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02 / CAPITAL MECHANISM · V2.0Reinvestment and Long-term Capital · Three Inputs, Return Sources and DRIPSeparate the original business investment, income rights, equity and reinvestment into distinct contracts and cash mechanisms.V2.0 Internal Mechanism Design Draft · Additions are proposals; entities, contracts, parameters and applicability remain to be confirmed. Original: Capital.pdf.02Entities: contributor / Asset or project company / Operating company / Return payment obligor / Equity issuer; specific names, relationships and jurisdictions remain to be confirmed.Sources of investable cashSeparate financing principalSettled returns available for voluntary reinvestmentApproved retained operating cashIdentify the source and use of each amountCommon entry conditionsProject approval, budget and valuation basisOwnership, contract, term and loss allocationStaged investment and milestone acceptancePost-investment ledger and designated reviewer01 / Business Investment02 / Contractual Income-right Investment03 / Equity InvestmentSelect a real businessEquipment purchase, leasing or smart sharingVerify through customer demand and ordersInvest and register assetsPurchase price, ownership and depreciation/maintenanceRecord delivery, utilization and wear/lossGenerate real recoveriesSales volume, fees, costs and receivable collectionsVerify project net cash and lossesStage review and actionContinue investment / Adjust / StopPay under the contract and record lossesBook valuation is not a direct cash returnIdentify the income-right contractLink to a specific project or businessFirst establish the nature of principal and rightsDefine the calculation baseRevenue, costs, expenses and taxesDistribution period, priority and audit recordsSettle based on actual resultsConfirm distributable amount and obligorHandle shortfalls, losses and disputes separatelyPerform the agreement; no automatic interestActual payment / Contractual deferral or terminationRecord rights settled and unpaid obligationsDo not treat future income rights as cash receivedDefine the equity transactionIssuer, valuation, price and unitsUse of funds and shareholding entityRegister shareholders and governance rightsVoting, dividends, dilution and transfer restrictionsRelated parties and effects of later financingBuild long-term valueAssets, customers, profit and governancePost-investment data and financial reportsList conditional exitsHold for dividends / Transfer / M&AExplore an IPO if conditions are metIf unlisted, continue holding or exit under the contractEvery contract must answerWho collects, who owns assets and who pays?What is the return base and when is it recognized?Who bears losses and when may it terminate?If performance fails, how are refunds, recovery or settlement handled?Separate pledges and lockupsPledge financing: verify collateral, debt and repayment separatelyLockups restrict trading; they do not automatically create returnsDo not combine income rights, equity and consumption rights into one balanceDRIP / Voluntary Reinvestment after Return SettlementConfirm settled returnsIdentify distributable amount and paying entityFirst meet actual cash and rights conditionsThe individual makes the choiceCash receipt / Full or partial reinvestmentTrace amount, term, risk and authorizationProcess as a new transactionNew price or valuation and new contractRecord new units and cost basis separatelyRe-enter project reviewInvest according to budget and purposeFuture returns still arise from real businessIn this draft, DRIP means voluntary reinvestment of settled returns; unrealized appreciation, returns not yet due and unsettled consumption rights are not directly treated as cash returns.yutengfei.com · Andrew David W.Y.
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