ZKHQ WKH\ ZHUH XVHG IRU WKH DQDO\VHV SUHVHQWHG LQ WKLV VWXG\ %HFDXVH WKH SHOLFDQV LQLWLDWHG FOXWFKHV IURP WKH PLGGOH RI )HEUXDU\ WKURXJK WKH HQG RI 0D\ RQ DQ\ JLYHQ GD\ WKH VXEFRORQ\ XQGHU REVHUYDWLRQ RIWHQ FRQVLVWHG RI D PL[ RI QHVWV FRQWDLQLQJ HJJV WKURXJK ROG QHVWOLQJV 8SRQ EURRG FRPSOHWLRQ ZH DGGHG QHVWV WR WKH IRFDO JURXS IRU FRQWLQXRXV GD\OLJKW REVHUYDWLRQ XQWLO $FKLFNV UHDFKHG DJH GD\V DIWHU ZKLFK QHVWV ZHUH UHWLUHG DQG RQO\ FHQVXVHG YLVXDOO\ HDFK GD\ WR GHWHUPLQH FKLFN IDWHV 1HVWV ZHUH FHQVXVHG DQG JURZWK ZDV PRQLWRUHG XQWLO DOO UHVLGHQWV KDG GLHG RU UHDFKHG

PAGE 94

DJH P\ RSHUDWLRQDO GHILQLWLRQ RI IOHGJLQJ VHH &KDSWHU f :H PDUNHG KDWFKOLQJ GD\ ROGf FKLFNV DFFRUGLQJ WR KDWFKLQJ RUGHU ZLWK \HOORZ DQG EODFN LQGHOLEOH SHQV 2OGHU FKLFNV UHFHLYHG EOXH DQG \HOORZ DFU\OLF SDLQW DQG VDPH FRORU IODJJLQJ WDSH VTXDUHV JOXHG ZLWK FRQWDFW FHPHQW RQ WKHLU EDFNV DQG KHDGV 3DLQW DQG IODJJLQJ ZHUH UHDSSOLHG IUHTXHQWO\ VHH &KDSWHU f &KLFNV ZHUH ZHLJKHG WR WKH QHDUHVW J ZLWK VSULQJ VFDOHVf DQG WKH OHQJWK RI WKH FXOPHQ ZDV PHDVXUHG WR WKH QHDUHVW PP ZLWK D FOHDU SODVWLF UXOHUf HYHU\ GD\V XQWLO WKH EURRGnV ILUVWKDWFKHG $f FKLFN ZDV RQ DYHUDJHf GD\V ROG UDQJH GD\Vf D PLQLPXP RI RQFH D ZHHN ZKHQ $DJH ZDV EHWZHHQ GD\V DQG DW OHDVW HYHU\ GD\V WKHUHDIWHU $JHV DQG KDWFKLQJ RUGHUV RI FKLFNV ZHUH GHWHUPLQHG E\ GLUHFW REVHUYDWLRQ RI QHZO\ KDWFKHG FKLFNV ZKHQHYHU SRVVLEOH )RU RWKHU FKLFNV DJHV ZHUH HVWLPDWHG IURP D UHJUHVVLRQ RI FXOPHQ OHQJWK RQ DJH RI NQRZQDJH QHVWOLQJV VHH &KDSWHU DQG $SSHQGL[ $ IRU PRUH GHWDLOVf 1HVW 2EVHUYDWLRQV )RFDO QHVWV ZHUH VFDQQHG LQ RUGHU IROORZLQJ D SUHVHW VHTXHQFH :H FRQWLQXHG WR VFDQ QHVWV XQWLO ZH GHWHFWHG IHHGLQJ RU ILJKWLQJ EHKDYLRU VHH EHORZf DW ZKLFK SRLQW ZH EHJDQ WR PRQLWRU DOO DFWLYLWLHV LQ WKH QHVW XQWLO ZH WHUPLQDWHG REVHUYDWLRQV EHFDXVH DOO IHHGLQJ DQG ILJKWLQJ

PAGE 95

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f 7KH\ JUDGXDOO\ VKLIWHG WR PDNLQJ GHOLYHULHV GLUHFWO\ DV WKH FKLFNV JRW ROGHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf :KHQ FKLFNV IHG GLUHFWO\ WKH\ UHDFKHG LQWR WKHLU SDUHQWnV SRXFK WR REWDLQ IRRG )HHGLQJ EHKDYLRU LQFOXGHG DOO GLUHFW DQG LQGLUHFW GHOLYHULHV RI IRRG WR QHVWOLQJV SOXV DOO FDVHV LQ ZKLFK SDUHQWV RSHQHG WKHLU ELOOV RYHU \RXQJ FKLFNV RU KDG ROGHU FKLFNV WKUXVWLQJ GHHS LQWR WKH EDVH RI WKH SRXFK ZLWKRXW DQ\ HYLGHQFH RI IRRG EHLQJ GHOLYHUHG $ SHULRG RI IHHGLQJ DFWLYLW\ ZDV GHILQHG DV HQGLQJ ZKHQ WKH SDUHQW EHJDQ D QRQIHHGLQJ DFWLYLW\ ZLWKRXW UHVXPLQJ IHHGLQJ DFWLYLW\ ZLWKLQ PLQXWH GHILQHG QRQIHHGLQJ DFWLYLWLHV WR LQFOXGH SUHHQLQJ ZLQJ

PAGE 96

IODSSLQJ QHVWFOHDQLQJ WRVVLQJ ILVK ERQHV VNLQ VWLFNV DQG YDULRXV XQLGHQWLILDEOH VFUDSV IURP WKH QHVWf DGMXVWLQJ VWLFNV LQ WKH QHVW DGRSWLQJ D UHVWLQJ SRVWXUH LQ ZKLFK WKH SDUHQW KHOG LWV FORVHG ELOO RXW RI UHDFK RI LWV FKLFNV SRVWXUHV VKRZQ LQ ILJXUHV DQG RI 6FKUHLEHU f QHVW UHOLHI EHKDYLRU 6FKUHLEHU f GLVSOD\LQJ WR RU VQDSSLQJ DW D QHLJKERU KRSSLQJ WR D SHUFK RU IO\LQJ DZD\ HVWLPDWHG WKH DPRXQW RI IRRG GHOLYHUHG WR FKLFNV E\ UHFRUGLQJ WKH ORQJHVW OLQHDU GLPHQVLRQV RI IRRG EROXVHV VZDOORZHG E\ HDFK FKLFN 7R HVWLPDWH EROXV VL]HV H[SUHVVHG WKH OHQJWK RI WKH EXOJH LQ D FKLFNnV QHFN DV D SHUFHQWDJH RI WKH SDUHQWnV ELOO OHQJWK EDVHG RQ 0RFN XQLWV IRRGXQLWVf %HFDXVH SDUHQWV VRPHWLPHV EORFNHG WKH REVHUYHUnV YLHZ SURKLELWLQJ GHWHUPLQDWLRQ RI ZKHWKHU IRRG GHOLYHULHV KDG RFFXUUHG P\ GDWD PXVW EH FRQVLGHUHG PLQLPXP HVWLPDWHV RI WKH DPRXQWV RI IRRG REWDLQHG E\ QHVWOLQJV )LJKWLQJ %HKDYLRU FRXQWHG DV ILJKWV DOO FDVHV ZKHUH RQH FKLFN GHOLYHUHG DW OHDVW RQH EORZ VHH EHORZf WR WKH ERG\ RI DQRWKHU FKLFN ZLWK HQRXJK IRUFH WR PRYH WKH YLFWLPnV KHDG ZKHQ VWUXFN $Q LQGLYLGXDO ILJKW FRQWLQXHG XQWLO RQH RI WKH FKLFNV DGRSWHG D VXEPLVVLYH SRVWXUH VHQVX 3LQ]Q DQG 'UXPPRQG LQ SUHVV VHH GHILQLWLRQV EHORZf RU QR IXUWKHU

PAGE 97

EORZV ZHUH GHOLYHUHG IRU DW OHDVW VHFRQGV $ WRWDO RI ILJKWV ZHUH REVHUYHG LQ LQ DOO RI WKH QHVWV XVHG LQ WKLV DQG UHODWHG VWXGLHV VHH &KDSWHUV DQG IRU GHVFULSWLRQV RI WKHVH UHODWHG VWXGLHVf )LJKWV LQYROYHG WZR W\SHV RI EORZV %LWHV DQG 6KDNHV GHILQHG EHORZf 7KH ILUVW EORZ RI D ILJKW ZDV D %LWH LQ ILJKWV DQG D 6KDNH LQ ILJKWV RI WKH ILJKWV LQ IRU ZKLFK ZH FRXOG LGHQWLI\ WKH W\SH RI EORZ WKDW ZDV GHOLYHUHG ILUVWf :KHQ %LWLQJ WKH DWWDFNHU UHDFKHG WRZDUG WKH KHDG RU ERG\ RI LWV DGYHUVDU\ FORVHG LWV PDQGLEOHV RYHU VRPH SDUW RI WKH YLFWLPnV DQDWRP\ VXFK WKDW WKH VKDUS QDLO DW WKH WLS RI WKH XSSHU PDQGLEOH GHSUHVVHG WKH YLFWLPnV VNLQ DQG WKHQ LPPHGLDWHO\ UHOHDVHG LWV KROG %LWHV ZHUH GHOLYHUHG WR WKH KHDG DQG QHFN ZLWK VXFK VSHHG DQG IRUFH WKDW WKH YLFWLPnV KHDG ZDV SXVKHG EDFNZDUG E\ WKH IRUFH %LWHV WR WKH EDFN DOVR SXVKHG WKH ERG\ DZD\ IURP WKH EORZ EXW WKLV PRYHPHQW ZDV RIWHQ VPDOO EHFDXVH EORZV XVXDOO\ SXVKHG WKH YLFWLPnV ERG\ LQWR WKH QHVW IORRU ZKLFK GDPSHG VRPH RI WKH PRYHPHQW %LWHV ZHUH RIWHQ GLUHFWHG WRZDUG WKH H\HV RU EDVH RI WKH VNXOO 6KDNHV RFFXUUHG ZKHQ WKH DWWDFNHU JUDVSHG LWV YLFWLPnV KHDG LQ D VFLVVRU JULS DQG IRUFHG WKH YLFWLPnV KHDG WR VWULNH DJDLQVW WKH YLFWLPnV ERG\ RU WKH QHVW IDEULF 7KH DWWDFNHU WKHQ SXOOHG WKH YLFWLPnV KHDG DZD\ IURP WKH REMHFW WKDW LW VWUXFN 7KLV ZDV RIWHQ IROORZHG E\ WKH DWWDFNHU RQFH DJDLQ VODPPLQJ WKH YLFWLPnV KHDG DJDLQVW LWV ERG\ RU WKH QHVW

PAGE 98

IORRU :KHQ VHYHUDO 6KDNHV RFFXUUHG LQ D FRQWLQXRXV VHULHV WKH DWWDFNHU GLG QRW UHOLQTXLVK LWV KROG RQ WKH YLFWLP EHWZHHQ EORZV )LJKWV RFFDVLRQDOO\ UHVXOWHG LQ SXQFWXUH ZRXQGV WR WKH KHDG DQG QHFN EXW EUHDNV LQ WKH VNLQ ZHUH UDUH 7KH PRVW FRPPRQ HYLGHQFH RI LQMXU\ ZDV WKDW DIWHU EHLQJ EHDWHQ UHSHDWHGO\ WKH YLFWLPnV VNLQ RIWHQ EHFDPH SXIIHG RXW LQ RGG VKDSHV DORQJ LWV EDFN VLGHV DQG QHFN SRVVLEO\ IURP DLU VDFV WKDW KDG EHHQ EURNHQ GXULQJ VLEOLQJ DWWDFNV 6RPH FKLFNV QHDU GHDWK KDG VPDOO SXQFWXUH ZRXQGV RQ WKHLU DEGRPHQV RU EUHDVWV 7KHVH ZRXQGV FRXOG QRW KDYH EHHQ FDXVHG E\ VLEOLQJ ELWHV EHFDXVH YLFWLPV DOPRVW DOZD\V NHSW WKHLU EUHDVWV SUHVVHG WR WKH QHVW IDEULF GXULQJ ILJKWV %XW D YLFWLPnV EUHDVW PLJKW EH SXQFWXUHG ZKHQ DQ DWWDFNHU GLUHFWHG SRZHUIXO EORZV WR WKH YLFWLPnV EDFN ZDONHG RU VDW RQ WKH YLFWLP RU RWKHUZLVH VKRYHG WKH YLFWLPnV ERG\ IRUFHIXOO\ LQWR WKH RIWHQ VKDUS VWLFNV RI WKH QHVW 1LQHWHHQ SHUFHQW RI DOO ILJKWV REVHUYHG LQ HQGHG LQ VXEPLVVLYH SRVWXUHV GHVFULEHG EHORZf WKDW ZHUH YLVLEOH WR WKH REVHUYHU 6RPH DGGLWLRQDO ILJKWV DOVR PD\ KDYH HQGHG LQ VXEPLVVLYH SRVWXUHV WKDW ZHUH QRW GHWHFWDEOH EHFDXVH WKH ORVHU ZDV KLGGHQ IURP WKH REVHUYHU E\ WKH QHVW ULP RU WKH ERG\ RI D IDPLO\ PHPEHU 6XEPLVVLYH SRVWXUHV LQFOXGHG &URXFK 1 ILJKWVf &XUO 1HFN 1 ILJKWVf 7XUQ /RZ 1 ILJKWVf 'XFN 1 ILJKWVf 5HYHUVH +HDG 1 ILJKWf /LH )ODW 1 ILJKWVf DQG +DQJ +HDG 1

PAGE 99

ILJKWVf $Q DGGLWLRQDO VXEPLVVLYH SRVWXUH /LH %DFN ZDV REVHUYHG RQH WLPH LQ D SRSXODWLRQ RI EURZQ SHOLFDQV WKDW REVHUYHG LQ DV SDUW RI DQRWKHU VWXG\ VWXG\ SUHVHQWHG LQ &KDSWHU f $ FKLFN LQ WKH &URXFK SRVLWLRQ )LJXUH O$f VTXDWWHG RQ LWV KHHOV ZLWK WKH EDFN UDLVHG RII WKH QHVW IORRU DW D r DQJOH IURP KRUL]RQWDO ZKLOH LWV WKURDW ZDV SUHVVHG DJDLQVW LWV QHFN LQ VXFK D ZD\ WKDW WKH ELOO ZDV SUHVVHG DJDLQVW WKH DEGRPHQ SDUDOOHO WR WKH DQJOH RI WKH EDFN :KHQ LQ WKH &XUO 1HFN SRVWXUH )LJXUH O%f D FKLFN OD\ ZLWK LWV DEGRPHQ SUHVVHG WR WKH QHVW IORRU LWV EDFN KRUL]RQWDO WKH GRUVDO VXUIDFH RI LWV QHFN O\LQJ RQ LWV VKRXOGHUV DQG LWV WKURDW UHVWLQJ RQ LWV EUHDVW VXFK WKDW WKH ELOO ZDV SUHVVHG DJDLQVW WKH IURQW RI WKH QHFN DQG EUHDVW DSSUR[LPDWHO\ SHUSHQGLFXODU WR WKH QHVW IORRU ,I WKH ELOO ZDV QRW SHUSHQGLFXODU WR WKH QHVW IORRU LW ZDV ZLWKLQ r RI SHUSHQGLFXODU VXFK WKDW WKH WLS RI WKH ELOO ZDV SRVWHULRU WR WKH IRUHKHDG SRVLWLRQ VKRZQ LQ )LJXUH O%f 7KH SRVLWLRQ RI WKH ERG\ RI FKLFNV LQ WKH 7XUQ /RZ 'XFN /LH %DFN 5HYHUVH +HDG DQG /LH )ODW SRVWXUHV ZHUH DOO WKH VDPH DV ZDV MXVW GHVFULEHG IRU WKH &XUO 1HFN SRVLWLRQ VHH )LJXUH %*f 7KHVH SRVWXUHV ZHUH GLVWLQJXLVKHG E\ WKH SRVLWLRQ RI WKH FKLFNnV ELOO KHDG DQG QHFN :KHQ DGRSWLQJ WKH 7XUQ /RZ SRVWXUH )LJXUH &f D FKLFN WXUQHG LWV KHDG WR RQH VLGH RI LWV ERG\ ZKLOH NHHSLQJ WKH GRUVDO VXUIDFH RI LWV QHFN SUHVVHG WR LWV VKRXOGHUV LWV WKURDW SUHVVHG WR LWV VLGH MXVW EHORZ LWV ZLQJ DQG LWV ELOO SUHVVHG DORQJ LWV

PAGE 100

VLGH ZLWK WKH WLS SRLQWLQJ SRVWHULRUO\ DW D r DQJOH WR WKH KRUL]RQWDO SODQH ,Q WKH 'XFN SRVWXUH )LJXUH O'f D FKLFN FXUOHG LWV KHDG XQGHU LWV ERG\ VXFK WKDW WKH YHQWUDO VXUIDFH RI WKH SRVWHULRUO\ SRLQWLQJ ELOO ZDV SUHVVHG DJDLQVW WKH DEGRPHQ DQG WKH GRUVDO VXUIDFHV RI WKH ELOO DQG KHDG ZHUH SUHVVHG DJDLQVW WKH QHVW IDEULF 7KLV SRVWXUH HIIHFWLYHO\ VKLHOGHG D FKLFNnV IDFH IURP VLEOLQJ DWWDFNV EXW OHIW LWV QDSH H[SRVHG :KHQ LQ WKH /LH %DFN SRVWXUH )LJXUH O(f D FKLFN SUHVVHG RQH FKHHN DJDLQVW LWV EDFN EHWZHHQ LWV ZLQJV ZKLOH LWV ELOO UHVWLQJ RQ WKH EDFN MXWWHG RXW WR WKH VLGH KRUL]RQWDOO\ ZKLOH EHLQJ KHOG DSSUR[LPDWHO\ SHUSHQGLFXODU WR WKH PHGLDO SODQH $ FKLFN DGRSWLQJ WKH 5HYHUVH +HDG SRVLWLRQ )LJXUH ,)f SODFHG LWV WKURDW DQG WKH YHQWUDO VXUIDFH RI LWV QHFN DQG SRVWHULRUO\ SRLQWLQJ ELOO DJDLQVW LWV EDFN EHWZHHQ WKH ZLQJV ,Q WKH /LH )ODW SRVLWLRQ )LJXUH *f D FKLFN OD\ ZLWK WKH ODWHUDO VXUIDFH RI LWV QHFN DQG KHDG SUHVVHG DJDLQVW WKH QHVW IDEULF ZKLOH WKH GRUVDO VXUIDFHV RI WKH GLVWDO DQG PHGLDO KDOYHV RI WKH QHFN UHPDLQHG IROGHG DJDLQVW RQH DQRWKHU DQG WKH WKURDW SUHVVHG DJDLQVW WKH YHQWUDO VXUIDFH RI WKH QHFN 7KH +DQJ +HDG SRVWXUH )LJXUH +f ZDV GHILQHG E\ D FKLFN KDQJLQJ LWV KHDG RYHU WKH ULP RI WKH QHVW RU WKH HGJH RI LWV SHUFK VXFK WKDW WKH WLS RI WKH ELOO KXQJ SDUDOOHO WR RU EHORZ WKH FKLFNnV IHHW %RG\ SRVLWLRQV GXULQJ WKH +DQJ +HDG UDQJHG IURP WKRVH GHVFULEHG IRU WKH &URXFK WR WKH &XUO 1HFN SRVWXUHV

PAGE 101

7KUHH SHUFHQW RI DOO ILJKWV REVHUYHG LQ HQGHG ZKHQ D ORVHU (VFDSHG E\ FUDZOLQJ UDSLGO\ DZD\ IURP LWV DWWDFNHU 7KH HVFDSLQJ ORVHU IOHG WR VHYHUDO GLIIHUHQW W\SHV RI ORFDWLRQ 6RPH ORVHUV IOHG ZKLOH UHPDLQLQJ ZLWKLQ WKH FRQILQHV RI WKH QHVW 1 ILJKWVf 6RPH ORVHUV OHIW WKH QHVW WR FOLPE RQWR D SHUFK 1 ILJKWVf 6RPH ORVHUV 1 f HVFDSHG E\ f FOLPELQJ IURP SHUFK WR SHUFK LQ WKH QHVW VLWH DIWHU WKH QHVW KDG EHHQ GHVWUR\HG E\ WKH FKLFNV VHH $SSHQGL[ &f RU f OHDYLQJ WKH YLFLQLW\ RI WKH QHVW $QDO\VHV XVHG IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQ LQ 6WDWYLHZ $EDFXV &RQFHSWV f WR GHWHUPLQH ZKLFK PHDVXUHV RI JURZWK DQG IRRG DPRXQWV ZHUH WKH EHVW SUHGLFWRUV RI LQWHQVLWLHV DQG UDWHV RI ILJKWLQJ $OWKRXJK FROOHFWHG GDWD RQ IHHGLQJ ILJKWLQJ DQG JURZWK IRU D WRWDO RI QHVWV FRXOG QRW LQFOXGH DOO RI WKHVH QHVWV LQ WKH VDPH UHJUHVVLRQ 7KLV ZDV EHFDXVH WKHVH QHVWV GLG QRW DOO FRQWDLQ WZR FKLFNV GXULQJ WKH VDPH SHULRG RI QHVWOLQJ OLIH )RU H[DPSOH EURRG VL]H GURSSHG WR RQH RU QR FKLFNV ZKHQ $FKLFN DJHV ZHUH DQ\ZKHUH IURP GD\V 1 EURRGVf WR RYHU GD\V 1 EURRGVf ZLWK WKH UHPDLQLQJ EURRGV GURSSLQJ LQ VL]H VRPHWLPH EHWZHHQ WKHVH DJHV 7KXV QHVW REVHUYDWLRQV ZHUH WHUPLQDWHG DW GLIIHUHQW FKLFN DJHV 2EVHUYDWLRQV DQG JURZWK PHDVXUHPHQWV RI FKLFNV LQ GLIIHUHQW QHVWV DOVR EHJDQ DW GLIIHUHQW FKLFN DJHV 7KLV ZDV EHFDXVH QHVWV FRQWDLQHG

PAGE 102

FKLFNV RI GLIIHUHQW DJHV ZKHQ ILUVW HQWHUHG WKH FRORQ\ WR PRQLWRU EHKDYLRU DQG JURZWK )RU H[DPSOH FKLFNV ZHUH ILUVW ZHLJKHG ZKHQ $FKLFN DJHV ZHUH DQ\ZKHUH IURP GD\V 1 EURRGVf WR GD\V 1 EURRGVf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sf GD\V 1 EURRGVf WKURXJK sf GD\V 1 EURRGVf WKURXJK sf GD\V 1 EURRGVf DQG WKURXJK sf GD\V 1 EURRGVf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

PAGE 103

ZHUH ROGHU WKDQ GD\V ZHUH QRW SRVVLEOH EHFDXVH RQO\ IRXU QHVWV FRQWDLQHG WZR FKLFNV 9DULDEOHV $V P\ WZR PHDVXUHV RI ILJKWLQJ UDWH XVHG ERWK WKH WRWDO QXPEHU RI ILJKWV WKDW RFFXUUHG DQG WKH WRWDO QXPEHU RI EORZV WKDW ZHUH GHOLYHUHG E\ FKLFNV GXULQJ HDFK VXPPDU\ LQWHUYDO 7KXV WKHUH ZDV RQH GDWD SRLQW SHU QHVW GXULQJ HDFK VXPPDU\ LQWHUYDO IRU HDFK ILJKWLQJ UDWH YDULDEOH ILJKWVVXPPDU\ LQWHUYDO DQG EORZVVXPPDU\ LQWHUYDOf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f RI $FKLFNV DQG RI %FKLFNV LQ WKH VXPPDU\ LQWHUYDO ZHUH QDPHG $FKLFN FXOPHQ JURZWK DQG %FKLFN FXOPHQ JURZWK UHVSHFWLYHO\ &XOPHQ JURZWK ZDV FDOFXODWHG IRU HDFK FKLFN E\ VXEWUDFWLQJ WKH FXOPHQ OHQJWK PPf DW WKH VWDUW RI D VXPPDU\ LQWHUYDO IURP

PAGE 104

WKH FXOPHQ OHQJWK DW WKH HQG RI WKDW VXPPDU\ LQWHUYDO 6HFRQG WKH GLIIHUHQFH RI $FKLFN FXOPHQ JURZWK PLQXV % FKLFN FXOPHQ JURZWK ZDV FDOOHG WKH FXOPHQ JURZWK GLIIHUHQWLDO PPGD\f 7KLV ZDV D PHDVXUH RI WKH GLIIHUHQFH LQ FXOPHQJURZWK UDWHV RI $ DQG %VLEOLQJV 7KLUG IRU HDFK QHVW FDOFXODWHG WKH GLIIHUHQFH LQ WKH OHQJWK RI WKH $FKLFNnV PLQXV WKH %FKLFNnV FXOPHQ DW WKH VWDUW RI D VXPPDU\ LQWHUYDO YDOXH Df DOVR FDOFXODWHG WKLV GLIIHUHQFH DW WKH HQG RI WKDW VXPPDU\ LQWHUYDO YDOXH Ef WKHQ WRRN WKH DYHUDJH RI WKHVH WZR YDOXHV DQG FDOOHG WKH UHVXOW WKH FXOPHQ OHQJWK GLIIHUHQFH PP DYHUDJH RI YDOXH D SOXV YDOXH Ef 7KLV PHDVXUH HYDOXDWHV WKH DEVROXWH GLIIHUHQFHV EHWZHHQ WKH VL]HV RI $DQG %FKLFNV 7KUHH PHDVXUHV RI PDVV ZHUH FDOFXODWHG DQG QDPHG DV IROORZV )LUVW IRU HDFK EURRG FDOFXODWHG WKH UDWH RI PDVV JDLQ JGD\f E\ $FKLFNV $FKLFN PDVV JDLQ DQG RI %FKLFNV %FKLFN PDVV JDLQ LQ WKH VXPPDU\ LQWHUYDO 7KXV IRU HDFK FKLFN VXEWUDFWHG WKH PDVV Jf DW WKH VWDUW RI WKH VXPPDU\ LQWHUYDO IURP WKH PDVV DW WKH HQG RI WKH VXPPDU\ LQWHUYDO 6HFRQG FDOFXODWHG WKH PDVV FKDQJH GLIIHUHQWLDO JGD\f ZKLFK ZDV WKH GLIIHUHQFH RI $FKLFN PDVV JDLQ PLQXV %FKLFN PDVV JDLQ GXULQJ WKH VXPPDU\ LQWHUYDO 7KLV ZDV DQRWKHU PHDVXUH RI JURZWK UDWH GLIIHUHQFHV EHWZHHQ $ DQG %VLEOLQJV 7KLUG FDOFXODWHG WKH GLIIHUHQFH LQ WKH $FKLFNnV PDVV PLQXV WKH %FKLFNnV PDVV DW WKH VWDUW DQG HQG RI D VXPPDU\ SHULRG 7KH DYHUDJH

PAGE 105

RI WKH VWDUWLQJ SOXV HQGLQJ YDOXH ZDV FDOOHG WKH PDVV GLIIHUHQFH Jf 7KLV YDULDEOH ZDV DQRWKHU PHDVXUH RI WKH VSUHDG LQ VL]HV EHWZHHQ $ DQG %FKLFNV :LWKLQ HDFK RI WKHVH FDWHJRULHV RI SRWHQWLDO SUHGLFWRUV IRRG DPRXQWV FXOPHQ JURZWK DQG PDVV FKDQJHV XVHG IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQ WR ILQG WKH VLQJOH EHVW SUHGLFWRUV RI ILJKWLQJ ZLWKLQ WKDW FDWHJRU\ WKHQ HQWHUHG WKHVH EHVW SUHGLFWRUV LQWR DQRWKHU VHW RI IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQV WR GHWHUPLQH ZKLFK YDULDEOHV EHVW SUHGLFWHG ILJKWLQJ UDWHV ILJKWVVXPPDU\ LQWHUYDO DQG EORZVVXPPDU\ LQWHUYDOf DQG LQWHQVLWLHV EORZVILJKWf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

PAGE 106

5HJ\OW" 1HVWOLQJV IRXJKW GXULQJ DOO VXPPDU\ LQWHUYDOV DW VLPLODU UDWHV DQG LQWHQVLWLHV 7KH WRWDO QXPEHU RI ILJKWV SHU EURRG ZDV VLPLODU GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $ FKLFNV ZHUH DQG GD\V ROG 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f 7KH QXPEHU RI EORZV GHOLYHUHG SHU EURRG ZHUH DOVR VLPLODU LQ WKHVH WZR VXPPDU\ LQWHUYDOV 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f DV ZHUH WKH DYHUDJH EORZVILJKW 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f :KHQ FRPSDUHG VXPPDU\ LQWHUYDOV ZKHQ $FKLFNV ZHUH YHUVXV GD\V ROG IRXQG WKDW EURRGV LQ WKHVH LQWHUYDOV KDG VLPLODU QXPEHUV RI ILJKWV 7DEOH 0DQQ :KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f QXPEHU RI EORZV 7DEOH 0DQQ:KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f DQG DYHUDJH EORZVILJKW 7DEOH 0DQQ:KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f 2YHUODS LQ FKLFN DJHV ZLWKLQ VXPPDU\ LQWHUYDOV SUHFOXGHG RWKHU FRPSDULVRQV 1HLWKHU ILJKWLQJ UDWH QRU LQWHQVLW\ RI ILJKWV ZDV UHODWHG WR DQ\ PHDVXUH RI FKLFN JURZWK RU IRRG GHOLYHUHG GXULQJ WKH VXPPDU\ LQWHUYDOV ZKHQ $FKLFNV ZHUH WKURXJK

PAGE 107

DQG WKURXJK GD\V ROG 7DEOHV WKURXJK f 7KXV IRU FKLFNV RI WKHVH DJHV WKH IRRGDPRXQW K\SRWKHVLV ZDV QRW VXSSRUWHG %XW ZKHQ FKLFNV ZHUH ROGHU WKH UDWH DQG LQWHQVLW\ RI ILJKWLQJ YDULHG ZLWK FKLFN JURZWK GHVFULEHG DV IROORZV :KHQ $FKLFN DJHV ZHUH WKURXJK GD\V WKH QXPEHU RI EORZV GHOLYHUHG GXULQJ WKLV SHULRG ZDV EHVW SUHGLFWHG E\ WKH FXOPHQ JURZWK GLIIHUHQWLDO 7DEOH f 7KXV PRUH EORZV ZHUH GHOLYHUHG LQ EURRGV ZLWK D ODUJHU GLIIHUHQFH LQ WKH UDWH RI FXOPHQ JURZWK RI WKH $FKLFN UHODWLYH WR WKH % FKLFN WKDQ LQ EURRGV ZKHUH WKLV GLIIHUHQFH LQ JURZWK UDWHV ZDV VPDOOHU )LJXUH f $FKLFN PDVV JDLQ DOVR FRQWULEXWHG VLJQLILFDQWO\ ZKHQ VWHSZLVH UHJUHVVLRQ DGGHG WKLV YDULDEOH WR WKH PRGHO DORQJ ZLWK WKH FXOPHQJURZWK GLIIHUHQWLDO %XW GLG QRW XVH WKLV IXOO PRGHO EHFDXVH OLQHDU UHJUHVVLRQ ZDV QRW DSSURSULDWH IRU WKH $FKLFN PDVV JDLQ YDULDEOH 7DEOH f /LQHDU UHJUHVVLRQ ZDV LQDSSURSULDWH EHFDXVH WKUHH EURRGV KDG WLHG YDOXHV IRU $ FKLFN PDVV JDLQ )LJXUH f :KHQ FRQVLGHUHG DORQH ZLWKRXW LQFOXGLQJ WKH FXOPHQJURZWK GLIIHUHQWLDOf XVLQJ WKH DSSURSULDWH QRQSDUDPHWULF WHVW $FKLFN PDVV JDLQ ZDV QRW VLJQLILFDQWO\ DVVRFLDWHG ZLWK WKH QXPEHU RI EORZV GHOLYHUHG 6SHDUPDQ UDQN FRUUHODWLRQ UV FRUUHFWHG IRU WLHV 3 f )URP VWHSZLVH OLQHDU UHJUHVVLRQ WKH QXPEHU RI ILJKWV LQ WKH WKURXJK GD\ VXPPDU\ SHULRG ZDV VLJQLILFDQWO\

PAGE 108

SUHGLFWHG RQO\ E\ $FKLFN PDVV JDLQ 7DEOH f %XW EHFDXVH RI WLHG YDOXHV )LJXUH f OLQHDU UHJUHVVLRQ ZDV QRW DSSURSULDWH :KHQ XVHG WKH DSSURSULDWH QRQSDUDPHWULF WHVW WR FRPSDUH $FKLFN PDVV JDLQ WR WKH QXPEHU RI ILJKWV WKH UHODWLRQVKLS DSSURDFKHG EXW GLG QRW DFKLHYH VLJQLILFDQFH 7DEOH 6SHDUPDQ UDQN FRUUHODWLRQ UV FRUUHFWHG IRU WLHV 3 f 7KXV ILJKWV ZHUH PRUH IUHTXHQW LQ EURRGV ZLWK VORZHU UDWHV RI $FKLFN PDVV JDLQ WKDQ LQ EURRGV ZKHUH $FKLFNV JDLQHG PDVV PRUH TXLFNO\ )LJXUH f DV LV FRQVLVWHQW ZLWK WKH IRRGDPRXQW K\SRWKHVLV %XW WKLV DVVRFLDWLRQ ZDV RQO\ PDUJLQDOO\ VLJQLILFDQW 1R YDULDEOH VLJQLILFDQWO\ SUHGLFWHG WKH QXPEHU RI ILJKWV GXULQJ WKLV VXPPDU\ SHULRG )LJKW LQWHQVLW\ DYHUDJH QXPEHU RI EORZV SHU ILJKWf GXULQJ WKH WKURXJK GD\ VXPPDU\ SHULRG ZDV EHVW SUHGLFWHG E\ WKH PDVV GLIIHUHQFH 7DEOH f ,Q RWKHU ZRUGV WKH EURRGV ZLWK WKH PRVW LQWHQVH ILJKWLQJ ZHUH WKRVH ZLWK WKH JUHDWHVW DYHUDJH PDVV DGYDQWDJH RI $ RYHU %FKLFNV )LJXUH f 7KHVH UHVXOWV IRU ILJKW LQWHQVLW\ DORQJ ZLWK WKH UHVXOWV IRU ILJKWLQJ UDWHV GLG QRW SURYLGH FOHDU VXSSRUW IRU WKH IRRGDPRXQW K\SRWKHVLV EXW GLG QRW UHIXWH LW HLWKHU VHH 'LVFXVVLRQf 'XULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFN DJHV ZHUH WKURXJK GD\V FKLFNV HQJDJHG LQ PRUH ILJKWV 7DEOH )LJXUH f DQG GHOLYHUHG PRUH EORZV 7DEOH f LQ EURRGV ZLWK IDVWHU PDVV JDLQV E\ %FKLFNV WKDQ LQ EURRGV ZKHUH %

PAGE 109

FKLFN PDVV JDLQ ZDV VORZHU *DLQV LQ $FKLFN PDVV ZHUH DOVR DVVRFLDWHG ZLWK KLJKHU ILJKWLQJ UDWHV IRXQG WKDW $FKLFN DV ZHOO DV %FKLFN PDVV FKDQJHV ZHUH VLJQLILFDQW SUHGLFWRUV RI WKH QXPEHU RI ILJKWV ZKHQ UDQ D VWHSZLVH UHJUHVVLRQ RQ DOO PHDVXUHV RI FKLFN PDVV DORQH QXPEHU RI ILJKWV ; $FKLFN PDVV JDLQ ; %FKLFN PDVV FKDQJH UA )R 3 f 7R DYRLG FRn FRUUHODWLRQ HQWHUHG RQO\ WKH EHVW KLJKHVW )YDOXHf RI WKHVH SUHGLFWRUV %FKLFN PDVV FKDQJH LQWR WKH ILQDO VWHSZLVH UHJUHVVLRQ UHFRUGHG LQ 7DEOH f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

PAGE 110

FOHDUO\ LQ WKH GLUHFWLRQ SUHGLFWHG E\ WKH IRRGDPRXQW K\SRWKHVLV 7KH IRRGDPRXQW K\SRWKHVLV ZDV QRW VXSSRUWHG GXULQJ WKH ILUVW ZHHN DQG D KDOI RI QHVWOLQJ OLIH ZKHQ ILJKWLQJ UDWHV DQG LQWHQVLWLHV ZHUH LQGHSHQGHQW RI IRRG VXSSOLHV DQG QHVWOLQJ JURZWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf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

PAGE 111

ILJKWLQJ ZDV DVVRFLDWHG ZLWK IRRG VKRUWDJHV WR WKH EURRG /DUJH GLIIHUHQFHV LQ JURZWK UDWHV RI $FKLFNV UHODWLYH WR % FKLFNV FRXOG EH SURGXFHG LI %FKLFN JURZWK UDWHV ZHUH GHSUHVVHG 'HSUHVVLRQ RI JURZWK UDWHV RI %FKLFNV FRXOG RFFXU LI IRRG ZDV VFDUFH DQG $FKLFNV KDG SULRULW\ RI DFFHVV WR IRRG GHOLYHULHV ,Q D VDPSOH RI QHVWV LQ P\ $ODILD EDQNV SRSXODWLRQ $FKLFNV UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV &KDSWHU f $FKLFNV DOVR KDG SULRULW\ RI DFFHVV WR IRRG LQ D 0H[LFDQ SRSXODWLRQ RI EURZQ SHOLFDQV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 7KHVH $FKLFNV UHFHLYHG PRUH IRRG PRUH RIWHQ WKDQ GLG %FKLFNV WKURXJKRXW WKH ILUVW GD\V RI OLIH 3LQ]Q DQG 'UXPPRQG LQ SUHVVf $OWHUQDWLYHO\ KLJKHU ILJKWLQJ UDWHV FRXOG KDYH GHSUHVVHG %FKLFN JURZWK UDWHV UHODWLYH WR UDWHV RI $FKLFN JURZWK 7KLV FRXOG KDYH SURGXFHG WKH REVHUYHG SDWWHUQ RI ODUJH FXOPHQJURZWK GLIIHUHQWLDOV LQ EURRGV ZLWK KLJK DPRXQWV RI ILJKWLQJ (YHQ LQ WKH DEVHQFH RI IRRGVKRUWDJHV $FKLFN DWWDFNV FRXOG KDYH SUHYHQWHG %FKLFNV IURP JDLQLQJ DFFHVV WR IRRG ,QGHHG LQ PDQ\ REOLJDWHO\ VLEOLFLGDO VSHFLHV $FKLFN DWWDFNV WKDW UHWDUG %FKLFN JURZWK RFFXU ZKLOH SDUHQWV VHHP WR VXSSO\ D IRRG VXUIHLW HJnV LQ 0H\EXUJ *DUJHWW f $QRWKHU SRVVLELOLW\ LV WKDW ERWK ILJKWLQJ UDWHV DQG FXOPHQJURZWK GLIIHUHQWLDO PLJKW FRn YDU\ ZLWK VRPH RWKHU IDFWRU WKDW GLG QRW PHDVXUH 7KH WHDVLQJ DSDUW RI FDXVHV DQG HIIHFWV RI ILJKWLQJ ZLOO KDYH WR

PAGE 112

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f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

PAGE 113

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f 6LPLODUO\ DQ DSSDUHQW UHYHUVDO RFFXUUHG LQ P\ VWXG\ WKH VL]H PDVV DQG FXOPHQ OHQJWKf RI WKH %FKLFN H[FHHGHG WKH $ FKLFNn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

PAGE 114

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f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

PAGE 115

FRVWV RI ILJKWLQJ PD\ KDYH EHHQ KLJKHU IRU FKLFNV ZKHQ WKH\ ZHUH WKURXJK GD\V ROG WKDQ ZKHQ WKH\ ZHUH WKURXJK GD\V ROG 7R FRPSDUH WKH HQHUJHWLF FRVWV RI ILJKWLQJ LQ FKLFNV RI GLIIHUHQW DJHV DQG KDWFKLQJ UDQNV ZLOO UHTXLUH IXUWKHU H[SHULPHQWV 7KH GRXEO\ ODEHOOHG ZDWHU WHFKQLTXH KDV EHHQ XVHG WR DVVHVV FRVWV RI ILJKWLQJ LQ HQWLUH EURRGV HJ %U\DQW DQG 7DWQHU f DQG VKRXOG SURYH YDOXDEOH IRU GHWHUPLQLQJ WKH FRVWV RI ILJKWLQJ IRU LQGLYLGXDO FKLFNV 6L]H +LHUDUFKLHV DQG 6LEOLQJ 5LYDOU\ 5HGXFWLRQ 6LEOLQJV VKRXOG FRPSHWH ZLWK HDFK RWKHU WR JDLQ PRUH WKDQ WKHLU IRRG VKDUH EHFDXVH WKH\ VKDUH RQO\ KDOI RI WKHLU JHQHV ZLWK WKHLU VLEOLQJV +DPLOWRQ f %XW ILJKWV DPRQJ QHVWOLQJV PD\ EH HQHUJHWLFDOO\ FRVWO\ WR ERWK WKH SDUWLFLSDQWV DQG WR WKHLU SDUHQWV ZKR PLJKW HYROYH ZD\V WR UHSUHVV VLEOLQJ FRQIOLFW +DPLOWRQ 7ULYHUV f +DKQ f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

PAGE 116

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f ZLWKRXW D FRUUHVSRQGLQJ LQFUHDVH LQ WKH EHQHILWV WR WKH DWWDFNHU $OWKRXJK VXJJHVWLQJ WKDW WKH VLEOLQJ ULYDOU\ UHGXFWLRQ K\SRWKHVLV PD\ QRW KROG IRU EURZQ SHOLFDQV P\ GDWD GR QRW SURYLGH D WUXH WHVW RI WKH K\SRWKHVLV ([SHULPHQWDO PDQLSXODWLRQV RI KDWFKLQJ DV\QFKURQ\ LQ EURRGV IHG VLPLODU IRRG DPRXQWV ZLOO EH QHFHVVDU\ WR WHVW WKH VLEOLQJ ULYDOU\ UHGXFWLRQ K\SRWKHVLV LQ WKLV VSHFLHV 6LEOLQJ $JJUHVVLRQ LQ 5HODWHG 6SHFLHV 6LEOLFLGDO DJJUHVVLRQ KDV EHHQ UHSRUWHG LQ $PHULFDQ ZKLWH SHOLFDQV 3HOHFDQXV HU\WKURUKYQFKRV -RKQVRQ DQG 6ORDQ .QRSI &DVK DQG (YDQV f ZKLWH SHOLFDQV

PAGE 117

3HOHFDQXV RQRFURWDOXV &RRSHU f DQG SLQNEDFNHG SHOLFDQV 3HOHFDQXV UXIHVFHQV 'LQ DQG (OWULQJKDP f ,Q DOO RI WKHVH VSHFLHV WKH $FKLFN EHJLQV DWWDFNLQJ LWV % VLEOLQJ VKRUWO\ DIWHU KDWFKLQJ YLUWXDOO\ DOZD\V NLOOLQJ LW ZLWKLQ WKH ILUVW ZHHNV RI KDWFKLQJ UHJDUGOHVV RI WKH IRRG VXSSOLHV &XUUHQW IRRG VXSSO\ PD\ EH DQ LQDSSURSULDWH FXH IRU VLEOLQJ DJJUHVVLRQ LQ WKHVH DQG RWKHU REOLJDWHO\ VLEOLFLGDO VSHFLHV LI SDUHQWV URXWLQHO\ SURYLGH LQVXIILFLHQW IRRG WR UDLVH ERWK FKLFNV WKURXJK WKH SURWUDFWHG QHVWOLQJ SHULRG 0RFN HW DO f ,Q WKLV VLWXDWLRQ FXUUHQW IRRG VXSSOLHV GR QRW DFFXUDWHO\ SUHGLFW IXWXUH VXSSOLHV 6HOHFWLRQ LQ WKHVH VSHFLHV PD\ KDYH IDYRUHG IRRGLQGHSHQGHQW DJJUHVVLRQ EHFDXVH LW IDFLOLWDWHV SUHHPSWLYH NLOOLQJ LQ DQWLFLSDWLRQ RI URXWLQH IRRG VKRUWDJHV 6WLQVRQ $QGHUVRQ 0RFN HW DO f %\ FRQWUDVW VLEOLQJ DJJUHVVLRQ LQ WKH EURZQ SHOLFDQV QHVWLQJ RQ $ODILD %DQNV ZDV DSSDUHQWO\ VHQVLWLYH WR DW OHDVW VRPH PHDVXUHV RI QHVWOLQJ QXWULWLRQDO FRQGLWLRQ 7KLV SDWWHUQ FRXOG EH DGDSWLYH LI FXUUHQW IRRG OHYHOV DUH JRRG SUHGLFWRUV RI IXWXUH VXSSOLHV 0RFN HW DO f

PAGE 118

7DEOH $YHUDJHV s 6'f SHU EURRG RI WKH QXPEHU RI ILJKWV QXPEHU RI EORZV DQG DYHUDJH EORZVILJKW GXULQJ HDFK VXPPDU\ LQWHUYDO 6XPPDU\ LQWHUYDOV DUH GD\ SHULRGV ZKHQ $FKLFNV ZHUH WKURXJK 1 EURRGVf WKURXJK 1 EURRGVf WKURXJK 1 EURRGVf DQG WKURXJK GD\V ROG 1 EURRGVf 6DPSOH VL]HV LQ WKHVH VXPPDU\ LQWHUYDOV DUH WKH VDPH LQ 7DEOHV WKURXJK 6HH PHWKRGV IRU IXUWKHU H[SODQDWLRQ 6XPPDU\ ,QWHUYDO 1XPEHU RI ILJKWV 1XPEHU RI EORZV $YHUDJH EORZVILJKW WKURXJK GD\V WKURXJK GD\V WKURXJK GD\V s WKURXJK GD\V 1RWH 5HVXOWV RI VLJQLILFDQFH WHVWV DUH UHSRUWHG LQ WH[W

PAGE 119

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r 1XPEHU RI ILJKWVr ; %FKLFN PDVV JDLQ D $OWKRXJK VLJQLILFDQW XVLQJ OLQHDU UHJUHVVLRQ WLHG YDOXHV PDGH WKLV DQDO\VLV LQDSSURSULDWH 1$f $ 6SHDUPDQ UDQN FRUUHODWLRQ LQYROYLQJ RQO\ WKLV YDULDEOH ZDV PDUJLQDOO\ VLJQLILFDQW UV FRUUHFWHG IRU WLHV 3 f E 5HJUHVVLRQ HTXDWLRQ U )R 3 ALQGLFDWHV VLJQLILFDQW SUHGLFWRUV LQ WKLV DQG DOO VLPLODU WDEOHV

PAGE 120

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r $FKLFN PDVV JDLQD 1 $ 1 $ 1XPEHU RI EORZVn ; &XOPHQJURZWK GLIIHUHQWLDO 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR EURRG %FKLFN FXOPHQ JURZWK %FKLFN PDVV JDLQr 1XPEHU RI EORZVF n ; %FKLFN PDVV JDLQ D 7LHG YDOXHV PDGH OLQHDU UHJUHVVLRQ LQDSSURSULDWH 1$f N 5HJUHVVLRQ HTXDWLRQ UA )R 3 F 5HJUHVVLRQ HTXDWLRQ UA )T 3

PAGE 121

7DEOH 5HVXOWV RI IRUZDUG VWHSZLVH UHJUHVVLRQ WR GHWHUPLQH WKH EHVW SUHGLFWRU RI WKH DYHUDJH EORZVILJKW GHOLYHUHG GXULQJ HDFK VXPPDU\ LQWHUYDO ,QGHSHQGHQW YDULDEOHV UHSUHVHQW WKH EHVW SUHGLFWRUV LQ HDFK RI WKUHH FDWHJRULHV IRRG DPRXQWV FXOPHQ JURZWK DQG PDVV FKDQJH 6HH 7DEOH DQG 0HWKRGV IRU H[SODQDWLRQ RI KRZ EHVW SUHGLFWRUV ZHUH GHWHUPLQHG 9DULDEOHV ZHUH GHILQHG DV LQ 7DEOH ,QGHSHQGHQW YDULDEOH )YDOXH 3YDOXH 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR %FKLFN $FKLFN FXOPHQ JURZWK %FKLFN PDVV JDLQ 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR EURRG $FKLFN FXOPHQ JURZWK $FKLFN PDVV JDLQ 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR %FKLFN &XOPHQOHQJWK GLIIHUHQFH 0DVV GLIIHUHQFHr $YHUDJH EORZVILJKWD ; 0DVV GLIIHUHQFH 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR $FKLFN %FKLFN FXOPHQ JURZWK 0DVV GLIIHUHQFH D 5HJUHVVLRQ HTXDWLRQ U )T 3

PAGE 122

)LJXUH 6XEPLVVLYH SRVWXUHV RI QHVWOLQJ EURZQ SHOLFDQV 3RVWXUHV DUH &URXFK $f &XUO 1HFN %f 7XUQ /RZ &f 'XFN 'f /LH %DFN (f 5HYHUVH +HDG )f /LH )ODW *f DQG +DQJ +HDG +f

PAGE 123

7RWDO EORZV LQ VXPPDU\ LQWHUYDO )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI EORZV GHOLYHUHG DQG WKH FXOPHQJURZWK GLIIHUHQWLDO EHWZHHQ $ DQG %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV 6HH 0HWKRGV IRU GHILQLWLRQV RI YDULDEOHV LQ WKLV DQG DOO IROORZLQJ ILJXUHV LQ WKLV FKDSWHU &XOPHQJURZWK GLIIHUHQWLDO PPGf

PAGE 124

7RWDO EORZV LQ VXPPDU\ LQWHUYDO L U R R R R L L R $FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI EORZV GHOLYHUHG DQG WKH UDWH RI PDVV JDLQ E\ $FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 125

,OO $FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI ILJKWV DQG WKH UDWH RI ZHLJKW JDLQ E\ $FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 1 EURRGV LQ )LJXUHV WKURXJK 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 126

$YHUDJH QXPEHU RI EORZV SHU ILJKW 0DVV GLIIHUHQFH Jf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH QXPEHU RI EORZV SHU ILJKW DQG WKH ZHLJKW GLIIHUHQWLDO EHWZHHQ $ DQG %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 127

rX f e FH f ‘( R} i FH R 2 %FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI ILJKWV DQG WKH UDWH RI PDVV JDLQ E\ %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 1 EURRGV 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 128

&+$37(5 ())(&7 2) %522' 6,=( 0$1,38/$7,216 21 )22' '(/,9(5,(6 $1' $33257,210(17 72 6(1,25 6,%/,1*6 ,QWURGXFWLRQ .LQJ /HDU 6KDNHVSHDUH f GLYLGHG KLV SDUHQWDO LQYHVWPHQW KLV ODQGV NLQJGRP DQG JRRGV HTXDOO\ EHWZHHQ KLV HOGHVW GDXJKWHUV ZKLOH OHDYLQJ KLV \RXQJHVW ZLWK QRWKLQJ (DFK GDXJKWHU VRXJKW PRUH IRU KHUVHOI WKDQ /HDU ZDQWHG WR JLYH SDUHQWRIIVSULQJ FRQIOLFWf 6R WKH GDXJKWHUV EDWWOHG HDFK RWKHU WR VHL]H PRUH WKDQ WKHLU VKDUH VLEOLQJ ULYDOU\f /HDU VDZ KLV GDXJKWHUV DV XQQDWXUDO EXW WKH LQVLJKW RI +DPLOWRQ f DV IRUPDOL]HG E\ 7ULYHUV f SUHGLFWV WKDW QDWXUDO VHOHFWLRQ VKRXOG RIWHQ IDYRU LQGLYLGXDO RIIVSULQJ WKDW DWWHPSW WR JDLQ PRUH SDUHQWDO LQYHVWPHQW 7ULYHUV f IRU WKHPVHOYHV WKDQ WKH SDUHQW LV VHOHFWHG WR JLYH 7KLV SLRQHHULQJ SUHGLFWLRQ RI FRQIOLFW ZLWKLQ WKH IDPLO\ KDV VWLPXODWHG FRQVLGHUDEOH WKHRUHWLFDO ZRUN UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f $ TXHVWLRQ WKDW KDV EHHQ SDUWLFXODUO\ DWWUDFWLYH WR WKHRUHWLFLDQV FRQFHUQV ZKHWKHU WKHUH LV SDUHQWRIIVSULQJ FRQIOLFW RYHU VLEOLFLGH 2n&RQQRU *RGIUD\ 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f 6LEOLFLGH LV D FRPPRQ IRUP RI EURRG UHGXFWLRQ LQ VRPH ELUGV LQFOXGLQJ

PAGE 129

UDSWRUV KHURQV HJUHWV JDQQHWV ERRELHV VNXDV SHOLFDQV DQG FUDQHV /DFN 2n&RQQRU 0RFN HW DO f LQ ZKLFK DJJUHVVLYH DWWDFNV E\ VRPH PHPEHUVf RI WKH EURRG FRQWULEXWH VLJQLILFDQWO\ WR WKH GHDWK RI D QHVWPDWH ,Q WKHVH VSHFLHV HJJV KDWFK DV\QFKURQRXVO\ DQG WKH VLEOLFLGH YLFWLPV DUH XVXDOO\ WKH \RXQJHVW PHPEHUV RI WKH EURRG 6HYHUDO GLIIHUHQW K\SRWKHVHV SURSRVH VHOHFWLYH DGYDQWDJHV WR VLEOLFLGH DQG RWKHU IRUPV RI EURRG UHGXFWLRQ UHYLHZHG LQ )RUEHV f 7KH GLIIHUHQFHV EHWZHHQ WKH K\SRWKHVHV OLH LQ WKHLU H[SODQDWLRQV RI WKH QDWXUH RI WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV WR WKHLU SDUHQWV -XQLRU FKLFNV PD\ KDYH YDOXH DV VXUYLYRUV DORQJ ZLWK DOO RI WKHLU VLEOLQJV DV PLJKW RFFXU ZKHQ UHVRXUFHV DUH SOHQWLIXO ZLWK VLEOLFLGH HOLPLQDWLQJ WKH MXQLRUV LQ \HDUV RI IRRG VFDUFLW\ 7KLV LV WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV KLVWRULFDOO\ FDOOHG /DFNnV f EURRG UHGXFWLRQ K\SRWKHVLV $OWHUQDWLYHO\ WKH SULPDU\ YDOXH RI MXQLRU FKLFNV PD\ EH DV UHSODFHPHQWV IRU DQ\ VHQLRUV WKDW GLH SUHPDWXUHO\ 7KLV LV WKH LQVXUDQFH K\SRWKHVLV 'RUZDUG f ,Q DGGLWLRQ MXQLRU FKLFNV PD\ SURYLGH SDUHQWV ZLWK D ZD\ RI VHOHFWLYHO\ UDLVLQJ WKRVH RIIVSULQJ ZLWK WKH KLJKHVW ILWQHVV H[SHFWDWLRQV SURJHQ\ FKRLFH K\SRWKHVLV %XFKKRO] .R]ORZVNL DQG 6WHDUQV )RUEHV f 8QGHU WKH SURJHQ\ FKRLFH K\SRWKHVLV D MXQLRU FKLFN ZRXOG FRQWULEXWH UHSURGXFWLYH YDOXH RQO\ ZKHQ LW ZDV LQWULQVLFDOO\ VXSHULRU WR D VHQLRU VLEOLQJ DQG LWV VXSHULRULW\ ZDV

PAGE 130

VXIILFLHQWO\ ODUJH WR RYHUFRPH WKH VHQLRUnV FRPSHWLWLYH DGYDQWDJHV SURGXFHG E\ DJH GLVSDULWLHV ,Q DOO RI WKHVH K\SRWKHVHV VLEOLFLGH LV FRQVLGHUHG D PHDQV IRU HOLPLQDWLQJ MXQLRU RIIVSULQJ ZKHQ IRRG LV LQVXIILFLHQW IRU UDLVLQJ WKH IXOO EURRG 7KHVH K\SRWKHVHV DVVXPH WKDW VXUYLYLQJ RIIVSULQJ EHQHILW IURP HOLPLQDWLQJ D VLEOLQJ EHFDXVH E\ GRLQJ VR WKH VXUYLYRUV REWDLQ WKH IRRG WKDW RWKHUZLVH ZRXOG KDYH EHHQ GHOLYHUHG WR WKDW VLEOLQJ )RUEHV f H[SUHVVHG WKLV IRU WKH LQVXUDQFH K\SRWKHVLV ZKHQ KH ZURWH 5HVRXUFHV H[SHQGHG RQ WKH HDUO\ IHHGLQJ RI LQVXUDQFH RIIVSULQJ WKDW HYHQWXDOO\ EHFRPH UHGXQGDQW PLJKW DOWHUQDWLYHO\ KDYH EHHQ H[SHQGHG RQ RWKHU FKLFNV HQKDQFLQJ WKHLU JURZWK DQG VXUYLYDO 0RFN DQG 3DUNHU f VWDWHG WKH VDPH DVVXPSWLRQ IRU /DFNnV f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

PAGE 131

%XW HYLGHQFH IURP H[SHULPHQWV XVHG WR WHVW D UHODWHG K\SRWKHVLV VXJJHVWV WKDW SDUHQWV GR QRW LJQRUH FKDQJHV LQ EURRG VL]HV ZKHQ GHWHUPLQLQJ KRZ PXFK IRRG WR GHOLYHU ,Q WKH PDMRULW\ RI ELUG VSHFLHV ZKRVH EURRGV KDYH EHHQ H[SHULPHQWDOO\ HQODUJHG SDUHQWV VXFFHVVIXOO\ UDLVHG WKH HQODUJHG EURRGV UHYLHZV LQ /HVVHOOV
PAGE 132

FRQWURO WKUHHFKLFNf EURRGV YHUVXV EURRGV WKDW ZHUH HQODUJHG WR IRXU FKLFNVf E\ DGGLQJ D FKLFN DQG YHUVXV EURRGV WKDW ZHUH UHGXFHG WR WZR FKLFNVf E\ UHPRYLQJ WKH WKLUGKDWFKHG &f FKLFN 7KLV H[SHULPHQWDO GHVLJQ IRFXVVHG RQ WKH HIIHFWV RI WKH GHDWK RI WKH &FKLFN RQ SDUHQWV DQG VHQLRU FKLFNV LQ D \HDU ZKHQ IRRG ZDV DSSDUHQWO\ LQ VKRUW VXSSO\ VHH &KDSWHU f )RU H[DPSOH LI SDUHQWDO IHHGLQJ RI WKH &FKLFN GHFUHDVHG WKH DPRXQW RI IRRG DYDLODEOH WR WKH VHQLRUV ZLWKRXW FRVW WR WKH SDUHQW WKHQ WKH VHQLRUV DORQH ZRXOG JDLQ D SUR[LPDWH EHQHILW IURP WKH &FKLFNnV GHDWK 7KLV SDWWHUQ ZRXOG EH HYLGHQW LI LQ P\ H[SHULPHQWV SDUHQWV EURXJKW WKH VDPH DPRXQW RI IRRG WR EURRGV RI DOO VL]HV EXW VHQLRUV UHFHLYHG f WKH PRVW IRRG LQ WZRFKLFN EURRGV IURP ZKLFK WKH \RXQJHVW KDG EHHQ UHPRYHG f LQWHUPHGLDWH DPRXQWV LQ XQPDQLSXODWHG WKUHHFKLFN EURRGV DQG f WKH OHDVW IRRG LQ EURRGV WR ZKLFK D IRXUWK FKLFN KDG EHHQ DGGHG %\ FRQWUDVW SDUHQWV PD\ EULQJ H[WUD IRRG WR &FKLFNV DW QR FRVW WR WKH VHQLRUV LQ ZKLFK FDVH SDUHQWV DORQH PD\ EHQHILW IURP WKH GHDWK RI WKH &FKLFN ,I WKLV ZHUH WKH FDVH WKHQ VHQLRUV VKRXOG JHW WKH VDPH DPRXQW RI IRRG LQ EURRGV RI DOO VL]HV %XW SDUHQWV VKRXOG DGMXVW WKHLU IRRG GHOLYHULHV WR EURRG VL]HV VXFK WKDW WKH WRWDO IRRG GHOLYHUHG ZRXOG EH ORZHVW IRU WZRFKLFN DQG KLJKHVW IRU IRXUFKLFN EURRGV

PAGE 133

0HWKRGV 6WXG\ 6LWH 7KH VWXG\ RFFXUUHG RQ 6XQNHQ LVODQG RQH RI WZR VSRLO LVODQGV WKDW PDNH XS $ODILD %DQNV LQ +LOOVERURXJK %D\ +LOOVERURXJK &R )ORULGD %URZQ SHOLFDQV QHVWHG LQ WKH WUHH FDQRS\ P DERYH WKH JURXQG /HZLV DQG /HZLV GHVFULEH WKH YHJHWDWLRQ RQ WKHVH LVODQGVf %URRGVL]H 0DQLSXODWLRQV 1HVWV WKDW KDWFKHG WKUHH FKLFNV WKDW DOO VXUYLYHG IRU D PLQLPXP RI GD\V ZHUH DVVLJQHG WR UHFHLYH RQH RI WKUHH H[SHULPHQWDO WUHDWPHQWV 7KHVH WUHDWPHQWV FRQVLVWHG RI HQODUJLQJ UHGXFLQJ RU OHDYLQJ EURRG VL]HV DW WKUHH FKLFNV DV D FRQWURO VHH EHORZ IRU GHWDLOVf 7KUHHFKLFN EURRGV ZHUH WKH DYHUDJH FOXWFK VL]H LQ WKLV HDUO\ SDUW RI WKH VHDVRQ &KDSWHU f %URRG VL]HV ZHUH H[SHULPHQWDOO\ DOWHUHG EHIRUH WKH ILUVWKDWFKHG $f FKLFN UHDFKHG GD\V RI DJH 7KXV EURRG VL]HV ZHUH DOWHUHG LQ WKH ZHHN EHIRUH WKH SHDN SHULRG RI PRUWDOLW\ GXH WR VWDUYDWLRQ DQG VLEOLFLGH &KDSWHU f 1HVWV ZHUH PDWFKHG GXULQJ WUHDWPHQW VR WKDW VHWV RI WKUHH EURRGV WKDW ZHUH LQLWLDWHG LH WKH $FKLFN KDWFKHGf ZLWKLQ D IHZ GD\V RI HDFK RWKHU HDFK UHFHLYHG D GLIIHUHQW UDQGRPO\ DVVLJQHG EURRGVL]H WUHDWPHQW 0HPEHUV RI HDFK WKUHHEURRG VHW ZHUH WUHDWHG RQ WKH VDPH GD\

PAGE 134

, FRPSDUHG WKH WRWDO IRRG GHOLYHUHG VHH )HHGLQJ %HKDYLRU EHORZf WR WUHDWPHQW EURRGV WKDW ZHUH NHSW XQGHU FRQWLQXRXV GD\OLJKW REVHUYDWLRQ IRFDO QHVWVf 0HWKRGV RI ZDWFKLQJ WKHVH IRFDO QHVWV ZHUH GHVFULEHG EHORZ LQ &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV 7KH ODVWKDWFKHG &f FKLFN ZDV UHPRYHG IURP VHYHQ RI WKHVH IRFDO QHVWV WR FUHDWH D WUHDWPHQW JURXS RI H[SHULPHQWDOO\ UHGXFHG WZRFKLFN %f EURRGV )LYH RI WKHVH &FKLFNV EHFDPH 'FKLFNV ZKHQ WKH\ ZHUH DGGHG WR HDFK RI ILYH RWKHU IRFDO QHVWV WR FUHDWH WKH H[SHULPHQWDOO\ HQODUJHG WUHDWPHQW JURXS RI IRXUFKLFN %f EURRGV 2QH RI WKH UHPDLQLQJ &FKLFNV ZDV SODFHG LQ D QHVW ZKHUH WKH WKLUG HJJ KDG IDLOHG WR KDWFK 7KLV QHVW ZDV QRW XVHG LQ P\ VWXG\ 7KH RWKHU UHPDLQLQJ &FKLFN ZDV DGGHG WR RQH RI WKH ILYH HQODUJHG EURRGV WR UHSODFH WKH RULJLQDO & FKLFN WKDW KDG GLHG ZLWKLQ GD\V DIWHU WUHDWPHQW )LYH IRFDO QHVWV ZHUH DVVLJQHG WR WKH FRQWURO JURXS FRQVLVWLQJ RI WKUHHFKLFN %f EURRGV ,Q HDFK FRQWURO QHVW RQ WKH GD\ WKDW LW UHFHLYHG LWV WUHDWPHQW DVVLJQPHQW UHPRYHG DQG WKHQ LPPHGLDWHO\ UHWXUQHG HDFK &FKLFN WR LWV QHVW 6HYHUDO OLQHV RI HYLGHQFH VXJJHVW WKDW IRVWHUHG FKLFNV ZHUH WUHDWHG VLPLODUO\ WR UHVLGHQW &FKLFNV DOWKRXJK GLG QRW WHVW WKLV H[SHULPHQWDOO\ )LUVW DOO 'FKLFNV ZHUH DFFHSWHG DQG IHG E\ WKHLU IRVWHU SDUHQWV 6HFRQG DOO & DQG 'FKLFNV GLHG DIWHU D VLPLODUO\ VKRUW SHULRG IROORZLQJ WUHDWPHQW VHH EHORZf 2QH 'FKLFN DFWXDOO\ OLYHG ORQJHU WKDQ WKH UHVLGHQW &FKLFN

PAGE 135

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n WUHDWPHQW ZKHQ FRPSDUHG IRRG GHOLYHULHV WR EURRGV LQ DOO WKUHH WUHDWPHQW JURXSV 7KLV FRPSDULVRQ LQYROYHG DOO ILYH HQODUJHG DQG FRQWURO EURRGV DQG VL[ RI WKH VHYHQ UHGXFHG EURRGV D WRWDO RI WUHDWPHQW EURRGVf 7KH VHYHQWK UHGXFHG EURRG ZDV RPLWWHG IURP WKLV DQDO\VLV EHFDXVH LW FRQWDLQHG WZR FKLFNV IRU RQO\ GD\V SRVWWUHDWPHQW 7KH WUHDWPHQWV UHPDLQHG LQ HIIHFW IRU GD\V SRVWn WUHDWPHQW LQ WKUHH FRQWURO DQG ILYH UHGXFHG EURRGV %\ WKH QLQWK GD\ WKH WKLUG FKLFN GLHG LQ RQH RI WKH FRQWURO EURRGV 2QO\ RQH FRQWURO EURRG VWLOO FRQWDLQHG WKUHH FKLFNV E\ GD\V SRVWWUHDWPHQW 7KHUHIRUH UHVWULFWHG P\ DQDO\VLV WR WKH ILUVW GD\V SRVWWUHDWPHQW ZKHQ FRPSDUHG IRRG GHOLYHULHV WR FRQWURO YHUVXV UHGXFHG EURRGV FRXOG KDYH FRQGXFWHG D ILQHUJUDLQ DQDO\VLV E\ FRPSDULQJ IRRG GHOLYHULHV DPRQJ WUHDWPHQWV VHSDUDWHO\ IRU HDFK RI WKH ILUVW GD\V SRVWWUHDWPHQW GLG QRW GR VR

PAGE 136

EHFDXVH RI WKH KLJK YDULDQFH LQ GDLO\ IRRGGHOLYHULHV 'XULQJ WKH ILUVW GD\V SRVWWUHDWPHQW EURRGV UHFHLYHG DQ\ZKHUH IURP IXQLWV RI IRRG SHU GD\ VHH )HHGLQJ %HKDYLRU EHORZ IRU GHILQLWLRQ RI IXQLWV DQG PHWKRGV XVHG LQ TXDQWLI\LQJ IRRG DPRXQWVf 7KH PLQLPXP IRRG GHOLYHUHG SHU GD\ DYHUDJHG sf IXQLWV DQG WKH PD[LPXP DYHUDJHG sf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nV DJH ZDV GD\V DQG DW OHDVW HYHU\ GD\V WKHUHDIWHU XQWLO IOHGJLQJ DJH 7KLV FHQVXVLQJ VFKHGXOH ZDV DOVR IROORZHG IRU IRFDO QHVWV VHH &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV EHORZf 7KH EURRGPDQLSXODWLRQ H[SHULPHQW WKXV LQYROYHG UHGXFHG %f EURRGV HQODUJHG

PAGE 137

%f EURRGV DQG FRQWURO %f EURRGV WKDW ZHUH XVHG WR FRPSDUH IOHGJLQJ VXFFHVV DQG WLPLQJ RI QHVWOLQJ PRUWDOLW\ &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV 0\ WZR ILHOG DVVLVWDQWV DQG XVHG D VSRWWLQJ VFRSH DQG ELQRFXODUV IURP D EOLQG WR REVHUYH QHVWV P DZD\ )RFDO QHVWV QHVWV XVHG LQ EHKDYLRUDO REVHUYDWLRQVf ZHUH NHSW XQGHU FRQWLQXRXV REVHUYDWLRQ GXULQJ GD\OLJKW KRXUV IURP $SULO WKURXJK 0D\ 2Q PRVW GD\V WZR REVHUYHUV DOWHUQDWHG DSSUR[LPDWHO\ KRXU REVHUYDWLRQ SHULRGV W\SLFDOO\ WUDGLQJ RII QHDU PLGGD\ 'XULQJ WKH ZHHN RI SHDN QHVWOLQJ DFWLYLW\ ERWK REVHUYHUV PDLQWDLQHG FRQWLQXRXV GDZQ WR GXVN YLJLOV (DFK REVHUYHU WUDFNHG DFWLYLWLHV LQ XS WR D PD[LPXP RI IRFDO QHVWV GXULQJ DQ REVHUYDWLRQ SHULRG :H VFDQQHG WKHVH IRFDO QHVWV VHTXHQWLDOO\ IURP ULJKW WR OHIW WKURXJK D YLVXDO DUF RI r DQG FRQWLQXHG WR VFDQ WKURXJK WKLV SUHVHW VHTXHQFH XQWLO IHHGLQJ RU ILJKWLQJ EHKDYLRU VHH EHORZf ZDV REVHUYHG DW D QHVW :H WKHQ PRQLWRUHG DOO DFWLYLWLHV LQ WKH QHVW XQWLO IHHGLQJ RU ILJKWLQJ FHDVHG VHH EHORZf DW ZKLFK SRLQW REVHUYDWLRQV ZHUH WHUPLQDWHG IRU WKDW QHVW DQG WKH VFDQ ZDV UHVXPHG VWDUWLQJ ZLWK WKH QH[W QHVW LQ WKH VHTXHQFH ,I GXULQJ D VFDQ ZH REVHUYHG IHHGLQJ LQ RQH QHVW DQG ILJKWLQJ LQ DQRWKHU QHVW ZH ZDWFKHG WKH QHVW LQ ZKLFK ILJKWLQJ ZDV RFFXUULQJ ,I WKH VDPH W\SH RI EHKDYLRU IHHGLQJ RU ILJKWLQJf ZDV RFFXUULQJ LQ WZR RU PRUH QHVWV LQ

PAGE 138

D SDUWLFXODU VFDQ ZH ZDWFKHG ZKLFKHYHU QHVW ZDV QH[W LQ WKH VFDQ VHTXHQFH 'DZQ WR GXVN PRQLWRULQJ RI QHVWOLQJ DFWLYLWLHV LQ LQGLYLGXDO IRFDO QHVWV EHJDQ RQ WKH GD\ WKDW D QHVW UHFHLYHG LWV EURRGVL]H WUHDWPHQW VHH %URRGVL]H 0DQLSXODWLRQV DERYHf DQG FRQWLQXHG XQWLO WKH ILUVWKDWFKHG $f FKLFN UHDFKHG DJH GD\V $IWHU WKLV QHVWV ZHUH UHWLUHG IURP WKH IRFDO VDPSOH EXW ZHUH REVHUYHG RSSRUWXQLVWLFDOO\ XQWLO WKH $FKLFN UHDFKHG D PLQLPXP DJH RI GD\V FRQWLQXHG WR FHQVXV IRUPHU IRFDO QHVWV DW OHDVW HYHU\ GD\V XQWLO DOO UHVLGHQWV KDG GLHG RU UHDFKHG DJH GD\V DSSUR[LPDWHO\ WKH DJH RI IOHGJLQJ VHH &KDSWHU f 'XUDWLRQ RI VXUYLYDO ZDV GHILQHG DV WKH DJH RI D FKLFN DW GHDWK RU GD\V IRU FKLFNV WKDW OLYHG WR IOHGJLQJ DJH XVHG \HOORZ DQG EODFN LQGHOLEOH PDUNHU SHQV WR GLVWLQJXLVK QHZO\ KDWFKHG FKLFNV DJHG KDWFKLQJ GD\f WR GD\V DFFRUGLQJ WR WKHLU KDWFKLQJ RUGHU PDUNHG ROGHU FKLFNV ZLWK EOXH DQG \HOORZ DFU\OLF SDLQW DQG IODJJLQJ WDSH VTXDUHV JOXHG ZLWK FRQWDFW FHPHQW RQWR FKLFN EDFNV DQG KHDGV :LWKLQ D EURRG FRORUV ZHUH UDQGRPO\ DVVLJQHG WR FKLFNV RI GLIIHUHQW KDWFKLQJ UDQNV :H UHIUHVKHG FKLFN PDUNV HYHU\ GD\V XQWLO $FKLFNV ZHUH GD\V ROG DQG HYHU\ GD\V WKHUHDIWHU XQWLO IOHGJLQJ 7KH DJHV DQG KDWFKLQJ RUGHU ZDV NQRZQ SUHFLVHO\ IRU VRPH QHVWOLQJV HVWLPDWHG WKH DJHV RI UHPDLQLQJ QHVWOLQJV IURP D FXUYH RI FXOPHQ JURZWK YHUVXV DJH RI FKLFNV ZKRVH

PAGE 139

DJHV ZHUH NQRZQ $SSHQGL[ $f &XOPHQV ZHUH PHDVXUHG LQ PP ZLWK D FOHDU SODVWLF UXOHU )HHGLQJ %HKDYLRU 'XULQJ WKH ILUVW GD\V RI QHVWOLQJ OLIH EURZQ SHOLFDQ SDUHQWV IHHG WKHLU FKLFNV DOPRVW H[FOXVLYHO\ E\ UHJXUJLWDWLQJ ILVK RQWR WKH QHVW IORRU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf $V WKH FKLFNV JHW ROGHU WKH\ EHJLQ WR LQWHUFHSW WKH IRRG EHIRUH LW UHDFKHV WKH QHVW IORRU E\ UHDFKLQJ LQWR WKH SDUHQWnV SRXFK %\ WKH WLPH QHVWOLQJV UHDFK DJH GD\V DOPRVW DOO IRRG LV GHOLYHUHG GLUHFWO\ WR WKH FKLFNV LQ WKLV PDQQHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf :KHQ VFDQQLQJ QHVWV WR VHOHFW RQH WR ZDWFK ZH FRQVLGHUHG DV IHHGLQJ EHKDYLRU DOO FDVHV ZKHUH D SDUHQW ORZHUHG LWV RSHQ ELOO RYHU VPDOO FKLFNV RU KDG ROGHU FKLFNV WKUXVW WKHLU ELOOV LQWR WKH SDUHQWnV RSHQ JDSH ZKHWKHU RU QRW IRRG ZDV GHOLYHUHG 7KH HQG RI D SHULRG RI IHHGLQJ DFWLYLW\ ZDV GHILQHG DV RFFXUULQJ ZKHQ WKH SDUHQW EHJDQ D QRQIHHGLQJ DFWLYLW\ ZLWKRXW UHVXPSWLRQ RI IHHGLQJ DFWLYLW\ IRU D PLQLPXP RI PLQXWH 1RQIHHGLQJ DFWLYLWLHV LQFOXGHG SUHHQLQJ ZLQJIODSSLQJ QHVWFOHDQLQJ WRVVLQJ ILVK ERQHV VNLQ VWLFNV DQG YDULRXV XQLGHQWLILDEOH VFUDSV IURP WKH QHVWf DGMXVWLQJ VWLFNV LQ WKH QHVW DGRSWLQJ D UHVWLQJ SRVWXUH LQ ZKLFK WKH SDUHQW KHOG LWV FORVHG ELOO RXW RI UHDFK RI LWV FKLFNV SRVWXUHV VKRZQ LQ ILJXUHV DQG RI 6FKUHLEHU f QHVW UHOLHI

PAGE 140

EHKDYLRU 6FKUHLEHU f GLVSOD\LQJ WR RU VQDSSLQJ DW D QHLJKERU KRSSLQJ WR D SHUFK RU IO\LQJ DZD\ 7KH DPRXQW RI IRRG WKDW SDUHQWV DWWHPSWHG WR GHOLYHU WR WKH EURRG ZDV HVWLPDWHG IURP WKH IUHTXHQF\ DQG ORQJHVW OLQHDU GLPHQVLRQ RI IRRG UHJXUJLWDWHG GLUHFWO\ WR HDFK FKLFN RU RQWR WKH QHVW IORRU )RRG VKDUHV JDLQHG E\ FKLFNV ZHUH GHWHUPLQHG E\ QRWLQJ ZKLFK LQGLYLGXDO FKLFNV VZDOORZHG EROXVHV DQG E\ HVWLPDWLQJ EROXV VL]HV E\ FRPSDULQJ WKH VL]H RI WKH EXOJH LQ D FKLFNnV QHFN WR WKH GLPHQVLRQV RI WKH SDUHQWnV ELOO EDVHG RQ 0RFN f )RRG DPRXQWV DUH H[SUHVVHG LQ IRRGXQLWV IXQLWVf WKH OHQJWK RI D EROXV DV D SHUFHQW RI WKH SDUHQWnV ELOO OHQJWK 'XULQJ VRPH SHULRGV RI IHHGLQJ EHKDYLRU ZH FRXOG QRW WHOO ZKHWKHU RU QRW IRRG KDG EHHQ GHOLYHUHG EHFDXVH WKH SDUHQWnV ERG\ EORFNHG WKH REVHUYHUn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

PAGE 141

)LJKWLQJ %HKDYLRU )LJKWV LQYROYHG RQH FKLFN GHOLYHULQJ RQH RU PRUH EORZV WR WKH KHDG RU ERG\ RI DQRWKHU FKLFN ZLWK VXIILFLHQW IRUFH WR PRYH WKH YLFWLPnV KHDG ZKHQ VWUXFN VHH &KDSWHU IRU PRUH GHWDLOHG GHVFULSWLRQVf 7KH HQG RI D ILJKW ZDV GHILQHG DV RFFXUULQJ ZKHQ QR IXUWKHU EORZV ZHUH H[FKDQJHG IRU VHFRQGV $QLPDO &DUH &RQVLGHUDWLRQV 0\ H[SHULPHQWDO WUHDWPHQWV ZHUH XQOLNHO\ WR KDYH FDXVHG WKH IRVWHUHG &FKLFNV WR EH DWWDFNHG E\ VLEOLQJV RU WR IDOO YLFWLP WR VLEOLFLGH DQG VWDUYDWLRQ PRUH IUHTXHQWO\ WKDQ ZRXOG KDYH RFFXUUHG KDG WKH\ EHHQ OHIW LQ WKHLU KRPH QHVWV $PRQJ WKH XQPDQLSXODWHG WKUHHFKLFN QHVWV WKDW REVHUYHG LQ WKH FRXUVH RI \HDUnV VWXG\ QR QHVW IOHGJHG DOO WKUHH FKLFNV DQG DOO LGHQWLILDEOH &FKLFNV GLHG XVXDOO\ IURP VWDUYDWLRQ DQGRU VLEOLFLGH &KDSWHU f 'XULQJ ODWH LQFXEDWLRQ DQG WKH ILUVW ZHHN RI KDWFKLQJ SDUHQWV XVXDOO\ UHPDLQHG RQ WKHLU QHVWV ZKLOH KDQGOHG WKH QHVW FRQWHQWV )OHGJLQJ VXFFHVV ZDV DFWXDOO\ EHWWHU LQ IRFDO QHVWV WKDQ LQ RWKHU SDUWV RI WKH FRORQ\ WKDW ZH QHYHU GLVWXUEHG &KDSWHU f

PAGE 142

5HVXOWV %URRGV RI DOO WKUHH H[SHULPHQWDO VL]HV IOHGJHG D VLPLODU QXPEHU RI FKLFNV ; s s DQG s FKLFNV IOHGJHG IURP % % DQG % QHVWV UHVSHFWLYHO\ .UXVNDO:DOOLV 2QHZD\ $129$ + FRUUHFWHG IRU WLHV 3 f 7KH GXUDWLRQ RI VHQLRU FKLFN VXUYLYDO ZDV DOVR VLPLODU LQ DOO WUHDWPHQWV ZLWK $FKLFNV OLYLQJ DQ DYHUDJH RI sf sf DQG s f GD\V DQG %FKLFNV OLYLQJ DQ DYHUDJH RI s f s f DQG s f GD\V LQ % % DQG % QHVWV UHVSHFWLYHO\ .UXVNDO:DOOLV WHVW + 3 IRU $FKLFNV DQG + 3 IRU % FKLFNV ERWK 16f 3DUHQWV EURXJKW VLPLODU DPRXQWV RI IRRG WR EURRGV RI DOO WKUHH VL]HV GXULQJ WKH ILUVW GD\V IROORZLQJ EURRGVL]H PDQLSXODWLRQV )LJXUH .UXVNDO:DOOLV WHVW + 3 f $FKLFNV LQ DOO EURRGVL]HV FRQVXPHG VLPLODU DPRXQWV RI IRRG GXULQJ WKLV SHULRG )LJXUH .UXVNDO:DOOLV WHVW + 3 f 7RWDO FRQVXPSWLRQ E\ %FKLFNV ZDV DOVR VLPLODU DPRQJ WKH EURRGVL]HV GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW )LJXUH .UXVNDO:DOOLV WHVW + 3 f %\ FRQWUDVW ZKHQ FRPSDUHG UHGXFHG YHUVXV FRQWURO EURRGV GD\V SRVWWUHDWPHQW IRXQG WKDW %FKLFNV DQG HQWLUH EURRGV JDLQHG VLJQLILFDQWO\ PRUH IRRG LQ % WKDQ LQ % QHVWV )LJXUH 0DQQ:KLWQH\ 8 3 IRU ERWK

PAGE 143

WUHDWPHQW FRPSDULVRQV RI EURRGV DQG RI %FKLFNVf ZKLOH $ FKLFNV REWDLQHG VLPLODU DPRXQWV LQ ERWK WUHDWPHQWV )LJXUH 0DQQ:KLWQH\ 8 3 f ,Q RQH RI WKH WKUHH % EURRGV XVHG LQ WKLV DQDO\VLV WKH $FKLFN ZDV VPDOOHU WKDQ WKH %FKLFN SULRU WR WUHDWPHQW WKHUHIRUH FRPSDUHG IRRG FRQVXPHG E\ %FKLFNV LQ % YHUVXV % EURRGV DJDLQ WKLV WLPH FODVVLI\LQJ DV D %FKLFN WKH $FKLFN WKDW ZDV VPDOOHU WKDQ LWV %VLEOLQJ :KHQ WKLV $FKLFN ZDV FODVVLILHG DV DQ %FKLFN WKH GLIIHUHQFH EHWZHHQ IRRG FRQVXPHG E\ %FKLFNV LQ UHGXFHG DQG FRQWURO EURRGV ZDV QR ORQJHU VLJQLILFDQW 0DQQ :KLWQH\ 8 3 IRU %FKLFNV UHFHLYLQJ ; s IXQLWV LQ % EURRGV DQG ; IXQLWV LQ % EURRGVf 6LPLODUO\ EHFDXVH WKH RQH %FKLFN ZDV ODUJHU WKDQ LWV $VLEOLQJ UHFODVVLILHG LW DV DQ $FKLFN :LWK WKLV FKLFN UHFODVVLILHG IRXQG WKDW $FKLFNV VWLOO UHFHLYHG VLPLODU DPRXQWV RI IRRG LQ UHGXFHG ; s f DQG FRQWURO EURRGV ; s 0DQQ:KLWQH\ 8 3 f SRROHG DOO WUHDWPHQWV WR GHWHUPLQH LI $FKLFNV JHQHUDOO\ UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV ,Q RI WKH WUHDWPHQW EURRGV $FKLFNV UHFHLYHG PRUH IRRG WKDQ WKHLU %VLEOLQJV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW WDLOHG 6LJQ 7HVW 3 f 6LPLODUO\ LQ WKH WUHDWPHQW EURRGV WKDW VWLOO FRQWDLQHG WZR FKLFNV GD\V DIWHU WUHDWPHQW $FKLFNV UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV LQ DOO H[FHSW WKUHH EURRGV WDLOHG 6LJQ 7HVW 3 f

PAGE 144

'XULQJ WKH ILUVW GD\V SRVWWUHDWPHQW $ DQG %FKLFNV HDFK UHFHLYHG VLJQLILFDQWO\ PRUH IRRG WKDQ GLG &FKLFNV LQ % EURRGV DQG WKDQ GLG & DQG 'FKLFNV FROOHFWLYHO\ LQ % EURRGV ,Q DOO % SOXV % QHVWV WKH DPRXQWV RI IRRG GHOLYHUHG WR &FKLFNV DQG WR & DQG 'FKLFNV FROOHFWLYHO\ ZHUH OHVV WKDQ DPRXQWV GHOLYHUHG WR HLWKHU WKHLU $ RU %VLEOLQJV WDLOHG 6LJQ 7HVW 3 f 7KH GLIIHUHQFH EHWZHHQ WKH SHUFHQW RI IRRG JDLQHG E\ $ FKLFNV PLQXV WKDW JDLQHG E\ %FKLFNV DYHUDJHG b ^s b 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf ,Q FRQWUDVW WKH GLIIHUHQFH EHWZHHQ WKH SHUFHQW RI IRRG JDLQHG E\ %FKLFNV PLQXV &FKLFNV DYHUDJHG b s b 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 7KHVH GLIIHUHQFHV ZHUH VLJQLILFDQW VXFK WKDW WKH SHUFHQW RI IRRG JDLQHG E\ $ DQG %FKLFNV ZDV PRUH VLPLODU WKDQ WKH SHUFHQW RI IRRG JDLQHG E\ % DQG &FKLFNV :LOFR[RQ VLJQHGUDQNV WHVW ] 3 DOO ILYH QHVWV KDG VPDOOHU GLIIHUHQFHV LQ $ YHUVXV %FKLFN IRRG VKDUHV WKDQ LQ % YHUVXV &FKLFN IRRG VKDUHV GLIIHUHQFHV GHULYHG IURP GDWD SUHVHQWHG LQ 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 6DPSOH VL]HV ZHUH WRR VPDOO RQO\ WKUHH QHVWVf WR GR D VLPLODU FRPSDULVRQ IRU % QHVWV GD\V SRVWWUHDWPHQW ,Q % QHVWV GD\V SRVWn WUHDWPHQW WKH PDJQLWXGH RI WKH GLIIHUHQFH EHWZHHQ $ YHUVXV %FKLFN VKDUHV ZDV VLPLODU WR WKDW EHWZHHQ % YHUVXV &FKLFN VKDUHV :LOFR[RQ VLJQHGUDQNV WHVW ] 3 QHVWV KDG VPDOOHU GLIIHUHQFHV LQ $ YHUVXV %FKLFN IRRG

PAGE 145

VKDUHV WKDQ LQ % YHUVXV &FKLFN IRRG VKDUHV GLIIHUHQFHV GHULYHG IURP GDWD SUHVHQWHG LQ 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 7KH GLIIHUHQFH EHWZHHQ $ DQG %FKLFN VKDUHV DYHUDJHG b bf DQG EHWZHHQ % DQG MXQLRU & SOXV 'f VKDUHV DYHUDJHG bf ,Q PRVW % DQG % EURRGV OHVV WKDQ D TXDUWHU RI WKH WRWDO IRRG GHOLYHUHG ZDV FRQVXPHG E\ WKH VPDOOHVW FKLFNV & FKLFNV LQ % DQG & DQG 'FKLFNV FROOHFWLYHO\ LQ % QHVWV VHH 7DEOH f ,Q % QHVWV DQ DYHUDJH RI b s b 7DEOH ff RI WKH WRWDO IRRG GHOLYHUHG WR WKH EURRG WKURXJK GD\V SRVWWUHDWPHQW ZDV FRQVXPHG E\ WKH & DQG FKLFNV FROOHFWLYHO\ ,Q % QHVWV &FKLFNV FRQVXPHG DQ DYHUDJH RI b s b 7DEOH f RI WKH WRWDO IRRG GHOLYHUHG WR WKH EURRG GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW ,Q WKH ILUVW GD\V SRVWWUHDWPHQW &FKLFNV FRQVXPHG DQ DYHUDJH RI b sb 7DEOH f RI WKH WRWDO IRRG GHOLYHUHG WR % EURRGV 'LVFXVVLRQ 6HQLRU FKLFN VXUYLYDO ZDV QRW DIIHFWHG E\ WKH EURRG VL]H WUHDWPHQWV 7KLV GRHV QRW ILW WKH SUHGLFWLRQ RI DGDSWLYH H[SODQDWLRQV RI EURRG UHGXFWLRQ WKDW VHQLRUV VKRXOG VXUYLYH EHWWHU LQ EURRGV IURP ZKLFK &FKLFNV ZHUH UHPRYHG %XW EHFDXVH &FKLFNV VXUYLYHG VR EULHIO\ WKLV H[SHULPHQW GLG QRW DGHTXDWHO\ WHVW WKH SUHGLFWLRQ ,W LV VWLOO SRVVLEOH WKDW KDG &FKLFNV QRW GLHG ZKHQ WKH\ GLG WKHLU

PAGE 146

FRQWLQXHG VXUYLYDO ZRXOG KDYH KDG D QHJDWLYH LPSDFW RQ WKH VXUYLYDO RI WKHLU VHQLRU VLEOLQJV 7R WHVW WKLV SUHGLFWLRQ LQ VSHFLHV ZKHUH EURRG UHGXFWLRQ RFFXUV VR TXLFNO\ ZRXOG UHTXLUH SUHYHQWLQJ EURRG UHGXFWLRQ IURP RFFXUULQJ HJ H[SHULPHQWDO GHVLJQ RI +XVE\ f E\ UHSODFLQJ &FKLFNV WKDW GLHG ZLWK QHZ LQGLYLGXDOV WR PDLQWDLQ % DQG % EURRGV %URRG UHGXFWLRQ PD\ QRW EH DGDSWLYH IRU EURZQ SHOLFDQV 7KH GHDWK RI WKH &FKLFN PD\ EH D QHJDWLYH FRQVHTXHQFH RI DQ DV\QFKURQRXV KDWFKLQJ SDWWHUQ WKDW PD\ KDYH HYROYHG QRW EHFDXVH LW IDFLOLWDWHV EURRG UHGXFWLRQ EXW EHFDXVH LW FUHDWHV VRPH RWKHU IDYRUDEOH FRQGLWLRQV )RU H[DPSOH +XVVHOO f DUJXHG WKDW VWDUWLQJ LQFXEDWLRQ RQ WKH ILUVW HJJ PD\ PLQLPL]H WKH WLPH EHWZHHQ OD\LQJ WKH ILUVW HJJ DQG IOHGJLQJ WKH ILUVW QHVWOLQJ 7KLV FRXOG PLQLPL]H WKH SHULRG GXULQJ ZKLFK HDUO\ODLG HJJV DUH DW ULVN RI SUHGDWLRQ &ODUN DQG :LOVRQ f GHYHORSHG D PRGHO WKDW SUHGLFWHG DQ DGYDQWDJH WR DV\QFKURQ\ ZKHQHYHU SUHGDWLRQ ULVNV DUH KLJKHU IRU HJJV WKDQ IRU QHVWOLQJV EHFDXVH WKLV PLQLPL]HV WKH SHULRG ZKHQ RQO\ HJJV DUH LQ WKH QHVW 3UHGDWLRQ RI SDUHQWDOO\ DWWHQGHG HJJV DQG QHVWOLQJV ZDV QRW HYLGHQW GXULQJ WKLV VWXG\ EXW GRHV RFFXU LQ RWKHU SRSXODWLRQV UHYLHZHG LQ &KDSWHU f 3UHGDWLRQ SDWWHUQV PD\ KDYH IDYRUHG KDWFKLQJ DV\QFKURQ\ LQ DUHDV VXEMHFW WR KLJK SUHGDWLRQ SUHVVXUHV DV PLJKW EH H[SHFWHG LQ UHDGLO\ DFFHVVLEOH JURXQG QHVWV %LUGV WKDW QHVW LQ DUHDV RI ORZHU

PAGE 147

SUHGDWLRQ HJ SHUKDSV WUHHVf PD\ JDLQ QR DGYDQWDJH IURP KDWFKLQJ DV\QFKURQ\ %URRG UHGXFWLRQ LQ WKHVH QHVWV PD\ EH D FRVW RI DV\QFKURQ\ WKDW LV D UHOLFW RI SDVW SUHGDWLRQ SUHVVXUH 2WKHU SRVVLEOH ZD\V WKDW KDWFKLQJ DV\QFKURQ\ FRXOG EH DGYDQWDJHRXV GHVSLWH EURRGUHGXFWLRQ FRVWV DUH UHYLHZHG E\ 0DJUDWK f 0RVW DUH XQOLNHO\ WR SHUWDLQ WR EURZQ SHOLFDQV %XW LI &FKLFNV QHYHU FRQWULEXWH GLUHFWO\ WR WKHLU SDUHQWn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n&RQQRU f 'R 6HQLRUV *DLQ D )RRG %RQXV IURP %URRG 5HGXFWLRQ" 7KH SUHGLFWLRQ WKDW VHQLRU FKLFNV JDLQ H[WUD IRRG IROORZLQJ EURRG UHGXFWLRQ EHFDXVH SDUHQWV PDLQWDLQ WKH VDPH OHYHO RI IHHGLQJ ZDV QRW VXSSRUWHG GXULQJ WKH SHULRG RI WKLV VWXG\ 3DUHQWDO GHOLYHULHV GLG UHPDLQ WKH VDPH LQ UHGXFHG FRQWURO DQG HQODUJHG EURRGV GXULQJ WKH ILUVW GD\V

PAGE 148

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f JHQHUDOO\ GHPRQVWUDWH WKDW SDUHQWV FDQ UHDU PRUH RIIVSULQJ WKDQ WKH\ QRUPDOO\ GR UHYLHZV LQ /HVVHOOV 0DUWLQ
PAGE 149

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f UHSRUWHG WKDW GHOLYHU\ UDWHV UHPDLQHG XQFKDQJHG ZLWK GHFUHDVLQJ EURRG VL]H WKH SUHGLFWLRQ WKDW LV EDVLF WR DGDSWLYH H[SODQDWLRQV RI EURRG UHGXFWLRQ ,Q DQRWKHU RI WKHVH VWXGLHV RQ %UHZHUnV EODFNELUGV (XRKDDXV FYDQRFHRKDOXV 3DWWHUVRQ HW DO f UHVXOWV ZHUH DPELJXRXV 0DOHV LQ WKLV VSHFLHV GHFUHDVHG WKHLU GHOLYHU\ UDWHV WR UHGXFHG UHODWLYH WR FRQWURO EURRGV EXW WKH VWDWLVWLFDO VLJQLILFDQFH RI WKLV UHODWLRQVKLS ZDV QRW FOHDU DQG GDWD ZHUH QRW SUHVHQWHG RQ ZKHWKHU IHPDOHV FRPSHQVDWHG IRU GHFUHDVHG PDOH IHHGLQJ ,Q FRQWUDVW WKH UDWH RI IRRG GHOLYHULHV RU QHVWYLVLWDWLRQ UDWHV FOHDUO\ GHFUHDVHG ZLWK GHFUHDVLQJ EURRG VL]H LQ ZKLWH UXPSHG VZLIWOHWV $HURGUDPXV VSRGLRSYFULXV 7DUEXUWRQ f VQDLONLWHV 5RVWUKDPXV VRFLDELOLV %HLVVLQJHU f KRXVH PDUWLQV 'HOLFKRQ XUELFD %U\DQW DQG :HVWHUWHUS f WUHH VZDOORZV 7DFKYFLQHWD ELFRORU /HIIHODDU DQG 5REHUWVRQ

PAGE 150

f VQRZ EXQWLQJV 3OHFWURSKHQD[ KYRHUERUHXV +XVVHOO f UHGZLQJHG EODFNELUGV $DHODLXV RKRHQLFHXV &URQPLOOHU DQG 7KRPSVRQ f DQG KRXVH VSDUURZV 3DVVHU GRPHVWLFXV +HJQHU DQG :LQJILHOG f ,Q DQ DGGLWLRQDO SDSHU QRW FRYHUHG LQ WKH UHYLHZV PHQWLRQHG HDUOLHU WKH GXUDWLRQ RI IHHGLQJ ERXWV GHFUHDVHG ZLWK GHFUHDVLQJ EURRG VL]H LQ ULQJ GRYHV 6WUHRWRRHOLD ULVRULD WHQ &DWH DQG +LOEHUV f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f VHQLRU FKLFNV UHFHLYHG OHVV IRRG LQ UHGXFHG WKDQ FRQWURO EURRGV 0RFN DQG /DPH\ f 6HFRQG ZKHQ DQDO\]HG IRRG FRQVXPHG E\ EURZQ SHOLFDQ QHVWOLQJV DFFRUGLQJ WR WKHLU KDWFKLQJ UDQN IRXQG WKDW %FKLFNV UHFHLYHG VLJQLILFDQWO\ OHVV IRRG LQ UHGXFHG WKDQ LQ FRQWURO EURRGV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW 7KLV UHVXOW VXJJHVWHG WKH K\SRWKHVLV WKDW WKH HIIHFW RI &FKLFN ORVV PLJKW GLIIHU IRU $ DQG %

PAGE 151

FKLFNV )RRG WR $FKLFNV PLJKW KDYH UHPDLQHG WKH VDPH ZKLOH IRRG WR %FKLFNV PLJKW KDYH GHFUHDVHG IROORZLQJ EURRG UHGXFWLRQ 2QH SRVVLEOH FDXVH IRU IRRG WR %FKLFNV WR GHFUHDVH IROORZLQJ EURRGUHGXFWLRQ ZRXOG EH LI %FKLFNV LQ FRQWURO EURRGV VHTXHVWHUHG YLUWXDOO\ HYHU\WKLQJ WKDW WKH $ FKLFN GLG QRW HDW LQFOXGLQJ WKH DGGLWLRQDO IRRG WKDW SDUHQWV SUHVXPDEO\ LQWHQGHG WR EH WKH &FKLFNnV VKDUH ,Q VXFK D VLWXDWLRQ %FKLFNV PLJKW DFWXDOO\ EHQHILW IURP WKH FRQWLQXHG VXUYLYDO RI &FKLFNV DV ORQJ DV WKHLU &VLEOLQJV UHPDLQ WRR LQWLPLGDWHG WR WKUHDWHQ WKHLU %VLEOLQJVn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n WUHDWPHQW SURYLGH VXJJHVWLYH EXW LQFRQFOXVLYH HYLGHQFH IRU WKHVH K\SRWKHVHV $Q DOWHUQDWLYH H[SODQDWLRQ LV WKDW WKH VLJQLILFDQW GHFUHDVH LQ IRRG WR %FKLFNV LQ UHGXFHG UHODWLYH WR FRQWURO EURRGV ZDV FDXVHG E\ LQFOXGLQJ D FRQWURO EURRG LQ

PAGE 152

ZKLFK WKH %FKLFN ZDV ODUJHU DQG GRPLQDQW WR LWV $VLEOLQJ :KHQ UHFODVVLILHG WKLV %FKLFN DV DQ $FKLFN IRXQG WKDW IRRG FRQVXPHG E\ $ DQG E\ %FKLFNV GLG QRW GLIIHU EHWZHHQ UHGXFHG DQG FRQWURO EURRGV 7KLV SDWWHUQ ZDV SURGXFHG DV IROORZV %HIRUH UHFODVVLILFDWLRQ ZKHQ FKLFNV ZHUH FODVVLILHG E\ KDWFKLQJ RUGHU IRXQG WKDW %FKLFNV JDLQHG IXQLWV PRUH LQ % WKDQ LQ % EURRGV D VLJQLILFDQW GLIIHUHQFHf ZKHUHDV IRRG DPRXQWV WR $FKLFNV ZHUH VLPLODU LQ % DQG % EURRGV )LJXUH f %XW ZKHQ FKLFNV ZHUH UHFODVVLILHG DFFRUGLQJ WR WKHLU UHODWLYH VL]HV DW WKH WLPH RI WUHDWPHQW IRXQG WKDW %FKLFNV UHFHLYHG RQO\ I XQLWV PRUH LQ % WKDQ LQ % EURRGV $FKLFNV FRQVXPHG WKH UHPDLQGHU RI WKH H[WUD IXQLWV WKDW ZHUH GHOLYHUHG WR VHQLRU FKLFNV LQ % UHODWLYH WR % EURRGV 0\ UHVXOWV LQGLFDWH WKDW HLWKHU f %FKLFNV UHFHLYHG PRUH IRRG LQ UHGXFHG WKDQ FRQWURO EURRGV ZKHQ UDQNHG E\ KDWFKLQJ RUGHUf RU f VHQLRU FKLFNV RI ERWK UDQNV UHFHLYHG VLPLODU DPRXQWV LQ UHGXFHG DQG FRQWURO EURRGV ZKHQ UDQNHG E\ UHODWLYH VL]HVf 7KXV ZKHWKHU WKH GHDWK RI D &VLEOLQJ DIIHFWV $ DQG %FKLFNV GLIIHUHQWO\ UHPDLQV XQFOHDU IRU EURRGV RI EURZQ SHOLFDQV 'DWD RQ IRRG GHOLYHULHV WR $ YHUVXV %FKLFNV LQ UHGXFHG DQG FRQWURO EURRGV KDYH QRW EHHQ SUHVHQWHG LQ DQ\ RI WKH VWXGLHV UHYLHZHG DERYH 7KXV WKH UHODWLYH LPSDFW RI EURRG UHGXFWLRQ RQ IRRG GHOLYHULHV WR VHQLRU FKLFNV RI GLIIHUHQW KDWFKLQJ UDQNV DZDLWV LQYHVWLJDWLRQ LQ DOO RI WKHVH VSHFLHV

PAGE 153

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f FKLFNV ZDV VLJQLILFDQWO\ OHVV WKDQ WKDW GHOLYHUHG WR HLWKHU $ RU %FKLFNV & DQG 'FKLFNV JDLQHG DQ DYHUDJH RI RQO\ b RI WKH WRWDO GHOLYHUHG WR EURRGV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW 6LPLODUO\ LQ WKH ILUVW GD\V SRVWWUHDWPHQW &FKLFNV JDLQHG RQO\ b RI WKH WRWDO IRRG GHOLYHUHG %XW WKH DSSDUHQW VLPLODULW\ DPRQJ WUHDWPHQWV LQ IRRG JDLQHG E\ VHQLRUV FRXOG KDYH EHHQ GXH WR WKH VPDOO VDPSOH VL]HV LQYROYHG +DG PRUH EURRGV EHHQ WUHDWHG FRVWV RI &FKLFNV WR WKHLU VHQLRUV PLJKW KDYH EHHQ GHWHFWHG $ IHHGLQJ KLHUDUFK\ EHWZHHQ WKH WZR VHQLRU FKLFNV ZDV DOVR DSSDUHQW ZLWK $FKLFNV JDLQLQJ PRUH IRRG WKDQ WKHLU % VLEOLQJV %FKLFNV DOVR EHFDPH YLFWLPV RI EURRGUHGXFWLRQ IUHTXHQWO\ G\LQJ RI VWDUYDWLRQ DQG VLEOLFLGH &KDSWHU f

PAGE 154

:KHWKHU RU QRW WKH SUHVHQFH RU DEVHQFH RI %FKLFNV DIIHFWV IRRG VXSSOLHG WR WKHLU $VLEOLQJV UHPDLQV XQWHVWHG 6HQLRUV PD\ KDYH H[SHULHQFHG RWKHU FRVWV IURP WKH FRQWLQXHG SUHVHQFH RI &FKLFNV 6HQLRUV DSSDUHQWO\ KDG WR DWWDFN WKHLU &VLEOLQJV WR PDLQWDLQ WKH GRPLQDQFH KLHUDUFK\ WKDW SURYLGHG VHQLRUV ZLWK D IHHGLQJ DGYDQWDJH RYHU & FKLFNV 7KHVH DWWDFNV FRXOG FDUU\ HQHUJHWLF FRVWV IRU WKH DWWDFNHUV *DUJHWW 0RFN Df ZKR PD\ DOVR ULVN LQMXU\ ZKHQ &FKLFNV UHWXUQ EORZV HJ *HUUDUG DQG %RUWRORWWL f DV WKH\ VRPHWLPHV GR LQ EURZQ SHOLFDQ EURRGV &KDSWHU f 7KH KDWFKLQJ DV\QFKURQ\ WKDW FUHDWHV WKH LQLWLDO FRPSHWLWLYH GLVSDULWLHV DPRQJ VLEOLQJV PD\ UHGXFH WKH FRVWV RI ILJKWLQJ DV VHHPV WR RFFXU LQ ODXJKLQJ JXOOV /DUXV DWULFLOOD +DKQ f DQG FDWWOH HJUHWV %XEXOFXV LELVf )XMLRND 0RFN DQG 3ORJHU f 7KLV PD\ DOVR EH WKH FDVH IRU EURZQ SHOLFDQV EXW VHH &KDSWHU f ZKRVH &FKLFNV XVXDOO\ KDWFK GD\V DIWHU WKHLU $VLEOLQJV &KDSWHU f 7KH LQLWLDO DJH GLIIHUHQFHV OHDG TXLFNO\ WR ODUJH GLVSDULWLHV LQ FKLFN VL]HV ZLWK &FKLFNV RIWHQ EHLQJ KDOI WKH VL]H RI WKHLU VHQLRUV XQSXE GDWDf &XUUHQW PDQLSXODWLRQV RI KDWFKLQJ DV\QFKURQ\ LQ EURZQ SHOLFDQ EURRGV E\ 0 6KLHOGV SHUV FRPPf PD\ VRRQ FODULI\ ZKHWKHU KDWFKLQJ DV\QFKURQ\ GHFUHDVHV WKH FRVWV RI ILJKWLQJ LQ WKLV VSHFLHV &RVWV WR SDUHQWV &OHDU FRVWV RI PDLQWDLQLQJ &FKLFNV IHOO RQ WKH SDUHQWV ZKR EURXJKW PRUH IRRG WR EURRGV ZLWK &

PAGE 155

FKLFNV SUHVHQW GD\V SRVWWUHDWPHQW 7KH DGGLWLRQDO IRRG WKDW SDUHQWV EURXJKW ZDV QRW VXIILFLHQW WR HQVXUH WKDW & FKLFNV UHFHLYHG HQRXJK WR VXUYLYH $OO &FKLFNV HYHQWXDOO\ GLHG PRVW GRLQJ VR E\ WKH HQG RI WKH ILUVW GD\V SRVWn WUHDWPHQW 3DUHQWV LQ FRQWURO DQG HQODUJHG EURRGV ORVW WKHLU LQYHVWPHQW LQ &FKLFNV LQYHVWPHQW WKDW SDUHQWV FRXOG KDYH XVHG WR HQKDQFH WKH FKDQFHV RI FXUUHQW $ DQG %FKLFNV RU IXWXUH RIIVSULQJ 7KDW SDUHQWV ZLWK UHGXFHG EURRGV LQYHVWHG OHVV WKDQ WKRVH ZLWK FRQWURO EURRGV VXJJHVWV WKDW SDUHQWV ZHUH FDSDEOH RI LQYHVWLQJ PRUH LQ UHGXFHG EURRGV WKDQ WKH\ DFWXDOO\ GLG LQYHVW 3UHVXPDEO\ LQ WKLV ORQJOLYHG VSHFLHV SDUHQWV WKDW GR QRW LQYHVW LQ FXUUHQW RIIVSULQJ DW WKH PD[LPXP OHYHO SURGXFH PRUH RIIVSULQJ RYHU WKHLU OLIHWLPHV WKDQ GR SDUHQWV WKDW PD[LPL]H WKHLU LQYHVWPHQW LQ FXUUHQW RIIVSULQJ HJ :LOOLDPV f 7R LQYHVWLJDWH WKH DFWXDO ILWQHVV FRVWV WR SDUHQWV WKDW IRUHVWDO EURRG UHGXFWLRQ ZLOO UHTXLUH TXDQWLI\LQJ WKH HIIHFWV RI EURRG VL]H PDQLSXODWLRQV RQ FRUUHODWHV RI IXWXUH SDUHQWDO ILWQHVV 2QH VXFK FRUUHODWH PLJKW EH WKH FRQGLWLRQ RI SDUHQWV WKURXJK WKH EUHHGLQJ VHDVRQ ZKHQ WKH PDQLSXODWLRQV ZHUH GRQH 2WKHUV PLJKW LQFOXGH WKH VXUYLYDO RI SDUHQWV LQWR WKH QH[W EUHHGLQJ VHDVRQ DQG WKHLU UHSURGXFWLRQ LQ \HDUV IROORZLQJ WKH EURRG VL]H PDQLSXODWLRQV

PAGE 156

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

PAGE 157

FKLFNV PD\ KDYH EHHQ PHW LQ ERWK WUHDWPHQWV VHH SUHFHGLQJ SDUDJUDSKf ,W ZDV QRW FOHDU IURP P\ UHVXOWV ZKHWKHU % FKLFNV JDLQHG VLPLODU DPRXQWV RI IRRG RU VXIIHUHG D ORVV RI IRRG LQ UHGXFHG UHODWLYH WR FRQWURO EURRGV 7KH SRVVLELOLW\ WKDW %FKLFNV PD\ JDLQ DGGLWLRQDO IRRG LQ EURRGV ZLWK DQ LQWLPLGDWHG &FKLFN VXJJHVWV WKH SRWHQWLDO IRU FRQIOLFW EHWZHHQ SDUHQWV DQG %FKLFNV RYHU ZKR JDLQV WKH &FKLFNn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nV VKDUH %\ EULQJLQJ DGGLWLRQDO IRRG WR EURRGV ZLWK &FKLFNV SDUHQWV DOVR EHKDYHG DV LI WKH\ ZHUH DWWHPSWLQJ WR GHOD\ WKH &FKLFNnV GHDWK 3DUHQWV DQG %FKLFNV PD\ ERWK KDYH IDYRUHG SRVWSRQHPHQW RI EURRG UHGXFWLRQ $OWHUQDWLYHO\ SDUHQWV PLJKW IDYRU EURRG UHGXFWLRQ XQGHU H[DFWO\ WKH FRQGLWLRQV XQGHU ZKLFK %FKLFNV VKRXOG RSSRVH

PAGE 158

LW ,I SDUHQWV LQWHQGHG &FKLFNV WR UHFHLYH WKH H[WUD IRRG GHOLYHUHG WR FRQWURO EURRGV WKHQ LI WKHLU HIIRUWV ZHUH WKZDUWHG E\ %FKLFNV VHFXULQJ WKH H[WUD IRRG SDUHQWV VKRXOG IDYRU WKH GHDWK RI WKH GRRPHG &FKLFNV %FKLFNV E\ FRQWUDVW VKRXOG DWWHPSW WR SURORQJ WKH &FKLFNnV OLIH DV ORQJ DV WKH %FKLFN FRQWLQXHG WR REWDLQ WKH &FKLFNnV IRRG VKDUH &RQIOLFW EHWZHHQ SDUHQWV DQG %FKLFNV FRXOG WDNH WKH IRUP RI SDUHQWV DWWHPSWLQJ WR KDVWHQ EURRG UHGXFWLRQ DQG % FKLFNV DWWHPSWLQJ WR IRUHVWDOO LW 3DUHQWV PLJKW KDVWHQ EURRG UHGXFWLRQ E\ ZLWKKROGLQJ IRRG DQG WROHUDWLQJ QHVWOLQJ ILJKWV 0RFN DQG /DPH\ f 3DUHQWV PLJKW HYHQ LQFUHDVH ILJKWLQJ IUHTXHQF\ E\ DGMXVWLQJ VWLFNV DQG RWKHUZLVH SODFLQJ WKH ELOO ZLWKLQ UHDFK RI KXQJU\ QHVWOLQJV ZLWKRXW SURYLGLQJ IRRG SHUV REVf $ %FKLFN PLJKW GHOD\ LWV &VLEOLQJnV GHDWK E\ FHDVLQJ WR DWWDFN WKH &FKLFN DQG DOORZLQJ WKH &FKLFN WR JDLQ VRPH IRRG 7KHVH SRVVLELOLWLHV UHPDLQ XQWHVWHG DQG DZDLW IXWXUH H[DPLQDWLRQ

PAGE 159

7DEOH 3HUFHQW RI WRWDO IRRG WR WKH EURRG WKDW ZDV FRQVXPHG E\ $ % DQG MXQLRU FKLFNV -UFKLFNVf 6KDUHV WR -UFKLFNV ZHUH DPRXQWV FRQVXPHG E\ &FKLFNV LQ WKUHH FKLFN %f EURRGV DQG DPRXQWV FRQVXPHG FROOHFWLYHO\ E\ & DQG 'FKLFNV LQ IRXUFKLFN %f EURRGV 6KDUHV ZHUH EDVHG RQ WRWDOV FRQVXPHG GXULQJ WKH ILUVW DQG GD\V SRVW WUHDWPHQW 1HVW ,' 3HUFHQW RI $FKLFNV % IRRG FRQVXPHG E\ FKLFNV -UFKLFNV D % EURRGV GD\V SRVWWUHDWPHQW ,D b b b b b b b b b b b b b b b E % EURRGV GD\V SRVWWUHDWPHQW ,D b b b b b b b b b F % EURRGV GD\V SRVWWUHDWPHQW b b b b b b b b b b b b b b b DOQ WKLV QHVW WKH %FKLFN KDG JURZQ ODUJHU WKDQ WKH $FKLFN E\ WKH WLPH WKDW WKH QHVW ZDV WUHDWHG

PAGE 160

0HDQ IRRG FRQVXPHG IXQLWVf $FKLFNV m L %FKLFNV L L r ‘ %URRGV L L ! f ‘ ‘ ‘ %URRG VL]H )LJXUH )RRG FRQVXPHG PHDQ s 6'f LQ WKH ILUVW GD\V SRVWWUHDWPHQW E\ $ DQG %FKLFNV DQG HQWLUH EURRGV UDLVHG LQ VL[ H[SHULPHQWDOO\ UHGXFHG %f ILYH HQODUJHG %f DQG ILYH FRQWURO %f QHVWV

PAGE 161

> f26 fURL % $FKLFNV [ ; %FKLFNV %URRGV %URRG VL]H )RRG FRQVXPHG PHDQ s 6'f LQ WKH ILUVW WUHDWPHQW E\ $ DQG %FKLFNV DQG GV UDLVHG LQ ILYH H[SHULPHQWDOO\ f DQG WKUHH FRQWURO %f QHVWV

PAGE 162

&+$37(5 6800$5< $1' &21&/86,216 $ IXQGDPHQWDO SUREOHP RI OLIHKLVWRU\ WKHRU\ FRQFHUQV WUDGHRIIV EHWZHHQ SUHVHQW DQG IXWXUH UHSURGXFWLYH VXFFHVV DQG KRZ WKH UHVROXWLRQ RI WKHVH WUDGHRIIV DIIHFW OLIHWLPH UHSURGXFWLYH VXFFHVV :LOOLDPV 6WHDUQV f 3DUHQWV PD\ LQYHVW VHQVX 7ULYHUV f PRUH LQ FXUUHQW RIIVSULQJ DW WKH H[SHQVH RI IXWXUH UHSURGXFWLRQ $OWHUQDWLYHO\ SDUHQWV PD\ ZLWKKROG LQYHVWPHQW LQ VRPH FXUUHQW RIIVSULQJ DQG HQKDQFH UHSURGXFWLYH VXFFHVV LQ WKH IXWXUH SURYLGHG WKDW SDUHQWV KDYH D KLJK SUREDELOLW\ RI VXUYLYLQJ WR EUHHG DJDLQ 7ULYHUV f DUJXHG WKDW WKHVH WUDGHRIIV EHWZHHQ SUHVHQW DQG IXWXUH SDUHQWDO UHSURGXFWLRQ OHDG WR FRQIOLFWV EHWZHHQ SDUHQWV DQG RIIVSULQJ RYHU WKH LQYHVWPHQW SDUHQWV PDNH LQ WKHLU RIIVSULQJ 7ULYHUV EDVHG KLV DUJXPHQW RQ +DPLOWRQnV f UXOH WKDW DQLPDOV VKRXOG EHKDYH DOWUXLVWLFDOO\ ZKHQHYHU WKH FRVW WR WKH DOWUXLVW LV OHVV WKDQ WKH EHQHILW WR WKH UHFLSLHQW RI DOWUXLVP PXOWLSOLHG E\ WKH GHJUHH RI UHODWHGQHVV EHWZHHQ WKH DOWUXLVW DQG WKH UHFLSLHQW 7ULYHUV f XVHG +DPLOWRQnV UXOH WR SUHGLFW FRQGLWLRQV LQ ZKLFK SDUHQWV VKRXOG EHKDYH DOWUXLVWLFDOO\ WRZDUG WKHLU RIIVSULQJ E\ SURYLGLQJ SDUHQWDO FDUH DQG ZKHQ RIIVSULQJ VKRXOG EHKDYH VHOILVKO\ E\ GHPDQGLQJ H[WUD LQYHVWPHQW IURP WKHLU SDUHQWV 7ULYHUV f DUJXHG WKDW

PAGE 163

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f 7KXV RIIVSULQJ VKRXOG GHPDQG PRUH LQYHVWPHQW IURP SDUHQWV WKDQ SDUHQWV DUH VHOHFWHG WR JLYH 7ULYHUV f )RU WKH VDPH UHDVRQV FRQIOLFW RYHU SDUHQWDO LQYHVWPHQW LV OLNHO\ DPRQJ VLEOLQJV LQ WKH VDPH EURRG HJ 2n&RQQRU f 7KHVH DUJXPHQWV DVVXPH WKDW E\ ZLWKKROGLQJ LQYHVWPHQW LQ FXUUHQW RIIVSULQJ SDUHQWV FDQ HQKDQFH WKHLU ILWQHVV WKURXJK IXWXUH RIIVSULQJ 6LQFH 7ULYHUVn f LQVLJKW QXPHURXV PRGHOV KDYH GHPRQVWUDWHG WKDW WKH LQFOXVLYH ILWQHVV LQWHUHVWV RI SDUHQWV DQG WKHLU RIIVSULQJ GLIIHU XQGHU D YDULHW\ RI FRQGLWLRQV UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f $ FRQVLGHUDEOH DPRXQW RI WKLV WKHRUHWLFDO ZRUN HJ 2n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f KDV IRFXVHG RQ WKH DSSOLFDWLRQ RI SDUHQW

PAGE 164

RIIVSULQJ FRQIOLFW WKHRU\ WR WKH SUREOHP RI EURRG UHGXFWLRQ %URRGUHGXFLQJ SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ DUH DEOH RU ZLOOLQJ WR VXSSO\ ZLWK IRRG $OO RI WKH DGDSWLYH H[SODQDWLRQV IRU EURRG UHGXFWLRQ DUH JHQHUDOO\ VWDWHG LQ WHUPV RI EHQHILWV WR WKH SDUHQWV ZLWK DQ LPSOLFLW DVVXPSWLRQ WKDW VXUYLYLQJ RIIVSULQJ DOVR EHQHILW IURP WKH GHDWK RI D VLEOLQJ VHH &KDSWHU f %XW WKH DSSOLFDWLRQ RI SDUHQWRIIVSULQJ FRQIOLFW WKHRU\ WR WKLV SUREOHP VXJJHVWV WKDW EURRG UHGXFWLRQ PD\ VRPHWLPHV EHQHILW VHQLRU RIIVSULQJ WR WKH GHWULPHQW RI SDUHQWDO ILWQHVV 2n&RQQRU f %URRG UHGXFWLRQ PD\ EH WKH UHVXOW RI SDUHQWRIIVSULQJ FRQIOLFW UDWKHU WKDQ VHOHFWLRQ DFWLQJ VLPLODUO\ RQ SDUHQWV DQG RIIVSULQJ ,Q D YDULHW\ RI VSHFLHV EURRG UHGXFWLRQ LV RIWHQ FDXVHG E\ IDWDO ILJKWLQJ DPRQJ VLEOLQJV UHYLHZHG E\ 0RFN HW DO f $V ZLWK EURRG UHGXFWLRQ JHQHUDOO\ VLEOLFLGH DQG VXEOHWKDO QHVWOLQJ DJJUHVVLRQ PD\ EHQHILW ERWK WKH DJJUHVVRUV DQG WKHLU SDUHQWV VHH )RUEHV f $OWHUQDWLYHO\ QHVWOLQJ DJJUHVVLRQ PD\ LQYROYH SDUHQWn RIIVSULQJ FRQIOLFW 7KH UHVXOWV RI P\ GLVVHUWDWLRQ SURYLGH LQVLJKW LQWR WKH IRUFHV WKDW VKDSH VLEOLFLGDO DJJUHVVLRQ DQG EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV 0\ VWXG\ VXJJHVWV WKDW QHVWOLQJ DJJUHVVLRQ DQG EURRG UHGXFWLRQ LQ WKLV VSHFLHV PD\ LQYROYH FRQIOLFWV RI LQWHUHVW EHWZHHQ SDUHQWV DQG WKHLU VHQLRU RIIVSULQJ RYHU SDUHQWDO LQYHVWPHQW DQG WKH IDWH RI WKH \RXQJHVW EURRG PHPEHUV

PAGE 165

3DUHQW2IIVSULQJ &RQIOLFW DQG )RRG'HSHQGHQW )LJKWLQJ 2n&RQQRU f FRQVLGHUHG VLEOLQJ DJJUHVVLRQ WR EH WKH GLUHFW FRQVHTXHQFH RI SDUHQWRIIVSULQJ FRQIOLFW RYHU WKH IDWH RI WKH \RXQJHU FKLFN +LV PRGHO SUHGLFWHG WKDW VHQLRUV VKRXOG IDYRU VLEOLFLGH ZKHQ IRRG ZDV LQ VXFK VKRUW VXSSO\ WKDW WKH ERRVW LQ VHQLRU VXUYLYDO IROORZLQJ VLEOLFLGH RXWZHLJKHG WKH ORVV RI WKH MXQLRU FKLFNnV FRQWULEXWLRQ WR WKH LQFOXVLYH ILWQHVV RI VHQLRUV +LV PRGHO DOVR SUHGLFWHG WKDW SDUHQWV VKRXOG IDYRU VLEOLFLGH GXULQJ VRPH IRRG VKRUWDJHV %XW IRRG ZRXOG QHHG WR EH VFDUFHU IRU SDUHQWV WR IDYRU VLEOLFLGH WKDQ IRU WKHLU VHQLRU RIIVSULQJ WR IDYRU LW 7KLV LV EHFDXVH SDUHQWV DUH HTXDOO\ UHODWHG WR DOO RIIVSULQJ ZKHUHDV RIIVSULQJ DUH PRUH FORVHO\ UHODWHG WR WKHPVHOYHV WKDQ WR WKHLU VLEOLQJV 2n&RQQRU f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f

PAGE 166

,Q 2n&RQQRUnV YLHZ VLEOLQJ DJJUHVVLRQ LQ WZRFKLFN EURRGV ZKHUH VHFRQGKDWFKHG %f FKLFNV DUH WKH SRWHQWLDO YLFWLPVf UHSUHVHQWV FRQIOLFW EHWZHHQ SDUHQWV DQG WKHLU ILUVWKDWFKHG RIIVSULQJ $FKLFNVf %URZQ SHOLFDQ $ FKLFNV JDLQHG D GLVSURSRUWLRQDWH VKDUH RI WKH WRWDO IRRG GHOLYHUHG WR EURRGV &KDSWHU DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf :KHQ H[SHULPHQWDOO\ PDQLSXODWHG EURRG VL]HV IRXQG WKDW $FKLFNV VHFXUHG VLPLODU DPRXQWV RI IRRG LQ EURRGV RI DOO VL]HV HYHQ LQ EURRGV WKDW UHFHLYHG OHVV WRWDO IRRG WKDQ RWKHUV &KDSWHU f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f IHHGLQJ DGYDQWDJH DQG %FKLFNV WU\LQJ WR ZUHVW GRPLQDQFH IURP WKHLU $VLEOLQJV WR JDLQ D IHHGLQJ DGYDQWDJH 7KH QDWXUH RI WKH UHODWLRQVKLS EHWZHHQ ILJKWLQJ UDWHV DQG FKLFN JURZWK WKDW IRXQG LQ EURZQ SHOLFDQ EURRGV &KDSWHU f OHQGV VXSSRUW WR WKLV K\SRWKHVLV 7KH DVVRFLDWLRQ RI LQFUHDVHG ILJKWLQJ ZLWK

PAGE 167

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f 7KH DV\QFKURQ\ RI KDWFKLQJ SUHVXPDEO\ XQGHU WKH FRQWURO RI SDUHQWVf FUHDWHV DQ LQLWLDO $FKLFN DGYDQWDJH WKDW DSSDUHQWO\ FRQWLQXHV WKURXJKRXW WKH QHVWOLQJ SHULRG $W OHDVW GXULQJ WKH ILUVW IHZ ZHHNV RI WKH QHVWOLQJ SHULRG $FKLFNV JDLQ PRUH IRRG WKDQ GR WKHLU %VLEOLQJV &KDSWHU DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 8OWLPDWHO\ PRUH $ WKDQ %FKLFNV VXUYLYH WR IOHGJH 6FKUHLEHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV &KDSWHU f ,W LV OLNHO\ WR EH LQ WKH $ FKLFNnV LQWHUHVW WR PDNH VXUH WKDW LW JDLQV DQG PDLQWDLQV GRPLQDQFH VR DV WR JDLQ WKH IHHGLQJ DQG VXUYLYDO DGYDQWDJHV WKDW DUH DVVRFLDWHG ZLWK GRPLQDQFH $FKLFNV PLJKW DFKLHYH GRPLQDQFH E\ DWWDFNLQJ WKHLU VLEOLQJV HDUO\ LQ WKH QHVWOLQJ SHULRG ,I WKLV LV VR WKHQ $FKLFNV PD\ EHQHILW IURP

PAGE 168

DWWDFNLQJ WKHLU VLEOLQJV HYHQ ZKHQ WKH\ GR QRW JDLQ DQ LPPHGLDWH IRRG UHZDUG ,Q EURZQ SHOLFDQ EURRGV ILJKWLQJ HDUO\ LQ QHVWOLQJ OLIH LV LQGHSHQGHQW RI IRRG VXSSO\ &KDSWHU f &KLFNV LQ WKH ILUVW ZHHN RI OLIH ILJKW DW VLPLODU UDWHV DV ROGHU FKLFNV EXW ZLWKRXW JDLQLQJ DQ\ REYLRXV IRRGUHZDUG 7KHVH SDWWHUQV PLJKW UHVXOW IURP $FKLFNV DWWDFNLQJ WKHLU VLEOLQJV LQ RUGHU WR HVWDEOLVK GRPLQDQFH )RRGLQGHSHQGHQW ILJKWLQJ GXULQJ WKH HDUO\ QHVWOLQJ SHULRG PD\ DOVR EHQHILW %FKLFNV SDUWLFXODUO\ LI WKH\ DUH FORVH LQ VL]H DQGRU DJH WR WKHLU $VLEOLQJV 7KLV LV EHFDXVH %FKLFNV PD\ EH EHWWHU DEOH WR UHYHUVH WKH GRPLQDQFH RUGHU HDUO\ LQ WKH QHVWOLQJ SHULRG EHIRUH WKH $FKLFNnV GRPLQDQFH DQG IHHGLQJ DGYDQWDJHV PDJQLI\ LWV VL]H DQG FRPSHWLWLYH VXSHULRULW\ WR VXFK D GHJUHH WKDW WKH FRVWV RI DWWHPSWLQJ D UHYHUVDO RXWZHLJK WKH XQOLNHO\ FKDQFHV IRU VXFFHVV 3DUHQWV VHW XS WKH LQLWLDO DJH GLVSDULWLHV 7KLV VXJJHVWV WKDW WKH ILWQHVV LQWHUHVWV RI ERWK $FKLFNV DQG SDUHQWV PLJKW EH VHUYHG E\ IRRGLQGHSHQGHQW ILJKWLQJ WR HVWDEOLVK WKH GRPLQDQFH KLHUDUFK\ HDUO\ LQ WKH QHVWOLQJ SHULRG EXW VHH 0DJUDWK IRU RWKHU H[SODQDWLRQV RI KDWFKLQJ DV\QFKURQ\f %URRG 5HGXFWLRQ DV D 3URGXFW RI 3DUHQW2IIVSULQJ &RQIOLFW 0RVW H[SODQDWLRQV RI EURRG UHGXFWLRQ SURSRVH DQ DGDSWLYH YDOXH WR SDUHQWV WKDW SURGXFH PRUH RIIVSULQJ WKDQ

PAGE 169

WKH\ FDQ IHHG UHYLHZHG LQ )RUEHV DQG VHH GLVFXVVLRQV LQ &KDSWHUV DQG f 5HFHQWO\ PRGHOV DSSO\LQJ NLQVKLS WKHRU\ +DPLOWRQ f WR WKH SUREOHP KDYH GHPRQVWUDWHG WKDW EURRG UHGXFWLRQ PD\ LQYROYH FRQIOLFW EHWZHHQ SDUHQWV DQG WKHLU VHQLRU RIIVSULQJ UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f 2QH DVVXPSWLRQ LV EDVLF WR ERWK WKH K\SRWKHVHV WKDW SRVHG DQ DGDSWLYH YDOXH WR EURRG UHGXFLQJ SDUHQWV DQG WR WKHVH UHFHQW PRGHOV SUHGLFWLQJ SDUHQW RIIVSULQJ FRQIOLFW RYHU EURRG UHGXFWLRQ $OO DVVXPH WKDW SDUHQWV GHOLYHU D IL[HG DPRXQW RI IRRG DQG WKDW IROORZLQJ EURRG UHGXFWLRQ VXUYLYRUV JDLQ QRW RQO\ D KLJKHU SURSRUWLRQ RI IRRG EXW PRUH LQ DQ DEVROXWH VHQVH DV ZHOO VHH &KDSWHUV DQG IRU UHYLHZV RI WKH DVVXPSWLRQV RI HDUOLHU K\SRWKHVHV DQG 2n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU IRU PRGHOV RI VLEOLFLGH WKDW SUHGLFW SDUHQWRIIVSULQJ FRQIOLFWf 0\ H[SHULPHQWDO PDQLSXODWLRQV RI EURRG VL]H SURYLGH LQWULJXLQJ EXW LQFRQFOXVLYH HYLGHQFH DJDLQVW WKH DVVXPSWLRQ WKDW EURRG UHGXFWLRQ FRQIHUV DQ LPPHGLDWH IRRG JDLQ WR VXUYLYRUV &KDSWHU f ,Q WKH ILUVW GD\V SRVWWUHDWPHQW SDUHQWV GHOLYHUHG VLPLODU DPRXQWV WR HQODUJHG FRQWURO DQG UHGXFHG EURRGV %XW VHQLRUV GLG QRW JDLQ H[WUD IRRG LQ UHGXFHG EURRGV 7KLV FRXOG PHDQ WKDW EURRG UHGXFWLRQ GRHV QRW SURYLGH VXUYLYRUV ZLWK D IHHGLQJ DGYDQWDJH LQ WKLV VSHFLHV %XW LW LV DOVR OLNHO\ WKDW WKH ODFN RI GLIIHUHQFHV DPRQJ WUHDWPHQWV ZDV GXH WR VPDOO VDPSOH VL]HV DQG WKH EULHI

PAGE 170

SHULRG GXULQJ ZKLFK WKH WUHDWPHQWV UHPDLQHG LQ HIIHFW &KDSWHU f 6WURQJHU HYLGHQFH DJDLQVW WKH DVVXPSWLRQ ZDV SURYLGHG E\ P\ FRPSDULVRQ RI UHGXFHG YHUVXV FRQWURO EURRGV GD\V SRVWWUHDWPHQW 'XULQJ WKLV SHULRG SDUHQWV GHFUHDVHG GHOLYHULHV WR H[SHULPHQWDOO\ UHGXFHG EURRGV 7KXV $ DQG %FKLFNV GLG QRW JDLQ DGGLWLRQDO IRRG IROORZLQJ WKH HOLPLQDWLRQ RI WKHLU MXQLRU &f VLEOLQJ $OWKRXJK FOHDUO\ DEOH WR GHOLYHU PRUH IRRG WR UHGXFHG EURRGV SDUHQWV H[HUFLVHG UHVWUDLQW E\ ZLWKKROGLQJ IRRG IURP WKHVH EURRGV 6XFK UHVWUDLQW PD\ RSWLPL]H OLIHWLPH UHSURGXFWLYH VXFFHVV RI SDUHQWV DV VHHPV OLNHO\ IRU DW OHDVW RQH 3HOHFDQLIRUP WKH 6RXWK $IULFDQ JDQQHW 6XOD FDSHQVLV -DUYLV f ,Q WKLV VSHFLHV DQG DOVR LQ WKH URRN &RUYXV IUXDLOHFUXV 5SVNDIW f XQXVXDOO\ KLJK LQYHVWPHQW LQ RQH VHDVRQ GHSUHVVHG SDUHQWDO UHSURGXFWLRQ LQ WKH IROORZLQJ VHDVRQ 3DUHQWDO UHVWUDLQW LV OLNHO\ WR IRVWHU FRQIOLFW EHWZHHQ SDUHQWV ZKR IDYRU GHFUHDVHG LQYHVWPHQW LQ FXUUHQW RIIVSULQJf DQG WKHLU FXUUHQW RIIVSULQJ ZKR IDYRU LQFUHDVHG LQYHVWPHQW 7ULYHUV f ,Q WKH VPDOO VDPSOH RI VSHFLHV IRU ZKLFK GDWD RQ IHHGLQJ KDYH EHHQ UHSRUWHG SDUHQWV JHQHUDOO\ GHFUHDVH IRRG VXSSOLHG WR FKLFNV LQ UHGXFHG UHODWLYH WR FRQWURO RU HQODUJHG EURRGV UHYLHZHG LQ &KDSWHU f 7KLV UDLVHV WKH SRVVLELOLW\ WKDW IRRG WR RQH RU ERWK VHQLRUV PLJKW DFWXDOO\ GHFUHDVH IROORZLQJ EURRG UHGXFWLRQ 7KLV SRVVLELOLW\ UHPDLQV XQWHVWHG %XW LI D VHQLRU VXIIHUV

PAGE 171

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n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU f :KHQ FDVHV RI FOXWFK VL]HV ODUJHU WKDQ WZR DUH PRGHOOHG WKHVH PRGHOV DVVXPH WKDW VHQLRUV DUH LGHQWLFDO LQ WKHLU YDOXH WR SDUHQWV 7KLV VHHPV WR EH D YDOLG DVVXPSWLRQ IRU VRPH VSHFLHV VXFK DV WKH WKUHHFKLFN EURRGV RI FDWWOH HJUHWV WKDW ZHUH VWXGLHG E\ 3ORJHU DQG 0RFN f ,Q WKLV VSHFLHV FRPSHWLWLYH GLVDGYDQWDJHV ZHUH FRQFHQWUDWHG RQ WKH &FKLFN UXQW ZLWK VHQLRUV REWDLQLQJ IRRG ZLWK VLPLODU VXFFHVV %XW VHQLRUV ZHUH QRW LGHQWLFDO LQ EURZQ SHOLFDQ EURRGV $FKLFNV JDLQHG PRUH IRRG WKDQ GLG %FKLFNV ZKR JDLQHG PRUH WKDQ GLG & FKLFNV VHH DOVR 3LQ]Q DQG 'UXPPRQG LQ SUHVVf +DWFKLQJ DV\QFKURQ\ QRW RQO\ FUHDWHG D UXQW EXW DOVR FUHDWHG D FRPSHWLWLYH KLHUDUFK\ DPRQJ VHQLRUV 7KH VXUYLYDO SURVSHFWV RI %FKLFNV ZHUH ORZHU WKDQ WKRVH RI WKHLU $VLEOLQJV O\LQJ VRPHZKHUH EHWZHHQ WKRVH RI $ DQG &FKLFNV 6FKUHLEHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV &KDSWHU f %HFDXVH RI WKLV

PAGE 172

KLHUDUFK\ WKH FRVWV RI EURRG UHGXFWLRQ PLJKW GLIIHU EHWZHHQ $ DQG %FKLFNV :KHQ GLVDGYDQWDJHV LQFUHDVH LQ D VWHSZLVH IDVKLRQ GRZQ WKH KDWFKLQJ KLHUDUFK\ WKH ILWQHVV LQWHUHVWV RI SDUHQWV PD\ FRQIOLFW ZLWK WKRVH RI RQH VHQLRU DQG QRW WKH RWKHU VHQLRU RIIVSULQJ 0RGHOV QHHG WR EH GHYHORSHG WR SUHGLFW ZKHQ FRQIOLFW PD\ DULVH EHWZHHQ SDUHQWV DQG HDFK RI WKHLU VHQLRU DV ZHOO DV UXQW RIIVSULQJ ZKHQ VHQLRUV GLIIHU LQ WKHLU FRPSHWLWLYH DELOLWLHV 3DUNHU DQG FROOHDJXHV f LQFOXGHG GLIIHUHQFHV LQ FRPSHWLWLYH DELOLWLHV RI VLEOLQJV LQ WKHLU PRGHOV RI VLEOLQJ FRPSHWLWLRQ RYHU SDUHQWDO LQYHVWPHQW 7KH\ PRGHOOHG RSWLPDO IRRG DSSRUWLRQPHQW WR $ % DQG &FKLFNV IURP WKH $FKLFNnV SHUVSHFWLYH 3DUNHU HW DO f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f ([WHQGLQJ WKLV PRGHO WR WKH FDVH RI WKUHH FKLFNV 3DUNHU HW DO f IRXQG WKDW ZKHQ

PAGE 173

UHVRXUFHV LQFUHDVH HDFK FKLFNn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f PDGH IRU WKH FDVH RI IRRG VFDUFLW\ )RRG VKDUHV GHFUHDVHG GRZQ WKH VL]HKLHUDUFK\ ZLWK $ DQG %FKLFN VKDUHV EHLQJ PRUH VLPLODU WKDQ ZHUH % DQG &FKLFN VKDUHV &KDSWHU f ,Q % QHVWV WKH GLIIHUHQFH LQ IRRG VKDUHV EHWZHHQ $ DQG %FKLFNV ZDV VLPLODU WR WKDW EHWZHHQ % DQG &FKLFNV &KDSWHU f 7KLV UHVXOW FRXOG EH HYLGHQFH DJDLQVW WKH SUHGLFWLRQ RI 3DUNHU HW DO f %XW LW LV DOVR OLNHO\ WKDW WKH ODFN RI GLIIHUHQFHV ZDV GXH WR WKH KLJK YDULDQFH LQ IRRG GHOLYHULHV WR % EURRGV &KDSWHU )LJXUH f DQG WKH DQRPDORXV VLWXDWLRQ RI KDYLQJ D IRXUWK QHVWOLQJ %URRGV UHFHLYLQJ PRUH WRWDO IRRG PD\ KDYH KDG D PRUH HTXDO GLVWULEXWLRQ RI IRRG DPRQJ QHVWOLQJV WKDQ EURRGV WKDW UHFHLYHG OHVV IRRG DV SUHGLFWHG E\ 3DUNHU HW DO f GLG QRW LQYHVWLJDWH ZKHWKHU WKHUH ZDV DQ

PAGE 174

DVVRFLDWLRQ EHWZHHQ WRWDO IRRG GHOLYHUHG DQG GLIIHUHQFHV LQ SDWWHUQV RI IRRG DSSRUWLRQPHQW 7KH UHVXOWV IRU % EURRGV GD\V SRVWWUHDWPHQW VXJJHVW WKDW WKH QHVWOLQJ GRPLQDQFH KLHUDUFK\ HQDEOHG $ FKLFNV WR FRQWURO DQG RSWLPL]H IRRG DOORFDWLRQ SDWWHUQV DV DVVXPHG E\ WKH PRGHO RI 3DUNHU HW DO f 7KXV IRRG UHVRXUFHV ZHUH VNHZHG WRZDUG VHQLRU FKLFNV 7KLV FRXOG EH LQ FRQIOLFW ZLWK SDUHQWDO DWWHPSWV WR DOORFDWH IRRG HTXDOO\ DPRQJ DOO RIIVSULQJ %XW XQGHU FHUWDLQ FLUFXPVWDQFHV SDUHQWV PD\ QRW EHQHILW IURP HTXDO UHVRXUFH DSSRUWLRQPHQW DPRQJ WKHLU RIIVSULQJ ,QVWHDG SDUHQWV PD\ EHQHILW E\ LQYHVWLQJ LQ RIIVSULQJ DFFRUGLQJ WR WKH VXUYLYDO SURVSHFWV RI HDFK RIIVSULQJ VHH EHORZf ,I WKLV LV WKH FDVH WKHQ D VNHZ LQ IRRG GLVWULEXWLRQ WRZDUG VHQLRUV FRXOG HQKDQFH WKH ILWQHVV RI ERWK VHQLRU RIIVSULQJ DQG WKHLU SDUHQWV 3DUHQWDO LQWHUHVWV DUH JHQHUDOO\ DVVXPHG WR EH EHVW VHUYHG E\ DQ HTXDO SDUWLWLRQLQJ RI UHVRXUFHV DPRQJ DOO RIIVSULQJ HJ 7ULYHUV 2n&RQQRU 0DFQDLU DQG 3DUNHU 3DUNHU DQG 0DFQDLU f 7KLV LV EHFDXVH WKH SDUHQW LV HTXDOO\ UHODWHG WR DOO RI LWV RIIVSULQJ 6PLWK DQG )UHWZHOO f ZHUH WKH ILUVW WR VKRZ WKDW WKH SDUHQW VKRXOG LQYHVW LQ DOO RIIVSULQJ HTXDOO\ 7HPPH f SRLQWHG RXW WKDW WKLV SUHGLFWLRQ GHSHQGV RQ WKH DVVXPSWLRQ WKDW RIIVSULQJ ILWQHVV LV GHWHUPLQHG RQO\ E\ WKH SDUHQWnV OHYHO RI UHVRXUFH LQYHVWPHQW

PAGE 175

%XW RIIVSULQJ ILWQHVV PD\ EH GHWHUPLQHG E\ IDFWRUV RWKHU WKDQ SDUHQWDO LQYHVWPHQW VXFK DV JHQHWLF GLIIHUHQFHV 7HPPH f 6XFK RIIVSULQJ PD\ KDYH GLIIHUHQW ILWQHVV H[SHFWDWLRQV JLYHQ WKH VDPH OHYHO RI SDUHQWDO LQYHVWPHQW 7HPPH f ,Q WKLV VLWXDWLRQ 7HPPHnV f PRGHO GHPRQVWUDWHG WKDW SDUHQWDO ILWQHVV LV QRW PD[LPL]HG E\ HTXDO LQYHVWPHQW LQ DOO RIIVSULQJ ,QVWHDG WKH PRGHO SUHGLFWHG WKDW SDUHQWV VKRXOG HTXDOL]H DPRQJ RIIVSULQJ WKH PDUJLQDO UHWXUQ IURP DGGLWLRQDO LQYHVWPHQW 7KXV SDUHQWV VKRXOG VNHZ LQYHVWPHQW WRZDUG WKRVH RIIVSULQJ ZKRVH VXUYLYDO FKDQFHV DUH HQKDQFHG WKH PRVW E\ UHFHLYLQJ WKH DGGLWLRQDO LQYHVWPHQW +DLJ f DSSOLHG WKLV DSSURDFK WR H[DPLQH ZKHQ SDUHQWV VKRXOG DERUW UDWKHU WKDQ SURYLVLRQ D ORZ TXDOLW\ RIIVSULQJ /RZTXDOLW\ KHUH UHIHUV WR DQ RIIVSULQJ ZKRVH ILWQHVV LV HQKDQFHG OHVV E\ D XQLW RI SDUHQWDO LQYHVWPHQW WKDQ WKH ILWQHVV HQKDQFHPHQW WKDW D KLJKTXDOLW\ RIIVSULQJ ZRXOG JDLQ IURP WKH VDPH XQLW 7KHVH PRGHOV ZHUH GHYHORSHG IRU WKH SUREOHP RI VHHG DERUWLRQ LQ SODQWV ZKHUH TXDOLWDWLYH GLIIHUHQFHV DPRQJ RIIVSULQJ DUH GXH WR GHYHORSPHQWDO DQG JHQHWLF GLIIHUHQFHV 7HPPH f GLVFXVVHG WZR ZD\V WKDW JHQHWLF GLIIHUHQFHV FRXOG FDXVH RIIVSULQJ WR GLIIHU LQ WKHLU ILWQHVV JDLQV IURP WKH VDPH OHYHO RI SDUHQWDO LQYHVWPHQW )LUVW JHQHWLF GLIIHUHQFHV FRXOG DIIHFW WKH FRQYHUVLRQ RI SDUHQWDOO\ SURYLGHG UHVRXUFHV LQWR RIIVSULQJ VXUYLYDO 6HFRQG JHQHWLF

PAGE 176

GLIIHUHQFHV FRXOG DIIHFW IXWXUH JURZWK DQG UHSURGXFWLRQ IROORZLQJ GHSOHWLRQ RI SDUHQWDOO\SURYLGHG UHVRXUFHV ,Q DV\QFKURQRXVO\ KDWFKLQJ ELUGV JHQHWLF GLIIHUHQFHV DPRQJ QRUPDO DV RSSRVHG WR PDOIRUPHGf QHVWOLQJV DUH XQOLNHO\ WR KDYH PXFK LQIOXHQFH RQ ILWQHVV UHODWLYH WR GLIIHUHQFHV LQ DJHV DQG VL]HV RI FKLFNV %XW QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH PLJKW FDXVH RIIVSULQJ WR GLIIHU LQ WKHLU DELOLWLHV WR FRQYHUW SDUHQWDO UHVRXUFHV LQWR RIIVSULQJ VXUYLYDO )RU H[DPSOH LQWLPLGDWHG MXQLRU FKLFNV PD\ VWD\ DW WKH HGJH RI WKH QHVW UDWKHU WKDQ EH EURRGHG RU VKDGHG E\ WKH SDUHQW SHUV REVf 7KLV FRXOG FDXVH MXQLRU FKLFNV WR EH H[SRVHG PRUH RIWHQ WR FROG RU KHDW VWUHVV WKDQ WKHLU VHQLRU VLEOLQJV 6XFK VWUHVV FRXOG UHGXFH D FKLFNnV HIILFLHQF\ LQ FRQYHUWLQJ IRRG WR JURZWK DQG VXUYLYDO 2n&RQQRU f 5HSDLU RI WLVVXH GDPDJHG GXULQJ VLEOLQJ DWWDFNV HJ &KDSWHU f FRXOG DOVR GHFUHDVH UHVRXUFHV DYDLODEOH IRU JURZWK DQG VXUYLYDO RI WKH MXQLRUf YLFWLPV UHODWLYH WR WKHLU VHQLRUf DWWDFNHUV %XW VHQLRU FKLFNV WKDW DWWDFN WKHLU VLEOLQJV PD\ H[SHULHQFH HQHUJHWLF FRVWV RI ILJKWLQJ 7KHVH FRVWV FRXOG FRQFHLYDEO\ GHFUHDVH D VHQLRU FKLFNnV HIILFLHQF\ LQ FRQYHUWLQJ IRRG WR VXUYLYDO UHODWLYH WR LWV VXERUGLQDWH MXQLRU VLEOLQJV 1HVWOLQJ ILJKWLQJ DQG GRPLQDQFH PLJKW DOVR DIIHFW IXWXUH UHSURGXFWLRQ $GXOW RIIVSULQJ WKDW ZHUH VXERUGLQDWH DV QHVWOLQJV PD\ GLIIHU EHKDYLRUDOO\ IURP DGXOW RIIVSULQJ WKDW ZHUH GRPLQDQW DV QHVWOLQJV 7KLV PLJKW RFFXU HYHQ LI

PAGE 177

ERWK UHFHLYHG WKH VDPH WRWDO SDUHQWDO LQYHVWPHQW GXULQJ WKH QHVWOLQJ SHULRG 7KHUH LV VRPH HYLGHQFH WKDW QHVWOLQJ VRFLDO H[SHULHQFH DIIHFWV SRVWIOHGJLQJ EHKDYLRU ,Q GRPHVWLF FKLFNHQV *DOOXV GRPHVWLFXVf TXDLO &RWXUQL[ e MDSQLFDf DQG UHG JURXVH /DDRSXV ODJRSXV VFRWLFXVf SRVLWLRQ LQ WKH QHVWOLQJ GRPLQDQFH KLHUDUFK\ FRUUHODWHV ZLWK VXFFHVV GXULQJ HQFRXQWHUV ZLWK QRQVLEOLQJV DIWHU IOHGJLQJ %RDJ DQG $OZD\ 5DMHFNL HW DO f 'RPLQDQFH GXULQJ WKH QHVWOLQJ SHULRG PLJKW FRUUHODWH ZLWK LQFUHDVHG DELOLW\ RI DGXOWV WR VHFXUH RU JXDUG PDWHV QHVWV RU WHUULWRULHV 7KLV FRXOG OHDG WR ORZHU UHSURGXFWLYH VXFFHVV RI ELUGV WKDW ZHUH VXERUGLQDWH UDWKHU WKDQ GRPLQDQW DV QHVWOLQJV 7KH HIIHFW RI QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH RQ f WKH HIILFLHQF\ RI FRQYHUVLRQ RI SDUHQWDO UHVRXUFHV WR QHVWOLQJ VXUYLYDO DQG f IXWXUH UHSURGXFWLRQ UHPDLQV WR EH LQYHVWLJDWHG %XW VXJJHVW WKDW QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH PD\ FDXVH $ % DQG &FKLFNV WR GLIIHU LQ WKHLU ILWQHVV JDLQV IURP WKH VDPH DPRXQW RI SDUHQWDO LQYHVWPHQW ,I WKLV LV VR WKHQ WKH PRGHOV RI 7HPPH f DQG +DLJ f PLJKW EH DSSOLFDEOH WR DV\QFKURQRXVO\ KDWFKLQJ ELUGV 7KXV SDUHQWV PLJKW LQYHVW GLVSURSRUWLRQDWHO\ LQ RIIVSULQJ ZKRVH ILWQHVV JDLQV DUH EHVW HQKDQFHG E\ WKDW LQYHVWPHQW 7R HYDOXDWH WKH SRWHQWLDO IRU SDUHQWRIIVSULQJ FRQIOLFW LQ WKH VLWXDWLRQ ZKHUH SDUHQWDO ILWQHVV LV PD[LPL]HG E\ XQHTXDO LQYHVWPHQW LQ RIIVSULQJ ZLOO UHTXLUH FRPELQLQJ WKH

PAGE 178

DSSURDFKHV RI 7HPPH f DQG +DLJ f ZLWK WKDW RI 3DUNHU HW DO f ,Q EURRGUHGXFLQJ VSHFLHV QHVWOLQJ VXUYLYDO LV UHODWHG ERWK WR EURRG VL]H DQG WR SDUHQWDO LQYHVWPHQW 7KHUHIRUH 3DUNHU DQG 0RFN f DGYLVHG WKDW PRGHOV VKRXOG LQFOXGH LQ WKH VDPH DQDO\VHV ERWK WKH HIIHFWV RI EURRG UHGXFWLRQ DQG RI QHVWOLQJV WDNLQJ XQHTXDO VKDUHV RI UHVRXUFHV /D]DUXV DQG ,QJOLV f H[SORUHG ERWK WKH HIIHFWV RI EURRG UHGXFWLRQ DQG SDUHQWDO LQYHVWPHQW %XW WKH\ GLG QRW WDNH LQWR DFFRXQW SRWHQWLDO GLIIHUHQFHV LQ FRPSHWLWLYH DELOLWLHV DPRQJ RIIVSULQJ ,GHDOO\ DOO RI WKHVH IDFWRUV EURRG UHGXFWLRQ SDUHQWDO LQYHVWPHQW SDWWHUQV DQG FRPSHWLWLYH GLIIHUHQFHV DPRQJ QHVWOLQJVf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

PAGE 179

$33(1',; $ '(7(50,1,1* &+,&. $*(6 SORWWHG DJH DJDLQVW FXOPHQ OHQJWK IRU NQRZQDJH FKLFNV $ % DQG &FKLFNVf ZKRVH FXOPHQ OHQJWKV ZHUH PHDVXUHG ZKHQ WKH FKLFNV ZHUH GD\V ROG )LJXUH $ f 7KH FXOPHQ OHQJWKV RI WKHVH FKLFNV RI NQRZQ DJHV ZHUH FRUUHODWHG ZLWK DJH )LJXUH $O 1 REVHUYDWLRQV UA 3 f 6FKUHLEHU f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f )XUWKHUPRUH IRU GD\ ROG FKLFNV WKH GLIIHUHQFH ZDV QRW LQ WKH SUHGLFWHG GLUHFWLRQ $W WKLV DJH

PAGE 180

FXOPHQ OHQJWKV RI &FKLFNV H[FHHGHG WKRVH RI %FKLFNV 7DEOH $f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f 7KXV E\ SRROLQJ P\ GDWD PD\ KDYH RYHUHVWLPDWHG WKH DJHV RI $FKLFNV DQG XQGHUHVWLPDWHG WKH DJHV RI &FKLFNV GLG QRW XVH FXOPHQ OHQJWKV WR HVWLPDWH DJHV RI FKLFNV OLNHO\ WR EH PRUH WKDQ GD\V ROG $IWHU WKLV DJH FXOPHQ OHQJWKV GLYHUJH EHWZHHQ VHQLRU DQG MXQLRU FKLFNV RI WKH VDPH DJH ZLWK $FKLFNV KDYLQJ UHODWLYHO\ ORQJHU ELOOV WKDQ WKHLU MXQLRUV DW WKH VDPH DJH 3UHVXPDEO\ WKH $FKLFNVn ELOOV JURZ PRUH EHFDXVH $FKLFNV JHW PRUH IRRG WKDQ WKHLU MXQLRUV &KDSWHU f 7KH PHDQ DJH DW ZKLFK $FKLFN FXOPHQV ILUVW H[FHHGHG WKRVH RI WKHLU MXQLRU VLEOLQJV E\ DW OHDVW PP ZDV f GD\V IRU NQRZQDJH $% SDLUV DQG sf GD\V IRU NQRZQDJH %& SDLUV IRU DQ RYHUDOO PHDQ RI s

PAGE 181

GD\V 7KXV DIWHU WKH PLQLPXP DJH RI GD\V FXOPHQV RI MXQLRU DQG VHQLRU FKLFNV PD\ EH GLYHUJLQJ DQG EH XQUHOLDEOH LQGLFDWRUV RI FKLFN DJH 7R HVWLPDWH DJHV RI FKLFNV ROGHU WKDQ GD\V FRPSDUHG WKH VNLQ FRORUV DQG SOXPDJHV RI FKLFNV RI XQNQRZQ DJHV ZLWK WKRVH RI NQRZQDJH FKLFNV 7DEOH $f DOVR XVHG 7DEOH $ WR HVWLPDWH WKH DJHV RI FKLFNV XQGHU GD\V ROG LQ EHFDXVH LQ WKDW \HDU GLG QRW PHDVXUH WKH FKLFNV 7KH DJH RI HDFK XQNQRZQDJH FKLFN ZDV HVWLPDWHG DV WKH PHGLDQ DJH RI NQRZQDJH FKLFNV ZKRVH GHVFULSWLRQV 7DEOH $f PDWFKHG WKDW RI WKH XQNQRZQDJH FKLFN

PAGE 182

7DEOH $ &XOPHQ OHQJWKV LQ PPf YHUVXV DJH LQ GD\Vf EDVHG RQ WKH UHJUHVVLRQ RI DJH RQ ,QFXOPHQ OHQJWKf IRU NQRZQDJH GD\ ROG FKLFNV &XOPHQ /HQJWKV $JH

PAGE 183

7DEOH $ 5HVXOWV RI VHSDUDWH VWDWLVWLFDO WHVWV IRU FKLFNV RI HDFK DJH GD\V WR GHWHUPLQH LI ELOO OHQJWKV GLIIHUHG DPRQJ $ % DQG &FKLFNV RI HDFK DJH %LOO OHQJWKV DUH SUHVHQWHG DV WKH PHDQ UDQNV RI ,QFXOPHQ OHQJWKf &XOPHQV ZHUH PHDVXUHG LQ PP 6DPSOH VL]HV DUH HQFORVHG LQ SDUHQWKHVHV &KLFN $JH 0HDQ UDQN RI ,QFXOPHQ OHQJWKf IRU $FKLFNV %FKLFNV &FKLFNV 7HVW 6WDWLVWLF 3 f f f +D f f f + r f f f + r f f f + f f f + f f f + f f f + f f f + r f f f + f f 8E f ‘ f 8 D+ LQGLFDWHV WDLOHG .UXVNDO:DOOLV WHVW + LV FRUUHFWHG IRU WLHV E8 LQGLFDWHV WDLOHG 0DQQ:KLWQH\ 8 WHVW XVHG EHFDXVH GDWD IRU FKLFNV RI WKLV DJH ZHUH DYDLODEOH RQO\ IRU WZR FKLFN UDQNV r,QGLFDWHV VLJQLILFDQW GLIIHUHQFHV DW 3

PAGE 184

7DEOH $ 6NLQ FRORUV DQG SOXPDJH GHVFULSWLRQV IRU FKLFNV RI NQRZQ DJHV 7KH DJHV RI VRPH FKLFNV XQGHU GD\V ROG ZHUH HVWLPDWHG IURP WKH FXOPHQOHQJWK UHJUHVVLRQf 0G $JH $JH 5DQJH 1 'HVFULSWLRQ 1DNHG SLQN VNLQ 1DNHG SXUSOLVKSLQN VNLQ 1DNHG SXUSOH VNLQ 6RPH FKLFNV FRYHUHG ZLWK JXDQR 1DNHG JUH\ VNLQ &KLFNV RIWHQ FRYHUHG ZLWK JXDQR 1DNHG JUH\ KHDG DQG QHFN EDFN ZLWK PP WXIWV RI ZKLWH GRZQ GRWWLQJ JUH\ VNLQ &KLFN PD\ EH FRYHUHG ZLWK JXDQR 1HFN ORRNV QDNHG DQG JUH\ IURP P KHDG DQG EDFN DUH FRYHUHG LQ ZKLWH GRZQ 1HFN JHWWLQJ ILQH GRZQ KHDG DQG EDFN GRZQ\ ZKLWH (QWLUH ERG\ LQFOXGLQJ QHFN FRYHUHG LQ ZKLWH GRZQ VFDSXODUV QRW YLVLEOH IURP P %RG\ FRPSOHWHO\ FRYHUHG LQ GRZQ H[FHSW EURZQ VFDSXODUV DUH YLVLEOH IURP P %URZQ KHDG XSSHU QHFN DQG ZLQJV EXW ZLWK VRPH GRZQ RQ UXPS ORZHU EDFN ORZHU QHFN DQG EHOO\ -XYHQDO SOXPDJH EURZQ KHDG QHFN ZLQJV EDFN DQG WDLO EHOO\ ZKLWH QR GRZQ YLVLEOH ZKHQ YLHZHG IURP P

PAGE 185

/QFXOPHQ OHQJWKf PPf )LJXUH $O 5HJUHVVLRQ RI OQFXOPHQ OHQJWKf YHUVXV FKLFN DJH IRU NQRZQDJH GD\ ROG FKLFNV RI DOO UDQNV &KLFN DJH ; ,Q RI FXOPHQ OHQJWK U 3

PAGE 186

$33(1',; % '(7(50,1,1* &/87&+ 6,=(6 $OO DQDO\VHV WKDW PDNH XVH RI FOXWFK VL]H LQIRUPDWLRQ LQFOXGH RQO\ FKLFNV IURP QHVWV LQ ZKLFK WKH LQLWLDO FOXWFK VL]H FRXOG EH GHWHUPLQHG FRQVLGHUHG WKH FOXWFK VL]H WR EH NQRZQ LQ QHVWV WKDW ILUVW IRXQG ZKHQ WKH\ FRQWDLQHG f HJJV DW WKH HQG RI LQFXEDWLRQ f RQH RU WZR KDWFKOLQJV HVWLPDWHG WR EH QR ROGHU WKDQ GD\V RU f WKUHH KDWFKOLQJV RI DQ\ DJH DVVXPHG WKDW WKUHHFKLFN EURRGV KDWFKHG IURP WKUHHHJJ FOXWFKHV EHFDXVH IRXUHJJ FOXWFKHV ZHUH H[WUHPHO\ UDUH $PRQJ QHVWV ZKRVH FOXWFK VL]HV ZHUH GHWHUPLQHG IURP GLUHFW REVHUYDWLRQV RI WKH HJJV IRXUHJJ FOXWFKHV RFFXUUHG LQ QRQH RI QHVWV LQ DQG RQH RI QHVWV LQ 6LPLODU YDOXHV KDYH EHHQ REWDLQHG E\ RWKHU ZRUNHUV WZR RI QHVWV FRQWDLQHG IRXU HJJV LQ D 1RUWK &DUROLQD SRSXODWLRQ 0 6KLHOGV SHUV FRPPf ,Q VRPH DQDO\VHV FRPSDUHG WKH IDWHV RI FKLFNV IURP FOXWFKHV RI WZR RU WKUHH HJJV )RU RWKHUV EURRGV RI WZR RU WKUHH FKLFNV ZHUH FRPSDUHG RPLWWLQJ FOXWFKHV LQ ZKLFK RQH RU PRUH FKLFNV IDLOHG WR KDWFK

PAGE 187

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f DQG DGXOWV DUH ORZHU WKDQ WKRVH LW ZRXOG IDFH IURP DWWDFNV E\ LQYDGLQJ DGXOWV RU ODUJHU FKLFNV LI LW UHPDLQHG RQ LWV RZQ QHVW 6LPLODUO\ D FKLFN WKDW MRLQV DQRWKHU PD\ EH OHVV OLNHO\ WR EH NLOOHG E\ D SUHGDWRU (YDQV f DOWKRXJK NQRZ RI QR QHVW SUHGDWRUV RI HDVWHUQ EURZQ SHOLFDQV WKDW WDNH \RXQJ DV ODUJH DV WKRVH WKDW DUH DEOH WR ZDQGHU WR RWKHU QHVWV 7KHUH PD\ DOVR EH WKHUPDO DGYDQWDJHV WR DVVRFLDWLQJ ZLWK DQRWKHU FKLFN %DUWKRORPHZ DQG 'DZVRQ (YDQV f ZKLFK PD\ PDNH LQYDGLQJ D ZRUWKZKLOH VWUDWHJ\ DV ORQJ DV WKH ULVN RI EHLQJ DWWDFNHG E\ D UHVLGHQW LV ORZ 7KH H[WHQW RI FKLFN PRYHPHQWV DPRQJ QHLJKERULQJ QHVWV ZDV OLPLWHG E\ WKH VWUXFWXUH RI WKH WUHH FDQRS\ WKDW FRQWDLQHG WKH QHVWV LQ WKLV VWXG\ 6XFK ZDQGHULQJ LV PXFK PRUH H[WHQVLYH DPRQJ

PAGE 188

SRSXODWLRQV RI JURXQGQHVWLQJ EURZQ SHOLFDQV ZKRVH FKLFNV OHDYH WKHLU QHVWV ZKHQ ZHHNV ROG %HQW %OXV DQG .HDKH\ .HLWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG VRPHWLPHV IRUP FUHFKHV %HQW 3LQ]Q DQG 'UXPPRQG LQ SUHVV 0 6KLHOGV SHUV FRPPf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f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

PAGE 189

IOLPV\ QHVWV WKDW VRRQ IHOO DSDUW DQG WKDW SUHVXPDEO\ VHUYHG RQO\ D OHDUQLQJ IXQFWLRQ 'LQ DQG (OWULQJKDP f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f DQG 6FKUHLEHU f DQG DPRQJ $XVWUDOLDQ SHOLFDQV 9HVWMHQV f DQG SLQNEDFNHG SHOLFDQV 'LQ DQG (OWULQJKDP f 6WLFN WKLHYHU\ LV QRW QHFHVVDULO\ UHVWULFWHG WR WKH QHVWEXLOGLQJ SHULRG $IWHU FKLFNV DUH DEOH WR VWDQG DQG ZDON SDUHQWV SHULRGLFDOO\ GHOLYHU VWLFNV WR WKHLU RIIVSULQJ ZKR PDQLSXODWH WKH VWLFNV DQG VRPHWLPHV LQVHUW WKHP LQWR WKH QHVW FRQWUD 6FKUHLEHU f 7KLV VWLFN SODFHPHQW GRHV QRW LQFUHDVH WKH VL]H RI WKH QHVW EHFDXVH

PAGE 190

FKLFNV SXOO RXW PRUH VWLFNV WKDQ WKH\ DGG 7KH\ HYHQWXDOO\ GHVWUR\ WKHLU RZQ QHVWV 6FKUHLEHU DQG SHUV REVf $GXOWV PD\ DOVR DWWDFN QHLJKERULQJ FKLFNV ZKLOH VWHDOLQJ VWLFNV WR GHOLYHU WR WKHLU RZQ RIIVSULQJ $OWHUQDWLYHO\ DWWDFNV E\ QHLJKERULQJ DGXOWV PD\ KDYH EHHQ SUHHPSWLYH RU UHWDOLDWLYH VWULNHV WR SUHYHQW WKH YLFWLPV IURP HQWHULQJ WKH DWWDFNHUnV RZQ QHVW WR DWWDFN WKH UHVLGHQWV RU DWWHPSW WR VWHDO IRRG ,QIDQWLFLGDO DWWDFNV PLJKW FRQFHLYDEO\ DOVR RFFXU GXULQJ DWWHPSWV E\ DGXOWV RU LPPDWXUHV WR FRSXODWH ZLWK QHVWOLQJV $GXOW SLQNEDFNHG SHOLFDQV DQG $PHULFDQ DQG $IULFDQ ZKLWH SHOLFDQV KDYH EHHQ UHSRUWHG WR PDNH VH[XDO DWWDFNV RQ XQDWWHQGHG QHVWOLQJV 6FKDOOHU %URZQ DQG 8UEDQ 'LQ DQG (OWULQJKDP f QHYHU REVHUYHG DQ\ FRSXODWLRQ DWWHPSWV WKDW LQYROYHG EURZQ SHOLFDQ QHVWOLQJV

PAGE 191

$33(1',; 1(67 7$.(29(56 'XULQJ WDNHRYHUV DGXOWV NLOOHG WKH UHVLGHQW HJJV RU QHVWOLQJV SUHVXPDEO\ LQ SUHSDUDWLRQ IRU LQLWLDWLQJ D FOXWFK RI WKHLU RZQ %\ VXFFHVVIXOO\ WDNLQJ RYHU D QHVW WKH LQYDGLQJ ELUGV PD\ HQKDQFH WKHLU UHSURGXFWLYH VXFFHVV SRVVLEO\ E\ DOORZLQJ WKHP WR LQLWLDWH WKHLU FOXWFK PRUH UDSLGO\ RU HIILFLHQWO\ WKDQ LI WKH\ KDG WR HQJDJH LQ VWLFN FROOHFWLQJ DQG QHVWEXLOGLQJ 6FKUHLEHU f SUHVHQWHG GDWD VKRZLQJ ORZHU UHSURGXFWLYH VXFFHVV LQ RUGLQDU\ QHVWV WKDQ LQ WKH QHVWV ZKHUH HJJV ZHUH SUHVHQW GXULQJ RQH FHQVXV JRQH LQ WKH QH[W DQG SUHVHQW DJDLQ LQ D VXEVHTXHQW FHQVXV $OWKRXJK 6FKUHLEHU f LQWHUSUHWHG WKH ODWWHU QHVWV WR EH HYLGHQFH RI UHSODFHPHQW FOXWFKHV ODLG E\ WKH RULJLQDO XQPDUNHG SDLU VDZ DQ LGHQWLFDO SDWWHUQ LQ DQG EXW QR UHSODFHPHQW FOXWFKHV ZHUH ODLG LQ P\ VWXG\ ,Q DOO FDVHV WKHVH QHZ FOXWFKHV ZHUH ODLG IROORZLQJ WDNHRYHUV ZLWK WKH QHZ SDLU OD\LQJ HJJV 3ORJHU XQSXE GDWDf ,I VRPH RI WKH UHSODFHPHQW FOXWFKHV UHSRUWHG E\ 6FKUHLEHU f ZHUH DFWXDOO\ WDNHRYHUV WKHQ 6FKUHLEHUnV GDWD VXJJHVW WKDW WDNHRYHUV PD\ SUHVHQW D FRQVLVWHQW VRXUFH RI PRUWDOLW\ DFURVV \HDUV DQG FRORQLHV EHFDXVH b RI DOO QHVWV b SHU \HDU RYHU \HDUVf FRQWDLQHG VXFK FOXWFKHV .HLWK f REVHUYHG IRXU VXFFHVVIXO WDNHRYHUV DPRQJ &DOLIRUQLD

PAGE 192

EURZQ SHOLFDQV $OWKRXJK WKH DWWDFNHUV WRVVHG WKH UHVLGHQWVn HJJV IURP WKH QHVW LQ WKUHH RI WKHVH FDVHV .HLWK f GLG QRW UHSRUW ZKHWKHU DQ\ RI WKH LQYDGHUV ODLG QHZ FOXWFKHV 7DNHRYHUV KDYH DOVR EHHQ REVHUYHG DPRQJ $XVWUDOLDQ SHOLFDQV 9HVWMHQV f :KLOH VXFFHVVIXO WDNHRYHUV OHDG WR WRWDO FOXWFK RU EURRG ORVV XQVXFFHVVIXO DWWHPSWV PLJKW RFFDVLRQDOO\ OHDG WR SDUWLDO ORVVHV DJDLQVW ZKLFK WKH SUHVHQFH RI H[WUD FKLFNV PLJKW DFW DV LQVXUDQFH

PAGE 193

/,67 2) 5()(5(1&(6 $EDFXV &RQFHSWV 6WDWYLHZ 9HUVLRQ %HUNHOH\ $EDFXV &RQFHSWV ,QF $OH[DQGHU 5 7KH HYROXWLRQ RI VRFLDO EHKDYLRU $QQ 5HY (FRO 6\VW $QGHUVRQ (YROXWLRQ RI REOLJDWH VLEOLFLGH LQ ERRELHV $ WHVW RI WKH LQVXUDQFHHJJ K\SRWKHVLV $P 1DW $QGHUVRQ : t *UHVV ) 6WDWXV RI D QRUWKHUQ SRSXODWLRQ RI &DOLIRUQLD EURZQ SHOLFDQV &RQGRU $QGHUVRQ : *UHVV ) t 0DLV ) %URZQ SHOLFDQV LQIOXHQFH RI IRRG VXSSO\ RQ UHSURGXFWLRQ 2LNRV $QGHUVRQ : -XUHN 5 0 t .HLWK 2 7KH VWDWXV RI EURZQ SHOLFDQV DW $QDFDSD ,VODQG LQ &DOLI )LVK *DPH %DUWKRORPHZ $ -U t 'DZVRQ : 5 7HPSHUDWXUH UHJXODWLRQ LQ \RXQJ SHOLFDQV KHURQV DQG JXOOV (FRORJ\ %DUWOHWW )LOLDO FDQQLEDOLVP LQ EXU\LQJ EHHWOHV %HKDY (FRO 6RFLRELRO %HLVVHQJHU 6 5 ([SHULPHQWDO EURRG PDQLSXODWLRQV DQG WKH PRQRSDUHQWDO WKUHVKROG LQ VQDLO NLWHV $P 1DW %HLVVLQJHU 6 5 t :DOWPDQ 5 ([WUDRUGLQDU\ FOXWFK VL]H DQG KDWFKLQJ DV\QFKURQ\ RI D QHRWURSLFDO SDUURW $XN %HQW $ & /LIH +LVWRULHV RI 1RUWK $PHULFDQ 3HWUHOV DQG 3HOLFDQV DQG 7KHLU $OOLHV 1HZ
PAGE 194

%RDJ $ t $OZD\ + (IIHFW RI VRFLDO HQYLURQPHQW ZLWKLQ WKH EURRG RQ GRPLQDQFH UDQN LQ JDOOLQDFHRXV ELUGV 7HWUDRQLGDH DQG 3KDVLDQLGDHf &DQ =RRO %RDJ 3 7 t *UDQW 3 5 ,QWHQVH QDWXUDO VHOHFWLRQ LQ D SRSXODWLRQ RI 'DUZLQnV ILQFKHV *HRVRL]LQDHf LQ WKH *DODSDJRV 6FLHQFH %RUWRORWWL 5 :LHEH / t ,NR : 0 &DQQLEDOLVP RI QHVWOLQJ $PHULFDQ NHVWUHOV E\ WKHLU SDUHQWV DQG VLEOLQJV &DQ =RRO %UDXQ % 0 t +XQW / -U %URRG UHGXFWLRQ LQ EODFNOHJJHG NLWWLZDNHV $XN %URZQ / + t 8UEDQ ( 7KH EUHHGLQJ ELRORJ\ RI WKH JUHDW ZKLWH SHOLFDQ 3HOHFDQXV RQRFURWDOXV URVHXV DW /DNH 6KDOD (WKLRSLD ,ELV %U\DQW 0 t 7DWQHU 3 +DWFKLQJ DV\QFKURQ\ VLEOLQJ FRPSHWLWLRQ DQG VLEOLFLGH LQ QHVWOLQJ ELUGV VWXGLHV RI VZLIWOHWV DQG EHHHDWHUV $QLP %HKDY %U\DQW 0 t :HVWHUWHUS 5 7LPH DQG HQHUJ\ OLPLWV WR EURRG VL]H LQ KRXVH PDUWLQV 'HOLFKRQ XUELFDf $QLP (FRO %XFKKRO] 7 'HYHORSPHQWDO VHOHFWLRQ LQ YDVFXODU SODQWV %RW *D] &DVK t (YDQV 5 0 %URRG UHGXFWLRQ LQ WKH $PHULFDQ ZKLWH SHOLFDQ 3HOHFDQXV HUYWKURUKYQFKRVf %HKDY (FRO 6RFLRELRO &ODUN $ % 6F :LOVRQ 6 $YLDQ EUHHGLQJ DGDSWDWLRQV KDWFKLQJ DV\QFKURQ\ EURRG UHGXFWLRQ DQG QHVW IDLOXUH 4 5HY %LRO &RRSHU )DWDO VLEOLQJ DJJUHVVLRQ LQ SHOLFDQVD UHYLHZ 2VWULFK &RXUWQH\ & + t )RUUHVWHU +HOPLQWK SDUDVLWHV RI WKH EURZQ SHOLFDQ LQ )ORULGD DQG /RXLVLDQD 3URF +HOPLQWKRORJLFDO 6RF RI :DVKLQJWRQ

PAGE 195

&UDPS 6 t 6LPPRQV ( / +DQGERRN RI WKH %LUGV RI (XURSH WKH 0LGGOH (DVW DQG 1RUWK $IULFD 7KH %LUGV RI WKH :HVWHUQ 3DOHDUFWLF 9RO 2VWULFK WR 'XFNV 2[IRUG 2[IRUG 8QLY 3UHVV &ULYHOOL $ 6F 9L]L 7KH 'DOPDWLDQ SHOLFDQ 3HOHFDQXV FULVSXV %UXFK D UHFHQWO\ ZRUOG HQGDQJHUHG ELUG VSHFLHV %LRO &RQVHUY &URQPLOOHU 5 t 7KRPSVRQ & ) ([SHULPHQWDO PDQLSXODWLRQ RI EURRG VL]H LQ UHGZLQJHG EODFNELUGV $XN 'HPHQWLHY 3 t *ODGNRY 1 $ %LUGV RI WKH 6RYLHW 8QLRQ 9RO -HUXVDOHP ,VUDHO 3URJUDP IRU 6FLHQWLILF 7UDQVODWLRQV 'LDPRQG 0 1HZV DQG YLHZV &DXVHV RI GHDWK EHIRUH ELUWK 1DWXUH 'LQ 1 $ 6F (OWULQJKDP 6 %UHHGLQJ RI WKH SLQN EDFNHG SHOLFDQ 3HOHFDQXV UXIHVFHQV LQ 5ZHQ]RUL 1DWLRQDO 3DUN 8JDQGD ZLWK QRWHV RQ D FRORQ\ RI PDUDERX VWRUNV /HSWRSWLODV FUDPHQLIHUXV ,ELV 'RPLQH\ : t %OXPHU / 6 &DQQLEDOLVP RI HDUO\ OLIH VWDJHV LQ ILVKHV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 196

'UXPPRQG + 2VRUQR / 7RUUHV 5 *DUFLD &KHYHODV & t /DULRV + 0 6H[XDO VL]H GLPRUSKLVP DQG VLEOLQJ FRPSHWLWLRQ LPSOLFDWLRQV IRU DYLDQ VH[ UDWLRV $P 1DW (GZDUGV 7 & -U t &ROORS\ 0 : 2EOLJDWH DQG IDFXOWDWLYH EURRG UHGXFWLRQ LQ HDJOHV DQ H[DPLQDWLRQ RI IDFWRUV WKDW LQIOXHQFH IUDWULFLGH $XN (LFNZRUW 5 &DQQLEDOLVP DQG NLQ VHOHFWLRQ LQ /DELGRPHUD FOLYLFROOLV &ROHSWHUD &KU\VRPHOLGDHf $P 1DW (YDQV 5 0 6RPH FDXVDO DQG IXQFWLRQDO FRUUHODWHV RI FUHFKLQJ LQ \RXQJ ZKLWH SHOLFDQV &DQ =RRO )HOGPDQ *DJQRQ +RIPDQQ 5 t 6LPSVRQ 6WDWYLHZ 6( *UDSKLFV 9HUVLRQ %HUNHO\ $EDFXV &RQFHSWV ,QF )LQQH\ /DWVFKD 5 %HQQHWW % 0 t +VX 3 7DEOHV IRU 7HVWLQJ 6LJQLILFDQFH LQ D ; &RQWLQJHQF\ 7DEOH &DPEULGJH &DPEULGJH 8QLYHUVLW\ 3UHVV )LW]*HUDOG )LOLDO FDQQLEDOLVP LQ ILVKHV ZK\ GR SDUHQWV HDW WKHLU RIIVSULQJ" 7UHQGV (FRO (YRO )RUEHV / 6 ,QVXUDQFH RIIVSULQJ DQG WKH HYROXWLRQ RI DYLDQ FOXWFK VL]H WKHRU %LRO )RUEHV / 6 ,QVXUDQFH RIIVSULQJ DQG EURRG UHGXFWLRQ LQ D YDULDEOH HQYLURQPHQW WKH FRVWV DQG EHQHILWV RI SHVVLPLVP 2LNRV )UDQN / *OLFNPDQ 6 ( t /LFKW 3 )DWDO VLEOLQJ DJJUHVVLRQ SUHFRFLDO GHYHORSPHQW DQG DQGURJHQV LQ QHRQDWDO VSRWWHG K\HQDV 6FLHQFH )UDVHU %HKDYLRUDO SHUVSHFWLYHV RQ SLJOHW VXUYLYDO 5HSURGXFWLRQ DQG )HUWLOLW\ 6XSSOHPHQW )XMLRND 0 )RRG GHOLYHU\ DQG VLEOLQJ FRPSHWLWLRQ LQ H[SHULPHQWDOO\ HYHQDJHG EURRGV RI WKH FDWWOH HJUHW %HKDY (FRO 6RFLRELRO

PAGE 197

*DUG 1 : t %LUG 0 %UHHGLQJ EHKDYLRU RI $PHULFDQ NHVWUHOV UDLVLQJ PDQLSXODWHG EURRG VL]HV LQ \HDUV RI YDU\LQJ SUH\ DEXQGDQFH :LOVRQ %XOO *DUJHWW 9 6LEOLQJ DJJUHVVLRQ LQ WKH EODFN HDJOH LQ WKH 0DWRSRV 5KRGHVLD 2VWULFK *HUUDUG t %RUWRORWWL 7KH %DOG (DJOH :DVKLQJWRQ '& 6PLWKVRQLRQ ,QVWLWXWH 3UHVV *LOPRUH 5 'RGULOO : t /LQOH\ 3 $ 5HSURGXFWLRQ DQG HPEU\RQLF GHYHORSPHQW RI WKH VDQG WLJHU VKDUN 2GRQWDRVLV WDXUXV 5DILQHVTXHf )LVK %XOO *RGIUD\ + & 0RGHOV IRU FOXWFK VL]H DQG VH[ UDWLR ZLWK VLEOLQJ LQWHUDFWLRQ 7KHRU 3RSXO %LRO *RGIUD\ + & t +DUSHU $ % 7KH HYROXWLRQ RI EURRG UHGXFWLRQ E\ VLEOLFLGH LQ ELUGV WKHRU %LRO *RGIUD\ + & t 3DUNHU $ &OXWFK VL]H IHFXQGLW\ DQG SDUHQWRIIVSULQJ FRQIOLFW 3KLO 7UDQV 5 6RF /RQG % *RGIUD\ + & t 3DUNHU $ 6LEOLQJ FRPSHWLWLRQ SDUHQWRIIVSULQJ FRQIOLFW DQG FOXWFK VL]H $QLP %HKDY +DKQ $V\QFKURQRXV KDWFKLQJ LQ WKH ODXJKLQJ JXOO FXWWLQJ ORVVHV DQG UHGXFLQJ ULYDOU\ $QLP %HKDY +DLJ &RQIOLFWV DPRQJ PHJDVSRUHV WKHRU %LRO +DLJ .LQ FRQIOLFW LQ VHHG SODQWV 7UHQGV (FRO (YRO +DLJ %URRG UHGXFWLRQ DQG RSWLPDO SDUHQWDO LQYHVWPHQW ZKHQ RIIVSULQJ GLIIHU LQ TXDOLW\ $P 1DW +DPLOWRQ : 7KH JHQHWLFDO HYROXWLRQ RI VRFLDO EHKDYLRU WKHRU %LRO

PAGE 198

+HJQHU 5 ( t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f $QLP (FRO -RKQVRQ 5 ) -U t 6ORDQ 1 ) :KLWH SHOLFDQ SURGXFWLRQ DQG VXUYLYDO RI \RXQJ DW &KDVH /DNH 1DWLRQDO :LOGOLIH 5HIXJH 1RUWK 'DNRWD :LOVRQ %XOO .HLWK 6\QHUJLVWLF HIIHFWV RI ''( DQG IRRG VWUHVV RQ UHSURGXFWLRQ LQ EURZQ SHOLFDQV DQG ULQJGRYHV 3K' WKHVLV 2KLR 6WDWH 8QLY &ROXPEXV .LQJ $ %ODQNLQVKLS 5 3DXO 5 7 t 5LFH 5 & $ D 7LFNV DV D IDFWRU LQ WKH QHVWLQJ IDLOXUH RI 7H[DV EURZQ SHOLFDQV :LOVRQ %XOO .LQJ $ .HLWK 0LWFKHOO & $ t .LHUDQV $ E 7LFNV DV D IDFWRU LQ QHVW GHVHUWLRQ RI &DOLIRUQLD EURZQ SHOLFDQV &RQGRU .QRSI ) / 6SDWLDO DQG WHPSRUDO DVSHFWV RI FRORQLDO QHVWLQJ RI ZKLWH SHOLFDQV &RQGRU

PAGE 199

.R]ORZVNL t 6WHDUQV 6 & +\SRWKHVHV IRU WKH SURGXFWLRQ RI H[FHVV ]\JRWHV PRGHOV RI EHWKHGJLQJ DQG VHOHFWLYH DERUWLRQ (YROXWLRQ /DFN 7KH VLJQLILFDQFH RI FOXWFKVL]H ,ELV /DFN 7KH 1DWXUDO 5HJXODWLRQ RI $QLPDO 1XPEHUV 2[IRUG &ODUHQGRQ 3UHVV /DFN 3RSXODWLRQ 6WXGLHV RI %LUGV 2[IRUG &ODUHQGRQ 3UHVV /DFN (FRORJLFDO $GDSWDWLRQV IRU %UHHGLQJ LQ %LUGV /RQGRQ 0HWKXHQ /D]DUXV t ,QJOLV 5 6KDUHG DQG XQVKDUHG SDUHQWDO LQYHVWPHQW SDUHQWRIIVSULQJ FRQIOLFW DQG EURRG VL]H $QLP %HKDY /HIIHODDU t 5REHUWVRQ 5 (TXDOLW\ RI IHHGLQJ UROHV DQG WKH PDLQWHQDQFH RI PRQRJDP\ LQ WUHH VZDOORZV %HKDY (FRO 6RFLRELRO /HVVHOOV & 0 %URRG VL]H LQ &DQDGD JHHVH $ PDQLSXODWLRQ H[SHULPHQW $QLP (FRO /HZLV 5 5 ,OO t /HZLV & 6 &RORQLDO ELUG XVH DQG SODQW VXFFHVVLRQ RQ GUHGJHG PDWHULDO LVODQGV LQ )ORULGD 9RO ,, SDWWHUQV RI SODQW VXFFHVVLRQ (QYLURQ (IIHFWV /DE 86 $UP\ (QJ :DWHUZD\V ([SHU 6WD 7HFK 5HSW 86 $UP\ &RUSV RI (QJLQHHUV 9LFNVEXUJ 0LVVLVVLSSL /OR\G 6H[XDO VWUDWHJLHV LQ SODQWV $Q K\SRWKHVLV RI VHULDO DGMXVWPHQW RI PDWHUQDO LQYHVWPHQW GXULQJ RQH UHSURGXFWLYH VHVVLRQ 1HZ 3K\WRO 0DF1DLU 0 5 t 3DUNHU $ 0RGHOV RI SDUHQWn RIIVSULQJ FRQIOLFW ,, 3URPLVFXLW\ $QLP %HKDY 0DJUDWK 5 +DWFKLQJ DV\QFKURQ\ LQ DOWULFLDO ELUGV %LRO 5HY 0DUWLQ 7 ( )RRG DV D OLPLW RQ EUHHGLQJ ELUGV D OLIHKLVWRU\ SHUVSHFWLYH $QQ 5HY (FRO 6\VW

PAGE 200

0DVXNR /DUYDO KHPRO\PSK IHHGLQJ D QRQGHVWUXFWLYH SDUHQWDO FDQQLEDOLVP LQ WKH SULPLWLYH DQW $PEO\DRQH VLOYHVWULL :KHHOHU +\PHQRSWHUD )RUPLFLGDHf %HKDY (FRO 6RFLRELRO 0D]HU 6 0DWHUQDO LQYHVWPHQW DQG PDOH UHSURGXFWLYH VXFFHVV LQ DQJLRVSHUPV 3DUHQWRIIVSULQJ FRQIOLFW RU VH[XDO VHOHFWLRQ" %LRO /LQQ 6RF 0H\EXUJ % 8 6LEOLQJ DJJUHVVLRQ DQG PRUWDOLW\ DPRQJ QHVWOLQJ HDJOHV ,ELV 0RFN : D ,QIDQWLFLGH VLEOLFLGH DQG DYLDQ QHVWOLQJ PRUWDOLW\ ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 201

1HOVRQ % 7KH 6XOLGDH *DQQHWV DQG %RRELHV 2[IRUG 2[IRUG 8QLYHUVLW\ 3UHVV 1HZWRQ %UHHGLQJ VWUDWHJLHV LQ ELUGV RI SUH\ /LYLQJ %LUG 1LVEHW & 7 6HOHFWLYH HIIHFWV RI SUHGDWLRQ LQ D WHUQ FRORQ\ &RQGRU 1LVEHW & 7 t &RKHQ 0 $V\QFKURQRXV KDWFKLQJ LQ FRPPRQ DQG URVHDWH WHUQV 6WHUQD KLUXQGR DQG e GRXDDOOLL ,ELV 2n&RQQRU 5 %URRG UHGXFWLRQ LQ ELUGV VHOHFWLRQ IRU IUDWULFLGH LQIDQWLFLGH DQG VXLFLGH" $QLP %HKDY 2n&RQQRU 5 7KH *URZWK DQG 'HYHORSPHQW RI %LUGV 1HZ
PAGE 202

3ORJHU % t 0RFN : 8QSXE 06 3DUWLWLRQLQJ WKH UHSURGXFWLYH YDOXH RI H[WUD FKLFNV UHYLVLWHG 3ROLV $ ,QWUDVSHFLILF SUHGDWLRQ DQG LQIDQW NLOOLQJ DPRQJ LQYHUWHEUDWHV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 203

6FKUHLEHU 5 : 0DLQWHQDQFH EHKDYLRU DQG FRPPXQLFDWLRQ LQ WKH EURZQ SHOLFDQ 2UQLWKRO 0RQRJU 6FKUHLEHU 5 : 5HSURGXFWLYH SHUIRUPDQFH RI WKH HDVWHUQ EURZQ SHOLFDQ 3HOHFDQXV RFFLGHQWDOLV &RQWULE 6FL /RV $QJHOHV &RXQW\ 0XV 1R 6FKUHLEHU 5 : t 5LVHEURXJK 5 : 6WDWXV RI EURZQ SHOLFDQ SRSXODWLRQV LQ WKH 8QLWHG 6WDWHV :LOVRQ %XOO 6FKUHLEHU 5 : 6FKUHLEHU ( $ $QGHUVRQ : t %UDGHOH\ : 3OXPDJHV DQG PROWV RI EURZQ SHOLFDQV &RQWULE 6FL /RV $QJHOHV &RXQW\ 0XV 1R 6KDNHVSHDUH : 7KH 7UDJHG\ RI .LQJ /HDU ,Q 7KH 5LYHUVLGH 6KDNHVSHDUH (G E\ % (YDQVf SS %RVWRQ +RXJKWRQ 0LIIOLQ &RPSDQ\ 6LPPRQV 5 2IIVSULQJ TXDOLW\ DQG WKH HYROXWLRQ RI FDLQLVP ,ELV 6LPRQ 0 3 7KH LQIOXHQFH RI FRQVSHFLILFV RQ HJJ DQG ODUYDO PRUWDOLW\ LQ DPSKLELDQV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 204

6WHSKHQVRQ $ t %HUWLQ 5 0DOH FRPSHWLWLRQ IHPDOH FKRLFH DQG VH[XDO VHOHFWLRQ LQ SODQWV ,Q 3ROOLQDWLRQ %LRORJ\ (G E\ / 5HDOf SS 1HZ
PAGE 205

:LOOLDPV & 1DWXUDO VHOHFWLRQ WKH FRVWV RI UHSURGXFWLRQ DQG D UHILQHPHQW RI /DFNnV SULQFLSOH $P 1DW :LOVRQ ( 2 7KH ,QVHFW 6RFLHWLHV &DPEULGJH 0DVVDFKXVVHWWV +DUYDUG 8QLYHUVLW\ 3UHVV :LQNOHU : )DFWRUV GHWHUPLQLQJ D FOXWFK VL]H UHGXFWLRQ LQ &DOLIRUQLD JXOOV /DUXV FDOLIRUQLFXVf $ PXOWLK\SRWKHVLV DSSURDFK (YROXWLRQ
PAGE 206

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

PAGE 207

IURP WKH 'HSDUWPHQW RI =RRORJ\ DW WKH 8QLYHUVLW\ RI 2NODKRPD IRU P\ ZRUN RQ VLEOLFLGH LQ FDWWOH HJUHWV FRQGXFWHG WKLV ZRUN XQGHU WKH GLUHFWLRQ RI 'RXJODV : 0RFN 2XU FROODERUDWLRQ ZKLOH ZDV D PDVWHUnV VWXGHQW UHVXOWHG LQ VHYHUDO FRDXWKRUHG SXEOLFDWLRQV HQWHUHG WKH 'HSDUWPHQW RI =RRORJ\ DW WKH 8QLYHUVLW\ RI )ORULGD LQ $XJXVW DV D VWXGHQW RI 'U + -DQH %URFNPDQQ ,Q WKH VXPPHU RI KHDGHG GHHSHU LQWR WKH WURSLFV IRU VHYHUDO PRQWKV DV D SDUWLFLSDQW LQ WKH 2UJDQL]DWLRQ IRU 7URSLFDO 6WXGLHV FRXUVH LQ WKH IXQGDPHQWDOV RI WURSLFDO HFRORJ\ $ GURXJKW GXULQJ DQG IRUFHG PH WR DEDQGRQ P\ ILUVW GLVVHUWDWLRQ SURMHFW RQ WKH SUR[LPDWH FDXVHV RI KDWFKLQJ DV\QFKURQ\ LQ FDWWOH HJUHWV ILQDOO\ UHWXUQHG WR WKDW nZRQGHUIXO ELUG WKH SHOLFDQn LQ IRU P\ GRFWRUDO UHVHDUFK $IWHU UHFHLYLQJ P\ 3K' LQ ]RRORJ\ SODQ WR FRQWLQXH WHDFKLQJ DQG FRQGXFWLQJ UHVHDUFK DV D XQLYHUVLW\ RU FROOHJH SURIHVVRU

PAGE 208

, FHUWLI\ WKDW KDYH UHDG WKLV VWXG\ DQG WKDW LQ P\ RSLQLRQ LW FRQIRUPV WR DFFHSWDEOH VWDQGDUGV RI VFKRODUO\ SUHVHQWDWLRQ DQG LV IXOO\ DGHTXDWH LQ VFRSH DQG TXDOLW\ DV D GLVVHUWDWLRQ IRU WKH GHJUHH RI 'RFWRU RI 3KLORVRSK\ rrf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

PAGE 209

, FHUWLI\ WKDW KDYH UHDG WKLV VWXG\ DQG WKDW LQ P\ RSLQLRQ LW FRQIRUPV WR DFFHSWDEOH VWDQGDUGV RI VFKRODUO\ SUHVHQWDWLRQ DQG LV IXOO\ DGHTXDWH LQ VFRSH DQG TXDOLW\ DV D GLVVHUWDWLRQ IRU WKH GHJUHH RI 'RFWRU RI3KLOSVRSK\ A-RKQ 6LYLQVNL A $VVLVWDQW 3URIHVVRU RI (QWRPRORJ\ DQG 1HPDWRORJ\ 7KLV GLVVHUWDWLRQ ZDV VXEPLWWHG WR WKH *UDGXDWH )DFXOW\ RI WKH 'HSDUWPHQW RI =RRORJ\ LQ WKH &ROOHJH RI /LEHUDO $UWV DQG 6FLHQFHV DQG WR WKH *UDGXDWH 6FKRRO DQG ZDV DFFHSWHG DV SDUWLDO IXOILOOPHQW RI WKH UHTXLUHPHQWV IRU WKH GHJUHH RI 'RFWRU RI 3KLORVRSK\ 'HFHPEHU 'HDQ *UDGXDWH 6FKRRO

PAGE 210

81,9(56,7< 2) )/25,'$


107
Table 3-4. Results of forward stepwise regression to determine
the best predictor of the average blows/fight delivered during
each summary interval. Independent variables represent the best
predictors in each of three categories: food amounts, culmen
growth and mass change. See Table 3-2 and Methods for
explanation of how best predictors were determined. Variables
were defined as in Table 3-2.
Independent variable
F-value
P-value
Summary interval for ages 6
through 10 days
Food to B-chick
1.135
>0.05
A-chick culmen growth
1.514
>0.05
B-chick mass gain
1.977
>0.05
Summary interval for ages 11
through 15 days
Food to brood
1.689
>0.05
A-chick culmen growth
1.577
>0.05
A-chick mass gain
0.939
>0.05
Summary interval for ages 13
through 17 days
Food to B-chick
0.236
>0.05
Culmen-length difference 0.010
>0.05
Mass difference*
21.748
0.02
Average blows/fighta =
4.22 + 0.01 X Mass
difference
Summary interval for ages 17
through 21 days
Food to A-chick
0.292
>0.05
B-chick culmen growth
0.741
>0.05
Mass difference
0.730
>0.05
a Regression equation, r
= 0.88, Fq.5,4 = 21.748, P = 0.02.


47
1990, Table 2-6) was the most common of the food-independent
deaths that affected chicks older than hatchlings.
Infanticidal attacks were probably not an artifact of
frequent colony disturbance. While using a boat offshore to
census parts of the island that we never entered, I observed
birds in subadult (N = 4) and adult (N = 1) plumage
attacking downy young, and also saw two adults grappling in
apparent takeover attempts (N = 2).
Both food-dependent and food-independent deaths
occurred among chicks of all ranks in 1990 (Table 2-3). But
the relative importance of these sources of mortality varied
with chick ranks and brood sizes. A-chicks in B/2 and B/3
nests died of food-independent and food-dependent causes
with similar frequency (Table 2-3, Binomial test for four
food-dependent versus four food-independent A-chick deaths
in B/2 nests, P = 1.0, and Binomial test for two food-
dependent versus six food-independent A-chick deaths in B/3
nests, P = 0.40). Food-dependent and food-independent
deaths also affected a similar number of B-chicks in B/3
nests (Table 2-3, Binomial test for three food-dependent
versus two food-independent B-chick deaths, P = 1.0). By
contrast, in B/2 nests, B-chicks died significantly more
often of food-dependent than of food-independent causes
(Table 2-3, Binomial test for 10 food-dependent versus one
food-independent death, P = 0.01). C-chicks also died more
often of food-dependent causes, but not significantly so


2
siblicide in birds (review in Mock et al. 1990) and mammals
(e.g. 01 Gara 1969, Fraser 1990, Frank et al. 1991).
These phenomena pose a problem for evolutionary
biologists: why do parents "waste" their time and resources
to produce offspring that they fail to provision with
parentally controlled resources? That this is common in a
wide variety of disparate taxa suggests that the production
of doomed offspring probably conferred enhanced fitness to
at least some of the participants (parents and/or some
offspring) in the past, and may continue to enhance fitness
in the present. Alternatively, such "brood reduction" (the
overproduction and subsequent elimination of some offspring)
could be a negative consequence of selection acting on some
other factor such as large clutch size, per se. or hatching
asynchrony (e.g. Clark and Wilson 1981). My dissertation
focuses on the proximate and ultimate causes of brood
reduction in brown pelicans (Pelecanus occidentalis). For
convenience, I refer to those brood-members most likely to
be the victims of brood reduction as "marginal" offspring
(Mock and Parker 1986) because their survival chances are
marginal and typically contingent on the death of a sibling
or unusually abundant food.
Four major hypotheses have been proposed to explain how
the production of "marginal" offspring may be beneficial to
parents (reviewed in Forbes 1990, 1991). First, "marginal"
offspring may be used as food for parents or offspring. This


84
floor. When several Shakes occurred in a continuous series,
the attacker did not relinquish its hold on the victim
between blows.
Fights occasionally resulted in puncture wounds to the
head and neck, but breaks in the skin were rare. The most
common evidence of injury was that after being beaten
repeatedly, the victim's skin often became puffed out in odd
shapes along its back, sides and neck, possibly from air-
sacs that had been broken during sibling attacks. Some
chicks near death had 5-10 small puncture wounds on their
abdomens or breasts. These wounds could not have been
caused by sibling bites, because victims almost always kept
their breasts pressed to the nest fabric during fights. But
a victim's breast might be punctured when an attacker
directed powerful blows to the victim's back, walked or sat
on the victim, or otherwise shoved the victim's body
forcefully into the often sharp sticks of the nest.
Nineteen percent of all fights observed in 1990 ended
in submissive postures (described below) that were visible
to the observer. Some additional fights also may have ended
in submissive postures that were not detectable because the
loser was hidden from the observer by the nest rim or the
body of a family member. Submissive postures included:
Crouch (N = 44 fights), Curl Neck (N = 105 fights), Turn Low
(N = 75 fights), Duck (N = 53 fights), Reverse Head (N = 1
fight), Lie Flat (N = 4 fights), and Hang Head (N = 36


124
a particular scan, we watched whichever nest was next in the
scan sequence.
Dawn to dusk monitoring of nestling activities in
individual focal nests began on the day that a nest received
its brood-size treatment (see Brood-size Manipulations,
above) and continued until the first-hatched (A-) chick
reached age 20 days. After this, nests were retired from
the focal sample but were observed opportunistically until
the A-chick reached a minimum age of 30 days. I continued
to census former focal nests at least every 10-12 days until
all residents had died or reached age 70 days, approximately
the age of fledging (see Chapter 2). Duration of survival
was defined as the age of a chick at death, or 70 days for
chicks that lived to fledging age.
I used yellow and black indelible marker pens to
distinguish newly hatched chicks aged 0 (hatching day) to 4
days according to their hatching order. I marked older
chicks with blue and yellow acrylic paint and flagging tape
squares glued with contact cement onto chick backs and
heads. Within a brood, colors were randomly assigned to
chicks of different hatching ranks. We refreshed chick
marks every 2-4 days until A-chicks were 29 days old, and
every 7-12 days thereafter until fledging.
The ages and hatching order was known precisely for
some nestlings. I estimated the ages of remaining nestlings
from a curve of culmen growth versus age of 62 chicks whose


106
Table 3-3. Results of forward stepwise regression to determine the best
predictor of the total number of blows delivered by nestlings in each
summary interval. Independent variables represent the best predictors in
each of three categories: food amounts, culmen growth and mass change. See
Table 3-2 and Methods for explanation of how best predictors were
determined. Variables were defined as in Table 3-2 and in Methods.
Independent variable
F-value
P-value
Summary interval for ages 6 through
10 days
Food to B-chick
1.054
>0.05
B-chick culmen growth
0.822
>0.05
B-chick mass gain
0.558
>0.05
Summary interval for ages 11 through
15 days
Food to B-chick
0.170
>0.05
Culmen-growth differential
1.507
>0.05
B-chick mass gain
0.266
>0.05
Summary interval for ages 13 through
17 days
Food to B-chick
0.015
>0.05
Culmen-growth differential*
38.332
0.008
A-chick mass gaina
N. A.
N. A.
Number of blows'3 = 2.77 + 212.
32 X Culmen-growth
differential
Summary interval for ages 17 through
21 days
Food to brood
1.797
>0.05
B-chick culmen growth
0.324
>0.05
B-chick mass gain*
8.706
0.04
Number of blowsc = 197.26 + 1.'
70 X B-chick mass gain
a Tied values made linear regression inappropriate (N.A.).
k Regression equation, r^ = 0.99, Fo.5,4 = 302.98, P = 0.003.
c Regression equation, r^ = 0.69, Fq.5,5 = 8.706, P = 0.04.


7
1987, Godfray and Harper 1990, Godfray and Parker 1991,
1992). These models predict parent-offspring conflict over
brood reduction. O'Connor's (1978) model predicted that the
threshold beyond which parents and senior offspring benefit
from brood reduction is lower for offspring than for
parents, creating conditions in which "siblings would gain
in net fitness by eliminating one young, albeit at the
expense of adult fitness" (O'Connor 1978:88). Thus, rather
than an adaptation favoring the fitness of both parents and
offspring, brood reduction may be the result of senior
siblings achieving their optimum to the detriment of
parents.
In Chapter 4, I explore some of the costs and benefits
to parents and offspring of eliminating the third-hatched
chick. Hypotheses proposing an adaptive value to brood
reduction all assume that senior survival increases
following brood reduction because seniors gain more food
following elimination of a competitor. Thus, parents and
seniors are assumed to benefit from brood reduction. But
this is possible only if parents do not decrease food
supplies following brood reduction. I experimentally
altered brood sizes to determine if parents fed reduced,
control and enlarged broods at the same level, as predicted.
I also determined if senior offspring gained more food in
reduced broods. Other outcomes would result if brood
reduction serves the interests of only the parents or the


174
populations of ground-nesting brown pelicans, whose chicks
leave their nests when 3-5 weeks old (Bent 1922, Blus and
Keahey 1978, Keith 1978, Pinzn and Drummond in press) and
sometimes form creches (Bent 1922, Pinzn and Drummond in
press, M. Shields pers. comm.). No information is available
on the frequency of aggression between members of these
creches. The opportunities for attacks between nonsibling
neighbors are likely to be greater among ground-nesting than
among tree-nesting neighbors, although fatal attacks might
be less common among ground-nesters because there are likely
to be more avenues of escape for the victims. Whether an
invader chick attacks the residents or is itself attacked
may depend on the relative sizes of the chicks and their
past social experience as victims or victors of sibling
fights (as in blue-footed boobies, Sula nebouxii. Drummond
et al. 1991) and as victims of attacks by invaders.
The attacks on unattended nestlings by fledglings and
nonbreeding immatures may provide a way for the attackers to
minimize their risk of injury while developing fighting
skills that will be necessary for defending or taking over
nest sites when they become breeders. Fledglings and
immatures that manipulate sticks or tear apart nests while
attacking residents may also be honing skills in stick
thievery that will be useful in future breeding seasons.
Juvenile pink-backed pelicans that destroy the nests of
unattended nestlings often use the stolen sticks to build


190
Stephenson, A. G. & Bertin, R. I. 1983. Male competition,
female choice, and sexual selection in plants. In:
Pollination Biology (Ed. by L. Real), pp. 109-149. New
York: Academic Press.
Stinson, C. H. 1979. On the selective advantage of
fratricide in raptors. Evolution, 33, 1219-1225.
Sutherland, S. 1986. Patterns of fruit-set: What controls
fruit-flower ratios in plants? Evolution, 40, 117-128.
Tarburton, M. K. 1987. An experimental manipulation of
clutch and brood size of white-rumped swiftlets
Aerodramus spodioovaius of Fiji. Ibis, 129, 107-114.
Temme, D. H. 1986. Seed size variability: a consequence of
variable genetic quality among offspring? Evolution,
40, 414-417.
Ten Cate, C. & Hilbers, J. 1991. Effects of brood size on
inter-clutch interval, offspring development and male-
female interactions in the ring dove Streptooelia
risoria. Anim. Behav., 41, 27-36.
Trivers, R. L. 1972. Parental investment and sexual
selection. In: Sexual Selection and the Descent of Man.
(Ed. by B. Campbell), pp. 136-179. Chicago: Aldine
Publ. Co.
Trivers, R. L.
Zool., 14,
1974. Parent-offspring conflict.
249-264.
Amer.
Valerio, M. & Barlow, G. W. 1986. Ontogeny of young Midas
cichlids: a study of feeding, filial cannibalism and
agonism in relation to differences in size. Biol.
Behav., 11, 16-35.
VanderWerf, E. 1992. Lack's clutch size hypothesis: an
examination of the evidence using meta-analysis.
Ecology, 73, 1699-1705.
Vesey-Fitzgerald, D. 1957. The breeding of the white
pelican (Pelecanus onocrotalus in the Rukwa Valley,
Tanganyika. Bull. Brit. Ornithol. Club, 77, 127-129.
Vestjens, W. J. M. 1977. Breeding behavior and ecology of
the Australian pelican, Pelecanus consoicillatus, in
New South Wales. Aust. Wildl. Res., 4, 37-58.


69
Table 2-5. Brown pelican nestling survival and reproductive values (RVe =
"extra-chick" component, RVi = "insurance" component, Total RV = RVe + RVi)
Junior chicks that fledged along with their seniors were called "extra"
chicks. Junior chicks that "replaced" a senior chick were those that lived
longer than a senior sibling. N = total number of chicks in each brood-size
and chick-rank category that fledged or died.
Initial
brood Chick
size rank
Number of
"extra"
chicks that
fledged
Number of chicks
that replaced a
senior chick and:
fledged died
Total
chicks
that
fledged
N
RVe
RVi
Total
RV
B/2
Ba
2
7
a. 1989
7
2
16
0.12
7
7
B/2
Combined
--


12
32


0.38
B/3
B or Cb
3
7
7
3
15
0.20
7
7
B/3
Combined


--
16
45
--
0.36
B/2
A
b. 1990
4
20
0.20
B/2
B
0
0
3C
0
20
0
0
0
B/2
Combined



4
40


0.10
B/3
A
--

2
14

--
0.14
B/3
B
0
2
3d
2
14
0
0.14
0.14
B/3
C
0
0
3d
0
14
0
0
0
B/3
Combined
--
--
4
42


0.10
Note :
RVe = (the number of
"extra"
chicks of a
particular junior
rank
(B or
C) / N chicks of that rank). RVi = (the number of juniors of a particular
rank that fledged after replacing a senior that died / N chicks of that
rank). Total RV = (the number of juniors of a particular rank that
fledged / N chicks of that rank).
a
Chicks were not marked in 1989 so data are presented only for two nests that
fledged both chicks and therefore had surviving B-chicks.
b
Data are presented only for three nests that fledged two chicks and
therefore had surviving B-chicks (or C-chicks if there were reversals),
c
One of these chicks died when 69 days old.
dT
In one reversal, the B- and C-chicks may have died on the same day, 3-5
days after the A-chick died.


90
the culmen length at the end of that summary interval.
Second, the difference of "A-chick culmen growth" minus "B-
chick culmen growth" was called the "culmen growth
differential" (mm/day). This was a measure of the
difference in culmen-growth rates of A- and B-siblings.
Third, for each nest, I calculated the difference in the
length of the A-chick's minus the B-chick's culmen at the
start of a summary interval ("value a"). I also calculated
this difference at the end of that summary interval ("value
b"). I then took the average of these two values and called
the result the "culmen length difference" (mm, average of
"value a" plus "value b"). This measure evaluates the
absolute differences between the sizes of A-and B-chicks.
Three measures of mass were calculated and named as
follows. First, for each brood, I calculated the rate of
mass gain (g/day) by A-chicks, "A-chick mass gain," and of
B-chicks, "B-chick mass gain," in the summary interval.
Thus, for each chick, I subtracted the mass (g) at the start
of the summary interval from the mass at the end of the
summary interval. Second, I calculated the "mass change
differential" (g/day), which was the difference of "A-chick
mass gain" minus "B-chick mass gain" during the summary
interval. This was another measure of growth rate
differences between A- and B-siblings. Third, I calculated
the difference in the A-chick's mass minus the B-chick's
mass at the start and end of a summary period. The average


TABLE OF CONTENTS
ACKNOWLEDGEMENTS ii
ABSTRACT viii
CHAPTERS
1 GENERAL INTRODUCTION 1
2 ROLE OF JUNIOR SIBLINGS IN RESOURCE TRACKING AND AS
INSURANCE FOR SENIOR LOSS 10
Introduction 10
Methods 15
Study Site 15
General Procedure 16
Focal Nests 19
Visual Census Nests 20
Measures of Hatching Success 21
Measures of Fledging Success 22
Determining Hatching Dates 22
Reproductive Value of Junior Siblings 24
Analyses of Fates Based on Chick Ranks 25
Analyses of Fates Independent of Chick Ranks 26
Causes of Chick Mortality 26
Supplemental Census Nests 33
Estimating Effects of Colony Disturbance 36
Statistical Analyses 37
Results 38
Survival 3 8
Reproductive Value of Junior Siblings 43
For What Causes of Senior Death do Juniors Provide
Insurance? 46
Comparisons of Food-dependent and Food-independent
Mortality 46
Timing of Food-dependent Deaths 48
Discussion 49
Survival 50
Partitioning the Reproductive Value of Junior
Chicks 52
For What Causes of Senior Death do Juniors Provide
Insurance? 57
Brood Reduction in Pelican Species 62
Xll


77
great blue herons (Ardea herodias) foster-parented by great
egrets also failed to depress fighting rates relative to
unprovisioned broods (Mock 1984b). In addition, field
observations of great egrets, great blue herons and cattle
egrets (Bubulcus ibis) failed to show increased aggression
with decreased food (results of various studies summarized
in Mock et al. 1987).
Although fighting occurred independently of food
amounts in these ardeid species, mortality, including
siblicide, was correlated with food shortage (Mock et al.
1987). A possible proximate mechanism to explain this
correlation in the absence of food-dependent fighting is
that the victim becomes more vulnerable to aggression during
food shortages even though levels of aggression are
invariant (Mock 1984b, Mock et al. 1990, Drummond and Garcia
Chvelas 1989). There are two ways that victim
vulnerability could be enhanced during food shortages.
First, parents may be absent more often on foraging trips
and thus, may rarely be able to suppress (fortuitously or
deliberately) nestling aggression (Newton 1977). Second,
competitive disparities among chicks may be exacerbated
during food scarcity, leading to malnourishment of the
younger one which thus succumbs more easily to the physical
abuse (Spellerberg 1971, Meyburg 1974, Edwards and Collopy
1983, Mock et al. 1987). Food abundance is also unlikely to
exert proximate control on nestling aggression in obligately


126
behavior (Schreiber 1977), displaying to or snapping at a
neighbor, hopping to a perch, or flying away.
The amount of food that parents attempted to deliver to
the brood was estimated from the frequency and longest
linear dimension of food regurgitated directly to each chick
or onto the nest floor. Food shares gained by chicks were
determined by noting which individual chicks swallowed
boluses and by estimating bolus sizes by comparing the size
of the bulge in a chick's neck to the dimensions of the
parent's bill (based on Mock 1985). Food amounts are
expressed in "food-units" ("f-units"), the length of a bolus
as a percent of the parent's bill length. During some
periods of feeding behavior, we could not tell whether or
not food had been delivered because the parent's body
blocked the observer's view. These observations were
recorded as nondeliveries even though some food may have
been delivered. Thus, my data are estimates of the minimum
amounts of food obtained by nestlings.
Food amounts delivered to each brood were defined as
the total food that was consumed by all members of the brood
during the first 6 and 9 days following experimental
alteration of brood sizes. Similarly, food amounts to A-
and B-chicks in each nest were the totals consumed by each
A- and B-chick, individually, summed over the first 6 and 9
days post-treatment.


32
frequency and intensity of sibling fights may depend on food
supplies in chicks more than a week old (see Chapter 3).
Some deaths were clearly food-dependent but I could not
determine whether the death was caused by (1) starvation in
the absence of nestling aggression, (2) siblicidal attacks,
or (3) the combined effects of nestling aggression and
starvation. These deaths were classified as being due to
"starvation &/or siblicide." To be classified as
"starvation &/or siblicide," deaths had to meet at least one
of the following conditions. First, starvation &/or
siblicide included emaciated chicks that received less than
25 blows in nests where some sibling fighting (and no
invader attacks) occurred in the victim's last 4 days of
life (N = 5). Second, starvation &/or siblicide included
single deaths that occurred more than 5 days and <.16 days
after the A-chicks hatched in nests for which information on
sibling fights and nestling condition was not available for
the last 4 days of nestling life (N = 9). Deaths meeting
the latter criteria were considered to be food-independent
because chicks < 16 days were (1) too young to fall
accidently because they could not yet crawl from the nest,
and (2) still constantly attended by parents and so not
subject to invader attacks. I also classified one death of
a chick < 5 days old as being due to starvation &/or
siblicide because there was evidence of fighting in the nest
prior to the victim's death.


Doug Mock has acted as an unofficial outside member of
my committee through periodic idea-full conversations and
through detailed critiques of my grant proposals. Doug also
provided valuable comments on earlier drafts of Chapter 2.
I thank Doug whole-heartedly for his continuing support.
Thanks also go to Trish Schwagmeyer for her suggestions and
ideas about the design of my research on brown pelicans.
Several people provided me with information on brown
pelicans that was either hard to obtain or unpublished. I
am grateful to D. Pinzn and Hugh Drummond for sending me
their unpublished manuscript. I thank Jim Rodgers for
providing hard-to-find references. Stephen Nesbitt provided
me with an annual performance report on brown pelicans in
nesting in Florida. He also provided helpful tips about
colony locations. I thank Carolina Murcia providing
information about a Panamanian pelican colony. I am also
indebted to Mark Shields for not only providing me with
unpublished data from his North Carolina population, but
also allowing me to collect blood from some of his birds for
a post-doctoral project.
The National Audubon Society provided invaluable
support during my 1990 brown pelican research. Special
thanks go to Rich Paul, manager of the Tampa Bay
Sanctuaries, for his generous support throughout the 1990
research season.. Rich not only provided me with permission
to work in the colonies, but also to stay in a cabin on one
in


40
nest by a courting pair or single male that attacked the
resident, tossed out its eggs and took over its nest (a
"takeover," discussed in Appendix D). As with abandonments,
the frequency of clutch takeovers was probably
underestimated in 1990. In 1989, 8% (6/78) of all clutches
were either abandoned or victims of takeovers, but the exact
cause could not be determined.
Survival of chicks according to size ranks. To assess
the value of the youngest brood members as insurance or as
"extra" chicks requires examining the frequency and causes
of single losses of eggs and chicks, as contrasted with the
simultaneous loss of all nestlings due to nest abandonment
and clutch takeovers. I therefore excluded abandonments and
clutch takeovers, and examined the frequency of deaths from
all other causes combined.
In 1990 B/2 nests of chicks with known ranks, I found
that B-chicks died more often than A-chicks, but not
significantly so (Table 2-3, 1-tailed Fisher exact test
against expectation that the youngest do not die more often
than their seniors, P > 0.05 for 4/20 surviving A-chicks
versus 0/20 surviving B-chicks). When I added 11 B/2 broods
with chicks of estimated ranks to these 20 known-rank
broods, I found that B-chicks died significantly more often
than did their A-siblings (1-tailed G-test, G = 4.55, df =
1, P = 0.05 for 8/31 surviving A-chicks versus 2/31
surviving B-chicks). Similarly, in 1989 B/2 broods for


Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
PROXIMATE AND ULTIMATE CAUSES OF BROOD REDUCTION IN BROWN
PELICANS (PELECANUS OCCIDENTALIS)
By
BONNIE JEAN PLOGER
December, 1992
Chairman: Dr. H. Jane Brockmann
Major Department: Zoology
Brown pelican (Pelecanus occidentalis) parents produce
more offspring than they usually raise to independence
because brood-members that hatch last starve or are killed
by their older siblings. This pattern is puzzling because
offspring are produced that seem to provide no reproductive
value to their parents. But these "marginal" offspring
(most likely to be brood-reduction victims) may contribute
reproductive value by surviving as replacements for senior
siblings that die unexpectedly. Marginal offspring may also
have value as additional survivors during periods of food
abundance. I found that brood reduction by starvation and
siblicide was common. Eggs also failed to hatch and chicks
fell from nests and were killed by strange adults and
IX


46
For What Causes of Senior Death do Juniors Provide
Insurance?.
Juniors replaced A-chicks that died of food-
independent, food-dependent and unknown causes. Of the five
A-chicks that were outlived by their juniors in B/3 nests,
three were survived by both their B- and C-siblings. Two of
these A-chicks died as hatchlings, while the remaining one
died either of starvation and/or siblicide. The two A-
chicks that were survived by the B-chick alone probably fell
from their nests, although the exact causes of death were
not certain, and were classified as unknown. In B/2 nests,
of the three A-chicks that died before their juniors, one
died as a hatchling, one was killed by its B-sibling, and
one died of unknown causes.
Comparisons of Food-dependent and Food-independent Mortality
When chicks of all ranks from broods of all sizes were
considered together, food-dependent causes of death were
more common than food-independent deaths in both 1989 and
1990 (Table 2-6). Overall, siblicide was the most common
source of death from known causes in 1990, affecting 10% of
all 162 chicks observed (Table 2-6). Food-independent
deaths affected 12% of all 94 chicks observed in 1989 and
15% of those observed in 1990 (Table 2-6). Infanticide
(which affected 4% of all chicks observed in both 1989 and


67
Table 2-3. Fates of hatchlings of known ranks from two- and three-chick
broods in 1990.
Chicks in
Three-chick broods
Chicks
Two-chick
in
broods
Chick Rank
A
B
C
A
B
Lived
Food-Dependent Deaths
2(14%)
2(14%)
0 (0%)
4(20%)
0 (0%)
Starvation
1 (7%)
1 (7%)
3 (21%)
2(10%)
1 (5%)
Siblicide
0 (0%)
2(14%)
1 (7%)
1 (5%)
4(20%)
Starvation &/or Siblicide
1L7%1.
0 (0%)
2(14%)
1 (5%)
5(25%)
Total Food-Dependent Death
2(14%)
3(21%)
6(43%)
4(20%)
10(50%)
Food-Independent Deaths
Died as Hatchling
2(14%)
0 (0%)
2(14%)
1 (5%)
0 (0%)
Fell Accidently
0 (0%)
0 (0%)
0 (0%)
1 (5%)
1 (5%)
Killed by Invader Chick
0 (0%)
0 (0%)
0 (0%)
1 (5%)
0 (0%)
Killed by Invader Adult
3(21%)
1 (7%)
0 (0%)
0 (0%)
0 (0%)
Unknown Accident
1 (7%)
1 (7%)
0 (0%)
1 (5%)
0 (0%)
Total Food-Independent Death
6(43%)
2(14%)
2(14%)
4(20%)
1 (5%)
Unknown Causes of Death
4(29%)
7(50%)
6(43%)
8(40%)
9(45%)
N
14
14
14
20
20
Note: Abandoned nests are not included in samples presented in this and
all remaining tables and figures in this chapter.


134
following brood-size alterations. However, A- and B-chicks
did not gain more food in smaller than larger broods. The
lack of differences among treatments could reflect a general
pattern of senior chicks gaining no additional food
following brood reduction. Alternatively, the brood-size
treatments may not have remained in effect long enough to
reflect differences among treatments either in food
consumption by the brood or by individual chicks.
Similarly, the number of broods per treatment group may have
been too small to detect true differences.
Parents delivered significantly less food to reduced
than control broods during the first 9 days post-treatment.
Again, A- and B-chicks did not gain more food following
brood reduction. These results could have been an artifact
of small sample size. But the results suggest that the
death of the C-chick may not provide extra food to seniors.
There is evidence that brood reduction in other species
may not provide senior offspring with extra food.
Experimental tests of the hypothesis that the average clutch
size is the most productive clutch size (Lack 1947, 1966)
generally demonstrate that parents can rear more offspring
than they normally do (reviews in Lessells 1986, Martin
1987, Ydenberg and Bertram 1989, VanderWerf 1992). The
increased fledging success in these experimentally enlarged
broods suggests that parents brought more food to enlarged
than control broods.


61
to total brood failure from parental abandonment, which may
occur throughout an entire colony (King et al. 1977a) or
sub-colony (M. Shields pers. comm.). Thus, tick infestation
is not a likely source of mortality for which youngest
chicks could serve as insurance. The value of juniors as
replacements for seniors with endoparasitic infections is
likely to be indistinguishable from their value as
replacements for apparently inferior, starving seniors.
This is because endoparasitic infections are probably lethal
only to starving chicks, whose exact cause of death (from
infection, starvation or their combined effects) can not be
determined. Temperature extremes are most likely to lead to
death of junior rather than senior nestlings, particularly
during the period when nestlings are first left unattended,
when seniors are able to thermoregulate but juniors may
still need protection from temperature extremes. If the
youngest brown pelican brood members are insurance for
losses of senior chicks, they are probably insurance for
losses due to senior inferiority, infanticide and/or
predation.
Partial clutch loss could also be due to egg shell
thinning. I saw no evidence of shell thinning in the 2
years of my study. However, the presence of "extra" eggs
may be due to recent past selective pressures (e.g. Boag and
Grant 1981) rather than current selection acting to maintain
larger clutch sizes. If there were within nest variance in


163
both received the same total parental investment during the
nestling period. There is some evidence that nestling
social experience affects post-fledging behavior. In
domestic chickens (Gallus domesticus) quail (Coturnix £..
japnica) and red grouse (Laaopus lagopus scoticus),
position in the nestling dominance hierarchy correlates with
success during encounters with nonsiblings after fledging
(Boag and Alway 1980, Rajecki et al. 1981). Dominance
during the nestling period might correlate with increased
ability of adults to secure or guard mates, nests or
territories. This could lead to lower reproductive success
of birds that were subordinate rather than dominant as
nestlings.
The effect of nestling fighting and dominance on (1)
the efficiency of conversion of parental resources to
nestling survival and (2) future reproduction remains to be
investigated. But I suggest that nestling fighting and
dominance may cause A-, B- and C-chicks to differ in their
fitness gains from the same amount of parental investment.
If this is so, then the models of Temme (1986) and Haig
(1990) might be applicable to asynchronously hatching birds.
Thus, parents might invest disproportionately in offspring
whose fitness gains are best enhanced by that investment.
To evaluate the potential for parent-offspring conflict
in the situation where parental fitness is maximized by
unequal investment in offspring will require combining the


20
have contained nests in the incubation through late nestling
stages. On any one day, we closely observed up to 16 focal
nests in a visual arc of 70-80' for a total of 27 focal
nests over the season.
Nests became part of the focal group as soon as their
broods were completed (i.e. no further eggs hatched). To
keep chicks individually marked and to measure nestling
growth, I visited focal nests following the schedule
described earlier (see Handling schedule in General
Procedure, above). In addition to visiting focal nests
periodically, I also kept focal nests under continuous
daylight observation until A-chicks reached the age of 20
days, by which time most younger siblings had already died.
When A-chicks were 20 through 30 days old, focal nests were
simply censused visually at least once each day and visited
every 2-4 days to monitor growth. Focal nests of these ages
were not kept under continuous observation. After A-chicks
reached a minimum of 30 days old, observations from the
blind were discontinued. But I continued to measure and
weigh chicks in these nests every 7-12 days depending on A-
chick age (see General Procedure, Handling schedule, above)
until all brood members had died or reached age 70 days.
Visual Census Nests
Nests in the "visual census" group were observed
opportunistically from the Sunken Island and Bird Island



PAGE 1

352;,0$7( $1' 8/7,0$7( &$86(6 2) %522' 5('8&7,21 ,1 %52:1 3(/,&$16 3(/(&$186 2&&,'(17$/,6f %< %211,( -($1 3/2*(5 $ ',66(57$7,21 35(6(17(' 72 7+( *5$'8$7( 6&+22/ 2) 7+( 81,9(56,7< 2) )/25,'$ ,1 3$57,$/ )8/),//0(17 2) 7+( 5(48,5(0(176 )25 7+( '(*5(( 2) '2&725 2) 3+,/2623+< 81,9(56,7< 2) )/25,'$

PAGE 2

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

PAGE 3

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

PAGE 4

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nV KRUVHVKRH FUDEV IRU D ZHHN VR WKDW FRXOG FRQWLQXH P\ SHOLFDQ REVHUYDWLRQV XQLQWHUUXSWHG $ WRWDO RI PRQWKV RI FRQWLQXRXV REVHUYDWLRQV FUHDWHG D WUHPHQGRXV PRXQWDLQ RI GDWD WKDQN -RDQ %LQNOH\ 5RQ &ORXVH -DPHV 3f -RXYHU DQG 0DUN 6WRZH IRU KHOSLQJ ,9

PAGE 5

PH ZLWK WKLV DUGXRXV WDVN 7KDQNV JR WR 0DUN 6WRZH IRU WKH XVH RI KLV FRPSXWHU SULQWHU DQG PRGHP IRU DQ H[WHQGHG SHULRG DOVR WKDQN 0LQJ /HH 3URVSHUR IRU DVVLVWDQFH ZLWK PDQXVFULSW SUHSDUDWLRQ DQG WKH OLWHUDWXUH VHDUFK )LQDQFLDO VXSSRUW LQ ZDV SURYLGHG E\ DQ (OL]DEHWK $GDPV )HOORZVKLS IURP 0RXQW +RO\RNH &ROOHJH DQG DZDUGV IURP WKH )UDQN 0 &KDSPDQ 0HPRULDO )XQG DQG WKH -RVHSK +HQU\ )XQG RI 6LJPD ;L *UDQWVLQ$LG RI 5HVHDUFK 7KH 'HSDUWPHQW RI =RRORJ\ DW WKH 8QLYHUVLW\ RI )ORULGD SURYLGHG PH ZLWK D UHVHDUFK DVVLVWDQWVKLS XVH RI D ERDW DQG KRXVLQJ DW WKH 6HDKRUVH .H\ %LRORJLFDO 6WDWLRQ IRU WKH VHDVRQ 7KDQNV DJDLQ JR WR + %URFNPDQQ IRU SURYLGLQJ VXSSOHPHQWDO ILQDQFLDO VXSSRUW LQ WKH VHDVRQ )LQDQFLDO VXSSRUW LQ ERWK \HDUV ZDV DOVR SURYLGHG E\ WKH 8QLYHUVLW\ RI )ORULGD )RXQGDWLRQ DOVR WKDQN P\ KXVEDQG 'RQ $OODQ IRU SURYLGLQJ DGGLWLRQDO ILQDQFLDO VXSSRUW GXULQJ WKLV SHULRG ZKHQ ZH ZHUH VWLOO HQJDJHG WR EH PDUULHG (Q URXWH WR P\ ZRUN ZLWK EURZQ SHOLFDQV FRQGXFWHG D YDULHW\ RI UHVHDUFK SURMHFWV ZLVK WR WKDQN DOO WKRVH ZKR DVVLVWHG PH GXULQJ WKHVH HDUOLHU SURMHFWV 0\ ILUVW SRWHQWLDO GLVVHUWDWLRQ SURMHFW LQYROYHG FRPPXQDO URRVWLQJ EHKDYLRU RI +HOHFRQLXV EXWWHUIOLHV WKDQN /LQFROQ %URZHU 7RP (PPHO DQG $OODQ 0DVWHUV IRU WKHLU KHOSIXO DGYLFH RQ WKLV SURMHFW 3HWHU 0D\ LQWURGXFHG PH WR JRRG ILHOG VLWHV LQ )ORULGD DOVR WKDQN /DUU\ *LOEHUW IRU VKRZLQJ PH KLV &RVWD 5LFD ILHOG VLWH DQG GLVFXVVLQJ WKH GHWDLOV RI Y

PAGE 6

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

PAGE 7

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nV %HKDYLRU *URXS IRU WKHLU LGHDV 6SHFLDO WKDQNV JR WR 0DUN 6WRZH IRU KLV IULHQGVKLS KHOSIXO FULWLFLVPV RI GUDIWV RI JUDQW SURSRVDOV IUXLWIXO GLVFXVVLRQV RI UHVHDUFK LGHDV DQG KLV LQYHQWLYH HOHFWURQLF ZL]DUGU\ 0DUN KDV EHHQ D JUHDW KHOS IURP WKH EHJLQQLQJ RI 9OO

PAGE 8

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

PAGE 9

$EVWUDFW RI 'LVVHUWDWLRQ 3UHVHQWHG WR WKH *UDGXDWH 6FKRRO RI WKH 8QLYHUVLW\ RI )ORULGD LQ 3DUWLDO )XOILOOPHQW RI WKH 5HTXLUHPHQWV IRU WKH 'HJUHH RI 'RFWRU RI 3KLORVRSK\ 352;,0$7( $1' 8/7,0$7( &$86(6 2) %522' 5('8&7,21 ,1 %52:1 3(/,&$16 3(/(&$186 2&&,'(17$/,6f %\ %211,( -($1 3/2*(5 'HFHPEHU &KDLUPDQ 'U + -DQH %URFNPDQQ 0DMRU 'HSDUWPHQW =RRORJ\ %URZQ SHOLFDQ 3HOHFDQXV RFFLGHQWDOLVf SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ XVXDOO\ UDLVH WR LQGHSHQGHQFH EHFDXVH EURRGPHPEHUV WKDW KDWFK ODVW VWDUYH RU DUH NLOOHG E\ WKHLU ROGHU VLEOLQJV 7KLV SDWWHUQ LV SX]]OLQJ EHFDXVH RIIVSULQJ DUH SURGXFHG WKDW VHHP WR SURYLGH QR UHSURGXFWLYH YDOXH WR WKHLU SDUHQWV %XW WKHVH PDUJLQDO RIIVSULQJ PRVW OLNHO\ WR EH EURRGUHGXFWLRQ YLFWLPVf PD\ FRQWULEXWH UHSURGXFWLYH YDOXH E\ VXUYLYLQJ DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLH XQH[SHFWHGO\ 0DUJLQDO RIIVSULQJ PD\ DOVR KDYH YDOXH DV DGGLWLRQDO VXUYLYRUV GXULQJ SHULRGV RI IRRG DEXQGDQFH IRXQG WKDW EURRG UHGXFWLRQ E\ VWDUYDWLRQ DQG VLEOLFLGH ZDV FRPPRQ (JJV DOVR IDLOHG WR KDWFK DQG FKLFNV IHOO IURP QHVWV DQG ZHUH NLOOHG E\ VWUDQJH DGXOWV DQG ,;

PAGE 10

QHLJKERULQJ QHVWOLQJV 6RPH VHFRQGKDWFKHG %f FKLFNV UHSODFHG GHDG ILUVWKDWFKHG $f FKLFNV DQG RWKHUV VXUYLYHG DORQJ ZLWK WKHLU VHQLRUV $OO WKLUGKDWFKHG &f FKLFNV GLHG )RRG VKRUWDJHV SUREDEO\ ZHUH QRW D SUR[LPDWH FDXVH RI VLEOLFLGDO DJJUHVVLRQ H[FHSW SRVVLEO\ ZKHQ EURRGV ZHUH GD\V ROG )LJKWLQJ GXULQJ WKH ILUVW ZHHN RI OLIH ZDV LQGHSHQGHQW RI QHVWOLQJ JURZWK DQG IRRG VXSSOLHV DQG SUREDEO\ VHUYHG WR HVWDEOLVK D GRPLQDQFH KLHUDUFK\ :KHQ EURRGV ZHUH GD\V ROG ILJKWLQJ UDWHV ZHUH EHVW SUHGLFWHG E\ WKH GLIIHUHQFH LQ WKH UDWH RI ELOO JURZWK RI $ FKLFNV UHODWLYH WR WKHLU %VLEOLQJV %XW ZKHQ EURRGV ZHUH GD\V ROG ILJKWLQJ UDWHV ZHUH EHVW SUHGLFWHG E\ DFFHOHUDWHG %FKLFN JURZWK DV FRXOG EH H[SHFWHG LI IDVWn JURZLQJ %FKLFNV WKUHDWHQHG WKH GRPLQDQFH RI $FKLFNV $OO DGDSWLYH H[SODQDWLRQV IRU EURRG UHGXFWLRQ DVVXPH WKDW SDUHQWV GHOLYHU D IL[HG DPRXQW RI IRRG DQG VR VXUYLYRUV JDLQ H[WUD IRRG DIWHU WKH GHDWK RI D VLEOLQJ WHVWHG WKLV DVVXPSWLRQ E\ UHPRYLQJ RU DGGLQJ D FKLFN WR WKUHHFKLFN EURRGV 3DUHQWV GHOLYHUHG VLPLODU DPRXQWV WR HQODUJHG FRQWURO DQG UHGXFHG EURRGV GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW %\ GD\V SRVWWUHDWPHQW SDUHQWV EURXJKW OHVV IRRG WR UHGXFHG WKDQ WR FRQWURO EURRGV 6HQLRUV GLG QRW JDLQ PRUH IRRG LQ UHGXFHG EURRGV GXULQJ WKHVH SHULRGV $ IHHGLQJ KLHUDUFK\ ZDV HYLGHQW ZLWK $FKLFNV JDLQLQJ PRUH IRRG WKDQ WKHLU %VLEOLQJV ZKR JDLQHG PRUH WKDQ WKHLU & [

PAGE 11

VLEOLQJV 7KH ILWQHVV LQWHUHVWV RI SDUHQWV PD\ FRQIOLFW ZLWK WKRVH RI RQH VHQLRU EXW QRW ZLWK WKH RWKHU VHQLRU RIIVSULQJ [L

PAGE 12

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

PAGE 13

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

PAGE 14

%,2*5$3+,&$/ 6.(7&+ [LY

PAGE 15

&+$37(5 *(1(5$/ ,1752'8&7,21 0DQ\ RUJDQLVPV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ XVXDOO\ UHDU WR LQGHSHQGHQFH EHFDXVH WKH\ DERUW HDW RU QHJOHFW VRPH RI WKHLU RIIVSULQJ RU DOORZ VLEOLQJV WR NLOO DQG VRPHWLPHV HDWf HDFK RWKHU $ERUWLRQ RI HPEU\RV LV FRPPRQ LQ PDQ\ SODQW VSHFLHV VHH UHYLHZV LQ %XFKKRO] /OR\G 6WHSKHQVRQ DQG %HUWLQ +DLJ 6XWKHUODQG DQG 0D]HU f DQG LQ VRPH PDPPDOV UHYLHZV LQ 'LDPRQG 6WHDUQV f 3DUHQWV PD\ FRQVXPH WKHLU SURJHQ\ LQ VRPH LQVHFWV HJ :LOVRQ 0DVXNR %DUWOHWW f ILVK HJ 6DOIHUW DQG 0RRGLH )LW]*HUDOG f DQG DPSKLELDQV 6LPRQ f ,Q VSHFLHV WKDW SURYLGH WKHLU RIIVSULQJ ZLWK IRRG SDUWLDO EURRG ORVV LV RIWHQ GXH WR VWDUYDWLRQ RI VRPH RIIVSULQJ WKURXJK SDUHQWDO QHJOHFW RU VLEOLQJ FRPSHWLWLRQ DV LV ZLGHVSUHDG LQ ELUGV /DFN +RZH 2n&RQQRU PRUH UHFHQW UHYLHZV LQ &ODUN DQG :LOVRQ 0RFN Df 3DUHQWV LQ PDQ\ WD[D LQFOXGLQJ LQVHFWV HJ (LFNZRUW f ILVK HJ 6SULQJHU *LOPRUH HW DO 9DOHULR DQG %DUORZ UHYLHZ LQ 'RPLQH\ DQG %OXPHU f DPSKLELDQV UHYLHZ LQ 6LPRQ f DQG ELUGV ,QJUDP %RUWRORWWL HW DO f WROHUDWH FDQQLEDOLVWLF VLEOLQJ FRPSHWLWLRQ UHYLHZHG LQ 3ROLV f 1RQFDQQLEDOLVWLF VLEOLFLGH LV PRUH FRPPRQ WKDQ FDQQLEDOLVWLF

PAGE 16

VLEOLFLGH LQ ELUGV UHYLHZ LQ 0RFN HW DO f DQG PDPPDOV HJ *DUD )UDVHU )UDQN HW DO f 7KHVH SKHQRPHQD SRVH D SUREOHP IRU HYROXWLRQDU\ ELRORJLVWV ZK\ GR SDUHQWV ZDVWH WKHLU WLPH DQG UHVRXUFHV WR SURGXFH RIIVSULQJ WKDW WKH\ IDLO WR SURYLVLRQ ZLWK SDUHQWDOO\ FRQWUROOHG UHVRXUFHV" 7KDW WKLV LV FRPPRQ LQ D ZLGH YDULHW\ RI GLVSDUDWH WD[D VXJJHVWV WKDW WKH SURGXFWLRQ RI GRRPHG RIIVSULQJ SUREDEO\ FRQIHUUHG HQKDQFHG ILWQHVV WR DW OHDVW VRPH RI WKH SDUWLFLSDQWV SDUHQWV DQGRU VRPH RIIVSULQJf LQ WKH SDVW DQG PD\ FRQWLQXH WR HQKDQFH ILWQHVV LQ WKH SUHVHQW $OWHUQDWLYHO\ VXFK EURRG UHGXFWLRQ WKH RYHUSURGXFWLRQ DQG VXEVHTXHQW HOLPLQDWLRQ RI VRPH RIIVSULQJf FRXOG EH D QHJDWLYH FRQVHTXHQFH RI VHOHFWLRQ DFWLQJ RQ VRPH RWKHU IDFWRU VXFK DV ODUJH FOXWFK VL]H SHU VH RU KDWFKLQJ DV\QFKURQ\ HJ &ODUN DQG :LOVRQ f 0\ GLVVHUWDWLRQ IRFXVHV RQ WKH SUR[LPDWH DQG XOWLPDWH FDXVHV RI EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf )RU FRQYHQLHQFH UHIHU WR WKRVH EURRGPHPEHUV PRVW OLNHO\ WR EH WKH YLFWLPV RI EURRG UHGXFWLRQ DV PDUJLQDO RIIVSULQJ 0RFN DQG 3DUNHU f EHFDXVH WKHLU VXUYLYDO FKDQFHV DUH PDUJLQDO DQG W\SLFDOO\ FRQWLQJHQW RQ WKH GHDWK RI D VLEOLQJ RU XQXVXDOO\ DEXQGDQW IRRG )RXU PDMRU K\SRWKHVHV KDYH EHHQ SURSRVHG WR H[SODLQ KRZ WKH SURGXFWLRQ RI PDUJLQDO RIIVSULQJ PD\ EH EHQHILFLDO WR SDUHQWV UHYLHZHG LQ )RUEHV f )LUVW PDUJLQDO RIIVSULQJ PD\ EH XVHG DV IRRG IRU SDUHQWV RU RIIVSULQJ 7KLV

PAGE 17

LV WKH H[SORLWDWLRQ K\SRWKHVLV RI +UG\ f GHVFULEHG HDUOLHU E\ ,QJUDP f DQG FDOOHG WKH LFHER[ K\SRWKHVLV E\ $OH[DQGHU f $Q REYLRXV SUHGLFWLRQ RI WKLV K\SRWKHVLV LV WKDW FDQQLEDOLVP RI RIIVSULQJ RU VLEOLQJV RFFXUV URXWLQHO\ RU DW OHDVW GXULQJ IRRG VKRUWDJHVf 6HFRQG PDUJLQDO RIIVSULQJ PD\ HQDEOH SDUHQWV WR VHOHFW RIIVSULQJ ZLWK WKH KLJKHVW ILWQHVV H[SHFWDWLRQV FDOO WKLV WKH SURJHQ\FKRLFH K\SRWKHVLV )RUEHV f 7KLV K\SRWKHVLV ZDV ILUVW FDOOHG GHYHORSPHQWDO VHOHFWLRQ E\ %XFKKRO] f DQG DOVR WKH VHOHFWLYHDERUWLRQ K\SRWKHVLV E\ .R]ORZVNL DQG 6WHDUQV f 7KH SURJHQ\FKRLFH K\SRWKHVLV DUJXHV WKDW RIIVSULQJ GLIIHU LQ TXDOLW\ DQG WKDW WKH EURRGPHPEHUV WKDW DUH HOLPLQDWHG DUH WKRVH WKDW DUH JHQHWLFDOO\ RU GHYHORSPHQWDOO\ LQIHULRU WR WKHLU VLEOLQJV (OLPLQDWLRQ RI WKHVH LQIHULRU VLEOLQJV LV SUHGLFWHG WR RFFXU YHU\ HDUO\ LQ WKH GHYHORSPHQWDO SHULRG DV VRRQ DV GLIIHUHQFHV LQ RIIVSULQJ TXDOLW\ DUH GHWHFWDEOH .R]ORZVNL DQG 6WHDUQV f 7KLUG PDUJLQDO RIIVSULQJ PD\ IXQFWLRQ DV LQVXUDQFH IRU SDUWLDO EURRG ORVV VHUYLQJ DV UHSODFHPHQWV IRU VLEOLQJV WKDW GLH XQH[SHFWHGO\ IURP DFFLGHQWDO FDXVHV RU FRQJHQLWDO GHIHFWV 7KLV LV WKH LQVXUDQFH K\SRWKHVLV RI 'RUZDUG f UHYLHZHG E\ )RUEHV f 7KLV K\SRWKHVLV SUHGLFWV WKDW DFFLGHQWV RU FRQJHQLWDO GHIHFWV DUH IUHTXHQW FDXVHV RI SDUWLDO EURRG ORVV )RU H[DPSOH XQGHU WKLV K\SRWKHVLV KDWFKLQJ IDLOXUH LQ ELUGV LV SUHGLFWHG WR EH PRUH FRPPRQ LQ EURRGUHGXFLQJ VSHFLHV WKDQ LQ VSHFLHV

PAGE 18

WKDW GR QRW SURGXFH PDUJLQDO RIIVSULQJ $QGHUVRQ f )RXUWK PDUJLQDO RIIVSULQJ PD\ HQDEOH SDUHQWV WR PD[LPL]H WKHLU UHSURGXFWLYH VXFFHVV IURP D JLYHQ FOXWFK ZKHQ UHVRXUFHV DUH XQSUHGLFWDEOH E\ OD\LQJ DV PDQ\ HJJV DV WKH\ FRXOG UDLVH LQ D JRRG \HDU DQG UHGXFLQJ WKH EURRG LI UHVRXUFHV WXUQ RXW WR EH VFDUFH 7KLV LV WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV IRUPXODWHG E\ /DFN f XVXDOO\ FDOOHG WKH EURRG UHGXFWLRQ K\SRWKHVLV VLQFH 5LFNOHIV f 0RUH UHFHQWO\ WKLV K\SRWKHVLV KDV EHHQ FDOOHG WKH UHVRXUFH DYDLODELOLW\ K\SRWKHVLV DQG UHVRXUFH WUDFNLQJ E\ )RUEHV DQG UHVSHFWLYHO\f DQG WKH EHWn KHGJLQJ K\SRWKHVLV E\ .R]ORZVNL DQG 6WHDUQV f ,Q WKH GLVVHUWDWLRQ ZLOO IROORZ )RUEHVn f DQG UHIHU WR WKLV DV WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV 7KHVH K\SRWKHVHV DUH QRW PXWXDOO\ H[FOXVLYH DQG LQGHHG DOO PD\ RSHUDWH VLPXOWDQHRXVO\ )RUEHV f %XW FOHDUO\ D NH\ WR GHWHUPLQLQJ ZKHWKHU DQ\ RU DOO RI WKHVH K\SRWKHVHV DUH YDOLG LV WR H[DPLQH FDXVHV DQG SDWWHUQV RI HJJ DQG QHVWOLQJ PRUWDOLW\ %URZQ SHOLFDQV W\SLFDOO\ OD\ WKUHH HJJV ZKLFK KDWFK DV\QFKURQRXVO\ 6FKUHLEHU f 1HVWOLQJ PRUWDOLW\ LV ELDVHG WRZDUG ODVWKDWFKHG PHPEHUV RI WKH EURRG 6FKUHLEHU f ZKR DUH IUHTXHQWO\ DWWDFNHG E\ WKHLU HOGHU VLEOLQJV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG W\SLFDOO\ GLH RI VWDUYDWLRQ DQG VLEOLFLGH VHH &KDSWHU f 3DUHQWV JHQHUDOO\ UHPRYH GHDG RIIVSULQJ E\ WRVVLQJ WKHP IURP WKH QHVW XQSXE

PAGE 19

GDWDf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f WKH IUHTXHQF\ RI VLEOLFLGH VKRXOG LQFUHDVH GXULQJ SHULRGV RI IRRG VKRUWDJH 2QH ZD\ WKDW VLEOLFLGH FRXOG LQFUHDVH ZLWK IRRG GHSOHWLRQ LV LI VLEOLQJ DJJUHVVLRQ LV SUR[LPDWHO\ FRQWUROOHG E\ IRRG VXSSO\ ZLWK GHFUHDVHV LQ IRRG WR QHVWOLQJV FDXVLQJ LQFUHDVHG DJJUHVVLRQ DPRQJ EURRGPHPEHUV ,Q EURZQ SHOLFDQV ZKHUH ROGHU

PAGE 20

VLEOLQJV DWWDFN WKHLU MXQLRUV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf WKH LQWHQVLW\ RI VLEOLQJ DJJUHVVLRQ YDULHV DPRQJ QHVWV &KDSWHU f ,Q &KDSWHU LQYHVWLJDWH ZKHWKHU WKLV YDULDWLRQ LQ VLEOLQJ DJJUHVVLRQ GHSHQGV RQ IRRG VXSSO\ DV PLJKW EH H[SHFWHG LI WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV LV RSHUDWLQJ 7KH SURJHQ\FKRLFH LQVXUDQFH DQG UHVRXUFHWUDFNLQJ K\SRWKHVHV DOO DUJXH WKDW WKH VXUYLYDO FKDQFHV RI \RXQJ WKDW GLG QRW GLH LQFUHDVH ZKHQ EURRG VL]H GHFUHDVHV 2n&RQQRU f EHFDXVH WKH UHPDLQLQJ \RXQJ REWDLQ PRUH IRRG DIWHU WKH GHDWK RI WKHLU FRPSHWLWRU 7KLV ZLOO RQO\ KDSSHQ LI SDUHQWV GHOLYHU WKH VDPH DPRXQW RI IRRG WR WKH EURRG EHIRUH DQG DIWHU EURRG UHGXFWLRQ 7KHVH K\SRWKHVHV FRQVLGHU WKH ILWQHVV RI ERWK SDUHQWV DQG VXUYLYLQJ RIIVSULQJ WR LQFUHDVH VLPLODUO\ ZLWK EURRG UHGXFWLRQ %XW WKLV QHHG QRW EH WKH FDVH $V +DPLOWRQ f ILUVW DUJXHG WKH ILWQHVV LQWHUHVWV RI SDUHQWV DQG RIIVSULQJ PD\ GLIIHU ,QGHHG FRQIOLFW LV OLNHO\ WR EH PRUH FRPPRQ WKDQ FRQJUXHQFH RI SDUHQW DQG RIIVSULQJ LQWHUHVWV EHFDXVH DV 7ULYHUV f GHYHORSPHQW RI +DPLOWRQnV LGHD FODULILHG VHOHFWLRQ VKRXOG IDYRU RIIVSULQJ WKDW VHHN PRUH LQYHVWPHQW IURP WKHLU SDUHQWV WKDQ WKHLU SDUHQWV DUH VHOHFWHG WR JLYH 7KLV LQVLJKW VSDZQHG PDQ\ WKHRUHWLFDO DQDO\VHV RI SDUHQWRIIVSULQJ FRQIOLFW VHH *RGIUD\ DQG 3DUNHU IRU UHYLHZf LQFOXGLQJ PDQ\ RQ SDUHQWRIIVSULQJ FRQIOLFW RYHU EURRG VL]H 2n&RQQRU *RGIUD\ /D]DUXV DQG ,QJOLV 3DUNHU DQG 0RFN

PAGE 21

*RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f 7KHVH PRGHOV SUHGLFW SDUHQWRIIVSULQJ FRQIOLFW RYHU EURRG UHGXFWLRQ 2n&RQQRUnV f PRGHO SUHGLFWHG WKDW WKH WKUHVKROG EH\RQG ZKLFK SDUHQWV DQG VHQLRU RIIVSULQJ EHQHILW IURP EURRG UHGXFWLRQ LV ORZHU IRU RIIVSULQJ WKDQ IRU SDUHQWV FUHDWLQJ FRQGLWLRQV LQ ZKLFK VLEOLQJV ZRXOG JDLQ LQ QHW ILWQHVV E\ HOLPLQDWLQJ RQH \RXQJ DOEHLW DW WKH H[SHQVH RI DGXOW ILWQHVV 2n&RQQRU f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

PAGE 22

RIIVSULQJ RU UHVXOWV IURP VRPH FRPSURPLVH RI SDUHQWn RIIVSULQJ FRQIOLFW 1DWXUDO VHOHFWLRQ IDYRUV SDUHQWV ZKRVH EHKDYLRU PD[LPL]HV WKHLU OLIHWLPH UHSURGXFWLYH VXFFHVV )URP WKLV /DFN f DUJXHG WKDW VHOHFWLRQ ZRXOG IDYRU SDUHQWDO EHKDYLRU WKDW PD[LPL]HV WKH QXPEHU RI VXUYLYLQJ RIIVSULQJ SURGXFHG IURP HDFK LQGLYLGXDO FOXWFK 7KH RYHUSURGXFWLRQ RI HJJV DQG VXEVHTXHQW UHGXFWLRQ LQ EURRG VL]HV WKURXJK VWDUYDWLRQ DQG VRPHWLPHV VLEOLFLGHf VHHP SDUDGR[LFDO EHFDXVH SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ DUH DEOH RU ZLOOLQJf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f 0\ GLVVHUWDWLRQ DWWHPSWV WR LGHQWLI\ ZKHUH WKH LQWHUHVWV RI SDUHQWV DQG RIIVSULQJ PD\ FRQIOLFW LQ EURRGV RI EURZQ SHOLFDQV DQG WR OD\ WKH JURXQGZRUN IRU

PAGE 23

GHWHUPLQLQJ ZKRVH LQWHUHVWV DUH EHLQJ UHSUHVHQWHG E\ EURRG UHGXFWLRQ WKRVH RI WKH SDUHQWV RU WKRVH RI WKH RIIVSULQJ

PAGE 24

&+$37(5 52/( 2) -81,25 6,%/,1*6 ,1 5(6285&( 75$&.,1* $1' $6 ,1685$1&( )25 6(1,25 /266 ,QWURGXFWLRQ ,Q PDQ\ ELUG VSHFLHV IHPDOHV OD\ PRUH HJJV WKDQ SDLUV W\SLFDOO\ DUH DEOH RU ZLOOLQJ WR IHHG VXIILFLHQWO\ $PRQJ VSHFLHV WKDW KDWFK DV\QFKURQRXVO\ LW LV WKH \RXQJHVW EURRG PHPEHUV WKDW XVXDOO\ GLH W\SLFDOO\ RI VWDUYDWLRQ RU IURP EHDWLQJV GHOLYHUHG E\ VLEOLQJV VLEOLFLGHf 7ZR PDMRU K\SRWKHVHV WKH UHVRXUFHWUDFNLQJ DQG LQVXUDQFHn RIIVSULQJ K\SRWKHVHV SURYLGH WHVWDEOH H[SODQDWLRQV IRU KRZ SDUHQWV PD\ EHQHILW IURP SURGXFLQJ RIIVSULQJ WKDW DUH XVXDOO\ GRRPHG WR GLH VHH )RUEHV IRU DGGLWLRQDO K\SRWKHVHVf 0RFN DQG 3DUNHU f SRLQWHG RXW WKDW WKHVH XVXDOO\ GRRPHG PDUJLQDO RIIVSULQJ PD\ FRQWULEXWH WR WKH UHSURGXFWLYH YDOXH RI WKHLU SDUHQWV LQ WZR ZD\V )LUVW PDUJLQDO RIIVSULQJ PD\ SURYLGH H[WUDFKLFN YDOXH E\ VXUYLYLQJ DORQJ ZLWK WKHLU VLEOLQJV ZKHQ IRRG LV SOHQWLIXO :KHQ IRRG LV VFDUFH PDUJLQDO FKLFNV VWDUYH TXLFNO\ ZKLFK SUHVXPDEO\ EHQHILWV VXUYLYLQJ VLEOLQJV ZKR JDLQ WKH PDUJLQDO FKLFNnV IRRG VKDUH UHVRXUFHWUDFNLQJ K\SRWKHVLV /DFN f 8QGHU WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV PDUJLQDO FKLFNV DUH H[WUD LQ WKH

PAGE 25

VHQVH WKDW WKH\ UHSUHVHQW D ERQXV XQLW RI UHSURGXFWLYH VXFFHVV WR SDUHQWV ZKHQ IRRG LV DEXQGDQW 6HFRQG PDUJLQDO RIIVSULQJ PD\ SURYLGH LQVXUDQFH YDOXH DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLH WKH LQVXUDQFHn RIIVSULQJ K\SRWKHVLV 'RUZDUG f $OWKRXJK RULJLQDOO\ VWDWHG DV D VHSDUDWH K\SRWKHVLV WKH LQVXUDQFH K\SRWKHVLV LV DFWXDOO\ D VSHFLDO FDVH RI WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV $QGHUVRQ f ,QVXUDQFH RSHUDWHV ZKHQ SDUHQWV DUH IDFHG ZLWK XQSUHGLFWDEOH EURRG VL]H HJ XQSUHGLFWDEOH OHYHOV RI KDWFKLQJ IDLOXUHf DQG SUHGLFWDEOH UHVRXUFH VKRUWDJHV DIWHU KDWFKLQJ 5HVRXUFHWUDFNLQJ RSHUDWHV ZKHQ EURRG VL]HV DUH SUHGLFWDEOH DQG UHVRXUFHV DUH XQSUHGLFWDEOH ,Q ERWK VLWXDWLRQV EURRG VL]HV DUH PDWFKHG WR FXUUHQW IRRG VXSSOLHV )RUEHV f 7KH LQVXUDQFH K\SRWKHVLV LV XVXDOO\ LQYRNHG IRU WKH H[WUHPH FDVH RI REOLJDWH VLEOLFLGH LQ ZKLFK WKH \RXQJHVW EURRG PHPEHUV KDYH RQO\ LQVXUDQFH YDOXH 0RFN DQG 3DUNHU f EHFDXVH WKH\ QHYHU VXUYLYH DORQJ ZLWK WKHLU VHQLRUV 7KH UHVRXUFHWUDFNLQJ K\SRWKHVLV LV XVXDOO\ LQYRNHG ZKHQ SDUWLDO EURRG ORVV LV OHVV IUHTXHQW DQG WKH \RXQJHVW FKLFN VXUYLYHV DORQJ ZLWK LWV VLEOLQJV ZKHQ FRQGLWLRQV DUH IDYRUDEOH WKHUHE\ SURYLGLQJ LWV SDUHQWV ZLWK DQ H[WUD XQLW RI UHSURGXFWLYH VXFFHVV 0RFN DQG 3DUNHU f ,Q IDFXOWDWLYH EURRG UHGXFHUV ZLWK LQWHUPHGLDWH OHYHOV RI MXQLRU FKLFN PRUWDOLW\ SDUHQWV PD\ GHULYH DGGLWLRQDO UHSURGXFWLYH VXFFHVV WKURXJK ERWK URXWHV ZLWK

PAGE 26

ODVWKDWFKHG FKLFNV FRQWULEXWLQJ ERWK H[WUDFKLFN DQG LQVXUDQFH YDOXH WR WKHLU SDUHQWV 0RFN DQG 3DUNHU f 7KH SXUSRVH RI WKLV VWXG\ LV WR HYDOXDWH VRPH RI WKH VHOHFWLYH SUHVVXUHV WKDW FRQWULEXWH WR WKH OD\LQJ RI H[WUD HJJV E\ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf XVHG WKUHH DSSURDFKHV WR H[DPLQH WKH LPSRUWDQFH RI MXQLRU FKLFNV DV H[WUD VXUYLYRUV DQG DV LQVXUDQFH DJDLQVW VHQLRU FKLFN ORVV )LUVW H[DPLQHG WKH H[DFW FDXVHV RI QHVWOLQJ PRUWDOLW\ WR HYDOXDWH WZR SUHGLFWLRQV f LI MXQLRU FKLFNV VHUYH SULPDULO\ DV H[WUD VXUYLYRUV ZKHQ IRRG LV DEXQGDQW WKHQ MXQLRU FKLFN PRUWDOLW\ VKRXOG EH IRRGGHSHQGHQW HJ VWDUYDWLRQ DQG VLEOLFLGHf f LI MXQLRUV VHUYH SULPDULO\ DV LQVXUDQFH DJDLQVW VHQLRU GHDWK WKHQ VHQLRU FKLFN PRUWDOLW\ VKRXOG EH GXH WR IRRGLQGHSHQGHQW FDXVHV VXFK DV KDWFKLQJ IDLOXUH GHDWKV RI KDWFKOLQJV 'RUZDUG 2n&RQQRU 6WLQVRQ 0RFN D 0DJUDWK f SUHGDWLRQ 1LVEHW 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU 'UXPPRQG f RU HFWRSDUDVLWHV %U\DQW DQG 7DWQHU f 6HFRQG FRPSDUHG WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV DV DGGLWLRQDO VXUYLYRUV DQG DV UHSODFHPHQWV IRU VHQLRU VLEOLQJV WKDW GLHG 7KH MXQLRU FKLFNnV YDOXH DV DQ H[WUD VXUYLYRU ZDV PHDVXUHG DV WKDW FRPSRQHQW RI LWV VXUYLYRUVKLS WKDW ZDV LQGHSHQGHQW RI LWV VLEOLQJVn VXUYLYDO 7KH MXQLRU FKLFNnV LQVXUDQFH YDOXH ZDV PHDVXUHG DV WKDW FRPSRQHQW RI LWV VXUYLYRUVKLS WKDW GHSHQGHG RQ WKH IDWH RI LWV VHQLRU VLEOLQJV 0RFN DQG 3DUNHU 3ORJHU DQG 0RFN XQSXE 06f

PAGE 27

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f 1HVWOLQJ PRUWDOLW\ KDV EHHQ JHQHUDOO\ DWWULEXWHG WR VWDUYDWLRQ EDVHG RQ UHSRUWV RI OLJKWZHLJKW QHVWOLQJV 6FKUHLEHU .HLWK f DQG FRUUHODWLRQV EHWZHHQ IOHGJLQJ VXFFHVV DQG ILVK VXSSOLHV $QGHUVRQ HW DO f RU UHJXUJLWDWLRQ IUHTXHQFLHV 6FKUHLEHU f $OO SDVW ZRUN ZLWK WKLV VSHFLHV KDV UHOLHG RQ FLUFXPVWDQWLDO HYLGHQFH IURP FHQVXVLQJ QHVWV WR DVVLJQ FDXVHV RI PRUWDOLW\ 6XFK HYLGHQFH LV QRW VXIILFLHQW DQG PD\ OHDG WR IDOVH HVWLPDWHV RI WKH UHODWLYH IUHTXHQFLHV RI IRRGGHSHQGHQW YHUVXV IRRGLQGHSHQGHQW GHDWKV )RU H[DPSOH 6FKUHLEHU f DWWULEXWHG WKH VHOHFWLYH PRUWDOLW\ RI ODVWKDWFKHG EURRG PHPEHUV WR VWDUYDWLRQ ZKHQHYHU D FKLFN IDLOHG WR JURZ EHWZHHQ WKH ODVW FHQVXVLQJ YLVLWV SULRU WR WKH FKLFNnV GLVDSSHDUDQFH %XW D WKLQ FKLFN WKDW YDQLVKHG EHWZHHQ FHQVXVLQJ YLVLWV PLJKW QRW KDYH VWDUYHG WR GHDWK ,QVWHDG VXFK D FKLFN PLJKW KDYH EHHQ UHFRYHULQJ ZKHQ LW ZDV WDNHQ E\

PAGE 28

D SUHGDWRU RU PLJKW KDYH GLHG IURP EHDWLQJV GHOLYHUHG E\ VLEOLQJV DV GHVFULEHG IRU WKH ILUVW WLPH IRU EURZQ SHOLFDQV E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 3LQ]Q DQG 'UXPPRQG DOVR UHOLHG SULPDULO\ RQ QHVW FHQVXVLQJ WR LGHQWLI\ FDXVHV RI GHDWK DOWKRXJK WKH\ GLUHFWO\ REVHUYHG VLEOLFLGDO DJJUHVVLRQ LQ VRPH QHVWV 7KH\ DWWULEXWHG GHDWK WR VLEOLFLGDO H[SXOVLRQ ZKHQHYHU D FKLFNn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f SUHVHQW WKH ILUVW GLVFXVVLRQ DQG HYLGHQFH WKDW EURZQ SHOLFDQV PD\ EH IDFXOWDWLYH EURRG UHGXFHUV SURGXFLQJ WKUHHHJJ FOXWFKHV DQG VHOHFWLYHO\ HOLPLQDWLQJ VRPH FKLFNV GXULQJ IRRG VKRUWDJHV %XW LQ WKUHHFKLFN EURRGV RI EURZQ SHOLFDQV WKH \RXQJHVW YLUWXDOO\ DOZD\V GLHV ZKHUHDV VXUYLYDO RI WKH VHFRQGKDWFKHG LV KLJKO\ YDULDEOH 6FKUHLEHU f 7KXV EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV PD\ EH REOLJDWH DPRQJ ODVWKDWFKHG \RXQJ

PAGE 29

DQG IDFXOWDWLYH DPRQJ WKRVH KDWFKLQJ VHFRQG LQ WKH EURRG $V D UHVXOW WKHVH FKLFNV DUH OLNHO\ WR GLIIHU LQ WKHLU UROHV DV LQVXUDQFH RU H[WUD FKLFNV ,Q DGGLWLRQ WKH QDWXUH RI WKH LQVXUDQFH YDOXH PD\ GLIIHU EHWZHHQ VHFRQG DQG WKLUGKDWFKHG FKLFNV ,Q PRVW REOLJDWHO\ EURRGUHGXFLQJ VSHFLHV WKH LQVXUDQFH YDOXH RI PDUJLQDO FKLFNV LV UHVWULFWHG WR WKH ILUVW ZHHN RU OHVV RI WKH QHVWOLQJ SHULRG $QGHUVRQ 0RFN HW DO f DQG VR FRYHUV RQO\ HJJ IDLOXUH DQG KDWFKOLQJ ORVVHV VXFK DV WKRVH FDXVHG E\ GHYHORSPHQWDO DEQRUPDOLWLHV ,Q FRQWUDVW IDFXOWDWLYH EURRGUHGXFHUV OLNH EURZQ SHOLFDQV PD\ UHWDLQ DOO EURRG PHPEHUV XQWLO IRRGVXSSOLHV EHFRPH OLPLWLQJ SHUKDSV ODWHU LQ WKH QHVWOLQJ SHULRGf 7KXV WKH LQVXUDQFH YDOXH RI D PDUJLQDO FKLFN FDQ UHPDLQ LQ HIIHFW IRU ORQJHU DQG PD\ FRYHU D ZLGHU UDQJH RI ULVNV WR WKH VHQLRUV WKDQ LQ REOLJDWH EURRGUHGXFHUV 0RFN DQG 3DUNHU f 0HWKRGV 6WXG\ 6LWH ,Q VWXGLHG EURZQ SHOLFDQV QHVWLQJ RQ %LUG DQG 6XQNHQ ,VODQGV WZR VSRLO LVODQGV FRQQHFWHG E\ D VDQGEDU WKDW WRJHWKHU DUH NQRZQ DV $ODILD %DQNV LQ +LOOVERURXJK %D\ QHDU 7DPSD )ORULGD $SSUR[LPDWHO\ EURZQ SHOLFDQV QHVWHG RQ WKH LVODQGV LQ 7KH\ QHVWHG SULPDULO\ RQ WRS RI WKH FDQRS\ LQ EODFN PDQJURYH $YLFHQQLD DHUPLQDQVf UHG

PAGE 30

PDQJURYH 5KL]RRKRUD PDQJOHf DQG %UD]LOLDQ SHSSHU 6FKLQXV WHUHELQWKLIROLXVf 6HH /HZLV DQG /HZLV IRU D GHWDLOHG GHVFULSWLRQ RI YHJHWDWLRQ RQ WKHVH LVODQGVf *HQHUDO 3URFHGXUH FHQVXVHG D WRWDO RI QHVWV IURP 0DUFK WKURXJK $XJXVW WR GHWHUPLQH FOXWFK VL]HV KDWFKLQJ VXFFHVV DQG IOHGJLQJ VXFFHVV VHSDUDWHG WKHVH QHVWV LQWR WKUHH JURXSV DFFRUGLQJ WR WKH FHQVXVLQJ PHWKRGV XVHG 7KH IRFDO QHVW JURXS FRQVLVWHG RI QHVWV WKDW ZHUH FRQWLQXRXVO\ REVHUYHG ZLWK D VSRWWLQJ VFRSH DQG ELQRFXODUV IURP GDZQ WR GXVN GXULQJ WKH ILUVW GD\V RI QHVWOLQJ OLIH VHH )RFDO 1HVWV EHORZ IRU GHWDLOVf 7KH YLVXDO FHQVXV JURXS FRQVLVWHG RI QHVWV WKDW ZHUH DGMDFHQW WR IRFDO QHVWV EXW ZHUH QRW FRQWLQXRXVO\ REVHUYHG RU PRQLWRUHG IRU QHVWOLQJ JURZWK VHH 9LVXDO &HQVXV QHVWV EHORZ IRU GHWDLOVf 7KH JURZWK QHVW JURXS FRQVLVWHG RI QHVWV FRQWDLQLQJ FKLFNV WKDW ZHUH ZHLJKHG DQG PHDVXUHG HYHU\ GD\V VHH +DQGOLQJ VFKHGXOH EHORZ IRU GHWDLOVf EXW ZHUH QHYHU NHSW XQGHU FRQWLQXRXV REVHUYDWLRQ 7LPLQJ RI FHQVXV LQLWLDWLRQ &HQVXVLQJ RI QHVWV EHJDQ GXULQJ WKH LQFXEDWLRQ SHULRG &OXWFK VL]HV IRU WKHVH QHVWV ZHUH NQRZQ SUHFLVHO\ VHH $SSHQGL[ % IRU FOXWFKVL]H GHWHUPLQDWLRQ FULWHULDf +HUHDIWHU IRU FRQYHQLHQFH FOXWFKHV WKDW GHILQLWHO\ FRQWDLQHG WZR RU WKUHH HJJV ZLOO EH UHSUHVHQWHG V\PEROLFDOO\ DV & DQG & UHVSHFWLYHO\

PAGE 31

&HQVXVLQJ RI WKH UHPDLQLQJ QHVWV EHJDQ DIWHU KDWFKLQJ &OXWFK VL]HV ZHUH QRW NQRZQ IRU WKHVH QHVWV 7KH LQLWLDO EURRG VL]H QXPEHU RI FKLFNV WKDW KDWFKHGf ZDV NQRZQ SUHFLVHO\ IRU IRXU RI WKHVH QHVWV DQG IRU RI WKH QHVWV IRU ZKLFK FOXWFK VL]HV ZHUH DOVR NQRZQ 7KH LQLWLDO EURRG VL]H ZDV FRQVLGHUHG WR EH NQRZQ LI WKH QXPEHU RI QHVWOLQJV ZDV ILUVW FRXQWHG ZLWKLQ GD\V DIWHU WKH ILUVW $f FKLFN KDWFKHG +HUHDIWHU EURRGV WKDW LQLWLDOO\ FRQWDLQHG WZR RU WKUHH FKLFNV UHJDUGOHVV RI FOXWFK VL]Hf ZLOO EH UHSUHVHQWHG DV % DQG % UHVSHFWLYHO\ 0DUNLQD ,Q IRFDO DQG JURZWK QHVWV LQGLYLGXDOO\ PDUNHG HDFK FKLFN WR IDFLOLWDWH GLVWLQJXLVKLQJ $FKLFNV IURP VHFRQGKDWFKHG %f DQG WKLUGKDWFKHG &f FKLFNV $OO QHZO\ KDWFKHG FKLFNV DJHG GD\ RI KDWFKLQJf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f WR WKH

PAGE 32

QHDUHVW PP ZLWK D FOHDU SODVWLF UXOHU ZHLJKHG QHVWOLQJV ZLWK J NJ DQG NJ VSULQJ VFDOHV $OO FKLFNV LQ IRFDO DQG JURZWK QHVWV ZHUH KDQGOHG ZHLJKHG DQG PHDVXUHG HYHU\ GD\V XQWLO WKH EURRGnV $ FKLFN ZDV RQ DYHUDJHf GD\V ROG UDQJH GD\Vf 7KHUHDIWHU DOO PHPEHUV RI WKH EURRG ZHUH KDQGOHG D PLQLPXP RI RQFH D ZHHN ZKHQ WKH EURRGnV $FKLFN ZDV IURP WKURXJK GD\V ROG DQG DW OHDVW HYHU\ GD\V ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 'HILQLWLRQ RI IOHGDLQD $OO QHVWV ZHUH FHQVXVHG XQWLO DOO EURRGPHPEHUV KDG GLHG RU XQWLO WKH $FKLFN UHDFKHG DJH GD\V VHH 'HWHUPLQLQJ +DWFKLQJ 'DWHV EHORZ IRU GHWDLOV DERXW DJLQJ FKLFNVf GLVFRQWLQXHG FHQVXVLQJ DIWHU GD\V $IWHU WKLV DJH FKLFNV ZHUH GLIILFXOW WR FDWFK EHFDXVH WKH\ PDGH P IOLJKWV EHWZHHQ SHUFKHV LQ WKH YLFLQLW\ RI WKH QHVW XQSXE GDWDf 7KHVH VKRUW IOLJKWV EHJDQ RQFH WKH MXYHQLOH SOXPDJH KDG GHYHORSHG WKHUHIRUH RSHUDWLRQDOO\ GHILQHG IOHGJLQJ DV RFFXUULQJ DW GD\V WKH DYHUDJH DJH E\ ZKLFK HLJKW FKLFNV KDG GHYHORSHG WKHLU EURZQ MXYHQLOH SOXPDJH UDQJH GD\Vf LQ DW 6HDKRUVH .H\ VHH 6XSSOHPHQWDO &HQVXV 1HVWV EHORZf 3LQ]Q DQG 'UXPPRQG LQ SUHVVf XVHG WKH VDPH RSHUDWLRQDO GHILQLWLRQ RI IOHGJLQJ IRU WKH SRSXODWLRQ RI EURZQ SHOLFDQV WKDW WKH\ VWXGLHG LQ 0H[LFR 7KH ILUVW VXVWDLQHG IOLJKW ZDV QRW DFKLHYHG XQWLO D PHDQ DJH RI GD\V sf IRU VHYHQ FKLFNV DW 6HDKRUVH .H\ LQ 6XVWDLQHG IOLJKW RFFXUUHG

PAGE 33

DW DQ DYHUDJH DJH RI GD\V RYHU WKH \HDUV RI 6FKUHLEHUnV VWXG\ DQG DW DJH GD\V LQ WKH FKLFNV REVHUYHG E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf )RFDO 1HVWV )RFDO QHVWV ZHUH REVHUYHG IURP WZR EOLQGV RQH RQ 6XQNHQ ,VODQG DQG WKH RWKHU RQ %LUG ,VODQG 1HVWV ZHUH ORFDWHG IURP P IURP WKH %LUG ,VODQG EOLQG DQG IURP P IURP WKH 6XQNHQ ,VODQG EOLQG +DWFKLQJ SHDNHG LQ IRFDO QHVWV RQ 6XQNHQ ,VODQG DERXW D PRQWK HDUOLHU WKDQ RQ %LUG ,VODQG 7KHUHIRUH REVHUYHUV %-3 SOXV DQ DVVLVWDQWf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

PAGE 34

KDYH FRQWDLQHG QHVWV LQ WKH LQFXEDWLRQ WKURXJK ODWH QHVWOLQJ VWDJHV 2Q DQ\ RQH GD\ ZH FORVHO\ REVHUYHG XS WR IRFDO QHVWV LQ D YLVXDO DUF RI rn IRU D WRWDO RI IRFDO QHVWV RYHU WKH VHDVRQ 1HVWV EHFDPH SDUW RI WKH IRFDO JURXS DV VRRQ DV WKHLU EURRGV ZHUH FRPSOHWHG LH QR IXUWKHU HJJV KDWFKHGf 7R NHHS FKLFNV LQGLYLGXDOO\ PDUNHG DQG WR PHDVXUH QHVWOLQJ JURZWK YLVLWHG IRFDO QHVWV IROORZLQJ WKH VFKHGXOH GHVFULEHG HDUOLHU VHH +DQGOLQJ VFKHGXOH LQ *HQHUDO 3URFHGXUH DERYHf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f XQWLO DOO EURRG PHPEHUV KDG GLHG RU UHDFKHG DJH GD\V 9LVXDO &HQVXV 1HVWV 1HVWV LQ WKH YLVXDO FHQVXV JURXS ZHUH REVHUYHG RSSRUWXQLVWLFDOO\ IURP WKH 6XQNHQ ,VODQG DQG %LUG ,VODQG

PAGE 35

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f ,Q IRXU RI WKHVH QHVWV DOO RI WKH FKLFNV GLHG RQ WKH VDPH GD\ EHFDXVH WKH SDUHQWV DEDQGRQHG WKH EURRG ZLWKLQ D IHZ GD\V RI EURRG FRPSOHWLRQ 7KLV OHIW EURRGV WKDW ZHUH QRW DEDQGRQHG IRU ZKLFK FOXWFK VL]HV LQLWLDO

PAGE 36

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sf GD\V IRU WKUHH %f DQG s

PAGE 37

f GD\V IRU % EURRGVf EHIRUH WKH %FKLFN %FKLFNV KDWFKHG sf GD\V EHIRUH WKHLU &VLEOLQJV 1 EURRGVf 7KHVH GDWD ZHUH IURP SDLUV RI FKLFNV ZKRVH KDWFKLQJ GDWHV ZHUH NQRZQ SUHFLVHO\ :KHQHYHU SRVVLEOH GHWHUPLQHG WKH DJH DQG KDWFKLQJ RUGHU RI VLEOLQJV IURP GLUHFW NQRZOHGJH RI KDWFKLQJ GDWHV GHWHUPLQHG GXULQJ GDLO\ FHQVXVHV 1 f 7KLV LV WKH NQRZQDJH JURXS XVHG D JURZWK FXUYH IRU FXOPHQ OHQJWKV RI NQRZQDJH FKLFNV UA 1 REVHUYDWLRQV $SSHQGL[ $f WR HVWLPDWH WKH DJHV DQG KDWFKLQJ RUGHU RI DQ DGGLWLRQDO HVWLPDWHGDJH FKLFNV WKDW ZHUH IRXQG LQ WKH ILUVW GD\V RI OLIH EXW ZKRVH KDWFKLQJ GDWHV ZHUH QRW NQRZQ SUHFLVHO\ 6FKUHLEHU f DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DOVR IRXQG D FRUUHODWLRQ EHWZHHQ DJH DQG FXOPHQ OHQJWK &KLFN DJHV ZKHQ ILUVW HVWLPDWHG KDG WR EH GD\V WR EH LQFOXGHG LQ WKH HVWLPDWHGDJH JURXS EHFDXVH DIWHU WKLV DJH FXOPHQ OHQJWKV RIWHQ UHIOHFWHG QXWULWLRQDO FRQGLWLRQ DQG ZRXOG KDYH SURGXFHG ELDVHG DJH HVWLPDWHV $SSHQGL[ $f ,Q WKUHH DGGLWLRQDO EURRGV HLJKW FKLFNV WRWDOf OHVV WKDQ GD\V ROG FXOPHQV ZHUH QRW PHDVXUHG DQG DJHV ZHUH HVWLPDWHG IURP VNLQ FRORUV DQG SOXPDJH GHYHORSPHQW E\ FRPSDULQJ WKHP WR NQRZQDJH FKLFNV $SSHQGL[ $f WKXV GHWHUPLQHG WKH UDQNV RI D WRWDO RI FKLFNV 7KLUW\WZR RI WKH NQRZQDJH FKLFNV WKDW ZHUH XVHG LQ WKH UHJUHVVLRQ ZHUH IURP QHVWV WKDW ZHUH ODWHU PDQLSXODWHG IRU H[SHULPHQWV VHH &KDSWHU f WKDW PD\ KDYH DIIHFWHG FKLFN

PAGE 38

IDWHV 7KHVH QHVWV ZHUH RPLWWHG IURP DOO DQDO\VHV RI IOHGJLQJ VXFFHVV DQG FDXVHV RI PRUWDOLW\ 5HSURGXFWLYH 9DOXH RI -XQLRU 6LEOLQJV FDOFXODWHG WKH UHSURGXFWLYH YDOXH RI QHVWOLQJV DV WKH WRWDO QXPEHU RI FKLFNV WKDW IOHGJHG GLYLGHG E\ WKH WRWDO WKDW KDWFKHG :KHQ FKLFN UDQNV ZHUH NQRZQ FDOFXODWHG WKH UHSURGXFWLYH YDOXH RI FKLFNV RI HDFK UDQN VHSDUDWHO\ SDUWLWLRQHG WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV RI HDFK UDQN % DQG &f DQG EURRG VL]H % DQG %f LQWR H[WUDn FKLFN 59Hf DQG LQVXUDQFH 59Lf FRPSRQHQWV IROORZLQJ PHWKRGV RI 0RFN DQG 3DUNHU PRGLILHG E\ %HLVVLQJHU DQG :DOWPDQ DQG 3ORJHU DQG 0RFN XQSXEOLVKHG 06f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f

PAGE 39

$QDO\VHV RI )DWHV %DVHG RQ &KLFN 5DQNV .QRZQDJH DQG HVWLPDWHGDJH FKLFNV ZHUH SRROHG IRU DOO DQDO\VHV RI FKLFNV DFFRUGLQJ WR UDQN 7KH DVVLJQPHQW RI FKLFN UDQNV WKXV UHIOHFW UHODWLYH VL]HV RI VLEOLQJV ZKHQ OHVV WKDQ GD\V ROG ZDV DEOH WR GHWHUPLQH WKH LQLWLDO EURRG VL]H DQG WKH IDWHV OLYHG RU GLHG RI YDULRXV FDXVHV VHH &DXVHV RI FKLFN PRUWDOLW\ EHORZf RI DOO EURRG PHPEHUV DFFRUGLQJ WR WKHLU VL]H UDQNV IRU % DQG % EURRGV 7KHVH EURRGV ZHUH XVHG WR FRPSDUH WKH IUHTXHQFLHV RI IRRG LQGHSHQGHQW DQG IRRGGHSHQGHQW PRUWDOLW\ IRU FKLFNV RI GLIIHUHQW UDQNV VHH &DXVHV RI &KLFN 0RUWDOLW\ EHORZf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

PAGE 40

$QDO\VHV RI )DWHV ,QGHSHQGHQW RI &KLFN 5DQNV 5HVWULFWLQJ DQDO\VHV WR FKLFNV ZKRVH UDQNV ZHUH NQRZQ ZRXOG QRW KDYH DGHTXDWHO\ UHSUHVHQWHG DOO RI WKH GLIIHUHQW W\SHV RI IRRGLQGHSHQGHQW IRRGGHSHQGHQW DQG XQNQRZQ FDXVHV RI GHDWK WKDW REVHUYHG LQ VHH &DXVHV RI &KLFN 0RUWDOLW\ EHORZf )RU WKLV UHDVRQ LQ DGGLWLRQ WR XVLQJ WKH FKLFNV ZKRVH UDQNV ZHUH NQRZQ DOVR GHWHUPLQHG WKH IDWHV RI XQUDQNHG FKLFNV 7KHVH XQUDQNHG FKLFNV ZHUH DGGHG WR WKH FHQVXV VDPSOH ZKHQ WRR ROG WR GHWHUPLQH DFFXUDWH KDWFKLQJ RUGHU DQG DJHV (LJKW FKLFNV RI NQRZQ UDQN DQG WZR RI WKH XQUDQNHG FKLFNV GLHG ZKHQ WKHLU QHVWV ZHUH DEDQGRQHG )RU IDWHV DQDO\VHV RPLWWHG WKHVH VL[ QHVWV DQG DOO QHVWV WKDW ZHUH DEDQGRQHG EHIRUH KDWFKLQJ DQ HJJ OLVWHG WKH IDWHV RI WKH UHPDLQLQJ HJJV WKDW KDWFKHG FKLFNV UDQNHG DQG XQUDQNHG FKLFNVf 7KHVH FKLFNV KDWFKHG IURP WKH QHVWV IRU ZKLFK ZDV DEOH WR GHWHUPLQH WKH IDWH RI DW OHDVW RQH HJJ RU FKLFN &DXVHV RI &KLFN 0RUWDOLW\ VHSDUDWHG FDXVHV RI PRUWDOLW\ LQWR GHDWKV GXH WR IRRGLQGHSHQGHQW GHDWKV GXH WR IRRGGHSHQGHQW DQG GHDWKV GXH WR XQNQRZQ FDXVHV )RRGLQGHSHQGHQW GHDWKV LQFOXGHG FKLFNV WKDW GLHG DV KDWFKOLQJV IHOO DFFLGHQWDOO\ ZHUH NLOOHG E\ LQYDGHU FKLFNV RU DGXOWV RU GLHG IURP DQ XQNQRZQ DFFLGHQW VHH GHILQLWLRQV LQ )RRGLQGHSHQGHQW

PAGE 41

GHDWKV EHORZf )RRGGHSHQGHQW GHDWKV LQFOXGHG YLFWLPV RI VLEOLFLGH YLFWLPV RI VWDUYDWLRQ DQG FKLFNV WKDW GLHG RI VWDUYDWLRQ tRU VLEOLFLGH VHH GHILQLWLRQV LQ )RRG GHSHQGHQW GHDWKV EHORZf 8QNQRZQ FDXVHV RI PRUWDOLW\ LQFOXGHG GHDWKV WKDW FRXOG QRW EH FODVVLILHG DV HLWKHU IRRG LQGHSHQGHQW RU IRRGGHSHQGHQW )RRGLQGHSHQGHQW GHDWKV )RRGLQGHSHQGHQW GHDWKV LQFOXGHG QHVWOLQJ GHDWKV WKDW ZHUH XQOLNHO\ WR EH UHODWHG WR IRRG FRQGLWLRQV ZLWKLQ WKHLU QHVW 7KH PRVW REYLRXV FDVHV RI IRRGLQGHSHQGHQW GHDWKV ZHUH WKRVH LQ ZKLFK D QHVWOLQJ ZDV NLOOHG E\ LQYDGHU FKLFNV RU DGXOWV DOVR UHIHUUHG WR DV LQIDQWLFLGHf GHILQHG DQ LQYDGHU WR EH D FKLFN RU DGXOW WKDW PRYHG LWV KHDG DQGRU ERG\ LQWR D QHVW WKDW ZDV QRW LWV RZQ ,QYDGHU FKLFNV LQFOXGHG UHFHQWO\ IOHGJHG \RXQJ ,QYDGHU DGXOWV LQFOXGHG ELUGV DW OHDVW \HDU ROG WKDW KDG VXEDGXOW RU DGXOW SOXPDJH VHH 6FKUHLEHU HW DO IRU SOXPDJHV RI VXEDGXOWV YHUVXV DGXOWVf ,QYDGHUV RIWHQ DWWDFNHG WKH FKLFNV ZKRVH UHVLGHQFH WKH\ LQYDGHG VHH $SSHQGL[ & IRU GLVFXVVLRQ RI ZK\ VRPH SHOLFDQV LQYDGH QHVWV DQG DWWDFN UHVLGHQWVf $Q DWWDFN LQYROYHG RQH RU PRUH EORZV GHOLYHUHG E\ RQH LQGLYLGXDO WKH DWWDFNHUf DJDLQVW DQRWKHU LQGLYLGXDO WKH YLFWLPf 7R EH FRXQWHG EORZV KDG WR EH IRUFHIXO HQRXJK WR PRYH WKH YLFWLPnV KHDG RU QHFN ZKHQ VWUXFN $ FKLFN WKDW ZDV NLOOHG E\ DQ LQYDGHU ZDV RQH WKDW f ZDV VHHQ EHLQJ WRVVHG 1 f RU NQRFNHG 1 f IURP WKH QHVW E\ DQ LQYDGHU RU f ZDV DWWDFNHG E\ DQ

PAGE 42

LQYDGHU ZLWKLQ 1 f WR 1 f GD\V RI WKH YLFWLPnV GHDWK LI WKH YLFWLP ZDV QRW DWWDFNHG E\ D VLEOLQJ GXULQJ WKLV SHULRG $QRWKHU W\SH RI IRRGLQGHSHQGHQW GHDWK RFFXUUHG ZKHQ D FKLFN IHOO DFFLGHQWO\ $ FKLFN ZDV FODVVLILHG DV G\LQJ ZKHQ LW IHOO DFFLGHQWO\ RQO\ LI DQ REVHUYHU VDZ WKH IDOO WKH IDOO ZDV QRW GLUHFWO\ SUHFHGHG E\ D VLEOLQJn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f VWDQG DQG SRWHQWLDOO\ IDOO IURP WKH QHVWf DQG f EH OHIW XQDWWHQGHG IRU KRXUV DQG SRWHQWLDOO\ EH DWWDFNHG E\ QHLJKERUVf 7KXV WKHVH FKLFNV HLWKHU GLHG EHFDXVH WKH\ IHOO DFFLGHQWO\ RU ZHUH NLOOHG E\ DQ LQYDGHU EXW FRXOG QRW GHWHUPLQH ZKLFK W\SH RI IRRGLQGHSHQGHQW PRUWDOLW\ ZDV WKH H[DFW FDXVH RI GHDWK

PAGE 43

$ ILQDO FDWHJRU\ RI IRRGLQGHSHQGHQW GHDWKV LQFOXGHG FKLFNV WKDW GLHG DV KDWFKOLQJV FODVVLILHG D FKLFN DV KDYLQJ GLHG DV D KDWFKOLQJ LI f WKH YLFWLP GLHG ZKHQ GD\V ROG 1 f ZKHQ FKLFNV VWLOO KDG UHVHUYHV RI \RONRU f WKH YLFWLP GLHG ZKHQ PRUH WKDQ GD\V EXW GD\V ROG DQG LW ZDV ZHOOIHG 1 f 7R EH FODVVLILHG DV KDYLQJ GLHG DV D KDWFKOLQJ WKHUH DOVR KDG WR EH QR HYLGHQFH RI ILJKWLQJ DPRQJ VLEOLQJV SULRU WR WKH YLFWLPn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nV IRRWZHEV WR WKH HGJH RI WKH QHVW ZKHQ SDUHQWV PRYHG WR D SHUFK 1 f 7KH GLVFRYHU\ RI OLYH KHDOWK\ORRNLQJ KDWFKOLQJV RQ WKH JURXQG 1 f VXJJHVWV WKDW FKLFNV ZHUH VRPHWLPHV IOLSSHG FRPSOHWHO\ RXW RI WKH QHVW $GGLWLRQDO UHDVRQV IRU FKLFNV WR KDYH GLHG DV KDWFKOLQJV LQFOXGH GHDWKV GXH WR GHYHORSPHQWDO DEQRUPDOLWLHV DQG LPSURSHU LQFXEDWLRQ ZKLFK DUH ERWK OLNHO\ WR EH IRRGLQGHSHQGHQW VRXUFHV RI PRUWDOLW\

PAGE 44

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nV GHDWK DV FDXVHG E\ VWDUYDWLRQ LI LW ZDV HPDFLDWHG ZKHQ ODVW KDQGOHG DQG LW KDG QRW EHHQ DWWDFNHG E\ DQRWKHU SHOLFDQ LQYDGHU RU VLEOLQJf IRU GD\V SUHFHGLQJ LWV GHDWK 1 f (PDFLDWHG FKLFNV ZHUH WKRVH ZKLFK KDG DW OHDVW WZR RI WKH IROORZLQJ FKDUDFWHULVWLFV f ORRVH VNLQ RQ WKH EUHDVW DEGRPHQ DQGRU EDFN DUHDV ZLWK FRQVLGHUDEOH WRQXV LQ ZHOO IHG LQGLYLGXDOVf f DQ DEGRPHQ WKDW IHOW IODFFLG ZKHQ SDOSDWHG RU ORRNHG IODW RU FRQFDYH ZKHQ YLHZHG ODWHUDOO\ f YHU\ OLTXLG \HOORZ IHFHV f OLVWOHVVQHVV DQG VNLQ WHPSHUDWXUH WKDW IHOW FROG WR P\ WRXFK DQG f IDLOXUH WR JDLQ PDVV VLQFH P\ ODVW YLVLW WR ZHLJK WKH FKLFN &KLFNV PD\ KDYH EHFRPH HPDFLDWHG DQG GLHG IURP HQGRSDUDVLWLF LQIHFWLRQV RU SHVWLFLGH FRQWDPLQDWLRQ UDWKHU WKDQ IURP VWDUYDWLRQ %XW HQGRSDUDVLWLF LQIHFWLRQV DUH SUREDEO\

PAGE 45

OHWKDO RQO\ WR FKLFNV WKDW DUH DOUHDG\ VWDUYLQJ 6LPLODUO\ SHVWLFLGHV VWRUHG LQ IDWV KDYH JUHDWHU HIIHFWV ZKHQ IDWV DUH PRELOL]HG LQ UHVSRQVH WR VWDUYDWLRQ 0RUWDOLW\ IURP HQGRSDUDVLWLF LQIHFWLRQV DQG SHVWLFLGH FRQWDPLQDWLRQ ZHUH QRW VHSDUDWHG IURP VWDUYDWLRQ DQG WKXV ZHUH DVVXPHG WR EH IRRGGHSHQGHQW $QRWKHU W\SH RI IRRGGHSHQGHQW GHDWK ZDV VLEOLFLGH ZKLFK GHILQHG WR LQFOXGH WKH IROORZLQJ FDVHV )LUVW VLEOLFLGH LQFOXGHG FKLFNV WKDW ZHUH VHHQ EHLQJ NQRFNHG IURP WKH QHVW E\ D VLEOLQJ 1 f 6HFRQG VLEOLFLGH LQFOXGHG FKLFNV ZKRVH VLEOLQJV SHUPDQHQWO\ GURYH WKHLU YLFWLPV RXW RI WKH QHVW LQWR WKH VXUURXQGLQJ EUDQFKHV 1 f 7KHVH YLFWLPV SUHYHQWHG E\ WKHLU VLEOLQJV IURP UHWXUQLQJ WR WKH QHVW ZDQGHUHG DURXQG LQ WKH FDQRS\ XQWLO WKH\ VXFFXPEHG WR VWDUYDWLRQ H[SRVXUH DQG WKH DWWDFNV RI QHLJKERUV ZKRVH QHVWV WKH\ ZDQGHUHG QHDU 7KLUG VLEOLFLGH LQFOXGHG FKLFNV ZKRVH GHDWKV ZHUH QRW GLUHFWO\ REVHUYHG EXW WKDW UHFHLYHG DW OHDVW EORZV IURP WKHLU VLEOLQJV DQG QRQH IURP LQYDGHUVf LQ WKH ODVW GD\V RI OLIH 1 f FRQVLGHUHG VLEOLFLGH WR EH D IRRGGHSHQGHQW FDXVH RI GHDWK EHFDXVH VLEOLQJ DWWDFNV OLPLWHG WKH YLFWLPnV DFFHVV WR IRRG 7KH YLFWLPnV RI UHSHDWHG VLEOLQJ DWWDFNV VRPHWLPHV EHFDPH VR LQWLPLGDWHG WKDW WKH\ UHPDLQHG LQ D VXEPLVVLYH SRVWXUH VHH &KDSWHU f GXULQJ DQ HQWLUH ERXW RI IHHGLQJ DFWLYLW\ DQG VR IDLOHG WR SDUWLFLSDWH LQ IHHGLQJ $QRWKHU UHDVRQ IRU FRQVLGHULQJ VLEOLFLGH WR EH IRRGGHSHQGHQW LV WKDW WKH

PAGE 46

IUHTXHQF\ DQG LQWHQVLW\ RI VLEOLQJ ILJKWV PD\ GHSHQG RQ IRRG VXSSOLHV LQ FKLFNV PRUH WKDQ D ZHHN ROG VHH &KDSWHU f 6RPH GHDWKV ZHUH FOHDUO\ IRRGGHSHQGHQW EXW FRXOG QRW GHWHUPLQH ZKHWKHU WKH GHDWK ZDV FDXVHG E\ f VWDUYDWLRQ LQ WKH DEVHQFH RI QHVWOLQJ DJJUHVVLRQ f VLEOLFLGDO DWWDFNV RU f WKH FRPELQHG HIIHFWV RI QHVWOLQJ DJJUHVVLRQ DQG VWDUYDWLRQ 7KHVH GHDWKV ZHUH FODVVLILHG DV EHLQJ GXH WR VWDUYDWLRQ tRU VLEOLFLGH 7R EH FODVVLILHG DV VWDUYDWLRQ tRU VLEOLFLGH GHDWKV KDG WR PHHW DW OHDVW RQH RI WKH IROORZLQJ FRQGLWLRQV )LUVW VWDUYDWLRQ tRU VLEOLFLGH LQFOXGHG HPDFLDWHG FKLFNV WKDW UHFHLYHG OHVV WKDQ EORZV LQ QHVWV ZKHUH VRPH VLEOLQJ ILJKWLQJ DQG QR LQYDGHU DWWDFNVf RFFXUUHG LQ WKH YLFWLPnV ODVW GD\V RI OLIH 1 f 6HFRQG VWDUYDWLRQ tRU VLEOLFLGH LQFOXGHG VLQJOH GHDWKV WKDW RFFXUUHG PRUH WKDQ GD\V DQG GD\V DIWHU WKH $FKLFNV KDWFKHG LQ QHVWV IRU ZKLFK LQIRUPDWLRQ RQ VLEOLQJ ILJKWV DQG QHVWOLQJ FRQGLWLRQ ZDV QRW DYDLODEOH IRU WKH ODVW GD\V RI QHVWOLQJ OLIH 1 f 'HDWKV PHHWLQJ WKH ODWWHU FULWHULD ZHUH FRQVLGHUHG WR EH IRRGLQGHSHQGHQW EHFDXVH FKLFNV GD\V ZHUH f WRR \RXQJ WR IDOO DFFLGHQWO\ EHFDXVH WKH\ FRXOG QRW \HW FUDZO IURP WKH QHVW DQG f VWLOO FRQVWDQWO\ DWWHQGHG E\ SDUHQWV DQG VR QRW VXEMHFW WR LQYDGHU DWWDFNV DOVR FODVVLILHG RQH GHDWK RI D FKLFN GD\V ROG DV EHLQJ GXH WR VWDUYDWLRQ tRU VLEOLFLGH EHFDXVH WKHUH ZDV HYLGHQFH RI ILJKWLQJ LQ WKH QHVW SULRU WR WKH YLFWLPnV GHDWK

PAGE 47

8QNQRZQ FDXVHV RI GHDWK &KLFNV ZKRVH GHDWKV FRXOG QRW EH FODVVLILHG DV HLWKHU IRRGGHSHQGHQW RU IRRGLQGHSHQGHQW ZHUH FRQVLGHUHG WR KDYH GLHG RI XQNQRZQ FDXVHV RI GHDWK XQOHVV WKH GHDWKV ZHUH GXH WR SDUHQWDO DEDQGRQPHQW DVVXPHG WKDW D FOXWFK KDG EHHQ DEDQGRQHG LI HJJV ZHUH SUHVHQW RQ RQH YLVLW DQG GDPDJHG RU JRQH RQ WKH QH[W DVVXPHG WKDW D EURRG KDG EHHQ DEDQGRQHG LI DOO WKH FKLFNV ZHUH IRXQG GHDG RU PLVVLQJ RQ WKH VDPH GD\ ILYH RU IHZHU GD\V DIWHU WKH $FKLFN KDG KDWFKHG $EDQGRQHG QHVWV ZHUH H[FOXGHG IURP DOO DQDO\VHV H[FHSW ZKHUH RWKHUZLVH LQGLFDWHG 6XSSOHPHQWDO &HQVXV 1HVWV *HQHUDO SURFHGXUH GHWHUPLQHG IDWHV IRU HJJV DQG XQPDUNHG QHVWOLQJV LQ QHVWV WKDW REVHUYHG IURP 0DUFK WKURXJK $XJXVW RQ 6HDKRUVH .H\ SDUW RI WKH &HGDU .H\V 1DWLRQDO :LOGOLIH 5HIXJH /HY\ &RXQW\ )ORULGD FHQVXVHG WKHVH QHVWV YLVXDOO\ HDFK GD\ IURP D OLJKWKRXVH WRZHU ORFDWHG ZLWKLQ P RI WKH QHVWV ZKLFK ZHUH P KLJK LQ PL[HG KDUGZRRGV )DWHV RI FKLFNV LQ QHVWV RQ 6HDKRUVH .H\ ZHUH GHWHUPLQHG E\ VFDQQLQJ WKH FRORQ\ WKURXJK D VSRWWLQJ VFRSH FRQWLQXRXVO\ IURP GDZQ WR GXVN IRU KRXU SHULRGV ZLWK VKRUW EUHDNV EHWZHHQ IRU D WRWDO RI KRXUGD\ $V LQ RQ $ODILD %DQNV FODVVLILHG GHDWKV RQ 6HDKRUVH .H\ DV EHLQJ IRRGLQGHSHQGHQW IRRGGHSHQGHQW RU LQYROYLQJ XQNQRZQ FDXVHV GHILQHG IRRGLQGHSHQGHQW

PAGE 48

PRUWDOLW\ DQG XQNQRZQ FDXVHV RI GHDWK XVLQJ WKH FULWHULD )RRGGHSHQGHQW GHDWKV LQFOXGHG VLEOLFLGH VDPH FULWHULD DV LQ f DQG GHDWKV WKDW FRXOG KDYH EHHQ GXH WR VWDUYDWLRQ tRU VLEOLFLGH FRXOG QRW VHSDUDWH VWDUYDWLRQ GHDWKV IURP VWDUYDWLRQ tRU VLEOLFLGH EHFDXVH GLG QRW KDQGOH FKLFNV LQ 7KH FULWHULD XVHG LQ IRU SODFLQJ D GHDWK LQWR WKH VWDUYDWLRQ tRU VLEOLFLGH FDWHJRU\ ZHUH WKH VDPH DV WKRVH XVHG LQ H[FHSW WKDW GHILQHG HPDFLDWLRQ GLIIHUHQWO\ LQ EHFDXVH GLG QRW KDQGOH FKLFNV ,Q D FKLFN ZDV FODVVLILHG DV HPDFLDWHG LI LW JRW QR IRRG IRU WKH ODVW GD\V RI OLIH DQG HGHPD FRPPRQ LQ VWDUYLQJ FKLFNVf FRXOG EH VHHQ ZLWK D VSRWWLQJ VFRSH DOVR FODVVLILHG DV HPDFLDWHG DQ\ FKLFN ZKRVH ELOO ZDV DV VKRUW RU VKRUWHU WKDQ KDOI WKH OHQJWK RI WKH ELOO RI LWV ODUJHVW VLEOLQJ FRPSDUHG WKH UHODWLYH OHQJWKV RI EURRG PHPEHUVn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f 6HFRQG ,

PAGE 49

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f $QDO\VHV RI )DWHV LQ %HFDXVH QHVWOLQJV ZHUH QRW PDUNHG LQ FRXOG QRW SRVLWLYHO\ LGHQWLI\ LQGLYLGXDOV DFFRUGLQJ WR WKHLU KDWFKLQJ UDQNV FKLFNV DUH WKHUHIRUH XVXDOO\ UHIHUUHG WR DV XQUDQNHG FKLFNV EXW VHH IROORZLQJ SDUDJUDSKf GHWHUPLQHG WKH IDWHV RI HJJV WKDW KDWFKHG FKLFNV IURP WKH QHVWV WKDW ZHUH QRW DEDQGRQHG DQG IRU ZKLFK ZDV DEOH WR GHWHUPLQH WKH IDWH RI DW OHDVW RQH HJJ RU FKLFN 7KHVH QHVWV ZHUH XVHG IRU DQDO\VHV FRPSDULQJ IDWHV UHJDUGOHVV RI FKLFN UDQNV

PAGE 50

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f WR VXEFRORQLHV WKDW ZH QHYHU HQWHUHG QHYHU GLVWXUEHGf RU ZDONHG SDVW ZKLOH ZDONLQJ DORQJ WKH EHDFK PRGHUDWHO\ GLVWXUEHGf 7R GHWHUPLQH SURGXFWLYLW\ LQ HDFK VXEFRORQ\ XVHG 6FKUHLEHUnV f PHWKRGV GHVFULEHG DV IROORZV (YHU\ ZHHNV WKURXJKRXW WKH QHVWLQJ VHDVRQ FRXQWHG WKH

PAGE 51

QXPEHU RI QHVWV DQG QHVWOLQJV WKDW ZHUH YLVLEOH IURP WKH ERDW LQ HDFK VXEFRORQ\ $W WKH HQG RI WKH VHDVRQ GHWHUPLQHG IRU HDFK VXEFRORQ\ ZKLFK RI WKHVH UHSHDWHG FHQVXVHV KDG WKH ODUJHVW QXPEHU RI QHVWV 7KLV FRXQW ZDV WKH PD[LPXP QXPEHU RI QHVWV IRU HDFK VXEFRORQ\ DOVR GHWHUPLQHG ZKLFK RI WKH UHSHDWHG FHQVXVHV LQ D VXEFRORQ\ KDG WKH ODUJHVW QXPEHU RI QHVWOLQJV SULRU WR WKH ILUVW REVHUYDWLRQ RI IOHGJLQJ LQ WKDW VXEFRORQ\ 7KLV ZDV WKH PD[LPXP QXPEHU RI QHVWOLQJV LQ D VXEFRORQ\ FRPSDUHG WKH SURGXFWLYLW\ RI HDFK VXEFRORQ\ E\ FRPSDULQJ HDFK VXEFRORQ\nV PD[LPXP QXPEHU RI QHVWOLQJV SHU PD[LPXP QXPEHU RI QHVWV FDOOHG PD[LPXP QHVWOLQJVPD[LPXP QHVWVf 6WDWLVWLFDO $QDO\VHV 6WDWLVWLFDO DQDO\VHV ZHUH SHUIRUPHG XVLQJ 6WDWYLHZ 6( *UDSKLFV )HOGPDQ HW DO f RQ D 0DFLQWRVK 6( FRPSXWHU $OO VWDWLVWLFDO WHVWV ZHUH WDLOHG XQOHVV RWKHUZLVH VWDWHG 5RZE\FROXPQ 5 ; &f *WHVWV RI LQGHSHQGHQFH ZHUH XVHG WR FRPSDUH VXUYLYDO IUHTXHQFLHV DPRQJ FKLFN UDQNV ZKHQHYHU b RI FHOOV KDG H[SHFWHG IUHTXHQFLHV RI ILYH RU PRUH :KHQHYHU DQ 5 ; & *WHVW ZDV VLJQLILFDQW FRQGXFWHG ; *WHVWV EHWZHHQ SDLUV RI VLEOLQJ UDQNV )RU WKHVH SDLUZLVH FRPSDULVRQV NHSW H[SHULPHQWZLVH HUURU DW 3 E\ XVLQJ FULWLFDO YDOXHV RI WKH FKLVTXDUH GLVWULEXWLRQ EDVHG RQ 6LGDNnV PXOWLSOLFDWLYH LQHTXDOLW\ 6RNDO DQG 5RKOI f :KHQ b RI H[SHFWHG FHOO IUHTXHQFLHV ZHUH OHVV WKDQ ILYH ,

PAGE 52

FDVW GDWD LQWR ; WDEOHV DQG SHUIRUPHG )LVKHU H[DFW WHVWV XVLQJ WKH H[SDQGHG WDEOHV RI )LQQH\ HW DO f 'LIIHUHQFHV ZHUH FRQVLGHUHG VLJQLILFDQW ZKHQ 3 3YDOXHV DUH SUHVHQWHG IRU DOO VWDWLVWLFDO WHVWV LQFOXGLQJ WKRVH WKDW ZHUH QRQVLJQLILFDQW H[FHSW IRU QRQVLJQLILFDQW UHVXOWV RI )LVKHU ([DFW 7HVWV FRXOG QRW SURYLGH 3YDOXHV IRU QRQVLJQLILFDQW )LVKHU ([DFW 7HVWV EHFDXVH 3YDOXHV KLJKHU WKDQ IRU WDLOHG DQG IRU WDLOHG WHVWV ZHUH QRW JLYHQ LQ VWDWLVWLFDO WDEOHV IRU ; FRQWLQJHQF\ WDEOHV )LQQH\ HW DO f 0HDQV DUH SUHVHQWHG 6' 5HVXOWV 6XUYLYDO &OXWFK VL]HV DQG KDWFKLQJ VXFFHVV ZHUH VLPLODU LQ ERWK \HDUV RI WKLV VWXG\ 7DEOH f )OHGJLQJ VXFFHVV DOWKRXJK ORZ LQ ERWK \HDUV ZDV ORZHVW LQ 7DEOH f 7KH SURGXFWLYLW\ RI QHVWV DV PHDVXUHG E\ WKH PD[LPXP QXPEHU RI QHVWOLQJV SHU PD[LPXP QHVWV ZDV VLJQLILFDQWO\ DVVRFLDWHG ZLWK GHJUHH RI UHVHDUFKHU GLVWXUEDQFH ZLWK SURGXFWLYLW\ LQFUHDVLQJ ZLWK GLVWXUEDQFH 7DEOH .UXVNDO:DOOLV WHVW + 3 f 7KXV UHVHDUFKHU DFWLYLWLHV ZHUH SUREDEO\ QRW UHVSRQVLEOH IRU WKH ORZ IOHGJLQJ VXFFHVV LQ 7KH SURGXFWLYLW\ YDOXHV WKDW REWDLQHG LQ IHOO LQ WKH UDQJH RI WKRVH REWDLQHG RYHU DQ \HDU SHULRG IOHGJOLQJV SHU WRWDO QHVW SHU \HDUf

PAGE 53

RQ QHDUE\ LVODQGV E\ 6FKUHLEHU f 7KDW KLJKO\ GLVWXUEHG QHVWV ZHUH PRUH SURGXFWLYH WKDQ OHVV GLVWXUEHG QHVWV FRXOG KDYH RFFXUUHG EHFDXVH ZDV PRUH IDPLOLDU ZLWK WKH ORFDWLRQ DQG EURRG VL]HV RI IRFDO QHVWV 7KXV P\ FRXQWV RI WRWDO QXPEHUV RI QHVWOLQJV DQG QHVWV PLJKW KDYH EHHQ KLJKHU DQG PRUH DFFXUDWHf LQ WKH KLJKO\ GLVWXUEHG UHODWLYH WR OHVV GLVWXUEHG VXEFRORQLHV ,Q DGGLWLRQ RXU DFWLYLWLHV LQ WKH KLJKO\ GLVWXUEHG FRORQLHV PD\ KDYH GHFUHDVHG RSSRUWXQLWLHV IRU QHVW WDNHRYHUV DQG VWLFN WKHIWV ZKLFK RIWHQ FRQWULEXWH WR SDUWLDO DQG FRPSOHWH ORVVHV RI FOXWFKHV DQG EURRGV VHH EHORZf 1HVW IDLOXUHV 1HVW DEDQGRQPHQW ZDV D FRPPRQ FDXVH RI QHVW IDLOXUH DIIHFWLQJ b f RI FOXWFKHV QHVWV FRQWDLQLQJ HJJVf DQG QR EURRGV QHVWV KDWFKLQJ VRPH FKLFNVf LQ DQG b RI FOXWFKHV DQG b f RI EURRGV LQ WKH QHVWV REVHUYHG LQ &OXWFK DEDQGRQPHQW LQ ZDV SUREDEO\ XQGHUHVWLPDWHG EHFDXVH GLG QRW EHJLQ REVHUYDWLRQV LQ WKLV \HDU XQWLO PRVW QHVWV ZHUH LQ WKH ODVW ZHHN RI WKH LQFXEDWLRQ SHULRG %\ FRQWUDVW EHJDQ WKH REVHUYDWLRQV ZKHQ WKH ELUGV ZHUH EXLOGLQJ WKH ILUVW QHVWV 7KHVH DEDQGRQPHQWV DSSHDUHG WR EH VSRQWDQHRXV DV FRQWUDVWHG ZLWK RQH DGGLWLRQDO FOXWFK WKDW ZDV DEDQGRQHG LQ DQG ILYH FOXWFKHV DQG WZR EURRGV DEDQGRQHG LQ IROORZLQJ KXPDQ DFWLYLWLHV LQ WKH FRORQ\ $Q DGGLWLRQDO b f DQG b f RI FOXWFKHV ZHUH ORVW LQ DQG UHVSHFWLYHO\ ZKHQ WKH LQFXEDWLQJ SDUHQW ZDV GULYHQ IURP LWV

PAGE 54

QHVW E\ D FRXUWLQJ SDLU RU VLQJOH PDOH WKDW DWWDFNHG WKH UHVLGHQW WRVVHG RXW LWV HJJV DQG WRRN RYHU LWV QHVW D WDNHRYHU GLVFXVVHG LQ $SSHQGL[ 'f $V ZLWK DEDQGRQPHQWV WKH IUHTXHQF\ RI FOXWFK WDNHRYHUV ZDV SUREDEO\ XQGHUHVWLPDWHG LQ ,Q b f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f :KHQ DGGHG % EURRGV ZLWK FKLFNV RI HVWLPDWHG UDQNV WR WKHVH NQRZQUDQN EURRGV IRXQG WKDW %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG WKHLU $VLEOLQJV WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 6LPLODUO\ LQ % EURRGV IRU

PAGE 55

ZKLFK HVWLPDWHG FKLFN UDQNV %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG $FKLFNV WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf ,Q % QHVWV VXUYLYDO ZDV VLJQLILFDQWO\ DVVRFLDWHG ZLWK FKLFN UDQN WDLOHG *WHVW GI 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNV YHUVXV VXUYLYLQJ &FKLFNVf 3DLUZLVH FRPSDULVRQV UHYHDOHG WKDW $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG WKHLU %VLEOLQJV H[SHULPHQWZLVH HUURU VHW DW 3 GI IRU RQH RI WKUHH FRPSDULVRQVf 6LPLODUO\ $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ WKHLU &VLEOLQJV H[SHULPHQWZLVH HUURU VHW DW 3 GI IRU RQH RI WKUHH FRPSDULVRQVf 6XUYLYDO RI %FKLFNV ZDV QRW VLJQLILFDQWO\ EHWWHU WKDQ WKDW RI &FKLFNV H[SHULPHQWZLVH HUURU 3 GI IRU RQH RI WKUHH FRPSDULVRQVf ,Q % QHVWV &FKLFNV GLHG PRUH RIWHQ WKDQ GLG WKHLU $VLEOLQJV EXW QRW VLJQLILFDQWO\ VR ZKHQ RQO\ FKLFNV RI NQRZQ UDQN ZHUH LQFOXGHG 7DEOH WDLOHG )LVKHU H[DFW WHVW 3 f :KHQ FKLFNV RI HVWLPDWHG UDQNV ZHUH DGGHG WR WKH DQDO\VLV WKLV UHODWLRQVKLS ZDV VLJQLILFDQW WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $ FKLFNV YHUVXV VXUYLYLQJ &FKLFNVf $ DQG %FKLFNV LQ % QHVWV VXUYLYHG ZLWK VLPLODUO\ ORZ IUHTXHQF\ ZKHQ ,

PAGE 56

FRQVLGHUHG RQO\ EURRGV ZLWK FKLFNV RI NQRZQ UDQNV 7DEOH f :KHQ DGGHG VL[ EURRGV ZLWK FKLFNV RI HVWLPDWHG UDQNV GLIIHUHQFHV LQ VXUYLYDO ZHUH VWLOO QRW VLJQLILFDQW WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 7KH SUHFHGLQJ DQDO\VHV SURYLGH HVWLPDWHV RI WKH HIIHFW RI KDWFKLQJ UDQN RQ FKLFN VXUYLYDO %XW WZR %FKLFNV JUHZ ODUJHU WKDQ WKHLU $VLEOLQJV ZLWKLQ WKH ILUVW GD\V RI OLIH LQ % QHVWV %\ JDLQLQJ VL]HVXSHULRULW\ WKHVH FKLFNV PD\ KDYH JDLQHG D VXUYLYDO DGYDQWDJH 7R HYDOXDWH WKH HIIHFW RI VL]HVXSHULRULW\ UDWKHU WKDQ KDWFKLQJ UDQNf RQ FKLFN VXUYLYDO UHFODVVLILHG WKH ODUJHU %FKLFNV DV $FKLFNV DQG WKH VPDOOHU $FKLFNV DV D %FKLFNV LQ WKHVH WZR QHVWV :KHQ FRPSDUHG % FKLFNV DFFRUGLQJ WR WKHLU VL]HVXSHULRULW\ DW GD\V RI DJH IRXQG WKDW $FKLFNV VXUYLYHG VLJQLILFDQWO\ PRUH RIWHQ WKDQ GLG %FKLFNV WDLOHG )LVKHU H[DFW WHVW 3 IRU VXUYLYLQJ $FKLFNV YHUVXV VXUYLYLQJ %FKLFNVf 6XFK VL]H UHYHUVDOV ZLWKLQ WKH ILUVW GD\V GLG QRW RFFXU LQ % QHVWV DQG GLG QRW LQYROYH DQ\ &FKLFNV 7KXV SUHFHGLQJ DQDO\VHV LQYROYLQJ % EURRGV DQG % &FKLFNV WKDW LQFOXGHG FKLFNV ZLWK HVWLPDWHG UDQNV UHIOHFW WKH HIIHFWV RI FKLFN VL]H VXSHULRULW\

PAGE 57

5HSURGXFWLYH 9DOXH RI -XQLRU 6LEOLQJV +DWFKLQJ IDLOXUH ZDV ORZ LQ P\ VWXG\ DIIHFWLQJ RQO\ b WR b RI DOO HJJV IURP & DQG & FOXWFKHV WKDW KDWFKHG DW OHDVW RQH HJJ 7DEOH f REVHUYHG RQO\ WZR & QHVWV RQH LQ WKDW KDWFKHG WKUHH DQG IOHGJHG RQH FKLFN DQG WKH RWKHU LQ WKDW KDWFKHG IRXU FKLFNV WKDW GLHG DV QHVWOLQJV %HFDXVH KDWFKLQJ IDLOXUH ZDV VR ORZ DVVHVVHG PRUWDOLW\ RI VXFFHVVIXOO\ KDWFKHG FKLFNV WR SDUWLWLRQ WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV LQWR H[WUDFKLFN DQG LQVXUDQFH FRPSRQHQWV 7ZR FKLFNV IOHGJHG IURP b RI DOO % QHVWV 1 EURRGVf DQG b RI % QHVWV 1 EURRGVf LQ 7KXV MXQLRU FKLFNV LQ % DQG % QHVWV KDG VRPH H[WUDFKLFN YDOXH LQ 7DEOH f FRXOG QRW SDUWLWLRQ WKH UHSURGXFWLYH YDOXHV RI FKLFNV RI GLIIHUHQW UDQNV LQWR LQVXUDQFH DQG H[WUDFKLFN FRPSRQHQWV EHFDXVH FKLFNV ZHUH QRW UDQNHG LQ WKDW \HDU 1R % QHVWV IOHGJHG WKUHH FKLFNV LQ HLWKHU \HDU 7KH WRWDO UHSURGXFWLYH YDOXH RI FKLFNV DYHUDJHG RYHU DOO UDQNV ZDV VLPLODU IRU % DQG % QHVWV ZLWKLQ HDFK \HDU 7DEOH f ,Q WKH RQO\ FKLFNV WR VXUYLYH ZHUH WKRVH ZKRVH VLEOLQJV DOO GLHG 7DEOH f 7KH WRWDO UHSURGXFWLYH YDOXH SURSRUWLRQ RI VXUYLYRUV RI HDFK UDQNf RI $ DQG %FKLFNV IURP % QHVWV ZDV LGHQWLFDO DQG DERXW WKUHHIRXUWKV WKDW RI $FKLFNV LQ % QHVWV 7DEOH f :KHQ SDUWLWLRQHG

PAGE 58

WKH UHSURGXFWLYH YDOXH RI %FKLFNV LQ % EURRGV LQWR H[WUDFKLFN DQG LQVXUDQFH FRPSRQHQWV IRXQG WKDW WKH HQWLUH UHSURGXFWLYH YDOH RI WKHVH FKLFNV OD\ LQ WKHLU LQVXUDQFH YDOXH 6LPLODU DQDO\VLV IRU WKH ODVWKDWFKHG QHVWOLQJV LQ % DQG % EURRGV ZDV LPSRVVLEOH EHFDXVH WKH\ DOO GLHG %FKLFNV VXUYLYHG EHWWHU LQ % WKDQ LQ % QHVWV LQ 7DEOH f %XW WKH RQO\ %FKLFNV WR VXUYLYH LQ % QHVWV LQ ZHUH WKRVH ZKRVH $VLEOLQJV GLHG 7KXV LQ WKH UHSURGXFWLYH YDOXH RI WKHVH FKLFNV OD\ HQWLUHO\ LQ WKHLU YDOXH DV LQVXUDQFH DJDLQVW WKH GHPLVH RI WKHLU VHQLRUV %FKLFNV LQ % QHVWV UHSODFHG WKHLU VHQLRUV TXLWH RIWHQ b RI WKH %FKLFNV RXWOLYHG WKHLU VHQLRUV DQG WZR RI WKHVH b RI DOO %FKLFNVf IOHGJHG 7DEOH f 0RVW bf RI WKH %FKLFNV GLHG GXULQJ WKH ILUVW GD\V RI WKH QHVWOLQJ SHULRG GHILQHG DV EHJLQQLQJ ZLWK WKH $FKLFNnV KDWFKLQJ )LJXUH f 7KLV ZDV WKH SHULRG LQ ZKLFK b RI WKH $FKLFNV GLHG )LJXUH f 2YHUDOO PRUWDOLW\ SHDNHG GXULQJ WKH VDPH SHULRG IRU ERWK $ DQG %FKLFNV 8 3 IRU UDQNVFHUWDLQ $FKLFNV YV UDQNVFHUWDLQ %FKLFNVf 'HDWKV RFFXUUHG DQ DYHUDJH RI s f GD\V LQWR WKH QHVWOLQJ SHULRG IRU $FKLFNV DQG DIWHU s f GD\V IRU %FKLFNV $OWKRXJK DOO &FKLFNV GLHG LQ b RI WKHP OLYHG ORQJHU WKDQ RQH RI WKHLU VHQLRUV 7DEOH f 0RUWDOLW\ RI VHQLRUV SHDNHG GXULQJ WKH VDPH SHULRG DV WKDW RI &FKLFNV

PAGE 59

DYHUDJLQJ sf DQG sf GD\V IRU VHQLRUV DQG &FKLFNV UHVSHFWLYHO\ 8 3 IRU VHQLRUV YV &FKLFNV SOXV XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLH LQ WKHLU QHVWVf ,Q WKLV DQDO\VLV XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLH ZHUH LQFOXGHG )LJXUH f EHFDXVH WKH FRPSDULVRQ RI LQWHUHVW LV ZKHWKHU WKHVH FKLFNV OLYHG ORQJ HQRXJK WR EH SUHVHQW GXULQJ WKH SHULRG RI SHDN ULVN WR WKHLU VHQLRUV %\ LQFOXGLQJ WKHVH XQUDQNHG ILUVW GHDWKV DV &FKLFNV WKH WLPH RI GHDWK ZRXOG EH XQGHUHVWLPDWHG LQ WKH HYHQW WKDW VRPH RI WKHVH ILUVW GHDWKV DFWXDOO\ LQYROYHG VHQLRUV ,Q % QHVWV DOWKRXJK DOO RI WKH %FKLFNV HYHQWXDOO\ GLHG LQ b RI WKHP VWLOO RXWOLYHG WKHLU VHQLRUV RQH RI ZKLFK GLG QRW GLH XQWLO LW ZDV GD\V ROG 7DEOH f %FKLFN PRUWDOLW\ SHDNHG GXULQJ WKH VDPH SHULRG DV WKDW RI $FKLFNV )LJXUH f ZLWK %FKLFNV G\LQJ DQ DYHUDJH RI sf GD\V DQG $FKLFNV G\LQJ sf GD\V LQWR WKH QHVWOLQJ SHULRG 8 3 IRU $ FKLFNV DQG %FKLFNV SOXV XQUDQNHG FKLFNV WKDW ZHUH WKH ILUVW WR GLH VHH DERYH GLVFXVVLRQ IRU % &FKLFNV IRU DQ H[SODQDWLRQ RI ZK\ XQUDQNHG FKLFNV ZHUH LQFOXGHG LQ WKLV DQDO\VLVf %RWK FKLFNV VXUYLYHG WRJHWKHU IRU D PD[LPXP RI GD\V LQWR WKH QHVWOLQJ SHULRG RI % EURRGV

PAGE 60

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f 2YHUDOO VLEOLFLGH ZDV WKH PRVW FRPPRQ VRXUFH RI GHDWK IURP NQRZQ FDXVHV LQ DIIHFWLQJ b RI DOO FKLFNV REVHUYHG 7DEOH f )RRGLQGHSHQGHQW GHDWKV DIIHFWHG b RI DOO FKLFNV REVHUYHG LQ DQG b RI WKRVH REVHUYHG LQ 7DEOH f ,QIDQWLFLGH ZKLFK DIIHFWHG b RI DOO FKLFNV REVHUYHG LQ ERWK DQG

PAGE 61

7DEOH f ZDV WKH PRVW FRPPRQ RI WKH IRRGLQGHSHQGHQW GHDWKV WKDW DIIHFWHG FKLFNV ROGHU WKDQ KDWFKOLQJV ,QIDQWLFLGDO DWWDFNV ZHUH SUREDEO\ QRW DQ DUWLIDFW RI IUHTXHQW FRORQ\ GLVWXUEDQFH :KLOH XVLQJ D ERDW RIIVKRUH WR FHQVXV SDUWV RI WKH LVODQG WKDW ZH QHYHU HQWHUHG REVHUYHG ELUGV LQ VXEDGXOW 1 f DQG DGXOW 1 f SOXPDJH DWWDFNLQJ GRZQ\ \RXQJ DQG DOVR VDZ WZR DGXOWV JUDSSOLQJ LQ DSSDUHQW WDNHRYHU DWWHPSWV 1 f %RWK IRRGGHSHQGHQW DQG IRRGLQGHSHQGHQW GHDWKV RFFXUUHG DPRQJ FKLFNV RI DOO UDQNV LQ 7DEOH f %XW WKH UHODWLYH LPSRUWDQFH RI WKHVH VRXUFHV RI PRUWDOLW\ YDULHG ZLWK FKLFN UDQNV DQG EURRG VL]HV $FKLFNV LQ % DQG % QHVWV GLHG RI IRRGLQGHSHQGHQW DQG IRRGGHSHQGHQW FDXVHV ZLWK VLPLODU IUHTXHQF\ 7DEOH %LQRPLDO WHVW IRU IRXU IRRGGHSHQGHQW YHUVXV IRXU IRRGLQGHSHQGHQW $FKLFN GHDWKV LQ % QHVWV 3 DQG %LQRPLDO WHVW IRU WZR IRRG GHSHQGHQW YHUVXV VL[ IRRGLQGHSHQGHQW $FKLFN GHDWKV LQ % QHVWV 3 f )RRGGHSHQGHQW DQG IRRGLQGHSHQGHQW GHDWKV DOVR DIIHFWHG D VLPLODU QXPEHU RI %FKLFNV LQ % QHVWV 7DEOH %LQRPLDO WHVW IRU WKUHH IRRGGHSHQGHQW YHUVXV WZR IRRGLQGHSHQGHQW %FKLFN GHDWKV 3 f %\ FRQWUDVW LQ % QHVWV %FKLFNV GLHG VLJQLILFDQWO\ PRUH RIWHQ RI IRRGGHSHQGHQW WKDQ RI IRRGLQGHSHQGHQW FDXVHV 7DEOH %LQRPLDO WHVW IRU IRRGGHSHQGHQW YHUVXV RQH IRRGLQGHSHQGHQW GHDWK 3 f &FKLFNV DOVR GLHG PRUH RIWHQ RI IRRGGHSHQGHQW FDXVHV EXW QRW VLJQLILFDQWO\ VR

PAGE 62

7DEOH %LQRPLDO WHVW IRU VL[ IRRGGHSHQGHQW YHUVXV WZR IRRGLQGHSHQGHQW &FKLFN GHDWKV 3 f DOWKRXJK WKH GLIIHUHQFH ZDV VLJQLILFDQW ZKHQ RPLWWHG &FKLFNV WKDW GLHG DV KDWFKOLQJV 7DEOH %LQRPLDO WHVW IRU VL[ IRRG GHSHQGHQW YHUVXV QR IRRGGHSHQGHQW &FKLFN GHDWKV 3 f 7LPLQJ RI )RRGGHSHQGHQW 'HDWKV ,Q PRVW VWDUYDWLRQ DQG VLEOLFLGH RI MXQLRU FKLFNV % DQG & FKLFNV LQ % QHVWV DQG %FKLFNV LQ % QHVWVf RFFXUUHG ZKHQ WKHVH FKLFNV ZHUH WR GD\V ROG )LJXUH f 7KH PHDQ DJH RI IRRGGHSHQGHQW GHDWKV ZDV sf GD\V IRU HLJKW %FKLFNV LQ % QHVWV sf GD\V IRU WKUHH %FKLFNV LQ % QHVWV DQG sf IRU HLJKW & FKLFNV LQFOXGLQJ WZR XQUDQNHG FKLFNV WKDW ZHUH ILUVW WR GLHf /DVWKDWFKHG FKLFNV LQ % DQG % QHVWV GLHG DW VLPLODU DJHV IURP IRRGGHSHQGHQW FDXVHV 8 QL & FKLFNV Q %FKLFNV IURP % QHVWV 3 f ,Q WKH IHZ EURRGV LQ ZKLFK WZR FKLFNV GLHG RI IRRGGHSHQGHQW FDXVHV MXQLRUV GLHG DQ DYHUDJH RI GD\V s 1 &FKLFNV LQ % EURRGV DQG %FKLFNV LQ % EURRGVf EHIRUH WKHLU VHQLRUV :LOFR[RQ VLJQHGUDQN WHVW MXQLRUV GLHG EHIRUH WKHLU VHQLRU VLEOLQJV 3 f 1R % EURRG ORVW DOO PHPEHUV WR IRRGGHSHQGHQW FDXVHV LQ 6LEOLFLGHV LQ RFFXUUHG DQ DYHUDJH RI s f GD\V LQWR WKH QHVWOLQJ SHULRG ZKHUHDV VWDUYDWLRQ GHDWKV

PAGE 63

ZHUH GHOD\HG XQWLO f GD\V LQWR WKLV SHULRG )LJXUH f 7KHVH GLIIHUHQFHV ZHUH QRW VLJQLILFDQW 8 3 QL VLEOLFLGHV DQG Q VWDUYDWLRQ GHDWKV RI FKLFNV RI DOO UDQNV ZKRVH IDWHV ZHUH NQRZQ IURP % DQG % EURRGVf 'LVFXVVLRQ 7KLV VWXG\ SURYLGHV D PL[ RI HYLGHQFH IRU DQG DJDLQVW ERWK WKH UHVRXUFHWUDFNLQJ DQG LQVXUDQFH K\SRWKHVHV 6WDUYDWLRQ DQG VLEOLFLGH ZHUH FRPPRQ DQG FRQFHQWUDWHG RQ WKH ODVWKDWFKHG EURRGPHPEHUV DV SUHGLFWHG E\ WKH UHVRXUFHn WUDFNLQJ K\SRWKHVLV /DFN 2f&RQQRU 0RFN D 'UXPPRQG 0DJUDWK f $V SUHGLFWHG E\ WKH LQVXUDQFH K\SRWKHVLV 'RUZDUG 6WLQVRQ 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU %U\DQW DQG 7DWQHU f VHQLRUV IDFHG D KLJK ULVN RI G\LQJ IURP IRRGLQGHSHQGHQW FDXVHV LQFOXGLQJ KDWFKLQJ IDLOXUH DFFLGHQWDO GHDWKV DQG LQIDQWLFLGH )XUWKHUPRUH ERWK % DQG &FKLFNV IUHTXHQWO\ UHSODFHG VHQLRUV WKDW GLHG IURP VXFK FDXVHV 6XUYLYDO ZDV DVVRFLDWHG ZLWK QHVWOLQJ VL]HUDQNV DV SUHGLFWHG E\ ERWK K\SRWKHVHV %XW WKLV DVVRFLDWLRQ ZDV QRW VLJQLILFDQW ZKHQ UHVWULFWHG DQDO\VHV WR FKLFNV RI NQRZQ KDWFKLQJ UDQNV VHH 6XUYLYDO EHORZf %FKLFNV SURYLGHG RQO\ LQVXUDQFH YDOXH LQ EXW LQ VRPH %FKLFNV LQ % DQG % QHVWV VXUYLYHG DORQJ ZLWK WKHLU VLEOLQJV 7KXV WKH UHSURGXFWLYH YDOXH RI %FKLFNV

PAGE 64

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

PAGE 65

NQRZQ KDWFKLQJ UDQNV WKH LPSRUWDQFH RI KDWFKLQJ UDQN WR FKLFN VXUYLYDO ZDV QRW FOHDU IURP P\ VWXG\ %XW FKLFNV WKDW JDLQHG VL]H VXSHULRULW\ RYHU WKHLU VLEOLQJV FOHDUO\ JDLQHG D VXUYLYDO DGYDQWDJH (YLGHQFH IRU WKLV ZDV SURYLGHG E\ DQDO\VHV WKDW LQFOXGHG FKLFNV RI HVWLPDWHG UDQNV EHFDXVH WKHVH FKLFN UDQNV ZHUH EDVHG RQ VL]H GLIIHUHQFHV DIWHU WKH ILUVW GD\V RI OLIH 7KXV ODUJHVW $f FKLFNV VXUYLYHG PRUH IUHTXHQWO\ WKDQ GLG WKHLU VPDOOHU %f VLEOLQJV LQ % EURRGV DQG LQ % EURRGV LQ ERWK \HDUV 7KHVH $ FKLFNV DOVR VXUYLYHG PRUH RIWHQ WKDQ WKHLU VPDOOHVW &f VLEOLQJV LQ ERWK \HDUV ,Q $FKLFNV DOVR VXUYLYHG PRUH RIWHQ WKDQ WKHLU % VLEOLQJV LQ % EURRGV ZKHQ UHFODVVLILHG FKLFNV DFFRUGLQJ WR WKHLU UHODWLYH VL]HV DW DJH GD\V LQ WZR QHVWV ZKHUH WKH % FKLFNV JUHZ ODUJHU WKDQ WKHLU $VLEOLQJV 5HVXOWV LQ WKH OLWHUDWXUH DOVR LQGLFDWH WKDW VXUYLYDO LV DVVRFLDWHG ZLWK FKLFN VL]H DQGRU KDWFKLQJ RUGHU 6FKUHLEHU f UHSRUWHG WKDW DOO $FKLFNV VXUYLYHG LQ WKH \HDUV RI KLV VWXG\ ZKHUHDV %FKLFN VXUYLYDO YDULHG DPRQJ \HDUV DQG &FKLFNV YLUWXDOO\ DOZD\V GLHG 6LPLODU DQQXDO YDULDWLRQ LV OLNHO\ LQ P\ $ODILD EDQNV VLWH ZKLFK ZDV ORFDWHG DERXW PLOHV IURP 6FKUHLEHUnV f VWXG\ FRORQ\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DOVR IRXQG WKDW QHVWOLQJ VXUYLYDO ZDV KLJKHVW DPRQJ $FKLFNV DQG ORZHVW DPRQJ & FKLFNV LQ D 0H[LFDQ SRSXODWLRQ RI EURZQ SHOLFDQV

PAGE 66

3DUWLWLRQLQJ WKH 5HSURGXFWLYH 9DOXH RI -XQLRU &KLFNV $VVXPLQJ KDWFKLQJ VXFFHVV ZDV LQGHSHQGHQW RI OD\LQJ RUGHU DV LQ ZKLWH SHOLFDQV 2n0DOOH\ DQG (YDQV f RQO\ b RI $HJJV LQ & DQG & QHVWV IDLOHG WR KDWFK LQ DQG 7DEOH f &OHDUO\ VRPH H[WUD HJJV KDG YDOXH LQ UHSODFLQJ XQKDWFKHG FOXWFKPDWHV %XW WKH UHSODFHPHQW YDOXH RI MXQLRU FKLFNV ZDV SULPDULO\ IRU ORVV RI VHQLRU FKLFNV UDWKHU WKDQ HJJV &DVK DQG (YDQV f FDPH WR WKH VDPH FRQFOXVLRQ IRU ZKLWH SHOLFDQV ZKLFK KDG D KLJKHU KDWFKLQJ IDLOXUH UDWH RI b ,Q FRQWUDVW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf FRQFOXGHG WKDW WKH SULPDU\ DGYDQWDJH RI OD\LQJ VHFRQG DQG WKLUG HJJV LQ WKHLU EURZQ SHOLFDQ SRSXODWLRQ ZDV DV LQVXUDQFH IRU KDWFKLQJ IDLOXUH ZKLFK DIIHFWHG b RI WKH HJJV %XW MXQLRU HJJV DOVR UHSODFHG b RI DOO $FKLFNV LQ % DQG % QHVWV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 3LQ]Q DQG 'UXPPRQGnV HVWLPDWHV RI KDWFKLQJ IDLOXUH VOLJKWO\ RYHUHVWLPDWH WKH YDOXHV IRU ZKLFK MXQLRUV FRXOG VHUYH DV LQVXUDQFH EHFDXVH WKH\ LQFOXGHG FDVHV RI WRWDO FOXWFK ORVV DQG HJJV ORVW GXH WR UHVHDUFKHU GLVWXUEDQFH 7KHLU KLJKHU KDWFKLQJ IDLOXUH UDWHV PD\ EH EHFDXVH VRPH RI WKHLU QHVWV ZHUH RQ WKH JURXQG *URXQG QHVWV PD\ H[SHULHQFH JUHDWHU RYHUKHDWLQJ DQG FRQVHTXHQW SDUWLDO FOXWFK ORVV WKDQ RFFXUV LQ WUHH QHVWV $QGHUVRQ f 7KH UHODWLYH LPSRUWDQFH RI MXQLRU FKLFNV DV LQVXUDQFH IRU HJJ ORVV UDWKHU WKDQ FKLFN ORVV PD\ EH JUHDWHU

PAGE 67

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b RI % EURRGV IOHGJHG WZR FKLFNV 7DEOH f $OWKRXJK QR %FKLFNV SURYLGHG H[WUDFKLFN YDOXH LQ RQH %FKLFN DOPRVW IOHGJHG ZLWK LWV $VLEOLQJ LQ WKDW \HDU )LJXUH f 7KHVH GDWD VXJJHVW WKDW WKHUH PD\ EH FRQVLGHUDEOH YDULDWLRQ WKH H[WUDFKLFN YDOXH RI %FKLFNV DPRQJ \HDUV DQG FRORQLHV 6FKUHLEHUnV f GDWD DOVR VKRZ KLJK DQQXDO YDULDQFH LQ WKH VXUYLYDO RI %FKLFNV ZKHQ WKHLU $VLEOLQJV DOVR OLYHG WKH IUHTXHQF\ ZLWK ZKLFK ERWK $ DQG %FKLFNV VXUYLYHG UDQJHG IURP b RI % EURRGV SHU \HDU ZLWK %FKLFNV VXUYLYLQJ RXW RI WKH WRWDO RI EURRGV FHQVXVHG LQ WKH \HDUV RI KLV VWXG\ %FKLFNV LQ 6FKUHLEHUnV f VWXG\ DSSDUHQWO\ SURYLGHG QR LQVXUDQFH YDOXH DOO $FKLFNV IOHGJHG 1R &FKLFNV IOHGJHG LQ WKLV VWXG\ 7KXV WKH &FKLFNV LQ P\ VWXG\ SURYLGHG QR UHSURGXFWLYH YDOXH WR WKHLU SDUHQWV 7KLV LV SUREDEO\ W\SLFDO IRU &FKLFNV LQ PRVW SRSXODWLRQV

PAGE 68

)RU H[DPSOH 6FKUHLEHU REVHUYHG EURRGV IOHGJLQJ DOO WKUHH \RXQJ LQ RQO\ b RI WKH % QHVWV WKDW KH PRQLWRUHG IRU JURZWK IURP 6FKUHLEHU f DQG LQ RQO\ b RI DOO QHVWV WKDW KH REVHUYHG IURP 6FKUHLEHU f 7KUHHFKLFN VXUYLYDO ZDV DOVR ORZ LQ D 1RUWK &DUROLQD FRORQ\ ZKHUH RQO\ b RI % EURRGV IOHGJHG DOO \RXQJ 0 6KLHOGV SHUV FRPPf 6LPLODUO\ LQ 0H[LFR QRQH RI % QHVWV IOHGJHG WKUHH FKLFNV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf :KHQ FRPELQHG ZLWK P\ GDWD WKHVH UHVXOWV VXJJHVW WKDW &FKLFN VXUYLYDO LV UDUH EXW WKDW &FKLFNV GR RFFDVLRQDOO\ SURYLGH H[WUDFKLFN YDOXH E\ VXUYLYLQJ DORQJ ZLWK WKHLU VLEOLQJV LQ VRPH \HDUV %URRG UHGXFWLRQ JHQHUDOO\ ILWWHG DQ REOLJDWH SDWWHUQ IRU &FKLFNV %\ FRQWUDVW LQ RQH 3DQDPDQLDQ FRORQ\ &FKLFNV VXUYLYHG DORQJ ZLWK WKHLU VLEOLQJV LQ b RI DOO % QHVWV REVHUYHG 0RQWJRPHU\ DQG 0DUWLQH] f 7KLV SRSXODWLRQ IHG RQ ILVK WKDW ZHUH SUHGLFWDEO\ DEXQGDQW EHFDXVH RI XSZHOOLQJ WKDW UHOLDEO\ RFFXUUHG GXULQJ WKH EUHHGLQJ VHDVRQ &FKLFNV LQ WKLV SRSXODWLRQ PD\ KDYH H[WUDFKLFN YDOXH PRUH IUHTXHQWO\ WKDQ LQ WKH RWKHU SRSXODWLRQV GLVFXVVHG ZKLFK UHO\ RQ OHVV SUHGLFWDEOH IRRG VXSSOLHV :KHWKHU &FKLFNV HYHU SURYLGH LQVXUDQFH YDOXH DZDLWV IXWXUH VWXG\ 1R &FKLFNV VXUYLYHG DV UHSODFHPHQWV IRU GHDG $FKLFNV LQ WKH SRSXODWLRQV VWXGLHG E\ 6FKUHLEHU LQ DQG E\ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf %XW WKH UHPDLQLQJ VWXGLHV PHQWLRQHG LQ WKH SUHFHGLQJ SDUDJUDSK GLG QRW SURYLGH

PAGE 69

VXIILFLHQW LQIRUPDWLRQ WR GHWHUPLQH ZKHWKHU &FKLFNV HYHU VXUYLYHG DV UHSODFHPHQWV IRU $FKLFNV WKDW GLHG 7KH WLPLQJ RI &FKLFN GHDWKV LQ P\ VWXG\ VXJJHVWV WKDW WKH\ FRXOG KDYH VHUYHG DV LQVXUDQFH DJDLQVW WKH GHDWK RI D VHQLRU $ RU %f VLEOLQJ ,Q JHQHUDO ZKHQ MXQLRUV SURYLGH LQVXUDQFH VHQLRUV VKRXOG UHIUDLQ IURP NLOOLQJ WKHLU VLEOLQJV DQG SDUHQWV VKRXOG DYRLG VWDUYLQJ WKHLU \RXQJHVW RIIVSULQJ XQWLO DIWHU WKH VXUYLYDO RI WKH HOGHVW VHHPV VHFXUH 0RFN HW DO f (OLPLQDWLRQ RI WKH \RXQJHVW FKLFN VKRXOG TXLFNO\ IROORZ DIWHU WKLV EHFDXVH IRRG FRQVXPHG E\ WKH GRRPHG \RXQJHVW ZRXOG EH ZDVWHG DQG WKH FRVWV RI NLOOLQJ LW PD\ LQFUHDVH DV WKH \RXQJHVW JURZV ODUJHU 0RFN HW DO f 7KHVH SDWWHUQV ZHUH REVHUYHG IRU &FKLFNV LQ % EURRGV ZLWK PRVW &FKLFNV OLYLQJ LQWR WKH SHULRG RI SHDN VHQLRU PRUWDOLW\ GD\V DIWHU WKH $FKLFN KDWFKHG DQG G\LQJ TXLFNO\ RI VWDUYDWLRQ RU VLEOLFLGH LI WKHLU VHQLRUV VXUYLYHG WKLV ULVN SHULRG 7KDW VRPH &FKLFNV RXWOLYHG WKHLU $ VLEOLQJV EHIRUH G\LQJ IXUWKHU VXJJHVWV WKDW &FKLFNV PD\ KDYH SRWHQWLDO LQVXUDQFH YDOXH DV UHSODFHPHQWV IRU ORVW VHQLRUV $OWHUQDWLYHO\ &FKLFNV PD\ QRW PDNH D VLJQLILFDQW FRQWULEXWLRQ WR WKHLU SDUHQWVn OLIHWLPH UHSURGXFWLYH VXFFHVV HLWKHU DV H[WUD RU DV LQVXUDQFH FKLFNV 7KH SUHVHQFH RI &FKLFNV PD\ UHIOHFW VHOHFWLRQ SUHVVXUHV LQ WKH UHFHQW SDVW HJ %RDJ DQG *UDQW f UDWKHU WKDQ FXUUHQW DGDSWLYH YDOXH )RU H[DPSOH &FKLFNV PD\ KDYH LQVXUDQFH

PAGE 70

YDOXH LQ JURXQGQHVWLQJ SRSXODWLRQV ZKHUH KDWFKLQJ IDLOXUH GXH WR RYHUKHDWLQJ PD\ EH PRUH FRPPRQ $QGHUVRQ f & FKLFNV PD\ QR ORQJHU KDYH WKLV YDOXH LQ WUHHQHVWLQJ SRSXODWLRQV VXFK DV 6FKUHLEHU f DQG VWXGLHG 7KH SURGXFWLRQ RI &HJJV FRXOG DOVR EH D UHFHQW UHVSRQVH WR SHVWLFLGHLQGXFHG HJJIDLOXUHV VHH EHORZf ,Q WKH % EURRGV WKDW VWXGLHG WKH \RXQJHVW FKLFN KDG YDOXH DV DQ H[WUD VXUYLYRU ZLWK ERWK FKLFNV OLYLQJ LQ b RI % QHVWV LQ 7DEOH f 6LPLODUO\ 6FKUHLEHU f IRXQG WKDW ERWK VXUYLYHG LQ b RI WKH WZRFKLFN EURRGV WKDW KH PRQLWRUHG LQ KLV \HDU VWXG\ DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf REVHUYHG ERWK FKLFNV VXUYLYLQJ LQ b RI WKH EURRGV WKDW WKH\ REVHUYHG %FKLFNV LQ % QHVWV PD\ DOVR KDYH LQVXUDQFH YDOXH LQ VRPH \HDUV DV VXJJHVWHG E\ P\ GDWD VKRZLQJ WKDW VRPH %FKLFNV OLYHG ORQJHU WKDQ WKHLU $VLEOLQJV LQ DQG PDQ\ OLYHG LQWR WKH SHULRG RI SHDN $FKLFN PRUWDOLW\ ,QGHHG RQH %FKLFN IOHGJHG DIWHU LWV $VLEOLQJ GLHG LQ WKH % QHVWV WKDW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf REVHUYHG 7R SURSHUO\ DVVHVV WKH YDOXH RI MXQLRU FKLFNV DV LQVXUDQFH YHUVXV H[WUD FKLFNV ZLOO UHTXLUH ORQJWHUP VWXG\ RI D VLQJOH SRSXODWLRQ 7KH UHODWLYH IUHTXHQF\ ZLWK ZKLFK MXQLRU FKLFNV VXUYLYHG DV H[WUD YHUVXV LQVXUDQFH FKLFNV FRXOG EH WRWDOOHG RYHU HDFK SDUHQWnV OLIHWLPH 7KLV FRXOG OHDG WR LQVLJKW LQWR WKH UHODWLYH LPSRUWDQFH RI WKHVH WZR W\SHV RI UHSURGXFWLYH YDOXH 6LPLODUO\ WKH WRWDO YDOXH RI

PAGE 71

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f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

PAGE 72

VHQLRUV VXJJHVWV WKDW &FKLFNV KDG DW OHDVW VRPH SRWHQWLDO IRU UHSODFLQJ D VHQLRU WKDW GLHG RI VXFK FDXVHV ,QGHHG LQ WKH IHZ FDVHV ZKHUH MXQLRUV DFWXDOO\ RXWOLYHG D VHQLRU DOWKRXJK PRVW UHSODFHG $FKLFNV WKDW GLHG DV KDWFKOLQJV RU RI XQNQRZQ FDXVHV RQH % DQG &FKLFN LQ D % EURRG DQG RQH %FKLFN LQ D % EURRG UHSODFHG DQ $FKLFN WKDW GLHG RI IRRGGHSHQGHQW FDXVHV 7KLV VXJJHVWV WKDW MXQLRUV PD\ VRPHWLPHV VHUYH DV LQVXUDQFH DJDLQVW D GHIHFWLYH 0RFN D 0RFN DQG 3DUNHU 0RFN HW DO f RU FRPSHWLWLYHO\ LQIHULRU &DVK DQG (YDQV 'UXPPRQG f VHQLRU E\ GRPLQDWLQJ DQ LQIHULRU VHQLRU DQG UHYHUVLQJ WKH XVXDO IHHGLQJ DGYDQWDJHV VR WKDW WKH VXERUGLQDWHG VHQLRU ZRXOG VWDUYH RU EH NLOOHG E\ LWV GRPLQDQW MXQLRU LQ WKH HYHQW RI D IRRG VKRUWDJH 7KH VXERUGLQDWLRQ RI DQ $FKLFN E\ LWV %VLEOLQJ FRXOG DOVR RFFXU LI WKH %FKLFN ZDV XQXVXDOO\ ZHOOGHYHORSHG D VXSHUFKLFN 0RFN Df 'RPLQDQFH UHYHUVDOV ZLWK ORVHUV G\LQJ RI IRRGGHSHQGHQW FDXVHV DOVR ZRXOG EH H[SHFWHG LI WKH SURGXFWLRQ DQG VXEVHTXHQW HOLPLQDWLRQ RI H[WUD RIIVSULQJ LV D SDUHQWDO SOR\ WR VHOHFWLYHO\ UDLVH WKH ILWWHVW JHQRW\SHV %XFKKRO] FDOOHG SURJHQ\ FKRLFH E\ .R]ORZVNL DQG 6WHDUQV f E\ DOORZLQJ VLEOLQJV WR HOLPLQDWH LQIHULRU FRPSHWLWRUV 6LPPRQV f ,Q V\QFKURQRXVO\ KDWFKLQJ VSHFLHV WKLV FRXOG DOORZ SDUHQWV WR VRUW RXW WKH EHVW DPRQJ RIIVSULQJ ZLWK UHODWLYHO\ VLPLODU FRPSHWLWLYH DELOLWLHV DOWKRXJK DW SRWHQWLDOO\ KLJK FRVWV LQ HQHUJ\ 0RFN DQG 3ORJHU f DQG

PAGE 73

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f LI WKH IRRG VKRUWDJH WKDW NLOOV WKH VHQLRU RFFXUV ZKHQ WKH MXQLRU LV VWLOO DQ HJJ 1HOVRQ f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

PAGE 74

SRSXODWLRQV 0RVW UHSRUWV RI QHVW SUHGDWLRQ DJDLQVW EURZQ SHOLFDQV LQYROYH DEDQGRQHG HJJV RU QHVWOLQJV WDNHQ E\ DYLDQ SUHGDWRUV LQFOXGLQJ ILVK FURZV &RUYXV RVVLIUDFUXV 6FKUHLEHU DQG 5LVHEURXJK 3ORJHU SHUV REVf FRPPRQ UDYHQV e FRUD[ ZHVWHUQ JXOOV /DUXV RFFLGHQWDOLV .HLWK f DQG +HHUPDQnV JXOOV / KHHUPDQQL .HLWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf %XW ZHVWHUQ JXOOV DQG UDYHQV DOVR WDNH HJJV IURP QHVWV ZKLOH D SDUHQW LV LQ DWWHQGDQFH .HLWK f DQG EODFN YXOWXUHV &RUDRYRV DWUDWXVf WDNH GRZQ\ QHVWOLQJV WKDW DUH OHIW XQDWWHQGHG IRU H[WHQGHG SHULRGV & 0XUFLD SHUV FRPPf DV LV XVXDO DPRQJ WKHVH \RXQJ ZKLFK DUH ROG HQRXJK WR WKHUPRUHJXODWH %DUWKRORPHZ DQG 'DZVRQ f 3UHGDWLRQ E\ YXOWXUHV FRXOG FDXVH SDUWLDO EURRG ORVV DOWKRXJK YXOWXUHV XVXDOO\ WRRN WKH HQWLUH EURRGV RI YHU\ \RXQJ FKLFNV & 0XUFLD SHUV FRPPf 7KH RQO\ SUHGDWLRQ RI EURZQ SHOLFDQ HJJV WKDW REVHUYHG RFFXUUHG ZKHQ SDUHQWV WHPSRUDULO\ DEDQGRQHG D QHVW WR EDWKH DQG ZHUH DEVHQW IURP WKH QHVW IRU RQO\ PLQXWHV 7KLV XVXDOO\ UHVXOWHG LQ ILVK FURZV WDNLQJ WKH HQWLUH FOXWFK EXW VRPHWLPHV RQO\ RQH HJJ ZDV NLOOHG EHIRUH WKH SDUHQW UHWXUQHG DQG WKH UHPDLQLQJ HJJV VXUYLYHG 3ORJHU XQSXE GDWDf %URZQ SHOLFDQ QHVWOLQJV DUH DOVR VXEMHFW WR WLFN LQIHVWDWLRQV .LQJ HW DO D E .HLWK 0 6KLHOGV SHUV FRPPf HQGRSDUDVLWLF LQIHFWLRQV &RXUWQH\ DQG )RUUHVWHU f DQG GHDWK IURP H[SRVXUH WR WHPSHUDWXUH H[WUHPHV .HLWK f +HDY\ WLFN LQIHVWDWLRQV XVXDOO\ OHDG

PAGE 75

WR WRWDO EURRG IDLOXUH IURP SDUHQWDO DEDQGRQPHQW ZKLFK PD\ RFFXU WKURXJKRXW DQ HQWLUH FRORQ\ .LQJ HW DO Df RU VXEFRORQ\ 0 6KLHOGV SHUV FRPPf 7KXV WLFN LQIHVWDWLRQ LV QRW D OLNHO\ VRXUFH RI PRUWDOLW\ IRU ZKLFK \RXQJHVW FKLFNV FRXOG VHUYH DV LQVXUDQFH 7KH YDOXH RI MXQLRUV DV UHSODFHPHQWV IRU VHQLRUV ZLWK HQGRSDUDVLWLF LQIHFWLRQV LV OLNHO\ WR EH LQGLVWLQJXLVKDEOH IURP WKHLU YDOXH DV UHSODFHPHQWV IRU DSSDUHQWO\ LQIHULRU VWDUYLQJ VHQLRUV 7KLV LV EHFDXVH HQGRSDUDVLWLF LQIHFWLRQV DUH SUREDEO\ OHWKDO RQO\ WR VWDUYLQJ FKLFNV ZKRVH H[DFW FDXVH RI GHDWK IURP LQIHFWLRQ VWDUYDWLRQ RU WKHLU FRPELQHG HIIHFWVf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f UDWKHU WKDQ FXUUHQW VHOHFWLRQ DFWLQJ WR PDLQWDLQ ODUJHU FOXWFK VL]HV ,I WKHUH ZHUH ZLWKLQ QHVW YDULDQFH LQ

PAGE 76

VKHOO WKLQQLQJ GXH WR SHVWLFLGH FRQWDPLQDWLRQ WKHQ WKH H[WUD HJJ PLJKW KDYH KDG YDOXH DV UHSODFHPHQW IRU D WKLQ VKHOOHG VLEOLQJ 7KLV UHSODFHPHQW YDOXH PLJKW KDYH EHHQ LPSRUWDQW LQ WKH nV DQG nV ZKHQ SULRU WR LWV EDQ ''7 FRQWDPLQDWLRQ ZDV FRPPRQ UHYLHZHG E\ $QGHUVRQ DQG *UHVV f 7KLV LV QRW D OLNHO\ H[SODQDWLRQ RI P\ UHVXOWV EHFDXVH & FOXWFKHV KDYH EHHQ WKH QRUP LQ )ORULGD VLQFH WKH nV %HQW f )XUWKHUPRUH ZKHQ H[DPLQHG LQ DQG )ORULGD HJJV H[SHULHQFHG RQO\ PRGHUDWH OHYHOV RI SHVWLFLGH FRQWDPLQDWLRQ DQG HJJ VKHOO WKLQQLQJ ZLWK RQO\ b RI DOO HJJV EUHDNLQJ GXULQJ LQFXEDWLRQ 6FKUHLEHU DQG 5LVHEURXJK f %U44G 5HGXFWLRQ LQ 3HOLFDQ 6%ILJO66 7KH RFFXUUHQFH RI IDFXOWDWLYH EURRG UHGXFWLRQ RI % FKLFNV DORQJ ZLWK REOLJDWH &FKLFN GHDWKV LQ EURRGV RI EURZQ SHOLFDQV FRQWUDVWV ZLWK WKH SDWWHUQ VHHQ LQ PRVW RWKHU SHOLFDQ VSHFLHV 7KH SHOLFDQ VSHFLHV IRU ZKLFK WKH PRVW FRPSOHWH LQIRUPDWLRQ LV DYDLODEOH DOO KDYH PRGDO FOXWFK VL]HV RI WZR HJJV DQG DUH REOLDDWHOY VLEOLFLGDO $PHULFDQ ZKLWH SHOLFDQ 3HOHFDQXV HU\WKURUKYQFKRV -RKQVRQ DQG 6ORDQ .QRSI &DVK DQG (YDQV f ZKLWH SHOLFDQ 3HOHFDQXV RQRFURWDOXV 9HVH\)LW]JHUDOG &RRSHU f DQG SLQNEDFNHG SHOLFDQ 3HOHFDQXV UXIHVFHQV 'LQ DQG (OWULQJKDP f 'UXPPRQG f VSHFXODWHG WKDW LQ $XVWUDOLDQ SHOLFDQV 3HOHFDQXV FRQVSLFLOODWXV ZKLFK DOVR

PAGE 77

XVXDOO\ OD\ WZRHJJ FOXWFKHV 9HVWMHQV f EURRG UHGXFWLRQ PLJKW EH IDFXOWDWLYH EXW IXUWKHU LQIRUPDWLRQ LV QHHGHG IRU WKLV VSHFLHV 9LUWXDOO\ QRWKLQJ LV NQRZQ DERXW ZKHWKHU SDUWLDO EURRG ORVV LV REOLJDWH RU IDFXOWDWLYH LQ WKH LQLWLDOO\ WKUHHFKLFN EURRGV RI 3KLOLSSLQH SHOLFDQ 3HOHFDQXV RKLOLRRHQVLV 1HHODNDQWDQ f DQG WKH 'DOPDWLDQ SHOLFDQ 3HOHFDQXV FULVRXV 'HPHQWLHY DQG *ODGNRY &UDPS DQG 6LPPRQV &ULYHOOL DQG 9L]L f 'HDWK RFFXUV LQ WKH ILUVW ZHHN RI OLIH LQ PRVW REOLJDWHO\ VLEOLFLGDO VSHFLHV 0RFN HW DO f %XW WKH WLPLQJ RI REOLJDWH VLEOLFLGH LQ SHOLFDQ VSHFLHV YDULHV FRQVLGHUDEO\ RFFXUULQJ ZLWKLQ WKH ILUVW GD\V LQ ZKLWH SHOLFDQV &RRSHU f UDQJLQJ IURP WKH ILUVW GD\V -RKQVRQ DQG 6ORDQ &DVK DQG (YDQV f WKURXJK WKH ILUVW ZHHNV LQ $PHULFDQ ZKLWH SHOLFDQV .QRSI f DQG SHDNLQJ LQ WKH WK ZHHN LQ SLQNEDFNHG SHOLFDQV 'LQ DQG (OWULQJKDP f 7KH DSSDUHQWO\ REOLJDWH GHDWKV RI EURZQ SHOLFDQ &FKLFNV RFFXUUHG DW DQ LQWHUPHGLDWH DJH UHODWLYH WR WKRVH RI WKHLU FRQJHQHUV SHDNLQJ LQ WKH VHFRQG ZHHN RI OLIH LQ WKLV VWXG\ DQG LQ WKH WKLUG ZHHN LQ D 0H[LFDQ SRSXODWLRQ 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 7KHVH GLIIHUHQFHV LQ WKH WLPLQJ RI REOLJDWH EURRG UHGXFWLRQ FRXOG DULVH LI WKH \RXQJHVW FKLFNV VHUYH DV LQVXUDQFH IRU GLIIHUHQW FDXVHV RI VHQLRU PRUWDOLW\ WKDW FRPH LQWR HIIHFW DW GLIIHUHQW SRLQWV LQ WKH QHVWOLQJ SHULRG 7KH UDSLG VLEOLFLGH RI ZKLWH SHOLFDQ %FKLFNV VXJJHVWV WKDW WKH\ VHUYH SULPDULO\ DV

PAGE 78

LQVXUDQFH IRU HJJ ORVV RU GHDWK DV KDWFKOLQJV RI LQIHULRU $ FKLFNV ,Q FRQWUDVW WKH RFFXUUHQFH RI VLEOLFLGH ODWHU LQ WKH QHVWOLQJ SHULRG PD\ EH EHFDXVH MXQLRU FKLFNV DUH LQVXUDQFH SULPDULO\ IRU SUHGDWLRQ 1LVEHW 1LVEHW DQG &RKHQ 0RFN DQG 3DUNHU %U\DQW DQG 7DWQHU f DFFLGHQWDO GHDWKV DQG LQIDQWLFLGH WKLV VWXG\f RU RWKHU GHDWKV WKDW SHDN DIWHU WKH ILUVW ZHHN RI QHVWOLQJ OLIH 7KH UROH RI WKH \RXQJHVW FKLFN DV LQVXUDQFH RU DV DQ H[WUD FKLFN KDV EHHQ HYDOXDWHG RQO\ IRU $PHULFDQ ZKLWH SHOLFDQV ZKRVH ODVWKDWFKHG FKLFNV VHUYH SULPDULO\ DV LQVXUDQFH DJDLQVW KDWFKLQJ IDLOXUH DQG HDUO\ GHDWK RI WKH $ FKLFN &DVK DQG (YDQV f )RU RWKHU VSHFLHV WKH GLYLVLRQ RI UHSURGXFWLYH YDOXH LQWR H[WUDFKLFN DQG LQVXUDQFH HOHPHQWV DZDLWV IXUWKHU VWXG\ %HFDXVH 'DOPDWLDQ DQG 3KLOLSSLQH SHOLFDQV PD\ KDYH EURRG VL]HV VLPLODU WR EURZQ SHOLFDQV WKH TXHVWLRQ DULVHV RI ZKHWKHU MXQLRU FKLFNV KDYH ERWK LQVXUDQFH DQG H[WUD FKLFN YDOXH DV DSSDUHQWO\ LV WKH FDVH IRU EURZQ SHOLFDQ %FKLFNV LQ % EURRGV 'LUHFW H[SHULPHQWDO WHVWV RI WKH LQVXUDQFH YDOXH RI MXQLRU FKLFNV KDYH EHHQ FDUULHG RXW RQO\ IRU ZKLWH SHOLFDQV &DVK DQG (YDQV f 6LPLODU H[SHULPHQWV RQ EURZQ SHOLFDQV DQG RWKHU VSHFLHV ZLWK & FOXWFKHV DUH QHFHVVDU\ WR FODULI\ WKH YDOXH RI &FKLFNV

PAGE 79

7DEOH &RPSDULVRQ RI FOXWFK VL]HV KDWFKLQJ VXFFHVV DQG IOHGJLQJ VXFFHVV PHDQ s 6'f RI EURZQ SHOLFDQ QHVWV DW 6HDKRUVH .H\ LQ DQG DW $ODILD %DQNV LQ 0HDQ 1 0HDQ 1D W 3 &OXWFK VL]H +DWFKOLQJVFOXWFK )OHGJOLQJVFOXWFK )OHGJOLQJVEURRG D6DPSOHV LQFOXGHG QHVWV WKDW ZHUH DEDQGRQHG GXULQJ LQFXEDWLRQ RU KDWFKLQJ 6HH WH[W IRU GLVFXVVLRQ RI QHVW DEDQGRQPHQW

PAGE 80

7DEOH %URZQ SHOLFDQ SURGXFWLYLW\ PD[LPXP QHVWOLQJVPD[LPXP QHVWVf LQ VXEFRORQLHV WKDW ZHUH KLJKO\ +LJKf PRGHUDWHO\ 0RGf RU QHYHU 1RQHf GLVWXUEHG E\ UHVHDUFKHU DFWLYLWLHV 6LWH 'LVWXUEDQFH OHYHO 0D[LPXP QHVWV 0D[ QHVWOLQJV 0D[ QHVWV %LUG ,VODQG IRFDO QHVWV +LJK 6XQNHQ ,VODQG IRFDO QHVWV +LJK 6XQNHQ ,VODQG JURZWK QHVWV +LJK %LUG ,VODQG &RYH 0RG 6XQNHQ ,VODQG 6RXWK 0RG 6XQNHQ ,VODQG ([WHQVLRQ 1RQH 6XQNHQ ,VODQG 1RUWK 1RQH 1RWH VHH 0HWKRGV IRU GHILQLWLRQV RI PD[LPXP QHVWV DQG PD[LPXP QHVWOLQJVPD[LPXP QHVWV

PAGE 81

7DEOH )DWHV RI KDWFKOLQJV RI NQRZQ UDQNV IURP WZR DQG WKUHHFKLFN EURRGV LQ &KLFNV LQ 7KUHHFKLFN EURRGV &KLFNV 7ZRFKLFN LQ EURRGV &KLFN 5DQN $ % & $ % /LYHG )RRG'HSHQGHQW 'HDWKV bf bf bf bf bf 6WDUYDWLRQ bf bf bf bf bf 6LEOLFLGH bf bf bf bf bf 6WDUYDWLRQ tRU 6LEOLFLGH f§/b bf bf bf bf 7RWDO )RRG'HSHQGHQW 'HDWK bf bf bf bf bf )RRG,QGHSHQGHQW 'HDWKV 'LHG DV +DWFKOLQJ bf bf bf bf bf )HOO $FFLGHQWO\ bf bf bf bf bf .LOOHG E\ ,QYDGHU &KLFN bf bf bf bf bf .LOOHG E\ ,QYDGHU $GXOW bf bf bf bf bf 8QNQRZQ $FFLGHQW bf bf bf bf bf 7RWDO )RRG,QGHSHQGHQW 'HDWK bf bf bf bf bf 8QNQRZQ &DXVHV RI 'HDWK bf bf bf bf bf 1 1RWH $EDQGRQHG QHVWV DUH QRW LQFOXGHG LQ VDPSOHV SUHVHQWHG LQ WKLV DQG DOO UHPDLQLQJ WDEOHV DQG ILJXUHV LQ WKLV FKDSWHU

PAGE 82

7DEOH +DWFKLQJ VXFFHVV DQG FKLFN VXUYLYDO WR GD\Vf LQ QHVWV IRU ZKLFK FOXWFK DQG EURRG VL]HV DQG IOHGJLQJ VXFFHVV FRXOG EH GHWHUPLQHG ,QFOXGHV RQO\ QHVWV KDWFKLQJ DW OHDVW RQH FKLFN &OXWFK VL]H 7RWDO FOXWFKHV b HJJV KDWFKHG )OHGJOLQJV SHU FOXWFK D & b & bD E & b & bD D,QFOXGHV RQH EURRG LQ ZKLFK RQO\ RQH HJJ KDWFKHG

PAGE 83

7DEOH %URZQ SHOLFDQ QHVWOLQJ VXUYLYDO DQG UHSURGXFWLYH YDOXHV 59H H[WUDFKLFN FRPSRQHQW 59L LQVXUDQFH FRPSRQHQW 7RWDO 59 59H 59Lf -XQLRU FKLFNV WKDW IOHGJHG DORQJ ZLWK WKHLU VHQLRUV ZHUH FDOOHG H[WUD FKLFNV -XQLRU FKLFNV WKDW UHSODFHG D VHQLRU FKLFN ZHUH WKRVH WKDW OLYHG ORQJHU WKDQ D VHQLRU VLEOLQJ 1 WRWDO QXPEHU RI FKLFNV LQ HDFK EURRGVL]H DQG FKLFNUDQN FDWHJRU\ WKDW IOHGJHG RU GLHG ,QLWLDO EURRG &KLFN VL]H UDQN 1XPEHU RI H[WUD FKLFNV WKDW IOHGJHG 1XPEHU RI FKLFNV WKDW UHSODFHG D VHQLRU FKLFN DQG IOHGJHG GLHG 7RWDO FKLFNV WKDW IOHGJHG 1 59H 59L 7RWDO 59 % %D D % &RPELQHG f§ f§ f§ f§ % % RU &E % &RPELQHG f§ f§ % $ E % % & % &RPELQHG f§ f§ f§ f§ f§ % $ f§ f§ % % G % & G % &RPELQHG f§ f§ 1RWH 59H WKH QXPEHU RI H[WUD FKLFNV RI D SDUWLFXODU MXQLRU UDQN % RU &f 1 FKLFNV RI WKDW UDQNf 59L WKH QXPEHU RI MXQLRUV RI D SDUWLFXODU UDQN WKDW IOHGJHG DIWHU UHSODFLQJ D VHQLRU WKDW GLHG 1 FKLFNV RI WKDW UDQNf 7RWDO 59 WKH QXPEHU RI MXQLRUV RI D SDUWLFXODU UDQN WKDW IOHGJHG 1 FKLFNV RI WKDW UDQNf D &KLFNV ZHUH QRW PDUNHG LQ VR GDWD DUH SUHVHQWHG RQO\ IRU WZR QHVWV WKDW IOHGJHG ERWK FKLFNV DQG WKHUHIRUH KDG VXUYLYLQJ %FKLFNV E 'DWD DUH SUHVHQWHG RQO\ IRU WKUHH QHVWV WKDW IOHGJHG WZR FKLFNV DQG WKHUHIRUH KDG VXUYLYLQJ %FKLFNV RU &FKLFNV LI WKHUH ZHUH UHYHUVDOVf F 2QH RI WKHVH FKLFNV GLHG ZKHQ GD\V ROG G7 ,Q RQH UHYHUVDO WKH % DQG &FKLFNV PD\ KDYH GLHG RQ WKH VDPH GD\ GD\V DIWHU WKH $FKLFN GLHG

PAGE 84

7DEOH )DWHV RI HJJV DQG FKLFNV LQ DOO QHVWV LQ ZKLFK DW OHDVW RQH FKLFN KDWFKHG LQFOXGLQJ QHVWV ZLWK XQNQRZQ FKLFN UDQNV FOXWFKHV DQGRU EURRG VL]HV 7KHVH HJJV DQG FKLFNV FDPH IURP QHVWV LQ DQG QHVWV LQ /LYHG 1HYHU +DWFKHG )RRG'HSHQGHQW 'HDWKV 6WDUYDWLRQ D 6LEOLFLGH 6WDUYDWLRQ tRU 6LEOLFLGH 7RWDO )RRG'HSHQGHQW 'HDWKV )RRG,QGHSHQGHQW 'HDWKV 'LHG DV +DWFKOLQJ )HOO $FFLGHQWO\ ,QIDQWLFLGH .LOOHG E\ ,QYDGHU &KLFN .LOOHG E\ ,QYDGHU $GXOW 8QNQRZQ $FFLGHQW BB 7RWDO )RRG,QGHSHQGHQW 'HDWKV 'HDWKV IURP 8QNQRZQ &DXVHV 1 6WDUYDWLRQ GHDWKV FRXOG QRW EH VHSDUDWHG IURP 6WDUYDWLRQ tRU 6LEOLFLGH LQ EHFDXVH FKLFNV ZHUH QRW KDQGOHG LQ

PAGE 85

)LJXUH )UHTXHQF\ RI PRUWDOLW\ WKURXJK WKH QHVWOLQJ SHULRG GHILQHG DV EHJLQQLQJ ZLWK KDWFKLQJ RI WKH $FKLFNf IRU $ % DQG &FKLFNV LQ % DQG $ DQG %FKLFNV LQ % EURRGV LQ 7KH JUDSKV IRU &FKLFNV DQG % %FKLFNV LQFOXGH FKLFNV RI WKHVH UDQNV SOXV XQUDQNHG FKLFNV WKDW ZHUH WKH ILUVW WR GLH LQ % DQG % EURRGV UHVSHFWLYHO\ 2QO\ FKLFNV IURP EURRGV KDWFKLQJ DOO HJJV ZHUH LQFOXGHG 1XPEHUV DERYH EDUV LQGLFDWH IRU HDFK WLPH SHULRG WKH QXPEHU RI $FKLFNV WKDW GLHG EHIRUH WKHLU MXQLRUV $FKLFN JUDSKVf RU WKH QXPEHU RI %FKLFNV RU &FKLFNV WKDW GLHG DIWHU D VHQLRU VLEOLQJ % DQG &FKLFN JUDSKV UHVSHFWLYHO\f

PAGE 86

)UHTXHQF\ % 1HVWV ‘ )RRGLQGHSHQGHQW GHDWKV ’ )RRGGHSHQGHQW GHDWKV ’ $OO GHDWKV % 1HVWV 'D\V LQ QHVWOLQJ SHULRG

PAGE 87

&+$37(5 +81*(5 $6 $ 352;,0$7( &$86( 2) ),*+7,1* ,QWURGXFWLRQ )LHUFH ILJKWLQJ DPRQJ QHVWOLQJV LV FRPPRQ LQ D YDULHW\ RI DYLDQ WD[D UHYLHZV LQ 2n&RQQRU 6WLQVRQ 0RFN HW DO f ,Q REOLJDWHO\ VLEOLFLGDO VSHFLHV GHDWK LV WKH YLUWXDOO\ LQHYLWDEOH UHVXOW RI QHVWOLQJ DJJUHVVLRQ 0RFN HW DO f ,Q IDFXOWDWLYHO\ VLEOLFLGDO VSHFLHV WKH OHWKDOLW\ RI VLEOLQJ ILJKWLQJ YDULHV DQG PD\ GHSHQG RQ IRRG VXSSOLHV WR WKH EURRG 0RFN HW DO f 7KH XOWLPDWH FDXVH RI ERWK REOLJDWH DQG IDFXOWDWLYH VLEOLFLGH LV SUHVXPDEO\ IRRG LQVXIILFLHQF\ 0RFN D 0RFN HW DO 'UXPPRQG DQG *DUFLD &KHYHODV f QHVWOLQJV ILJKW WR HOLPLQDWH FRPSHWLWRUV ZKHQ IRRG SURYHV LQDGHTXDWH IRU WKH IXOO EURRG 2EOLJDWH VLEOLFLGH LV XVXDOO\ H[SODLQHG DV D ZD\ RI HOLPLQDWLQJ D EURRGPHPEHU EHFDXVH IRRG LV FHUWDLQ WR EHFRPH LQDGHTXDWH IRU UDLVLQJ WKH IXOO EURRG ZKHQ QHVWOLQJV EHFRPH ROGHU 6WLQVRQ 0RFN HW DO f )DFXOWDWLYH VLEOLFLGH XVXDOO\ LV H[SODLQHG DV D IRUP RI UHVRXUFH WUDFNLQJ ZKHUHE\ SDUHQWV DWWHPSW WR PDWFK EURRG VL]H WR XQSUHGLFWDEOH UHVRXUFHV E\ SURGXFLQJ DQ H[WUD FKLFN WKDW VXUYLYHV LI IRRG LV DEXQGDQW EXW LV HOLPLQDWHG LI IRRG EHFRPHV VFDUFH /DFN FDOOHG

PAGE 88

/DFNnV EURRG UHGXFWLRQ K\SRWKHVLV E\ 5LFNOHIV f 7KHRUHWLFDOO\ XQSUHGLFWDEOH IRRG VXSSOLHV XOWLPDWHO\ IDYRU IDFXOWDWLYH VLEOLFLGH 0RFN HW DO f LQ VSHFLHV ZKHUH QHVWOLQJ VWDUYDWLRQ LV EURRGVL]H GHSHQGHQW :KHQ VXFK VSHFLHV IDFH IRRG VKRUWDJHV URXWLQHO\ VHOHFWLRQ VKRXOG OHDG WR UHGXFWLRQV LQ FOXWFK UDWKHU WKDQ EURRGf VL]H WR PDWFK UHVRXUFHV %XW URXWLQH VKRUWDJHV FDQ IDYRU RYHUSURGXFWLRQ IROORZHG E\ REOLJDWH VLEOLFLGH ZKHQ WKH GHVLJQDWHG YLFWLP KDV VRPH YDOXH DV D SRWHQWLDO UHSODFHPHQW IRU D VLEOLQJ WKDW GLHV 'RUZDUG UHYLHZV LQ 6WLQVRQ $QGHUVRQ VHH DOVR &KDSWHU f 0RVW VSHFLHV DFFRPSOLVK EURRG UHGXFWLRQ ZLWKRXW RYHUW QHVWOLQJ DJJUHVVLRQ VHH UHYLHZV LQ +RZH &ODUN DQG :LOVRQ f 6HYHUDO FRQGLWLRQV PXVW EH PHW IRU WKH HYROXWLRQ RI VLEOLFLGDO DJJUHVVLRQ WR EH IDYRUHG )LUVW QHVWOLQJV PXVW SRVVHVV SRWHQWLDOO\ OHWKDO ZHDSRQU\ 6HFRQG WKH\ PXVW H[SHULHQFH VSDWLDO FRQILQHPHQW WKDW SUHFOXGHV HVFDSH IURP VLEOLQJ DWWDFNV 7KLUG QHVWOLQJV PXVW HQJDJH LQ FRPSHWLWLRQ IRU IRRG WKDW LV SURYLVLRQHG LQ VPDOO XQLWV WKDW FDQ EH GHIHQGHG HDVLO\ WKURXJK DJJUHVVLRQ 0RFN HW DO f 6LEOLFLGDO VSHFLHV DUH DOVR FKDUDFWHUL]HG E\ FRPSHWLWLYH GLVSDULWLHV DPRQJ VLEOLQJV 7KHVH GLVSDULWLHV ZKLFK DUH XVXDOO\ LQLWLDWHG E\ KDWFKLQJ DV\QFKURQ\ PD\ IXQFWLRQ WR UHGXFH VLEOLFLGDO DJJUHVVLRQ 'UXPPRQG DQG *DUFLD &K£YHODV +DKQ )XMLRND 0RFN DQG 3ORJHU EXW VHH +XVVHOO &ODUN DQG :LOVRQ

PAGE 89

0DJUDWK UHYLHZHG FDXVHV RI KDWFKLQJ DV\QFKURQ\f /DUJH VL]H GLVSDULWLHV KRZHYHU PD\ EH D FRQVHTXHQFH UDWKHU WKDQ FDXVH RI QHVWOLQJ DJJUHVVLRQ 0RFN HW DO f 7KH GHJUHH RI QHVWOLQJ DJJUHVVLRQ YDULHV DPRQJ EURRGV ZLWKLQ DQG EHWZHHQ SRSXODWLRQV RI IDFXOWDWLYHO\ VLEOLFLGDO VSHFLHV 0RFN HW DO f 7KH GHJUHH RI ZLWKLQEURRG DJJUHVVLRQ FDQ QRW EH SUHGLFWHG E\ VLPSO\ GHWHUPLQLQJ WKDW D VSHFLHV SRVVHVVHV DOO RI WKH DWWULEXWHV HJ ZHDSRQU\ PRQRSROL]DEO\ GHOLYHUHG IRRGf WKDW IDYRU VLEOLFLGH 7R H[SODLQ WKH YDULDQFH LQ QHVWOLQJ DJJUHVVLRQ UHTXLUHV H[DPLQDWLRQ RI LWV SUR[LPDWH FDXVHV 2QH IUHTXHQWO\ LQYRNHG K\SRWKHVLV LV WKDW KXQJHU LV WKH SUR[LPDWH PHFKDQLVP WKDW WULJJHUV ILJKWLQJ IRRGDPRXQW K\SRWKHVLV ,QJUDP /DFN 3URFWHU 1HOVRQ 3RROH %UDXQ DQG +XQW )XMLRND f 7KLV LQWXLWLYH K\SRWKHVLV GHULYHV IURP WKH K\SRWKHVLV WKDW IRRG OLPLWDWLRQ LV WKH XOWLPDWH VHOHFWLYH SUHVVXUH IDYRULQJ VLEOLFLGH 'UXPPRQG DQG *DUFLD &K£YHODV 0RFN HW DO f 0RVW HYLGHQFH IRU WKH IRRG DPRXQW K\SRWKHVLV LV FRUUHODWLRQDO 7KLV HYLGHQFH LQFOXGHV f D WHPSRUDO DVVRFLDWLRQ EHWZHHQ ILJKWLQJ DQG PHDOV f D GLVLQFOLQDWLRQ RI UHFHQWO\ IHG FKLFNV WR DWWDFN DQG f DQ DVVRFLDWLRQ EHWZHHQ MXQLRU FKLFN GHDWK ZLWK UHGXFHG SDUHQWDO IHHGLQJ UDWHV GXULQJ SURWUDFWHG LQFOHPHQW ZHDWKHU VHH UHYLHZ LQ 0RFN HW DO f 7KHUH LV DOVR DQ LQYHUVH UHODWLRQVKLS EHWZHHQ SDUHQWDO IHHGLQJ UDWHV DQG VLEOLQJ

PAGE 90

DJJUHVVLRQ LQ R\VWHUFDWFKHUV +DHPDWRRXV RVWUDOHRXV 6DIULHO f RVSUH\V 3DQGLRQ KDOLDHWXV 3RROH VXPPDUL]HG LQ 0RFN HW DO f DQG VRPH RWKHU UDSWRUV 1HZWRQ f 7KH EHVW HYLGHQFH WKDW KXQJHU WULJJHUV ILJKWLQJ FRPHV IURP DQ H[SHULPHQWDO VWXG\ RI EOXHIRRWHG ERRELHV 6XOD QHERX[LL 'UXPPRQG DQG *DUFLD &K£YHODV f %URRG UHGXFWLRQ LQ WKLV VSHFLHV XVXDOO\ RFFXUV VKRUWO\ DIWHU WKH VHQLRU FKLFNnV PDVV GURSV DERXW b EHORZ WKDW H[SHFWHG DW LWV FXUUHQW DJH LQ D JRRG \HDU 'UXPPRQG HW DO f 6HQLRU QHVWOLQJV ZKRVH QHFNV ZHUH WDSHG WR SUHYHQW VZDOORZLQJ SHFNHG WKHLU VLEOLQJV RYHU WKUHH WLPHV PRUH RIWHQ WKDQ EHIRUH WDSLQJ RU DIWHU WDSHV ZHUH UHPRYHG 'UXPPRQG DQG *DUFLD &K£YHODV f 5DWHV RI VXFK DJJUHVVLYH SHFNLQJ URVH PRVW VWHHSO\ ZKHQ VHQLRU PDVV GURSSHG WR b EHORZ SRWHQWLDO 6LPLODUO\ H[SHULPHQWDO IRRG GHSULYDWLRQ DOVR VHHPHG WR FDXVH HOHYDWHG ILJKWLQJ DPRQJ VRXWK SRODU VNXD FKLFNV &DWKDUDFWD PDFFRUPLFNL 3URFWHU f DOWKRXJK GHVLJQ SUREOHPV FDXVHG LQFRQFOXVLYH UHVXOWV ,Q WKH RQO\ RWKHU H[SHULPHQWDO WHVW RI WKH IRRGDPRXQW K\SRWKHVLV VLEOLQJ ILJKWLQJ ZDV QRW FRUUHODWHG ZLWK IRRG LQJHVWLRQ LQ EURRGV RI JUHDW HJUHWV &DVPHURGLXV DOEXV 0RFN HW DO f 3URYLVLRQHG EURRGV LQ ILHOG H[SHULPHQWV IRXJKW VOLJKWO\ PRUH WKDQ XQSURYLVLRQHG FRQWUROV DQG FDSWLYH EURRGV IHG KLJK DPRXQWV IRXJKW PRUH WKDQ GLG EURRGV UHFHLYLQJ ORZ IRRG DOORWPHQWV ([SHULPHQWDO SURYLVLRQLQJ RI

PAGE 91

JUHDW EOXH KHURQV $UGHD KHURGLDVf IRVWHUSDUHQWHG E\ JUHDW HJUHWV DOVR IDLOHG WR GHSUHVV ILJKWLQJ UDWHV UHODWLYH WR XQSURYLVLRQHG EURRGV 0RFN Ef ,Q DGGLWLRQ ILHOG REVHUYDWLRQV RI JUHDW HJUHWV JUHDW EOXH KHURQV DQG FDWWOH HJUHWV %XEXOFXV LELVf IDLOHG WR VKRZ LQFUHDVHG DJJUHVVLRQ ZLWK GHFUHDVHG IRRG UHVXOWV RI YDULRXV VWXGLHV VXPPDUL]HG LQ 0RFN HW DO f $OWKRXJK ILJKWLQJ RFFXUUHG LQGHSHQGHQWO\ RI IRRG DPRXQWV LQ WKHVH DUGHLG VSHFLHV PRUWDOLW\ LQFOXGLQJ VLEOLFLGH ZDV FRUUHODWHG ZLWK IRRG VKRUWDJH 0RFN HW DO f $ SRVVLEOH SUR[LPDWH PHFKDQLVP WR H[SODLQ WKLV FRUUHODWLRQ LQ WKH DEVHQFH RI IRRGGHSHQGHQW ILJKWLQJ LV WKDW WKH YLFWLP EHFRPHV PRUH YXOQHUDEOH WR DJJUHVVLRQ GXULQJ IRRG VKRUWDJHV HYHQ WKRXJK OHYHOV RI DJJUHVVLRQ DUH LQYDULDQW 0RFN E 0RFN HW DO 'UXPPRQG DQG *DUFLD &K£YHODV f 7KHUH DUH WZR ZD\V WKDW YLFWLP YXOQHUDELOLW\ FRXOG EH HQKDQFHG GXULQJ IRRG VKRUWDJHV )LUVW SDUHQWV PD\ EH DEVHQW PRUH RIWHQ RQ IRUDJLQJ WULSV DQG WKXV PD\ UDUHO\ EH DEOH WR VXSSUHVV IRUWXLWRXVO\ RU GHOLEHUDWHO\f QHVWOLQJ DJJUHVVLRQ 1HZWRQ f 6HFRQG FRPSHWLWLYH GLVSDULWLHV DPRQJ FKLFNV PD\ EH H[DFHUEDWHG GXULQJ IRRG VFDUFLW\ OHDGLQJ WR PDOQRXULVKPHQW RI WKH \RXQJHU RQH ZKLFK WKXV VXFFXPEV PRUH HDVLO\ WR WKH SK\VLFDO DEXVH 6SHOOHUEHUJ 0H\EXUJ (GZDUGV DQG &ROORS\ 0RFN HW DO f )RRG DEXQGDQFH LV DOVR XQOLNHO\ WR H[HUW SUR[LPDWH FRQWURO RQ QHVWOLQJ DJJUHVVLRQ LQ REOLJDWHO\

PAGE 92

VLEOLFLGDO VSHFLHV ,Q WKHVH VSHFLHV IDWDO DJJUHVVLRQ LV WKH UXOH HYHQ GXULQJ SHULRGV RI IRRG DEXQGDQFH 0RFN HW DO f LQYHVWLJDWHG WKH IRRGDPRXQW K\SRWKHVLV DV D SUR[LPDWH H[SODQDWLRQ IRU DJJUHVVLRQ DPRQJ QHVWOLQJ EURZQ SHOLFDQV 3HOHFDQXV RFFLGHQWDOLVf %URZQ SHOLFDQV KDWFK WKHLU HJJV DV\QFKURQRXVO\ 'HDWK LV REOLJDWH IRU WKH ODVW KDWFKHG PHPEHUV RI WKUHHFKLFN EURRGV DQG LV IDFXOWDWLYH IRU VHFRQGKDWFKHG FKLFNV &KDSWHU f 1HVWOLQJV IUHTXHQWO\ ILJKW 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG WKHVH DWWDFNV RIWHQ FRQWULEXWH WR WKH GHDWK RI MXQLRU EURRGPHPEHUV &KDSWHU 3LQ]Q DQG 'UXPPRQG LQ SUHVVf )RU WKH IRRGDPRXQW K\SRWKHVLV WR EH D SRVVLEOH H[SODQDWLRQ IRU QHVWOLQJ DJJUHVVLRQ LQ WKLV VSHFLHV WKHUH VKRXOG EH DQ LQYHUVH UHODWLRQVKLS EHWZHHQ QHVWOLQJ DJJUHVVLRQ DQG DPRXQW RI IRRG FRQVXPHG DQG JURZWK RI DW OHDVW VRPH EURRG PHPEHUV 0HWKRGV 6WXG\ 6LWH REVHUYHG EURZQ SHOLFDQV QHVWLQJ LQ WKH FDQRS\ RI PDQJURYHV DQG RWKHU WUHHV JURZLQJ RQ %LUG DQG 6XQNHQ ,VODQGV WRJHWKHU NQRZQ DV $ODILD %DQNV LQ +LOOVERURXJK %D\ 7DPSD )ORULGD VHH &KDSWHU IRU IXUWKHU GHVFULSWLRQ RI WKH VWXG\ VLWHf

PAGE 93

2EVHUYDWLRQ DQG &HQVXVLQJ 0HWKRGV 2EVHUYDWLRQV ZHUH PDGH ZLWK VSRWWLQJ VFRSH DQG ELQRFXODUV IURP WZR EOLQGV RQH RQ %LUG ,VODQG P IURP REVHUYDWLRQ QHVWV DQG WKH RWKHU RQ 6XQNHQ LVODQG P IURP REVHUYDWLRQ QHVWV 7ZR REVHUYHUV SDUWLFLSDWHG LQ FRQWLQXRXV GD\OLJKW YLJLOV RQ DOWHUQDWH GD\V IURP 0DUFK WKURXJK -XO\ %RWK REVHUYHUV ZHUH SUHVHQW VLPXOWDQHRXVO\ GXULQJ WKH ZHHNV RI SHDN QHVWOLQJ DFWLYLW\ $ GDLO\ PD[LPXP RI IRFDO QHVWV ZHUH PRQLWRUHG VLPXOWDQHRXVO\ LQ D YLVXDO DUF RI r 7KHVH IRFDO QHVWV LQFOXGHG EURRGV XVHG LQ RWKHU VWXGLHV VHH &KDSWHUV DQG f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

PAGE 94

DJH P\ RSHUDWLRQDO GHILQLWLRQ RI IOHGJLQJ VHH &KDSWHU f :H PDUNHG KDWFKOLQJ GD\ ROGf FKLFNV DFFRUGLQJ WR KDWFKLQJ RUGHU ZLWK \HOORZ DQG EODFN LQGHOLEOH SHQV 2OGHU FKLFNV UHFHLYHG EOXH DQG \HOORZ DFU\OLF SDLQW DQG VDPH FRORU IODJJLQJ WDSH VTXDUHV JOXHG ZLWK FRQWDFW FHPHQW RQ WKHLU EDFNV DQG KHDGV 3DLQW DQG IODJJLQJ ZHUH UHDSSOLHG IUHTXHQWO\ VHH &KDSWHU f &KLFNV ZHUH ZHLJKHG WR WKH QHDUHVW J ZLWK VSULQJ VFDOHVf DQG WKH OHQJWK RI WKH FXOPHQ ZDV PHDVXUHG WR WKH QHDUHVW PP ZLWK D FOHDU SODVWLF UXOHUf HYHU\ GD\V XQWLO WKH EURRGnV ILUVWKDWFKHG $f FKLFN ZDV RQ DYHUDJHf GD\V ROG UDQJH GD\Vf D PLQLPXP RI RQFH D ZHHN ZKHQ $DJH ZDV EHWZHHQ GD\V DQG DW OHDVW HYHU\ GD\V WKHUHDIWHU $JHV DQG KDWFKLQJ RUGHUV RI FKLFNV ZHUH GHWHUPLQHG E\ GLUHFW REVHUYDWLRQ RI QHZO\ KDWFKHG FKLFNV ZKHQHYHU SRVVLEOH )RU RWKHU FKLFNV DJHV ZHUH HVWLPDWHG IURP D UHJUHVVLRQ RI FXOPHQ OHQJWK RQ DJH RI NQRZQDJH QHVWOLQJV VHH &KDSWHU DQG $SSHQGL[ $ IRU PRUH GHWDLOVf 1HVW 2EVHUYDWLRQV )RFDO QHVWV ZHUH VFDQQHG LQ RUGHU IROORZLQJ D SUHVHW VHTXHQFH :H FRQWLQXHG WR VFDQ QHVWV XQWLO ZH GHWHFWHG IHHGLQJ RU ILJKWLQJ EHKDYLRU VHH EHORZf DW ZKLFK SRLQW ZH EHJDQ WR PRQLWRU DOO DFWLYLWLHV LQ WKH QHVW XQWLO ZH WHUPLQDWHG REVHUYDWLRQV EHFDXVH DOO IHHGLQJ DQG ILJKWLQJ

PAGE 95

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f 7KH\ JUDGXDOO\ VKLIWHG WR PDNLQJ GHOLYHULHV GLUHFWO\ DV WKH FKLFNV JRW ROGHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf :KHQ FKLFNV IHG GLUHFWO\ WKH\ UHDFKHG LQWR WKHLU SDUHQWnV SRXFK WR REWDLQ IRRG )HHGLQJ EHKDYLRU LQFOXGHG DOO GLUHFW DQG LQGLUHFW GHOLYHULHV RI IRRG WR QHVWOLQJV SOXV DOO FDVHV LQ ZKLFK SDUHQWV RSHQHG WKHLU ELOOV RYHU \RXQJ FKLFNV RU KDG ROGHU FKLFNV WKUXVWLQJ GHHS LQWR WKH EDVH RI WKH SRXFK ZLWKRXW DQ\ HYLGHQFH RI IRRG EHLQJ GHOLYHUHG $ SHULRG RI IHHGLQJ DFWLYLW\ ZDV GHILQHG DV HQGLQJ ZKHQ WKH SDUHQW EHJDQ D QRQIHHGLQJ DFWLYLW\ ZLWKRXW UHVXPLQJ IHHGLQJ DFWLYLW\ ZLWKLQ PLQXWH GHILQHG QRQIHHGLQJ DFWLYLWLHV WR LQFOXGH SUHHQLQJ ZLQJ

PAGE 96

IODSSLQJ QHVWFOHDQLQJ WRVVLQJ ILVK ERQHV VNLQ VWLFNV DQG YDULRXV XQLGHQWLILDEOH VFUDSV IURP WKH QHVWf DGMXVWLQJ VWLFNV LQ WKH QHVW DGRSWLQJ D UHVWLQJ SRVWXUH LQ ZKLFK WKH SDUHQW KHOG LWV FORVHG ELOO RXW RI UHDFK RI LWV FKLFNV SRVWXUHV VKRZQ LQ ILJXUHV DQG RI 6FKUHLEHU f QHVW UHOLHI EHKDYLRU 6FKUHLEHU f GLVSOD\LQJ WR RU VQDSSLQJ DW D QHLJKERU KRSSLQJ WR D SHUFK RU IO\LQJ DZD\ HVWLPDWHG WKH DPRXQW RI IRRG GHOLYHUHG WR FKLFNV E\ UHFRUGLQJ WKH ORQJHVW OLQHDU GLPHQVLRQV RI IRRG EROXVHV VZDOORZHG E\ HDFK FKLFN 7R HVWLPDWH EROXV VL]HV H[SUHVVHG WKH OHQJWK RI WKH EXOJH LQ D FKLFNnV QHFN DV D SHUFHQWDJH RI WKH SDUHQWnV ELOO OHQJWK EDVHG RQ 0RFN XQLWV IRRGXQLWVf %HFDXVH SDUHQWV VRPHWLPHV EORFNHG WKH REVHUYHUnV YLHZ SURKLELWLQJ GHWHUPLQDWLRQ RI ZKHWKHU IRRG GHOLYHULHV KDG RFFXUUHG P\ GDWD PXVW EH FRQVLGHUHG PLQLPXP HVWLPDWHV RI WKH DPRXQWV RI IRRG REWDLQHG E\ QHVWOLQJV )LJKWLQJ %HKDYLRU FRXQWHG DV ILJKWV DOO FDVHV ZKHUH RQH FKLFN GHOLYHUHG DW OHDVW RQH EORZ VHH EHORZf WR WKH ERG\ RI DQRWKHU FKLFN ZLWK HQRXJK IRUFH WR PRYH WKH YLFWLPnV KHDG ZKHQ VWUXFN $Q LQGLYLGXDO ILJKW FRQWLQXHG XQWLO RQH RI WKH FKLFNV DGRSWHG D VXEPLVVLYH SRVWXUH VHQVX 3LQ]Q DQG 'UXPPRQG LQ SUHVV VHH GHILQLWLRQV EHORZf RU QR IXUWKHU

PAGE 97

EORZV ZHUH GHOLYHUHG IRU DW OHDVW VHFRQGV $ WRWDO RI ILJKWV ZHUH REVHUYHG LQ LQ DOO RI WKH QHVWV XVHG LQ WKLV DQG UHODWHG VWXGLHV VHH &KDSWHUV DQG IRU GHVFULSWLRQV RI WKHVH UHODWHG VWXGLHVf )LJKWV LQYROYHG WZR W\SHV RI EORZV %LWHV DQG 6KDNHV GHILQHG EHORZf 7KH ILUVW EORZ RI D ILJKW ZDV D %LWH LQ ILJKWV DQG D 6KDNH LQ ILJKWV RI WKH ILJKWV LQ IRU ZKLFK ZH FRXOG LGHQWLI\ WKH W\SH RI EORZ WKDW ZDV GHOLYHUHG ILUVWf :KHQ %LWLQJ WKH DWWDFNHU UHDFKHG WRZDUG WKH KHDG RU ERG\ RI LWV DGYHUVDU\ FORVHG LWV PDQGLEOHV RYHU VRPH SDUW RI WKH YLFWLPnV DQDWRP\ VXFK WKDW WKH VKDUS QDLO DW WKH WLS RI WKH XSSHU PDQGLEOH GHSUHVVHG WKH YLFWLPnV VNLQ DQG WKHQ LPPHGLDWHO\ UHOHDVHG LWV KROG %LWHV ZHUH GHOLYHUHG WR WKH KHDG DQG QHFN ZLWK VXFK VSHHG DQG IRUFH WKDW WKH YLFWLPnV KHDG ZDV SXVKHG EDFNZDUG E\ WKH IRUFH %LWHV WR WKH EDFN DOVR SXVKHG WKH ERG\ DZD\ IURP WKH EORZ EXW WKLV PRYHPHQW ZDV RIWHQ VPDOO EHFDXVH EORZV XVXDOO\ SXVKHG WKH YLFWLPnV ERG\ LQWR WKH QHVW IORRU ZKLFK GDPSHG VRPH RI WKH PRYHPHQW %LWHV ZHUH RIWHQ GLUHFWHG WRZDUG WKH H\HV RU EDVH RI WKH VNXOO 6KDNHV RFFXUUHG ZKHQ WKH DWWDFNHU JUDVSHG LWV YLFWLPnV KHDG LQ D VFLVVRU JULS DQG IRUFHG WKH YLFWLPnV KHDG WR VWULNH DJDLQVW WKH YLFWLPnV ERG\ RU WKH QHVW IDEULF 7KH DWWDFNHU WKHQ SXOOHG WKH YLFWLPnV KHDG DZD\ IURP WKH REMHFW WKDW LW VWUXFN 7KLV ZDV RIWHQ IROORZHG E\ WKH DWWDFNHU RQFH DJDLQ VODPPLQJ WKH YLFWLPnV KHDG DJDLQVW LWV ERG\ RU WKH QHVW

PAGE 98

IORRU :KHQ VHYHUDO 6KDNHV RFFXUUHG LQ D FRQWLQXRXV VHULHV WKH DWWDFNHU GLG QRW UHOLQTXLVK LWV KROG RQ WKH YLFWLP EHWZHHQ EORZV )LJKWV RFFDVLRQDOO\ UHVXOWHG LQ SXQFWXUH ZRXQGV WR WKH KHDG DQG QHFN EXW EUHDNV LQ WKH VNLQ ZHUH UDUH 7KH PRVW FRPPRQ HYLGHQFH RI LQMXU\ ZDV WKDW DIWHU EHLQJ EHDWHQ UHSHDWHGO\ WKH YLFWLPnV VNLQ RIWHQ EHFDPH SXIIHG RXW LQ RGG VKDSHV DORQJ LWV EDFN VLGHV DQG QHFN SRVVLEO\ IURP DLU VDFV WKDW KDG EHHQ EURNHQ GXULQJ VLEOLQJ DWWDFNV 6RPH FKLFNV QHDU GHDWK KDG VPDOO SXQFWXUH ZRXQGV RQ WKHLU DEGRPHQV RU EUHDVWV 7KHVH ZRXQGV FRXOG QRW KDYH EHHQ FDXVHG E\ VLEOLQJ ELWHV EHFDXVH YLFWLPV DOPRVW DOZD\V NHSW WKHLU EUHDVWV SUHVVHG WR WKH QHVW IDEULF GXULQJ ILJKWV %XW D YLFWLPnV EUHDVW PLJKW EH SXQFWXUHG ZKHQ DQ DWWDFNHU GLUHFWHG SRZHUIXO EORZV WR WKH YLFWLPnV EDFN ZDONHG RU VDW RQ WKH YLFWLP RU RWKHUZLVH VKRYHG WKH YLFWLPnV ERG\ IRUFHIXOO\ LQWR WKH RIWHQ VKDUS VWLFNV RI WKH QHVW 1LQHWHHQ SHUFHQW RI DOO ILJKWV REVHUYHG LQ HQGHG LQ VXEPLVVLYH SRVWXUHV GHVFULEHG EHORZf WKDW ZHUH YLVLEOH WR WKH REVHUYHU 6RPH DGGLWLRQDO ILJKWV DOVR PD\ KDYH HQGHG LQ VXEPLVVLYH SRVWXUHV WKDW ZHUH QRW GHWHFWDEOH EHFDXVH WKH ORVHU ZDV KLGGHQ IURP WKH REVHUYHU E\ WKH QHVW ULP RU WKH ERG\ RI D IDPLO\ PHPEHU 6XEPLVVLYH SRVWXUHV LQFOXGHG &URXFK 1 ILJKWVf &XUO 1HFN 1 ILJKWVf 7XUQ /RZ 1 ILJKWVf 'XFN 1 ILJKWVf 5HYHUVH +HDG 1 ILJKWf /LH )ODW 1 ILJKWVf DQG +DQJ +HDG 1

PAGE 99

ILJKWVf $Q DGGLWLRQDO VXEPLVVLYH SRVWXUH /LH %DFN ZDV REVHUYHG RQH WLPH LQ D SRSXODWLRQ RI EURZQ SHOLFDQV WKDW REVHUYHG LQ DV SDUW RI DQRWKHU VWXG\ VWXG\ SUHVHQWHG LQ &KDSWHU f $ FKLFN LQ WKH &URXFK SRVLWLRQ )LJXUH O$f VTXDWWHG RQ LWV KHHOV ZLWK WKH EDFN UDLVHG RII WKH QHVW IORRU DW D r DQJOH IURP KRUL]RQWDO ZKLOH LWV WKURDW ZDV SUHVVHG DJDLQVW LWV QHFN LQ VXFK D ZD\ WKDW WKH ELOO ZDV SUHVVHG DJDLQVW WKH DEGRPHQ SDUDOOHO WR WKH DQJOH RI WKH EDFN :KHQ LQ WKH &XUO 1HFN SRVWXUH )LJXUH O%f D FKLFN OD\ ZLWK LWV DEGRPHQ SUHVVHG WR WKH QHVW IORRU LWV EDFN KRUL]RQWDO WKH GRUVDO VXUIDFH RI LWV QHFN O\LQJ RQ LWV VKRXOGHUV DQG LWV WKURDW UHVWLQJ RQ LWV EUHDVW VXFK WKDW WKH ELOO ZDV SUHVVHG DJDLQVW WKH IURQW RI WKH QHFN DQG EUHDVW DSSUR[LPDWHO\ SHUSHQGLFXODU WR WKH QHVW IORRU ,I WKH ELOO ZDV QRW SHUSHQGLFXODU WR WKH QHVW IORRU LW ZDV ZLWKLQ r RI SHUSHQGLFXODU VXFK WKDW WKH WLS RI WKH ELOO ZDV SRVWHULRU WR WKH IRUHKHDG SRVLWLRQ VKRZQ LQ )LJXUH O%f 7KH SRVLWLRQ RI WKH ERG\ RI FKLFNV LQ WKH 7XUQ /RZ 'XFN /LH %DFN 5HYHUVH +HDG DQG /LH )ODW SRVWXUHV ZHUH DOO WKH VDPH DV ZDV MXVW GHVFULEHG IRU WKH &XUO 1HFN SRVLWLRQ VHH )LJXUH %*f 7KHVH SRVWXUHV ZHUH GLVWLQJXLVKHG E\ WKH SRVLWLRQ RI WKH FKLFNnV ELOO KHDG DQG QHFN :KHQ DGRSWLQJ WKH 7XUQ /RZ SRVWXUH )LJXUH &f D FKLFN WXUQHG LWV KHDG WR RQH VLGH RI LWV ERG\ ZKLOH NHHSLQJ WKH GRUVDO VXUIDFH RI LWV QHFN SUHVVHG WR LWV VKRXOGHUV LWV WKURDW SUHVVHG WR LWV VLGH MXVW EHORZ LWV ZLQJ DQG LWV ELOO SUHVVHG DORQJ LWV

PAGE 100

VLGH ZLWK WKH WLS SRLQWLQJ SRVWHULRUO\ DW D r DQJOH WR WKH KRUL]RQWDO SODQH ,Q WKH 'XFN SRVWXUH )LJXUH O'f D FKLFN FXUOHG LWV KHDG XQGHU LWV ERG\ VXFK WKDW WKH YHQWUDO VXUIDFH RI WKH SRVWHULRUO\ SRLQWLQJ ELOO ZDV SUHVVHG DJDLQVW WKH DEGRPHQ DQG WKH GRUVDO VXUIDFHV RI WKH ELOO DQG KHDG ZHUH SUHVVHG DJDLQVW WKH QHVW IDEULF 7KLV SRVWXUH HIIHFWLYHO\ VKLHOGHG D FKLFNnV IDFH IURP VLEOLQJ DWWDFNV EXW OHIW LWV QDSH H[SRVHG :KHQ LQ WKH /LH %DFN SRVWXUH )LJXUH O(f D FKLFN SUHVVHG RQH FKHHN DJDLQVW LWV EDFN EHWZHHQ LWV ZLQJV ZKLOH LWV ELOO UHVWLQJ RQ WKH EDFN MXWWHG RXW WR WKH VLGH KRUL]RQWDOO\ ZKLOH EHLQJ KHOG DSSUR[LPDWHO\ SHUSHQGLFXODU WR WKH PHGLDO SODQH $ FKLFN DGRSWLQJ WKH 5HYHUVH +HDG SRVLWLRQ )LJXUH ,)f SODFHG LWV WKURDW DQG WKH YHQWUDO VXUIDFH RI LWV QHFN DQG SRVWHULRUO\ SRLQWLQJ ELOO DJDLQVW LWV EDFN EHWZHHQ WKH ZLQJV ,Q WKH /LH )ODW SRVLWLRQ )LJXUH *f D FKLFN OD\ ZLWK WKH ODWHUDO VXUIDFH RI LWV QHFN DQG KHDG SUHVVHG DJDLQVW WKH QHVW IDEULF ZKLOH WKH GRUVDO VXUIDFHV RI WKH GLVWDO DQG PHGLDO KDOYHV RI WKH QHFN UHPDLQHG IROGHG DJDLQVW RQH DQRWKHU DQG WKH WKURDW SUHVVHG DJDLQVW WKH YHQWUDO VXUIDFH RI WKH QHFN 7KH +DQJ +HDG SRVWXUH )LJXUH +f ZDV GHILQHG E\ D FKLFN KDQJLQJ LWV KHDG RYHU WKH ULP RI WKH QHVW RU WKH HGJH RI LWV SHUFK VXFK WKDW WKH WLS RI WKH ELOO KXQJ SDUDOOHO WR RU EHORZ WKH FKLFNnV IHHW %RG\ SRVLWLRQV GXULQJ WKH +DQJ +HDG UDQJHG IURP WKRVH GHVFULEHG IRU WKH &URXFK WR WKH &XUO 1HFN SRVWXUHV

PAGE 101

7KUHH SHUFHQW RI DOO ILJKWV REVHUYHG LQ HQGHG ZKHQ D ORVHU (VFDSHG E\ FUDZOLQJ UDSLGO\ DZD\ IURP LWV DWWDFNHU 7KH HVFDSLQJ ORVHU IOHG WR VHYHUDO GLIIHUHQW W\SHV RI ORFDWLRQ 6RPH ORVHUV IOHG ZKLOH UHPDLQLQJ ZLWKLQ WKH FRQILQHV RI WKH QHVW 1 ILJKWVf 6RPH ORVHUV OHIW WKH QHVW WR FOLPE RQWR D SHUFK 1 ILJKWVf 6RPH ORVHUV 1 f HVFDSHG E\ f FOLPELQJ IURP SHUFK WR SHUFK LQ WKH QHVW VLWH DIWHU WKH QHVW KDG EHHQ GHVWUR\HG E\ WKH FKLFNV VHH $SSHQGL[ &f RU f OHDYLQJ WKH YLFLQLW\ RI WKH QHVW $QDO\VHV XVHG IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQ LQ 6WDWYLHZ $EDFXV &RQFHSWV f WR GHWHUPLQH ZKLFK PHDVXUHV RI JURZWK DQG IRRG DPRXQWV ZHUH WKH EHVW SUHGLFWRUV RI LQWHQVLWLHV DQG UDWHV RI ILJKWLQJ $OWKRXJK FROOHFWHG GDWD RQ IHHGLQJ ILJKWLQJ DQG JURZWK IRU D WRWDO RI QHVWV FRXOG QRW LQFOXGH DOO RI WKHVH QHVWV LQ WKH VDPH UHJUHVVLRQ 7KLV ZDV EHFDXVH WKHVH QHVWV GLG QRW DOO FRQWDLQ WZR FKLFNV GXULQJ WKH VDPH SHULRG RI QHVWOLQJ OLIH )RU H[DPSOH EURRG VL]H GURSSHG WR RQH RU QR FKLFNV ZKHQ $FKLFN DJHV ZHUH DQ\ZKHUH IURP GD\V 1 EURRGVf WR RYHU GD\V 1 EURRGVf ZLWK WKH UHPDLQLQJ EURRGV GURSSLQJ LQ VL]H VRPHWLPH EHWZHHQ WKHVH DJHV 7KXV QHVW REVHUYDWLRQV ZHUH WHUPLQDWHG DW GLIIHUHQW FKLFN DJHV 2EVHUYDWLRQV DQG JURZWK PHDVXUHPHQWV RI FKLFNV LQ GLIIHUHQW QHVWV DOVR EHJDQ DW GLIIHUHQW FKLFN DJHV 7KLV ZDV EHFDXVH QHVWV FRQWDLQHG

PAGE 102

FKLFNV RI GLIIHUHQW DJHV ZKHQ ILUVW HQWHUHG WKH FRORQ\ WR PRQLWRU EHKDYLRU DQG JURZWK )RU H[DPSOH FKLFNV ZHUH ILUVW ZHLJKHG ZKHQ $FKLFN DJHV ZHUH DQ\ZKHUH IURP GD\V 1 EURRGVf WR GD\V 1 EURRGVf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sf GD\V 1 EURRGVf WKURXJK sf GD\V 1 EURRGVf WKURXJK sf GD\V 1 EURRGVf DQG WKURXJK sf GD\V 1 EURRGVf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

PAGE 103

ZHUH ROGHU WKDQ GD\V ZHUH QRW SRVVLEOH EHFDXVH RQO\ IRXU QHVWV FRQWDLQHG WZR FKLFNV 9DULDEOHV $V P\ WZR PHDVXUHV RI ILJKWLQJ UDWH XVHG ERWK WKH WRWDO QXPEHU RI ILJKWV WKDW RFFXUUHG DQG WKH WRWDO QXPEHU RI EORZV WKDW ZHUH GHOLYHUHG E\ FKLFNV GXULQJ HDFK VXPPDU\ LQWHUYDO 7KXV WKHUH ZDV RQH GDWD SRLQW SHU QHVW GXULQJ HDFK VXPPDU\ LQWHUYDO IRU HDFK ILJKWLQJ UDWH YDULDEOH ILJKWVVXPPDU\ LQWHUYDO DQG EORZVVXPPDU\ LQWHUYDOf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f RI $FKLFNV DQG RI %FKLFNV LQ WKH VXPPDU\ LQWHUYDO ZHUH QDPHG $FKLFN FXOPHQ JURZWK DQG %FKLFN FXOPHQ JURZWK UHVSHFWLYHO\ &XOPHQ JURZWK ZDV FDOFXODWHG IRU HDFK FKLFN E\ VXEWUDFWLQJ WKH FXOPHQ OHQJWK PPf DW WKH VWDUW RI D VXPPDU\ LQWHUYDO IURP

PAGE 104

WKH FXOPHQ OHQJWK DW WKH HQG RI WKDW VXPPDU\ LQWHUYDO 6HFRQG WKH GLIIHUHQFH RI $FKLFN FXOPHQ JURZWK PLQXV % FKLFN FXOPHQ JURZWK ZDV FDOOHG WKH FXOPHQ JURZWK GLIIHUHQWLDO PPGD\f 7KLV ZDV D PHDVXUH RI WKH GLIIHUHQFH LQ FXOPHQJURZWK UDWHV RI $ DQG %VLEOLQJV 7KLUG IRU HDFK QHVW FDOFXODWHG WKH GLIIHUHQFH LQ WKH OHQJWK RI WKH $FKLFNnV PLQXV WKH %FKLFNnV FXOPHQ DW WKH VWDUW RI D VXPPDU\ LQWHUYDO YDOXH Df DOVR FDOFXODWHG WKLV GLIIHUHQFH DW WKH HQG RI WKDW VXPPDU\ LQWHUYDO YDOXH Ef WKHQ WRRN WKH DYHUDJH RI WKHVH WZR YDOXHV DQG FDOOHG WKH UHVXOW WKH FXOPHQ OHQJWK GLIIHUHQFH PP DYHUDJH RI YDOXH D SOXV YDOXH Ef 7KLV PHDVXUH HYDOXDWHV WKH DEVROXWH GLIIHUHQFHV EHWZHHQ WKH VL]HV RI $DQG %FKLFNV 7KUHH PHDVXUHV RI PDVV ZHUH FDOFXODWHG DQG QDPHG DV IROORZV )LUVW IRU HDFK EURRG FDOFXODWHG WKH UDWH RI PDVV JDLQ JGD\f E\ $FKLFNV $FKLFN PDVV JDLQ DQG RI %FKLFNV %FKLFN PDVV JDLQ LQ WKH VXPPDU\ LQWHUYDO 7KXV IRU HDFK FKLFN VXEWUDFWHG WKH PDVV Jf DW WKH VWDUW RI WKH VXPPDU\ LQWHUYDO IURP WKH PDVV DW WKH HQG RI WKH VXPPDU\ LQWHUYDO 6HFRQG FDOFXODWHG WKH PDVV FKDQJH GLIIHUHQWLDO JGD\f ZKLFK ZDV WKH GLIIHUHQFH RI $FKLFN PDVV JDLQ PLQXV %FKLFN PDVV JDLQ GXULQJ WKH VXPPDU\ LQWHUYDO 7KLV ZDV DQRWKHU PHDVXUH RI JURZWK UDWH GLIIHUHQFHV EHWZHHQ $ DQG %VLEOLQJV 7KLUG FDOFXODWHG WKH GLIIHUHQFH LQ WKH $FKLFNnV PDVV PLQXV WKH %FKLFNnV PDVV DW WKH VWDUW DQG HQG RI D VXPPDU\ SHULRG 7KH DYHUDJH

PAGE 105

RI WKH VWDUWLQJ SOXV HQGLQJ YDOXH ZDV FDOOHG WKH PDVV GLIIHUHQFH Jf 7KLV YDULDEOH ZDV DQRWKHU PHDVXUH RI WKH VSUHDG LQ VL]HV EHWZHHQ $ DQG %FKLFNV :LWKLQ HDFK RI WKHVH FDWHJRULHV RI SRWHQWLDO SUHGLFWRUV IRRG DPRXQWV FXOPHQ JURZWK DQG PDVV FKDQJHV XVHG IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQ WR ILQG WKH VLQJOH EHVW SUHGLFWRUV RI ILJKWLQJ ZLWKLQ WKDW FDWHJRU\ WKHQ HQWHUHG WKHVH EHVW SUHGLFWRUV LQWR DQRWKHU VHW RI IRUZDUG VWHSZLVH OLQHDU UHJUHVVLRQV WR GHWHUPLQH ZKLFK YDULDEOHV EHVW SUHGLFWHG ILJKWLQJ UDWHV ILJKWVVXPPDU\ LQWHUYDO DQG EORZVVXPPDU\ LQWHUYDOf DQG LQWHQVLWLHV EORZVILJKWf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

PAGE 106

5HJ\OW" 1HVWOLQJV IRXJKW GXULQJ DOO VXPPDU\ LQWHUYDOV DW VLPLODU UDWHV DQG LQWHQVLWLHV 7KH WRWDO QXPEHU RI ILJKWV SHU EURRG ZDV VLPLODU GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $ FKLFNV ZHUH DQG GD\V ROG 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f 7KH QXPEHU RI EORZV GHOLYHUHG SHU EURRG ZHUH DOVR VLPLODU LQ WKHVH WZR VXPPDU\ LQWHUYDOV 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f DV ZHUH WKH DYHUDJH EORZVILJKW 7DEOH 0DQQ:KLWQH\ 8 QL DQG Q EURRGV 3 f :KHQ FRPSDUHG VXPPDU\ LQWHUYDOV ZKHQ $FKLFNV ZHUH YHUVXV GD\V ROG IRXQG WKDW EURRGV LQ WKHVH LQWHUYDOV KDG VLPLODU QXPEHUV RI ILJKWV 7DEOH 0DQQ :KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f QXPEHU RI EORZV 7DEOH 0DQQ:KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f DQG DYHUDJH EORZVILJKW 7DEOH 0DQQ:KLWQH\ 8WHVW 8 QL EURRGV LQ GD\ VXPPDU\ LQWHUYDO Q EURRGV LQ GD\ VXPPDU\ LQWHUYDO 3 f 2YHUODS LQ FKLFN DJHV ZLWKLQ VXPPDU\ LQWHUYDOV SUHFOXGHG RWKHU FRPSDULVRQV 1HLWKHU ILJKWLQJ UDWH QRU LQWHQVLW\ RI ILJKWV ZDV UHODWHG WR DQ\ PHDVXUH RI FKLFN JURZWK RU IRRG GHOLYHUHG GXULQJ WKH VXPPDU\ LQWHUYDOV ZKHQ $FKLFNV ZHUH WKURXJK

PAGE 107

DQG WKURXJK GD\V ROG 7DEOHV WKURXJK f 7KXV IRU FKLFNV RI WKHVH DJHV WKH IRRGDPRXQW K\SRWKHVLV ZDV QRW VXSSRUWHG %XW ZKHQ FKLFNV ZHUH ROGHU WKH UDWH DQG LQWHQVLW\ RI ILJKWLQJ YDULHG ZLWK FKLFN JURZWK GHVFULEHG DV IROORZV :KHQ $FKLFN DJHV ZHUH WKURXJK GD\V WKH QXPEHU RI EORZV GHOLYHUHG GXULQJ WKLV SHULRG ZDV EHVW SUHGLFWHG E\ WKH FXOPHQ JURZWK GLIIHUHQWLDO 7DEOH f 7KXV PRUH EORZV ZHUH GHOLYHUHG LQ EURRGV ZLWK D ODUJHU GLIIHUHQFH LQ WKH UDWH RI FXOPHQ JURZWK RI WKH $FKLFN UHODWLYH WR WKH % FKLFN WKDQ LQ EURRGV ZKHUH WKLV GLIIHUHQFH LQ JURZWK UDWHV ZDV VPDOOHU )LJXUH f $FKLFN PDVV JDLQ DOVR FRQWULEXWHG VLJQLILFDQWO\ ZKHQ VWHSZLVH UHJUHVVLRQ DGGHG WKLV YDULDEOH WR WKH PRGHO DORQJ ZLWK WKH FXOPHQJURZWK GLIIHUHQWLDO %XW GLG QRW XVH WKLV IXOO PRGHO EHFDXVH OLQHDU UHJUHVVLRQ ZDV QRW DSSURSULDWH IRU WKH $FKLFN PDVV JDLQ YDULDEOH 7DEOH f /LQHDU UHJUHVVLRQ ZDV LQDSSURSULDWH EHFDXVH WKUHH EURRGV KDG WLHG YDOXHV IRU $ FKLFN PDVV JDLQ )LJXUH f :KHQ FRQVLGHUHG DORQH ZLWKRXW LQFOXGLQJ WKH FXOPHQJURZWK GLIIHUHQWLDOf XVLQJ WKH DSSURSULDWH QRQSDUDPHWULF WHVW $FKLFN PDVV JDLQ ZDV QRW VLJQLILFDQWO\ DVVRFLDWHG ZLWK WKH QXPEHU RI EORZV GHOLYHUHG 6SHDUPDQ UDQN FRUUHODWLRQ UV FRUUHFWHG IRU WLHV 3 f )URP VWHSZLVH OLQHDU UHJUHVVLRQ WKH QXPEHU RI ILJKWV LQ WKH WKURXJK GD\ VXPPDU\ SHULRG ZDV VLJQLILFDQWO\

PAGE 108

SUHGLFWHG RQO\ E\ $FKLFN PDVV JDLQ 7DEOH f %XW EHFDXVH RI WLHG YDOXHV )LJXUH f OLQHDU UHJUHVVLRQ ZDV QRW DSSURSULDWH :KHQ XVHG WKH DSSURSULDWH QRQSDUDPHWULF WHVW WR FRPSDUH $FKLFN PDVV JDLQ WR WKH QXPEHU RI ILJKWV WKH UHODWLRQVKLS DSSURDFKHG EXW GLG QRW DFKLHYH VLJQLILFDQFH 7DEOH 6SHDUPDQ UDQN FRUUHODWLRQ UV FRUUHFWHG IRU WLHV 3 f 7KXV ILJKWV ZHUH PRUH IUHTXHQW LQ EURRGV ZLWK VORZHU UDWHV RI $FKLFN PDVV JDLQ WKDQ LQ EURRGV ZKHUH $FKLFNV JDLQHG PDVV PRUH TXLFNO\ )LJXUH f DV LV FRQVLVWHQW ZLWK WKH IRRGDPRXQW K\SRWKHVLV %XW WKLV DVVRFLDWLRQ ZDV RQO\ PDUJLQDOO\ VLJQLILFDQW 1R YDULDEOH VLJQLILFDQWO\ SUHGLFWHG WKH QXPEHU RI ILJKWV GXULQJ WKLV VXPPDU\ SHULRG )LJKW LQWHQVLW\ DYHUDJH QXPEHU RI EORZV SHU ILJKWf GXULQJ WKH WKURXJK GD\ VXPPDU\ SHULRG ZDV EHVW SUHGLFWHG E\ WKH PDVV GLIIHUHQFH 7DEOH f ,Q RWKHU ZRUGV WKH EURRGV ZLWK WKH PRVW LQWHQVH ILJKWLQJ ZHUH WKRVH ZLWK WKH JUHDWHVW DYHUDJH PDVV DGYDQWDJH RI $ RYHU %FKLFNV )LJXUH f 7KHVH UHVXOWV IRU ILJKW LQWHQVLW\ DORQJ ZLWK WKH UHVXOWV IRU ILJKWLQJ UDWHV GLG QRW SURYLGH FOHDU VXSSRUW IRU WKH IRRGDPRXQW K\SRWKHVLV EXW GLG QRW UHIXWH LW HLWKHU VHH 'LVFXVVLRQf 'XULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFN DJHV ZHUH WKURXJK GD\V FKLFNV HQJDJHG LQ PRUH ILJKWV 7DEOH )LJXUH f DQG GHOLYHUHG PRUH EORZV 7DEOH f LQ EURRGV ZLWK IDVWHU PDVV JDLQV E\ %FKLFNV WKDQ LQ EURRGV ZKHUH %

PAGE 109

FKLFN PDVV JDLQ ZDV VORZHU *DLQV LQ $FKLFN PDVV ZHUH DOVR DVVRFLDWHG ZLWK KLJKHU ILJKWLQJ UDWHV IRXQG WKDW $FKLFN DV ZHOO DV %FKLFN PDVV FKDQJHV ZHUH VLJQLILFDQW SUHGLFWRUV RI WKH QXPEHU RI ILJKWV ZKHQ UDQ D VWHSZLVH UHJUHVVLRQ RQ DOO PHDVXUHV RI FKLFN PDVV DORQH QXPEHU RI ILJKWV ; $FKLFN PDVV JDLQ ; %FKLFN PDVV FKDQJH UA )R 3 f 7R DYRLG FRn FRUUHODWLRQ HQWHUHG RQO\ WKH EHVW KLJKHVW )YDOXHf RI WKHVH SUHGLFWRUV %FKLFN PDVV FKDQJH LQWR WKH ILQDO VWHSZLVH UHJUHVVLRQ UHFRUGHG LQ 7DEOH f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

PAGE 110

FOHDUO\ LQ WKH GLUHFWLRQ SUHGLFWHG E\ WKH IRRGDPRXQW K\SRWKHVLV 7KH IRRGDPRXQW K\SRWKHVLV ZDV QRW VXSSRUWHG GXULQJ WKH ILUVW ZHHN DQG D KDOI RI QHVWOLQJ OLIH ZKHQ ILJKWLQJ UDWHV DQG LQWHQVLWLHV ZHUH LQGHSHQGHQW RI IRRG VXSSOLHV DQG QHVWOLQJ JURZWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf VXJJHVWHG WKDW DJJUHVVLRQ ZLWKLQ EURRGV RI EURZQ SHOLFDQV GXULQJ WKH HDUO\ QHVWOLQJ SHULRG ZKHQ FKLFNV ZHUH VWLOO IHG LQGLUHFWO\ IURP WKH QHVW IORRU IXQFWLRQHG SULPDULO\ WR HVWDEOLVK GRPLQDQFHVXERUGLQDQFH UHODWLRQVKLSV EHWZHHQ VLEOLQJV UDWKHU WKDQ DV D PHWKRG RI PRQRSROL]LQJ IRRG GHOLYHULHV 7KH LQVHQVLWLYLW\ RI ILJKWLQJ WR IRRG DQG JURZWK WKDW IRXQG GXULQJ WKLV SHULRG ZDV FRQVLVWHQW ZLWK WKHLU K\SRWKHVLV 7KLV UHVXOW ZDV DOVR FRQVLVWHQW ZLWK WKH SRVVLELOLW\ WKDW IRRG LV QRW OLPLWLQJ DQG WKXV QRW WKH REMHFW RI DJJUHVVLYH FRQWHVWV DPRQJ YHU\ \RXQJ FKLFNV ZKRVH WRWDO IRRG GHPDQGV DUH IDU EHORZ SHDN GHPDQGV ODWHU LQ WKH QHVWOLQJ SHULRG 5DWKHU ZHDN HYLGHQFH LQ VXSSRUW RI WKH IRRGDPRXQW K\SRWKHVLV ZDV SURYLGHG E\ P\ UHVXOWV IRU QHVWOLQJV LQ WKHLU WKLUG ZHHN RI OLIH 'XULQJ WKLV SHULRG WKH QXPEHU RI EORZV GHOLYHUHG ZDV VLJQLILFDQWO\ DVVRFLDWHG ZLWK WKH FXOPHQ JURZWK GLIIHUHQWLDO ,Q RWKHU ZRUGV ILJKWLQJ UDWHV ZHUH KLJKHU LQ EURRGV ZKHUH $FKLFNV JUHZ UHODWLYHO\ IDVWHU WKDQ %FKLFNV WKDQ LQ EURRGV ZKHUH JURZWK UDWHV ZHUH VLPLODU IRU $ DQG %FKLFNV 7KLV UHODWLRQVKLS LV FRQVLVWHQW ZLWK WKH IRRGDPRXQW K\SRWKHVLV EHFDXVH WKHVH UHVXOWV VXJJHVW WKDW

PAGE 111

ILJKWLQJ ZDV DVVRFLDWHG ZLWK IRRG VKRUWDJHV WR WKH EURRG /DUJH GLIIHUHQFHV LQ JURZWK UDWHV RI $FKLFNV UHODWLYH WR % FKLFNV FRXOG EH SURGXFHG LI %FKLFN JURZWK UDWHV ZHUH GHSUHVVHG 'HSUHVVLRQ RI JURZWK UDWHV RI %FKLFNV FRXOG RFFXU LI IRRG ZDV VFDUFH DQG $FKLFNV KDG SULRULW\ RI DFFHVV WR IRRG GHOLYHULHV ,Q D VDPSOH RI QHVWV LQ P\ $ODILD EDQNV SRSXODWLRQ $FKLFNV UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV &KDSWHU f $FKLFNV DOVR KDG SULRULW\ RI DFFHVV WR IRRG LQ D 0H[LFDQ SRSXODWLRQ RI EURZQ SHOLFDQV 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 7KHVH $FKLFNV UHFHLYHG PRUH IRRG PRUH RIWHQ WKDQ GLG %FKLFNV WKURXJKRXW WKH ILUVW GD\V RI OLIH 3LQ]Q DQG 'UXPPRQG LQ SUHVVf $OWHUQDWLYHO\ KLJKHU ILJKWLQJ UDWHV FRXOG KDYH GHSUHVVHG %FKLFN JURZWK UDWHV UHODWLYH WR UDWHV RI $FKLFN JURZWK 7KLV FRXOG KDYH SURGXFHG WKH REVHUYHG SDWWHUQ RI ODUJH FXOPHQJURZWK GLIIHUHQWLDOV LQ EURRGV ZLWK KLJK DPRXQWV RI ILJKWLQJ (YHQ LQ WKH DEVHQFH RI IRRGVKRUWDJHV $FKLFN DWWDFNV FRXOG KDYH SUHYHQWHG %FKLFNV IURP JDLQLQJ DFFHVV WR IRRG ,QGHHG LQ PDQ\ REOLJDWHO\ VLEOLFLGDO VSHFLHV $FKLFN DWWDFNV WKDW UHWDUG %FKLFN JURZWK RFFXU ZKLOH SDUHQWV VHHP WR VXSSO\ D IRRG VXUIHLW HJnV LQ 0H\EXUJ *DUJHWW f $QRWKHU SRVVLELOLW\ LV WKDW ERWK ILJKWLQJ UDWHV DQG FXOPHQJURZWK GLIIHUHQWLDO PLJKW FRn YDU\ ZLWK VRPH RWKHU IDFWRU WKDW GLG QRW PHDVXUH 7KH WHDVLQJ DSDUW RI FDXVHV DQG HIIHFWV RI ILJKWLQJ ZLOO KDYH WR

PAGE 112

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f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

PAGE 113

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f 6LPLODUO\ DQ DSSDUHQW UHYHUVDO RFFXUUHG LQ P\ VWXG\ WKH VL]H PDVV DQG FXOPHQ OHQJWKf RI WKH %FKLFN H[FHHGHG WKH $ FKLFNn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

PAGE 114

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f $OWKRXJK GLG QRW PHDVXUH WKH HQHUJHWLF FRVWV RI ILJKWLQJ RQH SLHFH RI HYLGHQFH IURP P\ VWXG\ VXJJHVWV WKDW DW OHDVW GXULQJ WKH GD\ VXPPDU\ LQWHUYDO WKH UHODWLRQVKLS EHWZHHQ ILJKWLQJ DQG JURZWK PD\ EH VLPLODU IRU $ DQG % FKLFNV 7KLV HYLGHQFH ZDV WKDW PDVV JDLQV E\ $ DV ZHOO DV %FKLFNV ZHUH VLJQLILFDQW SUHGLFWRUV RI WKH QXPEHU RI ILJKWV ZKHQ UHVWULFWHG DQDO\VHV WR PHDVXUHV RI FKLFN PDVV 6SHFLILFDOO\ WKHUH ZDV D SRVLWLYH DVVRFLDWLRQ EHWZHHQ QXPEHU RI ILJKWV DQG PDVV JDLQV E\ $ DV ZHOO DV %FKLFNV (YHQ LI WKH HQHUJHWLF FRVWV RI ILJKWLQJ ZHUH VLPLODU IRU $ DQG %FKLFNV LQ WKH GD\ VXPPDU\ LQWHUYDO WKH

PAGE 115

FRVWV RI ILJKWLQJ PD\ KDYH EHHQ KLJKHU IRU FKLFNV ZKHQ WKH\ ZHUH WKURXJK GD\V ROG WKDQ ZKHQ WKH\ ZHUH WKURXJK GD\V ROG 7R FRPSDUH WKH HQHUJHWLF FRVWV RI ILJKWLQJ LQ FKLFNV RI GLIIHUHQW DJHV DQG KDWFKLQJ UDQNV ZLOO UHTXLUH IXUWKHU H[SHULPHQWV 7KH GRXEO\ ODEHOOHG ZDWHU WHFKQLTXH KDV EHHQ XVHG WR DVVHVV FRVWV RI ILJKWLQJ LQ HQWLUH EURRGV HJ %U\DQW DQG 7DWQHU f DQG VKRXOG SURYH YDOXDEOH IRU GHWHUPLQLQJ WKH FRVWV RI ILJKWLQJ IRU LQGLYLGXDO FKLFNV 6L]H +LHUDUFKLHV DQG 6LEOLQJ 5LYDOU\ 5HGXFWLRQ 6LEOLQJV VKRXOG FRPSHWH ZLWK HDFK RWKHU WR JDLQ PRUH WKDQ WKHLU IRRG VKDUH EHFDXVH WKH\ VKDUH RQO\ KDOI RI WKHLU JHQHV ZLWK WKHLU VLEOLQJV +DPLOWRQ f %XW ILJKWV DPRQJ QHVWOLQJV PD\ EH HQHUJHWLFDOO\ FRVWO\ WR ERWK WKH SDUWLFLSDQWV DQG WR WKHLU SDUHQWV ZKR PLJKW HYROYH ZD\V WR UHSUHVV VLEOLQJ FRQIOLFW +DPLOWRQ 7ULYHUV f +DKQ f SURSRVHG WKDW DV\QFKURQRXV KDWFKLQJ FRXOG EH DQ DGDSWDWLRQ WR UHGXFH VLEOLQJ ULYDOU\ E\ ORZHULQJ WKH DPRXQW RI DJJUHVVLRQ QHHGHG WR IRUP VWDEOH GRPLQDQFH KLHUDUFKLHV $ SUHGLFWLRQ RI WKLV K\SRWKHVLV LV WKDW WKH LQWHQVLW\ RI ILJKWLQJ VKRXOG EH ORZHU LQ EURRGV ZLWK JUHDWHU VL]H GLVSDULWLHV EHWZHHQ WKH PHPEHUV %URZQ SHOLFDQ EURRGV LQ P\ VWXG\ VKRZHG WKH RSSRVLWH SDWWHUQ ZKHQ $FKLFNV ZHUH GD\V ROG 'XULQJ WKLV SHULRG ILJKW LQWHQVLWLHV ZHUH KLJKHU LQ EURRGV ZLWK JUHDWHU VL]HVXSHULRULW\ RI $FKLFNV WKDQ LQ EURRGV ZKHUH WKH PDVVHV RI $ DQG %FKLFNV ZHUH PRUH

PAGE 116

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f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f ZKLWH SHOLFDQV

PAGE 117

3HOHFDQXV RQRFURWDOXV &RRSHU f DQG SLQNEDFNHG SHOLFDQV 3HOHFDQXV UXIHVFHQV 'LQ DQG (OWULQJKDP f ,Q DOO RI WKHVH VSHFLHV WKH $FKLFN EHJLQV DWWDFNLQJ LWV % VLEOLQJ VKRUWO\ DIWHU KDWFKLQJ YLUWXDOO\ DOZD\V NLOOLQJ LW ZLWKLQ WKH ILUVW ZHHNV RI KDWFKLQJ UHJDUGOHVV RI WKH IRRG VXSSOLHV &XUUHQW IRRG VXSSO\ PD\ EH DQ LQDSSURSULDWH FXH IRU VLEOLQJ DJJUHVVLRQ LQ WKHVH DQG RWKHU REOLJDWHO\ VLEOLFLGDO VSHFLHV LI SDUHQWV URXWLQHO\ SURYLGH LQVXIILFLHQW IRRG WR UDLVH ERWK FKLFNV WKURXJK WKH SURWUDFWHG QHVWOLQJ SHULRG 0RFN HW DO f ,Q WKLV VLWXDWLRQ FXUUHQW IRRG VXSSOLHV GR QRW DFFXUDWHO\ SUHGLFW IXWXUH VXSSOLHV 6HOHFWLRQ LQ WKHVH VSHFLHV PD\ KDYH IDYRUHG IRRGLQGHSHQGHQW DJJUHVVLRQ EHFDXVH LW IDFLOLWDWHV SUHHPSWLYH NLOOLQJ LQ DQWLFLSDWLRQ RI URXWLQH IRRG VKRUWDJHV 6WLQVRQ $QGHUVRQ 0RFN HW DO f %\ FRQWUDVW VLEOLQJ DJJUHVVLRQ LQ WKH EURZQ SHOLFDQV QHVWLQJ RQ $ODILD %DQNV ZDV DSSDUHQWO\ VHQVLWLYH WR DW OHDVW VRPH PHDVXUHV RI QHVWOLQJ QXWULWLRQDO FRQGLWLRQ 7KLV SDWWHUQ FRXOG EH DGDSWLYH LI FXUUHQW IRRG OHYHOV DUH JRRG SUHGLFWRUV RI IXWXUH VXSSOLHV 0RFN HW DO f

PAGE 118

7DEOH $YHUDJHV s 6'f SHU EURRG RI WKH QXPEHU RI ILJKWV QXPEHU RI EORZV DQG DYHUDJH EORZVILJKW GXULQJ HDFK VXPPDU\ LQWHUYDO 6XPPDU\ LQWHUYDOV DUH GD\ SHULRGV ZKHQ $FKLFNV ZHUH WKURXJK 1 EURRGVf WKURXJK 1 EURRGVf WKURXJK 1 EURRGVf DQG WKURXJK GD\V ROG 1 EURRGVf 6DPSOH VL]HV LQ WKHVH VXPPDU\ LQWHUYDOV DUH WKH VDPH LQ 7DEOHV WKURXJK 6HH PHWKRGV IRU IXUWKHU H[SODQDWLRQ 6XPPDU\ ,QWHUYDO 1XPEHU RI ILJKWV 1XPEHU RI EORZV $YHUDJH EORZVILJKW WKURXJK GD\V WKURXJK GD\V WKURXJK GD\V s WKURXJK GD\V 1RWH 5HVXOWV RI VLJQLILFDQFH WHVWV DUH UHSRUWHG LQ WH[W

PAGE 119

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r 1XPEHU RI ILJKWVr ; %FKLFN PDVV JDLQ D $OWKRXJK VLJQLILFDQW XVLQJ OLQHDU UHJUHVVLRQ WLHG YDOXHV PDGH WKLV DQDO\VLV LQDSSURSULDWH 1$f $ 6SHDUPDQ UDQN FRUUHODWLRQ LQYROYLQJ RQO\ WKLV YDULDEOH ZDV PDUJLQDOO\ VLJQLILFDQW UV FRUUHFWHG IRU WLHV 3 f E 5HJUHVVLRQ HTXDWLRQ U )R 3 ALQGLFDWHV VLJQLILFDQW SUHGLFWRUV LQ WKLV DQG DOO VLPLODU WDEOHV

PAGE 120

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r $FKLFN PDVV JDLQD 1 $ 1 $ 1XPEHU RI EORZVn ; &XOPHQJURZWK GLIIHUHQWLDO 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR EURRG %FKLFN FXOPHQ JURZWK %FKLFN PDVV JDLQr 1XPEHU RI EORZVF n ; %FKLFN PDVV JDLQ D 7LHG YDOXHV PDGH OLQHDU UHJUHVVLRQ LQDSSURSULDWH 1$f N 5HJUHVVLRQ HTXDWLRQ UA )R 3 F 5HJUHVVLRQ HTXDWLRQ UA )T 3

PAGE 121

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r $YHUDJH EORZVILJKWD ; 0DVV GLIIHUHQFH 6XPPDU\ LQWHUYDO IRU DJHV WKURXJK GD\V )RRG WR $FKLFN %FKLFN FXOPHQ JURZWK 0DVV GLIIHUHQFH D 5HJUHVVLRQ HTXDWLRQ U )T 3

PAGE 122

)LJXUH 6XEPLVVLYH SRVWXUHV RI QHVWOLQJ EURZQ SHOLFDQV 3RVWXUHV DUH &URXFK $f &XUO 1HFN %f 7XUQ /RZ &f 'XFN 'f /LH %DFN (f 5HYHUVH +HDG )f /LH )ODW *f DQG +DQJ +HDG +f

PAGE 123

7RWDO EORZV LQ VXPPDU\ LQWHUYDO )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI EORZV GHOLYHUHG DQG WKH FXOPHQJURZWK GLIIHUHQWLDO EHWZHHQ $ DQG %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV 6HH 0HWKRGV IRU GHILQLWLRQV RI YDULDEOHV LQ WKLV DQG DOO IROORZLQJ ILJXUHV LQ WKLV FKDSWHU &XOPHQJURZWK GLIIHUHQWLDO PPGf

PAGE 124

7RWDO EORZV LQ VXPPDU\ LQWHUYDO L U R R R R L L R $FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI EORZV GHOLYHUHG DQG WKH UDWH RI PDVV JDLQ E\ $FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 125

,OO $FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI ILJKWV DQG WKH UDWH RI ZHLJKW JDLQ E\ $FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 1 EURRGV LQ )LJXUHV WKURXJK 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 126

$YHUDJH QXPEHU RI EORZV SHU ILJKW 0DVV GLIIHUHQFH Jf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH QXPEHU RI EORZV SHU ILJKW DQG WKH ZHLJKW GLIIHUHQWLDO EHWZHHQ $ DQG %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 127

rX f e FH f ‘( R} i FH R 2 %FKLFN PDVV JDLQ JGf )LJXUH 5HODWLRQVKLS EHWZHHQ WKH WRWDO QXPEHU RI ILJKWV DQG WKH UDWH RI PDVV JDLQ E\ %FKLFNV GXULQJ WKH VXPPDU\ LQWHUYDO ZKHQ $FKLFNV ZHUH WKURXJK GD\V ROG 1 EURRGV 6HH 7DEOH IRU UHJUHVVLRQ UHVXOWV

PAGE 128

&+$37(5 ())(&7 2) %522' 6,=( 0$1,38/$7,216 21 )22' '(/,9(5,(6 $1' $33257,210(17 72 6(1,25 6,%/,1*6 ,QWURGXFWLRQ .LQJ /HDU 6KDNHVSHDUH f GLYLGHG KLV SDUHQWDO LQYHVWPHQW KLV ODQGV NLQJGRP DQG JRRGV HTXDOO\ EHWZHHQ KLV HOGHVW GDXJKWHUV ZKLOH OHDYLQJ KLV \RXQJHVW ZLWK QRWKLQJ (DFK GDXJKWHU VRXJKW PRUH IRU KHUVHOI WKDQ /HDU ZDQWHG WR JLYH SDUHQWRIIVSULQJ FRQIOLFWf 6R WKH GDXJKWHUV EDWWOHG HDFK RWKHU WR VHL]H PRUH WKDQ WKHLU VKDUH VLEOLQJ ULYDOU\f /HDU VDZ KLV GDXJKWHUV DV XQQDWXUDO EXW WKH LQVLJKW RI +DPLOWRQ f DV IRUPDOL]HG E\ 7ULYHUV f SUHGLFWV WKDW QDWXUDO VHOHFWLRQ VKRXOG RIWHQ IDYRU LQGLYLGXDO RIIVSULQJ WKDW DWWHPSW WR JDLQ PRUH SDUHQWDO LQYHVWPHQW 7ULYHUV f IRU WKHPVHOYHV WKDQ WKH SDUHQW LV VHOHFWHG WR JLYH 7KLV SLRQHHULQJ SUHGLFWLRQ RI FRQIOLFW ZLWKLQ WKH IDPLO\ KDV VWLPXODWHG FRQVLGHUDEOH WKHRUHWLFDO ZRUN UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f $ TXHVWLRQ WKDW KDV EHHQ SDUWLFXODUO\ DWWUDFWLYH WR WKHRUHWLFLDQV FRQFHUQV ZKHWKHU WKHUH LV SDUHQWRIIVSULQJ FRQIOLFW RYHU VLEOLFLGH 2n&RQQRU *RGIUD\ 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f 6LEOLFLGH LV D FRPPRQ IRUP RI EURRG UHGXFWLRQ LQ VRPH ELUGV LQFOXGLQJ

PAGE 129

UDSWRUV KHURQV HJUHWV JDQQHWV ERRELHV VNXDV SHOLFDQV DQG FUDQHV /DFN 2n&RQQRU 0RFN HW DO f LQ ZKLFK DJJUHVVLYH DWWDFNV E\ VRPH PHPEHUVf RI WKH EURRG FRQWULEXWH VLJQLILFDQWO\ WR WKH GHDWK RI D QHVWPDWH ,Q WKHVH VSHFLHV HJJV KDWFK DV\QFKURQRXVO\ DQG WKH VLEOLFLGH YLFWLPV DUH XVXDOO\ WKH \RXQJHVW PHPEHUV RI WKH EURRG 6HYHUDO GLIIHUHQW K\SRWKHVHV SURSRVH VHOHFWLYH DGYDQWDJHV WR VLEOLFLGH DQG RWKHU IRUPV RI EURRG UHGXFWLRQ UHYLHZHG LQ )RUEHV f 7KH GLIIHUHQFHV EHWZHHQ WKH K\SRWKHVHV OLH LQ WKHLU H[SODQDWLRQV RI WKH QDWXUH RI WKH UHSURGXFWLYH YDOXH RI MXQLRU FKLFNV WR WKHLU SDUHQWV -XQLRU FKLFNV PD\ KDYH YDOXH DV VXUYLYRUV DORQJ ZLWK DOO RI WKHLU VLEOLQJV DV PLJKW RFFXU ZKHQ UHVRXUFHV DUH SOHQWLIXO ZLWK VLEOLFLGH HOLPLQDWLQJ WKH MXQLRUV LQ \HDUV RI IRRG VFDUFLW\ 7KLV LV WKH UHVRXUFHWUDFNLQJ K\SRWKHVLV KLVWRULFDOO\ FDOOHG /DFNnV f EURRG UHGXFWLRQ K\SRWKHVLV $OWHUQDWLYHO\ WKH SULPDU\ YDOXH RI MXQLRU FKLFNV PD\ EH DV UHSODFHPHQWV IRU DQ\ VHQLRUV WKDW GLH SUHPDWXUHO\ 7KLV LV WKH LQVXUDQFH K\SRWKHVLV 'RUZDUG f ,Q DGGLWLRQ MXQLRU FKLFNV PD\ SURYLGH SDUHQWV ZLWK D ZD\ RI VHOHFWLYHO\ UDLVLQJ WKRVH RIIVSULQJ ZLWK WKH KLJKHVW ILWQHVV H[SHFWDWLRQV SURJHQ\ FKRLFH K\SRWKHVLV %XFKKRO] .R]ORZVNL DQG 6WHDUQV )RUEHV f 8QGHU WKH SURJHQ\ FKRLFH K\SRWKHVLV D MXQLRU FKLFN ZRXOG FRQWULEXWH UHSURGXFWLYH YDOXH RQO\ ZKHQ LW ZDV LQWULQVLFDOO\ VXSHULRU WR D VHQLRU VLEOLQJ DQG LWV VXSHULRULW\ ZDV

PAGE 130

VXIILFLHQWO\ ODUJH WR RYHUFRPH WKH VHQLRUnV FRPSHWLWLYH DGYDQWDJHV SURGXFHG E\ DJH GLVSDULWLHV ,Q DOO RI WKHVH K\SRWKHVHV VLEOLFLGH LV FRQVLGHUHG D PHDQV IRU HOLPLQDWLQJ MXQLRU RIIVSULQJ ZKHQ IRRG LV LQVXIILFLHQW IRU UDLVLQJ WKH IXOO EURRG 7KHVH K\SRWKHVHV DVVXPH WKDW VXUYLYLQJ RIIVSULQJ EHQHILW IURP HOLPLQDWLQJ D VLEOLQJ EHFDXVH E\ GRLQJ VR WKH VXUYLYRUV REWDLQ WKH IRRG WKDW RWKHUZLVH ZRXOG KDYH EHHQ GHOLYHUHG WR WKDW VLEOLQJ )RUEHV f H[SUHVVHG WKLV IRU WKH LQVXUDQFH K\SRWKHVLV ZKHQ KH ZURWH 5HVRXUFHV H[SHQGHG RQ WKH HDUO\ IHHGLQJ RI LQVXUDQFH RIIVSULQJ WKDW HYHQWXDOO\ EHFRPH UHGXQGDQW PLJKW DOWHUQDWLYHO\ KDYH EHHQ H[SHQGHG RQ RWKHU FKLFNV HQKDQFLQJ WKHLU JURZWK DQG VXUYLYDO 0RFN DQG 3DUNHU f VWDWHG WKH VDPH DVVXPSWLRQ IRU /DFNnV f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

PAGE 131

%XW HYLGHQFH IURP H[SHULPHQWV XVHG WR WHVW D UHODWHG K\SRWKHVLV VXJJHVWV WKDW SDUHQWV GR QRW LJQRUH FKDQJHV LQ EURRG VL]HV ZKHQ GHWHUPLQLQJ KRZ PXFK IRRG WR GHOLYHU ,Q WKH PDMRULW\ RI ELUG VSHFLHV ZKRVH EURRGV KDYH EHHQ H[SHULPHQWDOO\ HQODUJHG SDUHQWV VXFFHVVIXOO\ UDLVHG WKH HQODUJHG EURRGV UHYLHZV LQ /HVVHOOV
PAGE 132

FRQWURO WKUHHFKLFNf EURRGV YHUVXV EURRGV WKDW ZHUH HQODUJHG WR IRXU FKLFNVf E\ DGGLQJ D FKLFN DQG YHUVXV EURRGV WKDW ZHUH UHGXFHG WR WZR FKLFNVf E\ UHPRYLQJ WKH WKLUGKDWFKHG &f FKLFN 7KLV H[SHULPHQWDO GHVLJQ IRFXVVHG RQ WKH HIIHFWV RI WKH GHDWK RI WKH &FKLFN RQ SDUHQWV DQG VHQLRU FKLFNV LQ D \HDU ZKHQ IRRG ZDV DSSDUHQWO\ LQ VKRUW VXSSO\ VHH &KDSWHU f )RU H[DPSOH LI SDUHQWDO IHHGLQJ RI WKH &FKLFN GHFUHDVHG WKH DPRXQW RI IRRG DYDLODEOH WR WKH VHQLRUV ZLWKRXW FRVW WR WKH SDUHQW WKHQ WKH VHQLRUV DORQH ZRXOG JDLQ D SUR[LPDWH EHQHILW IURP WKH &FKLFNnV GHDWK 7KLV SDWWHUQ ZRXOG EH HYLGHQW LI LQ P\ H[SHULPHQWV SDUHQWV EURXJKW WKH VDPH DPRXQW RI IRRG WR EURRGV RI DOO VL]HV EXW VHQLRUV UHFHLYHG f WKH PRVW IRRG LQ WZRFKLFN EURRGV IURP ZKLFK WKH \RXQJHVW KDG EHHQ UHPRYHG f LQWHUPHGLDWH DPRXQWV LQ XQPDQLSXODWHG WKUHHFKLFN EURRGV DQG f WKH OHDVW IRRG LQ EURRGV WR ZKLFK D IRXUWK FKLFN KDG EHHQ DGGHG %\ FRQWUDVW SDUHQWV PD\ EULQJ H[WUD IRRG WR &FKLFNV DW QR FRVW WR WKH VHQLRUV LQ ZKLFK FDVH SDUHQWV DORQH PD\ EHQHILW IURP WKH GHDWK RI WKH &FKLFN ,I WKLV ZHUH WKH FDVH WKHQ VHQLRUV VKRXOG JHW WKH VDPH DPRXQW RI IRRG LQ EURRGV RI DOO VL]HV %XW SDUHQWV VKRXOG DGMXVW WKHLU IRRG GHOLYHULHV WR EURRG VL]HV VXFK WKDW WKH WRWDO IRRG GHOLYHUHG ZRXOG EH ORZHVW IRU WZRFKLFN DQG KLJKHVW IRU IRXUFKLFN EURRGV

PAGE 133

0HWKRGV 6WXG\ 6LWH 7KH VWXG\ RFFXUUHG RQ 6XQNHQ LVODQG RQH RI WZR VSRLO LVODQGV WKDW PDNH XS $ODILD %DQNV LQ +LOOVERURXJK %D\ +LOOVERURXJK &R )ORULGD %URZQ SHOLFDQV QHVWHG LQ WKH WUHH FDQRS\ P DERYH WKH JURXQG /HZLV DQG /HZLV GHVFULEH WKH YHJHWDWLRQ RQ WKHVH LVODQGVf %URRGVL]H 0DQLSXODWLRQV 1HVWV WKDW KDWFKHG WKUHH FKLFNV WKDW DOO VXUYLYHG IRU D PLQLPXP RI GD\V ZHUH DVVLJQHG WR UHFHLYH RQH RI WKUHH H[SHULPHQWDO WUHDWPHQWV 7KHVH WUHDWPHQWV FRQVLVWHG RI HQODUJLQJ UHGXFLQJ RU OHDYLQJ EURRG VL]HV DW WKUHH FKLFNV DV D FRQWURO VHH EHORZ IRU GHWDLOVf 7KUHHFKLFN EURRGV ZHUH WKH DYHUDJH FOXWFK VL]H LQ WKLV HDUO\ SDUW RI WKH VHDVRQ &KDSWHU f %URRG VL]HV ZHUH H[SHULPHQWDOO\ DOWHUHG EHIRUH WKH ILUVWKDWFKHG $f FKLFN UHDFKHG GD\V RI DJH 7KXV EURRG VL]HV ZHUH DOWHUHG LQ WKH ZHHN EHIRUH WKH SHDN SHULRG RI PRUWDOLW\ GXH WR VWDUYDWLRQ DQG VLEOLFLGH &KDSWHU f 1HVWV ZHUH PDWFKHG GXULQJ WUHDWPHQW VR WKDW VHWV RI WKUHH EURRGV WKDW ZHUH LQLWLDWHG LH WKH $FKLFN KDWFKHGf ZLWKLQ D IHZ GD\V RI HDFK RWKHU HDFK UHFHLYHG D GLIIHUHQW UDQGRPO\ DVVLJQHG EURRGVL]H WUHDWPHQW 0HPEHUV RI HDFK WKUHHEURRG VHW ZHUH WUHDWHG RQ WKH VDPH GD\

PAGE 134

, FRPSDUHG WKH WRWDO IRRG GHOLYHUHG VHH )HHGLQJ %HKDYLRU EHORZf WR WUHDWPHQW EURRGV WKDW ZHUH NHSW XQGHU FRQWLQXRXV GD\OLJKW REVHUYDWLRQ IRFDO QHVWVf 0HWKRGV RI ZDWFKLQJ WKHVH IRFDO QHVWV ZHUH GHVFULEHG EHORZ LQ &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV 7KH ODVWKDWFKHG &f FKLFN ZDV UHPRYHG IURP VHYHQ RI WKHVH IRFDO QHVWV WR FUHDWH D WUHDWPHQW JURXS RI H[SHULPHQWDOO\ UHGXFHG WZRFKLFN %f EURRGV )LYH RI WKHVH &FKLFNV EHFDPH 'FKLFNV ZKHQ WKH\ ZHUH DGGHG WR HDFK RI ILYH RWKHU IRFDO QHVWV WR FUHDWH WKH H[SHULPHQWDOO\ HQODUJHG WUHDWPHQW JURXS RI IRXUFKLFN %f EURRGV 2QH RI WKH UHPDLQLQJ &FKLFNV ZDV SODFHG LQ D QHVW ZKHUH WKH WKLUG HJJ KDG IDLOHG WR KDWFK 7KLV QHVW ZDV QRW XVHG LQ P\ VWXG\ 7KH RWKHU UHPDLQLQJ &FKLFN ZDV DGGHG WR RQH RI WKH ILYH HQODUJHG EURRGV WR UHSODFH WKH RULJLQDO & FKLFN WKDW KDG GLHG ZLWKLQ GD\V DIWHU WUHDWPHQW )LYH IRFDO QHVWV ZHUH DVVLJQHG WR WKH FRQWURO JURXS FRQVLVWLQJ RI WKUHHFKLFN %f EURRGV ,Q HDFK FRQWURO QHVW RQ WKH GD\ WKDW LW UHFHLYHG LWV WUHDWPHQW DVVLJQPHQW UHPRYHG DQG WKHQ LPPHGLDWHO\ UHWXUQHG HDFK &FKLFN WR LWV QHVW 6HYHUDO OLQHV RI HYLGHQFH VXJJHVW WKDW IRVWHUHG FKLFNV ZHUH WUHDWHG VLPLODUO\ WR UHVLGHQW &FKLFNV DOWKRXJK GLG QRW WHVW WKLV H[SHULPHQWDOO\ )LUVW DOO 'FKLFNV ZHUH DFFHSWHG DQG IHG E\ WKHLU IRVWHU SDUHQWV 6HFRQG DOO & DQG 'FKLFNV GLHG DIWHU D VLPLODUO\ VKRUW SHULRG IROORZLQJ WUHDWPHQW VHH EHORZf 2QH 'FKLFN DFWXDOO\ OLYHG ORQJHU WKDQ WKH UHVLGHQW &FKLFN

PAGE 135

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n WUHDWPHQW ZKHQ FRPSDUHG IRRG GHOLYHULHV WR EURRGV LQ DOO WKUHH WUHDWPHQW JURXSV 7KLV FRPSDULVRQ LQYROYHG DOO ILYH HQODUJHG DQG FRQWURO EURRGV DQG VL[ RI WKH VHYHQ UHGXFHG EURRGV D WRWDO RI WUHDWPHQW EURRGVf 7KH VHYHQWK UHGXFHG EURRG ZDV RPLWWHG IURP WKLV DQDO\VLV EHFDXVH LW FRQWDLQHG WZR FKLFNV IRU RQO\ GD\V SRVWWUHDWPHQW 7KH WUHDWPHQWV UHPDLQHG LQ HIIHFW IRU GD\V SRVWn WUHDWPHQW LQ WKUHH FRQWURO DQG ILYH UHGXFHG EURRGV %\ WKH QLQWK GD\ WKH WKLUG FKLFN GLHG LQ RQH RI WKH FRQWURO EURRGV 2QO\ RQH FRQWURO EURRG VWLOO FRQWDLQHG WKUHH FKLFNV E\ GD\V SRVWWUHDWPHQW 7KHUHIRUH UHVWULFWHG P\ DQDO\VLV WR WKH ILUVW GD\V SRVWWUHDWPHQW ZKHQ FRPSDUHG IRRG GHOLYHULHV WR FRQWURO YHUVXV UHGXFHG EURRGV FRXOG KDYH FRQGXFWHG D ILQHUJUDLQ DQDO\VLV E\ FRPSDULQJ IRRG GHOLYHULHV DPRQJ WUHDWPHQWV VHSDUDWHO\ IRU HDFK RI WKH ILUVW GD\V SRVWWUHDWPHQW GLG QRW GR VR

PAGE 136

EHFDXVH RI WKH KLJK YDULDQFH LQ GDLO\ IRRGGHOLYHULHV 'XULQJ WKH ILUVW GD\V SRVWWUHDWPHQW EURRGV UHFHLYHG DQ\ZKHUH IURP IXQLWV RI IRRG SHU GD\ VHH )HHGLQJ %HKDYLRU EHORZ IRU GHILQLWLRQ RI IXQLWV DQG PHWKRGV XVHG LQ TXDQWLI\LQJ IRRG DPRXQWVf 7KH PLQLPXP IRRG GHOLYHUHG SHU GD\ DYHUDJHG sf IXQLWV DQG WKH PD[LPXP DYHUDJHG sf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nV DJH ZDV GD\V DQG DW OHDVW HYHU\ GD\V WKHUHDIWHU XQWLO IOHGJLQJ DJH 7KLV FHQVXVLQJ VFKHGXOH ZDV DOVR IROORZHG IRU IRFDO QHVWV VHH &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV EHORZf 7KH EURRGPDQLSXODWLRQ H[SHULPHQW WKXV LQYROYHG UHGXFHG %f EURRGV HQODUJHG

PAGE 137

%f EURRGV DQG FRQWURO %f EURRGV WKDW ZHUH XVHG WR FRPSDUH IOHGJLQJ VXFFHVV DQG WLPLQJ RI QHVWOLQJ PRUWDOLW\ &HQVXV DQG 2EVHUYDWLRQ 0HWKRGV 0\ WZR ILHOG DVVLVWDQWV DQG XVHG D VSRWWLQJ VFRSH DQG ELQRFXODUV IURP D EOLQG WR REVHUYH QHVWV P DZD\ )RFDO QHVWV QHVWV XVHG LQ EHKDYLRUDO REVHUYDWLRQVf ZHUH NHSW XQGHU FRQWLQXRXV REVHUYDWLRQ GXULQJ GD\OLJKW KRXUV IURP $SULO WKURXJK 0D\ 2Q PRVW GD\V WZR REVHUYHUV DOWHUQDWHG DSSUR[LPDWHO\ KRXU REVHUYDWLRQ SHULRGV W\SLFDOO\ WUDGLQJ RII QHDU PLGGD\ 'XULQJ WKH ZHHN RI SHDN QHVWOLQJ DFWLYLW\ ERWK REVHUYHUV PDLQWDLQHG FRQWLQXRXV GDZQ WR GXVN YLJLOV (DFK REVHUYHU WUDFNHG DFWLYLWLHV LQ XS WR D PD[LPXP RI IRFDO QHVWV GXULQJ DQ REVHUYDWLRQ SHULRG :H VFDQQHG WKHVH IRFDO QHVWV VHTXHQWLDOO\ IURP ULJKW WR OHIW WKURXJK D YLVXDO DUF RI r DQG FRQWLQXHG WR VFDQ WKURXJK WKLV SUHVHW VHTXHQFH XQWLO IHHGLQJ RU ILJKWLQJ EHKDYLRU VHH EHORZf ZDV REVHUYHG DW D QHVW :H WKHQ PRQLWRUHG DOO DFWLYLWLHV LQ WKH QHVW XQWLO IHHGLQJ RU ILJKWLQJ FHDVHG VHH EHORZf DW ZKLFK SRLQW REVHUYDWLRQV ZHUH WHUPLQDWHG IRU WKDW QHVW DQG WKH VFDQ ZDV UHVXPHG VWDUWLQJ ZLWK WKH QH[W QHVW LQ WKH VHTXHQFH ,I GXULQJ D VFDQ ZH REVHUYHG IHHGLQJ LQ RQH QHVW DQG ILJKWLQJ LQ DQRWKHU QHVW ZH ZDWFKHG WKH QHVW LQ ZKLFK ILJKWLQJ ZDV RFFXUULQJ ,I WKH VDPH W\SH RI EHKDYLRU IHHGLQJ RU ILJKWLQJf ZDV RFFXUULQJ LQ WZR RU PRUH QHVWV LQ

PAGE 138

D SDUWLFXODU VFDQ ZH ZDWFKHG ZKLFKHYHU QHVW ZDV QH[W LQ WKH VFDQ VHTXHQFH 'DZQ WR GXVN PRQLWRULQJ RI QHVWOLQJ DFWLYLWLHV LQ LQGLYLGXDO IRFDO QHVWV EHJDQ RQ WKH GD\ WKDW D QHVW UHFHLYHG LWV EURRGVL]H WUHDWPHQW VHH %URRGVL]H 0DQLSXODWLRQV DERYHf DQG FRQWLQXHG XQWLO WKH ILUVWKDWFKHG $f FKLFN UHDFKHG DJH GD\V $IWHU WKLV QHVWV ZHUH UHWLUHG IURP WKH IRFDO VDPSOH EXW ZHUH REVHUYHG RSSRUWXQLVWLFDOO\ XQWLO WKH $FKLFN UHDFKHG D PLQLPXP DJH RI GD\V FRQWLQXHG WR FHQVXV IRUPHU IRFDO QHVWV DW OHDVW HYHU\ GD\V XQWLO DOO UHVLGHQWV KDG GLHG RU UHDFKHG DJH GD\V DSSUR[LPDWHO\ WKH DJH RI IOHGJLQJ VHH &KDSWHU f 'XUDWLRQ RI VXUYLYDO ZDV GHILQHG DV WKH DJH RI D FKLFN DW GHDWK RU GD\V IRU FKLFNV WKDW OLYHG WR IOHGJLQJ DJH XVHG \HOORZ DQG EODFN LQGHOLEOH PDUNHU SHQV WR GLVWLQJXLVK QHZO\ KDWFKHG FKLFNV DJHG KDWFKLQJ GD\f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

PAGE 139

DJHV ZHUH NQRZQ $SSHQGL[ $f &XOPHQV ZHUH PHDVXUHG LQ PP ZLWK D FOHDU SODVWLF UXOHU )HHGLQJ %HKDYLRU 'XULQJ WKH ILUVW GD\V RI QHVWOLQJ OLIH EURZQ SHOLFDQ SDUHQWV IHHG WKHLU FKLFNV DOPRVW H[FOXVLYHO\ E\ UHJXUJLWDWLQJ ILVK RQWR WKH QHVW IORRU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf $V WKH FKLFNV JHW ROGHU WKH\ EHJLQ WR LQWHUFHSW WKH IRRG EHIRUH LW UHDFKHV WKH QHVW IORRU E\ UHDFKLQJ LQWR WKH SDUHQWnV SRXFK %\ WKH WLPH QHVWOLQJV UHDFK DJH GD\V DOPRVW DOO IRRG LV GHOLYHUHG GLUHFWO\ WR WKH FKLFNV LQ WKLV PDQQHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV DQG 3ORJHU XQSXE GDWDf :KHQ VFDQQLQJ QHVWV WR VHOHFW RQH WR ZDWFK ZH FRQVLGHUHG DV IHHGLQJ EHKDYLRU DOO FDVHV ZKHUH D SDUHQW ORZHUHG LWV RSHQ ELOO RYHU VPDOO FKLFNV RU KDG ROGHU FKLFNV WKUXVW WKHLU ELOOV LQWR WKH SDUHQWnV RSHQ JDSH ZKHWKHU RU QRW IRRG ZDV GHOLYHUHG 7KH HQG RI D SHULRG RI IHHGLQJ DFWLYLW\ ZDV GHILQHG DV RFFXUULQJ ZKHQ WKH SDUHQW EHJDQ D QRQIHHGLQJ DFWLYLW\ ZLWKRXW UHVXPSWLRQ RI IHHGLQJ DFWLYLW\ IRU D PLQLPXP RI PLQXWH 1RQIHHGLQJ DFWLYLWLHV LQFOXGHG SUHHQLQJ ZLQJIODSSLQJ QHVWFOHDQLQJ WRVVLQJ ILVK ERQHV VNLQ VWLFNV DQG YDULRXV XQLGHQWLILDEOH VFUDSV IURP WKH QHVWf DGMXVWLQJ VWLFNV LQ WKH QHVW DGRSWLQJ D UHVWLQJ SRVWXUH LQ ZKLFK WKH SDUHQW KHOG LWV FORVHG ELOO RXW RI UHDFK RI LWV FKLFNV SRVWXUHV VKRZQ LQ ILJXUHV DQG RI 6FKUHLEHU f QHVW UHOLHI

PAGE 140

EHKDYLRU 6FKUHLEHU f GLVSOD\LQJ WR RU VQDSSLQJ DW D QHLJKERU KRSSLQJ WR D SHUFK RU IO\LQJ DZD\ 7KH DPRXQW RI IRRG WKDW SDUHQWV DWWHPSWHG WR GHOLYHU WR WKH EURRG ZDV HVWLPDWHG IURP WKH IUHTXHQF\ DQG ORQJHVW OLQHDU GLPHQVLRQ RI IRRG UHJXUJLWDWHG GLUHFWO\ WR HDFK FKLFN RU RQWR WKH QHVW IORRU )RRG VKDUHV JDLQHG E\ FKLFNV ZHUH GHWHUPLQHG E\ QRWLQJ ZKLFK LQGLYLGXDO FKLFNV VZDOORZHG EROXVHV DQG E\ HVWLPDWLQJ EROXV VL]HV E\ FRPSDULQJ WKH VL]H RI WKH EXOJH LQ D FKLFNnV QHFN WR WKH GLPHQVLRQV RI WKH SDUHQWnV ELOO EDVHG RQ 0RFN f )RRG DPRXQWV DUH H[SUHVVHG LQ IRRGXQLWV IXQLWVf WKH OHQJWK RI D EROXV DV D SHUFHQW RI WKH SDUHQWnV ELOO OHQJWK 'XULQJ VRPH SHULRGV RI IHHGLQJ EHKDYLRU ZH FRXOG QRW WHOO ZKHWKHU RU QRW IRRG KDG EHHQ GHOLYHUHG EHFDXVH WKH SDUHQWnV ERG\ EORFNHG WKH REVHUYHUn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

PAGE 141

)LJKWLQJ %HKDYLRU )LJKWV LQYROYHG RQH FKLFN GHOLYHULQJ RQH RU PRUH EORZV WR WKH KHDG RU ERG\ RI DQRWKHU FKLFN ZLWK VXIILFLHQW IRUFH WR PRYH WKH YLFWLPnV KHDG ZKHQ VWUXFN VHH &KDSWHU IRU PRUH GHWDLOHG GHVFULSWLRQVf 7KH HQG RI D ILJKW ZDV GHILQHG DV RFFXUULQJ ZKHQ QR IXUWKHU EORZV ZHUH H[FKDQJHG IRU VHFRQGV $QLPDO &DUH &RQVLGHUDWLRQV 0\ H[SHULPHQWDO WUHDWPHQWV ZHUH XQOLNHO\ WR KDYH FDXVHG WKH IRVWHUHG &FKLFNV WR EH DWWDFNHG E\ VLEOLQJV RU WR IDOO YLFWLP WR VLEOLFLGH DQG VWDUYDWLRQ PRUH IUHTXHQWO\ WKDQ ZRXOG KDYH RFFXUUHG KDG WKH\ EHHQ OHIW LQ WKHLU KRPH QHVWV $PRQJ WKH XQPDQLSXODWHG WKUHHFKLFN QHVWV WKDW REVHUYHG LQ WKH FRXUVH RI \HDUnV VWXG\ QR QHVW IOHGJHG DOO WKUHH FKLFNV DQG DOO LGHQWLILDEOH &FKLFNV GLHG XVXDOO\ IURP VWDUYDWLRQ DQGRU VLEOLFLGH &KDSWHU f 'XULQJ ODWH LQFXEDWLRQ DQG WKH ILUVW ZHHN RI KDWFKLQJ SDUHQWV XVXDOO\ UHPDLQHG RQ WKHLU QHVWV ZKLOH KDQGOHG WKH QHVW FRQWHQWV )OHGJLQJ VXFFHVV ZDV DFWXDOO\ EHWWHU LQ IRFDO QHVWV WKDQ LQ RWKHU SDUWV RI WKH FRORQ\ WKDW ZH QHYHU GLVWXUEHG &KDSWHU f

PAGE 142

5HVXOWV %URRGV RI DOO WKUHH H[SHULPHQWDO VL]HV IOHGJHG D VLPLODU QXPEHU RI FKLFNV ; s s DQG s FKLFNV IOHGJHG IURP % % DQG % QHVWV UHVSHFWLYHO\ .UXVNDO:DOOLV 2QHZD\ $129$ + FRUUHFWHG IRU WLHV 3 f 7KH GXUDWLRQ RI VHQLRU FKLFN VXUYLYDO ZDV DOVR VLPLODU LQ DOO WUHDWPHQWV ZLWK $FKLFNV OLYLQJ DQ DYHUDJH RI sf sf DQG s f GD\V DQG %FKLFNV OLYLQJ DQ DYHUDJH RI s f s f DQG s f GD\V LQ % % DQG % QHVWV UHVSHFWLYHO\ .UXVNDO:DOOLV WHVW + 3 IRU $FKLFNV DQG + 3 IRU % FKLFNV ERWK 16f 3DUHQWV EURXJKW VLPLODU DPRXQWV RI IRRG WR EURRGV RI DOO WKUHH VL]HV GXULQJ WKH ILUVW GD\V IROORZLQJ EURRGVL]H PDQLSXODWLRQV )LJXUH .UXVNDO:DOOLV WHVW + 3 f $FKLFNV LQ DOO EURRGVL]HV FRQVXPHG VLPLODU DPRXQWV RI IRRG GXULQJ WKLV SHULRG )LJXUH .UXVNDO:DOOLV WHVW + 3 f 7RWDO FRQVXPSWLRQ E\ %FKLFNV ZDV DOVR VLPLODU DPRQJ WKH EURRGVL]HV GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW )LJXUH .UXVNDO:DOOLV WHVW + 3 f %\ FRQWUDVW ZKHQ FRPSDUHG UHGXFHG YHUVXV FRQWURO EURRGV GD\V SRVWWUHDWPHQW IRXQG WKDW %FKLFNV DQG HQWLUH EURRGV JDLQHG VLJQLILFDQWO\ PRUH IRRG LQ % WKDQ LQ % QHVWV )LJXUH 0DQQ:KLWQH\ 8 3 IRU ERWK

PAGE 143

WUHDWPHQW FRPSDULVRQV RI EURRGV DQG RI %FKLFNVf ZKLOH $ FKLFNV REWDLQHG VLPLODU DPRXQWV LQ ERWK WUHDWPHQWV )LJXUH 0DQQ:KLWQH\ 8 3 f ,Q RQH RI WKH WKUHH % EURRGV XVHG LQ WKLV DQDO\VLV WKH $FKLFN ZDV VPDOOHU WKDQ WKH %FKLFN SULRU WR WUHDWPHQW WKHUHIRUH FRPSDUHG IRRG FRQVXPHG E\ %FKLFNV LQ % YHUVXV % EURRGV DJDLQ WKLV WLPH FODVVLI\LQJ DV D %FKLFN WKH $FKLFN WKDW ZDV VPDOOHU WKDQ LWV %VLEOLQJ :KHQ WKLV $FKLFN ZDV FODVVLILHG DV DQ %FKLFN WKH GLIIHUHQFH EHWZHHQ IRRG FRQVXPHG E\ %FKLFNV LQ UHGXFHG DQG FRQWURO EURRGV ZDV QR ORQJHU VLJQLILFDQW 0DQQ :KLWQH\ 8 3 IRU %FKLFNV UHFHLYLQJ ; s IXQLWV LQ % EURRGV DQG ; IXQLWV LQ % EURRGVf 6LPLODUO\ EHFDXVH WKH RQH %FKLFN ZDV ODUJHU WKDQ LWV $VLEOLQJ UHFODVVLILHG LW DV DQ $FKLFN :LWK WKLV FKLFN UHFODVVLILHG IRXQG WKDW $FKLFNV VWLOO UHFHLYHG VLPLODU DPRXQWV RI IRRG LQ UHGXFHG ; s f DQG FRQWURO EURRGV ; s 0DQQ:KLWQH\ 8 3 f SRROHG DOO WUHDWPHQWV WR GHWHUPLQH LI $FKLFNV JHQHUDOO\ UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV ,Q RI WKH WUHDWPHQW EURRGV $FKLFNV UHFHLYHG PRUH IRRG WKDQ WKHLU %VLEOLQJV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW WDLOHG 6LJQ 7HVW 3 f 6LPLODUO\ LQ WKH WUHDWPHQW EURRGV WKDW VWLOO FRQWDLQHG WZR FKLFNV GD\V DIWHU WUHDWPHQW $FKLFNV UHFHLYHG PRUH IRRG WKDQ GLG %FKLFNV LQ DOO H[FHSW WKUHH EURRGV WDLOHG 6LJQ 7HVW 3 f

PAGE 144

'XULQJ WKH ILUVW GD\V SRVWWUHDWPHQW $ DQG %FKLFNV HDFK UHFHLYHG VLJQLILFDQWO\ PRUH IRRG WKDQ GLG &FKLFNV LQ % EURRGV DQG WKDQ GLG & DQG 'FKLFNV FROOHFWLYHO\ LQ % EURRGV ,Q DOO % SOXV % QHVWV WKH DPRXQWV RI IRRG GHOLYHUHG WR &FKLFNV DQG WR & DQG 'FKLFNV FROOHFWLYHO\ ZHUH OHVV WKDQ DPRXQWV GHOLYHUHG WR HLWKHU WKHLU $ RU %VLEOLQJV WDLOHG 6LJQ 7HVW 3 f 7KH GLIIHUHQFH EHWZHHQ WKH SHUFHQW RI IRRG JDLQHG E\ $ FKLFNV PLQXV WKDW JDLQHG E\ %FKLFNV DYHUDJHG b ^s b 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf ,Q FRQWUDVW WKH GLIIHUHQFH EHWZHHQ WKH SHUFHQW RI IRRG JDLQHG E\ %FKLFNV PLQXV &FKLFNV DYHUDJHG b s b 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 7KHVH GLIIHUHQFHV ZHUH VLJQLILFDQW VXFK WKDW WKH SHUFHQW RI IRRG JDLQHG E\ $ DQG %FKLFNV ZDV PRUH VLPLODU WKDQ WKH SHUFHQW RI IRRG JDLQHG E\ % DQG &FKLFNV :LOFR[RQ VLJQHGUDQNV WHVW ] 3 DOO ILYH QHVWV KDG VPDOOHU GLIIHUHQFHV LQ $ YHUVXV %FKLFN IRRG VKDUHV WKDQ LQ % YHUVXV &FKLFN IRRG VKDUHV GLIIHUHQFHV GHULYHG IURP GDWD SUHVHQWHG LQ 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 6DPSOH VL]HV ZHUH WRR VPDOO RQO\ WKUHH QHVWVf WR GR D VLPLODU FRPSDULVRQ IRU % QHVWV GD\V SRVWWUHDWPHQW ,Q % QHVWV GD\V SRVWn WUHDWPHQW WKH PDJQLWXGH RI WKH GLIIHUHQFH EHWZHHQ $ YHUVXV %FKLFN VKDUHV ZDV VLPLODU WR WKDW EHWZHHQ % YHUVXV &FKLFN VKDUHV :LOFR[RQ VLJQHGUDQNV WHVW ] 3 QHVWV KDG VPDOOHU GLIIHUHQFHV LQ $ YHUVXV %FKLFN IRRG

PAGE 145

VKDUHV WKDQ LQ % YHUVXV &FKLFN IRRG VKDUHV GLIIHUHQFHV GHULYHG IURP GDWD SUHVHQWHG LQ 7DEOH IRU % QHVWV GD\V SRVWWUHDWPHQWf 7KH GLIIHUHQFH EHWZHHQ $ DQG %FKLFN VKDUHV DYHUDJHG b bf DQG EHWZHHQ % DQG MXQLRU & SOXV 'f VKDUHV DYHUDJHG bf ,Q PRVW % DQG % EURRGV OHVV WKDQ D TXDUWHU RI WKH WRWDO IRRG GHOLYHUHG ZDV FRQVXPHG E\ WKH VPDOOHVW FKLFNV & FKLFNV LQ % DQG & DQG 'FKLFNV FROOHFWLYHO\ LQ % QHVWV VHH 7DEOH f ,Q % QHVWV DQ DYHUDJH RI b s b 7DEOH ff RI WKH WRWDO IRRG GHOLYHUHG WR WKH EURRG WKURXJK GD\V SRVWWUHDWPHQW ZDV FRQVXPHG E\ WKH & DQG FKLFNV FROOHFWLYHO\ ,Q % QHVWV &FKLFNV FRQVXPHG DQ DYHUDJH RI b s b 7DEOH f RI WKH WRWDO IRRG GHOLYHUHG WR WKH EURRG GXULQJ WKH ILUVW GD\V SRVWn WUHDWPHQW ,Q WKH ILUVW GD\V SRVWWUHDWPHQW &FKLFNV FRQVXPHG DQ DYHUDJH RI b sb 7DEOH f RI WKH WRWDO IRRG GHOLYHUHG WR % EURRGV 'LVFXVVLRQ 6HQLRU FKLFN VXUYLYDO ZDV QRW DIIHFWHG E\ WKH EURRG VL]H WUHDWPHQWV 7KLV GRHV QRW ILW WKH SUHGLFWLRQ RI DGDSWLYH H[SODQDWLRQV RI EURRG UHGXFWLRQ WKDW VHQLRUV VKRXOG VXUYLYH EHWWHU LQ EURRGV IURP ZKLFK &FKLFNV ZHUH UHPRYHG %XW EHFDXVH &FKLFNV VXUYLYHG VR EULHIO\ WKLV H[SHULPHQW GLG QRW DGHTXDWHO\ WHVW WKH SUHGLFWLRQ ,W LV VWLOO SRVVLEOH WKDW KDG &FKLFNV QRW GLHG ZKHQ WKH\ GLG WKHLU

PAGE 146

FRQWLQXHG VXUYLYDO ZRXOG KDYH KDG D QHJDWLYH LPSDFW RQ WKH VXUYLYDO RI WKHLU VHQLRU VLEOLQJV 7R WHVW WKLV SUHGLFWLRQ LQ VSHFLHV ZKHUH EURRG UHGXFWLRQ RFFXUV VR TXLFNO\ ZRXOG UHTXLUH SUHYHQWLQJ EURRG UHGXFWLRQ IURP RFFXUULQJ HJ H[SHULPHQWDO GHVLJQ RI +XVE\ f E\ UHSODFLQJ &FKLFNV WKDW GLHG ZLWK QHZ LQGLYLGXDOV WR PDLQWDLQ % DQG % EURRGV %URRG UHGXFWLRQ PD\ QRW EH DGDSWLYH IRU EURZQ SHOLFDQV 7KH GHDWK RI WKH &FKLFN PD\ EH D QHJDWLYH FRQVHTXHQFH RI DQ DV\QFKURQRXV KDWFKLQJ SDWWHUQ WKDW PD\ KDYH HYROYHG QRW EHFDXVH LW IDFLOLWDWHV EURRG UHGXFWLRQ EXW EHFDXVH LW FUHDWHV VRPH RWKHU IDYRUDEOH FRQGLWLRQV )RU H[DPSOH +XVVHOO f DUJXHG WKDW VWDUWLQJ LQFXEDWLRQ RQ WKH ILUVW HJJ PD\ PLQLPL]H WKH WLPH EHWZHHQ OD\LQJ WKH ILUVW HJJ DQG IOHGJLQJ WKH ILUVW QHVWOLQJ 7KLV FRXOG PLQLPL]H WKH SHULRG GXULQJ ZKLFK HDUO\ODLG HJJV DUH DW ULVN RI SUHGDWLRQ &ODUN DQG :LOVRQ f GHYHORSHG D PRGHO WKDW SUHGLFWHG DQ DGYDQWDJH WR DV\QFKURQ\ ZKHQHYHU SUHGDWLRQ ULVNV DUH KLJKHU IRU HJJV WKDQ IRU QHVWOLQJV EHFDXVH WKLV PLQLPL]HV WKH SHULRG ZKHQ RQO\ HJJV DUH LQ WKH QHVW 3UHGDWLRQ RI SDUHQWDOO\ DWWHQGHG HJJV DQG QHVWOLQJV ZDV QRW HYLGHQW GXULQJ WKLV VWXG\ EXW GRHV RFFXU LQ RWKHU SRSXODWLRQV UHYLHZHG LQ &KDSWHU f 3UHGDWLRQ SDWWHUQV PD\ KDYH IDYRUHG KDWFKLQJ DV\QFKURQ\ LQ DUHDV VXEMHFW WR KLJK SUHGDWLRQ SUHVVXUHV DV PLJKW EH H[SHFWHG LQ UHDGLO\ DFFHVVLEOH JURXQG QHVWV %LUGV WKDW QHVW LQ DUHDV RI ORZHU

PAGE 147

SUHGDWLRQ HJ SHUKDSV WUHHVf PD\ JDLQ QR DGYDQWDJH IURP KDWFKLQJ DV\QFKURQ\ %URRG UHGXFWLRQ LQ WKHVH QHVWV PD\ EH D FRVW RI DV\QFKURQ\ WKDW LV D UHOLFW RI SDVW SUHGDWLRQ SUHVVXUH 2WKHU SRVVLEOH ZD\V WKDW KDWFKLQJ DV\QFKURQ\ FRXOG EH DGYDQWDJHRXV GHVSLWH EURRGUHGXFWLRQ FRVWV DUH UHYLHZHG E\ 0DJUDWK f 0RVW DUH XQOLNHO\ WR SHUWDLQ WR EURZQ SHOLFDQV %XW LI &FKLFNV QHYHU FRQWULEXWH GLUHFWO\ WR WKHLU SDUHQWn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n&RQQRU f 'R 6HQLRUV *DLQ D )RRG %RQXV IURP %URRG 5HGXFWLRQ" 7KH SUHGLFWLRQ WKDW VHQLRU FKLFNV JDLQ H[WUD IRRG IROORZLQJ EURRG UHGXFWLRQ EHFDXVH SDUHQWV PDLQWDLQ WKH VDPH OHYHO RI IHHGLQJ ZDV QRW VXSSRUWHG GXULQJ WKH SHULRG RI WKLV VWXG\ 3DUHQWDO GHOLYHULHV GLG UHPDLQ WKH VDPH LQ UHGXFHG FRQWURO DQG HQODUJHG EURRGV GXULQJ WKH ILUVW GD\V

PAGE 148

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f JHQHUDOO\ GHPRQVWUDWH WKDW SDUHQWV FDQ UHDU PRUH RIIVSULQJ WKDQ WKH\ QRUPDOO\ GR UHYLHZV LQ /HVVHOOV 0DUWLQ
PAGE 149

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f UHSRUWHG WKDW GHOLYHU\ UDWHV UHPDLQHG XQFKDQJHG ZLWK GHFUHDVLQJ EURRG VL]H WKH SUHGLFWLRQ WKDW LV EDVLF WR DGDSWLYH H[SODQDWLRQV RI EURRG UHGXFWLRQ ,Q DQRWKHU RI WKHVH VWXGLHV RQ %UHZHUnV EODFNELUGV (XRKDDXV FYDQRFHRKDOXV 3DWWHUVRQ HW DO f UHVXOWV ZHUH DPELJXRXV 0DOHV LQ WKLV VSHFLHV GHFUHDVHG WKHLU GHOLYHU\ UDWHV WR UHGXFHG UHODWLYH WR FRQWURO EURRGV EXW WKH VWDWLVWLFDO VLJQLILFDQFH RI WKLV UHODWLRQVKLS ZDV QRW FOHDU DQG GDWD ZHUH QRW SUHVHQWHG RQ ZKHWKHU IHPDOHV FRPSHQVDWHG IRU GHFUHDVHG PDOH IHHGLQJ ,Q FRQWUDVW WKH UDWH RI IRRG GHOLYHULHV RU QHVWYLVLWDWLRQ UDWHV FOHDUO\ GHFUHDVHG ZLWK GHFUHDVLQJ EURRG VL]H LQ ZKLWH UXPSHG VZLIWOHWV $HURGUDPXV VSRGLRSYFULXV 7DUEXUWRQ f VQDLONLWHV 5RVWUKDPXV VRFLDELOLV %HLVVLQJHU f KRXVH PDUWLQV 'HOLFKRQ XUELFD %U\DQW DQG :HVWHUWHUS f WUHH VZDOORZV 7DFKYFLQHWD ELFRORU /HIIHODDU DQG 5REHUWVRQ

PAGE 150

f VQRZ EXQWLQJV 3OHFWURSKHQD[ KYRHUERUHXV +XVVHOO f UHGZLQJHG EODFNELUGV $DHODLXV RKRHQLFHXV &URQPLOOHU DQG 7KRPSVRQ f DQG KRXVH VSDUURZV 3DVVHU GRPHVWLFXV +HJQHU DQG :LQJILHOG f ,Q DQ DGGLWLRQDO SDSHU QRW FRYHUHG LQ WKH UHYLHZV PHQWLRQHG HDUOLHU WKH GXUDWLRQ RI IHHGLQJ ERXWV GHFUHDVHG ZLWK GHFUHDVLQJ EURRG VL]H LQ ULQJ GRYHV 6WUHRWRRHOLD ULVRULD WHQ &DWH DQG +LOEHUV f ,I GHOLYHU\ UDWHV UHIOHFWHG DFWXDO DPRXQWV RI IRRG GHOLYHUHG WKHQ HLJKW RI WKHVH VWXGLHV GR QRW SURYLGH VXSSRUW IRU WKH DVVXPSWLRQ WKDW SDUHQWV IHHG VLPLODU DPRXQWV WR EURRGV EHIRUH DQG DIWHU EURRG UHGXFWLRQ 7KHVH UHVXOWV VXJJHVW WKDW IRRG DPRXQWV WR VHQLRUV PD\ QRW JHQHUDOO\ LQFUHDVH IROORZLQJ EURRG UHGXFWLRQ 7R GHWHUPLQH LI WKLV LV VR ZLOO UHTXLUH FRPSDULQJ IRRG GHOLYHUHG WR FKLFNV DFFRUGLQJ WR WKHLU KDWFKLQJ UDQNV DV ZHOO DV EURRG VL]H WUHDWPHQWV 7ZR OLQHV RI HYLGHQFH VXJJHVW WKDW VHQLRU FKLFNV PLJKW DFWXDOO\ UHFHLYH OHVV IRRG IROORZLQJ EURRG UHGXFWLRQ )LUVW LQ EURRGV RI FDWWOH HJUHWV %XEXOFXV LELVf VHQLRU FKLFNV UHFHLYHG OHVV IRRG LQ UHGXFHG WKDQ FRQWURO EURRGV 0RFN DQG /DPH\ f 6HFRQG ZKHQ DQDO\]HG IRRG FRQVXPHG E\ EURZQ SHOLFDQ QHVWOLQJV DFFRUGLQJ WR WKHLU KDWFKLQJ UDQN IRXQG WKDW %FKLFNV UHFHLYHG VLJQLILFDQWO\ OHVV IRRG LQ UHGXFHG WKDQ LQ FRQWURO EURRGV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW 7KLV UHVXOW VXJJHVWHG WKH K\SRWKHVLV WKDW WKH HIIHFW RI &FKLFN ORVV PLJKW GLIIHU IRU $ DQG %

PAGE 151

FKLFNV )RRG WR $FKLFNV PLJKW KDYH UHPDLQHG WKH VDPH ZKLOH IRRG WR %FKLFNV PLJKW KDYH GHFUHDVHG IROORZLQJ EURRG UHGXFWLRQ 2QH SRVVLEOH FDXVH IRU IRRG WR %FKLFNV WR GHFUHDVH IROORZLQJ EURRGUHGXFWLRQ ZRXOG EH LI %FKLFNV LQ FRQWURO EURRGV VHTXHVWHUHG YLUWXDOO\ HYHU\WKLQJ WKDW WKH $ FKLFN GLG QRW HDW LQFOXGLQJ WKH DGGLWLRQDO IRRG WKDW SDUHQWV SUHVXPDEO\ LQWHQGHG WR EH WKH &FKLFNnV VKDUH ,Q VXFK D VLWXDWLRQ %FKLFNV PLJKW DFWXDOO\ EHQHILW IURP WKH FRQWLQXHG VXUYLYDO RI &FKLFNV DV ORQJ DV WKHLU &VLEOLQJV UHPDLQ WRR LQWLPLGDWHG WR WKUHDWHQ WKHLU %VLEOLQJVn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n WUHDWPHQW SURYLGH VXJJHVWLYH EXW LQFRQFOXVLYH HYLGHQFH IRU WKHVH K\SRWKHVHV $Q DOWHUQDWLYH H[SODQDWLRQ LV WKDW WKH VLJQLILFDQW GHFUHDVH LQ IRRG WR %FKLFNV LQ UHGXFHG UHODWLYH WR FRQWURO EURRGV ZDV FDXVHG E\ LQFOXGLQJ D FRQWURO EURRG LQ

PAGE 152

ZKLFK WKH %FKLFN ZDV ODUJHU DQG GRPLQDQW WR LWV $VLEOLQJ :KHQ UHFODVVLILHG WKLV %FKLFN DV DQ $FKLFN IRXQG WKDW IRRG FRQVXPHG E\ $ DQG E\ %FKLFNV GLG QRW GLIIHU EHWZHHQ UHGXFHG DQG FRQWURO EURRGV 7KLV SDWWHUQ ZDV SURGXFHG DV IROORZV %HIRUH UHFODVVLILFDWLRQ ZKHQ FKLFNV ZHUH FODVVLILHG E\ KDWFKLQJ RUGHU IRXQG WKDW %FKLFNV JDLQHG IXQLWV PRUH LQ % WKDQ LQ % EURRGV D VLJQLILFDQW GLIIHUHQFHf ZKHUHDV IRRG DPRXQWV WR $FKLFNV ZHUH VLPLODU LQ % DQG % EURRGV )LJXUH f %XW ZKHQ FKLFNV ZHUH UHFODVVLILHG DFFRUGLQJ WR WKHLU UHODWLYH VL]HV DW WKH WLPH RI WUHDWPHQW IRXQG WKDW %FKLFNV UHFHLYHG RQO\ I XQLWV PRUH LQ % WKDQ LQ % EURRGV $FKLFNV FRQVXPHG WKH UHPDLQGHU RI WKH H[WUD IXQLWV WKDW ZHUH GHOLYHUHG WR VHQLRU FKLFNV LQ % UHODWLYH WR % EURRGV 0\ UHVXOWV LQGLFDWH WKDW HLWKHU f %FKLFNV UHFHLYHG PRUH IRRG LQ UHGXFHG WKDQ FRQWURO EURRGV ZKHQ UDQNHG E\ KDWFKLQJ RUGHUf RU f VHQLRU FKLFNV RI ERWK UDQNV UHFHLYHG VLPLODU DPRXQWV LQ UHGXFHG DQG FRQWURO EURRGV ZKHQ UDQNHG E\ UHODWLYH VL]HVf 7KXV ZKHWKHU WKH GHDWK RI D &VLEOLQJ DIIHFWV $ DQG %FKLFNV GLIIHUHQWO\ UHPDLQV XQFOHDU IRU EURRGV RI EURZQ SHOLFDQV 'DWD RQ IRRG GHOLYHULHV WR $ YHUVXV %FKLFNV LQ UHGXFHG DQG FRQWURO EURRGV KDYH QRW EHHQ SUHVHQWHG LQ DQ\ RI WKH VWXGLHV UHYLHZHG DERYH 7KXV WKH UHODWLYH LPSDFW RI EURRG UHGXFWLRQ RQ IRRG GHOLYHULHV WR VHQLRU FKLFNV RI GLIIHUHQW KDWFKLQJ UDQNV DZDLWV LQYHVWLJDWLRQ LQ DOO RI WKHVH VSHFLHV

PAGE 153

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f FKLFNV ZDV VLJQLILFDQWO\ OHVV WKDQ WKDW GHOLYHUHG WR HLWKHU $ RU %FKLFNV & DQG 'FKLFNV JDLQHG DQ DYHUDJH RI RQO\ b RI WKH WRWDO GHOLYHUHG WR EURRGV GXULQJ WKH ILUVW GD\V SRVWWUHDWPHQW 6LPLODUO\ LQ WKH ILUVW GD\V SRVWWUHDWPHQW &FKLFNV JDLQHG RQO\ b RI WKH WRWDO IRRG GHOLYHUHG %XW WKH DSSDUHQW VLPLODULW\ DPRQJ WUHDWPHQWV LQ IRRG JDLQHG E\ VHQLRUV FRXOG KDYH EHHQ GXH WR WKH VPDOO VDPSOH VL]HV LQYROYHG +DG PRUH EURRGV EHHQ WUHDWHG FRVWV RI &FKLFNV WR WKHLU VHQLRUV PLJKW KDYH EHHQ GHWHFWHG $ IHHGLQJ KLHUDUFK\ EHWZHHQ WKH WZR VHQLRU FKLFNV ZDV DOVR DSSDUHQW ZLWK $FKLFNV JDLQLQJ PRUH IRRG WKDQ WKHLU % VLEOLQJV %FKLFNV DOVR EHFDPH YLFWLPV RI EURRGUHGXFWLRQ IUHTXHQWO\ G\LQJ RI VWDUYDWLRQ DQG VLEOLFLGH &KDSWHU f

PAGE 154

:KHWKHU RU QRW WKH SUHVHQFH RU DEVHQFH RI %FKLFNV DIIHFWV IRRG VXSSOLHG WR WKHLU $VLEOLQJV UHPDLQV XQWHVWHG 6HQLRUV PD\ KDYH H[SHULHQFHG RWKHU FRVWV IURP WKH FRQWLQXHG SUHVHQFH RI &FKLFNV 6HQLRUV DSSDUHQWO\ KDG WR DWWDFN WKHLU &VLEOLQJV WR PDLQWDLQ WKH GRPLQDQFH KLHUDUFK\ WKDW SURYLGHG VHQLRUV ZLWK D IHHGLQJ DGYDQWDJH RYHU & FKLFNV 7KHVH DWWDFNV FRXOG FDUU\ HQHUJHWLF FRVWV IRU WKH DWWDFNHUV *DUJHWW 0RFN Df ZKR PD\ DOVR ULVN LQMXU\ ZKHQ &FKLFNV UHWXUQ EORZV HJ *HUUDUG DQG %RUWRORWWL f DV WKH\ VRPHWLPHV GR LQ EURZQ SHOLFDQ EURRGV &KDSWHU f 7KH KDWFKLQJ DV\QFKURQ\ WKDW FUHDWHV WKH LQLWLDO FRPSHWLWLYH GLVSDULWLHV DPRQJ VLEOLQJV PD\ UHGXFH WKH FRVWV RI ILJKWLQJ DV VHHPV WR RFFXU LQ ODXJKLQJ JXOOV /DUXV DWULFLOOD +DKQ f DQG FDWWOH HJUHWV %XEXOFXV LELVf )XMLRND 0RFN DQG 3ORJHU f 7KLV PD\ DOVR EH WKH FDVH IRU EURZQ SHOLFDQV EXW VHH &KDSWHU f ZKRVH &FKLFNV XVXDOO\ KDWFK GD\V DIWHU WKHLU $VLEOLQJV &KDSWHU f 7KH LQLWLDO DJH GLIIHUHQFHV OHDG TXLFNO\ WR ODUJH GLVSDULWLHV LQ FKLFN VL]HV ZLWK &FKLFNV RIWHQ EHLQJ KDOI WKH VL]H RI WKHLU VHQLRUV XQSXE GDWDf &XUUHQW PDQLSXODWLRQV RI KDWFKLQJ DV\QFKURQ\ LQ EURZQ SHOLFDQ EURRGV E\ 0 6KLHOGV SHUV FRPPf PD\ VRRQ FODULI\ ZKHWKHU KDWFKLQJ DV\QFKURQ\ GHFUHDVHV WKH FRVWV RI ILJKWLQJ LQ WKLV VSHFLHV &RVWV WR SDUHQWV &OHDU FRVWV RI PDLQWDLQLQJ &FKLFNV IHOO RQ WKH SDUHQWV ZKR EURXJKW PRUH IRRG WR EURRGV ZLWK &

PAGE 155

FKLFNV SUHVHQW GD\V SRVWWUHDWPHQW 7KH DGGLWLRQDO IRRG WKDW SDUHQWV EURXJKW ZDV QRW VXIILFLHQW WR HQVXUH WKDW & FKLFNV UHFHLYHG HQRXJK WR VXUYLYH $OO &FKLFNV HYHQWXDOO\ GLHG PRVW GRLQJ VR E\ WKH HQG RI WKH ILUVW GD\V SRVWn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f 7R LQYHVWLJDWH WKH DFWXDO ILWQHVV FRVWV WR SDUHQWV WKDW IRUHVWDO EURRG UHGXFWLRQ ZLOO UHTXLUH TXDQWLI\LQJ WKH HIIHFWV RI EURRG VL]H PDQLSXODWLRQV RQ FRUUHODWHV RI IXWXUH SDUHQWDO ILWQHVV 2QH VXFK FRUUHODWH PLJKW EH WKH FRQGLWLRQ RI SDUHQWV WKURXJK WKH EUHHGLQJ VHDVRQ ZKHQ WKH PDQLSXODWLRQV ZHUH GRQH 2WKHUV PLJKW LQFOXGH WKH VXUYLYDO RI SDUHQWV LQWR WKH QH[W EUHHGLQJ VHDVRQ DQG WKHLU UHSURGXFWLRQ LQ \HDUV IROORZLQJ WKH EURRG VL]H PDQLSXODWLRQV

PAGE 156

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

PAGE 157

FKLFNV PD\ KDYH EHHQ PHW LQ ERWK WUHDWPHQWV VHH SUHFHGLQJ SDUDJUDSKf ,W ZDV QRW FOHDU IURP P\ UHVXOWV ZKHWKHU % FKLFNV JDLQHG VLPLODU DPRXQWV RI IRRG RU VXIIHUHG D ORVV RI IRRG LQ UHGXFHG UHODWLYH WR FRQWURO EURRGV 7KH SRVVLELOLW\ WKDW %FKLFNV PD\ JDLQ DGGLWLRQDO IRRG LQ EURRGV ZLWK DQ LQWLPLGDWHG &FKLFN VXJJHVWV WKH SRWHQWLDO IRU FRQIOLFW EHWZHHQ SDUHQWV DQG %FKLFNV RYHU ZKR JDLQV WKH &FKLFNn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nV VKDUH %\ EULQJLQJ DGGLWLRQDO IRRG WR EURRGV ZLWK &FKLFNV SDUHQWV DOVR EHKDYHG DV LI WKH\ ZHUH DWWHPSWLQJ WR GHOD\ WKH &FKLFNnV GHDWK 3DUHQWV DQG %FKLFNV PD\ ERWK KDYH IDYRUHG SRVWSRQHPHQW RI EURRG UHGXFWLRQ $OWHUQDWLYHO\ SDUHQWV PLJKW IDYRU EURRG UHGXFWLRQ XQGHU H[DFWO\ WKH FRQGLWLRQV XQGHU ZKLFK %FKLFNV VKRXOG RSSRVH

PAGE 158

LW ,I SDUHQWV LQWHQGHG &FKLFNV WR UHFHLYH WKH H[WUD IRRG GHOLYHUHG WR FRQWURO EURRGV WKHQ LI WKHLU HIIRUWV ZHUH WKZDUWHG E\ %FKLFNV VHFXULQJ WKH H[WUD IRRG SDUHQWV VKRXOG IDYRU WKH GHDWK RI WKH GRRPHG &FKLFNV %FKLFNV E\ FRQWUDVW VKRXOG DWWHPSW WR SURORQJ WKH &FKLFNnV OLIH DV ORQJ DV WKH %FKLFN FRQWLQXHG WR REWDLQ WKH &FKLFNnV IRRG VKDUH &RQIOLFW EHWZHHQ SDUHQWV DQG %FKLFNV FRXOG WDNH WKH IRUP RI SDUHQWV DWWHPSWLQJ WR KDVWHQ EURRG UHGXFWLRQ DQG % FKLFNV DWWHPSWLQJ WR IRUHVWDOO LW 3DUHQWV PLJKW KDVWHQ EURRG UHGXFWLRQ E\ ZLWKKROGLQJ IRRG DQG WROHUDWLQJ QHVWOLQJ ILJKWV 0RFN DQG /DPH\ f 3DUHQWV PLJKW HYHQ LQFUHDVH ILJKWLQJ IUHTXHQF\ E\ DGMXVWLQJ VWLFNV DQG RWKHUZLVH SODFLQJ WKH ELOO ZLWKLQ UHDFK RI KXQJU\ QHVWOLQJV ZLWKRXW SURYLGLQJ IRRG SHUV REVf $ %FKLFN PLJKW GHOD\ LWV &VLEOLQJnV GHDWK E\ FHDVLQJ WR DWWDFN WKH &FKLFN DQG DOORZLQJ WKH &FKLFN WR JDLQ VRPH IRRG 7KHVH SRVVLELOLWLHV UHPDLQ XQWHVWHG DQG DZDLW IXWXUH H[DPLQDWLRQ

PAGE 159

7DEOH 3HUFHQW RI WRWDO IRRG WR WKH EURRG WKDW ZDV FRQVXPHG E\ $ % DQG MXQLRU FKLFNV -UFKLFNVf 6KDUHV WR -UFKLFNV ZHUH DPRXQWV FRQVXPHG E\ &FKLFNV LQ WKUHH FKLFN %f EURRGV DQG DPRXQWV FRQVXPHG FROOHFWLYHO\ E\ & DQG 'FKLFNV LQ IRXUFKLFN %f EURRGV 6KDUHV ZHUH EDVHG RQ WRWDOV FRQVXPHG GXULQJ WKH ILUVW DQG GD\V SRVW WUHDWPHQW 1HVW ,' 3HUFHQW RI $FKLFNV % IRRG FRQVXPHG E\ FKLFNV -UFKLFNV D % EURRGV GD\V SRVWWUHDWPHQW ,D b b b b b b b b b b b b b b b E % EURRGV GD\V SRVWWUHDWPHQW ,D b b b b b b b b b F % EURRGV GD\V SRVWWUHDWPHQW b b b b b b b b b b b b b b b DOQ WKLV QHVW WKH %FKLFN KDG JURZQ ODUJHU WKDQ WKH $FKLFN E\ WKH WLPH WKDW WKH QHVW ZDV WUHDWHG

PAGE 160

0HDQ IRRG FRQVXPHG IXQLWVf $FKLFNV m L %FKLFNV L L r ‘ %URRGV L L ! f ‘ ‘ ‘ %URRG VL]H )LJXUH )RRG FRQVXPHG PHDQ s 6'f LQ WKH ILUVW GD\V SRVWWUHDWPHQW E\ $ DQG %FKLFNV DQG HQWLUH EURRGV UDLVHG LQ VL[ H[SHULPHQWDOO\ UHGXFHG %f ILYH HQODUJHG %f DQG ILYH FRQWURO %f QHVWV

PAGE 161

> f26 fURL % $FKLFNV [ ; %FKLFNV %URRGV %URRG VL]H )RRG FRQVXPHG PHDQ s 6'f LQ WKH ILUVW WUHDWPHQW E\ $ DQG %FKLFNV DQG GV UDLVHG LQ ILYH H[SHULPHQWDOO\ f DQG WKUHH FRQWURO %f QHVWV

PAGE 162

&+$37(5 6800$5< $1' &21&/86,216 $ IXQGDPHQWDO SUREOHP RI OLIHKLVWRU\ WKHRU\ FRQFHUQV WUDGHRIIV EHWZHHQ SUHVHQW DQG IXWXUH UHSURGXFWLYH VXFFHVV DQG KRZ WKH UHVROXWLRQ RI WKHVH WUDGHRIIV DIIHFW OLIHWLPH UHSURGXFWLYH VXFFHVV :LOOLDPV 6WHDUQV f 3DUHQWV PD\ LQYHVW VHQVX 7ULYHUV f PRUH LQ FXUUHQW RIIVSULQJ DW WKH H[SHQVH RI IXWXUH UHSURGXFWLRQ $OWHUQDWLYHO\ SDUHQWV PD\ ZLWKKROG LQYHVWPHQW LQ VRPH FXUUHQW RIIVSULQJ DQG HQKDQFH UHSURGXFWLYH VXFFHVV LQ WKH IXWXUH SURYLGHG WKDW SDUHQWV KDYH D KLJK SUREDELOLW\ RI VXUYLYLQJ WR EUHHG DJDLQ 7ULYHUV f DUJXHG WKDW WKHVH WUDGHRIIV EHWZHHQ SUHVHQW DQG IXWXUH SDUHQWDO UHSURGXFWLRQ OHDG WR FRQIOLFWV EHWZHHQ SDUHQWV DQG RIIVSULQJ RYHU WKH LQYHVWPHQW SDUHQWV PDNH LQ WKHLU RIIVSULQJ 7ULYHUV EDVHG KLV DUJXPHQW RQ +DPLOWRQnV f UXOH WKDW DQLPDOV VKRXOG EHKDYH DOWUXLVWLFDOO\ ZKHQHYHU WKH FRVW WR WKH DOWUXLVW LV OHVV WKDQ WKH EHQHILW WR WKH UHFLSLHQW RI DOWUXLVP PXOWLSOLHG E\ WKH GHJUHH RI UHODWHGQHVV EHWZHHQ WKH DOWUXLVW DQG WKH UHFLSLHQW 7ULYHUV f XVHG +DPLOWRQnV UXOH WR SUHGLFW FRQGLWLRQV LQ ZKLFK SDUHQWV VKRXOG EHKDYH DOWUXLVWLFDOO\ WRZDUG WKHLU RIIVSULQJ E\ SURYLGLQJ SDUHQWDO FDUH DQG ZKHQ RIIVSULQJ VKRXOG EHKDYH VHOILVKO\ E\ GHPDQGLQJ H[WUD LQYHVWPHQW IURP WKHLU SDUHQWV 7ULYHUV f DUJXHG WKDW

PAGE 163

EHFDXVH ERWK SDUHQWV DQG RIIVSULQJ DUH UHODWHG WR IXWXUH RIIVSULQJ RI WKH SDUHQWV E\ RQHKDOI SDUHQWV DQG RIIVSULQJ H[SHULHQFH WKH VDPH FRVW LQ WHUPV RI UHGXFHG IXWXUH RXWSXW ZKHQ SDUHQWV LQYHVW PRUH LQ FXUUHQW RIIVSULQJ %XW WKH EHQHILWV RI SDUHQWDO LQYHVWPHQW LQ FXUUHQW RIIVSULQJ DUH WZLFH DV KLJK IRU RIIVSULQJ DV IRU SDUHQWV 7KLV LV EHFDXVH RIIVSULQJ DUH UHODWHG WR WKHPVHOYHV E\ RQH ZKLOH SDUHQWV DUH UHODWHG WR WKHLU RIIVSULQJ E\ RQHKDOI %HFDXVH SDUHQWV DUH UHODWHG HTXDOO\ WR FXUUHQW DQG IXWXUH RIIVSULQJ ZKHUHDV RIIVSULQJ DUH UHODWHG WR WKHPVHOYHV E\ RQH DQG WR VLEOLQJV E\ RQHKDOI WKH EHQHILWV RI SDUHQWDO LQYHVWPHQW WR DQ\ LQGLYLGXDO RIIVSULQJ DUH WZLFH WKDW RI WKH EHQHILWV WR LWV SDUHQW 7ULYHUV f 7KXV RIIVSULQJ VKRXOG GHPDQG PRUH LQYHVWPHQW IURP SDUHQWV WKDQ SDUHQWV DUH VHOHFWHG WR JLYH 7ULYHUV f )RU WKH VDPH UHDVRQV FRQIOLFW RYHU SDUHQWDO LQYHVWPHQW LV OLNHO\ DPRQJ VLEOLQJV LQ WKH VDPH EURRG HJ 2n&RQQRU f 7KHVH DUJXPHQWV DVVXPH WKDW E\ ZLWKKROGLQJ LQYHVWPHQW LQ FXUUHQW RIIVSULQJ SDUHQWV FDQ HQKDQFH WKHLU ILWQHVV WKURXJK IXWXUH RIIVSULQJ 6LQFH 7ULYHUVn f LQVLJKW QXPHURXV PRGHOV KDYH GHPRQVWUDWHG WKDW WKH LQFOXVLYH ILWQHVV LQWHUHVWV RI SDUHQWV DQG WKHLU RIIVSULQJ GLIIHU XQGHU D YDULHW\ RI FRQGLWLRQV UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f $ FRQVLGHUDEOH DPRXQW RI WKLV WKHRUHWLFDO ZRUN HJ 2n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU f KDV IRFXVHG RQ WKH DSSOLFDWLRQ RI SDUHQW

PAGE 164

RIIVSULQJ FRQIOLFW WKHRU\ WR WKH SUREOHP RI EURRG UHGXFWLRQ %URRGUHGXFLQJ SDUHQWV SURGXFH PRUH RIIVSULQJ WKDQ WKH\ DUH DEOH RU ZLOOLQJ WR VXSSO\ ZLWK IRRG $OO RI WKH DGDSWLYH H[SODQDWLRQV IRU EURRG UHGXFWLRQ DUH JHQHUDOO\ VWDWHG LQ WHUPV RI EHQHILWV WR WKH SDUHQWV ZLWK DQ LPSOLFLW DVVXPSWLRQ WKDW VXUYLYLQJ RIIVSULQJ DOVR EHQHILW IURP WKH GHDWK RI D VLEOLQJ VHH &KDSWHU f %XW WKH DSSOLFDWLRQ RI SDUHQWRIIVSULQJ FRQIOLFW WKHRU\ WR WKLV SUREOHP VXJJHVWV WKDW EURRG UHGXFWLRQ PD\ VRPHWLPHV EHQHILW VHQLRU RIIVSULQJ WR WKH GHWULPHQW RI SDUHQWDO ILWQHVV 2n&RQQRU f %URRG UHGXFWLRQ PD\ EH WKH UHVXOW RI SDUHQWRIIVSULQJ FRQIOLFW UDWKHU WKDQ VHOHFWLRQ DFWLQJ VLPLODUO\ RQ SDUHQWV DQG RIIVSULQJ ,Q D YDULHW\ RI VSHFLHV EURRG UHGXFWLRQ LV RIWHQ FDXVHG E\ IDWDO ILJKWLQJ DPRQJ VLEOLQJV UHYLHZHG E\ 0RFN HW DO f $V ZLWK EURRG UHGXFWLRQ JHQHUDOO\ VLEOLFLGH DQG VXEOHWKDO QHVWOLQJ DJJUHVVLRQ PD\ EHQHILW ERWK WKH DJJUHVVRUV DQG WKHLU SDUHQWV VHH )RUEHV f $OWHUQDWLYHO\ QHVWOLQJ DJJUHVVLRQ PD\ LQYROYH SDUHQWn RIIVSULQJ FRQIOLFW 7KH UHVXOWV RI P\ GLVVHUWDWLRQ SURYLGH LQVLJKW LQWR WKH IRUFHV WKDW VKDSH VLEOLFLGDO DJJUHVVLRQ DQG EURRG UHGXFWLRQ LQ EURZQ SHOLFDQV 0\ VWXG\ VXJJHVWV WKDW QHVWOLQJ DJJUHVVLRQ DQG EURRG UHGXFWLRQ LQ WKLV VSHFLHV PD\ LQYROYH FRQIOLFWV RI LQWHUHVW EHWZHHQ SDUHQWV DQG WKHLU VHQLRU RIIVSULQJ RYHU SDUHQWDO LQYHVWPHQW DQG WKH IDWH RI WKH \RXQJHVW EURRG PHPEHUV

PAGE 165

3DUHQW2IIVSULQJ &RQIOLFW DQG )RRG'HSHQGHQW )LJKWLQJ 2n&RQQRU f FRQVLGHUHG VLEOLQJ DJJUHVVLRQ WR EH WKH GLUHFW FRQVHTXHQFH RI SDUHQWRIIVSULQJ FRQIOLFW RYHU WKH IDWH RI WKH \RXQJHU FKLFN +LV PRGHO SUHGLFWHG WKDW VHQLRUV VKRXOG IDYRU VLEOLFLGH ZKHQ IRRG ZDV LQ VXFK VKRUW VXSSO\ WKDW WKH ERRVW LQ VHQLRU VXUYLYDO IROORZLQJ VLEOLFLGH RXWZHLJKHG WKH ORVV RI WKH MXQLRU FKLFNnV FRQWULEXWLRQ WR WKH LQFOXVLYH ILWQHVV RI VHQLRUV +LV PRGHO DOVR SUHGLFWHG WKDW SDUHQWV VKRXOG IDYRU VLEOLFLGH GXULQJ VRPH IRRG VKRUWDJHV %XW IRRG ZRXOG QHHG WR EH VFDUFHU IRU SDUHQWV WR IDYRU VLEOLFLGH WKDQ IRU WKHLU VHQLRU RIIVSULQJ WR IDYRU LW 7KLV LV EHFDXVH SDUHQWV DUH HTXDOO\ UHODWHG WR DOO RIIVSULQJ ZKHUHDV RIIVSULQJ DUH PRUH FORVHO\ UHODWHG WR WKHPVHOYHV WKDQ WR WKHLU VLEOLQJV 2n&RQQRU f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f

PAGE 166

,Q 2n&RQQRUnV YLHZ VLEOLQJ DJJUHVVLRQ LQ WZRFKLFN EURRGV ZKHUH VHFRQGKDWFKHG %f FKLFNV DUH WKH SRWHQWLDO YLFWLPVf UHSUHVHQWV FRQIOLFW EHWZHHQ SDUHQWV DQG WKHLU ILUVWKDWFKHG RIIVSULQJ $FKLFNVf %URZQ SHOLFDQ $ FKLFNV JDLQHG D GLVSURSRUWLRQDWH VKDUH RI WKH WRWDO IRRG GHOLYHUHG WR EURRGV &KDSWHU DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf :KHQ H[SHULPHQWDOO\ PDQLSXODWHG EURRG VL]HV IRXQG WKDW $FKLFNV VHFXUHG VLPLODU DPRXQWV RI IRRG LQ EURRGV RI DOO VL]HV HYHQ LQ EURRGV WKDW UHFHLYHG OHVV WRWDO IRRG WKDQ RWKHUV &KDSWHU f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f IHHGLQJ DGYDQWDJH DQG %FKLFNV WU\LQJ WR ZUHVW GRPLQDQFH IURP WKHLU $VLEOLQJV WR JDLQ D IHHGLQJ DGYDQWDJH 7KH QDWXUH RI WKH UHODWLRQVKLS EHWZHHQ ILJKWLQJ UDWHV DQG FKLFN JURZWK WKDW IRXQG LQ EURZQ SHOLFDQ EURRGV &KDSWHU f OHQGV VXSSRUW WR WKLV K\SRWKHVLV 7KH DVVRFLDWLRQ RI LQFUHDVHG ILJKWLQJ ZLWK

PAGE 167

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f 7KH DV\QFKURQ\ RI KDWFKLQJ SUHVXPDEO\ XQGHU WKH FRQWURO RI SDUHQWVf FUHDWHV DQ LQLWLDO $FKLFN DGYDQWDJH WKDW DSSDUHQWO\ FRQWLQXHV WKURXJKRXW WKH QHVWOLQJ SHULRG $W OHDVW GXULQJ WKH ILUVW IHZ ZHHNV RI WKH QHVWOLQJ SHULRG $FKLFNV JDLQ PRUH IRRG WKDQ GR WKHLU %VLEOLQJV &KDSWHU DQG 3LQ]Q DQG 'UXPPRQG LQ SUHVVf 8OWLPDWHO\ PRUH $ WKDQ %FKLFNV VXUYLYH WR IOHGJH 6FKUHLEHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV &KDSWHU f ,W LV OLNHO\ WR EH LQ WKH $ FKLFNnV LQWHUHVW WR PDNH VXUH WKDW LW JDLQV DQG PDLQWDLQV GRPLQDQFH VR DV WR JDLQ WKH IHHGLQJ DQG VXUYLYDO DGYDQWDJHV WKDW DUH DVVRFLDWHG ZLWK GRPLQDQFH $FKLFNV PLJKW DFKLHYH GRPLQDQFH E\ DWWDFNLQJ WKHLU VLEOLQJV HDUO\ LQ WKH QHVWOLQJ SHULRG ,I WKLV LV VR WKHQ $FKLFNV PD\ EHQHILW IURP

PAGE 168

DWWDFNLQJ WKHLU VLEOLQJV HYHQ ZKHQ WKH\ GR QRW JDLQ DQ LPPHGLDWH IRRG UHZDUG ,Q EURZQ SHOLFDQ EURRGV ILJKWLQJ HDUO\ LQ QHVWOLQJ OLIH LV LQGHSHQGHQW RI IRRG VXSSO\ &KDSWHU f &KLFNV LQ WKH ILUVW ZHHN RI OLIH ILJKW DW VLPLODU UDWHV DV ROGHU FKLFNV EXW ZLWKRXW JDLQLQJ DQ\ REYLRXV IRRGUHZDUG 7KHVH SDWWHUQV PLJKW UHVXOW IURP $FKLFNV DWWDFNLQJ WKHLU VLEOLQJV LQ RUGHU WR HVWDEOLVK GRPLQDQFH )RRGLQGHSHQGHQW ILJKWLQJ GXULQJ WKH HDUO\ QHVWOLQJ SHULRG PD\ DOVR EHQHILW %FKLFNV SDUWLFXODUO\ LI WKH\ DUH FORVH LQ VL]H DQGRU DJH WR WKHLU $VLEOLQJV 7KLV LV EHFDXVH %FKLFNV PD\ EH EHWWHU DEOH WR UHYHUVH WKH GRPLQDQFH RUGHU HDUO\ LQ WKH QHVWOLQJ SHULRG EHIRUH WKH $FKLFNnV GRPLQDQFH DQG IHHGLQJ DGYDQWDJHV PDJQLI\ LWV VL]H DQG FRPSHWLWLYH VXSHULRULW\ WR VXFK D GHJUHH WKDW WKH FRVWV RI DWWHPSWLQJ D UHYHUVDO RXWZHLJK WKH XQOLNHO\ FKDQFHV IRU VXFFHVV 3DUHQWV VHW XS WKH LQLWLDO DJH GLVSDULWLHV 7KLV VXJJHVWV WKDW WKH ILWQHVV LQWHUHVWV RI ERWK $FKLFNV DQG SDUHQWV PLJKW EH VHUYHG E\ IRRGLQGHSHQGHQW ILJKWLQJ WR HVWDEOLVK WKH GRPLQDQFH KLHUDUFK\ HDUO\ LQ WKH QHVWOLQJ SHULRG EXW VHH 0DJUDWK IRU RWKHU H[SODQDWLRQV RI KDWFKLQJ DV\QFKURQ\f %URRG 5HGXFWLRQ DV D 3URGXFW RI 3DUHQW2IIVSULQJ &RQIOLFW 0RVW H[SODQDWLRQV RI EURRG UHGXFWLRQ SURSRVH DQ DGDSWLYH YDOXH WR SDUHQWV WKDW SURGXFH PRUH RIIVSULQJ WKDQ

PAGE 169

WKH\ FDQ IHHG UHYLHZHG LQ )RUEHV DQG VHH GLVFXVVLRQV LQ &KDSWHUV DQG f 5HFHQWO\ PRGHOV DSSO\LQJ NLQVKLS WKHRU\ +DPLOWRQ f WR WKH SUREOHP KDYH GHPRQVWUDWHG WKDW EURRG UHGXFWLRQ PD\ LQYROYH FRQIOLFW EHWZHHQ SDUHQWV DQG WKHLU VHQLRU RIIVSULQJ UHYLHZHG LQ *RGIUD\ DQG 3DUNHU f 2QH DVVXPSWLRQ LV EDVLF WR ERWK WKH K\SRWKHVHV WKDW SRVHG DQ DGDSWLYH YDOXH WR EURRG UHGXFLQJ SDUHQWV DQG WR WKHVH UHFHQW PRGHOV SUHGLFWLQJ SDUHQW RIIVSULQJ FRQIOLFW RYHU EURRG UHGXFWLRQ $OO DVVXPH WKDW SDUHQWV GHOLYHU D IL[HG DPRXQW RI IRRG DQG WKDW IROORZLQJ EURRG UHGXFWLRQ VXUYLYRUV JDLQ QRW RQO\ D KLJKHU SURSRUWLRQ RI IRRG EXW PRUH LQ DQ DEVROXWH VHQVH DV ZHOO VHH &KDSWHUV DQG IRU UHYLHZV RI WKH DVVXPSWLRQV RI HDUOLHU K\SRWKHVHV DQG 2n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU *RGIUD\ DQG 3DUNHU IRU PRGHOV RI VLEOLFLGH WKDW SUHGLFW SDUHQWRIIVSULQJ FRQIOLFWf 0\ H[SHULPHQWDO PDQLSXODWLRQV RI EURRG VL]H SURYLGH LQWULJXLQJ EXW LQFRQFOXVLYH HYLGHQFH DJDLQVW WKH DVVXPSWLRQ WKDW EURRG UHGXFWLRQ FRQIHUV DQ LPPHGLDWH IRRG JDLQ WR VXUYLYRUV &KDSWHU f ,Q WKH ILUVW GD\V SRVWWUHDWPHQW SDUHQWV GHOLYHUHG VLPLODU DPRXQWV WR HQODUJHG FRQWURO DQG UHGXFHG EURRGV %XW VHQLRUV GLG QRW JDLQ H[WUD IRRG LQ UHGXFHG EURRGV 7KLV FRXOG PHDQ WKDW EURRG UHGXFWLRQ GRHV QRW SURYLGH VXUYLYRUV ZLWK D IHHGLQJ DGYDQWDJH LQ WKLV VSHFLHV %XW LW LV DOVR OLNHO\ WKDW WKH ODFN RI GLIIHUHQFHV DPRQJ WUHDWPHQWV ZDV GXH WR VPDOO VDPSOH VL]HV DQG WKH EULHI

PAGE 170

SHULRG GXULQJ ZKLFK WKH WUHDWPHQWV UHPDLQHG LQ HIIHFW &KDSWHU f 6WURQJHU HYLGHQFH DJDLQVW WKH DVVXPSWLRQ ZDV SURYLGHG E\ P\ FRPSDULVRQ RI UHGXFHG YHUVXV FRQWURO EURRGV GD\V SRVWWUHDWPHQW 'XULQJ WKLV SHULRG SDUHQWV GHFUHDVHG GHOLYHULHV WR H[SHULPHQWDOO\ UHGXFHG EURRGV 7KXV $ DQG %FKLFNV GLG QRW JDLQ DGGLWLRQDO IRRG IROORZLQJ WKH HOLPLQDWLRQ RI WKHLU MXQLRU &f VLEOLQJ $OWKRXJK FOHDUO\ DEOH WR GHOLYHU PRUH IRRG WR UHGXFHG EURRGV SDUHQWV H[HUFLVHG UHVWUDLQW E\ ZLWKKROGLQJ IRRG IURP WKHVH EURRGV 6XFK UHVWUDLQW PD\ RSWLPL]H OLIHWLPH UHSURGXFWLYH VXFFHVV RI SDUHQWV DV VHHPV OLNHO\ IRU DW OHDVW RQH 3HOHFDQLIRUP WKH 6RXWK $IULFDQ JDQQHW 6XOD FDSHQVLV -DUYLV f ,Q WKLV VSHFLHV DQG DOVR LQ WKH URRN &RUYXV IUXDLOHFUXV 5SVNDIW f XQXVXDOO\ KLJK LQYHVWPHQW LQ RQH VHDVRQ GHSUHVVHG SDUHQWDO UHSURGXFWLRQ LQ WKH IROORZLQJ VHDVRQ 3DUHQWDO UHVWUDLQW LV OLNHO\ WR IRVWHU FRQIOLFW EHWZHHQ SDUHQWV ZKR IDYRU GHFUHDVHG LQYHVWPHQW LQ FXUUHQW RIIVSULQJf DQG WKHLU FXUUHQW RIIVSULQJ ZKR IDYRU LQFUHDVHG LQYHVWPHQW 7ULYHUV f ,Q WKH VPDOO VDPSOH RI VSHFLHV IRU ZKLFK GDWD RQ IHHGLQJ KDYH EHHQ UHSRUWHG SDUHQWV JHQHUDOO\ GHFUHDVH IRRG VXSSOLHG WR FKLFNV LQ UHGXFHG UHODWLYH WR FRQWURO RU HQODUJHG EURRGV UHYLHZHG LQ &KDSWHU f 7KLV UDLVHV WKH SRVVLELOLW\ WKDW IRRG WR RQH RU ERWK VHQLRUV PLJKW DFWXDOO\ GHFUHDVH IROORZLQJ EURRG UHGXFWLRQ 7KLV SRVVLELOLW\ UHPDLQV XQWHVWHG %XW LI D VHQLRU VXIIHUV

PAGE 171

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n&RQQRU 3DUNHU DQG 0RFN *RGIUD\ DQG +DUSHU f :KHQ FDVHV RI FOXWFK VL]HV ODUJHU WKDQ WZR DUH PRGHOOHG WKHVH PRGHOV DVVXPH WKDW VHQLRUV DUH LGHQWLFDO LQ WKHLU YDOXH WR SDUHQWV 7KLV VHHPV WR EH D YDOLG DVVXPSWLRQ IRU VRPH VSHFLHV VXFK DV WKH WKUHHFKLFN EURRGV RI FDWWOH HJUHWV WKDW ZHUH VWXGLHG E\ 3ORJHU DQG 0RFN f ,Q WKLV VSHFLHV FRPSHWLWLYH GLVDGYDQWDJHV ZHUH FRQFHQWUDWHG RQ WKH &FKLFN UXQW ZLWK VHQLRUV REWDLQLQJ IRRG ZLWK VLPLODU VXFFHVV %XW VHQLRUV ZHUH QRW LGHQWLFDO LQ EURZQ SHOLFDQ EURRGV $FKLFNV JDLQHG PRUH IRRG WKDQ GLG %FKLFNV ZKR JDLQHG PRUH WKDQ GLG & FKLFNV VHH DOVR 3LQ]Q DQG 'UXPPRQG LQ SUHVVf +DWFKLQJ DV\QFKURQ\ QRW RQO\ FUHDWHG D UXQW EXW DOVR FUHDWHG D FRPSHWLWLYH KLHUDUFK\ DPRQJ VHQLRUV 7KH VXUYLYDO SURVSHFWV RI %FKLFNV ZHUH ORZHU WKDQ WKRVH RI WKHLU $VLEOLQJV O\LQJ VRPHZKHUH EHWZHHQ WKRVH RI $ DQG &FKLFNV 6FKUHLEHU 3LQ]Q DQG 'UXPPRQG LQ SUHVV &KDSWHU f %HFDXVH RI WKLV

PAGE 172

KLHUDUFK\ WKH FRVWV RI EURRG UHGXFWLRQ PLJKW GLIIHU EHWZHHQ $ DQG %FKLFNV :KHQ GLVDGYDQWDJHV LQFUHDVH LQ D VWHSZLVH IDVKLRQ GRZQ WKH KDWFKLQJ KLHUDUFK\ WKH ILWQHVV LQWHUHVWV RI SDUHQWV PD\ FRQIOLFW ZLWK WKRVH RI RQH VHQLRU DQG QRW WKH RWKHU VHQLRU RIIVSULQJ 0RGHOV QHHG WR EH GHYHORSHG WR SUHGLFW ZKHQ FRQIOLFW PD\ DULVH EHWZHHQ SDUHQWV DQG HDFK RI WKHLU VHQLRU DV ZHOO DV UXQW RIIVSULQJ ZKHQ VHQLRUV GLIIHU LQ WKHLU FRPSHWLWLYH DELOLWLHV 3DUNHU DQG FROOHDJXHV f LQFOXGHG GLIIHUHQFHV LQ FRPSHWLWLYH DELOLWLHV RI VLEOLQJV LQ WKHLU PRGHOV RI VLEOLQJ FRPSHWLWLRQ RYHU SDUHQWDO LQYHVWPHQW 7KH\ PRGHOOHG RSWLPDO IRRG DSSRUWLRQPHQW WR $ % DQG &FKLFNV IURP WKH $FKLFNnV SHUVSHFWLYH 3DUNHU HW DO f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f ([WHQGLQJ WKLV PRGHO WR WKH FDVH RI WKUHH FKLFNV 3DUNHU HW DO f IRXQG WKDW ZKHQ

PAGE 173

UHVRXUFHV LQFUHDVH HDFK FKLFNn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f PDGH IRU WKH FDVH RI IRRG VFDUFLW\ )RRG VKDUHV GHFUHDVHG GRZQ WKH VL]HKLHUDUFK\ ZLWK $ DQG %FKLFN VKDUHV EHLQJ PRUH VLPLODU WKDQ ZHUH % DQG &FKLFN VKDUHV &KDSWHU f ,Q % QHVWV WKH GLIIHUHQFH LQ IRRG VKDUHV EHWZHHQ $ DQG %FKLFNV ZDV VLPLODU WR WKDW EHWZHHQ % DQG &FKLFNV &KDSWHU f 7KLV UHVXOW FRXOG EH HYLGHQFH DJDLQVW WKH SUHGLFWLRQ RI 3DUNHU HW DO f %XW LW LV DOVR OLNHO\ WKDW WKH ODFN RI GLIIHUHQFHV ZDV GXH WR WKH KLJK YDULDQFH LQ IRRG GHOLYHULHV WR % EURRGV &KDSWHU )LJXUH f DQG WKH DQRPDORXV VLWXDWLRQ RI KDYLQJ D IRXUWK QHVWOLQJ %URRGV UHFHLYLQJ PRUH WRWDO IRRG PD\ KDYH KDG D PRUH HTXDO GLVWULEXWLRQ RI IRRG DPRQJ QHVWOLQJV WKDQ EURRGV WKDW UHFHLYHG OHVV IRRG DV SUHGLFWHG E\ 3DUNHU HW DO f GLG QRW LQYHVWLJDWH ZKHWKHU WKHUH ZDV DQ

PAGE 174

DVVRFLDWLRQ EHWZHHQ WRWDO IRRG GHOLYHUHG DQG GLIIHUHQFHV LQ SDWWHUQV RI IRRG DSSRUWLRQPHQW 7KH UHVXOWV IRU % EURRGV GD\V SRVWWUHDWPHQW VXJJHVW WKDW WKH QHVWOLQJ GRPLQDQFH KLHUDUFK\ HQDEOHG $ FKLFNV WR FRQWURO DQG RSWLPL]H IRRG DOORFDWLRQ SDWWHUQV DV DVVXPHG E\ WKH PRGHO RI 3DUNHU HW DO f 7KXV IRRG UHVRXUFHV ZHUH VNHZHG WRZDUG VHQLRU FKLFNV 7KLV FRXOG EH LQ FRQIOLFW ZLWK SDUHQWDO DWWHPSWV WR DOORFDWH IRRG HTXDOO\ DPRQJ DOO RIIVSULQJ %XW XQGHU FHUWDLQ FLUFXPVWDQFHV SDUHQWV PD\ QRW EHQHILW IURP HTXDO UHVRXUFH DSSRUWLRQPHQW DPRQJ WKHLU RIIVSULQJ ,QVWHDG SDUHQWV PD\ EHQHILW E\ LQYHVWLQJ LQ RIIVSULQJ DFFRUGLQJ WR WKH VXUYLYDO SURVSHFWV RI HDFK RIIVSULQJ VHH EHORZf ,I WKLV LV WKH FDVH WKHQ D VNHZ LQ IRRG GLVWULEXWLRQ WRZDUG VHQLRUV FRXOG HQKDQFH WKH ILWQHVV RI ERWK VHQLRU RIIVSULQJ DQG WKHLU SDUHQWV 3DUHQWDO LQWHUHVWV DUH JHQHUDOO\ DVVXPHG WR EH EHVW VHUYHG E\ DQ HTXDO SDUWLWLRQLQJ RI UHVRXUFHV DPRQJ DOO RIIVSULQJ HJ 7ULYHUV 2n&RQQRU 0DFQDLU DQG 3DUNHU 3DUNHU DQG 0DFQDLU f 7KLV LV EHFDXVH WKH SDUHQW LV HTXDOO\ UHODWHG WR DOO RI LWV RIIVSULQJ 6PLWK DQG )UHWZHOO f ZHUH WKH ILUVW WR VKRZ WKDW WKH SDUHQW VKRXOG LQYHVW LQ DOO RIIVSULQJ HTXDOO\ 7HPPH f SRLQWHG RXW WKDW WKLV SUHGLFWLRQ GHSHQGV RQ WKH DVVXPSWLRQ WKDW RIIVSULQJ ILWQHVV LV GHWHUPLQHG RQO\ E\ WKH SDUHQWnV OHYHO RI UHVRXUFH LQYHVWPHQW

PAGE 175

%XW RIIVSULQJ ILWQHVV PD\ EH GHWHUPLQHG E\ IDFWRUV RWKHU WKDQ SDUHQWDO LQYHVWPHQW VXFK DV JHQHWLF GLIIHUHQFHV 7HPPH f 6XFK RIIVSULQJ PD\ KDYH GLIIHUHQW ILWQHVV H[SHFWDWLRQV JLYHQ WKH VDPH OHYHO RI SDUHQWDO LQYHVWPHQW 7HPPH f ,Q WKLV VLWXDWLRQ 7HPPHnV f PRGHO GHPRQVWUDWHG WKDW SDUHQWDO ILWQHVV LV QRW PD[LPL]HG E\ HTXDO LQYHVWPHQW LQ DOO RIIVSULQJ ,QVWHDG WKH PRGHO SUHGLFWHG WKDW SDUHQWV VKRXOG HTXDOL]H DPRQJ RIIVSULQJ WKH PDUJLQDO UHWXUQ IURP DGGLWLRQDO LQYHVWPHQW 7KXV SDUHQWV VKRXOG VNHZ LQYHVWPHQW WRZDUG WKRVH RIIVSULQJ ZKRVH VXUYLYDO FKDQFHV DUH HQKDQFHG WKH PRVW E\ UHFHLYLQJ WKH DGGLWLRQDO LQYHVWPHQW +DLJ f DSSOLHG WKLV DSSURDFK WR H[DPLQH ZKHQ SDUHQWV VKRXOG DERUW UDWKHU WKDQ SURYLVLRQ D ORZ TXDOLW\ RIIVSULQJ /RZTXDOLW\ KHUH UHIHUV WR DQ RIIVSULQJ ZKRVH ILWQHVV LV HQKDQFHG OHVV E\ D XQLW RI SDUHQWDO LQYHVWPHQW WKDQ WKH ILWQHVV HQKDQFHPHQW WKDW D KLJKTXDOLW\ RIIVSULQJ ZRXOG JDLQ IURP WKH VDPH XQLW 7KHVH PRGHOV ZHUH GHYHORSHG IRU WKH SUREOHP RI VHHG DERUWLRQ LQ SODQWV ZKHUH TXDOLWDWLYH GLIIHUHQFHV DPRQJ RIIVSULQJ DUH GXH WR GHYHORSPHQWDO DQG JHQHWLF GLIIHUHQFHV 7HPPH f GLVFXVVHG WZR ZD\V WKDW JHQHWLF GLIIHUHQFHV FRXOG FDXVH RIIVSULQJ WR GLIIHU LQ WKHLU ILWQHVV JDLQV IURP WKH VDPH OHYHO RI SDUHQWDO LQYHVWPHQW )LUVW JHQHWLF GLIIHUHQFHV FRXOG DIIHFW WKH FRQYHUVLRQ RI SDUHQWDOO\ SURYLGHG UHVRXUFHV LQWR RIIVSULQJ VXUYLYDO 6HFRQG JHQHWLF

PAGE 176

GLIIHUHQFHV FRXOG DIIHFW IXWXUH JURZWK DQG UHSURGXFWLRQ IROORZLQJ GHSOHWLRQ RI SDUHQWDOO\SURYLGHG UHVRXUFHV ,Q DV\QFKURQRXVO\ KDWFKLQJ ELUGV JHQHWLF GLIIHUHQFHV DPRQJ QRUPDO DV RSSRVHG WR PDOIRUPHGf QHVWOLQJV DUH XQOLNHO\ WR KDYH PXFK LQIOXHQFH RQ ILWQHVV UHODWLYH WR GLIIHUHQFHV LQ DJHV DQG VL]HV RI FKLFNV %XW QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH PLJKW FDXVH RIIVSULQJ WR GLIIHU LQ WKHLU DELOLWLHV WR FRQYHUW SDUHQWDO UHVRXUFHV LQWR RIIVSULQJ VXUYLYDO )RU H[DPSOH LQWLPLGDWHG MXQLRU FKLFNV PD\ VWD\ DW WKH HGJH RI WKH QHVW UDWKHU WKDQ EH EURRGHG RU VKDGHG E\ WKH SDUHQW SHUV REVf 7KLV FRXOG FDXVH MXQLRU FKLFNV WR EH H[SRVHG PRUH RIWHQ WR FROG RU KHDW VWUHVV WKDQ WKHLU VHQLRU VLEOLQJV 6XFK VWUHVV FRXOG UHGXFH D FKLFNnV HIILFLHQF\ LQ FRQYHUWLQJ IRRG WR JURZWK DQG VXUYLYDO 2n&RQQRU f 5HSDLU RI WLVVXH GDPDJHG GXULQJ VLEOLQJ DWWDFNV HJ &KDSWHU f FRXOG DOVR GHFUHDVH UHVRXUFHV DYDLODEOH IRU JURZWK DQG VXUYLYDO RI WKH MXQLRUf YLFWLPV UHODWLYH WR WKHLU VHQLRUf DWWDFNHUV %XW VHQLRU FKLFNV WKDW DWWDFN WKHLU VLEOLQJV PD\ H[SHULHQFH HQHUJHWLF FRVWV RI ILJKWLQJ 7KHVH FRVWV FRXOG FRQFHLYDEO\ GHFUHDVH D VHQLRU FKLFNnV HIILFLHQF\ LQ FRQYHUWLQJ IRRG WR VXUYLYDO UHODWLYH WR LWV VXERUGLQDWH MXQLRU VLEOLQJV 1HVWOLQJ ILJKWLQJ DQG GRPLQDQFH PLJKW DOVR DIIHFW IXWXUH UHSURGXFWLRQ $GXOW RIIVSULQJ WKDW ZHUH VXERUGLQDWH DV QHVWOLQJV PD\ GLIIHU EHKDYLRUDOO\ IURP DGXOW RIIVSULQJ WKDW ZHUH GRPLQDQW DV QHVWOLQJV 7KLV PLJKW RFFXU HYHQ LI

PAGE 177

ERWK UHFHLYHG WKH VDPH WRWDO SDUHQWDO LQYHVWPHQW GXULQJ WKH QHVWOLQJ SHULRG 7KHUH LV VRPH HYLGHQFH WKDW QHVWOLQJ VRFLDO H[SHULHQFH DIIHFWV SRVWIOHGJLQJ EHKDYLRU ,Q GRPHVWLF FKLFNHQV *DOOXV GRPHVWLFXVf TXDLO &RWXUQL[ e MDSQLFDf DQG UHG JURXVH /DDRSXV ODJRSXV VFRWLFXVf SRVLWLRQ LQ WKH QHVWOLQJ GRPLQDQFH KLHUDUFK\ FRUUHODWHV ZLWK VXFFHVV GXULQJ HQFRXQWHUV ZLWK QRQVLEOLQJV DIWHU IOHGJLQJ %RDJ DQG $OZD\ 5DMHFNL HW DO f 'RPLQDQFH GXULQJ WKH QHVWOLQJ SHULRG PLJKW FRUUHODWH ZLWK LQFUHDVHG DELOLW\ RI DGXOWV WR VHFXUH RU JXDUG PDWHV QHVWV RU WHUULWRULHV 7KLV FRXOG OHDG WR ORZHU UHSURGXFWLYH VXFFHVV RI ELUGV WKDW ZHUH VXERUGLQDWH UDWKHU WKDQ GRPLQDQW DV QHVWOLQJV 7KH HIIHFW RI QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH RQ f WKH HIILFLHQF\ RI FRQYHUVLRQ RI SDUHQWDO UHVRXUFHV WR QHVWOLQJ VXUYLYDO DQG f IXWXUH UHSURGXFWLRQ UHPDLQV WR EH LQYHVWLJDWHG %XW VXJJHVW WKDW QHVWOLQJ ILJKWLQJ DQG GRPLQDQFH PD\ FDXVH $ % DQG &FKLFNV WR GLIIHU LQ WKHLU ILWQHVV JDLQV IURP WKH VDPH DPRXQW RI SDUHQWDO LQYHVWPHQW ,I WKLV LV VR WKHQ WKH PRGHOV RI 7HPPH f DQG +DLJ f PLJKW EH DSSOLFDEOH WR DV\QFKURQRXVO\ KDWFKLQJ ELUGV 7KXV SDUHQWV PLJKW LQYHVW GLVSURSRUWLRQDWHO\ LQ RIIVSULQJ ZKRVH ILWQHVV JDLQV DUH EHVW HQKDQFHG E\ WKDW LQYHVWPHQW 7R HYDOXDWH WKH SRWHQWLDO IRU SDUHQWRIIVSULQJ FRQIOLFW LQ WKH VLWXDWLRQ ZKHUH SDUHQWDO ILWQHVV LV PD[LPL]HG E\ XQHTXDO LQYHVWPHQW LQ RIIVSULQJ ZLOO UHTXLUH FRPELQLQJ WKH

PAGE 178

DSSURDFKHV RI 7HPPH f DQG +DLJ f ZLWK WKDW RI 3DUNHU HW DO f ,Q EURRGUHGXFLQJ VSHFLHV QHVWOLQJ VXUYLYDO LV UHODWHG ERWK WR EURRG VL]H DQG WR SDUHQWDO LQYHVWPHQW 7KHUHIRUH 3DUNHU DQG 0RFN f DGYLVHG WKDW PRGHOV VKRXOG LQFOXGH LQ WKH VDPH DQDO\VHV ERWK WKH HIIHFWV RI EURRG UHGXFWLRQ DQG RI QHVWOLQJV WDNLQJ XQHTXDO VKDUHV RI UHVRXUFHV /D]DUXV DQG ,QJOLV f H[SORUHG ERWK WKH HIIHFWV RI EURRG UHGXFWLRQ DQG SDUHQWDO LQYHVWPHQW %XW WKH\ GLG QRW WDNH LQWR DFFRXQW SRWHQWLDO GLIIHUHQFHV LQ FRPSHWLWLYH DELOLWLHV DPRQJ RIIVSULQJ ,GHDOO\ DOO RI WKHVH IDFWRUV EURRG UHGXFWLRQ SDUHQWDO LQYHVWPHQW SDWWHUQV DQG FRPSHWLWLYH GLIIHUHQFHV DPRQJ QHVWOLQJVf VKRXOG EH HQWHUHG LQWR WKH VDPH PRGHO 0\ GLVVHUWDWLRQ LGHQWLILHV DUHDV RI SRWHQWLDO FRQIOLFW EHWZHHQ EURZQ SHOLFDQ SDUHQWV DQG WKHLU RIIVSULQJ H[SORUH WKH SRVVLELOLW\ WKDW WKH FRPSHWLWLYH KLHUDUFK\ WKDW REVHUYHG EHWZHHQ VHQLRU FKLFNV PD\ FUHDWH D VLWXDWLRQ ZKHUH WKH ILWQHVV LQWHUHVWV RI SDUHQWV PD\ EH LQ FRQIOLFW ZLWK WKRVH RI RQH EXW QRW WKH RWKHU VHQLRU RIIVSULQJ )XUWKHU H[SHULPHQWV ZLOO EH QHHGHG WR H[SORUH SRWHQWLDO GLIIHUHQFHV EHWZHHQ WKH LQWHUHVWV RI SDUHQWV DQG HDFK RI WKHLU RIIVSULQJ DQG WR GHWHUPLQH KRZ DQ\ FRQIOLFWV DUH UHVROYHG

PAGE 179

$33(1',; $ '(7(50,1,1* &+,&. $*(6 SORWWHG DJH DJDLQVW FXOPHQ OHQJWK IRU NQRZQDJH FKLFNV $ % DQG &FKLFNVf ZKRVH FXOPHQ OHQJWKV ZHUH PHDVXUHG ZKHQ WKH FKLFNV ZHUH GD\V ROG )LJXUH $ f 7KH FXOPHQ OHQJWKV RI WKHVH FKLFNV RI NQRZQ DJHV ZHUH FRUUHODWHG ZLWK DJH )LJXUH $O 1 REVHUYDWLRQV UA 3 f 6FKUHLEHU f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f )XUWKHUPRUH IRU GD\ ROG FKLFNV WKH GLIIHUHQFH ZDV QRW LQ WKH SUHGLFWHG GLUHFWLRQ $W WKLV DJH

PAGE 180

FXOPHQ OHQJWKV RI &FKLFNV H[FHHGHG WKRVH RI %FKLFNV 7DEOH $f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f 7KXV E\ SRROLQJ P\ GDWD PD\ KDYH RYHUHVWLPDWHG WKH DJHV RI $FKLFNV DQG XQGHUHVWLPDWHG WKH DJHV RI &FKLFNV GLG QRW XVH FXOPHQ OHQJWKV WR HVWLPDWH DJHV RI FKLFNV OLNHO\ WR EH PRUH WKDQ GD\V ROG $IWHU WKLV DJH FXOPHQ OHQJWKV GLYHUJH EHWZHHQ VHQLRU DQG MXQLRU FKLFNV RI WKH VDPH DJH ZLWK $FKLFNV KDYLQJ UHODWLYHO\ ORQJHU ELOOV WKDQ WKHLU MXQLRUV DW WKH VDPH DJH 3UHVXPDEO\ WKH $FKLFNVn ELOOV JURZ PRUH EHFDXVH $FKLFNV JHW PRUH IRRG WKDQ WKHLU MXQLRUV &KDSWHU f 7KH PHDQ DJH DW ZKLFK $FKLFN FXOPHQV ILUVW H[FHHGHG WKRVH RI WKHLU MXQLRU VLEOLQJV E\ DW OHDVW PP ZDV f GD\V IRU NQRZQDJH $% SDLUV DQG sf GD\V IRU NQRZQDJH %& SDLUV IRU DQ RYHUDOO PHDQ RI s

PAGE 181

GD\V 7KXV DIWHU WKH PLQLPXP DJH RI GD\V FXOPHQV RI MXQLRU DQG VHQLRU FKLFNV PD\ EH GLYHUJLQJ DQG EH XQUHOLDEOH LQGLFDWRUV RI FKLFN DJH 7R HVWLPDWH DJHV RI FKLFNV ROGHU WKDQ GD\V FRPSDUHG WKH VNLQ FRORUV DQG SOXPDJHV RI FKLFNV RI XQNQRZQ DJHV ZLWK WKRVH RI NQRZQDJH FKLFNV 7DEOH $f DOVR XVHG 7DEOH $ WR HVWLPDWH WKH DJHV RI FKLFNV XQGHU GD\V ROG LQ EHFDXVH LQ WKDW \HDU GLG QRW PHDVXUH WKH FKLFNV 7KH DJH RI HDFK XQNQRZQDJH FKLFN ZDV HVWLPDWHG DV WKH PHGLDQ DJH RI NQRZQDJH FKLFNV ZKRVH GHVFULSWLRQV 7DEOH $f PDWFKHG WKDW RI WKH XQNQRZQDJH FKLFN

PAGE 182

7DEOH $ &XOPHQ OHQJWKV LQ PPf YHUVXV DJH LQ GD\Vf EDVHG RQ WKH UHJUHVVLRQ RI DJH RQ ,QFXOPHQ OHQJWKf IRU NQRZQDJH GD\ ROG FKLFNV &XOPHQ /HQJWKV $JH

PAGE 183

7DEOH $ 5HVXOWV RI VHSDUDWH VWDWLVWLFDO WHVWV IRU FKLFNV RI HDFK DJH GD\V WR GHWHUPLQH LI ELOO OHQJWKV GLIIHUHG DPRQJ $ % DQG &FKLFNV RI HDFK DJH %LOO OHQJWKV DUH SUHVHQWHG DV WKH PHDQ UDQNV RI ,QFXOPHQ OHQJWKf &XOPHQV ZHUH PHDVXUHG LQ PP 6DPSOH VL]HV DUH HQFORVHG LQ SDUHQWKHVHV &KLFN $JH 0HDQ UDQN RI ,QFXOPHQ OHQJWKf IRU $FKLFNV %FKLFNV &FKLFNV 7HVW 6WDWLVWLF 3 f f f +D f f f + r f f f + r f f f + f f f + f f f + f f f + f f f + r f f f + f f 8E f ‘ f 8 D+ LQGLFDWHV WDLOHG .UXVNDO:DOOLV WHVW + LV FRUUHFWHG IRU WLHV E8 LQGLFDWHV WDLOHG 0DQQ:KLWQH\ 8 WHVW XVHG EHFDXVH GDWD IRU FKLFNV RI WKLV DJH ZHUH DYDLODEOH RQO\ IRU WZR FKLFN UDQNV r,QGLFDWHV VLJQLILFDQW GLIIHUHQFHV DW 3

PAGE 184

7DEOH $ 6NLQ FRORUV DQG SOXPDJH GHVFULSWLRQV IRU FKLFNV RI NQRZQ DJHV 7KH DJHV RI VRPH FKLFNV XQGHU GD\V ROG ZHUH HVWLPDWHG IURP WKH FXOPHQOHQJWK UHJUHVVLRQf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

PAGE 185

/QFXOPHQ OHQJWKf PPf )LJXUH $O 5HJUHVVLRQ RI OQFXOPHQ OHQJWKf YHUVXV FKLFN DJH IRU NQRZQDJH GD\ ROG FKLFNV RI DOO UDQNV &KLFN DJH ; ,Q RI FXOPHQ OHQJWK U 3

PAGE 186

$33(1',; % '(7(50,1,1* &/87&+ 6,=(6 $OO DQDO\VHV WKDW PDNH XVH RI FOXWFK VL]H LQIRUPDWLRQ LQFOXGH RQO\ FKLFNV IURP QHVWV LQ ZKLFK WKH LQLWLDO FOXWFK VL]H FRXOG EH GHWHUPLQHG FRQVLGHUHG WKH FOXWFK VL]H WR EH NQRZQ LQ QHVWV WKDW ILUVW IRXQG ZKHQ WKH\ FRQWDLQHG f HJJV DW WKH HQG RI LQFXEDWLRQ f RQH RU WZR KDWFKOLQJV HVWLPDWHG WR EH QR ROGHU WKDQ GD\V RU f WKUHH KDWFKOLQJV RI DQ\ DJH DVVXPHG WKDW WKUHHFKLFN EURRGV KDWFKHG IURP WKUHHHJJ FOXWFKHV EHFDXVH IRXUHJJ FOXWFKHV ZHUH H[WUHPHO\ UDUH $PRQJ QHVWV ZKRVH FOXWFK VL]HV ZHUH GHWHUPLQHG IURP GLUHFW REVHUYDWLRQV RI WKH HJJV IRXUHJJ FOXWFKHV RFFXUUHG LQ QRQH RI QHVWV LQ DQG RQH RI QHVWV LQ 6LPLODU YDOXHV KDYH EHHQ REWDLQHG E\ RWKHU ZRUNHUV WZR RI QHVWV FRQWDLQHG IRXU HJJV LQ D 1RUWK &DUROLQD SRSXODWLRQ 0 6KLHOGV SHUV FRPPf ,Q VRPH DQDO\VHV FRPSDUHG WKH IDWHV RI FKLFNV IURP FOXWFKHV RI WZR RU WKUHH HJJV )RU RWKHUV EURRGV RI WZR RU WKUHH FKLFNV ZHUH FRPSDUHG RPLWWLQJ FOXWFKHV LQ ZKLFK RQH RU PRUH FKLFNV IDLOHG WR KDWFK

PAGE 187

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f DQG DGXOWV DUH ORZHU WKDQ WKRVH LW ZRXOG IDFH IURP DWWDFNV E\ LQYDGLQJ DGXOWV RU ODUJHU FKLFNV LI LW UHPDLQHG RQ LWV RZQ QHVW 6LPLODUO\ D FKLFN WKDW MRLQV DQRWKHU PD\ EH OHVV OLNHO\ WR EH NLOOHG E\ D SUHGDWRU (YDQV f DOWKRXJK NQRZ RI QR QHVW SUHGDWRUV RI HDVWHUQ EURZQ SHOLFDQV WKDW WDNH \RXQJ DV ODUJH DV WKRVH WKDW DUH DEOH WR ZDQGHU WR RWKHU QHVWV 7KHUH PD\ DOVR EH WKHUPDO DGYDQWDJHV WR DVVRFLDWLQJ ZLWK DQRWKHU FKLFN %DUWKRORPHZ DQG 'DZVRQ (YDQV f ZKLFK PD\ PDNH LQYDGLQJ D ZRUWKZKLOH VWUDWHJ\ DV ORQJ DV WKH ULVN RI EHLQJ DWWDFNHG E\ D UHVLGHQW LV ORZ 7KH H[WHQW RI FKLFN PRYHPHQWV DPRQJ QHLJKERULQJ QHVWV ZDV OLPLWHG E\ WKH VWUXFWXUH RI WKH WUHH FDQRS\ WKDW FRQWDLQHG WKH QHVWV LQ WKLV VWXG\ 6XFK ZDQGHULQJ LV PXFK PRUH H[WHQVLYH DPRQJ

PAGE 188

SRSXODWLRQV RI JURXQGQHVWLQJ EURZQ SHOLFDQV ZKRVH FKLFNV OHDYH WKHLU QHVWV ZKHQ ZHHNV ROG %HQW %OXV DQG .HDKH\ .HLWK 3LQ]Q DQG 'UXPPRQG LQ SUHVVf DQG VRPHWLPHV IRUP FUHFKHV %HQW 3LQ]Q DQG 'UXPPRQG LQ SUHVV 0 6KLHOGV SHUV FRPPf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f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

PAGE 189

IOLPV\ QHVWV WKDW VRRQ IHOO DSDUW DQG WKDW SUHVXPDEO\ VHUYHG RQO\ D OHDUQLQJ IXQFWLRQ 'LQ DQG (OWULQJKDP f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f DQG 6FKUHLEHU f DQG DPRQJ $XVWUDOLDQ SHOLFDQV 9HVWMHQV f DQG SLQNEDFNHG SHOLFDQV 'LQ DQG (OWULQJKDP f 6WLFN WKLHYHU\ LV QRW QHFHVVDULO\ UHVWULFWHG WR WKH QHVWEXLOGLQJ SHULRG $IWHU FKLFNV DUH DEOH WR VWDQG DQG ZDON SDUHQWV SHULRGLFDOO\ GHOLYHU VWLFNV WR WKHLU RIIVSULQJ ZKR PDQLSXODWH WKH VWLFNV DQG VRPHWLPHV LQVHUW WKHP LQWR WKH QHVW FRQWUD 6FKUHLEHU f 7KLV VWLFN SODFHPHQW GRHV QRW LQFUHDVH WKH VL]H RI WKH QHVW EHFDXVH

PAGE 190

FKLFNV SXOO RXW PRUH VWLFNV WKDQ WKH\ DGG 7KH\ HYHQWXDOO\ GHVWUR\ WKHLU RZQ QHVWV 6FKUHLEHU DQG SHUV REVf $GXOWV PD\ DOVR DWWDFN QHLJKERULQJ FKLFNV ZKLOH VWHDOLQJ VWLFNV WR GHOLYHU WR WKHLU RZQ RIIVSULQJ $OWHUQDWLYHO\ DWWDFNV E\ QHLJKERULQJ DGXOWV PD\ KDYH EHHQ SUHHPSWLYH RU UHWDOLDWLYH VWULNHV WR SUHYHQW WKH YLFWLPV IURP HQWHULQJ WKH DWWDFNHUnV RZQ QHVW WR DWWDFN WKH UHVLGHQWV RU DWWHPSW WR VWHDO IRRG ,QIDQWLFLGDO DWWDFNV PLJKW FRQFHLYDEO\ DOVR RFFXU GXULQJ DWWHPSWV E\ DGXOWV RU LPPDWXUHV WR FRSXODWH ZLWK QHVWOLQJV $GXOW SLQNEDFNHG SHOLFDQV DQG $PHULFDQ DQG $IULFDQ ZKLWH SHOLFDQV KDYH EHHQ UHSRUWHG WR PDNH VH[XDO DWWDFNV RQ XQDWWHQGHG QHVWOLQJV 6FKDOOHU %URZQ DQG 8UEDQ 'LQ DQG (OWULQJKDP f QHYHU REVHUYHG DQ\ FRSXODWLRQ DWWHPSWV WKDW LQYROYHG EURZQ SHOLFDQ QHVWOLQJV

PAGE 191

$33(1',; 1(67 7$.(29(56 'XULQJ WDNHRYHUV DGXOWV NLOOHG WKH UHVLGHQW HJJV RU QHVWOLQJV SUHVXPDEO\ LQ SUHSDUDWLRQ IRU LQLWLDWLQJ D FOXWFK RI WKHLU RZQ %\ VXFFHVVIXOO\ WDNLQJ RYHU D QHVW WKH LQYDGLQJ ELUGV PD\ HQKDQFH WKHLU UHSURGXFWLYH VXFFHVV SRVVLEO\ E\ DOORZLQJ WKHP WR LQLWLDWH WKHLU FOXWFK PRUH UDSLGO\ RU HIILFLHQWO\ WKDQ LI WKH\ KDG WR HQJDJH LQ VWLFN FROOHFWLQJ DQG QHVWEXLOGLQJ 6FKUHLEHU f SUHVHQWHG GDWD VKRZLQJ ORZHU UHSURGXFWLYH VXFFHVV LQ RUGLQDU\ QHVWV WKDQ LQ WKH QHVWV ZKHUH HJJV ZHUH SUHVHQW GXULQJ RQH FHQVXV JRQH LQ WKH QH[W DQG SUHVHQW DJDLQ LQ D VXEVHTXHQW FHQVXV $OWKRXJK 6FKUHLEHU f LQWHUSUHWHG WKH ODWWHU QHVWV WR EH HYLGHQFH RI UHSODFHPHQW FOXWFKHV ODLG E\ WKH RULJLQDO XQPDUNHG SDLU VDZ DQ LGHQWLFDO SDWWHUQ LQ DQG EXW QR UHSODFHPHQW FOXWFKHV ZHUH ODLG LQ P\ VWXG\ ,Q DOO FDVHV WKHVH QHZ FOXWFKHV ZHUH ODLG IROORZLQJ WDNHRYHUV ZLWK WKH QHZ SDLU OD\LQJ HJJV 3ORJHU XQSXE GDWDf ,I VRPH RI WKH UHSODFHPHQW FOXWFKHV UHSRUWHG E\ 6FKUHLEHU f ZHUH DFWXDOO\ WDNHRYHUV WKHQ 6FKUHLEHUnV GDWD VXJJHVW WKDW WDNHRYHUV PD\ SUHVHQW D FRQVLVWHQW VRXUFH RI PRUWDOLW\ DFURVV \HDUV DQG FRORQLHV EHFDXVH b RI DOO QHVWV b SHU \HDU RYHU \HDUVf FRQWDLQHG VXFK FOXWFKHV .HLWK f REVHUYHG IRXU VXFFHVVIXO WDNHRYHUV DPRQJ &DOLIRUQLD

PAGE 192

EURZQ SHOLFDQV $OWKRXJK WKH DWWDFNHUV WRVVHG WKH UHVLGHQWVn HJJV IURP WKH QHVW LQ WKUHH RI WKHVH FDVHV .HLWK f GLG QRW UHSRUW ZKHWKHU DQ\ RI WKH LQYDGHUV ODLG QHZ FOXWFKHV 7DNHRYHUV KDYH DOVR EHHQ REVHUYHG DPRQJ $XVWUDOLDQ SHOLFDQV 9HVWMHQV f :KLOH VXFFHVVIXO WDNHRYHUV OHDG WR WRWDO FOXWFK RU EURRG ORVV XQVXFFHVVIXO DWWHPSWV PLJKW RFFDVLRQDOO\ OHDG WR SDUWLDO ORVVHV DJDLQVW ZKLFK WKH SUHVHQFH RI H[WUD FKLFNV PLJKW DFW DV LQVXUDQFH

PAGE 193

/,67 2) 5()(5(1&(6 $EDFXV &RQFHSWV 6WDWYLHZ 9HUVLRQ %HUNHOH\ $EDFXV &RQFHSWV ,QF $OH[DQGHU 5 7KH HYROXWLRQ RI VRFLDO EHKDYLRU $QQ 5HY (FRO 6\VW $QGHUVRQ (YROXWLRQ RI REOLJDWH VLEOLFLGH LQ ERRELHV $ WHVW RI WKH LQVXUDQFHHJJ K\SRWKHVLV $P 1DW $QGHUVRQ : t *UHVV ) 6WDWXV RI D QRUWKHUQ SRSXODWLRQ RI &DOLIRUQLD EURZQ SHOLFDQV &RQGRU $QGHUVRQ : *UHVV ) t 0DLV ) %URZQ SHOLFDQV LQIOXHQFH RI IRRG VXSSO\ RQ UHSURGXFWLRQ 2LNRV $QGHUVRQ : -XUHN 5 0 t .HLWK 2 7KH VWDWXV RI EURZQ SHOLFDQV DW $QDFDSD ,VODQG LQ &DOLI )LVK *DPH %DUWKRORPHZ $ -U t 'DZVRQ : 5 7HPSHUDWXUH UHJXODWLRQ LQ \RXQJ SHOLFDQV KHURQV DQG JXOOV (FRORJ\ %DUWOHWW )LOLDO FDQQLEDOLVP LQ EXU\LQJ EHHWOHV %HKDY (FRO 6RFLRELRO %HLVVHQJHU 6 5 ([SHULPHQWDO EURRG PDQLSXODWLRQV DQG WKH PRQRSDUHQWDO WKUHVKROG LQ VQDLO NLWHV $P 1DW %HLVVLQJHU 6 5 t :DOWPDQ 5 ([WUDRUGLQDU\ FOXWFK VL]H DQG KDWFKLQJ DV\QFKURQ\ RI D QHRWURSLFDO SDUURW $XN %HQW $ & /LIH +LVWRULHV RI 1RUWK $PHULFDQ 3HWUHOV DQG 3HOLFDQV DQG 7KHLU $OOLHV 1HZ
PAGE 194

%RDJ $ t $OZD\ + (IIHFW RI VRFLDO HQYLURQPHQW ZLWKLQ WKH EURRG RQ GRPLQDQFH UDQN LQ JDOOLQDFHRXV ELUGV 7HWUDRQLGDH DQG 3KDVLDQLGDHf &DQ =RRO %RDJ 3 7 t *UDQW 3 5 ,QWHQVH QDWXUDO VHOHFWLRQ LQ D SRSXODWLRQ RI 'DUZLQnV ILQFKHV *HRVRL]LQDHf LQ WKH *DODSDJRV 6FLHQFH %RUWRORWWL 5 :LHEH / t ,NR : 0 &DQQLEDOLVP RI QHVWOLQJ $PHULFDQ NHVWUHOV E\ WKHLU SDUHQWV DQG VLEOLQJV &DQ =RRO %UDXQ % 0 t +XQW / -U %URRG UHGXFWLRQ LQ EODFNOHJJHG NLWWLZDNHV $XN %URZQ / + t 8UEDQ ( 7KH EUHHGLQJ ELRORJ\ RI WKH JUHDW ZKLWH SHOLFDQ 3HOHFDQXV RQRFURWDOXV URVHXV DW /DNH 6KDOD (WKLRSLD ,ELV %U\DQW 0 t 7DWQHU 3 +DWFKLQJ DV\QFKURQ\ VLEOLQJ FRPSHWLWLRQ DQG VLEOLFLGH LQ QHVWOLQJ ELUGV VWXGLHV RI VZLIWOHWV DQG EHHHDWHUV $QLP %HKDY %U\DQW 0 t :HVWHUWHUS 5 7LPH DQG HQHUJ\ OLPLWV WR EURRG VL]H LQ KRXVH PDUWLQV 'HOLFKRQ XUELFDf $QLP (FRO %XFKKRO] 7 'HYHORSPHQWDO VHOHFWLRQ LQ YDVFXODU SODQWV %RW *D] &DVK t (YDQV 5 0 %URRG UHGXFWLRQ LQ WKH $PHULFDQ ZKLWH SHOLFDQ 3HOHFDQXV HUYWKURUKYQFKRVf %HKDY (FRO 6RFLRELRO &ODUN $ % 6F :LOVRQ 6 $YLDQ EUHHGLQJ DGDSWDWLRQV KDWFKLQJ DV\QFKURQ\ EURRG UHGXFWLRQ DQG QHVW IDLOXUH 4 5HY %LRO &RRSHU )DWDO VLEOLQJ DJJUHVVLRQ LQ SHOLFDQVD UHYLHZ 2VWULFK &RXUWQH\ & + t )RUUHVWHU +HOPLQWK SDUDVLWHV RI WKH EURZQ SHOLFDQ LQ )ORULGD DQG /RXLVLDQD 3URF +HOPLQWKRORJLFDO 6RF RI :DVKLQJWRQ

PAGE 195

&UDPS 6 t 6LPPRQV ( / +DQGERRN RI WKH %LUGV RI (XURSH WKH 0LGGOH (DVW DQG 1RUWK $IULFD 7KH %LUGV RI WKH :HVWHUQ 3DOHDUFWLF 9RO 2VWULFK WR 'XFNV 2[IRUG 2[IRUG 8QLY 3UHVV &ULYHOOL $ 6F 9L]L 7KH 'DOPDWLDQ SHOLFDQ 3HOHFDQXV FULVSXV %UXFK D UHFHQWO\ ZRUOG HQGDQJHUHG ELUG VSHFLHV %LRO &RQVHUY &URQPLOOHU 5 t 7KRPSVRQ & ) ([SHULPHQWDO PDQLSXODWLRQ RI EURRG VL]H LQ UHGZLQJHG EODFNELUGV $XN 'HPHQWLHY 3 t *ODGNRY 1 $ %LUGV RI WKH 6RYLHW 8QLRQ 9RO -HUXVDOHP ,VUDHO 3URJUDP IRU 6FLHQWLILF 7UDQVODWLRQV 'LDPRQG 0 1HZV DQG YLHZV &DXVHV RI GHDWK EHIRUH ELUWK 1DWXUH 'LQ 1 $ 6F (OWULQJKDP 6 %UHHGLQJ RI WKH SLQN EDFNHG SHOLFDQ 3HOHFDQXV UXIHVFHQV LQ 5ZHQ]RUL 1DWLRQDO 3DUN 8JDQGD ZLWK QRWHV RQ D FRORQ\ RI PDUDERX VWRUNV /HSWRSWLODV FUDPHQLIHUXV ,ELV 'RPLQH\ : t %OXPHU / 6 &DQQLEDOLVP RI HDUO\ OLIH VWDJHV LQ ILVKHV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 196

'UXPPRQG + 2VRUQR / 7RUUHV 5 *DUFLD &KHYHODV & t /DULRV + 0 6H[XDO VL]H GLPRUSKLVP DQG VLEOLQJ FRPSHWLWLRQ LPSOLFDWLRQV IRU DYLDQ VH[ UDWLRV $P 1DW (GZDUGV 7 & -U t &ROORS\ 0 : 2EOLJDWH DQG IDFXOWDWLYH EURRG UHGXFWLRQ LQ HDJOHV DQ H[DPLQDWLRQ RI IDFWRUV WKDW LQIOXHQFH IUDWULFLGH $XN (LFNZRUW 5 &DQQLEDOLVP DQG NLQ VHOHFWLRQ LQ /DELGRPHUD FOLYLFROOLV &ROHSWHUD &KU\VRPHOLGDHf $P 1DW (YDQV 5 0 6RPH FDXVDO DQG IXQFWLRQDO FRUUHODWHV RI FUHFKLQJ LQ \RXQJ ZKLWH SHOLFDQV &DQ =RRO )HOGPDQ *DJQRQ +RIPDQQ 5 t 6LPSVRQ 6WDWYLHZ 6( *UDSKLFV 9HUVLRQ %HUNHO\ $EDFXV &RQFHSWV ,QF )LQQH\ /DWVFKD 5 %HQQHWW % 0 t +VX 3 7DEOHV IRU 7HVWLQJ 6LJQLILFDQFH LQ D ; &RQWLQJHQF\ 7DEOH &DPEULGJH &DPEULGJH 8QLYHUVLW\ 3UHVV )LW]*HUDOG )LOLDO FDQQLEDOLVP LQ ILVKHV ZK\ GR SDUHQWV HDW WKHLU RIIVSULQJ" 7UHQGV (FRO (YRO )RUEHV / 6 ,QVXUDQFH RIIVSULQJ DQG WKH HYROXWLRQ RI DYLDQ FOXWFK VL]H WKHRU %LRO )RUEHV / 6 ,QVXUDQFH RIIVSULQJ DQG EURRG UHGXFWLRQ LQ D YDULDEOH HQYLURQPHQW WKH FRVWV DQG EHQHILWV RI SHVVLPLVP 2LNRV )UDQN / *OLFNPDQ 6 ( t /LFKW 3 )DWDO VLEOLQJ DJJUHVVLRQ SUHFRFLDO GHYHORSPHQW DQG DQGURJHQV LQ QHRQDWDO VSRWWHG K\HQDV 6FLHQFH )UDVHU %HKDYLRUDO SHUVSHFWLYHV RQ SLJOHW VXUYLYDO 5HSURGXFWLRQ DQG )HUWLOLW\ 6XSSOHPHQW )XMLRND 0 )RRG GHOLYHU\ DQG VLEOLQJ FRPSHWLWLRQ LQ H[SHULPHQWDOO\ HYHQDJHG EURRGV RI WKH FDWWOH HJUHW %HKDY (FRO 6RFLRELRO

PAGE 197

*DUG 1 : t %LUG 0 %UHHGLQJ EHKDYLRU RI $PHULFDQ NHVWUHOV UDLVLQJ PDQLSXODWHG EURRG VL]HV LQ \HDUV RI YDU\LQJ SUH\ DEXQGDQFH :LOVRQ %XOO *DUJHWW 9 6LEOLQJ DJJUHVVLRQ LQ WKH EODFN HDJOH LQ WKH 0DWRSRV 5KRGHVLD 2VWULFK *HUUDUG t %RUWRORWWL 7KH %DOG (DJOH :DVKLQJWRQ '& 6PLWKVRQLRQ ,QVWLWXWH 3UHVV *LOPRUH 5 'RGULOO : t /LQOH\ 3 $ 5HSURGXFWLRQ DQG HPEU\RQLF GHYHORSPHQW RI WKH VDQG WLJHU VKDUN 2GRQWDRVLV WDXUXV 5DILQHVTXHf )LVK %XOO *RGIUD\ + & 0RGHOV IRU FOXWFK VL]H DQG VH[ UDWLR ZLWK VLEOLQJ LQWHUDFWLRQ 7KHRU 3RSXO %LRO *RGIUD\ + & t +DUSHU $ % 7KH HYROXWLRQ RI EURRG UHGXFWLRQ E\ VLEOLFLGH LQ ELUGV WKHRU %LRO *RGIUD\ + & t 3DUNHU $ &OXWFK VL]H IHFXQGLW\ DQG SDUHQWRIIVSULQJ FRQIOLFW 3KLO 7UDQV 5 6RF /RQG % *RGIUD\ + & t 3DUNHU $ 6LEOLQJ FRPSHWLWLRQ SDUHQWRIIVSULQJ FRQIOLFW DQG FOXWFK VL]H $QLP %HKDY +DKQ $V\QFKURQRXV KDWFKLQJ LQ WKH ODXJKLQJ JXOO FXWWLQJ ORVVHV DQG UHGXFLQJ ULYDOU\ $QLP %HKDY +DLJ &RQIOLFWV DPRQJ PHJDVSRUHV WKHRU %LRO +DLJ .LQ FRQIOLFW LQ VHHG SODQWV 7UHQGV (FRO (YRO +DLJ %URRG UHGXFWLRQ DQG RSWLPDO SDUHQWDO LQYHVWPHQW ZKHQ RIIVSULQJ GLIIHU LQ TXDOLW\ $P 1DW +DPLOWRQ : 7KH JHQHWLFDO HYROXWLRQ RI VRFLDO EHKDYLRU WKHRU %LRO

PAGE 198

+HJQHU 5 ( t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f $QLP (FRO -RKQVRQ 5 ) -U t 6ORDQ 1 ) :KLWH SHOLFDQ SURGXFWLRQ DQG VXUYLYDO RI \RXQJ DW &KDVH /DNH 1DWLRQDO :LOGOLIH 5HIXJH 1RUWK 'DNRWD :LOVRQ %XOO .HLWK 6\QHUJLVWLF HIIHFWV RI ''( DQG IRRG VWUHVV RQ UHSURGXFWLRQ LQ EURZQ SHOLFDQV DQG ULQJGRYHV 3K' WKHVLV 2KLR 6WDWH 8QLY &ROXPEXV .LQJ $ %ODQNLQVKLS 5 3DXO 5 7 t 5LFH 5 & $ D 7LFNV DV D IDFWRU LQ WKH QHVWLQJ IDLOXUH RI 7H[DV EURZQ SHOLFDQV :LOVRQ %XOO .LQJ $ .HLWK 0LWFKHOO & $ t .LHUDQV $ E 7LFNV DV D IDFWRU LQ QHVW GHVHUWLRQ RI &DOLIRUQLD EURZQ SHOLFDQV &RQGRU .QRSI ) / 6SDWLDO DQG WHPSRUDO DVSHFWV RI FRORQLDO QHVWLQJ RI ZKLWH SHOLFDQV &RQGRU

PAGE 199

.R]ORZVNL t 6WHDUQV 6 & +\SRWKHVHV IRU WKH SURGXFWLRQ RI H[FHVV ]\JRWHV PRGHOV RI EHWKHGJLQJ DQG VHOHFWLYH DERUWLRQ (YROXWLRQ /DFN 7KH VLJQLILFDQFH RI FOXWFKVL]H ,ELV /DFN 7KH 1DWXUDO 5HJXODWLRQ RI $QLPDO 1XPEHUV 2[IRUG &ODUHQGRQ 3UHVV /DFN 3RSXODWLRQ 6WXGLHV RI %LUGV 2[IRUG &ODUHQGRQ 3UHVV /DFN (FRORJLFDO $GDSWDWLRQV IRU %UHHGLQJ LQ %LUGV /RQGRQ 0HWKXHQ /D]DUXV t ,QJOLV 5 6KDUHG DQG XQVKDUHG SDUHQWDO LQYHVWPHQW SDUHQWRIIVSULQJ FRQIOLFW DQG EURRG VL]H $QLP %HKDY /HIIHODDU t 5REHUWVRQ 5 (TXDOLW\ RI IHHGLQJ UROHV DQG WKH PDLQWHQDQFH RI PRQRJDP\ LQ WUHH VZDOORZV %HKDY (FRO 6RFLRELRO /HVVHOOV & 0 %URRG VL]H LQ &DQDGD JHHVH $ PDQLSXODWLRQ H[SHULPHQW $QLP (FRO /HZLV 5 5 ,OO t /HZLV & 6 &RORQLDO ELUG XVH DQG SODQW VXFFHVVLRQ RQ GUHGJHG PDWHULDO LVODQGV LQ )ORULGD 9RO ,, SDWWHUQV RI SODQW VXFFHVVLRQ (QYLURQ (IIHFWV /DE 86 $UP\ (QJ :DWHUZD\V ([SHU 6WD 7HFK 5HSW 86 $UP\ &RUSV RI (QJLQHHUV 9LFNVEXUJ 0LVVLVVLSSL /OR\G 6H[XDO VWUDWHJLHV LQ SODQWV $Q K\SRWKHVLV RI VHULDO DGMXVWPHQW RI PDWHUQDO LQYHVWPHQW GXULQJ RQH UHSURGXFWLYH VHVVLRQ 1HZ 3K\WRO 0DF1DLU 0 5 t 3DUNHU $ 0RGHOV RI SDUHQWn RIIVSULQJ FRQIOLFW ,, 3URPLVFXLW\ $QLP %HKDY 0DJUDWK 5 +DWFKLQJ DV\QFKURQ\ LQ DOWULFLDO ELUGV %LRO 5HY 0DUWLQ 7 ( )RRG DV D OLPLW RQ EUHHGLQJ ELUGV D OLIHKLVWRU\ SHUVSHFWLYH $QQ 5HY (FRO 6\VW

PAGE 200

0DVXNR /DUYDO KHPRO\PSK IHHGLQJ D QRQGHVWUXFWLYH SDUHQWDO FDQQLEDOLVP LQ WKH SULPLWLYH DQW $PEO\DRQH VLOYHVWULL :KHHOHU +\PHQRSWHUD )RUPLFLGDHf %HKDY (FRO 6RFLRELRO 0D]HU 6 0DWHUQDO LQYHVWPHQW DQG PDOH UHSURGXFWLYH VXFFHVV LQ DQJLRVSHUPV 3DUHQWRIIVSULQJ FRQIOLFW RU VH[XDO VHOHFWLRQ" %LRO /LQQ 6RF 0H\EXUJ % 8 6LEOLQJ DJJUHVVLRQ DQG PRUWDOLW\ DPRQJ QHVWOLQJ HDJOHV ,ELV 0RFN : D ,QIDQWLFLGH VLEOLFLGH DQG DYLDQ QHVWOLQJ PRUWDOLW\ ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 201

1HOVRQ % 7KH 6XOLGDH *DQQHWV DQG %RRELHV 2[IRUG 2[IRUG 8QLYHUVLW\ 3UHVV 1HZWRQ %UHHGLQJ VWUDWHJLHV LQ ELUGV RI SUH\ /LYLQJ %LUG 1LVEHW & 7 6HOHFWLYH HIIHFWV RI SUHGDWLRQ LQ D WHUQ FRORQ\ &RQGRU 1LVEHW & 7 t &RKHQ 0 $V\QFKURQRXV KDWFKLQJ LQ FRPPRQ DQG URVHDWH WHUQV 6WHUQD KLUXQGR DQG e GRXDDOOLL ,ELV 2n&RQQRU 5 %URRG UHGXFWLRQ LQ ELUGV VHOHFWLRQ IRU IUDWULFLGH LQIDQWLFLGH DQG VXLFLGH" $QLP %HKDY 2n&RQQRU 5 7KH *URZWK DQG 'HYHORSPHQW RI %LUGV 1HZ
PAGE 202

3ORJHU % t 0RFN : 8QSXE 06 3DUWLWLRQLQJ WKH UHSURGXFWLYH YDOXH RI H[WUD FKLFNV UHYLVLWHG 3ROLV $ ,QWUDVSHFLILF SUHGDWLRQ DQG LQIDQW NLOOLQJ DPRQJ LQYHUWHEUDWHV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 203

6FKUHLEHU 5 : 0DLQWHQDQFH EHKDYLRU DQG FRPPXQLFDWLRQ LQ WKH EURZQ SHOLFDQ 2UQLWKRO 0RQRJU 6FKUHLEHU 5 : 5HSURGXFWLYH SHUIRUPDQFH RI WKH HDVWHUQ EURZQ SHOLFDQ 3HOHFDQXV RFFLGHQWDOLV &RQWULE 6FL /RV $QJHOHV &RXQW\ 0XV 1R 6FKUHLEHU 5 : t 5LVHEURXJK 5 : 6WDWXV RI EURZQ SHOLFDQ SRSXODWLRQV LQ WKH 8QLWHG 6WDWHV :LOVRQ %XOO 6FKUHLEHU 5 : 6FKUHLEHU ( $ $QGHUVRQ : t %UDGHOH\ : 3OXPDJHV DQG PROWV RI EURZQ SHOLFDQV &RQWULE 6FL /RV $QJHOHV &RXQW\ 0XV 1R 6KDNHVSHDUH : 7KH 7UDJHG\ RI .LQJ /HDU ,Q 7KH 5LYHUVLGH 6KDNHVSHDUH (G E\ % (YDQVf SS %RVWRQ +RXJKWRQ 0LIIOLQ &RPSDQ\ 6LPPRQV 5 2IIVSULQJ TXDOLW\ DQG WKH HYROXWLRQ RI FDLQLVP ,ELV 6LPRQ 0 3 7KH LQIOXHQFH RI FRQVSHFLILFV RQ HJJ DQG ODUYDO PRUWDOLW\ LQ DPSKLELDQV ,Q ,QIDQWLFLGH &RPSDUDWLYH DQG (YROXWLRQDU\ 3HUVSHFWLYHV (G E\ +DXVIDWHU t 6 % +UG\f SS 1HZ
PAGE 204

6WHSKHQVRQ $ t %HUWLQ 5 0DOH FRPSHWLWLRQ IHPDOH FKRLFH DQG VH[XDO VHOHFWLRQ LQ SODQWV ,Q 3ROOLQDWLRQ %LRORJ\ (G E\ / 5HDOf SS 1HZ
PAGE 205

:LOOLDPV & 1DWXUDO VHOHFWLRQ WKH FRVWV RI UHSURGXFWLRQ DQG D UHILQHPHQW RI /DFNnV SULQFLSOH $P 1DW :LOVRQ ( 2 7KH ,QVHFW 6RFLHWLHV &DPEULGJH 0DVVDFKXVVHWWV +DUYDUG 8QLYHUVLW\ 3UHVV :LQNOHU : )DFWRUV GHWHUPLQLQJ D FOXWFK VL]H UHGXFWLRQ LQ &DOLIRUQLD JXOOV /DUXV FDOLIRUQLFXVf $ PXOWLK\SRWKHVLV DSSURDFK (YROXWLRQ
PAGE 206

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

PAGE 207

IURP WKH 'HSDUWPHQW RI =RRORJ\ DW WKH 8QLYHUVLW\ RI 2NODKRPD IRU P\ ZRUN RQ VLEOLFLGH LQ FDWWOH HJUHWV FRQGXFWHG WKLV ZRUN XQGHU WKH GLUHFWLRQ RI 'RXJODV : 0RFN 2XU FROODERUDWLRQ ZKLOH ZDV D PDVWHUnV VWXGHQW UHVXOWHG LQ VHYHUDO FRDXWKRUHG SXEOLFDWLRQV HQWHUHG WKH 'HSDUWPHQW RI =RRORJ\ DW WKH 8QLYHUVLW\ RI )ORULGD LQ $XJXVW DV D VWXGHQW RI 'U + -DQH %URFNPDQQ ,Q WKH VXPPHU RI KHDGHG GHHSHU LQWR WKH WURSLFV IRU VHYHUDO PRQWKV DV D SDUWLFLSDQW LQ WKH 2UJDQL]DWLRQ IRU 7URSLFDO 6WXGLHV FRXUVH LQ WKH IXQGDPHQWDOV RI WURSLFDO HFRORJ\ $ GURXJKW GXULQJ DQG IRUFHG PH WR DEDQGRQ P\ ILUVW GLVVHUWDWLRQ SURMHFW RQ WKH SUR[LPDWH FDXVHV RI KDWFKLQJ DV\QFKURQ\ LQ FDWWOH HJUHWV ILQDOO\ UHWXUQHG WR WKDW nZRQGHUIXO ELUG WKH SHOLFDQn LQ IRU P\ GRFWRUDO UHVHDUFK $IWHU UHFHLYLQJ P\ 3K' LQ ]RRORJ\ SODQ WR FRQWLQXH WHDFKLQJ DQG FRQGXFWLQJ UHVHDUFK DV D XQLYHUVLW\ RU FROOHJH SURIHVVRU

PAGE 208

, FHUWLI\ WKDW KDYH UHDG WKLV VWXG\ DQG WKDW LQ P\ RSLQLRQ LW FRQIRUPV WR DFFHSWDEOH VWDQGDUGV RI VFKRODUO\ SUHVHQWDWLRQ DQG LV IXOO\ DGHTXDWH LQ VFRSH DQG TXDOLW\ DV D GLVVHUWDWLRQ IRU WKH GHJUHH RI 'RFWRU RI 3KLORVRSK\ rrf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

PAGE 209

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

PAGE 210

81,9(56,7< 2) )/25,'$


65
Table 2-1. Comparison of clutch sizes, hatching success and
fledging success (mean SD) of brown pelican nests at Seahorse
Key in 1989 and at Alafia Banks in 1990.
1989 1990
Mean
N
Mean
Na
t
P
Clutch size
2.4+ 0.7
53
2.5 + 0.6
71
--
Hatchlings/clutch
1.6+1.2
54
1.7+1.2
65
-0.305
Fledglings/clutch
0.6 + 0.7
53
0.3+0.4
71
3.488
<0.001
Fledglings/brood
0.9+0.6
36
0.3.+ 0.5
45
4.467
<0.001
aSamples included nests that were abandoned during incubation
or hatching. See text for discussion of nest abandonment.


66
Table 2-2. Brown pelican productivity (maximum
nestlings/maximum nests) in subcolonies that were highly
(High), moderately (Mod.) or never (None) disturbed by
researcher activities.
Site
Disturbance
level
Maximum
nests
Max. nestlings
Max. nests
Bird Island focal nests
High
34
0.90
Sunken Island focal nests
High
38
0.87
Sunken Island growth nests
High
105
0.63
Bird Island Cove
Mod.
112
0.39
Sunken Island South
Mod.
135
0.38
Sunken Island Extension
None
106
0.32
Sunken Island North
None
223
0.37
Note: see Methods for definitions of maximum nests and maximum
nestlings/maximum nests.


50
was divided between their value as "extra" chicks and as
insurance against senior death. No C-chicks survived.
Thus, their potential for having "extra" chick and insurance
value could not be evaluated in this study.
Survival
Both the insurance and the resource-tracking hypotheses
predict that nestling survival will be higher for first-
hatched than for last-hatched siblings. As predicted, A-
chicks survived more often than did B-chicks in B/2 broods
in both 1989 and 1990, at least when I included chicks with
estimated ranks. In B/3 broods, A-chicks survived more
frequently than their C-siblings in both 1989 and 1990 when
I included chicks with estimated ranks. A-chicks in B/3
broods survived more frequently than their B-siblings only
in 1989. Inclusion of chicks with estimated ranks may have
caused me to miss some early size reversals and thus to
underestimate B-chick survival relative to that of A-chicks.
But restricting my 1990 analysis to chicks of known ranks
may have underestimated A-chick survival relative to that of
B- and C-chicks. This is because mortality was so high for
chicks of all ranks in 1990 that sample sizes may have been
too small to reject the null even if A-chicks did survive
more frequently than their juniors in the Alafia banks
population. Because of small sample sizes for chicks of


98
await experimental manipulations of food amounts gained by
A- and B-chicks.
Inconclusive evidence for the food-amount hypothesis
was also provided by the marginally significant tendency for
the number of fights and A-chick mass gain to be inversely
associated when nestlings were 13 through 17 days old.
During this period, the number of fights tended to be higher
in broods with slower rates of A-chick mass gain. In broods
with low rates of A-chick mass gain, food shortages, at
least for A-chicks, may have caused the slow A-chick growth.
Thus, broods that were provided with less food may have
tended to fight more than broods that were provided with
more food. Alternatively, A-chicks may have tended to grow
more slowly in broods with higher fighting rates because
fighting was energetically costly (see Energetic Costs of
Fighting, below). But that the relationship did not achieve
statistical significance suggests that there may actually be
no relationship between the number of fights and my measures
of nestling growth and food supplies during this summary
interval.
The food-amount hypothesis was not supported during the
period when A-chick ages were 17 through 21 days old. In
this period, fighting rate was best predicted by faster
rates of mass-gain by B-chicks. There are several possible
hypotheses that could explain higher fighting rates in
broods with faster-growing B-chicks. First, A-chicks may


162
differences could affect future growth and reproduction
following depletion of parentally-provided resources.
In asynchronously hatching birds, genetic differences
among "normal" (as opposed to malformed) nestlings are
unlikely to have much influence on fitness relative to
differences in ages and sizes of chicks. But nestling
fighting and dominance might cause offspring to differ in
their abilities to convert parental resources into offspring
survival. For example, intimidated junior chicks may stay
at the edge of the nest rather than be brooded or shaded by
the parent (pers. obs.). This could cause junior chicks to
be exposed more often to cold or heat stress than their
senior siblings. Such stress could reduce a chick's
efficiency in converting food to growth and survival
(O'Connor 1984). Repair of tissue damaged during sibling
attacks (e.g. Chapter 3) could also decrease resources
available for growth and survival of the (junior) victims
relative to their (senior) attackers. But senior chicks
that attack their siblings may experience energetic costs of
fighting. These costs could conceivably decrease a senior
chick's efficiency in converting food to survival relative
to its subordinate junior siblings.
Nestling fighting and dominance might also affect
future reproduction. Adult offspring that were subordinate
as nestlings may differ behaviorally from adult offspring
that were dominant as nestlings. This might occur even if


14
a predator, or might have died from beatings delivered by
siblings, as described for the first time for brown pelicans
by Pinzn and Drummond (in press). Pinzn and Drummond also
relied primarily on nest censusing to identify causes of
death, although they directly observed siblicidal aggression
in some nests. They attributed death to siblicidal
expulsion whenever a chick's body was found outside of the
nest. But some such chicks might have been accidently
knocked from the nest and subsequently attacked by
neighbors, or have fallen accidently from tree nests and
been injured by the fall. These alternative explanations
are quite possible for brown pelicans, as I will discuss.
I also present observations of infanticidal attacks
initiated by unrelated adults and chicks against brown
pelican nestlings. This chapter presents a detailed
examination of the causes of mortality of nestling brown
pelicans based on continuous observations of a large sample
of nests.
Pinzn and Drummond (in press) present the first
discussion and evidence that brown pelicans may be
facultative brood reducers, producing three-egg clutches and
selectively eliminating some chicks during food shortages.
But in three-chick broods of brown pelicans, the youngest
virtually always dies whereas survival of the second-hatched
is highly variable (Schreiber 1976). Thus, brood reduction
in brown pelicans may be obligate among last-hatched young


116
sufficiently large to overcome the senior's competitive
advantages produced by age disparities.
In all of these hypotheses, siblicide is considered a
means for eliminating junior offspring when food is
insufficient for raising the full brood. These hypotheses
assume that surviving offspring benefit from eliminating a
sibling because by doing so the survivors obtain the food
that otherwise would have been delivered to that sibling.
Forbes (1990:355-356) expressed this for the insurance
hypothesis when he wrote: "Resources expended on the early
feeding of insurance offspring that eventually become
redundant might alternatively have been expended on other
chicks, enhancing their growth and survival." Mock and
Parker (1986) stated the same assumption for Lack's (1966)
hypothesis when they wrote that the hypothesis "hinges on
the assumption that ...[brood reduction] considerably
alleviate[s] the competition for nonshareable forms of
parental care, especially food." These hypotheses assume,
then, that parents maintain similar food deliveries before
and after brood reduction because they benefit from the
enhancement of senior survival that results when the number
of competitors is reduced. The interests of parents and
offspring are assumed to be congruent. This could occur
only if parents do not adjust food supplies downward after
brood reduction.


113
70
.2 60
*u
(1)
£ 50
ce
1 40
E 30
o
§ 20
"ce
2 10
o
-100 -60 -20 O 20 60 100
B-chick mass gain (g/d)
Figure 3-6. Relationship between the total number of fights
and the rate of mass gain by B-chicks during the summary
interval when A-chicks were 17 through 21 days old. N = 6
broods. See Table 3-2 for regression results.


Heleconius biology. I did not stay with this project. The
lure to work with creatures with feathered rather than
scaled wings was too great.
My second potential dissertation project investigated
the proximate causes of hatching asynchrony in cattle
egrets. Numerous people helped me with this two-year study.
This project required placing floating blinds in willow-
swamps. The following people helped to build and/or launch
two floating platforms: Rich Buchholz, Kazuo Horikoshi,
Carlos Martinez del Rio, Paul Andreadis, Doug Levey, Laurie
Eberhardt, Alan Pounds, Jane Brockmann, Mike Miamoto, Mark
Stowe and Cathy Sehley. One of my experiments required
construction of 30 artificial cattle egret nests. I thank
Vas Demas, Laurie Eberhardt, Peter Martin, Cathy Langtimm,
Paul and Debbie Andreadis, John Scott Foster, Alehondro
Grehal, Rob and Linda Garrett, Brent and Sylvia Palmer, and
Mark Stowe for participating in a "nest fest" and building
artificial nests. Martha Groom, Bob Podolsky, Carlos
Martinez Del Rio, Paul Andreadis, Linda Fink, Doug Mock and
Jane Brockmann all provided valuable comments on various
drafts of my cattle egret research proposal. Lou Guillette,
Vince Demarco, Brent Palmer and Vicki McDonald provided
helpful advice about embryonic development. Laurence
Alexander provided information about potential colony
sites.I also thank Peter Frederick, Marilyn Spalding, Ken
Meyer, Naomi Edelson and other members of the "Wading Bird"
vi


140
Whether or not the presence or absence of B-chicks affects
food supplied to their A-siblings remains untested.
Seniors may have experienced other costs from the
continued presence of C-chicks. Seniors apparently had to
attack their C-siblings to maintain the dominance hierarchy
that provided seniors with a feeding advantage over C-
chicks. These attacks could carry energetic costs for the
attackers (Gargett 1978:58-60, Mock 1984a) who may also risk
injury when C-chicks return blows (e.g. Gerrard and
Bortolotti 1988), as they sometimes do in brown pelican
broods (Chapter 3). The hatching asynchrony that creates
the initial competitive disparities among siblings may
reduce the costs of fighting, as seems to occur in laughing
gulls (Larus atricilla. Hahn 1981) and cattle egrets
(Bubulcus ibis) (Fujioka 1985, Mock and Ploger 1987). This
may also be the case for brown pelicans (but see Chapter 3),
whose C-chicks usually hatch 3 days after their A-siblings
(Chapter 2). The initial age differences lead quickly to
large disparities in chick sizes, with C-chicks often being
half the size of their seniors (unpub. data). Current
manipulations of hatching asynchrony in brown pelican broods
by M. Shields (pers. comm.) may soon clarify whether
hatching asynchrony decreases the costs of fighting in this
species.
Costs to parents. Clear costs of maintaining C-chicks
fell on the parents who brought more food to broods with C-


24
fates. These 32 nests were omitted from all analyses of
fledging success and causes of mortality.
Reproductive Value of Junior Siblings
I calculated the reproductive value of nestlings as the
total number of chicks that fledged divided by the total
that hatched. When chick ranks were known, I calculated
the reproductive value of chicks of each rank separately. I
partitioned the reproductive value of junior chicks of each
rank (B- and C-) and brood size (B/2 and B/3) into "extra
chick" (RVe) and insurance (RVi) components (following
methods of Mock and Parker 1986, modified by Beissinger and
Waltman 1991 and Ploger and Mock unpublished MS). Thus, RVe
for B-chicks = the number of B-chicks that fledged along
with their seniors, divided by the total number of B-chicks
that hatched. The RVi for B-chicks = the number of B-chicks
that fledged after replacing a senior that died, divided by
the total number of B-chicks that hatched. Analogous
calculations were made for C-chicks. I could not calculate
RVe and RVi to include eggs that failed to hatch because I
did not know the order in which eggs were laid (see Measures
of Hatching Success, above, for details and discussion of
estimating egg-loss insurance).


CHAPTER 4
EFFECT OF BROOD SIZE MANIPULATIONS ON FOOD DELIVERIES AND
APPORTIONMENT TO SENIOR SIBLINGS
Introduction
King Lear (Shakespeare 1623) divided his parental
investment, his lands, kingdom and goods, equally between
his eldest daughters while leaving his youngest with
nothing. Each daughter sought more for herself than Lear
wanted to give (parent-offspring conflict). So the
daughters battled each other to seize more than their share
(sibling rivalry). Lear saw his daughters as "unnatural,"
but the insight of Hamilton (1964) as formalized by Trivers
(1974) predicts that natural selection should often favor
individual offspring that attempt to gain more parental
investment (Trivers 1972) for themselves than the parent is
selected to give. This pioneering prediction of conflict
within the family has stimulated considerable theoretical
work (reviewed in Godfray and Parker 1991). A question that
has been particularly attractive to theoreticians concerns
whether there is parent-offspring conflict over siblicide
(O'Connor 1978, Godfray 1986, Parker and Mock 1987, Godfray
and Harper 1990, Godfray and Parker 1991, 1992). Siblicide
is a common form of brood reduction in some birds, including
114


8
offspring, or results from some compromise of parent
offspring conflict.
Natural selection favors parents whose behavior
maximizes their lifetime reproductive success. From this,
Lack (1947) argued that selection would favor parental
behavior that maximizes the number of surviving offspring
produced from each individual clutch. The overproduction of
eggs and subsequent reduction in brood sizes through
starvation (and sometimes siblicide) seem paradoxical
because parents produce more offspring than they are able
(or willing) to raise, thereby wasting resources that could
otherwise be invested in the remaining offspring to enhance
their fitness prospects. The exploitation, progeny-choice,
insurance and resource-tracking hypotheses are all attempts
to explain how parents who practice brood reduction could
still be maximizing their short-term reproductive success
during a single breeding attempt. What these hypotheses
overlook is the potential for conflict over parental
investment among current offspring and between parents and
current offspring as parents attempt to balance tradeoffs
between their interests in current versus future offspring
in a way that maximizes lifetime reproductive success
(Williams 1966). My dissertation attempts to identify where
the interests of parents and offspring may conflict in
broods of brown pelicans and to lay the groundwork for


118
control (three-chick) broods versus broods that were
enlarged (to four chicks) by adding a chick and versus
broods that were reduced (to two chicks) by removing the
third-hatched (C-) chick. This experimental design focussed
on the effects of the death of the C-chick on parents and
senior chicks in a year when food was apparently in short
supply (see Chapter 2). For example, if parental feeding of
the C-chick decreased the amount of food available to the
seniors, without cost to the parent, then the seniors alone
would gain a proximate benefit from the C-chick's death.
This pattern would be evident if in my experiments, parents
brought the same amount of food to broods of all sizes, but
seniors received (1) the most food in two-chick broods from
which the youngest had been removed, (2) intermediate
amounts in unmanipulated, three-chick broods, and (3) the
least food in broods to which a fourth chick had been added.
By contrast, parents may bring extra food to C-chicks at no
cost to the seniors, in which case parents alone may benefit
from the death of the C-chick. If this were the case, then
seniors should get the same amount of food in broods of all
sizes. But parents should adjust their food deliveries to
brood sizes, such that the total food delivered would be
lowest for two-chick and highest for four-chick broods.


Total blows in summary interval
110
500
i r
1
o
1
1
400
o
-
300
-
200
-
o
100
o
i i
1
I
o
20 40 60 80 100 120
A-chick mass gain (g/d)
Figure 3-3. Relationship between the total number of blows
delivered and the rate of mass gain by A-chicks during the
summary interval when A-chicks were 13 through 17 days old.
See Table 3-3 for regression results.


40
30
20
10
0
40
30
20
10
0
80
60
40
20
0
[-2
)OS
)roi
(B
147
A-chicks
1
x
X
B-chicks
I
Broods
1
1
Brood size
Food consumed (mean SD) in the first
-treatment by A- and B-chicks and
ds raised in five experimentally
2) and three control (B/3) nests.


139
Proximate Costs of Maintaining C-chicks
Costs to senior chicks. I measured proximate costs of
maintaining C-chicks in terms of reductions in food to
parents and seniors. By this measure, C-chicks were
apparently not costly to their senior siblings, who obtained
similar amounts of food in broods with and without C-chicks.
Food deliveries to broods and to seniors could remain
unchanged across broods of different sizes if A- and B-
chicks sequestered virtually all of the food consumed by the
broods in each treatment group, leaving juniors in B/3 and
B/4 nests gaining very little. The food delivered to last-
hatched (C- and D-) chicks was significantly less than that
delivered to either A- or B-chicks. C- and D-chicks gained
an average of only 14-15% of the total delivered to broods
during the first 6 days post-treatment. Similarly, in the
first 9 days post-treatment, C-chicks gained only 9% of the
total food delivered. But the apparent similarity among
treatments in food gained by seniors could have been due to
the small sample sizes involved. Had more broods been
treated, costs of C-chicks to their seniors might have been
detected.
A feeding hierarchy between the two senior chicks was
also apparent, with A-chicks gaining more food than their B-
siblings. B-chicks also became victims of brood-reduction,
frequently dying of starvation and siblicide (Chapter 2).


83
blows were delivered for at least 30 seconds. A total of
1646 fights were observed in 1990 in all of the nests used
in this and related studies (see Chapters 2 and 4 for
descriptions of these related studies).
Fights involved two types of blows, "Bites" and
"Shakes" (defined below) The first blow of a fight was a
Bite in 1255 fights and a Shake in 310 fights (of the
1565/1646 fights in 1990 for which we could identify the
type of blow that was delivered first). When Biting, the
attacker reached toward the head or body of its adversary,
closed its mandibles over some part of the victim's anatomy
such that the sharp nail at the tip of the upper mandible
depressed the victim's skin and then immediately released
its hold. Bites were delivered to the head and neck with
such speed and force that the victim's head was pushed
backward by the force. Bites to the back also pushed the
body away from the blow, but this movement was often small
because blows usually pushed the victim's body into the nest
floor which damped some of the movement. Bites were often
directed toward the eyes or base of the skull. Shakes
occurred when the attacker grasped its victim's head in a
scissor grip and forced the victim's head to strike against
the victim's body or the nest fabric. The attacker then
pulled the victim's head away from the object that it
struck. This was often followed by the attacker once again
slamming the victim's head against its body or the nest


105
Table 3-2. Results of forward stepwise regression to determine the best
predictor of the total number of nestling fights in each summary interval.
The independent variables that were entered into the stepwise regression
were the single best predictors that belonged to each of three different
categories of independent variables: food amount, culmen growth and mass
changes. These best predictors were selected by running separate stepwise
regressions on the independent variables belonging to each of these three
categories. See Methods for definitions of variables and for details about
analyses.
Independent variable
F-value
P-value
Summary interval for ages 6
through
10 days
Food to B-chick
1.697
>0.05
B-chick culmen growth
0.302
>0.05
B-chick mass gain
1.159
>0.05
Summary interval for ages 11
through
15 days
Food to A-chick
0.297
>0.05
Culmen-growth differential
1.898
>0.05
A-chick mass gain
0.146
>0.05
Summary interval for ages 13
through
17 days
Food to B-chick
0.112
>0.05
Culmen-growth differential
4.072
>0.05
A-chick mass gaina
N.A.
N.A.
Summary interval for ages 17
through
21 days
Food to brood
1.371
>0.05
B-chick culmen growth
0.052
>0.05
B-chick mass gain*
20.410
0.01
Number of fights*3 = 26
.92 + 0.;
24 X B-chick mass gain
a Although significant using
linear :
regression, tied values
made this
analysis inappropriate (N.A.). A Spearman rank correlation involving only
this variable was marginally significant (rs corrected for ties = -0.89, P
= 0.07) .
b Regression equation, r2 = 0.84, Fo.5,5 = 20.41, P = 0.01.
indicates significant predictors in this and all similar tables.


188
Ploger, B. J. & Mock, D. W. Unpub. MS. Partitioning the
reproductive value of extra chicks, revisited.
Polis, G. A. 1984. Intraspecific predation and "infant
killing" among invertebrates. In: Infanticide:
Comparative and Evolutionary Perspectives (Ed. by G.
Hausfater & S. B. Hrdy), pp. 87-104. New York: Aldine
Publ. Co.
Poole, A. 1979. Sibling aggression among nestling osprey
in Florida Bay. Auk, 96, 415-416.
Poole, A. 1982. Brood reduction in temperate and sub
tropical ospreys. Oecologia, 53, 14-119.
Procter, D. L. C. 1975. The problem of chick loss in the
south polar skua Catharacta maccormicki. Ibis, 117,
452-459.
Rajecki, D. W., Nerenz, D. R., Hoff, S. J., Newman, E. R. &
Volbrecht, V. J. 1981. Early development of
aggression in chickens: the relative importance of
pecking and leaping. Behav. Proc., 6, 239-248.
Ricklefs, R. E. 1968. Patterns of growth in birds. Ibis,
110, 109-451.
Roskaft, E. 1985. The effect of enlarged brood size on the
future reproductive potential of the rook. J. Anim.
Ecol., 54, 255-260.
Royama, T. 1966. Factors governing feeding rate, food
requirement and brood size of nestling great tit Parus
man or. Ibis, 108, 313-347.
Safriel, U. N. 1981. Social hierarchy among siblings in
broods of the Oystercatcher Haematoous ostraleous.
Behav. Ecol. Sociobiol., 9, 59-63.
Salfert, I. G. & Moodie, G. E. E. 1984. Filial egg
cannibalism in the brook stickleback, Culea inconstans
(Kirtland). Behaviour, 93, 82-100.
Schaller, G. B. 1964. Breeding behavior of the white
pelican at Yellowstone Lake, Wyoming. Condor, 66, 3-
23 .
Schreiber, R. W. 1976. Growth and development of nestling
brown pelicans. Bird-banding, 47, 19-39.


123
(B/4) broods and 10 control (B/3) broods that were used to
compare fledging success and timing of nestling mortality.
Census and Observation Methods
My two field assistants and I used a spotting scope and
binoculars from a blind to observe nests 28-42 m away.
"Focal" nests (nests used in behavioral observations) were
kept under continuous observation during daylight hours from
2 April through 9 May 1990. On most days, two observers
alternated approximately 7-hour observation periods,
typically trading off near mid-day. During the 1 week of
peak nestling activity, both observers maintained continuous
dawn to dusk vigils.
Each observer tracked activities in up to a maximum of
16 focal nests during an observation period. We scanned
these focal nests sequentially from right to left through a
visual arc of 70 and continued to scan through this preset
sequence until feeding or fighting behavior (see below) was
observed at a nest. We then monitored all activities in the
nest until feeding or fighting ceased (see below), at which
point observations were terminated for that nest and the
scan was resumed starting with the next nest in the
sequence. If during a scan we observed feeding in one nest
and fighting in another nest, we watched the nest in which
fighting was occurring. If the same type of behavior
(feeding or fighting) was occurring in two or more nests in


178
brown pelicans. Although the attackers tossed the
residents' eggs from the nest in three of these cases, Keith
(1978) did not report whether any of the invaders laid new
clutches. Takeovers have also been observed among
Australian pelicans (Vestjens 1977:37,55). While successful
takeovers lead to total clutch or brood loss, unsuccessful
attempts might occasionally lead to partial losses against
which the presence of "extra" chicks might act as insurance.


37
number of nests and nestlings that were visible from the
boat in each subcolony. At the end of the season, I
determined for each subcolony which of these repeated
censuses had the largest number of nests. This count was
the "maximum number of nests" for each subcolony. I also
determined which of the repeated censuses in a subcolony had
the largest number of nestlings prior to the first
observation of fledging in that subcolony. This was the
"maximum number of nestlings" in a subcolony. I compared
the productivity of each subcolony by comparing each
subcolony's maximum number of nestlings per maximum number
of nests (called "maximum nestlings/maximum nests").
Statistical Analyses
Statistical analyses were performed using Statview SE+
Graphics (Feldman et al. 1988) on a Macintosh SE computer.
All statistical tests were 2-tailed unless otherwise stated.
Row-by-column (R X C) G-tests of independence were used to
compare survival frequencies among chick ranks whenever 20%
of cells had expected frequencies of five or more. Whenever
an R X C G-test was significant, I conducted 2X2 G-tests
between pairs of sibling ranks. For these pairwise
comparisons, I kept experimentwise error at P < 0.05 by
using critical values of the chi-square distribution based
on Sidak's multiplicative inequality (Sokal and Rohlf 1981).
When 20% of expected cell frequencies were less than five, I


167
days. Thus, after the minimum age of 9.6 days, culmens of
junior and senior chicks may be diverging and be unreliable
indicators of chick age.
To estimate ages of chicks older than 10 days, I
compared the skin colors and plumages of chicks of unknown
ages with those of known-age chicks (Table A-3). I also
used Table A-3 to estimate the ages of chicks under 10 days
old in 1989 because in that year I did not measure the
chicks. The age of each unknown-age chick was estimated as
the median age of known-age chicks whose descriptions (Table
A-3) matched that of the unknown-age chick.


4
that do not produce "marginal" offspring (Anderson 1990).
Fourth, "marginal" offspring may enable parents to maximize
their reproductive success from a given clutch when
resources are unpredictable by laying as many eggs as they
could raise in a good year and reducing the brood if
resources turn out to be scarce. This is the "resource
tracking hypothesis" formulated by Lack (1947), usually
called the "brood reduction hypothesis" since Ricklefs
(1968). More recently, this hypothesis has been called the
"resource availability hypothesis" and "resource tracking"
by Forbes (1990 and 1991, respectively), and the "bet
hedging hypothesis" by Kozlowski and Stearns (1989). In the
dissertation, I will follow Forbes' (1991) and refer to this
as the resource-tracking hypothesis. These hypotheses are
not mutually exclusive, and indeed all may operate
simultaneously (Forbes 1991). But clearly, a key to
determining whether any or all of these hypotheses are valid
is to examine causes and patterns of egg and nestling
mortality.
Brown pelicans typically lay three eggs which hatch
asynchronously (Schreiber 1979). Nestling mortality is
biased toward last-hatched members of the brood (Schreiber
1979), who are frequently attacked by their elder siblings
(Pinzn and Drummond in press) and typically die of
starvation and siblicide (see Chapter 2). Parents generally
remove dead offspring by tossing them from the nest (unpub.


158
hierarchy, the costs of brood reduction might differ between
A- and B-chicks. When disadvantages increase in a stepwise
fashion down the hatching hierarchy, the fitness interests
of parents may conflict with those of one senior and not the
other senior offspring. Models need to be developed to
predict when conflict may arise between parents and each of
their senior as well as runt offspring when seniors differ
in their competitive abilities.
Parker and colleagues (1989) included differences in
competitive abilities of siblings in their models of sibling
competition over parental investment. They modelled optimal
food apportionment to A-, B- and C-chicks from the A-chick's
perspective. Parker et al. (1989) assumed that the
dominance hierarchy enables an A-chick to take as much
parental investment as maximizes its inclusive fitness,
leaving the B-chick to take, from the remainder, as much as
maximizes its inclusive fitness, and leaving the C-chick
with the leftovers. For two chicks, their model predicts
that A-chicks should take an additional unit of parental
investment whenever the fitness benefit that it thus gains
is more than half as high as the benefit that the B-chick
would get from taking that unit. In other words, an A-chick
should enlarge its share of the total food delivered until
its marginal fitness gain reduces to half that of the B-
chick (Parker et al. 1989). Extending this model to the
case of three chicks, Parker et al. (1989) found that when


80
age 70, my operational definition of fledging (see Chapter
2) .
We marked hatchling (0-4 day old) chicks according to
hatching order with yellow and black indelible pens. Older
chicks received blue and yellow acrylic paint and same color
flagging tape squares glued with contact cement on their
backs and heads. Paint and flagging were reapplied
frequently (see Chapter 2). Chicks were weighed (to the
nearest g with spring scales) and the length of the culmen
was measured (to the nearest mm with a clear plastic ruler)
every 2-4 days until the brood's first-hatched (A-) chick
was (on average) 29 days old (range 25-31 days), a minimum
of once a week when A-age was between 30-40 days, and at
least every 10-12 days thereafter. Ages and hatching orders
of chicks were determined by direct observation of newly
hatched chicks whenever possible. For other chicks, ages
were estimated from a regression of culmen length on age of
known-age nestlings (see Chapter 2 and Appendix A for more
details).
Nest Observations
Focal nests were scanned in order following a pre-set
sequence. We continued to scan nests until we detected
feeding or fighting behavior (see below), at which point we
began to monitor all activities in the nest until we
terminated observations because all feeding and fighting


141
chicks present 9 days post-treatment. The additional food
that parents brought was not sufficient to ensure that C-
chicks received enough to survive. All C-chicks eventually
died, most doing so by the end of the first 9 days post
treatment. Parents in control and enlarged broods lost
their investment in C-chicks, investment that parents could
have used to enhance the chances of current A- and B-chicks
or future offspring.
That parents with reduced broods invested less than
those with control broods suggests that parents were capable
of investing more in reduced broods than they actually did
invest. Presumably, in this long-lived species, parents
that do not invest in current offspring at the maximum level
produce more offspring over their lifetimes than do parents
that maximize their investment in current offspring (e.g.
Williams 1966). To investigate the actual fitness costs to
parents that forestal brood reduction will require
quantifying the effects of brood size manipulations on
correlates of future parental fitness. One such correlate
might be the condition of parents through the breeding
season when the manipulations were done. Others might
include the survival of parents into the next breeding
season, and their reproduction in years following the brood-
size manipulations.


Frequency
72
B/3 Nests
Food-independent deaths
Food-dependent deaths
All deaths
B/2 Nests
Days in nestling period


99
have increased their attacks to prevent dominance reversals
when B-chick growth was rapid. Second, fast-growing B-
chicks may have initiated more fights or retaliated to A-
chick attacks more often than slow-growing B-chicks. This
might be expected if rapid growth increased the chance that
a B-chick could gain dominance over its A-sibling. Such
reversals of the usual dominance hierarchy, with B-chicks
becoming dominant over their A-siblings occurred in brown
pelican broods in Mexico (Pinzn and Drummond in press).
Similarly, an apparent reversal occurred in my study; the
size (mass and culmen length) of the B-chick exceeded the A-
chick's size in one of the seven broods that I observed
during the summary interval of 13-17 and 17-21 days.
Alternatively, fighting rates and B-chick mass gain might be
associated with another, unknown factor that was not
measured in this study.
Energetic Costs of Fighting
There was a marginally significant tendency toward
depression of growth rates of A-chicks in 13-17 day old
broods that fought more. This tendency may have been due to
increased energy expended during more frequent fighting,
rather than to decreased food intake. If the tendency
toward depressed growth rates of A-chicks in broods that
fought more were due to energetic costs of fighting, then I
would have expected to see a similar pattern for B-chicks.


184
Hegner, R. E. & Wingfield, J. C. 1987. Effects of brood-
size manipulations on parental investment, breeding
success, and reproductive endocrinology of house
sparrows. Auk, 104, 470-480.
Howe, H. E. 1976. Egg size, hatching asynchrony, sex, and
brood reduction in the common grackle. Ecology, 57,
1195-1207.
Hrdy, S. B. 1979. Infanticide among animals. A review,
classification and examination of the implications for
the reproductive strategies of females. Ethol.,
Sociobiol. 1, 13-40.
Husby, M. 1986. On the adaptive value of brood reduction
in birds: experiments with the magpie Pica pica. J.
Anim. Ecol., 55, 75-83.
Hussell, D. J. T. 1972. Factors affecting clutch size in
Arctic passerines. Ecol. Monogr., 42, 317-364.
Ingram, C. 1959. The importance of juvenile cannibalism in
the breeding biology of certain birds of prey. Auk,
76, 218-226.
Jarvis, M. J. F. 1974. The ecological significance of
clutch size in the South African gannet (Sula
capensis). J. Anim. Ecol., 43, 1-17.
Johnson, R. F., Jr., & Sloan, N. F. 1978. White pelican
production and survival of young at Chase Lake National
Wildlife Refuge, North Dakota. Wilson Bull., 90, 346-
352 .
Keith, J. 0. 1978. Synergistic effects of DDE and food
stress on reproduction in brown pelicans and ringdoves.
Ph.D. thesis, Ohio State Univ., Columbus.
King, K. A., Blankinship, D. R., Paul, R. T. & Rice, R. C.
A. 1977a. Ticks as a factor in the 1975 nesting
failure of Texas brown pelicans. Wilson Bull., 89,
157-158.
King, K. A., Keith, J. 0., Mitchell, C. A. & Kierans, J. A.
1977b. Ticks as a factor in nest desertion of
California brown pelicans. Condor, 7, 507-509.
Knopf, F. L. 1981. Spatial and temporal aspects of
colonial nesting of white pelicans. Condor, 81, 353-
363 .


122
because of the high variance in daily food-deliveries.
During the first 6 days post-treatment, broods received
anywhere from 0-35 f-units of food per day (see Feeding
Behavior, below, for definition of f-units and methods used
in quantifying food amounts). The minimum food delivered
per day averaged 0.8 (1.6) f-units and the maximum
averaged 14.4 (8.1) f-units in the 16 treatment broods.
In five of the 16 treatment broods, no food was seen being
delivered for 3 of the first 6 days post-treatment. Because
of this variance, my analysis of food deliveries only
included broods for which I saw food being delivered on 3 or
more days during the first 6 days post-treatment.
In addition treating focal nests, I created a set of
three reduced and five control broods in another part of the
colony to bolster sample sizes for comparison of fledging
success. These additional nests were not kept under
continuous observation. The C-chicks that I removed from
reduced nests were placed in foster nests that failed to
hatch an egg. The additional set of reduced and control
nests were censused every 2-4 days following treatment until
the A-chick was about 29 days old, a minimum of weekly when
the A-chick's age was 30-40 days, and at least every 10-12
days thereafter until fledging age. This censusing schedule
was also followed for focal nests (see Census and
Observation Methods, below). The brood-manipulation
experiment thus involved 10 reduced (B/2) broods, 5 enlarged


Mean food consumed (f-units)
146
A-chicks
<
>
i
>
B-chicks
<
. i
>
i
*
Broods
i
i
> J
>

25
20
10
0
60
0
Brood size
Figure 4-1. Food consumed (mean SD) in the first
6 days post-treatment by A- and B-chicks and
entire broods raised in six experimentally reduced
(B/2), five enlarged (B/4) and five control (B/3)
nests.


35
calculated hatching success in nests that hatched at least
one chick and that were not abandoned in the first days of
nestling life. Thirteen C/2 and 20 C/3 nests with known
clutch and initial brood sizes fit these criteria in the
Seahorse Key sample. These nests were used to compare
hatching failure by clutch size on Seahorse Key and Alafia
Banks.
Measures of 1989 fledaina success. I calculated
Seahorse Key clutch sizes and fledging success per clutch
from the 53 nests for which I knew both the clutch size and
the number of chicks that fledged. Fledging success per
brood was calculated from the 36 Seahorse Key nests that
hatched at least one chick and for which I knew both the
initial brood size and number of chicks that fledged (see
Measures of Fledging Success, above, for Alafia Bank sample
sizes used in clutch size and fledging success analyses).
Analyses of Fates in 1989. Because nestlings were not
marked in 1989, I could not positively identify individuals
according to their hatching ranks. 1989 chicks are
therefore usually referred to as "unranked" chicks (but see
following paragraph). I determined the fates of 105 eggs
that hatched 94 chicks from the 44 nests that were not
abandoned and for which I was able to determine the fate of
at least one egg or chick. These nests were used for
analyses comparing fates regardless of chick ranks.


59
risk to surviving offspring. In asynchronously hatching
species, the progeny-choice hypothesis is effectively the
same as producing an "extra" chick as insurance for an
inferior senior, because reversals are likely only if a
junior is sufficiently superior that it is able to overcome
its age and size disadvantage. Thus, the progeny-choice
hypothesis becomes a special case of the insurance
hypothesis when hatching is asynchronous. Alternatively,
even potentially superior seniors may die of food-dependent
causes in the first few days after hatching if there is a
temporary food shortage during this period when young chicks
are vulnerable to starvation after using up their yolk
reserves. A junior may provide insurance for early senior
starvation (Forbes 1990) if the food shortage that kills the
senior occurs when the junior is still an egg (Nelson
1978:895) or hatchling with sufficient yolk reserves to
survive the brief shortage. In brown pelican broods, the 0-
2 day intervals between hatching of A- and B-chicks is too
short to facilitate this type of insurance, although the
hatching of C-chicks up to 5 days after their A-siblings
suggests that C-chicks could potentially provide such
insurance at least for A-chicks.
In other populations of brown pelicans, juniors may
have insurance value that covers other causes of senior
mortality. For example, predation may be a significant
source of partial brood loss in some brown pelican


115
raptors, herons, egrets, gannets, boobies, skuas, pelicans,
and cranes (Lack 1968, O'Connor 1978, Mock et al. 1990) in
which aggressive attacks by some member(s) of the brood
contribute significantly to the death of a nest-mate. In
these species, eggs hatch asynchronously and the siblicide
victims are usually the youngest members of the brood.
Several different hypotheses propose selective
advantages to siblicide and other forms of brood reduction
(reviewed in Forbes 1990, 1991). The differences between
the hypotheses lie in their explanations of the nature of
the reproductive value of junior chicks to their parents.
Junior chicks may have value as survivors along with all of
their siblings, as might occur when resources are plentiful,
with siblicide eliminating the juniors in years of food
scarcity. This is the resource-tracking hypothesis,
historically called Lack's (1966) brood reduction
hypothesis. Alternatively, the primary value of junior
chicks may be as replacements for any seniors that die
prematurely. This is the insurance hypothesis (Dorward
1962). In addition, junior chicks may provide parents with
a way of selectively raising those offspring with the
highest fitness expectations (progeny choice hypothesis,
Buchholz 1922, Kozlowski and Stearns 1989, Forbes 1991).
Under the progeny choice hypothesis, a junior chick would
contribute reproductive value only when it was intrinsically
superior to a senior sibling and its superiority was


129
treatment comparisons of broods and of B-chicks), while A-
chicks obtained similar amounts in both treatments (Figure
4-2, Mann-Whitney U = 7, P = 1.0). In one of the three B/3
broods used in this analysis, the A-chick was smaller than
the B-chick prior to treatment. I therefore compared food
consumed by B-chicks in B/3 versus B/2 broods again, this
time classifying as a B-chick the A-chick that was smaller
than its B-sibling. When this A-chick was classified as an
B-chick, the difference between food consumed by B-chicks in
reduced and control broods was no longer significant (Mann-
Whitney U = 3, P = 0.20 for B-chicks receiving X = 28.3
7.5 f-units in B/3 broods and X = 19.8 + 8.1 f-units in B/2
broods). Similarly, because the one B-chick was larger than
its A-sibling, I reclassified it as an A-chick. With this
chick reclassified, I found that A-chicks still received
similar amounts of food in reduced (X = 26.4 5.0) and
control broods (X = 31.5 4.6, Mann-Whitney U = 2, P =
0.10) .
I pooled all treatments to determine if A-chicks
generally received more food than did B-chicks. In 12 of
the 16 treatment broods, A-chicks received more food than
their B-siblings during the first 6 days post-treatment (1-
tailed Sign Test, P = 0.04). Similarly, in the 13 treatment
broods that still contained two chicks 9 days after
treatment, A-chicks received more food than did B-chicks in
all except three broods (1-tailed Sign Test, P = 0.046).


92
Regylt;?
Nestlings fought during all summary intervals at
similar rates and intensities. The total number of fights
per brood was similar during the summary interval when A-
chicks were 6-10 and 11-15 days old (Table 3-1, Mann-Whitney
U = 19, ni and n2 = 7 broods, P = 0.50). The number of
blows delivered per brood were also similar in these two
summary intervals (Table 3-1, Mann-Whitney U = 18, ni and n2
= 7 broods, P = 0.50), as were the average blows/fight
(Table 3-1, Mann-Whitney U = 19.5, ni and n2 = 7 broods, P =
0.50). When I compared summary intervals when A-chicks were
13-17 versus 17-21 days old, I found that broods in these
intervals had similar numbers of fights (Table 3-1, Mann-
Whitney U-test, U = 15, ni = 5 broods in 13-17 day summary
interval, n2 = 6 broods in 17-21 day summary interval, P =
1.0), number of blows (Table 3-1, Mann-Whitney U-test, U =
14, ni = 5 broods in 13-17 day summary interval, n2 = 6
broods in 17-21 day summary interval, P = 0.90), and average
blows/fight (Table 3-1, Mann-Whitney U-test, U = 14, ni = 5
broods in 13-17 day summary interval, n2 = 6 broods in 17-21
day summary interval, P = 0.90). Overlap in chick ages
within summary intervals precluded other comparisons.
Neither fighting rate nor intensity of fights was
related to any measure of chick growth or food delivered
during the summary intervals when A-chicks were 6 through 10


164
approaches of Temme (1986) and Haig (1990) with that of
Parker et al. (1989). In brood-reducing species, nestling
survival is related both to brood size and to parental
investment. Therefore, Parker and Mock (1987) advised that
models should include, in the same analyses, both the
effects of brood reduction and of nestlings taking unequal
shares of resources. Lazarus and Inglis (1986) explored
both the effects of brood reduction and parental investment.
But they did not take into account potential differences in
competitive abilities among offspring. Ideally, all of
these factors (brood reduction, parental investment patterns
and competitive differences among nestlings) should be
entered into the same model.
My dissertation identifies areas of potential conflict
between brown pelican parents and their offspring. I
explore the possibility that the competitive hierarchy that
I observed between senior chicks may create a situation
where the fitness interests of parents may be in conflict
with those of one but not the other senior offspring.
Further experiments will be needed to explore potential
differences between the interests of parents and each of
their offspring, and to determine how any conflicts are
resolved.


150
offspring conflict theory to the problem of brood reduction.
Brood-reducing parents produce more offspring than they are
able, or willing, to supply with food. All of the adaptive
explanations for brood reduction are generally stated in
terms of benefits to the parents, with an implicit
assumption that surviving offspring also benefit from the
death of a sibling (see Chapter 1). But the application of
parent-offspring conflict theory to this problem suggests
that brood reduction may sometimes benefit senior offspring
to the detriment of parental fitness (O'Connor 1978). Brood
reduction may be the result of parent-offspring conflict
rather than selection acting similarly on parents and
offspring.
In a variety of species, brood reduction is often
caused by fatal fighting among siblings (reviewed by Mock et
al. 1990). As with brood reduction generally, siblicide and
sublethal nestling aggression may benefit both the
aggressors and their parents (see Forbes 1990).
Alternatively, nestling aggression may involve parent
offspring conflict. The results of my dissertation provide
insight into the forces that shape siblicidal aggression and
brood reduction in brown pelicans. My study suggests that
nestling aggression and brood reduction in this species may
involve conflicts of interest between parents and their
senior offspring over parental investment and the fate of
the youngest brood members.


132
continued survival would have had a negative impact on the
survival of their senior siblings. To test this prediction
in species where brood reduction occurs so quickly would
require preventing brood reduction from occurring (e.g.
experimental design of Husby 1986), by replacing C-chicks
that died with new individuals to maintain B/3 and B/4
broods.
Brood reduction may not be adaptive for brown pelicans.
The death of the C-chick may be a negative consequence of an
asynchronous hatching pattern that may have evolved not
because it facilitates brood reduction, but because it
creates some other favorable conditions. For example,
Hussell (1972) argued that starting incubation on the first
egg may minimize the time between laying the first egg and
fledging the first nestling. This could minimize the period
during which early-laid eggs are at risk of predation.
Clark and Wilson (1981) developed a model that predicted an
advantage to asynchrony whenever predation risks are higher
for eggs than for nestlings because this minimizes the
period when only eggs are in the nest. Predation of
parentally attended eggs and nestlings was not evident
during this study, but does occur in other populations
(reviewed in Chapter 2). Predation patterns may have
favored hatching asynchrony in areas subject to high
predation pressures, as might be expected in readily-
accessible ground nests. Birds that nest in areas of lower


159
resources increase, each chick's share should approach one-
third of the total. But when resources are scarce, chick
shares should decrease down the dominance hierarchy.
Furthermore, during resource scarcity, the difference
between the shares taken by A- and B-chicks should be
smaller than the difference between the shares taken by B-
and C-chicks. Under extreme food scarcity, this model
predicts that A-chicks should take such a large share of the
total that their C-siblings are left with nothing.
The pattern of food distribution among chicks in B/3
broods of brown pelicans fit the predictions that Parker et
al. (1989) made for the case of food scarcity. Food shares
decreased down the size-hierarchy, with A- and B-chick
shares being more similar than were B- and C-chick shares
(Chapter 4). In B/4 nests, the difference in food shares
between A- and B-chicks was similar to that between B- and
C-chicks (Chapter 4). This result could be evidence against
the prediction of Parker et al. (1989). But it is also
likely that the lack of differences was due to the high
variance in food deliveries to B/4 broods (Chapter 4, Figure
4-1) and the anomalous situation of having a fourth
nestling. Broods receiving more total food may have had a
more equal distribution of food among nestlings than broods
that received less food, as predicted by Parker et al.
(1989). I did not investigate whether there was an


Figure 2-1. Frequency of mortality through the nestling
period (defined as beginning with hatching of the A-chick)
for A-, B- and C-chicks in B/3, and A- and B-chicks in B/2
broods in 1990. The graphs for C-chicks and B/2 B-chicks
include chicks of these ranks, plus unranked 1990 chicks
that were the first to die in B/3 and B/2 broods,
respectively. Only chicks from broods hatching all eggs
were included. Numbers above bars indicate for each time
period the number of A-chicks that died before their juniors
(A-chick graphs), or the number of B-chicks or C-chicks that
died after a senior sibling (B- and C-chick graphs,
respectively).


175
flimsy nests that soon fell apart and that presumably served
only a learning function (Din and Eltringham 1974). I did
not observe rudimentary nest-building among brown pelican
immatures, although immatures occasionally placed a single
stick in the fork of a branch.
Stick thievery was common in both years of my study,
presumably because during nest-building, stealing was a
faster or easier way to obtain appropriate sticks than was
searching for sticks of the right sort and then struggling
to pull these from branches. By attacking resident
nestlings until they were too intimidated to retaliate,
stick thieves could gain access to a hoard of unguarded
sticks appropriate for nest-building. By killing a
nestling, a stick thief would permanently eliminate delays
or potential injury caused if the victim were to live to
defend its nest again. Stealing sticks from neighbors has
also been reported as common among brown pelicans by Bent
(1922) and Schreiber (1977) and among Australian pelicans
(Vestjens 1977:47) and pink-backed pelicans (Din and
Eltringham 1974:488).
Stick thievery is not necessarily restricted to the
nest-building period. After chicks are able to stand and
walk, parents periodically deliver sticks to their
offspring, who manipulate the sticks and sometimes insert
them into the nest (contra Schreiber 1977:40). This stick-
placement does not increase the size of the nest, because


131
shares than in B- versus C-chick food shares, differences
derived from data presented in Table 4-1 for B/4 nests 6
days post-treatment). The difference between A- and B-chick
shares averaged 0.14% (+. 0.17%), and between B- and junior
(C- plus D-) shares averaged 0.19 (+, 0.15%).
In most B/3 and B/4 broods, less than a quarter of the
total food delivered was consumed by the smallest chicks (C-
chicks in B/3 and C and D-chicks, collectively, in B/4
nests, see Table 4-1). In B/4 nests, an average of 15.2% (
12.4%, Table 4-1)) of the total food delivered to the brood
through 6 days post-treatment was consumed by the C- and D-
chicks, collectively. In B/3 nests, C-chicks consumed an
average of 14.2% ( 7.1%, Table 4-1) of the total food
delivered to the brood during the first 6 days post
treatment. In the first 9 days post-treatment, C-chicks
consumed an average of 9% (4.4%, Table 4-1) of the total
food delivered to B/3 broods.
Discussion
Senior chick survival was not affected by the brood-
size treatments. This does not fit the prediction of
adaptive explanations of brood reduction that seniors should
survive better in broods from which C-chicks were removed.
But because C-chicks survived so briefly, this experiment
did not adequately test the prediction. It is still
possible that had C-chicks not died when they did, their


CHAPTER 2
ROLE OF JUNIOR SIBLINGS IN RESOURCE TRACKING AND AS
INSURANCE FOR SENIOR LOSS
Introduction
In many bird species, females lay more eggs than pairs
typically are able or willing to feed sufficiently. Among
species that hatch asynchronously, it is the youngest brood
members that usually die, typically of starvation or from
beatings delivered by siblings (siblicide). Two major
hypotheses, the "resource-tracking" and "insurance
offspring" hypotheses, provide testable explanations for how
parents may benefit from producing offspring that are
usually doomed to die (see Forbes 1991 for additional
hypotheses). Mock and Parker (1986) pointed out that these
usually doomed "marginal" offspring may contribute to the
reproductive value of their parents in two ways. First,
"marginal" offspring may provide "extra-chick value" by
surviving along with their siblings when food is plentiful.
When food is scarce, "marginal" chicks starve quickly, which
presumably benefits surviving siblings who gain the
"marginal" chick's food share ("resource-tracking
hypothesis," Lack 1947, 1954, 1968). Under the resource
tracking hypothesis, "marginal" chicks are "extra" in the
10


57
junior chicks could be evaluated by examining how much A-
versus B- and C-chicks contribute to the lifetime
reproductive success of their parents. If junior chicks
make a negligible contribution to the lifetime reproductive
success of their parents, then this would suggest that the
resource-tracking and insurance hypotheses do not explain
the production of junior chicks in this species.
For What Causes of Senior Death do Juniors Provide
Insurance?
The low incidence of hatching failure, the coincidence
of the peak periods of mortality for all chick ranks and the
delay of this mortality until about a week after the
hatchling period (Figure 2-1) suggests that in both brood
sizes, B- and C-chicks served as insurance for seniors dying
of causes other than egg or hatchling failure. Thus,
juniors probably served primarily as replacements of seniors
dying of infanticide, accidental deaths or food-dependent
causes. I saw no evidence of predation in this study.
I had expected that the insurance value of junior
chicks would be restricted to replacing seniors that died of
food-independent causes, because the size-based competitive
superiority of seniors should ensure that their younger
siblings would precede them in succumbing to starvation or
siblicide during food shortages. But the similarity in the
timing of food-dependent deaths of C-chicks and their


ACKNOWLEDGEMENTS
I thank Jane Brockmann for her tremendous support
through all phases of my research. Jane has been a
wonderful advisor, treating me simultaneously as a
colleague, student and friend. Thanks also go to Peter
Feinsinger for his friendship, inspired teaching and helpful
criticisms of research proposals. I also thank Peter
Feinsinger, along with Carol Aubspurger, for getting me
excited about "siblicide" and "brood-reduction" in plants.
In addition to Peter, I also thank Marty Crump and Mike
Collopy for their ideas and advice during the planning of my
research. I wish that they had remained in Florida and thus
been able to remain on my committee.
I thank Jack Kaufmann, Doug Levey and John Sivinski for
generously coming on board as committee members at the 11th
hour. I thank them for their helpful comments on earlier
drafts of the dissertation. Doug Levey provided
particularly detailed comments on drafts of the
dissertation, for which I am grateful. I thank Lou
Guillette for all his ideas and advice about my project on
embryonic development in cattle egrets. I also thank Lou
for remaining on my committee after I changed projects and
strayed far from developmental biology.
11


153
increased growth-rates of B-chicks in 17-21 day old broods
could fit one or both of the following explanations. First,
A-chicks may have increased their attacks when fast-growing
B-chicks posed the threat of dominance reversals. Second,
B-chicks might have increased their attacks during periods
of rapid growth when they may have a better chance of
success in reversing dominance with their A-siblings. B-
chicks might increase their survival chances by initiating
and retaliating during fights. Enhanced survival by these
means is likely only when the benefits of reversing
dominance outweigh the costs (e.g. risks of injury and
energetic costs of fighting, see Chapters 3 and 4).
The asynchrony of hatching (presumably under the
control of parents) creates an initial A-chick advantage
that apparently continues throughout the nestling period.
At least during the first few weeks of the nestling period,
A-chicks gain more food than do their B-siblings (Chapter 4
and Pinzn and Drummond in press). Ultimately, more A- than
B-chicks survive to fledge (Schreiber 1976, Pinzn and
Drummond in press, Chapter 2). It is likely to be in the A-
chick's interest to make sure that it gains and maintains
dominance so as to gain the feeding and survival advantages
that are associated with dominance. A-chicks might achieve
dominance by attacking their siblings early in the nestling
period. If this is so, then A-chicks may benefit from


xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID EQBKLGI9T_KWB5YW INGEST_TIME 2013-02-14T16:27:13Z PACKAGE AA00013539_00001
AGREEMENT_INFO ACCOUNT UF PROJECT UFDC
FILES


21
blinds. In contrast focal nests whose contents were under
continuous observation, the number of eggs and chicks in
visual census nests were counted only 1-3 times per day.
Nestlings in visual census nests were never handled and so
remained unmarked and were not measured for growth.
Measures of Hatching Success
To calculate hatching success in all broods,
independent of brood size, I used the 65 nests for which I
knew both the clutch size and the initial brood size. These
nests included 19 focal, 24 visual census and 22 growth
nests. This calculation of hatching success included nests
in which all chicks failed to hatch.
Last-laid eggs may have value as replacements for older
eggs that fail to hatch. To assess this possibility, I
calculated hatching success a second time, restricting the
analysis to only those nests of known clutch and initial
brood sizes that also hatched at least one chick. Because I
also wanted to assess fledging success in the same sample, I
restricted this analysis further to include only nests in
which I also knew how many chicks fledged. A total of 45
nests met these criteria (17 focal, 7 visual census and 21
growth nests). In four of these nests, all of the chicks
died on the same day because the parents abandoned the brood
within a few days of brood completion. This left 41 broods
that were not abandoned, for which clutch sizes, initial


168
Table A-1. Culmen lengths (in mm) versus age (in days)
based on the regression of age on In(culmen length) for 63
known-age 0-25 day old chicks.
Culmen
Lengths
Age
20-21
0
22-22.5
1
23-24
2
25-26
3
27-28
4
29-30
5
31-32
6
33-34
7
35-37
8
38-40
9
41-43
10


88
chicks of different ages when I first entered the colony to
monitor behavior and growth. For example, chicks were first
weighed when A-chick ages were anywhere from 2-5 days (N = 6
broods) to 13-17 days (N = 4 broods). First weighing of the
remaining eight broods fell within these extremes.
Use of "summary intervals." Had I included all of the
18 nests for which I collected data in a single regression,
different nests would have contributed unequally to the
regression. To avoid this problem, I ran separate
regressions for nests of different ages. Because I measured
and weighed chicks only every 4 days, I used 4-day intervals
for regression analyses. For convenience, I refer to these
intervals as "summary intervals." These summary intervals
included the periods during which A-chick ages were 6
through 11 (2) days (N = 7 broods), 11 through 15 (2) days
(N = 7 broods), 13 through 17 (2) days (N = 5 broods) and
17 through 21 (2) days (N = 6 broods). A total of 13
broods were used in these analyses. Six of these were used
in only a single summary interval, three were used in two
different summary intervals, three were used in three
summary intervals, and one was used in all four summary
intervals. To be included in these analyses, broods had to
consist of two chicks during the entire summary interval. I
could not do analyses for summary intervals including chicks
younger than 6 days because I had complete data on feeding,
fighting and growth for only one nest. Analyses when chicks


95
chick mass gain was slower. Gains in A-chick mass were also
associated with higher fighting rates. I found that A-chick
as well as B-chick mass changes were significant predictors
of the number of fights when I ran a stepwise regression on
all measures of chick mass, alone (number of fights = 15.6 +
0.159 X A-chick mass gain + 0.284 X B-chick mass change, r^
= 0.98, Fo.05,5 = 96.48, P = 0.002). To avoid co
correlation, I entered only the "best" (highest F-value) of
these predictors, B-chick mass change, into the final
stepwise regression (recorded in Table 3-2) that was used to
find the overall best predictor of fighting rates. The
results of all fighting rate analyses for the 17-21 day
summary interval were in the opposite direction of that
predicted by the food-amount hypothesis. The average blows
per fight were not significantly related to any measure of
chick growth or food amount delivered.
Discussion
The Food-amount Hypothesis
The results of this study generally did not support the
food-amount hypothesis, except for some inconclusive
evidence when nestlings were 13 through 17 days old. The
relationship between food supplies and fighting varied with
nestling age. Fighting varied with nestling growth during
some summary intervals. But these relationships were not


neighboring nestlings. Some second-hatched ("B-") chicks
replaced dead first-hatched ("A-") chicks and others
survived along with their seniors. All third-hatched ("C-")
chicks died.
Food shortages probably were not a proximate cause of
siblicidal aggression, except possibly when broods were 13-
17 days old. Fighting during the first week of life was
independent of nestling growth and food supplies, and
probably served to establish a dominance hierarchy. When
broods were 13-17 days old, fighting rates were best
predicted by the difference in the rate of bill growth of A-
chicks relative to their B-siblings. But when broods were
17-21 days old, fighting rates were best predicted by
accelerated B-chick growth, as could be expected if fast
growing B-chicks threatened the dominance of A-chicks.
All adaptive explanations for brood reduction assume
that parents deliver a fixed amount of food and so survivors
gain extra food after the death of a sibling. I tested this
assumption by removing or adding a chick to three-chick
broods. Parents delivered similar amounts to enlarged,
control and reduced broods during the first 6 days post
treatment. By 9 days post-treatment, parents brought less
food to reduced than to control broods. Seniors did not
gain more food in reduced broods during these periods. A
feeding hierarchy was evident, with A-chicks gaining more
food than their B-siblings who gained more than their C-
x


137
chicks. Food to A-chicks might have remained the same while
food to B-chicks might have decreased following brood
reduction. One possible cause for food to B-chicks to
decrease following brood-reduction would be if B-chicks in
control broods sequestered virtually everything that the A-
chick did not eat, including the additional food that
parents presumably intended to be the C-chick's share. In
such a situation, B-chicks might actually benefit from the
continued survival of C-chicks as long as their C-siblings
remain too intimidated to threaten their B-siblings' food
supply. If this hypothesis is correct, then B-chicks should
attack their C-siblings only enough to insure that C-chicks
get only the food left over after their B-siblings are full.
But B-chicks should refrain from killing their C-siblings.
Whether or not this actually occurs remains to be
investigated.
Further studies with larger sample sizes will be needed
to test the related hypotheses that the death of the C-chick
affects A- and B-chick food supplies differently, and that
B-chicks may gain a feeding advantage by the continued
survival of an intimidated C-chick. The results of my
comparison of reduced versus control broods 9 days post
treatment provide suggestive but inconclusive evidence for
these hypotheses. An alternative explanation is that the
significant decrease in food to B-chicks in reduced relative
to control broods was caused by including a control brood in


189
Schreiber, R. W. 1977. Maintenance behavior and
communication in the brown pelican. Ornithol. Monogr.,
22, 1-78.
Schreiber, R. W. 1979. Reproductive performance of the
eastern brown pelican, Pelecanus occidentalis.
Contrib. Sci., Los Angeles County Mus. No. 317, 1-43.
Schreiber, R. W. & Risebrough, R. W. 1972. Status of brown
pelican populations in the United States. Wilson
Bull., 84, 119-135.
Schreiber, R. W., Schreiber, E. A., Anderson, D. W. &
Bradeley, D. W. 1989. Plumages and molts of brown
pelicans. Contrib. Sci., Los Angeles County Mus. No.
402, 1-43.
Shakespeare, W. 1623. The Tragedy of King Lear. In: The
Riverside Shakespeare (Ed. by G. B. Evans), pp. 1249-
1305. Boston: Houghton Mifflin Company.
Simmons, R. 1988. Offspring quality and the evolution of
cainism. Ibis, 130, 339-357.
Simon, M. P. 1984. The influence of conspecifics on egg
and larval mortality in amphibians. In: Infanticide:
Comparative and Evolutionary Perspectives (Ed. by G.
Hausfater & S. B. Hrdy), pp. 65-86. New York: Aldine
Publ. Co.
Smith, C. C. & Fretwell, S. D. 1974. The optimal balance
between size and number of offspring. Am. Nat., 108,
499-506.
Sokal, R. R. & Rohlf, F. J. 1981. Biometry. San
Francisco: W. H. Freeman and Company.
Spellerberg, I. F. 1971. Breeding behavior of the
McCormick skua Catharacta maccormicki in Antarctica.
Ardea, 59, 189-230.
Springer, S. 1948. Oviphagous embryos of the sand shark,
Carcharlas taurus. Copeia, 1948, 153-157.
Stearns, S. C. 1976. Life-history tactics: a review of the
ideas. Q. Rev. Biol., 51, 3-47.
Stearns, S. C. 1987. The selection arena hypothesis. In:
The Evolution of Sex and its Consequences (Ed. by S. C.
Stearns), pp. 337-349. Basel, Switzerland: Birkhuser.


183
Gard, N. W. & Bird, D. M. 1990. Breeding behavior of
American kestrels raising manipulated brood sizes in
years of varying prey abundance. Wilson Bull., 102,
605-614.
Gargett, V. 1978. Sibling aggression in the black eagle in
the Matopos, Rhodesia. Ostrich, 49, 57-63.
Gerrard, J. & Bortolotti, G. 1988. The Bald Eagle.
Washington, D.C.: Smithsonion Institute Press.
Gilmore, R. G., Dodrill, J. W. & Linley, P. A. 1983.
Reproduction and embryonic development of the sand
tiger shark, Odontaosis taurus (Rafinesque). Fish.
Bull., 81, 201-225.
Godfray, H. C. J. 1986. Models for clutch size and sex
ratio with sibling interaction. Theor. Popul. Biol.,
30, 215-231.
Godfray, H. C. J. & Harper, A. B. 1990. The evolution of
brood reduction by siblicide in birds. J. theor. Biol.,
145, 163-175.
Godfray, H. C. J. & Parker, G. A. 1991. Clutch size,
fecundity and parent-offspring conflict. Phil. Trans.
R. Soc. Lond., B, 332, 67-79.
Godfray, H. C. J. & Parker, G. A. 1992. Sibling
competition, parent-offspring conflict and clutch size.
Anim. Behav., 43, 473-490.
Hahn, D. 1981. Asynchronous hatching in the laughing gull:
cutting losses and reducing rivalry. Anim. Behav., 29,
421-427.
Haig, D. 1986. Conflicts among megaspores. J. theor.
Biol., 123, 471-480.
Haig, D. 1987. Kin conflict in seed plants. Trends Ecol.
Evol., 2, 337-340.
Haig, D. 1990. Brood reduction and optimal parental
investment when offspring differ in quality. Am. Nat.
136, 50-566.
Hamilton, W. D. 1964. The genetical evolution of social
behavior. J. theor. Biol., 7, 1-52.


29
A final category of food-independent deaths included
chicks that "died as hatchlings." I classified a chick as
having "died as a hatchling" if (1) the victim died when < 2
days old (N = 5), when chicks still had reserves of yolk,.or
(2) the victim died when more than 2 days but < 5 days old
and it was well-fed (N = 1). To be classified as having died
as a hatchling, there also had to be no evidence of fighting
among siblings prior to the victim's death. I considered
the chicks that I classified as having died as hatchlings to
be victims of food-independent deaths because evidence
suggested that these chicks were not attacked by their
siblings and did not experience food shortages before their
deaths. I assumed that these chicks were killed accidently
by parents that crushed chicks or flipped them from the nest
when parents departed suddenly. Several lines of evidence
support this assumption. First, chicks < 5 days old were
small enough to die of these causes. Second, I found one
chick that may have been crushed to death. Third, I have
seen hatchlings flipped off a parent's foot-webs to the edge
of the nest when parents moved to a perch (N = 3). The
discovery of live, healthy-looking hatchlings on the ground
(N = 2) suggests that chicks were sometimes flipped
completely out of the nest. Additional reasons for chicks
to have died as hatchlings include deaths due to
developmental abnormalities and improper incubation, which
are both likely to be food-independent sources of mortality.


144
it. If parents intended C-chicks to receive the extra food
delivered to control broods, then, if their efforts were
thwarted by B-chicks securing the extra food, parents should
favor the death of the doomed C-chicks. B-chicks, by
contrast, should attempt to prolong the C-chick's life as
long as the B-chick continued to obtain the C-chick's food
share. Conflict between parents and B-chicks could take the
form of parents attempting to hasten brood reduction and B-
chicks attempting to forestall it.
Parents might hasten brood reduction by withholding
food and tolerating nestling fights (Mock and Lamey 1991).
Parents might even increase fighting frequency by adjusting
sticks and otherwise placing the bill within reach of hungry
nestlings without providing food (pers. obs.). A B-chick
might delay its C-sibling's death by ceasing to attack the
C-chick and allowing the C-chick to gain some food. These
possibilities remain untested and await future examination.


6
siblings attack their juniors (Pinzn and Drummond in
press), the intensity of sibling aggression varies among
nests (Chapter 3). In Chapter 3, I investigate whether this
variation in sibling aggression depends on food supply, as
might be expected if the resource-tracking hypothesis is
operating.
The progeny-choice, insurance and resource-tracking
hypotheses all argue that the survival chances of young that
did not die increase when brood size decreases (O'Connor
1978) because the remaining young obtain more food after the
death of their competitor. This will only happen if parents
deliver the same amount of food to the brood before and
after brood reduction. These hypotheses consider the
fitness of both parents and surviving offspring to increase
similarly with brood reduction. But this need not be the
case. As Hamilton (1964) first argued, the fitness
interests of parents and offspring may differ. Indeed,
conflict is likely to be more common than congruence of
parent and offspring interests, because, as Trivers1 (1974)
development of Hamilton's idea clarified, selection should
favor offspring that seek more investment from their parents
than their parents are selected to give. This insight
spawned many theoretical analyses of parent-offspring
conflict (see Godfray and Parker 1991 for review), including
many on parent-offspring conflict over brood size (O'Connor
1978, Godfray 1986, Lazarus and Inglis 1986, Parker and Mock


87
Three percent of all fights observed in 1990 ended when
a loser Escaped by crawling rapidly away from its attacker.
The escaping loser fled to several different types of
location. Some losers fled while remaining within the
confines of the nest (N = 35 fights). Some losers left the
nest to climb onto a perch (N = 15 fights). Some losers (N
= 6) escaped by (1) climbing from perch to perch in the nest
site after the nest had been destroyed by the chicks (see
Appendix C), or (2) leaving the vicinity of the nest.
Analyses
I used forward stepwise linear regression in Statview
(Abacus Concepts 1992) to determine which measures of growth
and food amounts were the best predictors of intensities and
rates of fighting. Although I collected data on feeding,
fighting and growth for a total of 18 nests, I could not
include all of these nests in the same regression. This was
because these nests did not all contain two chicks during
the same period of nestling life. For example, brood size
dropped to one or no chicks when A-chick ages were anywhere
from 9-13 days (N = 4 broods) to over 25 days (N = 4
broods), with the remaining 10 broods dropping in size
sometime between these ages Thus, nest observations were
terminated at different chick ages. Observations and growth
measurements of chicks in different nests also began at
different chick ages. This was because nests contained


74
"Lack's brood reduction hypothesis" by Ricklefs 1968).
Theoretically, unpredictable food supplies ultimately favor
facultative siblicide (Mock et al. 1990) in species where
nestling starvation is brood-size dependent. When such
species face food shortages routinely, selection should lead
to reductions in clutch (rather than brood) size to match
resources. But routine shortages can favor overproduction
followed by obligate siblicide when the designated victim
has some value as a potential replacement for a sibling that
dies (Dorward 1962, reviews in Stinson 1979, Anderson 1990,
see also Chapter 2).
Most species accomplish brood reduction without overt
nestling aggression (see reviews in Howe 1976, Clark and
Wilson 1981). Several conditions must be met for the
evolution of siblicidal aggression to be favored. First,
nestlings must possess potentially lethal weaponry. Second,
they must experience spatial confinement that precludes
escape from sibling attacks. Third, nestlings must engage
in competition for food that is provisioned in small units
that can be defended easily through aggression (Mock et al.
1990). Siblicidal species are also characterized by
competitive disparities among siblings. These disparities,
which are usually initiated by hatching asynchrony, may
function to reduce siblicidal aggression (Drummond and
Garcia Chvelas 1989, Hahn 1981, Fujioka 1985, Mock and
Ploger 1987, but see Hussell 1972, Clark and Wilson 1981;


APPENDIX A
DETERMINING CHICK AGES
I plotted age against culmen length for 63 known-age
chicks (20 A-, 24 B-, and 19 C-chicks) whose culmen lengths
were measured when the chicks were 0-25 days old (Figure A-
1). The culmen lengths of these chicks of known ages were
correlated with age (Figure A-l, N=204 observations, r^ =
0.95, P = 0.001). Schreiber (1976) also found a correlation
between age and culmen length. From this regression, I
constructed Table A-l to estimate chick ages from culmen
lengths for chicks that were found in their first 10 days of
lif e.
Ideally, I would have estimated chick ages separately
for A-, B- and C-chicks by using separate regressions for
chicks of each of these ranks. This would have controlled
for the possibility that same-age chicks of different ranks
might have different culmen lengths. Specifically, culmens
of A-chicks might be longer than those of B-chicks which
might be longer than those of C-chicks of the same rank.
When I tested this possibility for chicks less than 11 days
old, I found that culmen lengths differed significantly
among chick ranks only when chicks were 1, 2 and 7 days old
(Table A-2). Furthermore, for 1-day old chicks, the
difference was not in the predicted direction. At this age,
165


me with this arduous task. Thanks go to Mark Stowe for the
use of his computer, printer and modem for an extended
period. I also thank Ming Lee Prospero for assistance with
manuscript preparation and the literature search.
Financial support in 1990 was provided by an Elizabeth
Adams Fellowship from Mount Holyoke College and awards from
the Frank M. Chapman Memorial Fund and the Joseph Henry Fund
of Sigma Xi Grants-in-Aid of Research. The Department of
Zoology at the University of Florida provided me with a
research assistantship, use of a boat, and housing at the
Seahorse Key Biological Station for the 1989 season. Thanks
again go to H. J. Brockmann for providing supplemental
financial support in the 1989 season. Financial support in
both years was also provided by the University of Florida
Foundation. I also thank my husband, Don Allan, for
providing additional financial support during this period
when we were still engaged to be married.
En route to my work with brown pelicans, I conducted a
variety of research projects. I wish to thank all those who
assisted me during these earlier projects. My first
potential dissertation project involved communal roosting
behavior of Heleconius butterflies. I thank Lincoln Brower,
Tom Emmel, and Allan Masters for their helpful advice on
this project. Peter May introduced me to good field sites
in Florida. I also thank Larry Gilbert for showing me his
Costa Rica field site and discussing the details of
v


157
a food loss following brood reduction, its parent might
actually benefit from the death of a junior offspring before
the senior benefits. This could occur if parents that
decrease their investment following brood reduction gain
more in future reproductive success than they could gain
from current offspring maintained at pre-brood reduction
levels.
The models of parent-offspring conflict over brood
reduction that have been developed so far concern a maximum
of two classes of chicks, seniors and runts (O'Connor 1978,
Parker and Mock 1987, Godfray and Harper 1990). When cases
of clutch sizes larger than two are modelled, these models
assume that seniors are identical in their value to parents.
This seems to be a valid assumption for some species, such
as the three-chick broods of cattle egrets that were studied
by Ploger and Mock (1986). In this species, competitive
disadvantages were concentrated on the C-chick runt, with
seniors obtaining food with similar success. But seniors
were not identical in brown pelican broods. A-chicks gained
more food than did B-chicks who gained more than did C-
chicks (see also Pinzn and Drummond in press). Hatching
asynchrony not only created a runt but also created a
competitive hierarchy among seniors. The survival prospects
of B-chicks were lower than those of their A-siblings, lying
somewhere between those of A- and C-chicks (Schreiber 1976,
Pinzn and Drummond in press, Chapter 2). Because of this


CHAPTER 5
SUMMARY AND CONCLUSIONS
A fundamental problem of life-history theory concerns
tradeoffs between present and future reproductive success
and how the resolution of these tradeoffs affect life-time
reproductive success (Williams 1966, Stearns 1976). Parents
may invest (sensu Trivers 1972) more in current offspring at
the expense of future reproduction. Alternatively, parents
may withhold investment in some current offspring and
enhance reproductive success in the future, provided that
parents have a high probability of surviving to breed again.
Trivers (1974) argued that these tradeoffs between
present and future parental reproduction lead to conflicts
between parents and offspring over the investment parents
make in their offspring. Trivers based his argument on
Hamilton's (1964) "rule" that animals should behave
altruistically whenever the cost to the altruist is less
than the benefit to the recipient of altruism multiplied by
the degree of relatedness between the altruist and the
recipient. Trivers (1974) used Hamilton's rule to predict
conditions in which parents should behave "altruistically"
toward their offspring by providing parental care, and when
offspring should behave "selfishly" by demanding extra
investment from their parents. Trivers (1974) argued that
148


BIOGRAPHICAL SKETCH
192
xiv


APPENDIX D
NEST TAKEOVERS
During takeovers adults killed the resident eggs or
nestlings presumably in preparation for initiating a clutch
of their own. By successfully taking over a nest, the
invading birds may enhance their reproductive success,
possibly by allowing them to initiate their clutch more
rapidly or efficiently than if they had to engage in stick
collecting and nest-building. Schreiber (1979) presented
data showing lower reproductive success in ordinary nests
than in the nests where eggs were present during one census,
gone in the next, and present again in a subsequent census.
Although Schreiber (1979) interpreted the latter nests to be
evidence of replacement clutches laid by the original,
unmarked pair, I saw an identical pattern in 1989 and 1990,
but no replacement clutches were laid in my study. In all
cases these new clutches were laid following takeovers, with
the new pair laying eggs (Ploger unpub. data). If some of
the replacement clutches reported by Schreiber (1979) were
actually takeovers, then Schreiber's data suggest that
takeovers may present a consistent source of mortality
across years and colonies, because 9% of all nests (0-26%
per year over 8 years) contained such clutches. Keith
(1978) observed four successful takeovers among California


102
similar. This pattern could have been produced if broods
with large A-chick size superiority experienced food
shortages. In these broods, A-chicks may have received
virtually all of the food, leaving B-chicks with little to
eat. This could create a large size difference between A-
and B-chicks. The high intensity of fighting in broods with
large A-chick size superiority might have reflected these
food shortages, rather than being caused by the larger
spread in chick sizes.
Alternatively, A-chicks may have preferentially
attacked chicks that were much smaller than themselves
rather than chicks of similar size. This might be expected
if the costs of attacking increase with increased size of
the victim (Mock et al. 1990), without a corresponding
increase in the benefits to the attacker.
Although suggesting that the sibling rivalry reduction
hypothesis may not hold for brown pelicans, my data do not
provide a true test of the hypothesis. Experimental
manipulations of hatching asynchrony in broods fed similar
food amounts will be necessary to test the sibling rivalry
reduction hypothesis in this species.
Sibling Aggression in Related Species
Siblicidal aggression has been reported in American
white pelicans (Pelecanus erythrorhvnchos. Johnson and Sloan
1978, Knopf 1981, Cash and Evans 1986), white pelicans


149
because both parents and offspring are related to future
offspring of the parents by one-half, parents and offspring
experience the same cost in terms of reduced future output
when parents invest more in current offspring. But the
benefits of parental investment in current offspring are
twice as high for offspring as for parents. This is because
offspring are related to themselves by one, while parents
are related to their offspring by one-half. Because parents
are related equally to current and future offspring, whereas
offspring are related to themselves by one and to siblings
by one-half, the benefits of parental investment to any
individual offspring are twice that of the benefits to its
parent (Trivers 1974). Thus, offspring should demand more
investment from parents than parents are selected to give
(Trivers 1974). For the same reasons, conflict over
parental investment is likely among siblings in the same
brood (e.g. O'Connor 1978). These arguments assume that by
withholding investment in current offspring, parents can
enhance their fitness through future offspring.
Since Trivers' (1974) insight, numerous models have
demonstrated that the inclusive fitness interests of parents
and their offspring differ under a variety of conditions
(reviewed in Godfray and Parker 1991). A considerable
amount of this theoretical work (e.g. O'Connor 1978, Parker
and Mock 1987, Godfray and Harper 1990, Godfray and Parker
1991, 1992) has focused on the application of parent-


142
Parent-offspring Conflict
This study addressed two sources of potential conflict
between parents and their senior offspring. Parents and
seniors may be in conflict over the size of parental
investment in individual seniors and over the fate of the
last-hatched brood-member. That food shares to A- and B-
chicks remained the same in enlarged, control and reduced
broods in the first 6 days post-treatment suggests three
possibilities. First, the interests of parents and senior
chicks may have been similarly served by this food
allocation pattern. Second, senior chicks may have been
able to control access to the food despite parental attempts
to distribute it more equally among all offspring. Third,
sample sizes may have been insufficient to detect true
differences among the treatments. This possibility leaves
the potential for parent-offspring conflict unexplored
during the first 6 days post-treatment.
The decrease in food delivered to reduced relative to
control broods 9 days post-treatment suggests the potential
for conflict between parents and their senior offspring.
Parents could have provided seniors in reduced broods with
more food than was actually supplied. Conflict could have
occurred if senior chicks sought additional food in reduced
broods. But that A-chicks gained similar amounts in both
B/2 and B/3 broods suggests that the food-demands of A-


127
Fighting Behavior
Fights involved one chick delivering one or more blows
to the head or body of another chick with sufficient force
to move the victim's head when struck (see Chapter 3 for
more detailed descriptions). The end of a fight was defined
as occurring when no further blows were exchanged for 30
seconds.
Animal Care Considerations
My experimental treatments were unlikely to have caused
the fostered C-chicks to be attacked by siblings or to fall
victim to siblicide and starvation more frequently than
would have occurred had they been left in their home nests.
Among the unmanipulated three-chick nests that I observed in
the course of 2-year's study, no nest fledged all three
chicks, and all identifiable C-chicks died, usually from
starvation and/or siblicide (Chapter 2).
During late incubation and the first week of hatching,
parents usually remained on their nests while I handled the
nest contents. Fledging success was actually better in
focal nests than in other parts of the colony that we never
disturbed (Chapter 2).


51
known hatching ranks, the importance of hatching rank to
chick survival was not clear from my study.
But chicks that gained size superiority over their
siblings clearly gained a survival advantage. Evidence for
this was provided by analyses that included chicks of
estimated ranks because these chick ranks were based on size
differences after the first 10 days of life. Thus, largest
("A-") chicks survived more frequently than did their
smaller ("B-") siblings in 1989 B/3 broods and in B/2 broods
in both years. These "A-" chicks also survived more often
than their smallest ("C-") siblings in both years. In 1990,
"A-"chicks also survived more often than their "B-" siblings
in B/3 broods when I re-classified chicks according to their
relative sizes at age 10 days in two nests where the B-
chicks grew larger than their A-siblings.
Results in the literature also indicate that survival
is associated with chick size and/or hatching order.
Schreiber (1976) reported that all A-chicks survived in the
4 years of his study, whereas B-chick survival varied among
years and C-chicks virtually always died. Similar annual
variation is likely in my Alafia banks site, which was
located about 30 miles from Schreiber's (1976) study colony.
Pinzn and Drummond (in press) also found that nestling
survival was highest among A-chicks and lowest among C-
chicks in a Mexican population of brown pelicans.


siblings. The fitness interests of parents may conflict
with those of one senior but not with the other senior
offspring.
xi


53
in ground-nesting than tree-nesting populations of brown
pelicans.
The pattern of B-chick deaths in B/3 broods was
consistent with their having value both as insurance and as
"extra-chicks." Some B-chicks replaced A-chicks that died,
so serving as insurance for A-chick death. In addition,
most B-chicks lived into the period when A-chicks faced a
high probability of dying, suggesting that they were at
least available as potential replacements in the event of A-
chick death. B-chicks clearly had value as "extra" chicks
in 1989 when 36% of B/3 broods fledged two chicks (Table 2-
5). Although no B-chicks provided "extra-chick" value in
1990, one B-chick almost fledged with its A-sibling in that
year (Figure 2-1). These data suggest that there may be
considerable variation the "extra-chick" value of B-chicks
among years and colonies. Schreiber's (1976) data also show
high annual variance in the survival of B-chicks when their
A-siblings also lived; the frequency with which both A- and
B-chicks survived ranged from 0-100% of B/3 broods per year,
with 11 B-chicks surviving out of the total of 16 broods
censused in the 4 years of his study. B-chicks in
Schreiber's (1976) study apparently provided no insurance
value; all A-chicks fledged.
No C-chicks fledged in this study. Thus, the C-chicks
in my study provided no reproductive value to their parents.
This is probably typical for C-chicks in most populations.


79
Observation and Censusing Methods
Observations were made with spotting scope and
binoculars from two blinds, one on Bird Island 1-33 m from
observation nests, and the other on Sunken island, 28-42 m
from observation nests. Two observers participated in
continuous daylight vigils on alternate days from 15 March
through 8 July 1990. Both observers were present
simultaneously during the 2 weeks of peak nestling activity.
A daily maximum of 16 focal nests were monitored
simultaneously in a visual arc of 70-80. These focal nests
included broods used in other studies (see Chapters 2 and
4), as well as the 13 nests used in this study. I used only
two-chick broods in this study, including 10 broods from
two-egg clutches and three broods that initially contained
three chicks but were reduced to two chicks by the age when
they were used for the analyses presented in this study.
Because the pelicans initiated clutches from the middle
of February through the end of May, 1990, on any given day
the subcolony under observation often consisted of a mix of
nests containing eggs through old nestlings. Upon brood
completion, we added nests to the focal group for continuous
daylight observation until A-chicks reached age 20 days,
after which nests were retired and only censused visually
each day to determine chick fates. Nests were censused and
growth was monitored until all residents had died or reached


APPENDIX B
DETERMINING CLUTCH SIZES
All analyses that make use of clutch size information
include only chicks from nests in which the initial clutch
size could be determined. I considered the clutch size to
be known in nests that I first found when they contained (1)
eggs at the end of incubation, (2) one or two hatchlings
estimated to be no older than 5 days, or (3) three
hatchlings of any age. I assumed that three-chick broods
hatched from three-egg clutches because four-egg clutches
were extremely rare. Among nests whose clutch sizes were
determined from direct observations of the eggs, four-egg
clutches occurred in none of 71 nests in 1990, and one of 53
nests in 1989. Similar values have been obtained by other
workers; two of 30 nests contained four eggs in a North
Carolina population (M. Shields, pers. comm.). In some
analyses I compared the fates of chicks from clutches of two
or three eggs. For others, broods of two or three chicks
were compared, omitting clutches in which one or more chicks
failed to hatch.
172


64
insurance for egg loss or death as hatchlings of inferior A-
chicks. In contrast, the occurrence of siblicide later in
the nestling period may be because junior chicks are
insurance primarily for predation (Nisbet 1975, Nisbet and
Cohen 1975, Mock and Parker 1986, Bryant and Tatner 1990),
accidental deaths and infanticide (this study) or other
deaths that peak after the first week of nestling life.
The role of the youngest chick as insurance or as an
"extra" chick has been evaluated only for American white
pelicans, whose last-hatched chicks serve primarily as
insurance against hatching failure and early death of the A-
chick (Cash and Evans 1986). For other species, the
division of reproductive value into "extra-chick" and
insurance elements awaits further study. Because Dalmatian
and Philippine pelicans may have brood sizes similar to
brown pelicans, the question arises of whether junior chicks
have both insurance and "extra" chick value, as apparently
is the case for brown pelican B-chicks in B/3 broods.
Direct experimental tests of the insurance value of junior
chicks have been carried out only for white pelicans (Cash
and Evans 1986). Similar experiments on brown pelicans and
other species with C/3 clutches are necessary to clarify the
value of C-chicks.


12
last-hatched chicks contributing both "extra-chick" and
"insurance" value to their parents (Mock and Parker 1986).
The purpose of this study is to evaluate some of the
selective pressures that contribute to the laying of "extra"
eggs by brown pelicans (Pelecanus occidentalis) I used
three approaches to examine the importance of junior chicks
as "extra" survivors and as insurance against senior chick
loss. First, I examined the exact causes of nestling
mortality to evaluate two predictions: (1) if junior chicks
serve primarily as "extra" survivors when food is abundant,
then junior chick mortality should be food-dependent (e.g.
starvation and siblicide); (2) if juniors serve primarily as
insurance against senior death, then senior chick mortality
should be due to food-independent causes such as hatching
failure, deaths of hatchlings (Dorward 1962, O'Connor 1978,
Stinson 1979, Mock 1984a, Magrath 1990), predation (Nisbet
1975, Nisbet and Cohen 1975, Mock and Parker 1986, Drummond
1986), or ectoparasites (Bryant and Tatner 1990). Second, I
compared the reproductive value of junior chicks as
additional survivors and as replacements for senior siblings
that died. The junior chick's value as an "extra" survivor
was measured as that component of its survivorship that was
independent of its siblings' survival. The junior chick's
insurance value was measured as that component of its
survivorship that depended on the fate of its senior
siblings (Mock and Parker 1986, Ploger and Mock unpub. MS).


93
and 11 through 15 days old (Tables 3-2 through 3-4). Thus,
for chicks of these ages, the food-amount hypothesis was not
supported. But when chicks were older, the rate and
intensity of fighting varied with chick growth, described as
follows.
When A-chick ages were 13 through 17 days, the number
of blows delivered during this period was best predicted by
the culmen growth differential (Table 3-3) Thus, more
blows were delivered in broods with a larger difference in
the rate of culmen growth of the A-chick relative to the B-
chick than in broods where this difference in growth rates
was smaller (Figure 3-2). A-chick mass gain also
contributed significantly when stepwise regression added
this variable to the model along with the culmen-growth
differential. But I did not use this full model because
linear regression was not appropriate for the A-chick mass-
gain variable (Table 3-3). Linear regression was
inappropriate because three broods had tied values for A-
chick mass gain (Figure 3-3). When considered alone
(without including the culmen-growth differential) using the
appropriate nonparametric test, A-chick mass gain was not
significantly associated with the number of blows delivered
(Spearman rank correlation, rs corrected for ties = -0.78, P
= 0.10).
From stepwise linear regression, the number of fights
in the 13 through 17 day summary period was significantly


96
clearly in the direction predicted by the food-amount
hypothesis.
The food-amount hypothesis was not supported during the
first week and a half of nestling life, when fighting rates
and intensities were independent of food supplies and
nestling growth. Pinzn and Drummond (in press) suggested
that aggression within broods of brown pelicans during the
early nestling period, when chicks were still fed indirectly
from the nest floor, functioned primarily to establish
dominance-subordinance relationships between siblings rather
than as a method of monopolizing food deliveries. The
insensitivity of fighting to food and growth that I found
during this period was consistent with their hypothesis.
This result was also consistent with the possibility that
food is not limiting, and thus not the object of aggressive
contests among very young chicks whose total food demands
are far below peak demands later in the nestling period.
Rather weak evidence in support of the food-amount
hypothesis was provided by my results for nestlings in their
third week of life. During this period, the number of blows
delivered was significantly associated with the culmen-
growth differential. In other words, fighting rates were
higher in broods where A-chicks grew relatively faster than
B-chicks than in broods where growth rates were similar for
A- and B-chicks. This relationship is consistent with the
food-amount hypothesis because these results suggest that


my work in Florida. Special thanks also go to Abby Palmer
and Jane Morris for their wonderful emotional support.
I can not thank my husband, Don Allan, enough for all
of his logistic support in 1990, assistance with manuscript
preparation, and tremendous emotional support throughout all
phases of my pelican research. Don has kept me healthy and
happy through a highly stressed period of my life.
Finally, I want to express my deepest gratitude to my
parents, Eleanore and William Ploger, and to my brother Jim
Ploger, for all of their support and encouragement. We have
shared many wonderful hours exploring backroads and
wilderness areas. I thank them for stimulating and
supporting my interest in natural history which brings me
such joy.
vm


133
predation (e.g. perhaps trees) may gain no advantage from
hatching asynchrony. Brood reduction in these nests may be
a cost of asynchrony that is a relict of past predation
pressure. Other possible ways that hatching asynchrony
could be advantageous despite brood-reduction costs are
reviewed by Magrath (1990). Most are unlikely to pertain to
brown pelicans.
But if C-chicks never contribute directly to their
parent's reproductive success, then selection should
generally favor reduction in clutch size. The continued
production of third offspring that never survive might occur
in the unlikely event that their production and brief
survival as nestlings is cost-free. Alternatively, third
eggs might be produced despite nonexistent survival
prospects if their presence enhances the survival of their
siblings in some way. For example, the efficiency of
brooding might be greater and endothermy might be achieved
at an earlier age in nests containing three rather than two
chicks (Royama 1966, reviewed by O'Connor 1984).
Do Seniors Gain a Food Bonus from Brood Reduction?
The prediction that senior chicks gain extra food
following brood reduction because parents maintain the same
level of feeding was not supported during the period of this
study. Parental deliveries did remain the same in reduced,
control and enlarged broods during the first 6 days


151
Parent-Offspring Conflict and Food-Dependent Fighting
O'Connor (1978) considered sibling aggression to be the
direct consequence of parent-offspring conflict over the
fate of the younger chick. His model predicted that seniors
should favor siblicide when food was in such short supply
that the boost in senior survival following siblicide
outweighed the loss of the junior chick's contribution to
the inclusive fitness of seniors. His model also predicted
that parents should favor siblicide during some food
shortages. But food would need to be scarcer for parents to
favor siblicide than for their senior offspring to favor it.
This is because parents are equally related to all
offspring, whereas offspring are more closely related to
themselves than to their siblings.
O'Connor (1978) predicted conflict between parents and
their senior offspring when food supplies are scarce enough
for seniors to favor siblicide, but not scarce enough for
parents to favor it. In this situation, senior chicks
should attack their juniors to exclude them from parental
feedings while parents should attempt to feed and defend
their victimized junior offspring. Similar predictions
result from explicit genetic models of avian siblicide as
long as the siblicide victim is assumed to be a "runt" that
is unable to damage its siblings (Godfray and Harper 1990).


70
Table 2-6. Fates of eggs and chicks in all nests in which at
least one chick hatched, including nests with unknown chick
ranks, clutches and/or brood sizes. These eggs and chicks came
from 44 nests in 1989 and 81 nests in 1990.
1989
1990
Lived
37
33
Never Hatched
11
15
Food-Dependent Deaths:
Starvation
0a
11
Siblicide
16
17
Starvation &/or Siblicide
15.
15
Total Food-Dependent Deaths
31
43
Food-Independent Deaths:
Died as Hatchling
4
8
Fell Accidently
1
3
Infanticide
Killed by Invader Chick
0
2
Killed by Invader Adult
4
5
Unknown Accident
__2
Total Food-Independent Deaths
11
24
Deaths from Unknown Causes
15
62
N
105
177
Starvation deaths could not be separated from Starvation &/or
Siblicide in 1989 because chicks were not handled in 1989.


154
attacking their siblings even when they do not gain an
immediate food reward.
In brown pelican broods, fighting early in nestling
life is independent of food supply (Chapter 3). Chicks in
the first week of life fight at similar rates as older
chicks, but without gaining any obvious food-reward. These
patterns might result from A-chicks attacking their siblings
in order to establish dominance.
Food-independent fighting during the early nestling
period may also benefit B-chicks, particularly if they are
close in size and/or age to their A-siblings. This is
because B-chicks may be better able to reverse the dominance
order early in the nestling period, before the A-chick's
dominance and feeding advantages magnify its size and
competitive superiority to such a degree that the costs of
attempting a reversal outweigh the unlikely chances for
success. Parents set up the initial age disparities. This
suggests that the fitness interests of both A-chicks and
parents might be served by food-independent fighting to
establish the dominance hierarchy early in the nestling
period (but see Magrath 1990 for other explanations of
hatching asynchrony).
Brood Reduction as a Product of Parent-Offspring Conflict
Most explanations of brood reduction propose an
adaptive value to parents that produce more offspring than


31
lethal only to chicks that are already starving. Similarly,
pesticides stored in fats have greater effects when fats are
mobilized in response to starvation. Mortality from
endoparasitic infections and pesticide contamination were
not separated from starvation, and thus were assumed to be
food-dependent.
Another type of food-dependent death was "siblicide,"
which I defined to include the following cases. First,
siblicide included chicks that were seen being knocked from
the nest by a sibling (N = 2). Second, siblicide included
chicks whose siblings permanently drove their victims out of
the nest into the surrounding branches (N = 2). These
victims, prevented by their siblings from returning to the
nest, wandered around in the canopy until they succumbed to
starvation, exposure and the attacks of neighbors whose
nests they wandered near. Third, siblicide included chicks
whose deaths were not directly observed, but that received
at least 25 blows from their siblings (and none from
invaders) in the last 2 days of life (N = 13). I considered
siblicide to be a food-dependent cause of death because
sibling attacks limited the victim's access to food. The
victim's of repeated sibling attacks sometimes became so
intimidated that they remained in a submissive posture (see
Chapter 3) during an entire bout of feeding activity and so
failed to participate in feeding. Another reason for
considering siblicide to be food-dependent is that the


180
Boag, D. A. & Alway, J. H. 1980. Effect of social
environment within the brood on dominance rank in
gallinaceous birds (Tetraonidae and Phasianidae). Can.
J. Zool., 58, 44-49.
Boag, P. T. & Grant, P. R. 1981. Intense natural selection
in a population of Darwin's finches (Geosoizinae) in
the Galapagos. Science, 214, 82-85.
Bortolotti, G. R., Wiebe, K. L. & Iko, W. M. 1991.
Cannibalism of nestling American kestrels by their
parents and siblings. Can. J. Zool., 69, 1447-1453.
Braun, B. M. & Hunt, G. L., Jr. 1983. Brood reduction in
black-legged kittiwakes. Auk, 100,469-476.
Brown, L. H. & Urban, E. K. 1969. The breeding biology of
the great white pelican Pelecanus onocrotalus roseus at
Lake Shala, Ethiopia. Ibis, 111, 199-237.
Bryant, D. M. & Tatner, P. 1990. Hatching asynchrony,
sibling competition and siblicide in nestling birds:
studies of swiftlets and bee-eaters. Anim. Behav., 39,
657-671.
Bryant, D. M., & Westerterp, K. R. 1983. Time and energy
limits to brood size in house martins (Delichon
urbica). J. Anim. Ecol., 52, 905-925.
Buchholz, J. T. 1922. Developmental selection in vascular
plants. Bot. Gaz., 73, 249-286.
Cash, K. J. & Evans, R. M. 1986. Brood reduction in the
American white pelican (Pelecanus ervthrorhvnchos).
Behav. Ecol. Sociobiol., 18, 413-418.
Clark, A. B. Sc Wilson, D. S. 1981. Avian breeding
adaptations: hatching asynchrony, brood reduction, and
nest failure. Q. Rev. Biol., 56, 253-277.
Cooper, J. 1980. Fatal sibling aggression in pelicans--a
review. Ostrich, 51, 183-186.
Courtney, C. H. & Forrester, D. J. 1974. Helminth
parasites of the brown pelican in Florida and
Louisiana. Proc. Helminthological Soc. of Washington,
41, 89-93.


161
But offspring fitness may be determined by factors
other than parental investment, such as genetic differences
(Temme 1986). Such offspring may have different fitness
expectations given the same level of parental investment
(Temme 1986). In this situation, Temme's (1986) model
demonstrated that parental fitness is not maximized by equal
investment in all offspring. Instead, the model predicted
that parents should equalize among offspring the marginal
return from additional investment. Thus, parents should
skew investment toward those offspring whose survival
chances are enhanced the most by receiving the additional
investment. Haig (1990) applied this approach to examine
when parents should abort rather than provision a "low-
quality" offspring. "Low-quality" here refers to an
offspring whose fitness is enhanced less by a unit of
parental investment than the fitness enhancement that a
"high-quality" offspring would gain from the same unit.
These models were developed for the problem of seed
abortion in plants, where qualitative differences among
offspring are due to developmental and genetic differences.
Temme (1986) discussed two ways that genetic differences
could cause offspring to differ in their fitness gains from
the same level of parental investment. First, genetic
differences could affect the conversion of parentally
provided resources into offspring survival. Second, genetic


181
Cramp, S. & Simmons, K. E. L. 1977. Handbook of the Birds
of Europe, the Middle East and North Africa. The Birds
of the Western Palearctic, Vol I: Ostrich to Ducks.
Oxford: Oxford Univ. Press.
Crivelli, A. Sc Vizi, 0. 1981. The Dalmatian pelican,
Pelecanus crispus Bruch 1982, a recently world-
endangered bird species. Biol. Conserv., 20, 297-310.
Cronmiller, J. R. & Thompson, C. F. 1980. Experimental
manipulation of brood size in red-winged blackbirds.
Auk, 97, 559-565.
Dementiev, G. P. & Gladkov, N. A. 1966. Birds of the
Soviet Union, Vol. I. Jerusalem: Israel Program for
Scientific Translations.
Diamond, J. M. 1987. News and views: Causes of death
before birth. Nature, 329, 487-488.
Din, N. A. Sc Eltringham, S. K. 1974. Breeding of the pink-
backed pelican Pelecanus rufescens in Rwenzori National
Park, Uganda; with notes on a colony of marabou storks
Leptoptilas crameniferus. Ibis, 116, 477-493.
Dominey, W. J. & Blumer, L. S. 1984. Cannibalism of early
life stages in fishes. In: Infanticide: Comparative
and Evolutionary Perspectives. (Ed. by G. Hausfater, &
S. B. Hrdy), pp. 43-64. New York: Aldine Publ. Co.
Dorward, D. F. 1962. Comparative biology of the white
booby and the brown booby Sula spp. at Ascension. Ibis,
103, 174-220.
Drummond, H. 1986. Parent-offspring conflict and
siblicidal brood reduction in boobies. In: Acta XIX
Congressus Internationalis Ornithologici, vol. I (Ed.
by H. Ouellet), pp.70-153. Ottawa: Univ. Ottawa Press.
Drummond, H. 1987. A review of parent-offspring conflict
and brood reduction in the Pelecaniformes. Colonial
Waterbirds, 10, 1-14.
Drummond, H. & Garcia Chvelas, C. 1989. Food shortage
influences sibling aggression in the blue-footed booby.
Anim. Behav., 37, 806-819.
Drummond, H., Gonzalez. E. & Osorno, J. L. 1986. Parent-
offspring cooperation in the blue-footed booby (Sula
nebouxii): social roles in infanticidal brood
reduction. Behav. Ecol. Sociobiol., 19, 365-372.


169
Table A-2 Results of separate statistical tests for chicks
of each age 0-10 days to determine if bill lengths differed
among A-, B- and C-chicks of each age. Bill lengths are
presented as the mean ranks of In(culmen length). Culmens
were measured in mm. Sample sizes are enclosed in
parentheses.
Chick
Age
Mean rank of
In(culmen length) for:
A-chicks B-chicks C-chicks
Test
Statistic
P
0
11.8
(3)
9.8
(4)
6.8
(9)
Ha =
3.15
0.10
1
13.0
(5)
7.0
(7)
7.8
(5)
H =
5.46
0.03*
2
15.5
(5)
8.8
(6)
7.4
(8)
H =
7.02
0.01*
3
7.5
(4)
7.3
(7)
8.0
(3)
H =
0.07
0.50
4
14.3
(8)
13.1
(9)
7.4
(6)
H =
4.00
0.07
5
10.4
(4)
8.6
(7)
4.6
(4)
H =
3.57
0.08
6
8.0
(8)
7.8
(4)
5.0
(2)
H =
0.87
0.30
7
11.8
(8)
7.6
(7)
2.5
(2)
H =
6.42
0.02*
8
5.7
(3)
5.4
(4)
3.2
(2)
H =
1.10
0.30
9
3.6
(4)
4.5
(3)
-
-
Ub =
4.50
0.30
10
4.0
(3)
-
1.5
(2)
U =
0
0.10
aH indicates 1-tailed Kruskal-Wallis test. H is corrected
for ties.
bU indicates 1-tailed Mann-Whitney U test used because
data for chicks of this age were available only for two
chick ranks.
*Indicates significant differences at P < 0.05.


39
on nearby islands by Schreiber (1979). That highly
disturbed nests were more productive than less disturbed
nests could have occurred because I was more familiar with
the location and brood sizes of focal nests. Thus, my
counts of total numbers of nestlings and nests might have
been higher (and more accurate) in the highly disturbed
relative to less disturbed subcolonies. In addition, our
activities in the highly disturbed colonies may have
decreased opportunities for nest takeovers and stick thefts,
which often contribute to partial and complete losses of
clutches and broods (see below).
Nest failures. Nest abandonment was a common cause of
nest failure, affecting 24% (19/78) of clutches (nests
containing eggs) and no broods (nests hatching some chicks)
in 1989 and 13% of clutches and 4% (4/107) of broods in the
nests observed in 1990. Clutch abandonment in 1990 was
probably underestimated because I did not begin observations
in this year until most nests were in the last week of the
incubation period. By contrast, I began the 1989
observations when the birds were building the first nests.
These abandonments appeared to be spontaneous, as contrasted
with one additional clutch that was abandoned in 1989, and
five clutches and two broods abandoned in 1990 following
human activities in the colony. An additional 9% (7/78) and
2% (2/107) of clutches were lost in 1989 and 1990,
respectively, when the incubating parent was driven from its


48
(Table 2-3, Binomial test for six food-dependent versus two
food-independent C-chick deaths, P = 0.30), although the
difference was significant when I omitted C-chicks that died
as hatchlings (Table 2-3, Binomial test for six food-
dependent versus no food-dependent C-chick deaths, P =
0.03 ) .
Timing of Food-dependent Deaths
In 1990, most starvation and siblicide of junior chicks
(B and C chicks in B/3 nests and B-chicks in B/2 nests)
occurred when these chicks were 10 to 20 days old (Figure 2-
1). The mean age of food-dependent deaths was 16.6 (2.5)
days for eight B-chicks in B/2 nests, 18.0 (2.6) days for
three B-chicks in B/3 nests, and 13.3 (7.6) for eight C-
chicks (including two unranked chicks that were first to
die). Last-hatched chicks in B/2 and B/3 nests died at
similar ages from food-dependent causes (U = 20, ni = 8 C-
chicks, n2 = 8 B-chicks from B/2 nests, P = 0.20).
In the few 1990 broods in which two chicks died of
food-dependent causes, juniors died an average of 5.4 days
(7.5, N = 3 C-chicks in B/3 broods and 4 B-chicks in B/2
broods) before their seniors (Wilcoxon signed-rank test, 5/6
juniors died before their senior siblings, P = 0.07). No
B/3 brood lost all members to food-dependent causes in 1990.
Siblicides in 1990 occurred an average of 19.4 ( 9.4)
days into the nestling period, whereas starvation deaths


PROXIMATE AND ULTIMATE CAUSES OF BROOD REDUCTION IN BROWN
PELICANS (PELECANUS OCCIDENTALIS)
BY
BONNIE JEAN PLOGER
A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
1992


82
flapping, nest-cleaning (tossing fish bones, skin, sticks
and various unidentifiable scraps from the nest), adjusting
sticks in the nest, adopting a "resting" posture in which
the parent held its closed bill out of reach of its chicks
(postures shown in figures 16, 18, and 19 of Schreiber
1977), nest relief behavior (Schreiber 1977), displaying to
or snapping at a neighbor, hopping to a perch or flying
away.
I estimated the amount of food delivered to chicks by
recording the longest linear dimensions of food boluses
swallowed by each chick. To estimate bolus sizes, I
expressed the length of the bulge in a chick's neck as a
percentage of the parent's bill length (based on Mock 1985,
units = "food-units"). Because parents sometimes blocked
the observer's view, prohibiting determination of whether
food deliveries had occurred, my data must be considered
minimum estimates of the amounts of food obtained by
nestlings.
Fighting Behavior
I counted as "fights" all cases where one chick
delivered at least one blow (see below) to the body of
another chick with enough force to move the victim's head
when struck. An individual fight continued until one of the
chicks adopted a "submissive" posture (sensu Pinzn and
Drummond in press, see definitions below), or no further


3
is the "exploitation hypothesis" of Hrdy (1979), described
earlier by Ingram (1959) and called the "ice-box hypothesis"
by Alexander (1974). An obvious prediction of this
hypothesis is that cannibalism of offspring or siblings
occurs routinely (or at least during food shortages).
Second, "marginal" offspring may enable parents to select
offspring with the highest fitness expectations. I call
this the "progeny-choice hypothesis" (Forbes 1991). This
hypothesis was first called developmental selection by
Buchholz (1922) and also the "selective-abortion hypothesis"
by Kozlowski and Stearns (1989). The progeny-choice
hypothesis argues that offspring differ in quality and that
the brood-members that are eliminated are those that are
genetically or developmentally "inferior" to their siblings.
Elimination of these "inferior" siblings is predicted to
occur very early in the developmental period, as soon as
differences in offspring quality are detectable (Kozlowski
and Stearns 1989). Third, "marginal" offspring may function
as insurance for partial brood loss, serving as replacements
for siblings that die unexpectedly from accidental causes or
congenital defects. This is the "insurance hypothesis" of
Dorward (1962), reviewed by Forbes (1990, 1991). This
hypothesis predicts that accidents or congenital defects are
frequent causes of partial brood loss. For example, under
this hypothesis, hatching failure in birds is predicted to
be more common in brood-reducing species than in species


160
association between total food delivered and differences in
patterns of food apportionment.
The results for B/3 broods 6 days post-treatment
suggest that the nestling dominance hierarchy enabled A-
chicks to control and optimize food allocation patterns, as
assumed by the model of Parker et al. (1989). Thus, food
resources were skewed toward senior chicks. This could be
in conflict with parental attempts to allocate food equally
among all offspring. But under certain circumstances,
parents may not benefit from equal resource apportionment
among their offspring. Instead, parents may benefit by
investing in offspring according to the survival prospects
of each offspring (see below). If this is the case, then a
skew in food distribution toward seniors could enhance the
fitness of both senior offspring and their parents.
Parental interests are generally assumed to be best
served by an equal partitioning of resources among all
offspring (e.g. Trivers 1974, O'Connor 1978, Macnair and
Parker 1978, Parker and Macnair 1978). This is because the
parent is equally related to all of its offspring. Smith
and Fretwell (1974) were the first to show that the parent
should invest in all offspring equally. Temme (1986)
pointed out that this prediction depends on the assumption
that offspring fitness is determined only by the parent's
level of resource investment.


108
Figure 3-1. Submissive postures of nestling brown
pelicans. Postures are Crouch (A), Curl Neck (B), Turn
Low (C), Duck (D), Lie Back (E), Reverse Head (F), Lie
Flat (G) and Hang Head (H).


94
predicted only by A-chick mass gain (Table 3-2). But
because of tied values (Figure 3-4), linear regression was
not appropriate. When I used the appropriate nonparametric
test to compare A-chick mass gain to the number of fights,
the relationship approached but did not achieve significance
(Table 3-2, Spearman rank correlation, rs corrected for ties
= -0.89, P = 0.07). Thus, fights were more frequent in
broods with slower rates of A-chick mass gain than in broods
where A-chicks gained mass more quickly (Figure 3-4), as is
consistent with the food-amount hypothesis. But this
association was only marginally significant. No variable
significantly predicted the number of fights during this
summary period.
Fight intensity (average number of blows per fight)
during the 13 through 17 day summary period was best
predicted by the mass difference (Table 3-4). In other
words, the broods with the most intense fighting were those
with the greatest average mass advantage of A- over B-chicks
(Figure 3-5). These results for fight intensity, along with
the results for fighting rates, did not provide clear
support for the food-amount hypothesis, but did not refute
it either (see Discussion).
During the summary interval when A-chick ages were 17
through 21 days, chicks engaged in more fights (Table 3-2,
Figure 3-6) and delivered more blows (Table 3-3) in broods
with faster mass gains by B-chicks than in broods where B-


CHAPTER 3
HUNGER AS A PROXIMATE CAUSE OF FIGHTING
Introduction
Fierce fighting among nestlings is common in a variety
of avian taxa (reviews in O'Connor 1978, Stinson 1979, Mock
et al. 1990). In "obligately" siblicidal species, death is
the virtually inevitable result of nestling aggression (Mock
et al. 1990). In "facultatively" siblicidal species, the
lethality of sibling fighting varies and may depend on food
supplies to the brood (Mock et al. 1990).
The ultimate cause of both obligate and facultative
siblicide is presumably food insufficiency (Mock 1984a, Mock
et al. 1987, 1990, Drummond and Garcia Chevelas 1989);
nestlings fight to eliminate competitors when food proves
inadequate for the full brood. Obligate siblicide is
usually explained as a way of eliminating a brood-member
because food is certain to become inadequate for raising the
full brood when nestlings become older (Stinson 1979, Mock
et al. 1990). Facultative siblicide usually is explained as
a form of resource tracking, whereby parents attempt to
match brood size to unpredictable resources by producing an
extra chick that survives if food is abundant but is
eliminated if food becomes scarce (Lack 1947, 1954, called
73


27
deaths, below). Food-dependent deaths included victims of
"siblicide," victims of "starvation" and chicks that died of
"starvation &/or siblicide" (see definitions in Food-
dependent deaths, below). "Unknown causes" of mortality-
included deaths that could not be classified as either food-
independent or food-dependent.
Food-independent deaths. Food-independent deaths
included nestling deaths that were unlikely to be related to
food conditions within their nest. The most obvious cases
of food-independent deaths were those in which a nestling
was "killed by invader chicks or adults" (also referred to
as "infanticide"). I defined an "invader" to be a chick or
adult that moved its head and/or body into a nest that was
not its own. Invader chicks included recently fledged
young. Invader adults included birds at least 1 year old
that had subadult or adult plumage (see Schreiber et al.
1989 for plumages of subadults versus adults). Invaders
often attacked the chicks whose residence they invaded (see
Appendix C for discussion of why some pelicans invade nests
and attack residents). An "attack" involved one or more
"blows" delivered by one individual (the "attacker") against
another individual (the "victim"). To be counted, "blows"
had to be forceful enough to move the victim's head or neck
when struck. A chick that was "killed by an invader" was
one that (1) was seen being tossed (N = 3) or knocked (N =
1) from the nest by an invader or (2) was attacked by an


130
During the first 6 days post-treatment, A- and B-chicks
each received significantly more food than did C-chicks in
B/3 broods and than did C- and D-chicks, collectively, in
B/4 broods. In all 10 B/3 plus B/4 nests, the amounts of
food delivered to C-chicks and to C- and D-chicks,
collectively, were less than amounts delivered to either
their A- or B-siblings (1-tailed Sign Test, P = 0.001).
The difference between the percent of food gained by A-
chicks minus that gained by B-chicks averaged -0.04% {
0.17%, Table 4-1 for B/3 nests 6 days post-treatment). In
contrast, the difference between the percent of food gained
by B-chicks minus C-chicks averaged 0.3% ( 0.15%, Table 4-1
for B/3 nests 6 days post-treatment). These differences
were significant, such that the percent of food gained by A-
and B-chicks was more similar than the percent of food
gained by B- and C-chicks (Wilcoxon signed-ranks test, z =
-0.023, P = 0.04, all five nests had smaller differences in
A- versus B-chick food shares than in B- versus C-chick food
shares, differences derived from data presented in Table 4-1
for B/3 nests 6 days post-treatment). Sample sizes were too
small (only three nests) to do a similar comparison for B/3
nests 9 days post-treatment. In B/4 nests 6 days post
treatment, the magnitude of the difference between A- versus
B-chick shares was similar to that between B- versus C-chick
shares (Wilcoxon signed-ranks test, z = -0.134, P = 0.90,
3/5 nests had smaller differences in A- versus B-chick food


120
I compared the total food delivered (see Feeding
Behavior, below) to treatment broods that were kept under
continuous daylight observation ("focal" nests). Methods of
watching these focal nests were described below in Census
and Observation Methods. The last-hatched (C-) chick was
removed from seven of these focal nests to create a
treatment group of experimentally reduced two-chick (B/2)
broods. Five of these C-chicks became D-chicks when they
were added to each of five other focal nests to create the
experimentally enlarged treatment group of four-chick (B/4)
broods. One of the remaining C-chicks was placed in a nest
where the third egg had failed to hatch. This nest was not
used in my study. The other remaining C-chick was added to
one of the five enlarged broods to replace the original C-
chick that had died within 2 days after treatment. Five
focal nests were assigned to the control group consisting of
three-chick (B/3) broods. In each control nest on the day
that it received its treatment assignment, I removed and
then immediately returned each C-chick to its nest.
Several lines of evidence suggest that fostered D-
chicks were treated similarly to resident C-chicks, although
I did not test this experimentally. First, all D-chicks
were accepted and fed by their foster parents. Second, all
C- and D-chicks died after a similarly short period
following treatment (see below). One D-chick actually lived
longer than the resident C-chick.


18
nearest mm with a clear plastic ruler. I weighed nestlings
with 100 g, 2.5 kg and 5 kg spring scales. All chicks in
focal and growth nests were handled, weighed and measured
every 2-4 days until the brood's A- chick was (on average)
29 days old (range 25-31 days). Thereafter, all members of
the brood were handled a minimum of once a week when the
brood's A-chick was from 30 through 40 days old, and at
least every 10-12 days when A-chicks were 40 through 70 days
old.
Definition of fledaina. All nests were censused until
all brood-members had died or until the A-chick reached age
70 days (see Determining Hatching Dates, below, for details
about aging chicks). I discontinued censusing after 70
days. After this age, chicks were difficult to catch
because they made 3-10 m flights between perches in the
vicinity of the nest (unpub. data). These short flights
began once the juvenile plumage had developed. I therefore
operationally defined "fledging" as occurring at 70 days,
the average age by which eight chicks had developed their
brown juvenile plumage (range=57-82 days) in 1989 at
Seahorse Key (see Supplemental Census Nests, below). Pinzn
and Drummond (in press) used the same operational definition
of fledging for the population of brown pelicans that they
studied in Mexico. The first sustained flight was not
achieved until a mean age of 81.3 days (2.14) for seven
chicks at Seahorse Key in 1989. Sustained flight occurred


56
value in ground-nesting populations where hatching failure
due to overheating may be more common (Anderson 1990) C-
chicks may no longer have this value in tree-nesting
populations such as Schreiber (1976) and I studied. The
production of C-eggs could also be a recent response to
pesticide-induced egg-failures (see below).
In the B/2 broods that I studied, the youngest chick
had value as an "extra" survivor, with both chicks living in
25% of B/2 nests in 1989 (Table 2-5). Similarly, Schreiber
(1976) found that both survived in 62% of the 21 two-chick
broods that he monitored in his 4 year study, and Pinzn
and Drummond (in press) observed both chicks surviving in
19% of the 16 broods that they observed. B-chicks in B/2
nests may also have insurance value in some years, as
suggested by my 1990 data showing that some B-chicks lived
longer than their A-siblings in 1990 and many lived into the
period of peak A-chick mortality. Indeed, one B-chick
fledged after its A-sibling died in the 16 B/2 nests that
Pinzn and Drummond (in press) observed.
To properly assess the value of junior chicks as
insurance versus "extra" chicks will require long-term study
of a single population. The relative frequency with which
junior chicks survived as "extra" versus insurance chicks
could be totalled over each parent's lifetime. This could
lead to insight into the relative importance of these two
types of reproductive value. Similarly, the total value of


170
Table A-3. Skin colors and plumage descriptions for chicks of known
ages. (The ages of some chicks under 10 days old were estimated from
the culmen-length regression.)
Md
Age
Age
Range
N
Description
0
0-2
21
Naked pink skin.
1
0-3
10
Naked purplish-pink skin.
3
1-5
11
Naked purple skin. Some chicks covered with
guano.
8
8-10
3
Naked grey skin. Chicks often covered with
guano.
13
10-14
9
Naked grey head and neck, back with 1-3 mm tufts
of white down dotting grey skin. Chick may be
covered with guano.
18
16-19
4
Neck looks naked and grey from 3 m, head and back
are covered in white down.
20
20-31
3
Neck getting fine down, head and back downy
white.
27
26-31
5
Entire body, including neck, covered in white
down, scapulars not visible from 3 m.
32
26-34
9
Body completely covered in down except brown
scapulars are visible from 3 m.
59
55-62
4
Brown head, upper neck and wings, but with some
down on rump, lower back, lower neck, and
belly.
72
57-82
8
Juvenal plumage: brown head, neck, wings, back
and tail, belly white, no down visible when
viewed from 3 m.


15
and facultative among those hatching second in the brood.
As a result, these chicks are likely to differ in their
roles as insurance or "extra" chicks. In addition, the
nature of the insurance value may differ between second and
third-hatched chicks. In most obligately brood-reducing
species, the insurance value of marginal chicks is
restricted to the first week or less of the nestling period
(Anderson 1990, Mock et al. 1990) and so covers only egg
failure and hatchling losses such as those caused by
developmental abnormalities. In contrast, facultative
brood-reducers like brown pelicans may retain all brood
members until food-supplies become limiting (perhaps later
in the nestling period). Thus, the insurance value of a
marginal chick can remain in effect for longer and may cover
a wider range of risks to the seniors than in obligate
brood-reducers (Mock and Parker 1986).
Methods
Study Site
In 1990, I studied brown pelicans nesting on Bird and
Sunken Islands, two spoil islands connected by a sandbar
that together are known as Alafia Banks in Hillsborough Bay,
near Tampa, Florida. Approximately 850-900 brown pelicans
nested on the islands in 1990. They nested primarily on top
of the canopy in black mangrove (Avicennia aerminans). red


138
which the B-chick was larger and dominant to its A-sibling.
When I reclassified this B-chick as an A-chick, I found that
food consumed by A- and by B-chicks did not differ between
reduced and control broods. This pattern was produced as
follows. Before reclassification, when chicks were
classified by hatching order, I found that B-chicks gained
13.6 f-units more in B/3 than in B/2 broods (a significant
difference), whereas food amounts to A-chicks were similar
in B/2 and B/3 broods (Figure 4-2). But when chicks were
reclassified according to their relative sizes at the time
of treatment, I found that B-chicks received only 8.5 f-
units more in B/3 than in B/2 broods. A-chicks consumed the
remainder of the "extra" 13.6 f-units that were delivered to
senior chicks in B/3 relative to B/2 broods. My results
indicate that either (1) B-chicks received more food in
reduced than control broods (when ranked by hatching order),
or (2) senior chicks of both ranks received similar amounts
in reduced and control broods (when ranked by relative
sizes). Thus, whether the death of a C-sibling affects A-
and B-chicks differently remains unclear for broods of brown
pelicans. Data on food deliveries to A- versus B-chicks in
reduced and control broods have not been presented in any of
the studies reviewed above. Thus, the relative impact of
brood reduction on food deliveries to senior chicks of
different hatching ranks awaits investigation in all of
these species.


155
they can feed (reviewed in Forbes 1990, 1991 and see
discussions in Chapters 1 and 4). Recently, models applying
kinship theory (Hamilton 1964) to the problem have
demonstrated that brood reduction may involve conflict
between parents and their senior offspring (reviewed in
Godfray and Parker 1991). One assumption is basic to both
the hypotheses that posed an adaptive value to brood-
reducing parents and to these recent models predicting
parent offspring conflict over brood reduction. All assume
that parents deliver a fixed amount of food and that
following brood reduction, survivors gain not only a higher
proportion of food, but more in an absolute sense as well
(see Chapters 1 and 4 for reviews of the assumptions of
earlier hypotheses, and O'Connor 1978, Parker and Mock 1987,
Godfray and Harper 1990, Godfray and Parker 1991, 1992 for
models of siblicide that predict parent-offspring conflict).
My experimental manipulations of brood size provide
intriguing but inconclusive evidence against the assumption
that brood reduction confers an immediate food gain to
survivors (Chapter 4). In the first 6 days post-treatment,
parents delivered similar amounts to enlarged, control and
reduced broods. But seniors did not gain extra food in
reduced broods. This could mean that brood reduction does
not provide survivors with a feeding advantage in this
species. But it is also likely that the lack of differences
among treatments was due to small sample sizes and the brief


9
determining whose interests are being represented by brood
reduction, those of the parents or those of the offspring.


Average number of blows per fight
112
12
10
8
6
4
2
0
-100 0 100 200 300 400 500
Mass difference (g)
Figure 3-5. Relationship between the number of blows per
fight and the weight differential between A- and B-chicks
during the summary interval when A-chicks were 13 through 17
days old. See Table 3-4 for regression results.


19
at an average age of 76 days over the 4 years of Schreiber's
1976 study, and at age 75 days in the chicks observed by
Pinzn and Drummond (in press).
Focal Nests
"Focal nests" were observed from two blinds, one on
Sunken Island and the other on Bird Island. Nests were
located from 1-33 m from the Bird Island blind and from 28-
42 m from the Sunken Island blind. Hatching peaked in focal
nests on Sunken Island about a month earlier than on Bird
Island. Therefore, observers (BJP plus an assistant) were
able to watch focal nests on Sunken Island from hatching
until chicks were at least 20 days old, then move to Bird
Island to watch another set of focal nests beginning at
hatching. We observed focal nests on Sunken Island from 2
April through 9 May and on Bird Island from 11 May through 8
July 1990. Focal nests on both islands were observed
continuously during daylight hours On Sunken Island,
observers alternated approximately 7-hour observation
periods, usually trading off around 1300. But during the 1
week of peak nestling activity, both observers were present
in the same blind throughout each day. On Bird Island,
observers alternated daily dawn to dusk observation periods.
Pelicans nesting on Alafia Banks initiated clutches
from the middle of February through the end of May, 1990.
Thus, on a given day the subcolony under observation might


81
behavior at the target nest had ceased. After termination
of observations at a target nest, we resumed scanning of
nests starting with the next nest in the sequence. When
fighting was occurring in one nest while feeding was
occurring at another, we selected the nest with fighting as
our target for behavioral observations. If two or more
nests both had feeding or both had fighting behavior
occurring during a scan, we chose to watch whichever nest
was next in the scan sequence.
Feeding Behavior
Parents regurgitated fish onto the nest floor during
the first week of nestling life ("indirect" feeding, Pinzn
and Drummond in press and Ploger, unpub. data). They
gradually shifted to making deliveries directly as the
chicks got older (Pinzn and Drummond in press and Ploger,
unpub. data). When chicks fed "directly", they reached into
their parent's pouch to obtain food. "Feeding behavior"
included all direct and indirect deliveries of food to
nestlings, plus all cases in which parents opened their
bills over young chicks or had older chicks thrusting deep
into the base of the pouch without any evidence of food
being delivered. A period of feeding activity was defined
as ending when the parent began a nonfeeding activity
without resuming feeding activity within 1 minute. I
defined nonfeeding activities to include preening, wing-


176
chicks pull out more sticks than they add. They eventually
destroy their own nests (Schreiber 1977 and pers. obs.).
Adults may also attack neighboring chicks while stealing
sticks to deliver to their own offspring. Alternatively,
attacks by neighboring adults may have been preemptive or
retaliative strikes to prevent the victims from entering the
attacker's own nest to attack the residents or attempt to
steal food. Infanticidal attacks might conceivably also
occur during attempts by adults or immatures to copulate
with nestlings. Adult pink-backed pelicans and American and
African white pelicans have been reported to make sexual
attacks on unattended nestlings (Schaller 1964, Brown and
Urban 1969, Din and Eltringham 1974). I never observed any
copulation attempts that involved brown pelican nestlings.


166
culmen lengths of C-chicks exceeded those of B-chicks (Table
A-2). Because culmen lengths did not differ significantly
among chick ranks at most ages under 11 days, I pooled data
for all ranks to create the regression that I used to
estimate chick ages. Pooling data from all ranks enabled me
to estimate ages of C-chicks that were first measured when
older than 10 days. Only five culmen lengths were measured
for C-chicks known to be 10-25 days old. Thus, a regression
based on C-chicks alone might have yielded poor estimates of
chick ages. But pooling of data for all ranks may also have
biased my age estimates. For 7/10 chick ages, culmen length
decreased down the hatching hierarchy, although the
differences were significant in the predicted direction only
for 2- and 7-day old chicks (Table A-2). Thus, by pooling
my data, I may have overestimated the ages of A-chicks and
underestimated the ages of C-chicks.
I did not use culmen lengths to estimate ages of chicks
likely to be more than 10 days old. After this age, culmen
lengths diverge between senior and junior chicks of the same
age, with A-chicks having relatively longer bills than their
juniors at the same age. Presumably the A-chicks' bills
grow more because A-chicks get more food than their juniors
(Chapter 4). The mean age at which A-chick culmens first
exceeded those of their junior siblings by at least 6 mm was
14 (+4) days for 12 known-age A-B pairs, and 12 (4) days
for 6 known-age B-C pairs, for an overall mean of 13.4 3.8


128
Results
Broods of all three experimental sizes fledged a
similar number of chicks (X = 0.9 0.7, 0.7 0.5 and 1.0
0.7 chicks fledged from 10 B/2, 10 B/3 and 5 B/4 nests,
respectively, Kruskal-Wallis One-way ANOVA, H corrected for
ties = 0.781, P = 0.70). The duration of senior chick
survival was also similar in all treatments, with A-chicks
living an average of 58.7 (16.4), 45.6 (26.5) and 48.4
( 29.6) days and B-chicks living an average of 33.7 (
25.8), 40.3 ( 25.0) and 47.0 ( 29.3) days in 10 B/2, 10
B/3 and 5 B/4 nests, respectively (Kruskal-Wallis test H =
1.29, P = 0.5 for A-chicks and H = 0.22, P = 0.90 for B-
chicks, both NS).
Parents brought similar amounts of food to broods of
all three sizes during the first 6 days following brood-size
manipulations (Figure 4-1, Kruskal-Wallis test H = 2.44, P =
0.30). A-chicks in all brood-sizes consumed similar amounts
of food during this period (Figure 4-1, Kruskal-Wallis test
H = 0.11, P = 0.90). Total consumption by B-chicks was also
similar among the brood-sizes during the first 6 days post
treatment (Figure 4-1, Kruskal-Wallis test H = 2.687, P =
0.30). By contrast, when I compared reduced versus control
broods 9 days post-treatment, I found that B-chicks and
entire broods gained significantly more food in B/3 than in
B/2 nests (Figure 4-2, Mann-Whitney U = 0, P = 0.04 for both


78
siblicidal species. In these species, fatal aggression is
the rule even during periods of food abundance (Mock et al.
1990) .
I investigated the food-amount hypothesis as a
proximate explanation for aggression among nestling brown
pelicans (Pelecanus occidentalis). Brown pelicans hatch
their eggs asynchronously. Death is obligate for the last-
hatched members of three-chick broods and is facultative for
second-hatched chicks (Chapter 2). Nestlings frequently
fight (Pinzn and Drummond in press) and these attacks often
contribute to the death of junior brood-members (Chapter 2,
Pinzn and Drummond in press). For the food-amount
hypothesis to be a possible explanation for nestling
aggression in this species, there should be an inverse
relationship between nestling aggression and amount of food
consumed and growth of at least some brood members.
Methods
Study Site
I observed brown pelicans nesting in the canopy of
mangroves and other trees growing on Bird and Sunken
Islands, together known as Alafia Banks, in Hillsborough
Bay, Tampa, Florida (see Chapter 2 for further description
of the study site).


171
Ln(culmen length) (mm)
Figure A-l. Regression of ln(culmen length)
versus chick age for 63 known-age 0-25 day old
chicks of all ranks. Chick age = 13.79 X In
of culmen length 41.52, r2 = 0.94, P =
0.0001.


28
invader within 1 (N = 2) to 3 (N = 1) days of the victim's
death if the victim was not attacked by a sibling during
this period.
Another type of food-independent death occurred when a
chick "fell accidently." A chick was classified as dying
when it "fell accidently" only if an observer saw the fall,
the fall was not directly preceded by a sibling's attack,
and the fall involved an alert chick able to crawl or walk.
I also included in this category one chick that died after
its wing became inextricably entangled in branches near its
nest. Chicks that fell accidently did not include extremely
weak chicks that fell or became entangled in branches during
convulsions.
I classified as "unknown accidents" deaths involving
chicks older than 16 days that died at least 3 days after
the death of their siblings, and that continued to gain mass
prior to death. These deaths could not have been food-
dependent because the victims were gaining mass rather than
starving and because there were no siblings in the nest to
cause siblicide. These chicks were old enough to (1) stand
(and potentially fall from the nest) and (2) be left
unattended for hours (and potentially be attacked by
neighbors). Thus, these chicks either died because they
fell accidently or were killed by an invader, but I could
not determine which type of food-independent mortality was
the exact cause of death.


43
Reproductive Value of Junior Siblings
Hatching failure was low in my study, affecting only 8%
to 12% of all eggs from C/2 and C/3 clutches that hatched at
least one egg (Table 2-4). I observed only two C/4 nests,
one in 1989 that hatched three and fledged one chick, and
the other in 1990 that hatched four chicks that died as
nestlings. Because hatching failure was so low, I assessed
mortality of successfully hatched chicks to partition the
reproductive value of junior chicks into "extra-chick" and
insurance components.
Two chicks fledged from 12% of all B/2 nests (N = 16
broods) and 20% of B/3 nests (N = 15 broods) in 1989. Thus,
junior chicks in B/2 and B/3 nests had some "extra-chick"
value in 1989 (Table 2-5). I could not partition the
reproductive values of 1989 chicks of different ranks into
insurance and "extra-chick" components because chicks were
not ranked in that year. No B/3 nests fledged three chicks
in either year. The total reproductive value of chicks
averaged over all ranks was similar for B/2 and B/3 nests
within each year (Table 2-5).
In 1990, the only chicks to survive were those whose
siblings all died (Table 2-5). The total reproductive value
(proportion of survivors of each rank) of A- and B-chicks
from B/3 nests was identical, and about three-fourths that
of A-chicks in B/2 nests (Table 2-5). When I partitioned


101
costs of fighting may have been higher for chicks when they
were 13 through 17 days old than when they were 17 through
21 days old. To compare the energetic costs of fighting in
chicks of different ages and hatching ranks will require
further experiments. The doubly labelled water technique
has been used to assess costs of fighting in entire broods
(e.g. Bryant and Tatner 1990) and should prove valuable for
determining the costs of fighting for individual chicks.
Size Hierarchies and Sibling Rivalry Reduction
Siblings should compete with each other to gain more
than their food share because they share only half of their
genes with their siblings (Hamilton 1964). But fights among
nestlings may be energetically costly to both the
participants and to their parents, who might evolve ways to
repress sibling conflict (Hamilton 1964, Trivers 1974).
Hahn (1981) proposed that asynchronous hatching could be an
adaptation to reduce sibling rivalry by lowering the amount
of aggression needed to form stable dominance hierarchies.
A prediction of this hypothesis is that the intensity of
fighting should be lower in broods with greater size-
disparities between the members. Brown pelican broods in my
study showed the opposite pattern when A-chicks were 13-17
days old. During this period, fight intensities were higher
in broods with greater size-superiority of A-chicks than in
broods where the masses of A- and B-chicks were more


3 HUNGER AS A PROXIMATE CAUSE OF FIGHTING
73
Introduction 73
Methods 78
Study Site 78
Observation and Censusing Methods 79
Nest Observations 80
Feeding Behavior 81
Fighting Behavior 82
Analyses 87
Results 92
Discussion 95
The Food-amount Hypothesis 95
Energetic Costs of Fighting 99
Size Hierarchies and Sibling Rivalry Reduction 101
Sibling Aggression in Related Species 102
4 EFFECT OF BROOD SIZE MANIPULATIONS ON FOOD DELIVERIES
AND APPORTIONMENT TO SENIOR SIBLINGS 114
Introduction 114
Methods 119
Study Site 119
Brood-size Manipulations 119
Census and Observation Methods 123
Feeding Behavior 125
Fighting Behavior 127
Animal Care Considerations 127
Results 128
Discussion 131
Do Seniors Gain a Food Bonus from Brood Reduction? . 133
Proximate Costs of Maintaining C-chicks 139
Parent-offspring Conflict 142
5 SUMMARY AND CONCLUSIONS 148
Parent-Offspring Conflict and Food-Dependent Fighting.. 151
Brood Reduction as a Product of Parent-Offspring
Conflict 154
APPENDICES
A DETERMINING CHICK AGES 165
B DETERMINING CLUTCH SIZES 172
C WHY DO OLDER CHICKS AND ADULTS ATTACK NESTLINGS? 173
D NEST TAKEOVERS 177
LIST OF REFERENCES 179
xiii


13
I could not use this direct approach for last-hatched chicks
in three-chick broods, because all of the last-hatched
nestlings died during my study. Instead, I used a third
approach, which was to inspect the order and timing of last-
hatched versus senior deaths. To have potential insurance
value, a last-hatched chick would need to survive into the
period of peak mortality risk to seniors.
Brown pelicans lay more eggs than they ordinarily
fledge; clutch sizes average three eggs which typically
yield one or two fledglings (Blus and Keahey 1978, Schreiber
1979). Nestling mortality has been generally attributed to
starvation, based on reports of light-weight nestlings
(Schreiber 1976, Keith 1978) and correlations between
fledging success and fish supplies (Anderson et al. 1977,
1982) or regurgitation frequencies (Schreiber 1979). All
past work with this species has relied on circumstantial
evidence from censusing nests to assign causes of mortality.
Such evidence is not sufficient and may lead to false
estimates of the relative frequencies of food-dependent
versus food-independent deaths. For example, Schreiber
(1976) attributed the selective mortality of last-hatched
brood members to starvation whenever a chick failed to grow
between the last censusing visits prior to the chick's
disappearance. But a thin chick that vanished between
censusing visits might not have starved to death. Instead,
such a chick might have been recovering when it was taken by


38
cast data into 2X2 tables and performed Fisher exact tests
using the expanded tables of Finney et al. (1963).
Differences were considered significant when P< 0.05.
P-values are presented for all statistical tests including
those that were nonsignificant, except for nonsignificant
results of Fisher Exact Tests. I could not provide P-values
for nonsignificant Fisher Exact Tests because P-values
higher than 0.05 for 1-tailed and 0.1 for 2-tailed tests
were not given in statistical tables for 2X2 contingency
tables (Finney et al. 1963). Means are presented +. 1 SD.
Results
Survival
Clutch sizes and hatching success were similar in both
years of this study (Table 2-1). Fledging success, although
low in both years, was lowest in 1990 (Table 2-1). The
productivity of 1990 nests, as measured by the maximum
number of nestlings per maximum nests, was significantly
associated with degree of researcher disturbance, with
productivity increasing with disturbance (Table 2-2,
Kruskal-Wallis test H = 5.357, P < 0.03). Thus, researcher
activities were probably not responsible for the low
fledging success in 1990. The productivity values that I
obtained in 1990 fell in the range of those obtained over an
8 year period (0.33-1.79 fledglings per total nest per year)


5
data). Cannibalism is rare and occurred in only one of the
122 nests that I kept under close observation during this
study. In this one nest, the parent ate its youngest
offspring after it died and the second-hatched chick ate a
dead nonsibling that had been experimentally added earlier
to enlarge the brood. The rarity of cannibalism makes the
exploitation hypothesis an unlikely explanation for brood
reduction in brown pelicans and I will not consider it
further. This leaves the progeny-choice, insurance and
resource-tracking hypotheses as possible explanations. In
Chapter 2 of this dissertation, I evaluate the insurance and
resource-tracking hypotheses for brown pelicans. I examine
in detail the role of the last-hatched member of brown
pelican broods as insurance for senior loss and as survivors
along with their senior siblings. This chapter also
includes some discussion of the validity of the progeny-
choice hypothesis for siblicidal pelican broods.
The resource-tracking hypothesis assumes that partial
brood losses increase directly with food scarcity. Where
siblicide is a major cause of brood reduction, as in brown
pelicans (see Chapter 2), the frequency of siblicide should
increase during periods of food shortage. One way that
siblicide could increase with food depletion is if sibling
aggression is proximately controlled by food supply, with
decreases in food to nestlings causing increased aggression
among brood-members. In brown pelicans, where older


I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor of Philosophy.
-*-*
H. Jane Brockmann, Chair
Professor of Zoology
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality, as
a dissertation for the degree of Doctor of Philosophy.
Professor of Zoology
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality,
a dissertation for the degree of Doctor of Philosophy.
It
John H. Kaufma(prn
Professor of Zoology
as
I certify that I have read this study and that in my
opinion it conforms to acceptable standards of scholarly
presentation and is fully adequate, in scope and quality,
a dissertation for the degree of Doptor of Philosophy.
Douglas J
Assistant
Zoology
Levey
Professor
of
as


30
One additional 3-day old chick was classified as having died
as a hatchling even though I did not know whether or not
this chick had received food. I included this chick because
it vanished from a nest in which the chicks were not brooded
properly because there was a deep pit in the center of the
nest. This chick probably died from exposure during
improper brooding.
Food-dependent deaths. I defined food-dependent deaths
to be nestling deaths that were probably related to
insufficient food being delivered to broods. The most
obviously food-dependent deaths involved chicks that died of
"starvation." I defined a chick's death as caused by
"starvation" if it was "emaciated" when last handled, and it
had not been attacked by another pelican (invader or
sibling) for 4 days preceding its death (N = 11).
"Emaciated" chicks were those which had at least two of the
following characteristics: (1) loose skin on the breast,
abdomen and/or back (areas with considerable tonus in well-
fed individuals); (2) an abdomen that felt flaccid when
palpated, or looked flat or concave when viewed laterally;
(3) very liquid, yellow feces; (4) listlessness and skin
temperature that felt cold to my touch; and (5) failure to
gain mass since my last visit to weigh the chick. Chicks
may have become emaciated and died from endoparasitic
infections or pesticide contamination rather than from
starvation. But endoparasitic infections are probably


of the islands. I am particularly grateful to Rich for
loaning me a boat, and continuing to let me use it even
after I sank it. I also thank the Gardenier Mining Company
for permission to work on their islands and for providing
parking for research vehicles. Pam Phelps and Steve McGehee
provided outstanding assistance while living in primitive
conditions and working extremely long hours. I also thank
them both for their continued friendship.
I thank Jim Johnson, Refuge Manager of the Lower
Suwannee National Wildlife Refuge of the U.S. Fish and
Wildlife Service, for permission to work on Seahorse Key in
1989. Thanks also go to Frank Maturo for facilitating my
use of the biological station on the island, and to Chuck
Haven, Henry Coulter and especially K. C. Brown for
maintenance of the boats and research station. I thank
Laurie Eberhardt and Jane Brockmann for keeping track of
events in key focal nests on a few days when I needed
several hours on break. I also thank my mother, Eleanore
Ploger, for assisting with some data entry while enduring
extreme heat and humidity. Thanks also go to my brother,
Jim Ploger, for working on Jane Brockmann's horseshoe crabs
for a week so that I could continue my pelican observations
uninterrupted.
A total of 11 months of continuous observations created
a tremendous mountain of data. I thank Joan Binkley, Ron
Clouse, James ("J. P.") Jouver, and Mark Stowe for helping
IV


BIOGRAPHICAL SKETCH
I was born and raised in Seattle, Washington, where my
love of the natural world was kindled by my mother early in
my childhood during our explorations of the misty forests,
beaches, marshes and mountains of the Pacific Northwest. By
the age of eight, I had decided to become a biologist.
During the back-road trips with my mother, while hiking the
Cascades and Olympics with my younger brother, and during my
numerous independent wanderings, I became fascinated by the
behavior and ecology of the birds that I encountered.
My interest in bird behavior led me to Mount Holyoke
College in Massachusetts, where I conducted research on the
feeding ecology of black-capped chickadees under the
direction of Susan M. Smith. After graduating with honors
in biology in 1981, I left the eastern deciduous forest of
my undergraduate days for the plains of Oklahoma and the
coast of Texas to study the breeding behavior of cattle
egrets. As a first-year graduate student, I went to Colima
and Jalisco, Mexico, on a field course that included a
project that led to my first publication, co-authored with
Gary Schnell and Barbara Woods. This paper was,
coincidentally, on brown pelicans, a species to which I
ultimately returned. In 1985, I received the M.S. degree
192


119
Methods
Study Site
The study occurred on Sunken island, one of two spoil
islands that make up Alafia Banks in Hillsborough Bay,
Hillsborough Co., Florida. Brown pelicans nested in the
tree canopy 3-4 m above the ground. (Lewis and Lewis 1978,
describe the vegetation on these islands.)
Brood-size Manipulations
Nests that hatched three chicks that all survived for a
minimum of 3 days were assigned to receive one of three
experimental treatments. These treatments consisted of
enlarging, reducing or leaving brood sizes at three chicks
as a control (see below for details). Three-chick broods
were the average clutch size in this early part of the
season (Chapter 2). Brood sizes were experimentally altered
before the first-hatched (A-) chick reached 11 days of age.
Thus, brood sizes were altered in the week before the peak
period of mortality due to starvation and siblicide (Chapter
2). Nests were matched during treatment so that sets of
three broods that were initiated (i.e. the A-chick hatched)
within a few days of each other each received a different,
randomly assigned brood-size treatment. Members of each
three-brood set were treated on the same day.


63
usually lay two-egg clutches (Vestjens 1977), brood
reduction might be facultative, but further information is
needed for this species. Virtually nothing is known about
whether partial brood loss is obligate or facultative in the
initially three-chick broods of Philippine pelican
(Pelecanus ohiliooensis. Neelakantan 1949) and the Dalmatian
pelican (Pelecanus crisous. Dementiev and Gladkov 1966,
Cramp and Simmons 1977, Crivelli and Vizi 1981).
Death occurs in the first week of life in most
obligately siblicidal species (Mock et al. 1990). But the
timing of obligate siblicide in pelican species varies
considerably, occurring within the first 3 days in white
pelicans (Cooper 1980), ranging from the first 3-10 days
(Johnson and Sloan 1978, Cash and Evans 1986) through the
first 3 weeks in American white pelicans (Knopf 1981), and
peaking in the 8-9th week in pink-backed pelicans (Din and
Eltringham 1974). The apparently obligate deaths of brown
pelican C-chicks occurred at an intermediate age relative to
those of their congeners, peaking in the second week of life
in this study and in the third week in a Mexican population
(Pinzn and Drummond in press). These differences in the
timing of obligate brood reduction could arise if the
youngest chicks serve as insurance for different causes of
senior mortality that come into effect at different points
in the nestling period. The rapid siblicide of white
pelican B-chicks suggests that they serve primarily as


54
For example, Schreiber observed broods fledging all three
young in only 6% of the 16 B/3 nests that he monitored for
growth from 1969-1972 (Schreiber 1976) and in only 4% of all
nests that he observed from 1969-1976 (Schreiber 1979).
Three-chick survival was also low in a North Carolina
colony, where only 13% of 38 B/3 broods fledged all young
(M. Shields, pers. comm.). Similarly, in Mexico none of 11
B/3 nests fledged three chicks (Pinzn and Drummond in
press) When combined with my data, these results suggest
that C-chick survival is rare, but that C-chicks do
occasionally provide "extra-chick" value by surviving along
with their siblings in some years. Brood reduction
generally fitted an obligate pattern for C-chicks. By
contrast, in one Panamanian colony, C-chicks survived along
with their siblings in 19% of all B/3 nests observed
(Montgomery and Martinez 1984). This population fed on fish
that were predictably abundant because of upwelling that
reliably occurred during the breeding season. C-chicks in
this population may have "extra-chick" value more frequently
than in the other populations discussed, which rely on less
predictable food supplies.
Whether C-chicks ever provide insurance value awaits
future study. No C-chicks survived as replacements for dead
A-chicks in the populations studied by Schreiber in 1976 and
by Pinzn and Drummond (in press). But the remaining
studies mentioned in the preceding paragraph did not provide


135
The results of experimental manipulations of brood
sizes suggest that parents might adjust food deliveries to
brood size by decreasing deliveries to reduced broods. Food
provisioning was investigated in a small proportion of
studies that involved brood-size manipulations. Of the
published studies that were listed in the aforementioned
reviews and that involved experimental manipulations of
brood sizes greater than one egg, only 10 provided data on
food provisioning. Only two of these, (Winkler 1985 for
California gulls, Larus californicus: and Gard and Bird
1990 for American kestrels, Falco soarverius) reported that
delivery rates remained unchanged with decreasing brood
size, the prediction that is basic to adaptive explanations
of brood reduction. In another of these studies, on
Brewer's blackbirds (Euohaaus cvanoceohalus. Patterson et
al. 1980), results were ambiguous. Males in this species
decreased their delivery rates to reduced relative to
control broods, but the statistical significance of this
relationship was not clear and data were not presented on
whether females compensated for decreased male feeding. In
contrast, the rate of food deliveries or nest-visitation
rates clearly decreased with decreasing brood size in white-
rumped swiftlets (Aerodramus spodiopvcrius. Tarburton 1987),
snail-kites (Rostrhamus sociabilis. Beissinger 1990), house
martins (Delichon urbica. Bryant and Westerterp, 1983), tree
swallows (Tachvcineta bicolor. Leffelaar and Robertson


group for valuable suggestions about the research design.
The cattle egret project would have been impossible
without assistance in the field. Russ Sanderson was
tremendously enthusiastic about splashing hip-deep in
alligator-infested water at 4:00 a.m. every morning. I also
thank Ken Kroel, Use Barube, Cathy Sahley and Pam Wexler-
Rubin for enduring difficult field conditions and a
stressed and sometimes testy supervisor.
Financial support for cattle egret project was provided
by an Animal Behavior Research Grant, a Herbert and Betty
Carnes Research Fund Award from the American Ornithologists 1
Union, an E. Alexander Bergstrom Memorial Research Fund
Award from the Association of Field Ornithologists, a
Florida Ornithological Society Research Grant, a Grant-in-
Aid of Research from Sigma Xi and a Zoology Department
Research Assistantship.
Several people deserve thanks both for their friendship
and for their helpful comments about my research. These
people include: Rich Buccholtz, Laurie Eberhardt, Bob
Podolsky, Martha Groom and Dustin Penn. I also thank other
members of Jane Brockmann's "Behavior Group" for their
ideas.
Special thanks go to Mark Stowe for his friendship,
helpful criticisms of drafts of grant proposals, fruitful
discussions of research ideas, and his inventive electronic
wizardry. Mark has been a great help from the beginning of
Vll


52
Partitioning the Reproductive Value of Junior Chicks
Assuming hatching success was independent of laying
order, as in white pelicans (O'Malley and Evans 1980), only
8-12% of A-eggs in C/2 and C/3 nests failed to hatch in 1989
and 1990 (Table 2-4) Clearly, some "extra" eggs had value
in replacing unhatched clutch-mates. But the replacement
value of junior chicks was primarily for loss of senior
chicks rather than eggs. Cash and Evans (1986) came to the
same conclusion for white pelicans, which had a higher
hatching failure rate of 15-18%. In contrast, Pinzn and
Drummond (in press) concluded that the primary advantage of
laying second and third eggs in their brown pelican
population was as insurance for hatching failure, which
affected 15-32% of the eggs. But junior eggs also replaced
7% of all A-chicks in B/2 and B/3 nests (Pinzn and Drummond
in press). Pinzn and Drummond's estimates of hatching
failure slightly overestimate the values for which juniors
could serve as insurance, because they included cases of
total clutch loss and eggs lost due to researcher
disturbance. Their higher hatching failure rates may be
because some of their nests were on the ground. Ground
nests may experience greater overheating and consequent
partial clutch loss than occurs in tree nests (Anderson
1990). The relative importance of junior chicks as
insurance for egg loss rather than chick loss may be greater


91
of the starting plus ending value was called the "mass
difference" (g). This variable was another measure of the
spread in sizes between A- and B-chicks.
Within each of these categories of potential
predictors, food amounts, culmen growth and mass changes, I
used forward stepwise linear regression to find the single
best predictors of fighting within that category. I then
entered these best predictors into another set of forward
stepwise linear regressions to determine which variables
best predicted fighting rates (fights/summary interval and
blows/summary interval) and intensities (blows/fight).
For the food-amount hypothesis to be clearly supported,
fighting rates and intensities would have to be predicted
best by food amounts to A- or B-chicks or the brood, or by
A-chick culmen growth, B-chick culmen growth, A-chick mass
change or B-chick mass change. Furthermore, this
relationship would have to be inverse, with the most
fighting occurring in broods with the slowest growth of A-
or B-chicks or the lowest amounts of food to these chicks
individually or collectively.
Unless otherwise stated, all statistical tests are 2-
tailed. A value of P < 0.05 constituted a significant
difference. Errors presented with reports of mean values
are standard deviations.


60
populations. Most reports of nest predation against brown
pelicans involve abandoned eggs or nestlings taken by avian
predators, including fish crows, Corvus ossifracrus
(Schreiber and Risebrough 1972, Ploger pers. obs.), common
ravens, £. corax, western gulls, Larus occidentalis (Keith
1978) and Heerman's gulls, L. heermanni (Keith 1978, Pinzn
and Drummond in press). But western gulls and ravens also
take eggs from nests while a parent is in attendance (Keith
1978), and black vultures (Coraovos atratus) take downy
nestlings that are left unattended for extended periods (C.
Murcia pers. comm.), as is usual among these young which are
old enough to thermoregulate (Bartholomew and Dawson 1954).
Predation by vultures could cause partial brood loss,
although vultures usually took the entire broods of very
young chicks (C. Murcia pers. comm.). The only predation of
brown pelican eggs that I observed occurred when parents
temporarily abandoned a nest to bathe and were absent from
the nest for only 1-2 minutes. This usually resulted in
fish crows taking the entire clutch, but sometimes only one
egg was killed before the parent returned, and the remaining
eggs survived (Ploger unpub. data).
Brown pelican nestlings are also subject to tick
infestations (King et al. 1977a, b, Keith 1978, M. Shields
pers. comm.), endoparasitic infections (Courtney and
Forrester 1974) and death from exposure to temperature
extremes (Keith 1978). Heavy tick infestations usually lead


16
mangrove (Rhizoohora mangle), and Brazilian pepper (Schinus
terebinthifolius). (See Lewis and Lewis 1978 for a detailed
description of vegetation on these islands.)
General Procedure
I censused a total of 107 nests from 15 March through 4
August to determine clutch sizes, hatching success and
fledging success. I separated these nests into three groups
according to the censusing methods used. The "focal nest"
group consisted of 27 nests that were continuously observed
with a spotting scope and binoculars from dawn to dusk
during the first 20 days of nestling life (see Focal Nests,
below, for details). The "visual census" group consisted of
51 nests that were adjacent to focal nests but were not
continuously observed or monitored for nestling growth (see
Visual Census nests, below, for details). The "growth nest"
group consisted of 29 nests containing chicks that were
weighed and measured every 4-12 days (see Handling schedule,
below, for details) but were never kept under continuous
observation.
Timing of census initiation. Censusing of 76 nests
began during the incubation period. Clutch sizes for these
nests were known precisely (see Appendix B for clutch-size
determination criteria). Hereafter, for convenience,
clutches that definitely contained two or three eggs will be
represented symbolically as C/2 and C/3, respectively.


41
which I estimated chick ranks, B-chicks died significantly
more often than did A-chicks (1-tailed G-test, G = 9.11, df
= 1, P = 0.005 for 10/16 surviving A-chicks versus 2/16
surviving B-chicks).
In 1989 B/3 nests, survival was significantly
associated with chick rank (1-tailed G-test, G = 31.78, df =
2, P < 0.001 for 13/15 surviving A-chicks versus 3/15
surviving B-chicks versus 0/15 surviving C-chicks).
Pairwise comparisons revealed that A-chicks survived
significantly more often than did their B-siblings (G =
14.66, experimentwise error set at P < 0.05, df = 2 for one
of three comparisons). Similarly, A-chicks survived
significantly more often than their C-siblings (G = 29.27,
experimentwise error set at P < 0.05, df = 2 for one of
three comparisons). Survival of B-chicks was not
significantly better than that of C-chicks (G = 4.49,
experimentwise error P > 0.05, df = 2 for one of three
comparisons).
In 1990 B/3 nests, C-chicks died more often than did
their A-siblings, but not significantly so when only chicks
of known rank were included (Table 2-3, 1-tailed Fisher
exact test, P < 0.05). When chicks of estimated ranks were
added to the analysis, this relationship was significant (1-
tailed Fisher exact test, P = 0.05 for 6/20 surviving A-
chicks versus 0/20 surviving C-chicks). A- and B-chicks in
1990 B/3 nests survived with similarly low frequency when I


62
shell thinning due to pesticide contamination, then the
"extra" egg might have had value as replacement for a thin-
shelled sibling. This replacement value might have been
important in the 1960's and 1970's when, prior to its ban,
DDT contamination was common (reviewed by Anderson and Gress
1983). This is not a likely explanation of my results
because C/3 clutches have been the norm in Florida since the
1920's (Bent 1922). Furthermore, when examined in 1969 and
1970, Florida eggs experienced only moderate levels of
pesticide contamination and egg shell thinning, with only 0-
3% of all eggs breaking during incubation (Schreiber and
Risebrough 1972).
BrQQd Reduction in, Pelican SBfiglSS
The occurrence of facultative brood reduction of B-
chicks along with obligate C-chick deaths in broods of brown
pelicans contrasts with the pattern seen in most other
pelican species. The pelican species for which the most
complete information is available all have modal clutch
sizes of two eggs and are obliaatelv siblicidal: American
white pelican, Pelecanus erythrorhvnchos (Johnson and Sloan
1978, Knopf 1981, Cash and Evans 1986), white pelican,
Pelecanus onocrotalus (Vesey-Fitzgerald 1957, Cooper 1980),
and pink-backed pelican Pelecanus rufescens (Din and
Eltringham 1974). Drummond (1987) speculated that in
Australian pelicans, Pelecanus conspicillatus. which also


36
For analyses of fledging success according to chick
ranks, I estimated chick ranks in 16 B/3 and 15 B/2 broods.
These chicks are referred to as having "estimated ranks".
Ranks were initially determined by noting hatching dates and
skin colors of chicks within their first week of life. I
then tracked changes in the body sizes, culmen lengths and
plumage development by visually comparing each nestling to
its siblings every day until all chicks had died or fledged.
Size differences and ranks could not always be determined
until nestlings were more than 10 days old. Therefore, I
could not detect early reversals in dominance or size using
this method of rank estimation.
Estimating Effects of Colony Disturbance
To determine whether our activities in the colony
adversely affected nestling survival in 1990, I used a boat
to count nestlings and nests in subcolonies of the Alafia
Banks colony that faced different levels of researcher
disturbance. I compared subcolonies that contained focal
and growth nests ("highly" disturbed, visited every 2-4 days
during the first 30 days, as described earlier) to
subcolonies that we never entered ("never" disturbed) or
walked past while walking along the beach ("moderately"
disturbed). To determine productivity in each subcolony, I
used Schreiber's (1979) methods, described as follows.
Every 2 weeks throughout the nesting season, I counted the


22
brood sizes and fledging success were known and in which at
least one chick hatched. These nests were used to compare
hatching failure in 21 C/2 versus 19 C/3 clutches. Because
eggs were not marked, I could not assess the relationship,
if any, between laying order and egg failure. Thus, I could
not determine if last-laid eggs ever replaced earlier-laid
eggs that failed to hatch. But low rates of hatching
failure would suggest that last-laid eggs have little egg-
insurance value, whereas high rates of hatching failure
would suggest the potential for last-laid eggs to replace
senior eggs that failed to hatch.
Measures of Fledging Success
I calculated fledging success per clutch from the 71
nests for which I knew both the clutch size and the number
of chicks that fledged. This sample included 18 focal, 29
visual census and 24 growth nests. These nests were also
used to calculate clutch sizes.
I also calculated fledging success per brood. For this
analysis, I used the 45 nests in which at least one chick
hatched and for which I was able to determine the initial
brood size and number of chicks that fledged..
Determining Hatching Dates
Eggs hatched asynchronously within clutches, with the
A-chick hatching 1.3 (0.6) days (for three B/2) and 1.1 (


17
Censusing of the 31 remaining nests began after hatching.
Clutch sizes were not known for these nests. The initial
brood size (number of chicks that hatched) was known
precisely for four of these 31 nests and for 65 of the nests
for which clutch sizes were also known. The initial brood
size was considered to be known if the number of nestlings
was first counted within 5 days after the first (A-) chick
hatched. Hereafter, broods that initially contained two or
three chicks (regardless of clutch size) will be represented
as B/2 and B/3, respectively.
Markina. In focal and growth nests, I individually
marked each chick to facilitate distinguishing A-chicks from
second-hatched (B-) and third-hatched (C-) chicks. All
newly hatched chicks aged 0 (day of hatching) to 4 days were
marked according to their hatching order with yellow and
black indelible marker pens. Older chicks were marked with
blue and yellow acrylic paint on their backs and heads, plus
the same color flagging tape squares glued with contact
cement flat onto the back and head. Paint and flagging had
to be reapplied frequently as the combination of water, fish
oils and guano acted as a solvent for both oil- and water-
based paints and glues.
Handling schedule. All chicks in focal and growth
nests were handled regularly to refresh their color-marks,
assess their physical condition, and monitor their growth.
I measured bill length (length of exposed culmen) to the


76
aggression in oystercatchers (Haematoous ostraleous. Safriel
1981), ospreys (Pandion haliaetus. Poole 1979, 1982,
summarized in Mock et al. 1990) and some other raptors
(Newton 1977).
The best evidence that hunger triggers fighting comes
from an experimental study of blue-footed boobies (Sula
nebouxii. Drummond and Garcia Chvelas 1989). Brood
reduction in this species usually occurs shortly after the
senior chick's mass drops about 20% below that expected at
its current age in a good year (Drummond et al. 1986) .
Senior nestlings whose necks were taped to prevent
swallowing pecked their siblings over three times more often
than before taping or after tapes were removed (Drummond and
Garcia Chvelas 1989). Rates of such aggressive pecking
rose most steeply when senior mass dropped to 20% below
potential. Similarly, experimental food deprivation also
seemed to cause elevated fighting among south polar skua
chicks (Catharacta maccormicki. Procter 1975), although
design problems caused inconclusive results. In the only
other experimental test of the food-amount hypothesis,
sibling fighting was not correlated with food ingestion in
broods of great egrets (Casmerodius albus. Mock et al.
1987). Provisioned broods in field experiments fought
slightly more than unprovisioned controls, and captive
broods fed high amounts fought more than did broods
receiving low food allotments. Experimental provisioning of


125
ages were known (Appendix A). Culmens were measured in mm
with a clear plastic ruler.
Feeding Behavior
During the first 5 days of nestling life, brown pelican
parents feed their chicks almost exclusively by
regurgitating fish onto the nest floor (Pinzn and Drummond
in press and Ploger, unpub. data). As the chicks get older,
they begin to intercept the food before it reaches the nest
floor by reaching into the parent's pouch. By the time
nestlings reach age 20 days, almost all food is delivered
directly to the chicks in this manner (Pinzn and Drummond
in press and Ploger, unpub. data). When scanning nests to
select one to watch, we considered as "feeding behavior" all
cases where a parent lowered its open bill over small chicks
or had older chicks thrust their bills into the parent's
open gape, whether or not food was delivered. The end of a
period of feeding activity was defined as occurring when the
parent began a nonfeeding activity without resumption of
feeding activity for a minimum of 1 minute. Nonfeeding
activities included preening, wing-flapping, nest-cleaning
(tossing fish bones, skin, sticks and various unidentifiable
scraps from the nest), adjusting sticks in the nest,
adopting a "resting" posture in which the parent held its
closed bill out of reach of its chicks (postures shown in
figures 16, 18, and 19 of Schreiber 1977), nest relief


Ill
40 60 80
A-chick mass gain (g/d)
100
120
Figure 3-4. Relationship between the total number of fights
and the rate of weight gain by A-chicks during the summary
interval when A-chicks were 13 through 17 days old. N = 5
broods in Figures 3-1 through 3-4. See Table 3-2 for
regression results.


86
side with the tip pointing posteriorly at a 0-45 angle to
the horizontal plane. In the Duck posture (Figure 3-lD), a
chick curled its head under its body such that the ventral
surface of the posteriorly pointing bill was pressed against
the abdomen and the dorsal surfaces of the bill and head
were pressed against the nest fabric. This posture
effectively shielded a chick's face from sibling attacks,
but left its nape exposed. When in the Lie Back posture
(Figure 3-lE), a chick pressed one cheek against its back
between its wings while its bill, resting on the back,
jutted out to the side horizontally, while being held
approximately perpendicular to the medial plane. A chick
adopting the Reverse Head position (Figure 3-IF) placed its
throat and the ventral surface of its neck and posteriorly
pointing bill against its back between the wings. In the
Lie Flat position (Figure 3-1G), a chick lay with the
lateral surface of its neck and head pressed against the
nest fabric while the dorsal surfaces of the distal and
medial halves of the neck remained folded against one-
another, and the throat pressed against the ventral surface
of the neck. The Hang Head posture (Figure 3-1H) was
defined by a chick hanging its head over the rim of the nest
or the edge of its perch such that the tip of the bill hung
parallel to or below the chick's feet. Body positions
during the Hang Head ranged from those described for the
Crouch to the Curl Neck postures.


25
Analyses of Fates Based on Chick Ranks
Known-age and estimated-age chicks were pooled for all
analyses of chicks according to rank. The assignment of
chick ranks thus reflect relative sizes of siblings when
less than 10 days old. I was able to determine the initial
brood size and the fates (lived or died of various causes;
see Causes of chick mortality, below) of all brood members
according to their size ranks for 14 B/3 and 20 B/2 broods.
These broods were used to compare the frequencies of food-
independent and food-dependent mortality for chicks of
different ranks (see Causes of Chick Mortality, below). I
also used these broods to analyze the reproductive values of
chicks according to their size ranks. Of the B/3 broods
used in these analyses, nine were focal nests and five were
growth nests. Of the B/2 broods used in these analyses, 11
were focal nests, 8 were growth nests, and 1 was a visual
census nest.
In an additional seven B/3 and 14 B/4 nests, chick
ranks were assigned according to relative sizes and plumage
development when chicks were more than 10 days old. These
"estimated-rank" chicks were used only when pooled with
chicks of known ranks to compare the fledging success among
chick ranks.


193
from the Department of Zoology at the University of Oklahoma
for my work on siblicide in cattle egrets. I conducted this
work under the direction of Douglas W. Mock. Our
collaboration while I was a master's student resulted in
several co-authored publications. I entered the Department
of Zoology at the University of Florida in August, 1985, as
a student of Dr. H. Jane Brockmann. In the summer of 1986,
I headed deeper into the tropics for several months as a
participant in the Organization for Tropical Studies course
in the fundamentals of tropical ecology. A drought during
1987 and 1988 forced me to abandon my first dissertation
project on the proximate causes of hatching asynchrony in
cattle egrets. I finally returned to that 'wonderful bird,
the pelican' in 1989 for my doctoral research. After
receiving my Ph.D. in zoology, I plan to continue teaching
and conducting research as a university or college
professor.


100
But I found the opposite pattern for B-chicks during the 17-
21 day summary interval. In this period, B-chick growth
rates were higher in broods with higher fighting rates than
in broods with lower fighting rates. Clearly, any energetic
costs of fighting for these chicks did not diminish their
growth.
Several hypotheses could provide possible explanations
for these apparently contradictory results. One hypothesis
is that the energetic costs of fighting may be higher for A-
than for B-chicks. This may be a likely possibility because
in many fights, the A-chick alone delivers blows, while the
B-chick often adopts a submissive posture and remains
motionless. An attacker may expend far more energy
delivering blows than does its motionless victim (e.g.
observations by Gargett 1978 interpreted by Mock 1984a:13).
Although I did not measure the energetic costs of fighting,
one piece of evidence from my study suggests that at least
during the 17-21 day summary interval, the relationship
between fighting and growth may be similar for A- and B-
chicks. This evidence was that mass gains by A- as well as
B-chicks were significant predictors of the number of fights
when I restricted analyses to measures of chick mass.
Specifically, there was a positive association between
number of fights and mass gains by A- as well as B-chicks.
Even if the energetic costs of fighting were similar
for A- and B-chicks in the 17-21 day summary interval, the


55
sufficient information to determine whether C-chicks ever
survived as replacements for A-chicks that died. The timing
of C-chick deaths in my study suggests that they could have
served as insurance against the death of a senior (A- or B-)
sibling. In general, when juniors provide "insurance,"
seniors should refrain from killing their siblings and
parents should avoid starving their youngest offspring until
after the survival of the eldest seems secure (Mock et al.
1990). Elimination of the youngest chick should quickly
follow after this, because food consumed by the doomed
youngest would be wasted and the costs of killing it may
increase as the youngest grows larger (Mock et al. 1990).
These patterns were observed for C-chicks in B/3 broods,
with most C-chicks living into the period of peak senior
mortality 17-20 days after the A-chick hatched, and dying
quickly of starvation or siblicide if their seniors survived
this risk period. That some C-chicks outlived their A-
siblings before dying further suggests that C-chicks may
have potential insurance value as replacements for lost
seniors.
Alternatively, C-chicks may not make a significant
contribution to their parents' lifetime reproductive
success, either as "extra" or as insurance chicks. The
presence of C-chicks may reflect selection pressures in the
recent past (e.g. Boag and Grant 1981) rather than current
adaptive value. For example, C-chicks may have insurance


23
0.7) days (for 16 B/3 broods) before the B-chick. B-chicks
hatched 1.6 (0.6) days before their C-siblings (N = 16
broods). These data were from pairs of chicks whose
hatching dates were known precisely. Whenever possible, I
determined the age and hatching order of siblings from
direct knowledge of hatching dates determined during daily
censuses (N = 41). This is the "known-age" group. I used a
growth curve for culmen lengths of 62 known-age chicks (r^ =
0.945, N=204 observations, Appendix A) to estimate the ages
and hatching order of an additional 51 "estimated-age"
chicks that were found in the first 10 days of life but
whose hatching dates were not known precisely. Schreiber
(1976) and Pinzn and Drummond (in press) also found a
correlation between age and culmen length. Chick ages when
first estimated had to be < 10 days to be included in the
estimated-age group, because after this age, culmen lengths
often reflected nutritional condition and would have
produced biased age estimates (Appendix A). In three
additional broods (eight chicks total) less than 10 days
old, culmens were not measured and ages were estimated from
skin colors and plumage development by comparing them to
known-age chicks (Appendix A). I thus determined the ranks
of a total of 100 chicks.
Thirty-two of the 62 known-age chicks that were used in
the regression were from nests that were later manipulated
for experiments (see Chapter 4) that may have affected chick


97
fighting was associated with food shortages to the brood.
Large differences in growth rates of A-chicks relative to B-
chicks could be produced if B-chick growth rates were
depressed. Depression of growth rates of B-chicks could
occur if food was scarce and A-chicks had priority of access
to food deliveries. In a sample of nests in my Alafia banks
population, A-chicks received more food than did B-chicks
(Chapter 4). A-chicks also had priority of access to food
in a Mexican population of brown pelicans (Pinzn and
Drummond in press). These A-chicks received more food, more
often, than did B-chicks throughout the first 25 days of
life (Pinzn and Drummond in press).
Alternatively, higher fighting rates could have
depressed B-chick growth rates relative to rates of A-chick
growth. This could have produced the observed pattern of
large culmen-growth differentials in broods with high
amounts of fighting. Even in the absence of food-shortages,
A-chick attacks could have prevented B-chicks from gaining
access to food. Indeed, in many obligately siblicidal
species, A-chick attacks that retard B-chick growth occur
while parents seem to supply a food surfeit (e.g.'s in
Meyburg 1974, Gargett 1978). Another possibility is that
both fighting rates and culmen-growth differential might co
vary with some other factor that I did not measure. The
teasing apart of causes and effects of fighting will have to


26
Analyses of Fates Independent of Chick Ranks
Restricting analyses to chicks whose ranks were known
would not have adequately represented all of the different
types of food-independent, food-dependent and unknown causes
of death that I observed in 1990 (see Causes of Chick
Mortality, below). For this reason, in addition to using
the 100 chicks whose ranks were known, I also determined the
fates of 72 "unranked" chicks. These "unranked" chicks were
added to the census sample when too old to determine
accurate hatching order and ages. Eight chicks of known
rank and two of the unranked chicks died when their nests
were abandoned. For fates analyses, I omitted these six
nests and all nests that were abandoned before hatching an
egg. I listed the fates of the remaining 177 eggs that
hatched 162 chicks (92 ranked and 70 unranked chicks).
These chicks hatched from the 81 nests for which I was able
to determine the fate of at least one egg or chick.
Causes of Chick Mortality
I separated causes of mortality into deaths due to
food-independent, deaths due to food-dependent and deaths
due to unknown causes. Food-independent deaths included
chicks that "died as hatchlings," "fell accidentally," were
"killed by invader chicks or adults," or died from an
"unknown accident" (see definitions in Food-independent


45
averaging 19.5 (16.1) and 16.6 (10.1) days for seniors
and C-chicks, respectively (U = 275.5, P = 0.80 for 24
seniors vs. 15 C-chicks plus 9 unranked chicks that were
first to die in their nests). In this analysis, unranked
chicks that were first to die were included (Figure 2-1)
because the comparison of interest is whether these chicks
lived long enough to be present during the period of peak
risk to their seniors. By including these unranked first
deaths as C-chicks, the time of death would be
underestimated in the event that some of these first deaths
actually involved seniors.
In B/2 nests, although all of the B-chicks eventually
died in 1990, 15% of them still outlived their seniors, one
of which did not die until it was 69 days old (Table 2-5).
B-chick mortality peaked during the same period as that of
A-chicks (Figure 2-1), with B-chicks dying an average of
21.0 (14.2) days and A-chicks dying 19.4 (12.2) days
into the nestling period (U = 102.5, P = 0.80 for 11 A-
chicks and 15 B-chicks plus 5 unranked chicks that were the
first to die, see above discussion for B/3 C-chicks for an
explanation of why unranked chicks were included in this
analysis). Both chicks survived together for a maximum of
36 days into the nestling period of B/2 broods.


44
the reproductive value of B-chicks in 1990 B/3 broods into
"extra-chick" and insurance components, I found that the
entire reproductive vale of these chicks lay in their
insurance value. Similar analysis for the last-hatched
nestlings in B/2 and B/3 broods was impossible because they
all died.
B-chicks survived better in B/3 than in B/2 nests in
1990 (Table 2-5). But the only B-chicks to survive in B/3
nests in 1990 were those whose A-siblings died. Thus, in
1990 the reproductive value of these chicks lay entirely in
their value as insurance against the demise of their
seniors. B-chicks in B/3 nests replaced their seniors quite
often; 38% of the B-chicks outlived their seniors and two of
these (15% of all B-chicks) fledged (Table 2-5). Most (83%)
of the B-chicks died during the first 24 days of the
nestling period (defined as beginning with the A-chick's
hatching, Figure 2-1). This was the period in which 77% of
the A-chicks died (Figure 2-1). Overall mortality peaked
during the same period for both A- and B-chicks (U = 63.5, P
= 0.40 for 13 ranks-certain A-chicks vs. 12 ranks-certain
B-chicks). Deaths occurred an average of 16.2 ( 12.3) days
into the nestling period for A-chicks and after 22.8 (
18.9) days for B-chicks
Although all C-chicks died in 1990, 23% of them lived
longer than one of their seniors (Table 2-5). Mortality of
seniors peaked during the same period as that of C-chicks,


33
Unknown causes of death. Chicks whose deaths could not
be classified as either food-dependent or food-independent
were considered to have died of "unknown causes of death,"
unless the deaths were due to parental "abandonment." I
assumed that a clutch had been abandoned if eggs were
present on one visit, and damaged or gone on the next. I
assumed that a brood had been abandoned if all the chicks
were found dead or missing on the same day, five or fewer
days after the A-chick had hatched. Abandoned nests were
excluded from all analyses except where otherwise indicated.
Supplemental Census Nests
General procedure. I determined fates for eggs and
unmarked nestlings in 78 nests that I observed from 22 March
through 29 August 1989 on Seahorse Key, part of the Cedar
Keys National Wildlife Refuge, Levy County, Florida. I
censused these nests visually each day from a lighthouse
tower located within 6-10 m of the nests, which were 3-12 m
high in mixed hardwoods. Fates of chicks in nests on
Seahorse Key were determined by scanning the colony through
a spotting scope continuously from dawn to dusk for 4-6 hour
periods, with short breaks between, for a total of 11-16
hour/day.
As in 1990 on Alafia Banks, I classified 1989 deaths on
Seahorse Key as being food-independent, food-dependent, or
involving unknown causes. I defined food-independent


103
(Pelecanus onocrotalus. Cooper 1980) and pink-backed
pelicans (Pelecanus rufescens. Din and Eltringham 1974). In
all of these species, the A-chick begins attacking its B-
sibling shortly after hatching, virtually always killing it
within the first 1-3 weeks of hatching, regardless of the
food supplies. Current food supply may be an inappropriate
cue for sibling aggression in these and other obligately
siblicidal species if parents routinely provide insufficient
food to raise both chicks through the protracted nestling
period (Mock et al. 1990). In this situation, current food
supplies do not accurately predict future supplies.
Selection in these species may have favored food-independent
aggression because it facilitates preemptive killing in
anticipation of routine food shortages (Stinson 1979,
Anderson 1990, Mock et al. 1990). By contrast, sibling
aggression in the brown pelicans nesting on Alafia Banks was
apparently sensitive to at least some measures of nestling
nutritional condition. This pattern could be adaptive if
current food levels are good predictors of future supplies
(Mock et al. 1987) .


89
were older than 21 days were not possible because only four
nests contained two chicks.
Variables. As my two measures of fighting rate, I used
both the total number of fights that occurred and the total
number of blows that were delivered by chicks during each
summary interval. Thus there was one data point per nest
during each summary interval for each fighting rate variable
(fights/summary interval and blows/summary interval). This
was also the case for all other variables. I measured fight
intensity as the number of blows per fight averaged through
each summary interval.
Measures of food amounts, culmen growth and mass
changes during each summary interval were entered into
stepwise regression models as potential predictors of
fighting. Food amount variables included the total food
consumed in each brood by A-chicks, by B-chicks and by both
chicks in each summary interval. These food amounts were
summed across all days in each summary interval.
Chicks were weighed and measured at the start and end
of each summary interval. Three estimates of culmen growth
were calculated and named as follows. First, for each
brood, the rate of culmen growth (mm/day) of A-chicks and of
B-chicks in the summary interval were named "A-chick culmen
growth" and "B-chick culmen growth," respectively. Culmen
growth was calculated for each chick by subtracting the
culmen length (mm) at the start of a summary interval from


CHAPTER 1
GENERAL INTRODUCTION
Many organisms produce more offspring than they usually
rear to independence because they abort, eat or neglect some
of their offspring, or allow siblings to kill (and sometimes
eat) each other. Abortion of embryos is common in many
plant species (see reviews in Buchholz 1922, Lloyd 1980,
Stephenson and Bertin 1983, Haig 1986, 1987, Sutherland 1986
and Mazer 1987) and in some mammals (reviews in Diamond
1987, Stearns 1987). Parents may consume their progeny in
some insects (e.g. Wilson 1971, Masuko 1986, Bartlett 1987),
fish (e.g. Salfert and Moodie 1984, FitzGerald 1992) and
amphibians (Simon 1984). In species that provide their
offspring with food, partial brood loss is often due to
starvation of some offspring through parental neglect or
sibling competition, as is widespread in birds (Lack 1968,
Howe 1976, O'Connor 1978, more recent reviews in Clark and
Wilson 1981, Mock 1984a). Parents in many taxa including
insects (e.g. Eickwort 1973), fish (e.g. Springer 1948,
Gilmore et al. 1983, Valerio and Barlow 1986, review in
Dominey and Blumer 1984), amphibians (review in Simon 1984),
and birds (Ingram 1959, Bortolotti et al. 1991) tolerate
cannibalistic sibling competition (reviewed in Polis 1984).
Noncannibalistic siblicide is more common than cannibalistic
1


UNIVERSITY OF FLORIDA
3 1262
08554 4442


143
chicks may have been met in both treatments (see preceding
paragraph). It was not clear from my results whether B-
chicks gained similar amounts of food or suffered a loss of
food in reduced relative to control broods.
The possibility that B-chicks may gain additional food
in broods with an intimidated C-chick suggests the potential
for conflict between parents and B-chicks over who gains the
C-chick's food share. Parents presumably fed control broods
more than reduced broods while C-chicks were alive because
parents were attempting to delay the death of their C-
chicks. The additional food was presumably meant for the C-
chick. But B-chicks may have manipulated the situation by
securing the C-chick1s share. Parents may have ended up
bringing the extra food to their B-chicks.
A B-chick benefit from the continued survival of C-
siblings could lead to a congruence or conflict of interests
between parents and their B-chicks over the fate of the C-
chick. Parents and B-chicks might both profit from the
continued existence of C-chicks. Certainly, B-chicks would
gain if they received extra food by obtaining part of the C-
chick's share. By bringing additional food to broods with
C-chicks, parents also behaved as if they were attempting to
delay the C-chick's death. Parents and B-chicks may both
have favored postponement of brood reduction.
Alternatively, parents might favor brood reduction under
exactly the conditions under which B-chicks should oppose


182
Drummond, H., Osorno, J. L., Torres, R., Garcia Chevelas, C.
& Larios, H. M. 1991. Sexual size dimorphism and
sibling competition: implications for avian sex ratios.
Am. Nat., 138, 623-641.
Edwards, T. C., Jr. & Collopy, M. W. 1983. Obligate and
facultative brood reduction in eagles: an examination
of factors that influence fratricide. Auk, 100, 630-
635.
Eickwort, K. R. 1973. Cannibalism and kin selection in
Labidomera clivicollis (Coleptera: Chrysomelidae).
Am. Nat., 107, 452-453.
Evans, R. M. 1984. Some causal and functional correlates
of creching in young white pelicans. Can. J. Zool., 62,
814-819.
Feldman, D., Gagnon, J., Hofmann, R. & Simpson, J. 1988.
Statview SE+ Graphics. Version 1.03. Berkely: Abacus
Concepts, Inc.
Finney, D. J., Latscha, R., Bennett, B. M. & Hsu, P. 1963.
Tables for Testing Significance in a 2 X 2 Contingency
Table. Cambridge: Cambridge University Press.
FitzGerald, G. J. 1992. Filial cannibalism in fishes: why
do parents eat their offspring? Trends Ecol. Evol., 7,
7-10.
Forbes, L. S. 1990. Insurance offspring and the evolution
of avian clutch size. J. theor. Biol., 147, 345-359.
Forbes, L. S. 1991. Insurance offspring and brood
reduction in a variable environment: the costs and
benefits of pessimism. Oikos, 62, 325-332.
Frank, L. G., Glickman, S. E. & Licht, P. 1991. Fatal
sibling aggression, precocial development, and
androgens in neonatal spotted hyenas. Science, 252,
702,704.
Fraser, D. 1990. Behavioral perspectives on piglet
survival. J. Reproduction and Fertility, Supplement,
40, 355-370.
Fujioka, M. 1985. Food delivery and sibling competition in
experimentally even-aged broods of the cattle egret.
Behav. Ecol. Sociobiol., 17, 67-74.


34
mortality and unknown causes of death using the 1990
criteria. Food-dependent deaths included siblicide (same
criteria as in 1990) and deaths that could have been due to
starvation &/or siblicide. I could not separate starvation
deaths from starvation &/or siblicide because I did not
handle chicks in 1989. The criteria used in 1989 for
placing a death into the starvation &/or siblicide category
were the same as those used in 1990, except that I defined
emaciation differently in 1989 because I did not handle
chicks. In 1989, a chick was classified as "emaciated" if
it got no food for the last 3 days of life and edema (common
in starving chicks) could be seen with a spotting scope. I
also classified as emaciated any chick whose bill was as
short or shorter than half the length of the bill of its
largest sibling. I compared the relative lengths of brood-
members' bills when the profiles of at least two chicks were
visible simultaneously through a spotting scope.
Measures of 1989 hatching success. I used two measures
of hatching success to compare 1989 Seahorse Key broods
versus 1990 Alafia Bank broods. First, I calculated
hatching success in all clutches, regardless of clutch size
and including nests in which all chicks failed to hatch.
For this analysis, I used the 54 Seahorse Key nests for
which I knew both the clutch and initial brood sizes (see
Measures of Hatching Success, above, for 1990 Alafia Bank
sample sizes used in hatching success analyses). Second, I


191
Williams, G. C. 1966. Natural selection, the costs of
reproduction, and a refinement of Lack's principle.
Am. Nat., 100, 687-690.
Wilson, E. O. 1971. The Insect Societies. Cambridge,
Massachussetts: Harvard University Press.
Winkler, D. W. 1985. Factors determining a clutch size
reduction in California gulls (Larus californicus); A
multi-hypothesis approach. Evolution, 39, 657-666.
Ydenberg, R. C. & Bertram, D. F. 1989. Lack's clutch size
hypothesis and brood enlargement studies on colonial
seabirds. Colonial Waterbirds, 12, 134-137.


185
Kozlowski, J. & Stearns, S. C. 1989. Hypotheses for the
production of excess zygotes: models of bet-hedging and
selective abortion. Evolution, 43, 1369-1377.
Lack, D. 1947. The significance of clutch-size. Ibis, 89,
302-352.
Lack, D. 1954. The Natural Regulation of Animal Numbers.
Oxford: Clarendon Press.
Lack, D. 1966. Population Studies of Birds. Oxford:
Clarendon Press.
Lack, D. 1968. Ecological Adaptations for Breeding in
Birds. London: Methuen.
Lazarus, J. & Inglis, I. R. 1986. Shared and unshared
parental investment, parent-offspring conflict and
brood size. Anim. Behav., 34, 1791-1804.
Leffelaar, D. & Robertson, R. J. 1986. Equality of feeding
roles and the maintenance of monogamy in tree swallows.
Behav. Ecol. Sociobiol., 18, 199-206.
Lessells, C. M. 1986. Brood size in Canada geese: A
manipulation experiment. J. Anim. Ecol., 55, 669-689.
Lewis, R. R., Ill & Lewis, C. S. 1978. Colonial bird use
and plant succession on dredged material islands in
Florida. Vol. II: patterns of plant succession.
Environ. Effects Lab., U.S. Army Eng. Waterways Exper.
Sta., Tech. Rept. D-78-14. U.S. Army Corps of
Engineers, Vicksburg, Mississippi.
Lloyd, D. G. 1980. Sexual strategies in plants. I. An
hypothesis of serial adjustment of maternal investment
during one reproductive session. New Phytol., 86, 69-
79 .
MacNair, M. R. & Parker, G. A. 1978. Models of parent
offspring conflict. II. Promiscuity. Anim. Behav., 26,
111-122.
Magrath, R. D. 1990. Hatching asynchrony in altricial
birds. Biol. Rev., 95, 587-622.
Martin, T. E. 1987. Food as a limit on breeding birds: a
life-history perspective. Ann. Rev. Ecol. Syst., 18,
453-487.


42
considered only broods with chicks of known ranks (Table 2-
3). When I added six broods with chicks of estimated ranks,
differences in survival were still not significant (1-tailed
Fisher exact test, P > 0.05 for 6/20 surviving A-chicks
versus 2/20 surviving B-chicks).
The preceding 1990 analyses provide estimates of the
effect of hatching rank on chick survival. But two B-chicks
grew larger than their A-siblings within the first 10 days
of life in 1990 B/3 nests. By gaining size-superiority,
these chicks may have gained a survival advantage. To
evaluate the effect of size-superiority (rather than
hatching rank) on chick survival, I re-classified the larger
B-chicks as "A-"chicks, and the smaller A-chicks as a
"B-"chicks in these two nests. When I compared B/3 chicks
according to their size-superiority at 10 days of age, I
found that "A-"chicks survived significantly more often than
did "B-"chicks (1-tailed Fisher exact test, P = 0.05 for
7/20 surviving "A-"chicks versus 1/20 surviving "B-"chicks).
Such size reversals within the first 10 days did not occur
in 1990 B/2 nests and did not involve any 1990 C-chicks.
Thus, preceding analyses involving 1990 B/2 broods and B/3
C-chicks that included chicks with estimated ranks reflect
the effects of chick size superiority.


121
I hoped to examine total food delivered to seniors and
broods over a prolonged period to compare the effects of
reducing and enlarging broods. Unfortunately, in all
treatment groups, nestling mortality was so high that all
three treatments remained in effect in focal nests only for
the first 6 days post-treatment. All five enlarged broods
contained four chicks for the first 5 days post-treatment.
By the sixth day following treatment, brood size dropped to
three chicks in three of the enlarged broods. For this
reason, I restricted my analysis to the first 6 days post
treatment when I compared food deliveries to broods in all
three treatment groups. This comparison involved all five
enlarged and control broods, and six of the seven reduced
broods (a total of 16 treatment broods). The seventh
reduced brood was omitted from this analysis because it
contained two chicks for only 3 days post-treatment.
The treatments remained in effect for 9 days post
treatment in three control and five reduced broods. By the
ninth day, the third chick died in one of the control
broods. Only one control brood still contained three chicks
by 10 days post-treatment. Therefore, I restricted my
analysis to the first 9 days post-treatment when I compared
food deliveries to control versus reduced broods.
I could have conducted a finer-grain analysis by
comparing food deliveries among treatments separately for
each of the first 1-6 days post-treatment. I did not do so