$*UDQG'HFHLW

$*UDQG'HFHLW

7KH:RUOG%DQN VFODLPV RI JRRGJRYHUQDQFH LQ3DSXD1HZ*XLQHD

%\'U7LP$QGHUVRQ 3ROLWLFDO(FRQRP\8QLYHUVLW\RI6\GQH\

$UHSRUWSUHSDUHGIRUWKH$XVWUDOLDQ&RQVHUYDWLRQ)RXQGDWLRQ $&) DQGWKH&HQWUHIRU(QYLURQPHQWDO/DZDQG&RPPXQLW\5LJKWV &(/&25 $XJXVW



$*UDQG'HFHLW

7DEOHRI&RQWHQWV $FNQRZOHGJHPHQWV



6XPPDU\



,QWURGXFWLRQ



:K\ JRRGJRYHUQDQFH "



3DSXD1HZ*XLQHD VDVVHWVDQGSUREOHPV



:KDWLVWKH:RUOG%DQN"



7KH:RUOG%DQNDQG JRRGJRYHUQDQFH



,QWHUSUHWLQJ:RUOG%DQN JRRGJRYHUQDQFH



%DQNJRYHUQDQFHRIORJJLQJDQGFDVKFURSSLQJ



$OWHUQDWLYHVVRFLDOGHPRFUDWLFJRYHUQDQFH



'HDOLQJZLWKWKH:RUOG%DQN



%LEOLRJUDSK\





$*UDQG'HFHLW

$FNQRZOHJHPHQWV 7KRXJKQRRQHHOVHLVUHVSRQVLEOHIRUP\FRPPHQWV,RZHWKDQNVWRDZLGHUDQJHRISHRSOH IRUWKHLULQSXWLQWRWKHSUHSDUDWLRQRIWKLVUHSRUW,QSDUWLFXODU, GOLNHWRWKDQN/HH7DQRIWKH $&)'DPLHQ$VHRI&(/&255XWK3XQH%ULDQ%UXQWRQ5LFKDUG%UXQWRQ7HG:ROIHUV $LQXL 3DWWHUVRQ /HVWHU6HUL/HR5XNL$QGHUVRQ.RMD.DQDZL3RXUX0DWLOGD .RPD $OPDK 7DUDULD$QQLH.DMLU0DUWLQ$QGD3DXO'XII\


$*UDQG'HFHLW

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

*RYHUQDQFH LVDFRQFHSWRISROLWLFDOUHJXODWLRQZKLFKLVZLGHUWKDQVLPSOH JRYHUQPHQW E\D VWDWH%XWWKHUHLVQRDJUHHGGHILQLWLRQDQGLWLVQRZDQDUHQDRIIXULRXVGHEDWH(FRQRPLF OLEHUDOVKDYHIRFXVVHGWKHLUDUJXPHQWVDERXW JRRGJRYHUQDQFH RQWKHWUDGLWLRQDOWDUJHWVRI HFRQRPLFOLEHUDOSROLF\OLPLWLQJRUUHGXFLQJWKHH[WHQWRISXEOLFVHUYLFHVSULYDWLVLQJ FRPPXQLW\DQGSXEOLFDVVHWVDQGH[SDQGLQJPDUNHWVDQGPDUNHWRSSRUWXQLWLHVIRUSULYDWH LQYHVWRUV7KHLUPRGHOKDVEHHQUHYLVHGWRLQFOXGHVRPHQHZIXQFWLRQVIRUWKHFDSLWDOLVW VWDWHLQWKHZDNHRIFULWLFLVPVRI6WUXFWXUDO$GMXVWPHQW3URJUDPVLQWKHVWKH UHFRQVWUXFWLRQRIVWDWHVLQ(DVWHUQ(XURSHDQGWKHQDWXUHRIQHZDQGYRODWLOHZRUOGPDUNHWV 7KH:RUOG%DQN VDQWLFRUUXSWLRQDQGSURGHPRFUDF\ JRRGJRYHUQDQFH SURJUDPVFRPHLQ WKHZDNHRIVWURQJDQGVXVWDLQHGFULWLFLVPRIWKH%DQNIRUVXSSRUWLQJFRUUXSWGLFWDWRUVKLSV VXFKDVWKRVHLQ&KLOHDQG,QGRQHVLD6RLQVLVWHQWKDYHWKH%DQN VQHZFODLPVEHHQWKDWZH FDQQRZILQGIHZUHIHUHQFHVWRWKHPXFKFULWLFLVHG VWUXFWXUDODGMXVWPHQW  QRZ SRYHUW\ UHGXFWLRQ SULYDWLVDWLRQ QRZ SDUWQHUVKLSV DQGSULYDWHVHFWRU SDUWLFLSDWLRQV RUORDQ

FRQGLWLRQDOLW\  QRZLQFRUSRUDWHGDVHOHPHQWVRI JRRGJRYHUQDQFH 7KHFRPSOH[LW\RIWKLV

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

31* VSUREOHPVDUHGLIIHUHQWO\SRUWUD\HGDVHLWKHU G\VIXQFWLRQZLWKLQWUDQVSODQWHGZHVWHUQ VRFLDOVWUXFWXUHV RUDVWKH EUHDNGRZQRIWUDGLWLRQDOFRPPXQLW\VXSSRUWVWUXFWXUHV 7KH SUREOHPVDUHFRPPRQO\FLWHGDVFRUUXSWLRQSRRUVHFXULW\ WKH EUHDNGRZQLQODZDQGRUGHU  

$*UDQG'HFHLW SRYHUW\DQGLQHIIHFWLYH GHYHORSPHQW 
GHYHORSPHQWVWUDWHJ\31*KDVEHHQDZRUOGFODVVH[SRUWHUIRUPDQ\GHFDGHVEXWWKLVKDV QRWWUDQVODWHGLQWREHQHILWVIRURUGLQDU\SHRSOH2QWKHFRQWUDU\WKHVWUDWHJ\KDVVHULRXVO\ GDPDJHGGHFHQWOLYHOLKRRGVDQGVXVWDLQDEOHFRPPXQLWLHV

:KDWLVWKH:RUOG%DQN" )RUDOOLWV QHZVSHDN  LQFOXGLQJ JRRGJRYHUQDQFH WKH:RUOG%DQNLVDSXEOLFERG\ FRPPLWWHGWRSULYDWLVDWLRQ,WVFHQWUDOSXUSRVHLVWRIDFLOLWDWHSULYDWHIRUHLJQLQYHVWPHQWE\ VXSSOHPHQWLQJDQGKHOSLQJFUHDWHWKHFRQGLWLRQVIRUQHZLQYHVWPHQWVRUWKHWDNHRYHURI SXEOLFO\RZQHGLQVWLWXWLRQVDQGPDUNHWV'HVSLWHLWVQHZODQJXDJHLWKDVQRWVXEVWDQWLDOO\ GHSDUWHGIURPLWVLQLWLDOIRFXVRQIDFLOLWDWLQJSULYDWHIRUHLJQLQYHVWPHQW7KHUHDUHWKUHHZD\V ZHNQRZWKLVWKHFOHDUDLPVRIWKH%DQN VFRQVWLWXWLRQWKHHFRQRPLFOLEHUDOLGHRORJ\RIWKH EDQNHUVDQGWKHFOHDUIRUHLJQLQYHVWPHQWDQGWUDGHLQWHUHVWVRIWKH%DQN VPDMRUVKDUHKROGHUV 7KHKLVWRULFDOSUDFWLFH 6WUXFWXUDO$GMXVWPHQW3URJUDPV RIWKH:RUOG%DQNFRQILUPVWKLV 7KH%DQN VDUJXPHQWWKDWLWUHSUHVHQWVVRPHLQGHSHQGHQWYLHZRI JRRGJRYHUQDQFH LVDQ H[HUFLVHLQPDVVLYHGHFHSWLRQ,WLVILUPO\FRPPLWWHGWRSULYDWLVDWLRQDQGWKHSURPRWLRQDQG SULYLOHJLQJRISULYDWHIRUHLJQLQYHVWPHQW 7KH:RUOG%DQNDQG JRRGJRYHUQDQFH

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

7RKHOSXQGHUVWDQGWKH%DQN V JRRGJRYHUQDQFH PRGHOZHQHHGWRGLVWLQJXLVKLWV FRUH

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

DGYLFH9HUEDOHQJDJHPHQWZLWKWKH:RUOG%DQNGRHVQRWVLJQLILFDQWO\DOWHULWVVWUXFWXUDO DLPVZKLFKDUHVHWE\LWVFRQVWLWXWLRQDQGWKHLQWHUHVWVRILWVVKDUHKROGHUVDQGZKLFKDUH FRQILUPHGE\LWVSUDFWLFHDURXQGWKHZRUOG&RPPXQLW\DFWLYLVWVHQJDJLQJZLWKWKH:RUOG %DQNIRUWKHOHJLWLPDWHSXUSRVHRIKROGLQJLWSXEOLFO\DFFRXQWDEOHIRULWVDFWLRQVLQ31* VKRXOGEHFDUHIXOWRQRWOHQGLWSODWIRUPVRUOHJLWLPDF\IRULWVSDUWLVDQIRUHLJQLQYHVWPHQW OREE\LQJDFWLYLWLHVGUHVVHGXSDV JRRGJRYHUQDQFH RU SRYHUW\UHGXFWLRQ SURJUDPV



$*UDQG'HFHLW

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

$*UDQG'HFHLW SURJUDPVZLWKLPSRUWDQWHQYLURQPHQWDOLPSOLFDWLRQVWKH:RUOG%DQN V)RUHVWU\DQG &RQVHUYDWLRQ3URJUDPDQGWKH$VLDQ'HYHORSPHQW%DQN VDJURLQGXVWU\SURJUDPV, FRQFOXGHZLWKVRPHFRPPHQWVRQKRZEHVWWRDSSURDFKGHDOLQJVZLWKWKH:RUOG%DQNDQG KRZZHPLJKWVHHDQDOWHUQDWLYHVRFLDOGHPRFUDWLFPRGHORIJRRGJRYHUQDQFH



$*UDQG'HFHLW

:K\ *RRG*RYHUQDQFH " $VDFRQFHSWRISROLWLFDOUHJXODWLRQZKLFKLVZLGHUWKDQVLPSOH JRYHUQPHQW E\DVWDWH JRRG JRYHUQDQFH ZDVVHL]HGRQLQWKHVE\81DJHQFLHVDQGWKHPXOWLODWHUDOEDQNV WKH,0) DQGWKH:RUOG%DQN ,WLVQRZDQDUHQDRIIXULRXVGHEDWHZLWKQRFOHDUGHILQLWLRQV XQOLNH ULJKWVZKLFKKDYHDQDJUHHGEDVLVLQLQWHUQDWLRQDOWUHDWLHV EXWHQRUPRXVPRUDODVVHUWLRQ 7KHFRQFHSWKDVDKLVWRU\ZLWKWZREURDGJHQHDORJLHV

)LUVWWKHUHLVDQLQVWLWXWLRQDOIRFXVORRNLQJDWJRYHUQDQFHDVWKHFRRUGLQDWLRQDQG FRPSHWLWLRQEHWZHHQGRPHVWLFLQVWLWXWLRQVDQGWKHVWDWHDQGEHWZHHQVWDWHVDQGLQWHUQDWLRQDO ERGLHV+LVWRULFDOO\LQWHULPSHULDOLQWHUQDWLRQDOFRRUGLQDWLRQLQWKHHDUO\WKFHQWXU\ IROORZHGE\WKH/HDJXHRI1DWLRQVDQG8QLWHG1DWLRQVLQWKHWKFHQWXU\KDYHEHHQ GHVFULEHGDVWKHILUVWIRUPVRIIRUPDOJRYHUQDQFHLQWKHPRGHUQHUD 7HKUDQLDQ 

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
$*UDQG'HFHLW (XURSH :LFNUDPDVLQJKH  JRRGJRYHUQDQFH JDLQHGSURPLQHQFHDORQJVLGHWKHQRWLRQ RI FRKHUHQFH EHWZHHQWKH*GRPLQDWHGLQWHUQDWLRQDOHFRQRPLFDJHQFLHV7KH*$77 GHFODUDWLRQRUJDQLVHGE\WKH*ZDVRIDQLQWHQGHGFRQWULEXWLRQE\WKH:72WR JUHDWHUFRKHUHQFHLQJOREDOHFRQRPLFSROLF\PDNLQJ7KHLQWHUOLQNDJHVEHWZHHQWKHGLIIHUHQWDVSHFWVRI HFRQRPLFSROLF\UHTXLUHWKDWWKHLQWHUQDWLRQDOLQVWLWXWLRQVIROORZFRQVLVWHQWDQGPXWXDOO\VXSSRUWLYH SROLFLHV :72 

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

FRQVHQVXV KDVEHHQSRZHUIXOZLWKDFDGHPLFVUHSHDWLQJLWVPDQWUDVRIGHYHORSPHQWLQWRWKH QHZOLWDQ\RI JRYHUQDQFH IRUH[DPSOH

5HRULHQWLQJWKHSXEOLFVHFWRUVRWKDWLWHPSOR\VIDUIHZHUSHRSOHLQDJJUHJDWHUHGXFLQJHPSOR\PHQWLQ DFWLYLWLHVZKHUHWKHVWDWHKDVQRFRPSDUDWLYHDGYDQWDJHSHUKDSVLQFUHDVLQJHPSOR\PHQWLQVHFWRUV VXFKDV HGXFDWLRQDJULFXOWXUDOH[WHQVLRQDQGKHDOWKFDUH ZKHUHLWKDVDFRPSDUDWLYHDGYDQWDJHDQGPXFKPRUH JHQHURXVO\FRPSHQVDWLQJWKRVHWKDWLWGRHVHPSOR\DUHZLGHO\LGHQWLILHGE\GHYHORSPHQWDQDO\VWVDVFUXFLDO SULRULWLHV 7UHELOFRFNDQG+RZVH 

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

7KHVHFRQGDSSURDFKWRJRYHUQDQFHLVPRUHEURDGO\VRFLDOPRUHH[SDQVLYHWKDQWKH LQVWLWXWLRQDODSSURDFK+HUHVRFLDOFODVVHVFXVWRPVDQGFXOWXUDOSUDFWLFHVQRWLRQVRIFLWL]HQV

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

$*UDQG'HFHLW ,QWKLVWUDGLWLRQDQGRIWHQLQFRUSRUDWLQJDUJXPHQWVEDVHGRQKXPDQULJKWVWKH81'3KDV GHYHORSHGDFROOHFWLRQRIUHSRUWVRQJRYHUQDQFH,WDUJXHGLQWKDW

WKHJRDORIJRRGJRYHUQDQFHVKRXOGEHWRGHYHORSFDSDFLWLHVWKDWDUHQHHGHGWRUHDOLVHGHYHORSPHQWWKDW JLYHSULRULWLHVWRWKHSRRUDGYDQFHVZRPHQVXVWDLQVWKHHQYLURQPHQWDQGFUHDWHVQHHGHGRSSRUWXQLWLHVIRU HPSOR\PHQWDQGRWKHUOLYHOLKRRGV>*RYHUQDQFH@LVWKHFRPSOH[PHFKDQLVPVSURFHVVHVUHODWLRQVKLSVDQG LQVWLWXWLRQVWKURXJKZKLFKFLWL]HQVDQGJURXSVDUWLFXODWHWKHLULQWHUHVWVH[HUFLVHWKHLUULJKWVDQGREOLJDWLRQV DQGPHGLDWHWKHLUGLIIHUHQFHV 81'3 

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

UHFRORQL]DWLRQRIWKH>$IULFDQ@FRQWLQHQW  +RRJYHOW ,Q31*KXPDQULJKWV DFWLYLVW3RZ\V 3DUNRSV LQ'L[RQ QRWHGWKDWWKHUHZHUHQRZWKUHHW\SHVRIFRORQLDOLVP LQWKH3DFLILFROGVW\OH(XURSHDQFRORQLDOLVPVRXWKVRXWKFRORQLDOLVP HJ,QGRQHVLDLQ:HVW 3DSXDDQG(DVW7LPRU DQGUHFRORQLVDWLRQRIWKHUHJLRQE\WKH:RUOG%DQNWKH,0)DQG WUDQVQDWLRQDOFRPSDQLHV7KHLVVXHVRIUHFRORQLVDWLRQDUHWKHVDPH3DUNRSVVDLGDOLHQDWLRQ GHSULYDWLRQRIODQGULJKWVGHVWUXFWLRQRIWKHHQYLURQPHQW LQ'L[RQ  7KHUHDUHPDQ\SURPLQHQWFULWLFVRIQHROLEHUDOJRYHUQDQFH&KRVVXGRYVN\  VD\VWKH

JRRGJRYHUQDQFH RI6WUXFWXUDO$GMXVWPHQW3URJUDPVKDVUHTXLUHGSROLWLFDOUHSUHVVLRQDQG WKHVWUHQJWKHQLQJRILQWHUQDOVHFXULW\UHJLPHVFRPELQHGZLWKHFRQRPLFUHSUHVVLRQWKURXJK WKHSULYLOHJLQJRISRZHUIXOLQWHUHVWV

WKHYHU\QDWXUHRIWKHHFRQRPLFUHIRUPVSUHFOXGHVDJHQXLQHGHPRFUDWLVDWLRQ>6$3VUHTXLUH@WKHEDFNLQJ RIWKHPLOLWDU\DQGRIWKHDXWKRULWDULDQVWDWH6WUXFWXUDODGMXVWPHQWSURPRWHVERJXVLQVWLWXWLRQVDQGDIDNH SDUOLDPHQWDU\GHPRFUDF\ &KRVVXGRYVN\

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

&KDYH]0DODOXDQDQG*XWWDO  QRWHWKDWGHVSLWHWKHQHZODQJXDJHRI:RUOG %DQN,0) 3RYHUW\5HGXFWLRQ6WUDWHJLHV  ZKLFKUHSODFHG6$3VLQ OLWWOHKDVFKDQJHG LQWKHPRGXVRSHUDQGLRIWKH%DQNDQGWKH)XQGGHVSLWHWKHDVVRUWPHQWRIUHTXLUHGSROLFLHV 

$*UDQG'HFHLW ORRVHO\FDWHJRULVHGDV JRRGJRYHUQDQFH 6WDWHVLQGHYHORSLQJFRXQWULHVKDYHEHHQUHTXLUHG WRUHEDGJHWKHLUOLEHUDOLVDWLRQSURJUDPVEXWWKHVXEVWDQFHUHPDLQVPXFKWKHVDPH+RZHYHU 7UHDNOH  VD\VWKDWWKHQHZODQJXDJHRIWKH:RUOG%DQNLVZLGHQLQJWKHVSDFHIRU KXPDQULJKWVFRQVLGHUDWLRQVHYHQDVLWVSROLFLHVPDLQWDLQDWUDGLWLRQRIXQGHUPLQLQJ GHPRFUDF\DQGKXPDQULJKWV7KHYDJXHIRUPXODWLRQRI:RUOG%DQN JRRGJRYHUQDQFH

DUJXPHQWVKDUGO\DPRXQWVWRDSROLF\RISXUVXLQJKXPDQULJKWVLQGHYHORSPHQW%XWPXFKRI WKHQHZODQJXDJHRIQHROLEHUDO JRRGJRYHUQDQFH KDVEHHQGULYHQE\HIIHFWLYHDWWDFNVRQWKH FUHGLELOLW\RIQHROLEHUDOVWUXFWXUDODGMXVWPHQW,QWKHZDNHRIWKH$VLDQ)LQDQFLDO&ULVLV :DOGHQ%HOOR  ZULWHVRIDFULVLVRIOHJLWLPDF\IRUWKHJOREDOJRYHUQDQFHRIWKH :72,0):RUOG%DQNDIWHUWKHKLJKSRLQWRIWKH:72 VFUHDWLRQLQ7KHUHVSRQVHWR WKHFULVLVKDVGULYHQXSWKH GRXEOHVSHDN )RUVHYHUDO\HDUV%HOORKDVDUJXHGWKDWQHROLEHUDO

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

SDUWQHUVKLSV DQGSULYDWHVHFWRU SDUWLFLSDWLRQV RUORDQ FRQGLWLRQDOLW\  QRZLQFRUSRUDWHGDV HOHPHQWVRI JRRGJRYHUQDQFH  7KHFRPSOH[LW\RIWKLV QHZVSHDN KDVPDGHLWPRUHLPSRUWDQWWKDWHVVHQWLDOLQWHUHVWVEH VHSDUDWHGIURPVWDWHGREMHFWLYHVDQGWKDWWKH:RUOG%DQN VPRGHORI JRRGJRYHUQDQFH LQ 3DSXD1HZ*XLQHDEHSURSHUO\DQDO\VHGDQGQRWVLPSO\WDNHQDWIDFHYDOXH%XWEHIRUH SURFHHGLQJWRWKLVDQGEHFDXVH JRRGJRYHUQDQFH LVJHQHUDOO\VHWXSDVWKHVROXWLRQWR VSHFLILFSUREOHPVZHPXVWILUVWORRNDWWKHGLIIHUHQWZD\VLQZKLFK3DSXD1HZ*XLQHD V SUREOHPVDUHVHHQ



$*UDQG'HFHLW

3DSXD1HZ*XLQHD V$VVHWVDQG3UREOHPV 3DSXD1HZ*XLQHD VVRFLRHFRQRPLFSUREOHPVFDQEHVHHQLQTXLWHGLIIHUHQWZD\VHYHQ ZKHQORRNLQJDWZKDWDSSHDUVWREHWKHVDPHSUREOHP$QGLWZRXOGEHQDLYHWRLPDJLQHWKDW DQ\DFFRXQWRIWKHFRXQWU\ VSUREOHPVFDQEH REMHFWLYH RUGHYRLGRIDVVXPSWLRQVDERXWKRZ WKHFRXQWU\PLJKWEHVWGHYHORS)RUPXODWLRQRISUREOHPVQHFHVVDULO\LQWURGXFHVVRFLDOYDOXHV DQGGHYHORSPHQWDODVVXPSWLRQV&RUUXSWLRQIRUH[DPSOHFRXOGEHVHHQHLWKHUDVD

G\VIXQFWLRQ LQIOXHQFHGE\WKHUHTXLUHPHQWVRIWULEDOOR\DOWLHVRUDVDORJLFDOH[WHQVLRQRI HFRQRPLFOLEHUDOSULYDWLVDWLRQDUJXPHQWV,WLVLPSRUWDQWWRXQGHUVWDQGWKHVHSUREOHPVDV IRUPXODWLRQVRISUREOHPVDUHPRVWRIWHQWKHSUHFXUVRUWRSURSRVHGSROLFLHVRU JRRG JRYHUQDQFH PRGHOV,LQWHQGWRGLVFXVV31* VSUREOHPVLQWZREURDGZD\VILUVWIURPWKH RUWKRGR[YLHZRIG\VIXQFWLRQZLWKLQWUDQVSODQWHGZHVWHUQVRFLDOVWUXFWXUHVDQGVHFRQGDV ODUJHO\WKHV\PSWRPVRIDEUHDNGRZQRIWUDGLWLRQDOFRPPXQLW\VXSSRUWVWUXFWXUHV%XWEHIRUH WXUQLQJWRSUREOHPVLWLVHTXDOO\LPSRUWDQWWRUHFRJQLVH31* VPDQ\DVVHWV 31*¶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

&XVWRPDU\ODQGWHQXUHVKRXOGEHVHHQDVDFHQWUDOSDUWRIWKHVHFRPPXQLW\VXSSRUWVWUXFWXUHV DQGDVRFLDODVVHWUDWKHUWKDQDSUREOHP%XVLQHVVUHSUHVHQWDWLYHVUHJXODUO\FLWHODQGWHQXUH SUREOHPVDVDSULPHREVWDFOHWRLQYHVWPHQWDQGGHYHORSPHQW3XWWLQJDVLGHIRUWKHPRPHQW WKHVHOILQWHUHVWLQWKLVFULWLFLVPDQGWDNLQJVHULRXVO\WKHQHHGWRUHJDUGODQGDVDSURGXFWLYH DVVHWZHDOVRQHHGWRUHFRJQLVHWKHHQRUPRXVGHYHORSPHQWDQGVRFLDOVHFXULW\EHQHILWVRI FXVWRPDU\ODQGWHQXUH6PDOOIDUPHUVDUHRIWHQPRUHSURGXFWLYHWKDQODUJHFDVKFURSSHUVDQG DV$QGUHZ/DNDXVD\V 

$*UDQG'HFHLW ³FXVWRPDU\ODQGWHQXUHFDQEHXQIDLUO\GHQRXQFHGIRUQRWEHLQJUHVSRQVLYHWRLQFUHDVHGSURGXFWLYLW\DQG HFRQRPLFXWLOLVDWLRQRIODQG)RUFDVKFURSSLQJDQGDJULFXOWXUDOGHYHORSPHQWWREHERRVWHGVXSSRUW VHUYLFHVDQGLQFHQWLYHVOLNHDJULFXOWXUDOLQSXWVIDYRXUDEOHSULFHSROLFLHVPDUNHWRXWOHWVDQGFUHGLW SURYLVLRQVDPRQJVWRWKHUVZLOOKDYHWREHUHDGLO\DYDLODEOH´ /DNDX

&RPPXQLW\DQGODQJXDJHGLYHUVLW\LVDEURDGHUDVVHWRIWKHHQWLUHQDWLRQDQGDYDOXHZKLFK SDUDOOHOVWKHFRXQWU\ VELRORJLFDODQGIRRGGLYHUVLW\:HVWHUQVFLHQWLVWVRIWHQUHIHUWRWKHQHHG WRSURWHFWELRORJLFDOGLYHUVLW\OHVVYDOXHLVUHFRJQLVHGLQWKHFXOWXUDODQGODQJXDJHGLYHUVLW\ RIWKHFRXQWU\ VSHRSOH,JQRUDQFHRIWKHYDOXHRIFXOWXUDODQGODQJXDJHGLYHUVLW\LVUHIOHFWHG LQ HFRQRPLF DUJXPHQWV HJIURP$XV$,' DJDLQVW WRNSOHV  ORFDOODQJXDJH WHDFKLQJLQ 31* VSULPDU\VFKRROV
QDWLRQDOVRYHUHLJQW\DQGVHOIUHOLDQFH  3DSXD1HZ*XLQHDQZD\V DQGVXVWDLQDEOH GHYHORSPHQWLHIRU31* VQDWXUDOUHVRXUFHVWREHFRQVHUYHGDQGXVHGIRUWKHFROOHFWLYH EHQHILWRIXVDOODQGEHUHSOHQLVKHGIRUWKHEHQHILWRIIXWXUHJHQHUDWLRQV´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

$*UDQG'HFHLW SRRUVHFXULW\ WKH EUHDNGRZQLQODZDQGRUGHU SRYHUW\DQGLQHIIHFWLYH GHYHORSPHQW 








'&DY   

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

3RYHUW\PHDVXUHVDUHRIWHQXQVDWLVIDFWRU\HVSHFLDOO\LQGHYHORSLQJFRXQWULHVZLWKODUJH LQIRUPDOVHFWRUV,QFRPHPHDVXUHV XVHGWRPHDVXUHLQHTXDOLW\DQGSRYHUW\LQFRXQWULHVZLWK ODUJHIRUPDOVHFWRUV DUHJHQHUDOO\LQDSSURSULDWHDVWKH\GRQRWDFFRXQWIRUWKHTXDOLW\ RU RWKHUZLVH RIVXEVLVWHQFHOLIHVW\OHV7KH:RUOG%DQN  EHJLQVE\XVLQJFRQVXPSWLRQ 

$*UDQG'HFHLW ILJXUHVWRGHILQHSRYHUW\LQ31*EXWWKHVHDUHQRWPXFKEHWWHUDVWKH\UHYHUWWRLQFRPHDQG H[SHQGLWXUHPHDVXUHV6LQJOHGROODUILJXUHVDUHDWWUDFWLYHIRUWKRVHZKRDWWHPSWWROLQN DJJUHJDWHJURZWKDQGDYHUDJHLQFRPHPHDVXUHVZLWK SRYHUW\UHGXFWLRQ EXWWKH\PLVVVRPH LPSRUWDQWGLVWLQFWLRQV,QP\YLHZSRYHUW\LQDFRXQWU\OLNH31*ZRXOGEHEHWWHUPHDVXUHG E\DJURXSRIUHDOQXWULWLRQKHDOWKDQGHGXFDWLRQLQGLFDWRUVVXFKDVWKRVHFRPSLOHGE\WKH 81'37KHVLQJOHILJXUHLQGH[LVDWWUDFWLYHEXWPLVOHDGLQJ

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

31*

,QGRQHVLD

7KDLODQG

&KLQD

9LHWQDP

 

 

 

 

 









































31* VVRFLDOLQGLFDWRUVWKRXJKEDGZHUHUHFHQWO\PLVUHSUHVHQWHGE\WKHIRUPHUUHJLRQDO KHDGRIWKH:RUOG%DQN,QDVSHHFKDWWKH8QLYHUVLW\RI6\GQH\.ODXV5RKODQG  FODLPHGWKDW31*UDQNHGWKRQWKH81'3 V+XPDQ'HYHORSPHQW,QGLFDWRUOLVWLQJQHDU 'MLERXWLDQG&KDG,QIDFWDFFRUGLQJWRWKH81'3 V+XPDQ'HYHORSPHQW5HSRUWVIRUWKH 

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

GHYHORSPHQWV LQIDYRXURIWKHLQYHVWPHQWQHHGVRIIRUHLJQFRUSRUDWLRQVVXFKDV5LPEXQDQ +LMDX1HZV/LPLWHG5DPX6XJDUDQG5'7XQD7KHWKHPHRI FRQWUROOHGGHYHORSPHQW

:ROIHUV KDVUXQOLNHDWKUHDGIURPWKHFRORQLDOSHULRGWRWKHFXUUHQWGD\

)RUH[DPSOHLQ$XVWUDOLDQ)RUHLJQ0LQLVWHU%LOO+D\GHQOLQNHGGHYHORSPHQW DVVLVWDQFHWRIXWXUHSXUFKDVHVRI$XVWUDOLDQULFH$FFRUGLQJWR31* V)RUHLJQ0LQLVWHU +D\GHQH[SUHVVHGWKH$XVWUDOLDQ*RYHUQPHQW¶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

 31*  $XVWUDOLD  (QJODQGDQG:DOHV  *HUPDQ\  86$  :DVKLQJWRQ'&  6RXWK$IULFD  5XVVLD  (VWRQLD  -DPDLFD  %UD]LO  5LR  6DR3DROR 6RXUFHV31*:RUOG%DQN  $XVWUDOLD$,&   :DVKLQJWRQ-DPDLFD.RYDOHVNL  %UD]LO%XFNOH\  RWKHUFRXQWULHV%DUFOD\DQG7DYDUHV  

%XVLQHVVRUJDQLVDWLRQVVHHPSULPDULO\SUHRFFXSLHGZLWKWKHVDIHW\DQGSURSHUW\FRQFHUQVRI IRUHLJQHUV 'RQQHOO\ EXWVHFXULW\SUREOHPVLQ31*DUHQRWQHDUO\DVZLGHVSUHDGDV LPDJLQHGDQGWKHKLJKILJXUHVLQWKHPDMRUFLWLHVDUHRXWZHLJKHGE\YHU\ORZILJXUHVLQWKH 

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

,QHTXDOLW\ULFKHVWWRSRRUHVW FRQVXPSWLRQ ,QHTXDOLW\ULFKHVWWRSRRUHVW FRQVXPSWLRQ 6RXUFH81'3  +XPDQ'HYHORSPHQW5HSRUW

 

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

,IWKHULFKFDQSHUVXDGHWKHSRRUWKDWWKHUHDVRQVIRUWKHH[LVWHQFHRIDZLGHJXOIDUHOHJLWLPDWHWKH GLVVDWLVIDFWLRQZLWKWKHFRQGLWLRQRIVRFLHW\ZLOOQRWEHPDQLIHVWUHODWLYHGHSULYDWLRQZLOOEHDVSXUWR FULPHRQO\LQVRFLHWLHVZKHUHWKHMXVWLI\LQJLGHRORJ\IDLOVWRSHUVXDGHWKHUHODWLYHO\SRRUWKDWWKHLUVLWXDWLRQ LVDOWKRXJKXQIRUWXQDWHQHFHVVDU\:KHUHWKRVHZKRVWDUYHWRGHDWKDUHFRQYLQFHGWKDWWKHUHLVWUDGLWLRQDO RUUHOLJLRXVMXVWLILFDWLRQIRUWKHFDVWHVWUDWLILFDWLRQRIVRFLHW\WKH\ZLOODFFHSWWKHLUORWLQOLIHDQGGHDWK

7KDWLV LOOHJLWLPDWH LQHTXDOLW\LVDIXUWKHUDJJUDYDWLQJIDFWRU,QP\YLHZWKLVSRLQWVWRD UDWKHUXJO\UROHWKDWHFRQRPLVWVDQGSROLWLFLDQVSOD\LQGHYHORSLQJFRXQWULHV,IPDVVHVRI SHRSOHFDQEHFRQYLQFHG IRUH[DPSOH WKDWDIRUHLJQFRQVXOWDQW VODERXULVVRPHKRZZRUWK WLPHVWKDWRIDORFDOZRUNHU E\ PDUNHWIRUFHV WKHQLQHTXDOLW\ZLOOEHWROHUDWHG +RZHYHULIWKLVLVVHHQDVXQIDLUDQGPRUDOO\H[SORLWDWLYHWKHUHZLOOEHDVRFLDOUHDFWLRQDQG SDUWRIWKLVUHDFWLRQZLOOLQFOXGHWKHIWEXUJODU\DQGUREEHU\6RPHUHVHDUFKHUVORRNLQJDW LQGLJHQRXVFRPPXQLWLHVLQ$XVWUDOLDKDYHDOVRREVHUYHGWKDWVRPHSURSHUW\RIIHQFHV YDQGDOLVPDVVDXOWVDQGEHKDYLRXUFODVVLILHGDVRIIHQVLYHFDQ>EHVW@EHXQGHUVWRRGDVDIRUP RIUHVLVWDQFH &XQHHQDQG0F'RQDOG 6RLQDSRVWFRORQLDOVHWWLQJWKHH[WHQWRI LQHTXDOLW\WKHSHUFHLYHGLOOHJLWLPDF\RIWKLVLQHTXDOLW\DQGUHVLVWDQFHWRWKLVLQHTXDOLW\FDQ DOOEHDJJUDYDWLQJIDFWRUVRIFULPHLQFOXGLQJYLROHQWFULPH
$*UDQG'HFHLW UHDVRQWRGLVJXLVHWKHVRFLDODQGPRUDOGLPHQVLRQVRILQHTXDOLW\LQ31*7KDWLVZHFDQQRW OHJLWLPDWHO\ KLGH RUMXVWLI\JURVVLQHTXDOLW\VRDVWRGDPSHQUHVHQWPHQWDQGFULPH

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

7KH:RUOG%DQNVD\VWKDWFRUUXSWLRQDSSHDUVWRKDYHLQFUHDVHGFRQVLGHUDEO\RYHUWKHSDVW \HDUVFLWLQJDUHFHQWVXUYH\LQZKLFKSHUFHQWRIILUPVFODLPHGWKDWWKH\KDGWRPDNH XQRIILFLDOSD\PHQWV :RUOG%DQN 

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

+RZHYHUWKHIDLOXUHRIWKHVWDWHWRGHDOZLWKWKLVFRUUXSWLRQ DORQJZLWKWKHODZDQGRUGHU SUREOHP PDNHVXSDQLPSRUWDQWSDUWRIWKHFODLPVWKDW31*LVDWLPPLQHQWULVNRIEHFRPLQJ D IDLOHGVWDWH ,WLVQRWLPPHGLDWHO\FOHDUZKDWWKLVRPLQRXVVXJJHVWLRQPHDQVEXWWKHQRWLRQ KDVEHHQSLFNHGXSDQGUHSHDWHG6RPH$XVWUDOLDQZULWHUVKDYHPDGHDODUPLVWFODLPVWKDW

JRYHUQPHQWFROODSVH DQGD IDLOHGVWDWH LQ31*FRXOGSRVHDWKUHDWWR$XVWUDOLDQVHFXULW\ 

$*UDQG'HFHLW EHFDXVHRIDGUXJVIRUDUPVWUDGHDQGVXSSRVHGWHUURULVWRSSRUWXQLWLHV :LQG\EDQNDQG 0DQQLQJ %XWZKLOHWKHUHLVVRPHHYLGHQFHRIWKHIRUPHU LQDPLQRUZD\ WKHUHLV QRQHRIWKHODWWHU7KHQRWLRQRID IDLOHGVWDWH LQWHUQDWLRQDOO\KDVEHHQLQUHODWLRQWR FROODSVLQJDQGGLVVROYLQJVWDWHVDQGKDVLQGHHGEHHQOLQNHGWRSUREOHPVRILQWHUQDWLRQDO VHFXULW\UDLVLQJWKHTXHVWLRQRILQWHUQDWLRQDOLQWHUYHQWLRQ 7KUHU 

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

LGHDKDVEHHQOLQNHGWRWKHFORVXUHRIPLQHVRLOSLSHOLQHVDQGIHDUVIRUIRUHLJQHUVFRQYHUVHO\

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

QDWLRQDOJRDOVDQGGLUHFWLYHSULQFLSOHV ERWKWKH$XVWUDOLDQ*RYHUQPHQWDQGWKH:RUOG%DQN KDYHGHPDQGHGDQH[SRUWGULYHQDSSURDFKWRGHYHORSPHQW7KLVKDVEHHQDVSHFWDFXODU IDLOXUHLQ31*7KHFRXQWU\KDVKDGSKHQRPHQDOVXVWDLQHG VXFFHVV DVDUHVRXUFHH[SRUWHU EXWWKLVKDVQRWKHOSHGPRVW31*SHRSOH%HWZHHQDQG31* VDYHUDJHDQQXDO H[SRUWJURZWKUDWHZDVDPDVVLYHZKLOHLPSRUWVRQO\JUHZDWDQDYHUDJH :RUOG %DQN ([SRUWJURZWKIHOOLQWKHVEXWWKURXJKRXWWKHVDQGVH[SRUWV UHPDLQHGDWYHU\KLJKOHYHOVFRQVLVWHQWO\ZHOODERYHRI*'3 VHH7DEOH 7KHUHDUH 

$*UDQG'HFHLW IHZFRXQWULHVLQWKHZRUOG ZLWKWKHH[FHSWLRQRIVRPHRLOH[SRUWHUVDQGRWKHUSRRUFRXQWULHV XQGHU6WUXFWXUDO$GMXVWPHQW3URJUDPV ZLWKWKLVOHYHORIH[SRUWSHUIRUPDQFH,Q FRQYHQWLRQDOWHUPVWKLVVKRXOGKDYHEHHQDZRUOGFODVVVXFFHVVVWRU\RIH[SRUWRULHQWHG GHYHORSPHQWEXWLWZDVQRW

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

     

OLIHH[SHFWDQF\      

$XVWUDOLD *HUPDQ\ ,UHODQG 2(&'DY 3DSXD1HZ *XLQHD    1LJHULD    $QJROD    'HYHORSLQJ FRXQWU\DY 6RXUFH81'3  +XPDQ'HYHORSPHQW5HSRUW

        

LQIDQWPRUWDOLW\ ∆        

        

        

∆        

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
$*UDQG'HFHLW FURSSLQJDQGPRUHDSSURSULDWHLQYHVWPHQW IRUH[DPSOHLQYHVWPHQWLQFRPPXQLW\ LQGXVWULHVHGXFDWLRQWRXULVPGHYHORSPHQWDQGLQIUDVWUXFWXUH WKDWVXSSRUWVDQGPDLQWDLQV WKHFRXQWU\ VFRPPXQLW\VXSSRUWVWUXFWXUHVLWVFRPPXQLW\DQGODQJXDJHGLYHUVLW\LWV ELRORJLFDODQGIRRGGLYHUVLW\DQGWKHVRXQGGHYHORSPHQWJRDOVDQGIRUPDOFRPPXQLW\ULJKWV HQVKULQHGLQLWVFRQVWLWXWLRQ



$*UDQG'HFHLW

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
0LVVLRQ6WDWHPHQW FXUUHQWREMHFWLYHV 2XUGUHDPDZRUOGIUHHRISRYHUW\ZHFDQJLYH RXUFKLOGHQDPRUHSHDFHIXODQGHTXLWDEOHZRUOG

3URPRWHSULYDWHIRUHLJQLQYHVWPHQWDQG VXSSOHPHQWSULYDWHLQYHVWPHQW $UWLFOH (QFRXUDJLQJLQWHUQDWLRQDOLQYHVWPHQWWR SURPRWHJURZWKRILQWHUQDWLRQDOWUDGHDQG HTXLOLEULXPLQ%R3 $UW 2ULJLQDOPHPEHUVDUH,0)PHPEHUVQDWLRQVWDWH

VKDUHKROGHUV  $UW 3ROLWLFDODFWLYLW\E\WKH:%LVSURKLELWHG $UW  WKLVPD\H[FOXGHPDQ\FLYLODQGSROLWLFDO KXPDQULJKWVLVVXHV

7RILJKWSRYHUW\ZLWKSDVVLRQDQGSURIHVVLRQDOLVP IRUODVWLQJUHVXOWV7RKHOSSHRSOHKHOSWKHPVHOYHV WRUHGXFHSRYHUW\DQGLPSURYHOLYLQJVWDQGDUGV WKURXJKVXVWDLQDEOHJURZWKDQGLQYHVWPHQWLQ SHRSOH FRPPXQLWLHVDUH VWDNHKROGHUV LQ:RUOG%DQN SURJUDPV 6XSSRUWIRUKXPDQULJKWVHGXFDWLRQRIZRPHQ HQYLURQPHQWDOSURWHFWLRQFRPPXQLW\ HPSRZHUPHQW JRRGJRYHUQDQFH HWF

6RXUFH:RUOG%DQN   $UWLFOHVRI$JUHHPHQW ZZZZRUOGEDQNRUJ :RUOG%DQN   $ERXWWKH:RUOG%DQN*URXS ZZZZRUOGEDQNRUJ

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

$*UDQG'HFHLW  6RPHEDFNJURXQG $WWKH%UHWWRQ:RRGVFRQIHUHQFH LQWKH86$ WKH,QWHUQDWLRQDO0RQHWDU\)XQG ,0) DQGWKH,QWHUQDWLRQDO%DQNIRU5HFRQVWUXFWLRQDQG'HYHORSPHQW ,%5'WKH:RUOG%DQN ZHUHFUHDWHG7KLVFRQIHUHQFHLQFOXGHGWKHZHVWHUQ(XURSHDQSRZHUV PLQXV*HUPDQ\DQG ,WDO\ DQGWKH86EXWZDVGRPLQDWHGE\WKH867KH,0)ZDVVHWXSWRVXSHUYLVHWKHIRUHLJQ H[FKDQJHQHHGVRILWVPHPEHUVWDWHVZKLOHWKH:RUOG%DQNZDVVHWXSWRUHJXODWHORQJHU WHUPSULYDWHFDSLWDOGHYHORSPHQW7KHVHLQVWLWXWLRQVZHUHGHVLJQHGWRGHDOZLWKDQWLFLSDWHG IRUHLJQH[FKDQJHDQGLQYHVWPHQWSUREOHPVZLWKLQWKHZRUOGFDSLWDOLVWV\VWHPDIWHU:RUOG :DU7ZR7KHFRQIHUHQFHDIWHUGLVFXVVLQJDSRVVLEOHZRUOGFXUUHQF\ SURSRVHGE\-RKQ 0D\QDUG.H\QHVIURP%ULWDLQ VHWWOHGRQWKH86GROODUDVWKHGHIDFWRZRUOGFXUUHQF\ZLWK DOORWKHUFXUUHQFLHVIL[HGLQYDOXHDJDLQVWWKH86GROODU7KLVV\VWHPODVWHGWLOOZKHQLW ZDVDEDQGRQHGE\WKH86 7KH,0) VDLPLVWRSURPRWHLQWHUQDWLRQDOPRQHWDU\FRRSHUDWLRQDQGWRFUHDWHDQGPDQDJHD PXOWLODWHUDOSD\PHQWVV\VWHP $UWLFOH2QH ,WWDNHVGHSRVLWVIURPPHPEHUVWDWHVDQGDOORZV WKHP ZKHQWKHUHLVDIRUHLJQH[FKDQJHVKRUWDJH WRZLWKGUDZXSWRRIWKHLU TXRWD

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

$*UDQG'HFHLW FRQVLVWHQWZLWKWKHSURPRWLRQRISULYDWHIRUHLJQLQYHVWPHQW,WVFRQVWLWXWLRQDOVREDUVLWIURP

SROLWLFDO DFWLYLWLHVZKLFKKDYHEHHQWDNHQWRPHDQHQJDJHPHQWZLWKPDQ\KXPDQULJKWV FRQFHUQVVXUURXQGLQJLWVRZQDFWLYLWLHV,QVWHDGWKH:RUOG%DQNFODLPVWKDWLWVFDSLWDO OLEHUDOLVDWLRQSURJUDPV ZKLFKDUHPDGHDFRQGLWLRQRIDOOLWVOHQGLQJ DFWXDOO\SURGXFHJRRG KXPDQULJKWVUHVXOWV7KHYDULHW\RIFODLPVDERXWZKDWWKH:RUOG%DQNUHDOO\VWDQGVIRU PDNHVDPRUHFDUHIXOH[DPLQDWLRQGHVLUDEOH

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

7KH:RUOG%DQN VFODLPWKDWLWSURPRWHVDPRGHORI JRRGJRYHUQDQFH KDVWREHUHDGDJDLQVW LWVWZRGHFDGHKLVWRU\RI6WUXFWXUDO$GMXVWPHQW3URJUDPVLQFOXGLQJWKH6$3VLQ31*,Q 6HSWHPEHUWKH,0)DQG:RUOG%DQNUHQDPHGWKHLU6$3V 3RYHUW\5HGXFWLRQ6WUDWHJLHV  EXWLQGHSHQGHQWREVHUYHUVUDSLGO\FRQFOXGHGWKDWWKHUHKDGEHHQQRJUHDWFKDQJHLQWKH VXEVWDQFHRIWKHVHSURJUDPV7KH:RUOG'HYHORSPHQW0RYHPHQW  LQ/RQGRQ FRQFOXGHGWKDWWKHSROLF\FRQWHQWRI356VGRHVQRWFRQVWLWXWHDPDMRUFKDQJHIURPWKHSDVW DQGWKDWWKLVZDVSDUWLFXODUO\ZRUU\LQJJLYHQWKHVXEVWDQWLDOERG\RIHYLGHQFHVKRZLQJWKDW 6WUXFWXUDO$GMXVWPHQW3URJUDPPHVGLGQRWUHGXFHSRYHUW\7KH,0)UHQDPHGLWV(QKDQFHG 6WUXFWXUDO$GMXVWPHQW)DFLOLW\WKH3RYHUW\5HGXFWLRQDQG*URZWK)DFLOLW\EXWD UHSRUWIURPWKH86*HQHUDO$FFRXQWLQJ2IILFHWRWKH86&RQJUHVVFRQFOXGHGWKDWWKH,0) V QHZSURJUDPGLIIHUVOLWWOHIURPLWVSUHYLRXVSURJUDP *$2  6WUXFWXUDO$GMXVWPHQW3URJUDPV 6$3V ZHUHDVVRFLDWHGZLWKORDQVIURPWKH,0)DQGWKH :RUOG%DQNHVSHFLDOO\VLQFHWKHGHEWFULVLVRIWKHHDUO\V HJ$UJHQWLQD0H[LFR %UD]LO*KDQD1LJHULD EXWDOVRLQ(DVWHUQ(XURSHLQWKHHDUO\VDQGGXULQJWKH$VLDQ &ULVLVRI 7KDLODQG,QGRQHVLD6RXWK.RUHD 6$3VLPSRVHFRQGLWLRQVRQVKRUWWHUP KDUGFXUUHQF\ORDQV ,0) RUORQJHUWHUPORDQV :RUOG%DQN $FRPELQDWLRQRIVLPLODU FRQGLWLRQVLQFOXGLQJGHWDLOHGVFUXWLQ\RIDOOJRYHUQPHQWSROLFLHVZLOOEHHQIRUFHGWKURXJK PHPRUDQGDRIDJUHHPHQW OHWWHUVRILQWHQW DQGWKHJUDGXDOUHOHDVHRIIXQGV7KHVHFRQGLWLRQV W\SLFDOO\LQFOXGH y 5HPRYDORISULFHVXEVLGLHVDQGSULFHFRQWUROV y 'HHSFXWVLQWDULIIVDQGRWKHUWUDGHFRQWUROV y ,PPHGLDWHGHYDOXDWLRQRIWKHFXUUHQF\DQGOLEHUDOLVDWLRQRIIRUHLJQH[FKDQJHFRQWUROV y 3URPRWLRQRIH[SRUWLQGXVWULHV y +LJKLQWHUHVWUDWHVWRSUHYHQWLQIODWLRQDQGDWWUDFWIRUHLJQFDSLWDO y 5HGXFWLRQRIJRYHUQPHQWVHUYLFHVDQGDVKLIWWR SULYDWHVHUYLFHSURYLVLRQ DQG SXEOLFSULYDWH SDUWQHUVKLSV LQVRPHLQIUDVWUXFWXUH 

$*UDQG'HFHLW y 3ULYDWLVDWLRQRISURILWDEOHVWDWHRZQHGHQWHUSULVHV

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

7KHPRUHLQGHSHQGHQWFULWLFVRIVWUXFWXUDODGMXVWPHQWJRIXUWKHUWKDQWKLV5HSRUWLQJIRUWKH 81&RPPLVVLRQHUIRU+XPDQ5LJKWV3URIHVVRU)DQWX&KHUX  FRQFOXGHGWKDWFRXQWULHV XQGHU6$3VKDYHSUHWW\PXFKFHGHGWKHLUVRYHUHLJQW\WRWKH,0)DQGWKH:RUOG%DQN 6$3VLQYROYHG IRUFLEOHOLEHUDOLVDWLRQ DQGWKHLUPRVWFUXFLDOLPSDFWKDGEHHQ RQWKHUROHRIWKHVWDWHLQQDWLRQDOGHYHORSPHQWWKH6WDWHQRORQJHUDFWVDVDEXIIHUDJDLQVWWKHZRUOG HFRQRP\EXWSOD\VDQLQWHJUDOUROHLQIDFLOLWDWLQJJOREDOLVDWLRQ &KHUX

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

/LIHH[SHFWDQF\DWELUWK        

:RUOG$YHUDJH 2(&'DYHUDJH 'HYHORSLQJFRXQWU\DYHUDJH

 

 

 =DPELDRYHU:%ORDQVVLQFHWKHV  =LPEDEZHRYHU:%SURMHFWORDQVVLQFH  %RWVZDQD:%SURMHFWORDQVVLQFH  8JDQGDRYHU:%SURMHFWORDQVVLQFH  0R]DPELTXH:%SURMHFWORDQVVLQFH 81'3  +XPDQ'HYHORSPHQW5HSRUW7DEOHZZZXQGSRUJ :RUOG%DQN E 3URMHFWVKWWSZZZZRUOGEDQNRUJVSURMHFWV

    

5XVVLDRYHU:%SURMHFWORDQVVLQFH 8NUDLQHRYHU:%SURMHFWORDQVVLQFH

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



$*UDQG'HFHLW

7KH:RUOG%DQNDQG *RRG*RYHUQDQFH

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

0DQ\RIWKH%DQN VORDQVKDGVLJQLILFDQWFRQVHUYDWLRQLPSOLFDWLRQV2IWKHORDQVEHWZHHQ DQG86ZDVGLUHFWO\UHODWHGWRIRUHVWU\86PIRUWKHODQG PRELOLVDWLRQSURMHFWZKLFKDIIHFWHGIRUHVWVZKLOH86PZDVIRUDJULFXOWXUHPDLQO\ FDVKFURSSLQJZKLFKLQGLUHFWO\DIIHFWV31* VIRUHVWV7KHDQQXDO:RUOG%DQNLQFRPHRQWKH IRUHVWU\ORDQVRI86P DW ZRXOGEHPRUHWKDQ86PLOOLRQ :KDWWKH%DQNVD\VDERXWLWV JRRGJRYHUQDQFH

(YHQWKRXJKWKH:RUOG%DQNKDVDFRQVWLWXWLRQDOEDQRQ SROLWLFDODFWLYLW\  $UWLFOH LW KDVQRWEHHQVK\DERXWH[SUHVVLQJVWURQJYLHZVDQGPDNLQJVWURQJGHPDQGVRYHUJRYHUQDQFH LQFOXGLQJSROLWLFDOOHJDODQGFRQVWLWXWLRQDOFKDQJHV :RUOG%DQN5RKODQG  7KH%DQN VVXJJHVWHGSUREOHPVEHJLQZLWKVHFXULW\DQGFRUUXSWLRQLVVXHVEXWLWVSURSRVHG VROXWLRQVW\SLFDOO\EHJLQZLWKHFRQRPLFPHDVXUHV&RPPHQWLQJWKDWVRFLDOFDSLWDO>WUXVW@LV IUDJPHQWHGDQGWKHVWDWHKDVIRXQGHUHGLQ31* :RUOG%DQN[LL WKH%DQN VILUVW 

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

JRYHUQDQFH ZKLFKGUDZVRQLWVWUDLQLQJSURJUDPVLQ FRUSRUDWHJRYHUQDQFH +HUHWKH%DQN KLJKOLJKWVWKHUROHRIILQDQFHWKHSRZHURIPXOWLQDWLRQDOVDQGWKHUROHRISULYDWHFRPSDQLHV DWWKHFHQWUHRI JRYHUQDQFH LQFRQWHPSRUDU\VRFLHW\&KDOOHQJHVIRUWKLV JRYHUQDQFH LQDQ LQFUHDVLQJO\ ERUGHUOHVVZRUOG LQFOXGHWKHQHHGWRLQWURGXFHPHDVXUHVIRUEXVLQHVVVXFFHVVWR DFNQRZOHGJHUHVSRQVLELOLW\WRZDUGV VWDNHKROGHUV DQGWREHDFFRXQWDEOHWR VKDUHKROGHUV  &RUSRUDWLRQVPXVWEHFUHDWLYHDQGKDYHDORQJHUWHUPYLVLRQZKLFKLQFOXGHVQRWLRQVRI 

$*UDQG'HFHLW VWHZDUGVKLSDQGPDQDJHPHQW$FFRXQWDELOLW\LVWR RZQHUV  LHSULYDWHVKDUHKROGHUV EXW VWHZDUGVKLSLQYROYHVFRPPXQLFDWLRQVNLOOVVXVWDLQLQJUHSXWDWLRQDQGGHYHORSLQJ UHODWLRQVKLSVZLWK VWDNHKROGHUV  LHDIIHFWHGFRPPXQLW\JURXSV  .LQJ 

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

0HDVXUHVDJDLQVWFRUUXSWLRQZKLFKSOD\DELJSDUWLQ:RUOG%DQNFULWLTXHVDUHRQO\DVPDOO SDUWRILWVEURDGHUYLHZRI JRYHUQDQFH 


$*UDQG'HFHLW

 ,QWHUSUHWLQJ:RUOG%DQN JRRGJRYHUQDQFH

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

,RXWOLQHKHUHDPRGHOZKLFKGLVWLQJXLVKHV FRUH IURP YHQHHU SULQFLSOHVLQWKH:RUOG%DQN OH[LFRQRI JRRGJRYHUQDQFH 7KH FRUH SULQFLSOHVDUHWKRVHSULPDU\PRWLYDWRUVZKLFKPD\DW WLPHVEHGLVJXLVHGEXWZKLFKSOD\WKHGRPLQDQWUROHLQ:RUOG%DQNRSHUDWLRQV7KH\DUH EDFNHGE\WKH%DQN VFRQVWLWXWLRQLWVHFRQRPLFOLEHUDOLGHRORJ\DQGWKHVWUDWHJLFLQYHVWPHQW DQGWUDGHLQWHUHVWVRILWVPDMRUVKDUHKROGHUV:HFDQVHHVWURQJHYLGHQFHRIWKHRSHUDWLRQRI WKHVHFRUHSULQFLSOHVLQUHFHQW%DQNKLVWRU\SDUWLFXODUO\WKH6WUXFWXUDO$GMXVWPHQW QRZ

3RYHUW\5HGXFWLRQ 3URJUDPVDFURVVWKHJOREH7KHVHFRUHSULQFLSOHVDUHEDFNHGE\DQ HFRQRPLFOLEHUDO RU QHROLEHUDO EHOLHIV\VWHPZKLFKOHQGVWKHPVRPHFRKHUHQFH7KH

YHQHHU SULQFLSOHVDUHWKRVHVHFRQGDU\SULQFLSOHVZKLFKDUHZHDNDQGFRPSURPLVHGDQG ZKLFKKDYHEHHQJUDIWHGRQWRWKHFRUHDUHSRRUO\DUWLFXODWHGDQGRQO\YLDEOHLIFRQVLVWHQW ZLWKRUFRQVHTXHQWLDOWRSXUVXLWRIWKHFRUHSULQFLSOHVEXWZKLFKRIWHQFRQIOLFWZLWKFRUH SULQFLSOHV 7DEOH$PRGHORI:RUOG%DQN JRRGJRYHUQDQFH

%HOLHIV\VWHP &RUHSULQFLSOHV 9HQHHUSULQFLSOHV SULYDWHJDLQ IRUPDOGHPRFUDF\ SDUWLFLSDWLRQRIFLYLO !SXEOLFJRRG VRFLHW\ SULYDWLVDWLRQRISXEOLF SRYHUW\UHGXFWLRQ DQGFRPPXQLW\DVVHWV LQGLVFULPLQDWH EURDG UHGXFHGUHJXODWLRQRI HQYLURQPHQWDOSURWHFWLRQ EDVHG HFRQRPLFJURZWK SULYDWHIRUHLJQLQYHVWRUV !VRFLDOSURJUHVV UHGXFWLRQLQVKDUHG DQWLFRUUXSWLRQDQG SXEOLF VHUYLFHV LQVWLWXWLRQDOVWUHQJWKHQLQJ UHPRYDORISULFHDQG WUDQVSDUHQF\DQG ZDJHFRQWUROV DFFRXQWDELOLW\ 7$

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

$*UDQG'HFHLW SDUWLFLSDWLRQRIFLYLOVRFLHW\ LL SRYHUW\UHGXFWLRQ LLL HQYLURQPHQWDOSURWHFWLRQ LY DQWLFRUUXSWLRQDQGLQVWLWXWLRQDOVWUHQJWKHQLQJDQG Y WUDQVSDUHQF\DQGDFFRXQWDELOLW\7R WKLVYHQHHUOLVWZHFRXOGDGG ODQGULJKWV EXWKHUHWKH:RUOG%DQNKDVFRUUXSWHGWKHPHDQLQJ RIWKLVFRQFHSWVRFRPSOHWHO\WKDWWKLVDFWRIGHFHLWGHVHUYHVVSHFLDOWUHDWPHQW7KH FRUH DQG

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

HJ6DPXHOVRQHWDO3DUW)RXU 0RVWSROLWLFDOIRUPXODWLRQVDUHHYHQPRUHFUXGHDQG SROLFLHVIDYRXULQJLQGLVFULPLQDWHJURZWK ZKLFKJHQHUDOO\VXLWWKHLQWHUHVWVRIODUJHSULYDWH LQYHVWRUV UHHPHUJHDVDVXSSRVHGFHQWUDOLQGLFDWRURIVRFLDOZHOIDUH ,QWKLVSURFHVVWKHRUWKRGR[YLHZLJQRUHVPDQ\JRRGFULWLFDOWH[WV HJ:DULQJ-DFREV (FNHUVOH\+DPLOWRQ ZKLFKKDYHSRLQWHGRXWWKHPXOWLSOHSUREOHPVRIWKH

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

SRYHUW\UHGXFWLRQ LQGHYHORSLQJFRXQWULHV ZHUHGLVFUHGLWHGLQWKHVDQGVEXWWKH\ FODLPDQHZSDUDGLJPZKLFKWKDWWKH\VD\LVLQFUHDVLQJO\DFFHSWHGLQPXFKRIWKHZRUOG WKH:DVKLQJWRQFRQVHQVXV DQGZKLFKHPSKDVLVHV PDUNHWEDVHGSROLF\IXQGDPHQWDOVILVFDOGLVFLSOLQHLVDFUXFLDOSUHFRQGLWLRQIRUJURZWKJURZWKLVEHVW DGYDQFHGWKURXJKPDUNHWVUDWKHUWKDQVWDWHLQWHUYHQWLRQDQGWKURXJKRSHQHFRQRPLHVDQGH[SRUWSURPRWLRQ UDWKHUWKDQLPSRUWVXEVWLWXWLRQDQGLQGXVWULDOSROLFLHV *ZLQDQG1HOVRQ

7KLVUHDOO\LVOLWWOHPRUHWKDQDUHFRQVWUXFWHGLQGLVFULPLQDWHJURZWKVWUDWHJ\:KHQOLQNHGWR WKHHFRQRPLFOLEHUDOEHOLHIWKDWSULYDWHSURILWZLOOXQGHUSLQSXEOLFJRRG RIWHQPDNLQJXVHRI WKHWKFHQWXU\ LQYLVLEOHKDQG LGHDRI6FRWWLVKSKLORVRSKHU$GDP6PLWK VWUDWHJLHV IRFXVVHGRQHFRQRPLFJURZWKEHFRPHDUHFLSHIRUSULYLOHJLQJODUJHFRUSRUDWLRQV7KHOLQNLQJ RISULYDWHSURILWWRSXEOLFJRRGDOVREHJLQVWKHFRUURVLYHSURFHVVRIXQGHUPLQLQJVKDUHG FRPPXQLW\LQVWLWXWLRQVDQGEOXUULQJWKHLPSRUWDQWLVVXHRI FRQIOLFWRILQWHUHVW LQSXEOLF DIIDLUV

7KH:RUOG%DQN VILUVWFRUHSULQFLSOHVXSSRUWLQJIRUPDOGHPRFUDWLFSURFHVVHV DYHU\ OLPLWHGYLHZRI GHPRFUDF\ PDLQO\DQHOHFWRUDOV\VWHPWKHFRUHEXUHDXFUDF\FRXUWVDQG SROLFH PXVWEHUHDGLQFRQWH[WRIWKH%DQN VKLVWRU\RIVXSSRUWLQJFRUUXSWDQGEUXWDO GLFWDWRUVKLSV7KH,0) VILUVW6WUXFWXUDO$GMXVWPHQW3URJUDPVZHUHWULDOHGLQ3LQRFKHW V GLFWDWRUVKLSLQ&KLOHLQWKHPLGVDQGWKH:RUOG%DQNGLGQRWGLVVRFLDWHLWVHOIIURPWKH 6XKDUWRGLFWDWRUVKLSLQ,QGRQHVLDXQWLODIWHUWKH$VLDQ)LQDQFLDO&ULVLVLQ1HYHUWKHOHVV WKHVHPXOWLODWHUDOEDQNVWRGD\JHQHUDOO\VXSSRUWDV\VWHPRIIRUPDOGHPRFUDF\DVDPHDQVRI 

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

IRVWHUVLQYHVWPHQWDQGHQKDQFHVSURGXFWLYLW\DQGKHOSVWRHPSRZHUSRRUSHRSOHWRSDUWLFLSDWHLQHFRQRPLF RSSRUWXQLWLHVDQGLQVRFLHW\PRUHJHQHUDOO\ :RUOG%DQN 

:KDWWKLVPHDQVLQSUDFWLFHLVWKDWODQGDVWKHFHQWUDOFRPPXQLW\DVVHWRIPDQ\PDQ\ JHQHUDWLRQVDQGWKHSULPHPHDQVRIVXUYLYDOVKRXOGEHPRUWJDJHGRUH[FKDQJHGIRUVRPH VKRUWWHUPGROODUVRUSUL]HGFRPPRGLWLHV HJYHKLFOHV ZKLFKZLOOFHUWDLQO\EHJRQHLQDIHZ \HDUV,QWKHVKRUWWHUPVXFKH[FKDQJHVZLOOLQGHHGFRQWULEXWHWRJURZWKDQGSULYDWHSURILWV +RZHYHUWKH:RUOG%DQN V ODQGPRELOLVDWLRQ SURJUDPVLQWKHV UHJLVWUDWLRQDVD SUHFXUVRUWRWUDGHGULJKWV SURYRNHGDKXJHUHDFWLRQIURP31*FRPPXQLWLHVVHULRXVO\ GDPDJLQJWKH%DQN VFUHGLELOLW\LQ31* 5%UXQWRQ 

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

$*UDQG'HFHLW FRPPXQLW\SUHVVXUHWKDWEHDWEDFNWKHPRYHVWRSULYDWLVHPDQ\RI31* VFROOHFWLYHDVVHWV EXWSODQVDUHVWLOOLQSODFHIRUWKHSULYDWLVDWLRQRI7HOLNRP$LU1HZ*XLQHDWKH3RVW2IILFH DQGRWKHUHVVHQWLDOVHUYLFHV 3DUNRSV 

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

'HVSLWHWKLVWKH:RUOG%DQNGRHVQRWVHHPWRKDYHFRPSODLQHGDERXWWKH31* *RYHUQPHQW VSUDFWLFHRIJUDQWLQJWD[H[HPSWLRQVWRIRUHLJQFRPSDQLHVZKLFKWDNHPXFKEXW FRQWULEXWHOLWWOHWR31* HJWKH5'7XQDRSHUDWLRQVLQ0DGDQJ (YHQWKRXJKIRUHLJQ LQYHVWPHQWLVDUJXHGDVDPHDQVWRZDUGVJURZWKDQGWULFNOHGRZQ SRYHUW\UHGXFWLRQ LWLV FOHDUWKDWWKH:RUOG%DQNIDYRXUVIRUHLJQLQYHVWRUDFFHVVRYHUJURZWK:KLOH&KLQD V HFRQRPLFJURZWKIDUH[FHHGVWKDWRI$XVWUDOLDRYHUWKHSDVWGHFDGH:RUOG%DQNDQDO\VHV 

$*UDQG'HFHLW SODFH$XVWUDOLDZHOODKHDGRI&KLQDLQDKLHUDUFK\RI JRRGJRYHUQDQFH $XVWUDOLDLVUDQNHG LQDJURXSRI JRRGJRYHUQDQFH FRXQWULHVZKLOH&KLQDLVUDQNHGLQDJURXSODEHOHG SRRU JRYHUQDQFH 31*LVUDQNHGDVKDYLQJ IDLUJRYHUQDQFH QRWEHFDXVHLWLVDPRUHVWDEOHRU VXFFHVVIXOV\VWHPEXWEHFDXVHRIWKHORZHUUHJXODWRU\ EDUULHUV WRIRUHLJQLQYHVWRUV +XWKHU DQG6KDK 

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

:HNQRZWKDWWKH:RUOG%DQN VFODLPHGFRPPLWPHQWWRWKHSDUWLFLSDWLRQRIFLYLOVRFLHW\ LQ GHYHORSPHQWSODQQLQJLQ31*LVZHDNDQGFRPSURPLVHGEHFDXVHPDQ\:RUOG%DQN SURJUDPVKDYHHQRUPRXVO\DQWDJRQLVHGWKDWFLYLOVRFLHW\,QUHFHQW\HDUVWKH:RUOG%DQNKDV QRWHYHQPDGHPXFKRIDQHIIRUWWRVWUHVVWKHSDUWLFLSDWLRQRI31*FLYLOVRFLHW\SUREDEO\ EHFDXVHRIWKHEDWWHULQJLWKDVUHFHLYHGIURPWKDWVDPHFLYLOVRFLHW\RYHULWVSULYDWLVDWLRQDQG

ODQGPRELOLVDWLRQ FDPSDLJQV ,QRWKHUFRXQWULHVVXFKDV(DVW7LPRUWKH%DQNKDV UHSHDWHGO\VWUHVVHGORFDOSDUWLFLSDWLRQDQGOHDGHUVKLS:RUOG%DQN $WWKHYHU\HQG RIWKH%DQN VPDMRUWH[WRQ*RYHUQDQFHLQ31*LWPDNHVWKHWRNHQFODLPWKDWFRPPXQLW\ SDUWLFLSDWLRQLVHVVHQWLDOIRUJRRGJRYHUQDQFH :RUOG%DQN EXWVSHQGVOLWWOHWLPH RQWKLV2IWHQWKH%DQN VDSSURDFKWRFLYLOVRFLHW\LVUHGXFHGWRDYLHZRIFLYLOVRFLHW\VLPSO\ DVFRQVXPHUVLQYHVWRUVDQG VWDNHKROGHUV DQGLWDUJXHVWKHQHHGIRUWKHVWDWHWREH PRUH UHVSRQVLYH WRWKHLUQHHGV :RUOG%DQN $WWLPHVWKH%DQNKDVWKURZQVRPH PRQH\DWFULWLFDOFLYLOVRFLHW\JURXSVLQ31*WRVKXWWKHPXSGLYLGHWKHPRUFRRSWWKHP 5 %UXQWRQ  7KHPRVWDJJUDYDWLQJDVSHFWRI%DQN JRYHUQDQFH KDVEHHQLWVUHSHDWHGDWWHPSWVWR XQGHUPLQHFRPPXQLW\ODQGULJKWV7KHVHFXVWRPDU\ULJKWVDUHVXSSRUWHGE\WKHYDVWPDMRULW\ RI31*FLWL]HQV /DNDX DQGDUHHQWUHQFKHGLQWKHFRQVWLWXWLRQDQGODZRIWKHFRXQWU\
UHJLVWUDWLRQ DQGSULYDWLVDWLRQ+HDOVRREVHUYHVWKDWWKH:RUOG%DQNYLHZVHHPVWRVHH GHYHORSPHQWDVRQO\FRPLQJIURPRXWVLGHWKHFRXQWU\$OPRVWDOO%DQNFRQVXOWDQWVDUH IRUHLJQDQGVNLOOHGORFDOSHRSOHDUHUDUHO\XVHG 3DUNRSV  7KH$XV$,'YLHZKDVEHHQVLPLODU7KH$XV$,'DSSURDFKWRJRYHUQDQFHLQ31*KDVEHHQ

EURDGHQHG IURPIXQGLQJIRUSROLFHDQGSULVRQVWRLQFOXGHSXEOLFVHFWRUUDWLRQDOLVDWLRQDQGD IRFXVRQVWUHQJWKHQLQJV\VWHPVIRUWKHSURWHFWLRQRILQGLYLGXDOVULJKWVDQGIUHHGRPV $XV$,' 7KLVIRUPXODWLRQDOVRLJQRUHVFRPPXQLW\ULJKWV :HDOVRNQRZWKDWWKH:RUOG%DQN VFODLPHGFRPPLWPHQWWRSRYHUW\UHGXFWLRQ LVZHDNDQG FRPSURPLVHGEHFDXVHLWLVGHSHQGHQWRQWKH%DQN VH[SRUWRULHQWHGLQGLVFULPLQDWHJURZWK VWUDWHJ\WLHGWRSULYDWHIRUHLJQLQYHVWPHQW7KLVDSSURDFKKDVEHHQDVKRZFDVHIDLOXUHLQ 

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

$VPHQWLRQHGHDUOLHUWKH1*2PRQLWRULQJJURXS6$35,1IRXQGWKDW:RUOG%DQNEDFNHG SULYDWLVDWLRQSURFHVVHVKDGFRQWULEXWHGWRDQLQFUHDVHLQXQHPSOR\PHQWDQGMRELQVHFXULW\ KDGZHDNHQHGZRUNHUV ULJKWVDQGKDGLQFUHDVHGVHUYLFHFRVWVZKLOHUHGXFLQJVHUYLFHTXDOLW\ 3ROLFLHVRIFDSLWDODQGWUDGHOLEHUDOLVDWLRQKDGZHDNHQHGDJULFXOWXUDOVHFWRUVLPSDFWHG QHJDWLYHO\RQZRPHQDQGXQVNLOOHGZRUNHUVDQGKDGDJJUDYDWHGLQHTXDOLWLHV$KLJKHUOHYHO RIDEXVHRIODERXUULJKWVDIDOOLQUHDOZDJHVDQGLQFUHDVHGLQHTXDOLWLHVKDGEHHQDVVRFLDWHG ZLWKPRYHVWRZDUGVJUHDWHUODERXUPDUNHW IOH[LELOLW\ 3XEOLFH[SHQGLWXUHFXWVDQGLQFUHDVHG XVHUIHHVKDGGDPDJHGDFFHVVWRKHDOWKFDUHHGXFDWLRQDQGKRXVLQJIRUSRRUDQG GLVDGYDQWDJHGJURXSV 6$35,1 7KLVLVQRWSRYHUW\UHGXFWLRQ

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
FRILQDQFLQJ RIZDWHULQIUDVWUXFWXUHDQGLQWKHGHYHORSPHQWRIPDULQHLQGXVWULHV &RVWHOOR  7KHKLVWRU\RI:RUOG%DQNSURJUDPVLVOLWWHUHGZLWKHQYLURQPHQWDOGHVWUXFWLRQ7KH %DQN VRZQHYDOXDWLRQVIRUH[DPSOHSRLQWRXWWKDWLWVILQDQFLDOEDFNLQJIRUPRUHWKDQKDOID 

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
7KHHQYLURQPHQWDOLPSOLFDWLRQVRIWKLVSULYDWLVLQJDSSURDFKWRODQGWLWOHVKRXOGEHREYLRXV 7UDGLWLRQDOFXVWRGLDQVRIODQGDUHQRUPDOO\IDUEHWWHUDWHQVXULQJVXVWDLQDEOHXVHDQGWKH PDLQWHQDQFHRIORFDOHFRV\VWHPV H[FHSWZKHQWKH\KDYHEHHQERXJKWRXWRUPLVOHG WKDQWKH ODUJHUHVRXUFHH[WUDFWLQJLQGXVWULHV (QYLURQPHQWDOSURWHFWLRQ IRUWKH:RUOG%DQNSULPDULO\ UHSUHVHQWVDPHDQVRIOHJLWLPLVLQJWKHVHVDPH H[SRUWRULHQWHG LQGXVWULHVDQGRIFODLPLQJWKDW ODUJHVFDOHORJJLQJDQGPLQLQJFDQEH WZHDNHG WREHHFRORJLFDOO\VHQVLWLYHDQGVXVWDLQDEOH 

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

,Q31*WKH%DQNKDVXUJHGVHYHUDODQWLFRUUXSWLRQWDFWLFVILUVWSXEOLFVHFWRUUHIRUP JUHDWHU DFFRXQWDELOLW\EXWDOVRSHUIRUPDQFHLQFHQWLYHHOHPHQWVLQSXEOLFVHFWRUZDJHV VHFRQG UHGXFLQJH[HFXWLYHGLVFUHWLRQLQILQDQFLDODGPLQLVWUDWLRQWKLUGFUHDWLQJDQGVWUHQJWKHQLQJ SXEOLFZDWFKGRJRUJDQLVDWLRQVIRXUWKLQFUHDVLQJDQGHQIRUFLQJWKHSHQDOWLHVIRUFRUUXSW DFWLYLWLHVDQGILIWKVRPHIRUPRIVRFLDOPDUNHWLQJZKLFKLWLVKRSHGPLJKWLQIOXHQFHVRFLDO DWWLWXGHVWRFRUUXSWSUDFWLFHV :RUOG%DQN  
%XWLWLV%DQNFXOWXUHUDWKHUWKDQSDUWLFXODUVFDQGDOVZKLFKKDVDJJUDYDWHGFRUUXSWLRQDURXQG %DQNILQDQFHV$IWHUDOO:RUOG%DQNILQDQFHW\SLFDOO\LQYROYHVWKHGLVWULEXWLRQRI VHHG

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

$QGGHVSLWHWKHQREOHKLVWRU\RI%DQNZKLVWOHEORZHUV VXFKDV-RVHSK6WLJOLW] WKHUHLVDOVRD VWURQJ%DQNKLVWRU\RIHQWUHSUHQHXUVOHDYLQJWKH SXEOLFVHFWRU RIWKH%DQNWRSXUVXHSULYDWH FRQVXOWDQFLHVUHODWHGWRWKHLU%DQNZRUN+HUHWKHERXQGDULHVRIILQDQFLDOFXVWRGLDQVKLS DW WKH%DQN DQGSULYDWHHULQJDUHEOXUUHGDQGSRWHQWLDOFRQIOLFWVRILQWHUHVWDUHRIWHQQRW UHFRJQLVHG)RUH[DPSOH'DQ:HLVHDIRUPHU4XHHQVODQGSXEOLFVHUYDQWDQGODWHU:RUOG %DQNRIILFLDOLQ31*KDVEHHQSUDLVHGLQ$XVWUDOLDIRUKLVFRQFHUQRYHUFRUUXSWLRQLQ31* )RXU&RUQHUV EXWWKHQDWWDFNHGLQ31*IRUMXPSLQJDFURVVLQWRDKLJKO\SDLG31* *RYHUQPHQWFRQVXOWDQF\RQSULYDWLVDWLRQ 7KH1DWLRQDOG 7KH%DQNVHQGV SRZHUIXOVLJQDOVDERXWWKHLUUHOHYDQFHRIFRQIOLFWVRILQWHUHVWWKURXJKLWVFRQVWDQWEOXUULQJRI WKHERXQGDULHVEHWZHHQSULYDWHSURILWHHULQJRQWKHRQHKDQGDQGWKHEXLOGLQJRIVRFLDOWUXVW DQGVRFLDOLQVWLWXWLRQVRQWKHRWKHU

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³WRDVVHUWDQGSURWHFWWKHLPPXQLWLHVRIWKHRIILFLDOVRIWKH :RUOG%DQN´WKLVZDVOLNHO\WRDIIHFWWKHSUHVHQFHRIWKH%DQNLQ31*+RZHYHU &RPPLVVLRQHU&\SULDQ:DURNUDDSSHDOHGWRWKH%DQNWR KHOSHVWDEOLVKWKHIDFWVLQWKLVFDVH7KH:RUOG%DQNSOD\HGDQLPSRUWDQWUROHLQWKH31*%&VDOHDQGDQ\ HYLGHQFHWKH\JLYHZLOOEHYDOXDEOHLQGHFLGLQJWKHRXWFRPH 7KH1DWLRQDO

)RUPHU%DQNRIILFLDO'DQ:HLVHGLGJLYHHYLGHQFHWRWKH&RPPLVVLRQRI,QTXLU\DVKHKDG MXVWWDNHQRQDKLJKSD\LQJFRQVXOWDQF\ZLWKWKH31**RYHUQPHQW 7KH1DWLRQDOE  %XWWKH%DQNDSSHDUVWREHOHDQLQJRQLWVSULYLOHJHGVWDWXVDQGXQZLOOLQJWRVXEMHFW LWVHOIWRWKHVFUXWLQ\RID31*SXEOLFLQTXLU\7KLVLVKDUGO\WUDQVSDUHQF\ 

$*UDQG'HFHLW

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

$*UDQG'HFHLW

7DEOH:RUOG%DQN)RUHVWU\/RDQVWR31* )RUHVWU\UHODWHGORDQV

6WUXFWXUDO$GMXVWPHQW/RDQ (FRQRPLF5HFRYHU\3URJUDP/RDQ *RYHUQDQFH3URPRWLRQ$GMXVWPHQW/RDQ  )RUHVW\DQG&RQVHUYDWLRQ3URMHFW

IRUHVWU\

RIP RIP RIP RI P >DQRWKHU P@

>)&3IXQGVZHUHPDWFKHGE\DQHTXDO DPRXQWIURPWKH*()@

86PLOOLRQ

  

 

727$/:25/'%$1.)25(675</2$16  6RXUFH:RUOG%DQN F 31*&RXQWU\$VVLVWDQFH/RDQVZZZZRUOGEDQNRUJ

LQWHUHVWSD# 86P

    



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
*RYHUQDQFHKDVEHHQSDUWLFXODUO\SRRULQWKHDUHDRIIRUHVWU\ZLWKWKHVLGHHIIHFWRISURPRWLQJFRUUXSW SUDFWLFHVDQGXQGHUPLQLQJHQYLURQPHQWDOVXVWDLQDELOLW\LQORJJLQJDFWLYLWLHV7KH*RYHUQPHQWLVFRPPLWWHG WRLQWURGXFLQJDPRUDWRULXPRQDOOQHZIRUHVWU\OLFHQVHVH[WHQVLRQVDQGFRQYHUVLRQVDQGWRSURFHHGZLWKD UHYLHZRIDOOH[LVWLQJOLFHQVHVWRHQVXUHWKDWSURSHUSURFHGXUHVDUHIROORZHGWKDWORJJLQJSUDFWLFHVDUHQRW FDUULHGRXWLQDQXQVXVWDLQDEOHZD\DQGWKDWODQGRZQHUVJHWWKHLUIDLUVKDUHRIEHQHILWVIURPUHVRXUFHXVH 0RUDXWD

7KHVHPRYHVZHUHVWURQJO\VXSSRUWHGE\FRPPXQLW\JURXSV7KHPRUDWRULXPZDVSXWLQWR SODFHLQDQGWKH,QGHSHQGHQW)RUHVWU\5HYLHZSXWRXWLWVUHSRUWLQ+RZHYHU FRPPXQLW\JURXSVZHUHGLVDSSRLQWHGZLWKWKHRXWFRPHVRIWKH5HYLHZVD\LQJWKDWDOWKRXJK LWFRQILUPHGPDQ\RIWKHLUFRQFHUQVDQGKDGVRPHSRVLWLYHPHDVXUHVLWKDGIDLOHGWRGHDO ZLWKWKHVHULRXVSUREOHPVXQFRYHUHGE\WKHUHYLHZWRSURYLGHIRUSURSHUDGYLFHWR ODQGRZQHUVWRSURYLGHIRUSURSHUUHPHGLDWLRQWRWDNHIXOODFFRXQWRIWKHHQYLURQPHQWDO VWXGLHVDQGWRSURYLGHIRURQJRLQJUHYLHZDQGYHULILFDWLRQ 

$*UDQG'HFHLW 7KHOLNHO\UHVXOWRIWKHVHIDLOLQJVLVWKDWXSWRPLOOLRQKHFWDUHVRISULVWLQHIRUHVWZLOOEHDOORFDWHGIRUODUJH VFDOHORJJLQJZLWKRXWWKHLQIRUPHGFRQVHQWRIWKHODQGRZQHUV7KHORJJLQJZLOOKDYHPDVVLYHGHWULPHQWDO VRFLDOHQYLURQPHQWDODQGHFRQRPLFHIIHFWVWKDWZLOOVHYHUHO\LPSDFWRQWKHTXDOLW\RIOLIHIRUWKHORFDO SHRSOHSUREOHPVRIFRUUXSWLRQDQGSRRUVXSHUYLVLRQDQGPDQDJHPHQWZLOOUHPDLQ 31*)RUHVW:DWFK 

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

&RQVHUYDWLRQ7UXVW)XQG /DQGRZQHU)RUHVW'HFLVLRQ 0DNLQJ 6XVWDLQDEOH)RUHVW 0DQDJHPHQW

(QYLURQPHQWDO$VVHVVPHQW DQG0RQLWRULQJ

DLPVDQGOLQNV

WRHVWDEOLVKRQJRLQJDQGLQGHSHGQHQWLQFRXQWU\ILQGLQJIRU ELRGLYHUVLW\FRQVHUYDWLRQDQGVXVWDLQDEOHGHYHORSPHQWEDVHG RQODQGRZQHUSDUWLFLSDWLRQDSUHYLRXVO\H[LVWLQJSURJUDP ZKLFKJHWVIXQGVIURPWKH*()DQGKDVLWVRZQ%RDUG DLPVWRGHYHORSLPSURYHGPHDQVRILQFOXGLQJODQGRZQHUVLQ GHFVLVLRQPDNLQJLQFOXGHG GHYHORSPHQWRSWLRQVVWXG\ QRZ UHQDPHG ODQGXVHRSWLRQVVWXG\

DLPVWRKHOSWKH)RUHVW$XWKRULW\ZLWKPDQDJHPHQWRI

VXVWDLQDEOHSURGXFWLRQIRUIRUHVWSURGXFWV LQFOXGHVWKH 'HSDUWPHQWRI(QYLURQPHQWDQG&RQVHUYDWLRQ DLPVWRVXSSRUWHIIHFWLYHHQYLURQPHQWDOUHJXODWLRQIRUIRUHVW GHYHORSPHQWSURMHFWV

6RXUFHV3RXUXDQG31*)RUHVW$XWKRULW\



$*UDQG'HFHLW

7KH)RUHVWU\DQG&RQVHUYDWLRQ3URMHFW )&3 ILQDQFHGDQGVXSSRUWHGE\WKH%DQNDQG *OREDO(QYLURQPHQW)DFLOLW\ *() EHJDQSODQQLQJLQZDVDSSURYHGE\WKH:RUOG %DQNLQ'HFHPEHUDQGZDVEURXJKWLQWRHIIHFWLQ-XQH,WORFDWHGLWVHOILQ)RUHVW $XWKRULW\RIILFHVLQ3RUW0RUHVE\DQGFRPELQHGLWVWKUHHFRPSRQHQWVZLWKWKHSUHYLRXVO\ H[LVWLQJ&RQVHUYDWLRQ7UXVW)XQG

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

$*UDQG'HFHLW XQOLNHO\WKDWWKHVHRIILFLDOVZLOOFDOOWKHVKRWVIRUWKH%DQNDQGLWVVKDUHKROGHUVLQWKHORQJHU WHUP

7KHYHU\VWURQJUHSRUWIURPWKH)&3JURXSOHGE\*UDHPH3RZHOOKDGWREULQJWKHWHQVLRQ EHWZHHQWKH%DQNDQGWKH*RYHUQPHQWWRDKHDG,QHDUO\-XO\LWZDVUHSRUWHGWKDWWKH :RUOG%DQNKDGJLYHQZULWWHQQRWLFHWKDWLWZRXOGZLWKGUDZDOOVXSSRUWWR31*LIWKH JRYHUQPHQW IDLOHGLQWKHQH[WGD\VWRFOHDQXSRQIRUHVWLQGXVWU\FRUUXSWLRQ 7KLVWKUHDW ZDVLQDOHWWHUGHOLYHUHGRQ)ULGD\-XO\WR)LQDQFH0LQLVWHU%DUW3KLOHPRQDQG&KLHI 6HFUHWDU\-RVKXD.DOLQRH $QRQ 7KLVZRXOGQRWRQO\PHDQFDQFHOODWLRQRIWKH)&3 EXWDOVRZLWKGUDZDORI%DQNIXQGLQJIRUWKH+LJKODQGV+LJKZD\DELJQDWLRQDOLQIUDVWUXFWXUH SULRULW\%DQNZLWKGUDZDOIURPWKHFRXQWU\ZRXOGSUREDEO\DOVRPHDQDGURSLQ31* V DOUHDG\ORZLQWHUQDWLRQDOFUHGLWUDWLQJ PHDQLQJWKDWKLJKHUFRPPHUFLDOLQWHUHVWUDWHVZRXOG DWWDFKWR*RYHUQPHQWERUURZLQJV DQGDIDOOLQWKHYDOXHRI31* VFXUUHQF\WKH.LQD +RZHYHUIRUWKH%DQNZLWKGUDZDOZRXOGDOVRPHDQDQLQDELOLW\WRSXUVXHLWVSULPDU\WDVNRI RSHQLQJXSWKHFRXQWU\IRUSURILWDEOHUHVRXUFHH[WUDFWLRQLQGXVWULHV5HFDOOWKDWWKH$XVWUDOLDQ *RYHUQPHQW VVWUDWHJLFREMHFWLYHLVWRGRXEOH$XVWUDOLDQSULYDWHFRUSRUDWHWUDGHLQWKH3DFLILF EHWZHHQDQG 6WRUW] DQGWKDWDODUJHSDUWRI$XVWUDOLD V3DFLILF LQYHVWPHQWVDUHLQ31*,QWKLVOLJKWLWLVSHUKDSVQRWVXUSULVLQJWKDWWKH%DQNFXWDGHDOZLWK WKH6RPDUH*RYHUQPHQWZKLFKZRXOGDYRLGVXVSHQVLRQRIWKH)&3OHWDORQHD%DQN ZLWKGUDZDOIURPWKHFRXQWU\ 31*()) ,QPDNLQJWKLVGHDOWKH%DQNDOVRDYRLGHG FRQIOLFWZLWKWKH3ODQQLQJ0LQLVWHUDQGWKH0LQLVWHUIRU-XVWLFHERWKRIZKRPKDGVWURQJ EXVLQHVVLQWHUHVWVLQORJJLQJRSHUDWLRQVLQ(DVW1HZ%ULWDLQDQG(DVW.LNRULUHVSHFWLYHO\ 0DVDODLLWRNDXWD  )URPWKLVH[SHULHQFHZHFDQVDIHO\FRQFOXGHWKDWWKH:RUOG%DQN VSXUSRUWHGDWWHPSWV RYHU PRUHWKDQDGHFDGH WRHQVXUHWKHLQWHJULW\DQGHFRORJLFDOVXVWDLQDELOLW\RIWKHIRUHVWU\VHFWRU KDYHIDLOHGDQGWKDWWKH\ZHUHQHYHUUHDOO\FHQWUDOWRWKH%DQN VFRQFHUQV

7KH$'%¶V1XFOHXV$JURLQGXVWU\3URMHFW 7KH$VLDQ'HYHORSPHQW%DQN $'% ZKLFKZRUNVFORVHO\ZLWKWKH:RUOG%DQNKDVEHHQ PRUHFRQFLVHDQGVSDULQJWKDQWKH:RUOG%DQNLQLWVZULWLQJVRQJRYHUQDQFHEXWZKHQLW GRHVUHIHUWRJRYHUQDQFHLWPDNHVYHU\VLPLODUSRLQWV7KH$'%VWUHVVHVWKHQHHGLQ31*WR UHGXFHSXEOLFVHUYLFHVWRDGYDQFH³FRUSRUDWL]DWLRQDQGSULYDWL]DWLRQ´DQGWRFUHDWH³ZHOO GHILQHG«LQGLYLGXDO¶VULJKWVWRODQG´ $'%3DUW,' ,QWKH *RRG*RYHUQDQFH

VHFWLRQRIWKH$'% VUHYLVHG&RXQWU\6WUDWHJ\DQG3URJUDPLWVD\VLWZLOOSXWUHVRXUFHVLQWR SULYDWLVLQJVWDWHRZQHGHQWHUSULVHV³ZLGHUDQJLQJSXEOLFVHFWRUUHIRUP´DQGD³UHYLHZ«RI ODQGWHQXUH´ $'%,,% %\WKLVWKH$'%PHDQVPXFKWKHVDPHDVWKH:RUOG%DQN PRUHSULYDWLVDWLRQUHGXFWLRQRIVKDUHGVHUYLFHVDQGDOLHQDWLRQRIFXVWRPDU\ODQGV

7KH$'% VDSSURDFKWRDJURLQGXVWU\LVFRQVLVWHQWZLWKWKLVRYHUDOO JRYHUQDQFH YLHZ 3ULPDULO\DJURLQGXVWU\LVVHHQDVDQRSSRUWXQLW\IRUODUJHIRUHLJQLQYHVWRUVWRDFFHVVWKH UHVRXUFHEDVHRI31*DQGLWLVJHQHUDOO\DUJXHGWKDWVXFKODUJHRSHUDWLRQVDUHPRUH

SURGXFWLYH :HVKRXOGQRWHWKDWWKHLQWHUQDWLRQDOH[SHULHQFHGRHVQRWDOZD\VEHDURXWWKH DUJXPHQWWKDWODUJHPHFKDQLVHGFDVKFURSSLQJLV PRUHSURGXFWLYH LHSURGXFLQJPRUHIURP WKHVDPHODQGEHFDXVHVRPHVPDOOIDUPHUVFDQEHYHU\HIILFLHQW,QDQ\FDVHIDUPLQJLQ SRRUFRXQWULHVDOZD\VKDVPDQ\PRUHVRFLDOSXUSRVHV HJIRRGVHFXULW\VRFLDOVHFXULW\ PDLQWHQDQFHRIFXOWXUHDQGHQYLURQPHQWDOFXVWRGLDQVKLS WKDQVLPSO\PD[LPLVLQJRXWSXW%XW IRUWKH$'%DQG:RUOG%DQNDJURLQGXVWU\LVSULPDULO\DQRSSRUWXQLW\IRUSULYDWHIRUHLJQ 

$*UDQG'HFHLW LQYHVWRUVDQGLVMXVWLILHGE\FUXGHSURGXFWRXWSXW7KHUHIRUHZKLOHWKHDUJXPHQWVPD\VHHP WRUDQJHPRUHZLGHO\WKHSURMHFWVWKH$'%VXSSRUWVZLOOPRVWO\EHWKRVHZKLFKSURPRWHDQG VXEVLGLVHODUJHSULYDWHFDVKFURSVRUVPDOOKROGHUVIHHGLQJLQWRWKHPLOOVVHWXSE\ODUJH SODQWDWLRQV

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
$'% $'% $'% $'% $'% $'%

6WDUWHG     

SUH     

3URMHFW

$JULFXOWXUDO6XSSRUW6HUYLFHV :HVW6HSLN3URYLQFLDO'HYHORSPHQW3URMHFW 1XFOHXV(VWDWHVDQG6PDOOKROGHUV3URMHFW PRVWO\RLOSDOPEXWDOVRFRFRD $JULFXOWXUDO&UHGLWSURMHFW 2UR2LO3DOP'HYHORSPHQW3URMHFW>ODWHU H[WHQGHGE\$XV$,'JUDQWV@ >LQIRUPDWLRQGLIILFXOWWRREWDLQ@ $JULFXOWXUDO5HVHDUFKDQG([WHQVLRQ3URMHFW >RLOSDOPFRIIHHDQGFRFRD@ 6PDOOKROGHU6XSSRUW6HUYLFHV3LORW3URMHFW $JURLQGXVWU\'HYHORSPHQW 3UHSDULQJWKH$JULFXOWXUHDQG5XUDO 'HYORSPHQW3URMHFW $JUR(QWHUSULVHV7HFKQLFDO$VVLVWDQFH/RDQ >PRVWO\IRFXVVHGRQRLOSDOP@

86P       QD   

6RXUFH:RUOG%DQNG$VLDQ'HYHORSPHQW%DQNF

7KRXJKWKHUHZHUHVRPHSODQWDWLRQVLQ:HVW1HZ%ULWDLQLQWKHODWHVWKHPDMRU GHYHORSPHQWRISDOPRLOFURSSLQJLQ31*VWDUWHGLQWKHPLGVIROORZLQJLQGHSHQGHQFH 

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

XUJHQWQHHGIRUDFWLRQDJDLQVWWKHVSUHDGRIRLOSDOPSODQWDWLRQV7KHVHSODQWDWLRQVDUHXVXDOO\SUHFHGHG E\ORJJLQJZKLFK FOHDUV WKHODQGWRPDNHWKHPSRVVLEOH7KHSODQWDWLRQWKHQLPSHGHVWKHUHJURZWKRIWKH IRUHVWE\WKHZLGHVSUHDGXVHRIKHUELFLGHV :RUOG5DLQIRUHVW0RYHPHQW 

$SDUWIURPHQYLURQPHQWDOGHVWUXFWLRQDQGIRRGVHFXULW\SUREOHPV SRRUSHRSOHW\SLFDOO\ORVH DFFHVVWRWKHLUWUDGLWLRQDOODQGV PDVVSURGXFWLRQPHDQVRYHUVXSSO\DQGIDOOLQJSULFHVWKH EXUGHQRIZKLFKLVFDUULHGE\ORFDOSURGXFHUVDQGORFDOZRUNHUVZKRVHLQFRPHVJHW LQFUHDVLQJO\ORZHUHG´ :RUOG5DLQIRUHVW0RYHPHQW ,Q31*LQWKHPLGVIROORZLQJLQWKHIRRWVWHSVRIWKH:RUOG%DQNWKH$'%SXWRYHU 86PLOOLRQLQWRDQ$JULFXOWXUDO5HVHDUFKDQG([WHQVLRQ3URMHFWZKLFKIRFXVVHGRQWKH FRPPHUFLDOGHYHORSPHQWRIRLOSDOPFRIIHHDQGFRFRD(YHQEHIRUHWKHFUDVKLQJOREDO FRIIHHSULFHVWKH$'%KDGJUHDWHUUHJDUGIRUWKHSURGXFWLYHSRWHQWLDORIRLOSDOPWKDQIRU FRIIHHQRWLQJWKHLQFUHDVHGXVHRIIHUWLOLVHU $'% 7KH$'% VQH[WELJRLOSDOP VFKHPHDQQRXQFHGLQODWHWKH$JUR(QWHUSULVHV7HFKQLFDO$VVLVWDQFH/RDQKDVQRW H[SUHVVHGYHU\FOHDUREMHFWLYHV0DQ\SHRSOHLQ31*KDYHH[SUHVVHGIUXVWUDWLRQZLWKLWV FU\SWLFODQJXDJH7KH3URMHFWSURYLGHVDORDQZLWKLQWHUHVWUDWHVRIRQO\ IRUWKHILUVW \HDUV DQGIRUWKHQH[W\HDUVEXWRIWKLV 86PLOOLRQ ZLOOEHXVHGDV IRUHLJQH[FKDQJHIRUWKH$'% VLQWHUQDWLRQDOFRQVXOWDQWV$QRWKHU86PLOOLRQLVWREH UDLVHGE\WKH*RYHUQPHQWRI31*LQFOXGLQJIURPLWVSULYDWHVHFWRUSURSRQHQWV $'% E 7KH$'%VD\VWKLV3URMHFWLVDERXWGHYHORSLQJ

IHDVLELOLW\VWXGLHVIRUQXFOHXVHQWHUSULVHEDVHGGHYHORSPHQWSURMHFWVLQDJULFXOWXUHDQGDJURSURFHVVLQJ >DQG@SLORWDFWLYLWLHVLQDQGDURXQGSRWHQWLDOQXFOHXVHQWHUSULVHV $'%E

7KH$'%KDVRIWHQVWUHVVHGWKHEUHDGWKRILWVSURMHFWVDQGWKHLQFOXVLRQRIVPDOOIDUPHUVLQ LWVSURMHFWVIRUH[DPSOHWRLQFUHDVHVPDOOKROGHULQFRPHVDQGQDWLRQDORXWSXW $'%  +RZHYHUZHFDQVHHWKDWWKHHPSKDVLVRQFRPPHUFLDOO\RULHQWHGDJULFXOWXUH $'% LV QRWDLPHGDWVXEVLVWHQFHIDUPHUVRUPLFURWUDGHUVDQGWKHLGHDRIDQXFOHXVHQWHUSULVHLV IRFXVVHGRQSULYDWHFRUSRUDWH PDUNHW GHYHORSPHQWWKDWLVRQH 

$*UDQG'HFHLW WKDWSURYLGHVVPDOOKROGHUVDQGRXWJURZHUVZLWKPDUNHWRXWOHWVWHFKQLFDODQGILQDQFLDOVXSSRUWSODQWLQJ PDWHULDOVDQGVRFLDOVHUYLFHVWKDWFDQQRWEHSURYLGHGE\HLWKHUWKHSXEOLFVHFWRURUWKHVPDOOKROGHUV WKHPVHOYHV $'%

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

>DLPV@WRKHOS31*SDFNDJHQHZUXUDOGHYHORSPHQWYHQWXUHVDQGSDUWQHUVKLSVZLWKDIRFXVRQJHQHUDWLQJ EHQHILWVIRUVPDOOKROGHUVRXWJURZHUV,GHDOO\ZHZRXOGOLNHWRXVHWKHPDUNHWWREULQJDERXWHFRQRPLF GHYHORSPHQWDQGSRVLWLYHVRFLDOFKDQJHZKLOHDWWKHVDPHWLPHSURWHFWLQJDQGLPSURYLQJWKHHQYLURQPHQW ZLWKUHVSHFWWRRLOSDOPZHDUHZHOODZDUHRIWKHVRFLDODQGHQYLURQPHQWDOULVNVDQGDOOWKHSRVVLEOH FRQWURYHUVLDODVSHFWVRIVXFKPRQRFXOWXUDOSODQWDWLRQGHYHORSPHQWV 3RQ]LD

7KHULVNVRISODQWDWLRQPRQRFXOWXUHDUHZHOONQRZQKLJKXVHRIIHUWLOLVHUOHDGLQJWRZDWHU DQGPDULQHSROOXWLRQKLJKLQFLGHQFHRISHVWVIROORZHGE\SHVWLFLGHVDQGIXUWKHUJURXQGDQG ZDWHUFRQWDPLQDWLRQDQGGLVSODFHPHQWRIVPDOOODQGRZQHUVDQGWKHFUHDWLRQRIVHWWOHPHQWV DURXQGELJIDFWRULHVDQGPLOOV7KH$'%WKHQVXJJHVWHGWKDWRLOSDOPZDVQRWUHDOO\RQLWV DJHQGDZLWKWKHIROORZLQJVWDWHPHQWVLQPLGWKHUHDUHQRRLOSDOPSURMHFWVXQGHU FRQVLGHUDWLRQ 3RQ]LE DQG

7KHUHKDVEHHQDVOLJKWFRQIXVLRQ>GXHWR@PLVOHDGLQJVWDWHPHQWVE\VRPHUHSUHVHQWDWLYHVRIWKH31* *RYHUQPHQW:HKDGLQIDFWKRSHGWKDWRLOSDOPZRXOGFRQVWLWXWHDWPRVWRQO\SDUWRIWKHDUHDRIIRFXV +RZHYHUWKH'HSDUWPHQWRI1DWLRQDO3ODQQLQJDQG0RQLWRULQJ DVZDV GUHZXSDQLQLWLDOOLVWZKLFK FRPSULVHGPDLQO\RLOSDOPSRVVLELOLWLHV>EXW@WKLVLVRQO\DQLQLWLDOOLVWRISRVVLELOLWLHV 9DQGHU7DN 

7KH FRQIXVLRQ ZDVXQGHUVWDQGDEOHVLQFHWKH$'%KDVDORQJKLVWRU\RIIXQGLQJRLOSDOP GHYHORSPHQWVERWKLQ,QGRQHVLDDQGLQ31*

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



$*UDQG'HFHLW

7DEOH2LO3DOP'HYHORSPHQW$UHDVLQ31* ([LVWLQJ2LO3DOP $UHDV

:HVW1HZ%ULWDLQ 1HZ,UHODQG 0LOQH%D\ 2UR3RSRQGHWWD

$UHDV306RPDUHVD\V$'% VWXGLHVKDYHLGHQWLILHGDV

VXLWDEOH  -XQH

$PD]RQ%D\ &HQWUDO $URZH :HVW1HZ%ULWDLQ 7XUXEX6HSLN3ODLQV (6HSLN %HZDQL :HVW6HSLN

$UHDVIURP JRYHUQPHQW VRXUFHV EDVHGRQVWXGLHV 7KH,QGHSHQGHQW-XO\

$PD]RQ%D\ &HQWUDO $URZH :1% 6HSLN3ODLQV (6HSLN

9DLODOD *XOI 5DPX3ODLQV 0DGDQJ 2SHQ%D\ (1% 0RUREH*XOI%RUGHU &ROOLQJZRRG%D\ 0LOQH2UR

6RXUFHV6RPDUHE3HQL1RWHWKDWWKH&ROOLQJZRRG%D\SURSRVDOKDVEHHQQRZEORFNHG E\DODQGRZQHUFRXUWDFWLRQ

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

&HUWDLQO\WKHUHLVDJRRGWUDGHLQWKHODUJHVXSHUPDUNHWVLQ3RSRQGHWWDRQSD\GD\V

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

$*UDQG'HFHLW LPSURYHPHQWLQOLYLQJVWDQGDUGVRYHUWKHSDVW\HDUV7KH\EHOLHYHJURZHUVKDYHEHHQNHSW DWDVXEVLVWHQFHOHYHO .RMD +LJDWXUXZLOOQRWFROOHFWIUXLWIURPVPDOOJURZHUVLIWKH URDGVDUHUXQGRZQ .RMD DQGWKLVKDVOHGWRWKHSUHVVXUHIRU:RUOG%DQNDQG$XV$,' ORDQVWRPDLQWDLQIHHGHUURDGVWRWKH+LJDWXUXPLOO,QHQYLURQPHQWDOWHUPVLQVHFWLFLGHVDUH XVHGWKHRLOSDOPDWWUDFWVKRUGHVRIUDWVDQGIOLHVDQGWKHSODQWDWLRQVHWWOHPHQWDQGYLOODJH FURSVXVHVXEVWDQWLDODPRXQWVRIIHUWLOLVHU 5XNL 

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



$*UDQG'HFHLW

$OWHUQDWLYHVVRFLDOGHPRFUDWLFJRYHUQDQFH 7KLVVHFWLRQZLOOEULHIO\RXWOLQHWKHFRUHSULQFLSOHVRIDVRFLDOGHPRFUDWLFPRGHORI JRYHUQDQFHDQGVRPHLPSRUWDQWSUDFWLFDODOWHUQDWLYHVWRQHROLEHUDOGHYHORSPHQW

:LWKLQDEURDGHUYLHZRI JRYHUQDQFH WKHUHDUHPDQ\SUDFWLFDODOWHUQDWLYHVWRQHROLEHUDO GHYHORSPHQW LHWUDGHOLEHUDOLVDWLRQFDSLWDOOLEHUDOLVDWLRQGHUHJXODWLRQDQGSULYDWLVDWLRQ DV SURSRVHGE\WKH:RUOG%DQN0DQ\RIWKHVHDOWHUQDWLYHVKDYHEHHQWULHGDQGZRUNZHOO

,WLVLPSRUWDQWWRILUVWUHFRJQLVHWKHGLIIHUHQFHEHWZHHQ VWDELOLVDWLRQ SROLFLHV WKHQHHGWR VWDELOLVHSULFHVDVZHOODVWKHORFDOFXUUHQF\DQGWKHJHQHUDOHFRQRPLFHQYLURQPHQW DQG

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

VKDUHGEDVLFVHUYLFHV

EXLOGLQJSXEOLFLQVWLWXWLRQV

7$

DSSURSULDWHLQYHVWPHQWDQG HFRORJLFDOO\VXVWDLQDEOHGHYHORSPHQW

7KLVPRGHOFDQEHFRPSDUHGZLWK7DEOHZKLFKVKRZHGWKHHFRQRPLFOLEHUDOFRUH SULQFLSOHV IRUPDOGHPRFUDF\SULYDWLVDWLRQGHUHJXODWLRQUHGXFWLRQLQVKDUHGVHUYLFHVWKH UHPRYDORISULFHFRQWUROV RIWKH:RUOG%DQN VJRYHUQDQFHPRGHO 

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

DOWHUQDWLYH

H[DPSOH y

7UDGHOLEHUDOLVDWLRQ ,QGXVWULDOFOXVWHUGHYHORSPHQW 6WDWHFRRUGLQDWHGLPSRUW VXEVWLWXWLRQDQGH[SRUWVWUDWHJLHV

y y

y y y 7RELQ7D[WRFRQWUROKRWPRQH\ y $YDULHW\RI IDLUWUDGH SURSRVDOV

&DSLWDO OLEHUDOLVDWLRQ

y

-RLQWYHQWXUHLQYHVWPHQW

%XVLQHVVZHOIDUH

y 5HQDWLRQDOLVDWLRQRIVWUDWHJLF y LQGXVWULHV RUVXFFHVVIXOO\ y UHVLVWHGSULYDWLVDWLRQV y 0DLQWDLQSXEOLFHTXLW\LQ y VWUDWHJLFLQGXVWULHV y y 3XEOLFVKDUHKROGLQJ WKHSULFH y

&DSLWDOLQWHQVLYH FDVKFURSSLQJ

6WUHQJWKHQVXEVLVWHQFHIDUPV DQGORFDOWUDGH

3ULYDWLVDWLRQ

([LWWD[HVRQIRUHLJQLQYHVWPHQW

RIDFFHVVWRPDUNHWV

([WHQGHGSDWHQW SURWHFWLRQ :72

0DNHHVVHQWLDOJHQHULFGUXJV GLVFRXQWLQJRULJQRULQJSDWHQWV

([SRUWRULHQWHG SURGXFWLRQ

6XEVLVWHQFH VPDOOIDUPHU VXSSRUWVFKHPHV

3ULYDWLVHGKHDOWK VHUYLFHV %XGJHWVXUSOXV 7$

3XEOLFO\IXQGHGKHDOWKV\VWHP

%XGJHWGHILFLWVLQGRZQWXUQV EDODQFHGLQXSWXUQ

y y y y y y y y



&RPSXWHUDQGHQJLQHHULQJLQGXVWULHVLQ %DQJDORUH ,QGLD ,QGXVWULDOFOXVWHUVLQ&KLQD3DNLVWDQ0H[LFR

-DSDQIROORZHGE\.RUHD7DLZDQ6LQJDSRUH DQG0DOD\VLD VV 6ROLGDULW\QHWZRUNVWRVXSSRUWODERXUULJKWV 3URGXFHUFRRSHUDWLYHOLQNV /DERXUULJKWVLQWUDGHWUHDWLHV 7RELQ7D[PRYHPHQWVLQ(XURSHDQG/DWLQ $PHULFD

&KLQD VDQG&XED VVXFFHVVIXOMRLQWYHQWXUH QHZ LQYHVWPHQW SROLFLHVV 0DOD\VLDQFDSLWDOFRQWUROV

:DWHULQ%ROLYLD +RQGXUDV+XQJDU\ 7HOHYLVLRQLQ1HZ=HDODQG (OHFWULFLW\LQ&DOLIRUQLD

&KLQHVHIRUHLJQLQYHVWPHQWVWUDWHJ\ 6ZHGLVKZDWHUXWLOLWLHV PRVWHIILFLHQW &DSH7RZQWRZQVKLSVQHZZDWHUXWLOLWLHV 0DQ\VPDOOFRXQWULHV HJ31* HTXLW\LQ PLQLQJYHQWXUHV 6RPHODQGUHIRUPDUHDVLQ,QGLD 6RORPRQ,VODQGV0DURYR 067VHWWOHPHQWV%UD]LO 86VPDOOIDUPVSURJUDP

3URGXFWLRQRIFKHDSJHQHULFGUXJVLQ%UD]LODQG ,QGLD &XEDQZRUOGFODVVKHDOWKV\VWHP

,QGLD,QGRQHVLD SUH PDQ\SRRUFRXQWULHV 7KDLODQG  DQG&XED 

$*UDQG'HFHLW

'HDOLQJZLWKWKH:RUOG%DQN 7KH:RUOG%DQNDQGWKH$VLDQ'HYHORSPHQW%DQNDUHEHVWUHJDUGHGDVOREE\JURXSVIRU IRUHLJQLQYHVWRUV7KH\DUHQRW LQGHSHQGHQW GHYHORSPHQWDGYLVHUV

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

+RZHYHUKRQHVW\LQEXVLQHVVDQGLQLQWHUQDWLRQDOUHODWLRQVLVLPSRUWDQWDQGWKH:RUOG %DQNLQSDUWLFXODUKDVGHPRQVWUDWHGDQHQRUPRXVOHYHORIGHFHLWLQLWVDUJXPHQWVLQ31* 7KHDUJXPHQWVZKLFK,KDYHFKDUDFWHULVHGDVWKH YHQHHUSULQFLSOHV RILWVJRRGJRYHUQDQFH PRGHOLQYROYHJUDQGGHFHSWLRQ+DGWKHEDQNVLPSO\DSSHDUHGDVDVWUDLJKWIRUZDUGEXVLQHVV OREE\KRQHVWDERXWLWVLQWHQWLRQVLWPLJKWGHVHUYHVRPHUHVSHFW 9HUEDOHQJDJHPHQWZLWKWKH:RUOG%DQNGRHVQRWVLJQLILFDQWO\DOWHULWVVWUXFWXUDODLPV ZKLFKDUHVHWE\LWV$UWLFOHVRI$VVRFLDWLRQLWVHFRQRPLFOLEHUDOLGHRORJ\DQGWKHLQYHVWPHQW DQGWUDGHLQWHUHVWVRILWVVKDUHKROGHUVDQGFRQILUPHGE\LWVSUDFWLFHDURXQGWKHZRUOG

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¶V'HYHORSPHQW± (YDOXDWLRQDQG5HYLHZ6HULHV1R-XQH $XVWUDOLDQ,QVWXWHRI&ULPLQRORJ\   6HOHFWHG&ULPH3URILOHV  KWWSZZZDLFJRYDXSXEOLFDWLRQVIDFWVVHFKWPO

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µ3DSXD1HZ*XLQHD¶LQ6H\PRXU)UDQFHV-DQG1DYUR].'XEDVK (GV   7KH5LJKW&RQGLWLRQVWKH:RUOG%DQN6WUXFWXUDO$GMXVWPHQWDQG)RUHVW3ROLF\5HIRUP :RUG5HVRXUFHV,QVWLXWH:DVKLQJWRQSS 'XQFDQ5RQDQG6WHYH3ROODUG   $FRQFHSWXDOIUDPHZRUNIRUDFRXQWU\SRYHUW\UHGXFWLRQVWUDWHJ\  3DSHUWRWKH$VLDDQG3DFLILF)RUXPRQSRYHUW\ 5HIRUPLQJSROLFLHVDQGLQVWLWXWLRQVIRUSRYHUW\UHGXFWLRQ  $VLDQ'HYHORSPHQW%DQN0DQLOD)HEUXDU\ (FNHUVOH\5LFKDUG (G   0HDVXULQJ3URJUHVVLVOLIHJHWWLQJEHWWHU"&6,520HOERXUQH (OOLV-XOLH$QQ  5DFHIRUWKH5DLQIRUHVW31*%LRGLYHUVLW\&RQVHUYDWLRQDQG5HVRXUFH0DQDJHPHQW 3URJUDPPHDQG81'3:DLJDQL 31*

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

.DF]EHUVNL**&XUU\DQG.*LEVRQ  ,PSURYLQJ3URGXFWLYLW\RIWKH6PDOKROGHU2LO3DOP6HFWRULQ 3DSXD1HZ*XLQHDDVRFLRHFRQRPLFVWXG\RIWKH+RVNLQVDQG3RSRQGHWWD6FKHPHV235$$QQXDO 5HSRUW6XSSOHPHQW$XVWUDOLDQ1DWLRQDO8QLYHUVLW\1RYHPEHU .DXIPDQQ'DQLHO$DUW.UDD\DQG3DEOR=RLGR/REDWRQ  *RYHUQDQFH0DWWHUV,,XSGDWHGLQGLFDWRUVIRU 3ROLF\5HVHUDFK:RUNLQJ3DSHU7KH:RUOG%DQN'HYHORSPHQW5HVHUDFK*URXS)HEUXDU\ .DSLJHQR-DFTXHOLQHDQG/XF\.DSL  µ0LQLVWHU3KLOHPRQEODPHVODZ\HUVIRUKXJH.PLOOLRQ GDPDJHELOO¶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µ&XVWRPDU\ODQGWHQXUHDQGHFRQRPLFGHYHORSPHQWLQ31*¶LQ5RQ &URFRPEHDQG 0DODPD 0HOHLVHD (GV   /DQG,VVXHVLQWKH3DFLILF,QVWLWXWHRI6RXWK3DFLILF6WXGLHV8QLYHUVLW\RI WKH6RXWK3DFLILF6XYD /DNDX$QGUHZ   /DQG 3RVW&RXULHUDQG-XO\ /REH-LP   /HDUQIURP&XEDVD\V:RUOG%DQN  KWWSOHJDOPLQGVOSILQGODZFRPOLVWLSHPVJKWPO

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



$*UDQG'HFHLW

1DWLRQDO7KH  µ,PSXQLW\,PSDVVHDW31*%&VDOHLQTXLU\¶)HES 1DWLRQDO7KH D µ%63VD\VSULFHSDLGIRU31*%&ZDVFRUUHFW¶)HES 1DWLRQDO7KH E µ+LULQJRI:RUOG%DQNRIILFLDOIOD\HG¶DQGµ:HLVHSRLQWVRXUHIIHFWVRI.DPLW¶VOHWWHU¶ 0DUFKSS 1DWLRQDO7KH G :HLVHGHQLHV.PLOOLRQFRQWUDFW0DUFK 2L\RL2L\RLLVDPHPEHURI WKH5DPX9DOOH\/DQG2ZQHUV$VVRFLDWLRQ 59/2$ DQGDWUDGLWLRQDORZQHULQ//*:DUG@ 2YH-  )LHOGWULSUHSRUWVXVSLFLRXVORJJLQJGHDOVLQ%DLPXUX ,QWHOOLJHQFH 31*2IILFHRI&RXQWHU ,QWHOOLJHQFH-XQH

3DRO3RZ\V3DUNRSVLVDODZ\HUDQG IRUPHU*HQHUHDO6HFUHWDU\RI0HOVRO@ 3HQL(NRQLD   2LO3DOPWKHEHVWDOWHUQDWLYH 7KH,QGHSHQGHQW%XVLQHVV1HZVS 3RQ]L'DQLHOH D /HWWHUWR0V/HH7DQRIWKH$XVWUDOLDQ&RQVHUYDWLRQ)RXQGDWLRQ$XJXVW>'DQLHOHLV DQ(QYLURQPHQWDO(FRQRPLVWDQGD31*3URMHFW7HDP/HDGHUZLWKWKH$'%GSRQ]L#DGERUJ@ 3RQ]L'DQLHOH E /HWWHUWR0V/HH7DQRIWKH$XVWUDOLDQ&RQVHUYDWLRQ)RXQGDWLRQ$XJXVW 3RVW&RXULHU D µ&ULPHLQFUHDVHLVµHFRQRPLF¶¶)HES 3RVW&RXULHU E  3ULYDWLVDWLRQQRZWREH PRUHVHOHFWLYH

)HES 3RVW&RXULHU F µ31*%&EX\RXWVHHQDVDFRXS¶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aSHQ]RYHUVHDVEROYKRKWP 5RKODQG.ODXV   3DSXD1HZ*XLQHDDQGWKH3DFLILF 6SHHFKDWWKH8QLYHUVLW\RI6\GQH\ 'HFHPEHU  5DGLR$XVWUDOLD$VLD3DFLILF/HFWXUH6HULHV 5XNL/HR  ,QWHUYLHZZLWKWKLVZULWHU3RSRQGHWWD0DUFK>/HRLV3URMHFW0DQDJHURIWKHVWDWXWRU\ DXWKRULW\WKH2LO3DOP,QGXVWU\&RUSRUDWLRQ 23,& DW3RSRQGHWWD@

6DPXHOVRQ3DXO:'1RUGKDXVHWDO  (FRQRPLFV9ROPDFURHFRQRPLFVUGHGLWLRQ0F*UDZ+LOO 6\GQH\ 6$35,1   6$35,1&KDOOHQJHV:RUOG%DQNRQ)DLOXUHRI$GMXVWPHQW3URJUDPV 6$35,16HFUHWDULDW DQG([HFXWLYH&RPPLWWHHZZZGHYHORSPHQWJDSRUJVDSULQDSULO KWPO 6FKROWH-DQ$DUW   7KH*OREDOL]DWLRQRI:RUOG3ROLWLFV LQ-RKQ%D\OLVDQG6WHYH6PLWK (GV   7KH*OREDOL]DWLRQRI:RUOG3ROLWLFV2832[IRUG 6HNKUDQ1DQG60LOOHU  3DSXD1HZ*XLQHD&RXQWU\6WXG\RQ%LRORJLFDO'LYHUVLW\31*'HSDUWPHQW RI(QYLURQPHQWDQG&RQVHUYDWLRQ:DLJDQL



$*UDQG'HFHLW 6H\PRXU)UDQFHV-DQG1DYUR].'XEDVK (GV   7KH5LJKW&RQGLWLRQVWKH:RUOG%DQN6WUXFWXUDO $GMXVWPHQWDQG)RUHVW3ROLF\5HIRUP:RUG5HVRXUFHV,QVWLXWH:DVKLQJWRQ 6KHDUPDQ3KLODQG-LP&DQQRQ  31*)RUHVW5HVRXUFHVDQGWKH/RJ([SRUW,QGXVWU\31* (FR)RUHVWU\)RUXP:RUNLQJ3DSHU$SULO 6RPDUH0LFKDHO  30UHVSRQGVWRTXHVWLRQVRQWKHIRUHVWU\VHFWRU¶7KH1DWLRQDO0DUFKS 6RPDUH0LFKDHO E  $SSURSULDWHLQYHVWPHQWLQFHQWLYHVIRUDJULFXOWXUHDVDPHDQVWRVXVWDLQUXUDO OLYHOLKRRG $GGUHVVWRWKH1HZ%ULWDLQ3DOP2LO/LPLWHGDQGWKHEXVLQHVVFRPPXQLW\LQ.LPEH:HVW1HZ %ULWDLQ:HEVLWHRIWKH3ULPH0LQLVWHURISDSXD1HZ*XLQHDZZZSPJRYSJSPVRIILFH-XQH 6WLJOLW]-RVHSK  *OREDOL]DWLRQDQGLWV'LVFRQWHQWV1RUWRQ1HZ
9DJL/HJX/  µ3DSXD1HZ*XLQHD¶V5HODWLRQVZLWK$XVWUDOLDDQGWKH)LYH0U9DJL03ZDVWKHWKHQ0LQLVWHUIRU)RUHLJQ$IIDLUV@ 'HSWRI)RUHLJQ$IIDLUV$XJXVW 9DQGHU7DN6WHYHQ  /HWWHUWR0V/HH7DQRIWKH$XVWUDOLDQ&RQVHUYDWLRQ)RXQGDWLRQ-XO\>6WHYHQ LV3ULQFLSDO3URJUDPV2IILFHU(FRQRPLVW3DFLILF'HSDUWPHQWIRUWKH$'%@ 9DQ+HOGHQ)OLS  7KURXJKWKH7KLFNHWGLVHQWDQJOLQJWKHVRFLDOG\QDPLFVRIDQLQWHJUDWHGFRQVHUYDWLRQ DQGGHYHORSPHQWSURMHFWRQPDLQODQGSDSXD1HZ*XLQHD:DJHQLQJHQ8QLYHUVLW\1HWKHUODQGV 9DQ+HOGHQ)OLSDQG-RFKHP 6FKHHPDQQ  &XWWLQJWKH7UHHVWR.HHSWKH)RUHVW,QWHUFKXUFK 2UJDQLVDWLRQIRU'HYHORSPHQW&RRSHUDWLRQ ,&&2  =HLVW7KH1HWKHUODQGV :DULQJ 0DULO\Q  &RXQWLQJIRU1RWKLQJ:KDW0HQ9DOXHDQG:KDW:RPHQDUH:RUWK$OOHQ 8QZLQ:HOOLQJWRQ :DWNLQV.HYLQ   (6$)5HIRUPDQGWKH3RRU 2[IDP3ROLF\3DSHUVVSHHFKDW,0)*OREDO)RUXP :DVKLQJWRQ6HSWHPEHU



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


png-wb

Aid money is siphoned off and large companies make secret payments to .... While export strategies are good for foreign companies seeking access to cheap ...... PNG, the alarm from landowners and NGOs over the impact of logging led to the ...

269KB Sizes 8 Downloads 226 Views

Recommend Documents

No documents