7/28/2019 englishgprg-wps-071
1/38
7/28/2019 englishgprg-wps-071
2/38
7KHSURJUHVVRIVFKRROHGXFDWLRQLQ,QGLD
E\
*HHWD*DQGKL.LQJGRQ
0DUFK
$EVWUDFW
7KLVSDSHUSURYLGHVDQRYHUYLHZRIVFKRROHGXFDWLRQLQ,QGLD)LUVWO\LWSODFHV,QGLDVHGXFDWLRQDO
DFKLHYHPHQWVLQLQWHUQDWLRQDOSHUVSHFWLYHHVSHFLDOO\DJDLQVWFRXQWULHVZLWKZKLFKLWLVQRZLQFUHDVLQJO\FRPSDUHGVXFKDV%5,&HFRQRPLHVLQJHQHUDODQG&KLQDLQSDUWLFXODU,QGLDGRHVZHOO
UHODWLYHWR3DNLVWDQDQG%DQJODGHVKEXWODJVVHULRXVO\EHKLQG&KLQDDQGWKHRWKHU%5,&FRXQWULHV
HVSHFLDOO\LQVHFRQGDU\VFKRROSDUWLFLSDWLRQDQG\RXWKOLWHUDF\UDWHV6HFRQGO\WKHSDSHUH[DPLQHV
VFKRROLQJDFFHVVLQWHUPVRIHQUROPHQWDQGVFKRRODWWHQGDQFHUDWHVDQGVFKRROLQJTXDOLW\LQWHUPVRI
OLWHUDF\UDWHVOHDUQLQJDFKLHYHPHQWOHYHOVVFKRROUHVRXUFHVDQGWHDFKHULQSXWV7KHVXEVWDQWLDOVLOYHU
OLQLQJLQWKHFORXGRI,QGLDQHGXFDWLRQLVWKDWLWVSULPDU\HQUROPHQWUDWHVDUHQRZFORVHWRXQLYHUVDO+RZHYHUGHVSLWHSURJUHVVDWWHQGDQFHDQGUHWHQWLRQUDWHVDUHQRWFORVHWRXQLYHUVDOVHFRQGDU\
HQUROPHQWUDWHVDUHORZOHDUQLQJDFKLHYHPHQWOHYHOVDUHVHULRXVO\ORZDQGWHDFKHUDEVHQWHHLVPLV
KLJKVLJQDOOLQJSRRUTXDOLW\RIVFKRROLQJ7KLUGO\WKHSDSHUH[DPLQHVWKHUROHRISULYDWHVFKRROLQJ
LQ,QGLD:KLOHPRUHPRGHVWLQUXUDODUHDVWKHUHFHQWJURZWKRISULYDWHVFKRROLQJLQXUEDQDUHDVKDV
EHHQQRWKLQJVKRUWRIPDVVLYHUDLVLQJTXHVWLRQVDERXWJURZLQJLQHTXDOLW\LQHGXFDWLRQDORSSRUWXQLW\(YLGHQFHVXJJHVWVWKDWSULYDWHVFKRROVDUHERWKPRUHHIIHFWLYHLQLPSDUWLQJOHDUQLQJDQGGRVRDWD
IUDFWLRQRIWKHXQLWFRVWRIJRYHUQPHQWVFKRROVWKHLUFRVWDGYDQWDJHEHLQJEHFDXVHWKH\FDQSD\
PDUNHWZDJHVZKLOHJRYHUQPHQWVFKRROWHDFKHUVEXUHDXFUDWLFDOO\VHWPLQLPXPZDJHVKDYHODUJH
UHQWVLQWKHPZKLFKWHDFKHUXQLRQVKDYHIRXJKWKDUGWRVHFXUH/DVWO\WKHSDSHUGLVFXVVHVVRPHPDMRUSXEOLFHGXFDWLRQLQLWLDWLYHVVXFKDV6DUYD6KLNVKD$EKL\DQPLGGD\PHDODQGSDUDWHDFKHU
VFKHPHV7KHLPSDFWVRIWKHVHPDVVLYHLQWHUYHQWLRQVDQGWKHLUVXEFRPSRQHQWVRQFKLOGUHQVVFKRROLQJRXWFRPHVQHHGWREHULJRURXVO\HYDOXDWHGWROHDUQDERXWWKHFRVWHIIHFWLYHQHVVRIDOWHUQDWLYH
LQWHUYHQWLRQVIRUEHWWHUIXWXUHSROLF\PDNLQJ+RZHYHUWKHH[LVWHQFHRIVRPHRIWKHVHLQLWLDWLYHVDQG
WKHLQWURGXFWLRQRIWKHHGXFDWLRQFHVVWRIXQGWKHPVXJJHVWVLQFUHDVHGSXEOLFFRPPLWPHQWWR
VFKRROHGXFDWLRQDQGWRJHWKHUZLWKLQFUHDVHG1*2HGXFDWLRQDFWLYLW\JLYHVJURXQGVIRURSWLPLVP
DERXWWKHIXWXUHHYHQWKRXJKPDQ\FKDOOHQJHVUHPDLQ
-(/FODVVLILFDWLRQV,,
.H\ZRUGV6FKRROHGXFDWLRQ,QGLD
$XWKRUFRQWDFW'HSDUWPHQWRI(FRQRPLFV8QLYHUVLW\RI2[IRUG0DQRU5RDG2[IRUG2;84
3KRQH)D[(PDLOJHHWDNLQJGRQ#HFRQRPLFVR[DFXN
7/28/2019 englishgprg-wps-071
3/38
7KHSURJUHVVRIVFKRROHGXFDWLRQLQ,QGLD
*HHWD*DQGKL.LQJGRQ
,QWURGXFWLRQ
,QGLDVUHFHQWHFRQRPLFJURZWKUDWHVKDYHJHQHUDWHGPXFKRSWLPLVPDERXWLWVJHQHUDOVRFLDO
DQGHFRQRPLFGHYHORSPHQW%XWKDVWKHUHEHHQDFFRPSDQ\LQJSURJUHVVLQLQGLFDWRUVRIHGXFDWLRQDO
RXWFRPHV"+RZJRRGDUH,QGLDQHGXFDWLRQDODFKLHYHPHQWVLQUHODWLRQWR&KLQDVWKHFRXQWU\ZLWK
ZKLFKLWLVLQFUHDVLQJO\FRPSDUHG":KDWDUHWKHPRVWVLJQLILFDQWGHYHORSPHQWVLQ,QGLDQVFKRRO
HGXFDWLRQDQGZKDWKDVEHHQWKHLPSDFWRIYDULRXVHGXFDWLRQSROLF\LQLWLDWLYHV"7KLVSDSHUSUHVHQWVD
FULWLFDORYHUYLHZRIWKHVFKRROHGXFDWLRQVHFWRULQ,QGLDXVLQJQHZO\UHOHDVHGGDWDDQGDVXUYH\RI
H[LVWLQJVWXGLHV
7KHVWRU\RI,QGLDVHGXFDWLRQDODFKLHYHPHQWVLVRQHRIPL[HGVXFFHVV2QWKHGRZQVLGH
,QGLDKDVSHUFHQWRIWKHZRUOGVSRSXODWLRQEXWSHUFHQWRIWKHZRUOGVLOOLWHUDWHVDQGLVKRPH
WRDKLJKSURSRUWLRQRIWKHZRUOGVRXWRIVFKRROFKLOGUHQDQG\RXWK2QWKHSRVLWLYHVLGHLWKDVPDGH
HQFRXUDJLQJUHFHQWSURJUHVVLQUDLVLQJVFKRROLQJSDUWLFLSDWLRQ:KLOHWKHEDVHRI,QGLDVHGXFDWLRQ
S\UDPLGPD\EHZHDNLWKDVHPHUJHGDVDQLPSRUWDQWSOD\HULQWKHZRUOGZLGHLQIRUPDWLRQWHFKQRORJ\
UHYROXWLRQRQWKHEDFNRIVXEVWDQWLDODEVROXWHQXPEHUVRIZHOOHGXFDWHGFRPSXWLQJDQGRWKHU
JUDGXDWHV7KLVSDSHUSURYLGHVDQDVVHVVPHQWRIWKHFXUUHQWVLWXDWLRQDQGUHFHQWSURJUHVVRIVFKRRO
HGXFDWLRQ
,QGLDQHGXFDWLRQDODFKLHYHPHQWVLQLQWHUQDWLRQDOSHUVSHFWLYH
7DEOHSUHVHQWV,QGLDVDGXOWDQG\RXWKOLWHUDF\UDWHVDORQJVLGHHTXLYDOHQWILJXUHVIRULWV
UHJLRQDOQHLJKERXUVDVZHOODVIRUFRXQWULHVLQWKH%5,&JURXSLQJ%UD]LO5XVVLDQ)HGHUDWLRQ,QGLD
DQG&KLQD:KLOH,QGLDGRHVZHOOFRPSDUHGWR%DQJODGHVKDQG3DNLVWDQLWODJVVXEVWDQWLDOO\EHKLQG
DOOWKHRWKHU%5,&FRXQWULHVDQG6UL/DQND,QGHHGLWLVVWULNLQJWKDWLWVRYHUDOODGXOWOLWHUDF\UDWHLV
VLPLODUWRDQGIHPDOHDGXOWOLWHUDF\UDWHORZHUWKDQWKDWRI6XE6DKDUDQ$IULFD7KHFRPSDULVRQZLWK
&KLQDLVRISDUWLFXODULQWHUHVWDQGLWVKRZV,QGLDWREHDWDFRQVLGHUDEOHHGXFDWLRQDOGLVDGYDQWDJH
,QGLDVDGXOWOLWHUDF\LQWKHHDUO\VZDVZKROO\SHUFHQWDJHSRLQWVEHORZ&KLQDV(YHQ
7/28/2019 englishgprg-wps-071
4/38
IRFXVLQJPRUHQDUURZO\DWRQO\WKH\RXWKOLWHUDF\UDWHV,QGLDVGLVDGYDQWDJHZLWKUHVSHFWWR&KLQDLV
DODUJHSHUFHQWDJHSRLQWV
,QGLDVGLVDGYDQWDJHYLVDYLVRWKHUFRXQWULHVLQSULPDU\VFKRROSDUWLFLSDWLRQUDWHVLVPXFK
VPDOOHUFRPSDUHGWRWKDWIRU\RXWKOLWHUDF\UDWHVVLQFHRI,QGLDQHOHPHQWDU\VFKRRODJH
FKLOGUHQZHUHHQUROOHGLQVFKRROLQDFFRUGLQJWR$6(5VXUYH\3UDWKDP+RZHYHUDV
)LJXUHVKRZVDWWKHVHFRQGDU\VFKRROOHYHO,QGLDLVDJDLQDWDODUJHGLVDGYDQWDJHZLWKUHVSHFWWRDOO
WKUHHRWKHU%5,&FRXQWULHVZKHUHVHFRQGDU\HQUROPHQWUDWHVDUHIDUDERYHWKRVHSUHGLFWHGIRU
FRXQWULHVDWWKHLUOHYHOVRISHUFDSLWD*'3%UD]LOLDQDQG5XVVLDQVHFRQGDU\VFKRROQHWHQUROPHQW
UDWHVDUHSHUFHQWDJHSRLQWVKLJKHUWKDQ,QGLDV)LJXUHVKRZVWKDW,QGLDLVPRUHWKDQ\HDUV
EHKLQG&KLQDLQWHUPVRIWKHSURSRUWLRQRIWKHSRSXODWLRQZLWKFRPSOHWHGVHFRQGDU\DQGSRVW
VHFRQGDU\VFKRROLQJ
7DEOH
$GXOWDQG\RXWKOLWHUDF\UDWHV
$GXOW/LWHUDF\UDWHV\HDUROGV
7/28/2019 englishgprg-wps-071
5/38
)LJXUH
&URVVFRXQWU\FRPSDULVRQRIJURVVHQUROPHQWUDWLRVLQ6HFRQGDU\(GXFDWLRQDQGSHUFDSLWD*'36RXUFH:RUOG%DQNFDOFXODWLRQLVEDVHGRQ0+5'6HOHFWHG(GXFDWLRQ6WDWLVWLFV IRU,QGLDDQG:RUOG%DQNV(GXFDWLRQ6WDWLVWLFV'DWDEDVHIRURWKHUFRXQWULHV
)LJXUH
(GXFDWLRQDODWWDLQPHQW,QGLDDQG&KLQD
6RXUFH5LERXG6DYFKHQNRDQG7DQEDVHGRQYDULRXVURXQGVRIWKH1DWLRQDO6DPSOH6XUYH\IRU,QGLDDQGRQ%DUURZDQG/HHLQWHUQDWLRQDOGDWDRQHGXFDWLRQIRU&KLQD
7/28/2019 englishgprg-wps-071
6/38
&RPSDUDEOHGDWDRQOHDUQLQJDFKLHYHPHQWRIVWXGHQWVDUHQRWDYDLODEOHIRUPRVWRIWKH
FRXQWULHVZLWKZKLFK,QGLDLVFRPPRQO\FRPSDUHG)RULQVWDQFHQRQHRIWKH6RXWK$VLDQFRXQWULHV
QRU&KLQDSDUWLFLSDWHGLQWKHLQWHUQDWLRQDOVWXGLHVRIOHDUQLQJDFKLHYHPHQWVXFKDVWKH7UHQGVLQ
,QWHUQDWLRQDO0DWKHPDWLFVDQG6FLHQFH6WXG\7,066LQZKLFKFRXQWULHVSDUWLFLSDWHGRULQ
WKH3URJUHVVLQ,QWHUQDWLRQDO5HDGLQJ/LWHUDF\6WXG\3,5/6LQZKLFKFRXQWULHV
SDUWLFLSDWHG0RUHRYHU6RXWK$VLDGRHVQRWKDYHWKHHTXLYDOHQWRIWKH6$&0(4VWXG\ZKLFKLVD
UHJLRQDOLQWHUFRXQWU\FRPSDUDWLYHVWXG\RIDFKLHYHPHQWOHYHOVLQ$IULFDQFRXQWULHV+RZHYHU
:RUOG%DQNDSSOLHGWKH7,066TXHVWLRQVWRVHFRQGDU\VFKRROVWXGHQWVLQWKH,QGLDQVWDWHVRI
5DMDVWKDQDQG2ULVVDZLWKSHUPLVVLRQRIWKH,QGLDQ0LQLVWU\RI+XPDQ5HVRXUFH'HYHORSPHQW7KH
ILQGLQJVVKRZWKDWLQWHUQDWLRQDOPHDQDFKLHYHPHQWLQPDWKVWHVWZDVSHUFHQWIRUJUDGHVWXGHQWV
EXWWKHDYHUDJHVFRUHVRI5DMDVWKDQDQG2ULVVDVWXGHQWVRQWKHVDPHWHVWZHUHDQGSHUFHQW
UHVSHFWLYHO\6LPLODUO\WKHLQWHUQDWLRQDOPHDQRIDFKLHYHPHQWZDVSHUFHQWIRU*UDGHVWXGHQWV
EXWWKHFRUUHVSRQGLQJVFRUHVIRU,QGLDQVWXGHQWVZHUHDQGSHUFHQWLQ5DMDVWKDQDQG2ULVVD
UHVSHFWLYHO\+RZHYHUWKHKLJKLQWHUQDWLRQDODYHUDJHSHUFHQWDJHPDUNIURPWKH7,066FRXQWULHV
LQFOXGHGERWKKLJKDQGORZLQFRPHFRXQWULHV:KHQ,QGLDGLGSDUWLFLSDWHLQLQWHUQDWLRQDOVWXGLHVRI
OHDUQLQJDFKLHYHPHQWLQHDUO\VWKHSHUIRUPDQFHRI,QGLDQFKLOGUHQZDVSRRUUHODWLYHWRPRVW
SDUWLFLSDWLQJGHYHORSLQJFRXQWULHVDFFRUGLQJWRWKH,QWHUQDWLRQDO$VVRFLDWLRQIRUWKH(YDOXDWLRQRI
(GXFDWLRQDO$FKLHYHPHQW,($
6FKRROLQJDFFHVVDQGTXDOLW\
$W,QGHSHQGHQFH,QGLDLQKHULWHGDOHJDF\RIODUJHVFDOHLOOLWHUDF\DQGODFNRISURSHUSURYLVLRQ
IRUHGXFDWLRQ$WWKHILUVWSRVW,QGHSHQGHQFH&HQVXVRIRQO\SHUFHQWRIZRPHQDQGSHU
FHQWRIPHQZHUHOLWHUDWH,WZDVUHVROYHGE\WKHIUDPHUVRIWKHFRQVWLWXWLRQWKDWWKHQHZ,QGLDQVWDWH
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
VHFRQGORZHVW,UDQZDVEHKLQG,QGLDE\DVPDOOPDUJLQ0HDQVFRUHVRIVWXGHQWVLQ%ROLYLD7KDLODQG&RORPELD3HUX0H[LFR%UD]LO&KLOHDQG3DUDJXD\ZHUHDOOKLJKHUWKDQWKRVHRI,QGLDQVWXGHQWVWKHPHDQVFRUHRI-DSDQHVH
VWXGHQWVZDVWZLFHDVKLJKDVWKDWRI,QGLDQVWXGHQWV7KHUHVXOWVZHUHVLPLODULQRZQODQJXDJHUHDGLQJFRPSUHKHQVLRQPHGLDQUHDGLQJVFRUHZDVSRLQWV&KLOHVPHDQZDVSRLQWV,UDQVSRLQWVDQG,QGLDVWKHORZHVWDWSRLQWV.LQJGRQS
7/28/2019 englishgprg-wps-071
7/38
ZRXOGHQGHDYRXUWRSURYLGHIUHHDQGFRPSXOVRU\HGXFDWLRQWRDOOFKLOGUHQXSWRDJHE\7KLV
JRDOWXUQHGRXWWREHHOXVLYHDQGWKHGHDGOLQHIRULWVDFKLHYHPHQWKDVEHHQSXWEDFNUHSHDWHGO\LQWKH
SDVW\HDUV:KLOHHYHQWRGD\WKLVJRDOUHPDLQVXQIXOILOOHGWKHUHKDVEHHQYHU\HQFRXUDJLQJ
SURJUHVVLQVFKRROLQJSDUWLFLSDWLRQDQGRWKHUHGXFDWLRQDORXWFRPHLQGLFDWRUVLQUHFHQWWLPHV:H
FRQVLGHUVHYHUDOHGXFDWLRQDODFFHVVDQGTXDOLW\LQGLFDWRUVQH[W
3ULPDU\DQGVHFRQGDU\HQUROPHQWUDWHV
7KH$6(5VXUYH\SURYLGHVWKHODWHVWSLFWXUHRIVFKRROLQJSDUWLFLSDWLRQLQ,QGLD,WILQGV
WKDWSHUFHQWRIDOOHOHPHQWDU\VFKRRODJHFKLOGUHQ\HDUROGVZHUHHQUROOHGLQVFKRRODQ
HQFRXUDJLQJVWDWLVWLFUHIOHFWLQJDJRRGGHDORISURJUHVVFRPSDUHGWRHQUROPHQWVLQWKHHDUO\V
$PRQJFKLOGUHQ\HDUVROGHQUROZDVORZHURIJLUOVDQGRIER\VZHUHRXWRIVFKRRO
HLWKHUQHYHUHQUROOHGLQVFKRRORUGURSSHGRXW$PRQJ\HDUVROGVWKHFRUUHVSRQGLQJRXWRI
VFKRROILJXUHVURVHVWHHSO\WRDQGUHVSHFWLYHO\IRUJLUOVDQGER\V
)LJXUHVKRZVDJURVVHQUROPHQWUDWHLQVHFRQGDU\HGXFDWLRQRIZKLFKZHQRWHGZDV
EHORZWKHOHYHOSUHGLFWHGIRUDFRXQWU\RI,QGLDVSHUFDSLWDLQFRPHOHYHO6FKRROLQJSDUWLFLSDWLRQ
GHSHQGVRQERWKWKHH[WHQWRIGHPDQGIRUDQGWKHDYDLODELOLW\RIVXSSO\RIVFKRROLQJ$FFRUGLQJWR
6HYHQWK$OO,QGLD(GXFDWLRQ6XUYH\1&(57LQWKHUHZHUHRQO\RQHILIWKDVPDQ\
VHFRQGDU\VFKRROVWKRVHZLWKJUDGHFODVVHVDVWKHQXPEHURISULPDU\VFKRROV7KXVLWVHHPV
OLNHO\WKDWVHFRQGDU\VFKRROHQUROPHQWUDWHVDUHORZSDUWO\EHFDXVHRIWKHODFNRIVXSSO\RIQHDUE\
VHFRQGDU\VFKRROV+RZHYHUGHVSLWHVXSSO\FRQVWUDLQWVGHPDQGIRUVHFRQGDU\HGXFDWLRQKDVULVHQ
DQGLVOLNHO\WRULVHSDUWO\YLDLQFUHDVHLQSULYDWHVFKRROLQJEHFDXVHLWLVOXFUDWLYHOHYHORIHGXFDWLRQ
WRDFTXLUH.LQJGRQDQG.LQJGRQDQG8QQLILQGWKDWWKHHGXFDWLRQZDJHUHODWLRQVKLSLV
FRQYH[LQ,QGLDLHUHWXUQVWRVHFRQGDU\DQGKLJKHUHGXFDWLRQDUHVLJQLILFDQWO\JUHDWHUWKDQWR
SULPDU\DQGPLGGOHOHYHOVRIHGXFDWLRQ$SSHQGL[7DEOHXVLQJ1DWLRQDO6DPSOH6XUYH\GDWDDOVR
VKRZVWKDWWKHHFRQRPLFUHWXUQVWRHGXFDWLRQLQFUHDVHZLWKHGXFDWLRQOHYHOLHVLQFHWKHFRHIILFLHQW
RQWKHTXDGUDWLFWHUPLQ\HDUVRIHGXFDWLRQLVODUJHSRVLWLYHDQGVWDWLVWLFDOO\VLJQLILFDQWLQDOPRVW
HYHU\VWDWHIRUERWKJHQGHUV)LJXUHVKRZVWKDWIRUERWKPHQDQGZRPHQWKHUHWXUQVWRKLJKHU
VHFRQGDU\DQGWHUWLDU\HGXFDWLRQKDYHULVHQFRQVLVWHQWO\RYHUWLPH)RUZRPHQWKHUHWXUQWRSULPDU\
7KRXJKWKHILJXUHVHHPVKLJKLQUHODWLRQWR*RYHUQPHQWRI,QGLDV6HOHFWHG(GXFDWLRQ6WDWLVWLFVIRU
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
WKHHGXFDWLRQRIHDFKFKLOGZLWKLQWKHIDPLO\WRWDOIHUWLOLW\UDWHIRU,QGLDDVDZKROHIHOOIURPWRLQWKHSHULRG
7/28/2019 englishgprg-wps-071
8/38
HGXFDWLRQKDVIDOOHQEXWIRUPHQLWKDVUHPDLQHGVWDWLF7KHVHILQGLQJVDUHEDVHGRQ1DWLRQDO6DPSOH
6XUYH\GDWDDQDO\VHGE\'XUDLVDP\9DVXGHYD'DWWDDQG:RUOG%DQN
0HQ
:RPHQ
)LJXUH
0DUJLQDOUHWXUQVWRHGXFDWLRQE\OHYHORIHGXFDWLRQ\HDUDQGJHQGHU6RXUFH:RUOG%DQN
EHWZHHQDQG1)+6)LQDOO\GHPDQGIRUHGXFDWLRQPD\DOVRKDYHLQFUHDVHGLIWKHSHUFHLYHGEHQHILWVRIHGXFDWLRQLWVSULYDWHHFRQRPLFUDWHVRIUHWXUQLQFUHDVHG
7/28/2019 englishgprg-wps-071
9/38
8VLQJ1DWLRQDO6DPSOH6XUYH\GDWDIRUWKHUHLVDJRRGGHDORILQWHUVWDWHYDULDWLRQ
LQWKHH[WHQWRILQHTXDOLW\LQDFFHVVWRVHFRQGDU\VFKRROLQJDVVHHQLQ)LJXUH7KHLQHTXDOLW\
PHDVXUHGDVWKHGLIIHUHQFHLQDFFHVVWRVHFRQGDU\HGXFDWLRQDPRQJWKRVHLQWKHWRSDQGERWWRP
TXLQWLOHVRIWKHGLVWULEXWLRQRIKRXVHKROGSHUFDSLWDLQFRPHLVJUHDWHVWLQ+DU\DQD$QGKUD3UDGHVK
DQGWKHVRFDOOHG%,0$58VLFNVWDWHV%LKDU0DGK\D3UDGHVK5DMDVWKDQDQG8WWDU3UDGHVK
ZKLFKODJEHKLQGLQPDQ\RWKHULQGLFDWRUVRIVRFLDOGHYHORSPHQW7KHLQHTXDOLW\LVORZHVWLQWKHOHIW
OHDQLQJVWDWHVRI.HUDODDQG:HVW%HQJDO
)LJXUH'LIIHUHQWLDODFFHVVWRVHFRQGDU\VFKRROLQJEHWZHHQWKHWRSDQGERWWRPLQFRPHTXLQWLOHV
6RXUFH:RUOG%DQN
)LJXUHVKRZVJUHDWLQWHUVWDWHYDULDWLRQLQJHQGHUGLVSDULW\LQVHFRQGDU\VFKRROHQUROPHQW
UDWHV7KHJHQGHUSDULW\LQGH[KHUHLVWKHPDOHWRIHPDOHVHFRQGDU\VFKRROHQUROPHQWUDWLR$UDWLRRI
UHSUHVHQWVJHQGHUHTXDOLW\6WDWHVVXFKDV%LKDUDQG5DMDVWKDQKDYHJURWHVTXHJHQGHULQHTXDOLW\
JLUOVDUHRQO\KDOIDVOLNHO\WRHQUROLQVHFRQGDU\VFKRRODVER\V2WKHU%,0$58VWDWHV8WWDU3UDGHVKDQG0DGK\D3UDGHVKWRJHWKHUZLWKWKHLUVSOLWRIIV-KDUNKDQGDQG&KDWWLVJDUKDOVRKDYH
DSSDOOLQJJHQGHULQHTXDOLW\EXWRQWKHEULJKWVLGHPDQ\VWDWHVKDYHJHQGHUSDULW\RUHYHQVOLJKWO\
SURIHPDOHVHFRQGDU\HQUROPHQWUDWHVHJ.HUDODDQG7DPLO1DGX.LQJGRQILQGVWKDWDQ
LPSRUWDQWSDUWRIWKHUHDVRQIRUJHQGHULQHTXDOLW\LVWREHIRXQGZLWKLQWKHKRXVHKROGDVRSSRVHGWR
LQVWLWXWLRQDOH[SODQDWLRQVLQGHHGSROLF\SURPRWHVJLUOVHQUROPHQWE\LQVWLWXWLQJWXLWLRQIUHH
VFKRROLQJIRUJLUOV8VLQJKRXVHKROGIL[HGHIIHFWVHTXDWLRQVVKHILQGVVWURQJZLWKLQKRXVHKROGELDV
DJDLQVWGDXJKWHUVLQWHUPVRIHQUROPHQWDQGKRXVHKROGHGXFDWLRQDOH[SHQGLWXUH
-KDUNKDQGVSOLWRIIIURP%LKDUDQG&KDWWLVJDUKIURP0DGK\D3UDGHVKLQWRIRUPLQGHSHQGHQWQHZVWDWHV
7/28/2019 englishgprg-wps-071
10/38
)LJXUH*HQGHUSDULW\LQGH[LQVHFRQGDU\*URVV(QUROPHQW5DWLR
6RXUFH:RUOG%DQNEDVHGHQUROPHQWILJXUHVLQ0+5'
6FKRRODWWHQGDQFHUDWHV
&XUUHQWDWWHQGDQFHUDWHVDUHDPRUHUHOLDEOHLQGLFDWRURIVFKRROLQJSDUWLFLSDWLRQWKDQ
HQUROPHQWUDWHVVLQFHODUJHHQUROPHQWUDWHVPHDVXUHGDWWKHVWDUWRIWKHVFKRRO\HDUFDQPDVNQRQ
DWWHQGDQFHDQGRUGURSRXWODWHULQWKHVFKRRO\HDU7DEOHVKRZVFXUUHQWVFKRRODWWHQGDQFHUDWHV
IURPWKH1DWLRQDO)DPLO\+HDOWK6XUYH\V1)+6DQG,QWKLVVKRUW\HDUSHULRGVFKRRO
DWWHQGDQFHDPRQJUXUDO\HDUROGJLUOVDQGER\VLQFUHDVHGE\DQGSHUFHQWDJHSRLQWV
UHVSHFWLYHO\WKHVHDUHYHU\VXEVWDQWLDOLQFUHDVHV,QWKHUXUDO\HDUDJHJURXSLQFUHDVHVZHUH
PRUHPRGHVWEXWVWLOOODUJHHVSHFLDOO\IRUJLUOVDWSHUFHQW8UEDQLQFUHDVHVZHUHVPDOOHU
$QGKUD3UDGHVK0DGK\D3UDGHVK5DMDVWKDQDQG8WWDU3UDGHVKPDGHYHU\ODUJHLPSURYHPHQWVLQ
WKHLUFXUUHQWVFKRRODWWHQGDQFHUDWHVSDUWLFXODUO\LQUXUDODUHDVZKHUHLQHDFKRIWKHVHIRXUVWDWHV
DWWHQGDQFHUDWHVURVHE\RYHUSHUFHQWDJHSRLQWVLQWKHVL[\HDUSHULRG2YHUDOOQHDUO\SHUFHQW
RIDOO\HDUROGVZHUHDWWHQGLQJVFKRROLQ$V.LQJGRQHWDOQRWHVZKLOHDWWHQGDQFH
UDWHVWKHPVHOYHVDUHQRWDJXDUDQWHHRIJUDGHFRPSOHWLRQRURIDFKLHYLQJPLQLPXPOHYHOVRIOHDUQLQJ
WKHVHDUHQHYHUWKHOHVVKLJKO\HQFRXUDJLQJWUHQGV
7/28/2019 englishgprg-wps-071
11/38
7DEOH
,QFUHDVHLQFXUUHQWVFKRRODWWHQGDQFHE\VWDWHJHQGHUDQGUHVLGHQFH
5XUDO 8UEDQ
$JH $JH $JH $JH
,QFU HDVH ,QFU HDVH ,QFU HDVH ,QFU HDVH0$/( $QGKUD3UDGHVK %LKDU *XMDUDW +DU\DQD .DUQDWDND .HUDOD 0DGK\D3UDGHVK 0DKDUDVKWUD 2ULVVD 3XQMDE 5DMDVWKDQ
7DPLO1DGX 8WWDU3UDGHVK :HVW%HQJDO $OO,QGLD
)HPDOHV $QGKUD3UDGHVK
%LKDU *XMDUDW +DU\DQD .DUQDWDND .HUDOD 0DGK\D3UDGHVK
0DKDUDVKWUD 2ULVVD 3XQMDE 5DMDVWKDQ 7DPLO1DGX 8WWDU3UDGHVK :HVW%HQJDO $OO,QGLD
6RXUFH1)+6DQG1)+6VWDWHDQGDOO,QGLDUHSRUWV,,36DQG25&0DFUR1RWH+LPDFKDO3UDGHVKILJXUHVDUHQRWDYDLODEOHIURP1)+6'DWDRQFXUUHQWVFKRRODWWHQGDQFHIURPWKH1)+6VXUYH\KDYHQRWEHHQUHOHDVHGDVRIVSULQJ
/LWHUDF\UDWHV
'DWDIURPWKHDQG,QGLDQFHQVXVHVLQ7DEOHVKRZWKDWLQWKHSRSXODWLRQDJHG
\HDUVDQGROGHUOLWHUDF\UDWHVURVHVXEVWDQWLDOO\LQWKHVIURPSHUFHQWWRSHUFHQWDQ
LQFUHDVHRISRLQWV7KLVLVWKHKLJKHVWDEVROXWHLQFUHDVHLQDQ\GHFDGHVLQFHUHFRUGVEHJDQLQ
2YHUWKLV\HDUSHULRGWKHJHQGHUJDSDOVREHJDQWRFORVHQRWLFHDEO\DVVHHQLQ)LJXUH
6RPHVWDWHVH[SHULHQFHGSDUWLFXODUO\UDSLGOLWHUDF\LQFUHDVHVHJLQ0DGK\D3UDGHVKDQG5DMDVWKDQ
OLWHUDF\UDWHVURVHE\DQGSHUFHQWDJHSRLQWVUHVSHFWLYHO\7KHLQFUHDVHLQIHPDOHOLWHUDF\ZDV
/LWHUDF\UDWHVLQFUHDVHGE\SHUFHQWDJHSRLQWVLQWKHVSRLQWVLQWKHVDQGSRLQWVLQWKHV
7/28/2019 englishgprg-wps-071
12/38
DOVRODUJHLQWKHVHVWDWHVDVZHOODVLQ8WWDU3UDGHVKDQG$QGKUD3UDGHVK+RZHYHU%LKDUDQG*XMDUDW
PDGHSRRUSURJUHVV
)LJXUH/LWHUDF\UDWHVE\JHQGHU6RXUFH&HQVXVRI,QGLD
8QIRUWXQDWHO\DJHVSHFLILFOLWHUDF\GDWDZHUHQRWDYDLODEOHIURPWKH,QGLDQFHQVXVHYHQLQ
HDUO\+RZHYHUVXFKGDWDIURPWKH1DWLRQDO)DPLO\+HDOWK6XUYH\1)+6RIDQG
VKRZHQFRXUDJLQJWUHQGV7DEOHVKRZVWKDWGXULQJWKHVKRUW\HDUSHULRGEHWZHHQWR
OLWHUDF\UDWHVLQWKH\RXQJDJHJURXSVURVHUDSLGO\IRUJLUOVWDNLQJUXUDODQGXUEDQDUHDVWRJHWKHU
IHPDOHOLWHUDF\LQWKH\RXQJHVWDJHJURXSURVHE\QHDUO\SHUFHQWDJHSRLQWV)RUUXUDOJLUOV
DJHGOLWHUDF\UDWHVURVHE\DERXWSRLQWV2YHUDOOWKHQDWLRQDOOLWHUDF\UDWHIRUPDOHVDQG
IHPDOHVDJHG\HDUVLQFUHDVHGE\DERXWSHUFHQWDJHSRLQWV
$Q\PDMRULPSURYHPHQWLQQDWLRQDOOLWHUDF\LQWKHIXWXUHZLOOGHSHQGFUXFLDOO\RQLWVSURJUHVV
DPRQJ\RXQJSHUVRQVLQWKHIRXUODUJHQRUWK,QGLDQVWDWHVRI%LKDU0DGK\D3UDGHVK5DMDVWKDQDQG
8WWDU3UDGHVKWKHVRFDOOHG%,0$58RUVLFNVWDWHVZKLFKKDYHODJJHGEHKLQGSDUWLFXODUO\
VHULRXVO\LQWKHSDVW([DPLQLQJUHFHQWSURJUHVVLQWKHVHVWDWHVLVSHUKDSVWKHPRVWLQIRUPDWLYH
VWDWLVWLFZKHQDWWHPSWLQJWRIRUHVHHWKHIXWXUHRIOLWHUDF\LQ,QGLD7DEOHVKRZVPDUNHGDFFHOHUDWLRQ
RYHUWLPHLQOLWHUDF\UDWHVDPRQJ\HDUROGVLQWKHVHVWDWHV:KHUHDVWKHOLWHUDF\UDWHDPRQJWKH
&RUUHVSRQGLQJGDWDIURP1)+6DUHQRWDYDLODEOH\HW
7/28/2019 englishgprg-wps-071
13/38
\RXQJLQFUHDVHGE\RQO\SHUFHQWDJHSRLQWVLQHDFKRIWKHWZRGHFDGHVRIWKHVDQGVLW
LQFUHDVHGE\SRLQWVLQWKHVDQGE\SRLQWVLQWKHV
7DEOH
/LWHUDF\UDWHVE\VWDWHDUHDDQGJHQGHU
0DOH )HPDOH 3HUVRQV
,QFUHDVH ,QFUHDVH
,QFUHDVH
$QGKUD3UDGHVK %LKDU *XMDUDW
+DU\DQD +LPDFKDO3UDGHVK .DUQDWDND .HUDOD
0DGK\D3UDGHVK 0DKDUDVKWUD
2ULVVD 3XQMDE 5DMDVWKDQ 7DPLO1DGX 8WWDU3UDGHVK :HVW%HQJDO ,QGLD
6RXUFH&HQVXV&HQVXVERWKWDNHQIURP7DEOH3ODQQLQJ&RPPLVVLRQD
1RWH7KHROGERXQGDULHVRI%LKDU0DGK\D3UDGHVKDQG8WWDU3UDGHVKKDYHEHHQXVHGIRULHLQFOXGLQJ-KDUNKDQG&KKDWWLVJDUKDQG8WWDUDQFKDOUHVSHFWLYHO\
7DEOH
,QFUHDVHLQDJHVSHFLILFOLWHUDF\UDWHVE\DUHDDQGJHQGHU
5XUDO 8UEDQ 7RWDO
,QFUHDVH ,QFUHDVH
,QFUHDVH
0DOHV $JH
$JH $JH
)HPDOHV $JH $JH $JH
7RWDO
$JH $JH $JH
6RXUFH&RPSLOHGIURP1)+67DEOHDQG1)+67DEOH1DWLRQDO)LQDO5HSRUWV,,36DQG25&0DFUR
)LJXUHVIRU1)+6GDWDIURPDUHQRWUHOHDVHGDVRIHDUO\
7/28/2019 englishgprg-wps-071
14/38
7DEOH
/LWHUDF\UDWHVLQWKHDJHJURXS
%LKDU0DGK\D3UDGHVK5DMDVWKDQDQG8WWDU3UDGHVK
7/28/2019 englishgprg-wps-071
15/38
SUREOHPGLJLWVGLYLGHGE\GLJLW,QERWKUHDGLQJDQGDULWKPHWLFWKHUHZDVVLJQLILFDQWLQWHUVWDWH
YDULDWLRQLQVWXGHQWSHUIRUPDQFH)RUH[DPSOHLQEDVHGRQWKHVDPSOHRIJUDGHFKLOGUHQLQ
:HVW%HQJDO+DU\DQD%LKDU8WWDUDQFKDODQG&KKDWWLVJDUKOHVVWKDQFKLOGUHQZHUHXQDEOHWRGR
WKHVLPSOHGLYLVLRQSUREOHPV,QWKHERWWRPILYHVWDWHVRIJUDGHFKLOGUHQFRXOGQRWVROYH
WKHVDPHGLYLVLRQSUREOHPV
7DEOH
/HDUQLQJOHYHOVE\JUDGHOHYHORIGLIILFXOW\RITXHVWLRQDQGVXEMHFW
5HDGLQJ*UDGH 1RWKLQJ /HWWHU :RUG 3DUDDW
*UDGHOHYHO6WRU\DW
*UDGHOHYHO7RWDO
7RWDO
$ULWKPHWLF*UDGH 1RWKLQJ 1XPEHU
UHFRJQLWLRQ
6XEWUDFWLRQ 'LYLVLRQ 7RWDO
7RWDO
6RXUFH$6(53UDWKDP
$SSHQGL[7DEOHVKRZVWKHILUVWRIILFLDOO\FROOHFWHGQDWLRQDODFKLHYHPHQWOHYHOILJXUHVIRU
DERXWVWXGHQWVRIJUDGHDJH6WDQGDUGL]HGWHVWVRIFRPSHWHQF\LQODQJXDJH
PDWKHPDWLFVDQGHQYLURQPHQWDOVFLHQFHZHUHDGPLQLVWHUHGDQGHDFKVWXGHQWVPDUNVZHUHUHFRUGHGLQ
SHUFHQWDJHWHUPV7KHVHWHVWVZHUHDGPLQLVWHUHGE\WKH1DWLRQDO&RXQFLORI(GXFDWLRQDO5HVHDUFKDQG
7UDLQLQJ1&(57LQDQGWKHUHVXOWVSXEOLVKHGLQVRRQDIWHUWKHUHOHDVHRIWKH$6(5
VXUYH\7KHDYHUDJHSHUFHQWDJHPDUNIRU,QGLDDVDZKROHLVSHUFHQWLQVFLHQFHSHUFHQWLQ
PDWKVDQGLQODQJXDJH:KLOHLWLVQRWFOHDUKRZWRLQWHUSUHWWKHVHWKH\DSSHDUWRFRQILUP
$6(5VILQGLQJVRIORZOHDUQLQJOHYHOV
&RPSDULVRQE\VWDWHVXJJHVWVWKDWFHUWDLQVWDWHVWKDWKDYHKLJKOHYHOVRIHGXFDWLRQDODFFHVVDOVRKDYHORZDYHUDJH
DFKLHYHPHQWOHYHOV)RULQVWDQFH+LPDFKDO3UDGHVKKDVDQDYHUDJHPDUNRIRQO\DERXWLQVFLHQFHDQGPDWKV
7/28/2019 englishgprg-wps-071
16/38
/HDUQLQJDFKLHYHPHQWOHYHOVLQVHFRQGDU\HGXFDWLRQ
*LYHQWKHZHDNEDVHRIOHDUQLQJDWWKHSULPDU\OHYHOLWLVH[SHFWHGWKDWOHDUQLQJOHYHOVDWWKH
VHFRQGDU\OHYHORIHGXFDWLRQZLOODOVREHSRRU:HDOUHDG\VDZWKDWLQFURVVFRXQWU\FRPSDULVRQ
DFKLHYHPHQWOHYHOVRI,QGLDQVWXGHQWVDSSHDUWREHZHOOEHORZWKHLQWHUQDWLRQDODYHUDJHWKRXJKWKH
ODWWHUGRHVLQFOXGHGHYHORSHGFRXQWULHV:KLOHHDFK,QGLDQVWDWHH[DPLQDWLRQERDUGVHWVLWVRZQ
FXUULFXODDQGH[DPLQDWLRQVDQGWKHUHDUHQRQDWLRQDOOHYHOGDWDEDVHGRQDFRPPRQVWDQGDUGL]HG
DFKLHYHPHQWWHVWLQ,QGLDWKH&RXQFLORI%RDUGVRI6HFRQGDU\(GXFDWLRQ&2%6(SURYLGHV
SDVVUDWHVLQWKH+LJK6FKRRODQG,QWHUPHGLDWHVHQLRUVHFRQGDU\H[DPLQDWLRQVLQGLIIHUHQWVWDWHV
SDVVUDWHVLQWKH+LJK6FKRROH[DPYDULHGIURPLQ0DQLSXUWRLQ$QGKUD3UDGHVKEXW
VXFKLQWHUVWDWHFRPSDULVRQLVPHDQLQJOHVVVLQFHFXUULFXODH[DPSDSHUVSDVVLQJUHTXLUHPHQWVHWFDOO
GLIIHUIURPVWDWHWRVWDWH
,QDQ\FDVHWKHKLJKVFKRROSDVVUDWHVFDQQRWEHWDNHQDWIDFHYDOXHDVWKH\DUHPXFKLQIODWHG
GXHWRWKHSKHQRPHQRQRIZLGHVSUHDGFKHDWLQJLIWKHH[SHULHQFHRI8WWDU3UDGHVKFDQEH
JHQHUDOL]HG:KLOHWKHWUXHOHYHOVRIOHDUQLQJDFKLHYHPHQWVLQVHFRQGDU\HGXFDWLRQDUHJHQHUDOO\
KLGGHQIRUWXLWRXVO\WKH\EHFDPHYLVLEOHRQH\HDULQ8WWDU3UDGHVK7DEOHVKRZVWKDWZKHQWKH
.DO\DQ6LQJKJRYHUQPHQWEURXJKWLQDQDQWLFKHDWLQJUXOHDQGLQVWDOOHGSROLFHDWDOOH[DPLQDWLRQ
FHQWUHVLQWRSUHYHQWWKHPDVVFKHDWLQJWKDWURXWLQHO\WDNHVSODFHDWERDUGH[DPLQDWLRQVLQ8WWDU
3UDGHVKWKHSDVVUDWHLQWKH+LJK6FKRROH[DPIHOOIURPLQWRDSLWLIXOLQ
DPRQJUHJXODUFDQGLGDWHVDQGDPRQJFDQGLGDWHVZKRDSSHDUIRUH[DPVSULYDWHO\LHWKURXJK
VHOIVWXG\ZLWKRXWDWWHQGLQJDQ\VFKRRO7KLVLVZKHQWKHEDUIRUSDVVLQJLVVHWYHU\ORZLHD
VWXGHQWRQO\QHHGVRQDYHUDJHPDUNVLQWKHLUYDULRXVVXEMHFWVLQRUGHUWRSDVV+LJK6FKRRO7KLV
VXJJHVWVWKHWUXHH[WHQWRIWKHSUREOHPRIORZDFKLHYHPHQWOHYHOVLQVHFRQGDU\HGXFDWLRQWKRXJKLWLV
SRVVLEOHWKDWDFKLHYHPHQWOHYHOVLQ8WWDU3UDGHVKDUHORZHUWKDQWKRVHLQRWKHUVWDWHV0RUHRYHU
VWXGHQWVUHO\RQJXHVVSDSHUVZKLFKDUHSUHSDUHGDQGVROGDIHZZHHNVEHIRUHWKHH[DPV7KHVH
DWWHPSWWRDQWLFLSDWHH[DPTXHVWLRQDQGDUHRIWHQUHPDUNDEO\FORVHWRWKHP7KHUHLVIUHTXHQWOHDNLQJ
RISDSHUVLQDGYDQFHRIH[DPLQDWLRQV
DQGLQ.HUDODWKHFRUUHVSRQGLQJILJXUHVDUHDQGUHVSHFWLYHO\ZD\EHORZWKHQDWLRQDODYHUDJHLQERWKFDVHV%\FRQWUDVWWKHVWDWHZLWKWKHORZHVWOHYHORISDUWLFLSDWLRQLQHGXFDWLRQSRRUHVWDFFHVVLQGLFDWRUVDFFRUGLQJWR7DEOH
QDPHO\%LKDUKDVWKHKLJKHVWOHYHORIDFKLHYHPHQWDERXWSHUFHQWDJHSRLQWVDERYHWKHQDWLRQDODYHUDJH7KLVDSSDUHQWO\QHJDWLYHUHODWLRQVKLSEHWZHHQDFFHVVDQGDFKLHYHPHQWFRXOGEHH[SODLQHGE\WKHIDFWWKDWVWDWHVZLWKKLJK
DFFHVVLQGLFDWRUVKDYHDKLJKHUSURSRUWLRQRIILUVWJHQHUDWLRQOHDUQHUVDQGSRRUHUVWXGHQWVLQWKHLUVFKRROV+RZHYHUQRWDOOVWDWHVFRQIRUPWRWKLVSDWWHUQ)RULQVWDQFH7DPLO1DGXDVWDWHZLWKKLJKDFFHVVLQGLFDWRUVDOVRSHUIRUPVTXLWHZHOORQDFKLHYHPHQWOHYHOV
7/28/2019 englishgprg-wps-071
17/38
7DEOH
3DVVUDWHVLQH[DPVRIWKH83+LJK6FKRRO([DP%RDUG
7/28/2019 englishgprg-wps-071
18/38
VXFKDVGULQNLQJZDWHUWRLOHWVIXUQLWXUHWHDFKLQJDLGVDQGERRNVOHWDORQHPRUHDGYDQFHGUHVRXUFHV
VXFKDVIDQVSOD\JURXQGPXVLFDOLQVWUXPHQWVFRPSXWHUVHWF
(TXDOO\ZRUU\LQJSHUKDSVLVHYLGHQFHRIWHDFKHUQHJOLJHQFHLQVFKRROV)LUVWO\WHDFKHU
DEVHQFHUDWHVDUHKLJK.UHPHUHWDOVVXUYH\RIWHDFKHUDEVHQFHLQUXUDO,QGLDLQPDGH
WKUHHXQDQQRXQFHGYLVLWVWRHDFKRQHRIVFKRROVLQPDMRUVWDWHVRI,QGLD7KH\IRXQGWKDWRQ
DYHUDJHSHUFHQWRIWHDFKHUVLQJRYHUQPHQWSULPDU\VFKRROVZHUHDEVHQWIURPVFKRRORQDJLYHQ
GD\6HFRQGO\DQGPRUHGLVWXUELQJO\HYHQDPRQJWHDFKHUVZKRZHUHSUHVHQWRQO\DERXWKDOIZHUH
IRXQGHQJDJHGLQWHDFKLQJ.UHPHUHWDO7KH352%(VXUYH\KDGVLPLODUILQGLQJVRIORZ
OHYHORIWHDFKLQJDFWLYLW\LQVFKRROV352%(7HDPVWDWHVWKDWWKHH[WUHPHFDVHVRIWHDFKHU
QHJOLJHQFHZHUHOHVVGHYDVWDWLQJWKDQWKHTXLHWLQHUWLDRIWKHPDMRULW\RIWHDFKHUV,QKDOIRIWKH
VDPSOHVFKRROVWKHUHZDVQRWHDFKLQJDFWLYLW\DWWKHWLPHRIWKHLQYHVWLJDWRUVYLVLW,QDFWLYH
WHDFKHUVZHUHIRXQGHQJDJHGLQDYDULHW\RISDVWLPHVVXFKDVVLSSLQJWHDUHDGLQJFRPLFVRUHDWLQJ
SHDQXWVZKHQWKH\ZHUHQRWMXVWVLWWLQJLGOH*HQHUDOO\VSHDNLQJWHDFKLQJDFWLYLW\KDVEHHQUHGXFHG
WRDPLQLPXPLQWHUPVRIERWKWLPHDQGHIIRUW$QGWKLVSDWWHUQLVQRWFRQILQHGWRDPLQRULW\RI
LUUHVSRQVLEOHWHDFKHUVLWKDVEHFRPHDZD\RIOLIHLQWKHSURIHVVLRQ352%(7HDPS
7KH$6(5UHSRUWDOVRIRXQGDWHDFKHUDEVHQFHUDWHRIDVLQ.UHPHUHWDO
5ROHRISULYDWHVFKRROLQJ
3RRUO\UHVRXUFHGSXEOLFVFKRROVZKLFKVXIIHUIURPKLJKUDWHVRIWHDFKHUDEVHQWHHLVPFDQKDYH
HQFRXUDJHGWKHUDSLGJURZWKRISULYDWHXQDLGHGVFKRROLQJLQ,QGLDSDUWLFXODUO\LQXUEDQDUHDV
3ULYDWHVFKRROVGLYLGHLQWRWZRW\SHVUHFRJQLVHGVFKRROVDQGXQUHFRJQLVHGVFKRROV*RYHUQPHQW
UHFRJQLWLRQLVDQRIILFLDOVWDPSRIDSSURYDODQGIRUWKLVDSULYDWHVFKRROLVUHTXLUHGWRIXOILOD
QXPEHURIFRQGLWLRQVWKRXJKKDUGO\DQ\SULYDWHVFKRROVWKDWJHWUHFRJQLWLRQDFWXDOO\IXOILODOOWKH
$EVHQFHUDWHVYDULHGIURPSHUFHQWLQ0DKDUDVKWUDWRSHUFHQWLQ-KDUNKDQGZLWKKLJKHUUDWHVFRQFHQWUDWHGLQ
WKHSRRUHUVWDWHV7KH\DOVRIRXQGWKDWLQDYLOODJHIL[HGHIIHFWVHTXDWLRQRIWHDFKHUDEVHQFHSULYDWHVFKRROWHDFKHUVZHUHSHUFHQWDJHSRLQWVOHVVOLNHO\WREHDEVHQWWKDQSXEOLFVFKRROWHDFKHUVLQWKHVDPHYLOODJH:HGRQRWLQFOXGHWKHVRFDOOHGSULYDWHDLGHGVFKRROVLQWKHFDWHJRU\RISULYDWHVFKRROV$LGHGVFKRROVDUHUXQE\
SULYDWHPDQDJHPHQWVEXWIXQGHGODUJHO\E\JRYHUQPHQWJUDQWLQDLGDQGDUHYHU\VLPLODUWRJRYHUQPHQWVFKRROVLQ
PDQ\UHVSHFWV7KH\FKDUJHWKHVDPHIHHOHYHOVDVJRYHUQPHQWVFKRROVQRZPDQGDWHGWREHQLODQGIROORZLQJFHQWUDOLVLQJOHJLVODWLRQLQWKHHDUO\VWKHLUWHDFKHUVDUHSDLGGLUHFWO\IURPWKHVWDWHJRYHUQPHQWWUHDVXU\DWWKH
VWDWHWHDFKHUVDODU\UDWHV6FKRROVUXQE\SULYDWHPDQDJHPHQWVZLWKRXWVWDWHDLGDUHSULYDWHXQDLGHG7KHVHUXQHQWLUHO\RQIHHUHYHQXHVDQGKDYHYLUWXDOO\QRVWDWHLQYROYHPHQW8QDLGHGVFKRROVDUHWKXVWKHJHQXLQHO\SULYDWHVFKRROVDQGKHQFHIRUWKZHUHIHUWRWKHVHVLPSO\DVSULYDWHDQGUHIHUWRSULYDWHDLGHGVFKRROVVLPSO\DVDLGHG
7/28/2019 englishgprg-wps-071
19/38
FRQGLWLRQVRIUHFRJQLWLRQ7KHHPHUJHQFHRIODUJHQXPEHUVRIXQUHFRJQL]HGSULPDU\VFKRROV
VXJJHVWVWKDWVFKRROVDQGSDUHQWVGRQRWWDNHJRYHUQPHQWUHFRJQLWLRQDVDVWDPSRITXDOLW\
3ULYDWHVFKRROLQJVKDUHDFFRUGLQJWRRIILFLDODQGKRXVHKROGGDWD
'HVSLWHGDWDGHILFLHQFLHVLWLVFOHDUWKDWWKHUHLVDVXEVWDQWLDOIHHFKDUJLQJSULYDWHVFKRROLQJ
VHFWRULQ,QGLD7DEOHVKRZVWKHHQUROPHQWVKDUHRISULYDWHVFKRROVLQUXUDODQGXUEDQ,QGLD
DFFRUGLQJWRERWKRIILFLDOVFKRROUHWXUQVGDWDIURPDQGDQGKRXVHKROGVXUYH\GDWDIURP
DQG7KHERWWRPKDOIRIWKHWDEOHVKRZVFRUUHVSRQGLQJILJXUHVIRU8WWDU3UDGHVKDVWDWH
ZLWKKLJKOHYHOVRISULYDWHVFKRROSDUWLFLSDWLRQ7KHODWHVWRIILFLDOGDWDRQHQUROPHQWE\VFKRROW\SH
DUHIRUIURPWKH6HYHQWK$OO,QGLD(GXFDWLRQ6XUYH\WKRXJKRQO\WKHQDWLRQDOILJXUHVDUH
DYDLODEOHLQHDUO\
7DEOHVKRZVWKDWWKHWUXHVL]HRIWKHSULYDWHVHFWRULQ,QGLDLVPRUHWKDQWKUHHWLPHVWKDW
VKRZQLQRIILFLDOVWDWLVWLFV)RUH[DPSOHDFFRUGLQJWRRIILFLDOVWDWLVWLFVIRURQO\SHUFHQWRI
DOOUXUDOSULPDU\VFKRROVWXGHQWVZHUHDWWHQGLQJSULYDWHVFKRROVEXWDFFRUGLQJWRKRXVHKROGVXUYH\
GDWDIRUWKHVDPH\HDUSHUFHQWZHUH,QUXUDO8WWDU3UDGHVKWKHFRUUHVSRQGLQJILJXUHVZHUH
SHUFHQWDQGDJDLQWKHVXUYH\HVWLPDWHEHLQJPRUHWKDQWKUHHWLPHVWKHRIILFLDOHVWLPDWH%\
WKHWLPHRIWKH352%(VXUYH\LQSHUFHQWRIDOOSULPDU\DJHVWXGHQWV\HDUROGVLQ
UXUDO83DWWHQGHGSULYDWHVFKRROV3UREH7HDP7DEOHDOVRVKRZVWKDWWKHRIILFLDOHQUROPHQW
VKDUHRISULYDWHVFKRROVDWSULPDU\OHYHOURVHIURPLQWRLQ,IWKHH[WHQWRI
XQGHUHVWLPDWLRQLQLVWKHVDPHDVLQWKHQWKHWUXHSULYDWHVFKRROVKDUHRIWRWDOSULPDU\
HQUROPHQWVLQUXUDO,QGLDLQZDVWKUHHWLPHVDVKLJKDVLH7KLVLVFORVHWRWKHRQO\
UHFHQWQDWLRQDOHVWLPDWHDYDLODEOHDVVHHQLQWKHODVWFROXPQRI7DEOHWKH$6(53UDWKDP
SQDWLRQDOVDPSOHVXUYH\RIDERXWKRXVHKROGVDFURVVYLOODJHVILQGVWKDW
SHUFHQWRIDOODQGRIVFKRROJRLQJUXUDOSULPDU\DJHFKLOGUHQ\HDUROGVDWWHQGHGSULYDWH
,QGHHGVRPHRIWKHFRQGLWLRQVDUHRUKDYHRYHUWLPHEHFRPHPXWXDOO\LQFRQVLVWHQW)RULQVWDQFHWKHFRQGLWLRQWR
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
SULYDWHVHFWRULQSULPDU\HGXFDWLRQZDVLQILQLWHVLPDOO\VPDOORUQHJOLJLEO\VPDOO
7KHODWHVWILJXUHVIRUWKH\HDUIURPWKH'LVWULFW,QIRUPDWLRQ6\VWHPIRU(GXFDWLRQ',6(DUHQRWVKRZQEHFDXVHRILWVLQFRPSOHWHFRYHUDJH6LPLODUO\ILQGLQJVIURPWKH$6(5KRXVHKROGVXUYH\DUHQRWVKRZQDVLWGRHVQRWGLVWLQJXLVKEHWZHHQDLGHGDQGXQDLGHGVFKRROVDQGPHUJHVWKHPWRJHWKHULQWRDVLQJOHSULYDWHFDWHJRU\7KHWZRVRXUFHVDUHQRWH[DFWO\FRPSDUDEOHVLQFHLWLVSRVVLEOHWKDWVRPHVFKRROJRLQJ\HDUROGVPD\DWWHQG
SUHSULPDU\RUXSSHUSULPDU\FODVVHV+RZHYHULWLVXQOLNHO\WKDWPDQ\\HDUROGVZRXOGEHLQXSSHUSULPDU\FODVVHV2YHUDOOSHUFHQWRIDOO\HDUROGUXUDO,QGLDQVFKRROJRHUVZHQWWRSULYDWHVFKRROV6KDULII
7/28/2019 englishgprg-wps-071
20/38
VFKRROVLQ7DEOHVKRZVWKDWLQXUEDQ,QGLDSULYDWHVFKRROVVKDUHRIWRWDOHQUROPHQWLQ
ZDVEHWZHHQDERXWDQGSHUFHQWDWGLIIHUHQWOHYHOVRIHGXFDWLRQ
7DEOH
(QUROPHQWVKDUHRISULYDWHVFKRROV
2IILFLDO
SXEOLVKHGGDWD
+RXVHKROG
VXUYH\GDWD
2IILFLDO
SXEOLVKHGGDWD
+RXVHKROG
VXUYH\GDWD
$UHD 6FKRROOHYHO
$//,1',$
5XUDO 3ULPDU\ -XQLRUPLGGOH 6HFRQGDU\ 8UEDQ 3ULPDU\ 1$ -XQLRUPLGGOH 1$ 6HFRQGDU\ 1$
877$5
35$'(6+
5XUDO 3ULPDU\ 1$ -XQLRUPLGGOH 1$ 6HFRQGDU\ 1$ 8UEDQ 3ULPDU\ 1$ 1$ -XQLRUPLGGOH 1$ 1$
6HFRQGDU\ 1$ 1$
6RXUFH2IILFLDOGDWDFRPSXWHGIURPWKH6L[WK$OO,QGLD(GXFDWLRQ6XUYH\1&(572IILFLDOGDWDFRPSXWHGIURPWKH6HYHQWK$OO,QGLD(GXFDWLRQ6XUYH\KWWSJRYXDQLFLQ16FKHGXOH'DWDPDLQDVS[7KHVWDWH
ZLVHILJXUHVKDYHQRWEHHQSRVWHGE\6SULQJ5XUDOKRXVHKROGVXUYH\ILJXUHVIRUDUHEDVHGRQWKHDXWKRUVFDOFXODWLRQVIURP1&$(5VXUYH\7KHXUEDQKRXVHKROGVXUYH\ILJXUHVPDUNHG
DUHWDNHQIURP
1DWLRQDO6DPSOH6XUYH\SXEOLVKHGLQ1662$+RXVHKROGVXUYH\ILJXUHVIRUIRUUXUDO,QGLDWDNHQIURP$6(53UDWKDP
1RWH,QWKH$6(5GDWDFKLOGUHQDJHGDQGDUHDVVXPHGWREHLQSULPDU\PLGGOHDQGVHFRQGDU\
VFKRROUHVSHFWLYHO\RIDOOFKLOGUHQDJHGZHUHLQSULYDWHVFKRRODQGZHUHQRWLQVFKRROWKXVSULYDWHVFKRROVKDUHRIWRWDOVFKRROHQUROPHQWLVWDNHQWREHDQGVLPLODUFDOFXODWLRQVZHUH
SHUIRUPHGIRUPLGGOHDQGVHFRQGDU\VFKRRODJHV
7KHUHDVRQVIRUWKHODUJHGLVFUHSDQF\EHWZHHQKRXVHKROGVXUYH\HVWLPDWHVDQGRIILFLDO
HVWLPDWHVRIWKHVL]HRIWKHSULYDWHVFKRROLQJVHFWRULQ,QGLDDUHWZRIROG.LQJGRQD'Uq]HDQG
.LQJGRQ)LUVWJRYHUQPHQWDQGDLGHGVFKRROWHDFKHUVKDYHLQFHQWLYHVWRRYHUUHSRUWWKHLU
HQUROPHQWVZKHQWKHUHLVORZGHPDQGIRUWKHLUVHUYLFHVVLQFHDVFKRROZLWKIDOOLQJUROOVZRXOGORVH
WHDFKHUVDQGWKLVUHGXFHVWKHDSSDUHQWHQUROPHQWVKDUHRISULYDWHVFKRROV6HFRQGDOORIILFLDOVFKRRO
FHQVXVHVDUHFDUULHGRXWRQO\LQWKHJRYHUQPHQWUHFRJQL]HGVFKRROVDQGLQPRVW,QGLDQVWDWHVWKHUH
$OWKRXJK$6(5PHUJHGDLGHGDQGXQDLGHGSULYDWHVFKRROVLQWRDVLQJOHFDWHJRU\SULYDWHDWWKHSULPDU\OHYHORIHGXFDWLRQWKHUHDUHYHU\IHZDLGHGVFKRROVVRWKDWWKHSULYDWHHQUROPHQWUDWHVLQ$6(5FDQEHWDNHQWRPHDQPRVWO\SULYDWHXQDLGHGVFKRROHQUROPHQWV
7/28/2019 englishgprg-wps-071
21/38
LVQRUHTXLUHPHQWRQSULYDWHSULPDU\VFKRROVWREHHYHQUHJLVWHUHGOHWDORQHEHJRYHUQPHQW
UHFRJQL]HG
(YLGHQFHVXJJHVWVWKDWWKHWUXHVL]HRIWKHSULYDWHVFKRROLQJVHFWRULVJUHDWO\XQGHUHVWLPDWHGLQ
RIILFLDOGDWDGXHWRHQXPHUDWLQJRQO\WKHUHFRJQL]HGVFKRROV+RXVHKROGVXUYH\GDWDJLYHDSLFWXUH
IDUFORVHUWRWKHWUXWKWKDQRIILFLDOVWDWLVWLFVVLQFHSDUHQWVKDYHQRLQFHQWLYHVWRRYHUUHSRUWHQUROPHQW
LQSXEOLFO\IXQGHGVFKRROVRUWRUHSRUWHQUROPHQWLQUHFRJQL]HGVFKRROVRQO\+RXVHKROGVXUYH\GDWD
LQ7DEOHDOUHDG\JLYHDQLQGLFDWLRQRIWKHH[WHQWWRZKLFKWKHHQUROPHQWVKDUHRISULYDWHVFKRROVLQ
SULPDU\HGXFDWLRQLVXQGHUHVWLPDWHGLQRIILFLDOGDWDQDPHO\E\DERXWLQUXUDODUHDV
0XUDOLGKDUDQDQG.UHPHUILQGWKDWLQWKHLUQDWLRQDOVXUYH\RIVWDWHVRIDOOSULYDWH
UXUDOSULPDU\VFKRROVZHUHXQUHFRJQL]HG7KLVDFFRUGVZLWKHYLGHQFHIURPLQGLYLGXDOVWDWHVLQRWKHU
VWXGLHV
3ULYDWHVFKRROLQJLVXWLOL]HGHYHQDPRQJWKHSRRULQ,QGLD)LQGLQJVIURPWKH0,0$3VXUYH\
VKRZWKDWRIDOOHQUROOHGFKLOGUHQDJHG\HDUVROGOLYLQJEHORZWKHSRYHUW\OLQHDWWHQGHG
SULYDWHVFKRROVLQUXUDODQGLQXUEDQ,QGLD7KHFRUUHVSRQGLQJILJXUHVIRUDJHV
MXQLRUVFKRRODJHDQGVHFRQGDU\VFKRRODJHZHUHDQGUHVSHFWLYHO\3UDGKDQDQG
6XEUDPDQLDP7KDWSULYDWHVFKRROVDUHXVHGE\SRRUIDPLOLHVLVDOVRIRXQGLQQRUWK,QGLDQ
VWDWHV352%(7HDPDQGE\7RROH\DQG'L[RQLQ'HOKL
*URZWKLQSULYDWHVFKRROLQJ
7KHPRVWWHOOLQJVWDWLVWLFKRZHYHULVQRWWKHVKDUHRISULYDWHVFKRROLQJLQWKHVWRFNRIWRWDO
VFKRROHQUROPHQWEXWUDWKHUWKHVKDUHRISULYDWHVFKRROLQJLQWKHWRWDOUHFHQWLQFUHDVHLQVFKRRO
HQUROPHQWDWGLIIHUHQWOHYHOV7KLVVKRZVWKHUHODWLYHJURZWKRISULYDWHVFKRROLQJLQ,QGLDLHUHODWLYH
WRWKHJURZWKRIJRYHUQPHQWDQGDLGHGVFKRROLQJ7DEOHSUHVHQWVWKHSURSRUWLRQRIWKHWRWDO
HQUROPHQWLQFUHDVHRYHUWLPHWKDWLVDEVRUEHGE\SULYDWHVFKRROV,WLVFRQVWUXFWHGIURPXQGHUO\LQJ
QXPEHUVLQ$SSHQGL[7DEOHVDDQGE(YHQWKRXJKLQIRUPDWLRQRQHQUROPHQWE\VFKRRO
PDQDJHPHQWW\SHFDQRQO\EHJOHDQHGIURPRIILFLDOVWDWLVWLFVLHLWH[FOXGHVXQUHFRJQL]HGVFKRROV
HYHQUHFRJQL]HGSULYDWHVFKRROJURZWKQXPEHUVDUHWHOOLQJ:HOHDUQWZRWKLQJVIURP7DEOHILUVWO\
WKDWJURZWKRISULYDWHVFKRROLQJKDVDFFHOHUDWHGRYHUWLPHVHFRQGO\WKDWLQXUEDQDUHDVWKHJURZWKRI
,WVHHPVWKDWUXUDOSULYDWHVFKRROVLQSDUWLFXODUGRQRWHDVLO\JHWJRYHUQPHQWUHFRJQLWLRQIRUZKLFKPDQ\
FRQGLWLRQVQHHGWREHVKRZQWREHVDWLVILHG$V.LQJGRQDVD\VJLYHQWKHH[DFWLQJFRQGLWLRQVIRUDQGVFDQWUHZDUGVRIUHFRJQLWLRQLWLVQRWVXUSULVLQJWKDWPRVWSULYDWHSULPDU\VFKRROVUHPDLQXQUHFRJQL]HG$JJDUZDOIRXQGWKDWLQKLVIRXUVXUYH\HGGLVWULFWVRI+DU\DQDLQWKHUHZHUHSULYDWHSULPDU\
VFKRROVRIZKLFKZHUHXQUHFRJQL]HG7KH352%(VXUYH\RILQQRUWK,QGLDQVWDWHVGLGDFRPSOHWHFHQVXV
RIDOOVFKRROVLQVDPSOHYLOODJHV,WIRXQGSULYDWHVFKRROVRIZKLFKZHUHXQUHFRJQL]HG0HKWD
7/28/2019 englishgprg-wps-071
22/38
SULYDWHVFKRROLQJKDVFRQVLVWHQWO\EHHQWKHJUHDWHVWDWWKHSULPDU\OHYHODQGSURJUHVVLYHO\VPDOOHUDW
WKHPLGGOHDQGVHFRQGDU\VFKRROOHYHOVVRPHWKLQJSHUYHUVHIURPWKHHTXLW\SRLQWRIYLHZVLQFH
FKLOGUHQRIWKHSRRUDUHPRVWZHOOUHSUHVHQWHGDWWKHSULPDU\VFKRROLQJOHYHO
7DEOH
6KDUHRIUHFRJQLVHGSULYDWHVFKRROVLQWRWDOHQUROPHQWLQFUHDVHE\UHJLRQOHYHORIHGXFDWLRQDQGWLPHSHULRG
5XUDO 3ULPDU\ 0LGGOH 6HFRQGDU\
8UEDQ 3ULPDU\ 0LGGOH
6HFRQGDU\
5XUDO8UEDQ 3ULPDU\ 0LGGOH 6HFRQGDU\
6RXUFH$XWKRUVRZQFDOFXODWLRQVEDVHGRQHQUROPHQWE\VFKRROPDQDJHPHQWW\SHLQWKH$OO,QGLD(GXFDWLRQ6XUYH\VIRUYDULRXV\HDUV1&(576HH$SSHQGL[7DEOHVDDQGE
7DEOHVKRZVWKDWLQXUEDQ,QGLDRIDOOWKHLQFUHDVHLQWRWDOSULPDU\VFKRROHQUROPHQWLQWKHSHULRGZDVDEVRUEHGE\SULYDWHVFKRROVWKHFRUUHVSRQGLQJILJXUHIRUZDV
DQGIRUWKHSHULRGZDV&OHDUO\WKHSDFHRISULYDWLVDWLRQLQFUHDVHGJUHDWO\
LQWKHSHULRG,QWKLVQLQH\HDUSHULRGJRYHUQPHQWDQGDLGHGSULPDU\VFKRROVWRJHWKHU
DEVRUEHGRQO\RIWKHWRWDOLQFUHDVHLQSULPDU\VFKRROHQUROPHQWVLHWKHLUQXPEHUVRU
HQUROPHQWVJUHZYHU\VORZO\1HDUO\RIWKHWRWDOLQFUHDVHLQXUEDQSULPDU\HQUROPHQWZDVGXH
WRWKHJURZWKRISULYDWHVFKRROLQJ,WEHDUVHPSKDVLVLQJWKDWHYHQWKLVGUDPDWLFVWDWLVWLFLVOLNHO\WREH
DQXQGHUHVWLPDWHVLQFHLWWDNHVQRDFFRXQWRIHQUROPHQWJURZWKLQWKHQXPHURXVXQUHFRJQL]HGSULYDWH
VFKRROVWKDWDUHH[FOXGHGIURPWKHRIILFLDOVWDWLVWLFV7KHUHFHQWJURZWKRISULYDWHSULPDU\VFKRROLQJ
LQXUEDQ,QGLDKDVEHHQQRWKLQJVKRUWRIPDVVLYH
,QUXUDO,QGLDWKHUDWHRIH[SDQVLRQRISULYDWHSULPDU\VFKRROLQJKDVEHHQPXFKVORZHUEXW
HYHQKHUHWKHSDFHRISULYDWLVDWLRQSLFNHGXSRYHUWLPHRQO\RIWRWDOUXUDOJURZWKLQSULPDU\
HQUROPHQWLQWKHSHULRGZDVDEVRUEHGE\SULYDWHVFKRROVEXWWKHFRUUHVSRQGLQJILJXUHIRUWKH
SHULRGZDVDQGIRUWKHSHULRG7KH$6(5VXUYH\3UDWKDP
IRXQGWKDWLQGLVWULFWVRI3XQMDEWKHUHZHUHSULYDWHHOHPHQWDU\SULPDU\MXQLRUVFKRROVRIZKLFKZHUHXQUHFRJQL]HG)RUPRUHGHWDLOHGHYLGHQFHRQWKLVEDVHGRQYDULRXVGDWDVRXUFHVVHH.LQJGRQ
7/28/2019 englishgprg-wps-071
23/38
VKRZVWKDWDPRQJWKHPDMRU,QGLDQVWDWHVLQ3XQMDE+DU\DQDDQG.HUDODWKHSHUFHQWDJHRIFKLOGUHQ
DWWHQGLQJSULYDWHVFKRROLQFUHDVHGE\PRUHWKDQSHUFHQWDJHSRLQWVEHWZHHQDQG
,WEHDUVHPSKDVLVLQJWKDWWKHVHILJXUHVDUHDOOXQGHUHVWLPDWHVVLQFHWKH\GRQRWLQFOXGHJURZWK
LQHQUROPHQWVLQWKHXQUHFRJQL]HGSULYDWHSULPDU\VFKRROV.LQJGRQD,WLVDOVRZRUWKVWDWLQJ
WKDWDQ\LQFUHDVHLQDLGHGVFKRROHQUROPHQWVVKRZQLQ$SSHQGL[7DEOHVDDQGELILWFRPHVIURP
WKHHVWDEOLVKPHQWRIQHZDLGHGVFKRROVUDWKHUWKDQPHUHO\IURPH[SDQVLRQLQHQUROPHQWVL]HLQ
H[LVWLQJDLGHGVFKRROVUHSUHVHQWVLQIDFWDQLQFUHDVHLQSULYDWHVFKRROVVLQFHDLGHGVFKRROVDUHSULYDWH
VFKRROVWKDWVWDUWUHFHLYLQJJRYHUQPHQWJUDQWLQDLG,QVRPHVWDWHVDFFHOHUDWLRQLQWKHJURZWKRI
SULYDWHVFKRROLQJZDVVSHFWDFXODUHYHQLQWKHSHULRG)RULQVWDQFHLQXUEDQ8WWDU3UDGHVK
SHUFHQWRIDOOQHZSULPDU\VFKRROHQUROPHQWRYHUWKHSHULRGRFFXUUHGLQSULYDWH
VFKRROV'DWDE\VWDWHIRUDUHQRW\HWDYDLODEOH7KHJURZWKRISULYDWHVFKRROLQJSDUWLFXODUO\DW
SULPDU\DQGPLGGOHOHYHOVRIHGXFDWLRQVLJQDOVJURZLQJLQHTXDOLW\RIHGXFDWLRQDORSSRUWXQLW\
7KHJURZWKRISULYDWHVFKRROLQJRIIHUVDSRVVLEOHH[SODQDWLRQIRUZK\GHVSLWHIDOOLQJRU
YLUWXDOO\VWDWLFSHUFDSLWDSXEOLFHGXFDWLRQH[SHQGLWXUHLQVHYHUDO,QGLDQVWDWHVDQGIDOOLQJVKDUHRI
EDVLFHGXFDWLRQH[SHQGLWXUHLQVWDWHGRPHVWLFSURGXFW'Uq]HDQG6HQ&KDSWHUWKHVHVWDWHV
KDYHLPSURYHGWKHLUHGXFDWLRQDORXWFRPHLQGLFDWRUVLQWKHV.LQJGRQHWDO
5HODWLYHHIIHFWLYHQHVVRISULYDWHDQGSXEOLFVFKRROV
:K\KDVSULYDWHVFKRROLQJEHHQJURZLQJUDSLGO\LQUHFHQWWLPHV"0XUDOLGKDUDQDQG.UHPHU
SUHVHQWDQ2/6UHJUHVVLRQRIWKHSUHVHQFHRIDSULYDWHVFKRROLQDYLOODJHRQYLOODJHOHYHO
SUHGLFWRUV&RQWUROOLQJIRUYLOODJHSRSXODWLRQYLOODJHSHUFDSLWDLQFRPHSXSLOWHDFKHUUDWLRLQSXEOLF
VFKRROVLQWKHYLOODJHDQGVWDWHIL[HGHIIHFWVWKH\ILQGWKDWSULYDWHVFKRROVDUHVLJQLILFDQWO\PRUH
OLNHO\WRH[LVWLQYLOODJHVZLWKKLJKPHDQOHYHORIWHDFKHUDEVHQFHLQWKHSXEOLFVFKRROV7KHLUILQGLQJ
WKDWSULYDWHVFKRROVDUHGLVSURSRUWLRQDWHO\ORFDWHGLQDUHDVZLWKSRRUO\SHUIRUPLQJSXEOLFVFKRROV
VXSSRUWVWKHTXDOLWDWLYHUHIOHFWLRQVRIWKH352%(5HSRUWZKLFKEHOLHYHVWKDWLQH[SODLQLQJWKH
LQFUHDVHGSRSXODULW\RISULYDWHHGXFDWLRQWKHEUHDNGRZQRIJRYHUQPHQWVFKRROVLVRIWHQPRUH
GHFLVLYHWKDQSDUHQWDODELOLW\WRSD\,QUXUDO+LPDFKDO3UDGHVKIRULQVWDQFHWKHUHLVDJRRGGHDORI
SXUFKDVLQJSRZHUEXWWKHJRYHUQPHQWVFKRROVIXQFWLRQZHOOVRWKDWWKHUHDUHIHZSULYDWHVFKRROV,Q
FHQWUDO%LKDUE\FRQWUDVWSRYHUW\LVHQGHPLF\HWSULYDWHVFKRROVFDQEHIRXQGLQPDQ\YLOODJHVGXH
WRWKHG\VIXQFWLRQDOVWDWHRIJRYHUQPHQWVFKRROV352%(7HDPS
1DWLRQDOGDWDRQOHDUQLQJDFKLHYHPHQWOHYHOVLQ$6(53UDWKDPIRXQGWKDW
SULYDWHVFKRROVWXGHQWVRIJUDGHVWRZHUHPRUHOLNHO\WKDQJRYHUQPHQWVFKRROVWXGHQWVWR
EHDEOHWRUHDGDWH[WRIJUDGHVWDQGDUG7KH\ZHUHDOVRPRUHOLNHO\WREHDEOHWRVROYHD
7/28/2019 englishgprg-wps-071
24/38
GLYLVLRQSUREOHPGLJLWVGLYLGHGE\GLJLW2IFRXUVHWKHVHDUHUDZILJXUHVDQGSULYDWHVFKRRO
VWXGHQWVW\SLFDOO\FRPHIURPPRUHSULYLOHJHGKRPHV7KHUHLVDVPDOOOLWHUDWXUHH[DPLQLQJWKHUHODWLYH
HIIHFWLYHQHVVRISULYDWHDQGSXEOLFVFKRROLQJDIWHUFRQWUROOLQJIRUWKHGLIIHULQJVWXGHQWLQWDNHVRI
SULYDWHDQGJRYHUQPHQWVFKRROV'XHWRWKHODFNRIDFKLHYHPHQWGDWDOLQNHGWRVFKRRODQGWHDFKHU
FKDUDFWHULVWLFVVWXGLHVRIWKHUHODWLYHHIIHFWLYHQHVVRISXEOLFDQGSULYDWHVFKRROVLQ,QGLDKDYHKDGWR
UHO\RQDFKLHYHPHQWWHVWVFDUULHGRXWE\WKHUHVHDUFKHUVWKHPVHOYHVW\SLFDOO\LQVPDOOVDPSOHVRI
VFKRROV%DVKLU*RYLQGDDQG9DUJKHVH.LQJGRQE7KHVHVWXGLHV
KDYHEHHQFDUULHGRXWLQGLIIHUHQWSDUWVRI,QGLD7DPLO1DGX0DGK\D3UDGHVKDQG8WWDU3UDGHVK
UHVSHFWLYHO\DQGGLIIHULQVHYHUDOUHVSHFWVEXWWKH\VKDUHWKHFRPPRQFRQFOXVLRQWKDWSULYDWHVFKRRO
VWXGHQWVJHQHUDOO\RXWSHUIRUPWKHLUSXEOLFVFKRROFRXQWHUSDUWVLQOHDUQLQJDFKLHYHPHQWHYHQDIWHU
FRQWUROOLQJIRUVFKRROVVWXGHQWLQWDNHV0XUDOLGKDUDQDQG.UHPHUFRUURERUDWHWKHILQGLQJVRI
HDUOLHUVWXGLHVEXWZLWKQDWLRQDOO\UHSUHVHQWDWLYHGDWDRQUXUDOSULPDU\VFKRROV,QWKHLUVWXG\SULYDWH
VFKRROVWXGHQWVDFKLHYHPHQWZDVVWDQGDUGGHYLDWLRQKLJKHUWKDQWKDWRIJRYHUQPHQWVFKRRO
VWXGHQWVLQWKHVDPHYLOODJHLHXVLQJDYLOODJHIL[HGHIIHFWVDFKLHYHPHQWSURGXFWLRQIXQFWLRQDIWHU
FRQWUROOLQJIRUREVHUYHGVFKRROFKDUDFWHULVWLFVDQGSXSLOVKRPHEDFNJURXQG:KLOHPRVWRIWKHVH
VWXGLHVGLGQRWWHVWWKHSRVVLELOLW\WKDWWKHSULYDWHVFKRROHIIHFWPD\EHGULYHQE\XQREVHUYHG
KHWHURJHQHLW\PRUHDEOHRUPRUHPRWLYDWHGVWXGHQWVV\VWHPDWLFDOO\VHOHFWLQJLQWRSULYDWHVFKRROV
.LQJGRQVVWXG\IRU8WWDU3UDGHVKGLGFRUUHFWIRUVDPSOHVHOHFWLYLW\ELDVDQGZKLOHWKLVFRUUHFWLRQ
JUHDWO\UHGXFHGWKHSULYDWHVFKRRODGYDQWDJHWKHUHUHPDLQHGDVXEVWDQWLDOSULYDWHVFKRRODGYDQWDJH
RYHUJRYHUQPHQWDQGDLGHGVFKRROVLQWKHWHDFKLQJRIQXPHUDF\VNLOOV
5HODWLYHFRVWVRISULYDWHDQGSXEOLFVFKRROV
$YDLODEOHHYLGHQFHVXJJHVWVQRWRQO\WKDWSULYDWHVFKRROVDUHPRUHHIIHFWLYHWKDQSXEOLF
VFKRROVLQLPSDUWLQJFRJQLWLYHVNLOOVLQ,QGLDEXWDOVRWKDWWKH\KDYHPXFKORZHUXQLWFRVWVWKDQ
SXEOLFO\IXQGHGLHJRYHUQPHQWDQGDLGHGVFKRROV7KLVLVGXHODUJHO\WRWHDFKHUVDODULHVLQSULYDWH
VFKRROVEHLQJRQO\DIUDFWLRQRIWKRVHLQSXEOLFO\IXQGHGVFKRROV)LQGLQJVIURPILYHGLIIHUHQWVWDWHV
VXPPDULVHGLQ.LQJGRQVKRZWKDWLQWKHHDUO\WRPLGVSULYDWHVFKRROWHDFKHUVSD\ZDV
DERXWRIJRYHUQPHQWWHDFKHUVSD\EXWWKDWE\WKLVKDGIDOOHQWRRQO\DERXW
0XUDOLGKDUDQDQG.UHPHUEDVHGRQWKHLUQDWLRQDOVXUYH\RIUXUDOVFKRROVLQ,QGLDQ
VWDWHVFRQFOXGHHYHQFRQVHUYDWLYHO\UXUDOSULYDWHVFKRROWHDFKHUVDODULHVDUHW\SLFDOO\DURXQGRQH
0RUHUHFHQWO\7RROH\DQG'L[RQDOVRFRPSDUHWKHUHODWLYHSHUIRUPDQFHRIVWXGHQWVLQJRYHUQPHQWDQGSULYDWHVFKRROVEXWWKHLUVLVDGHVFULSWLYHVWDWLVWLFVWXG\:KLOH.LQJGRQVVWXG\LVEDVHGRQVWXGHQWVLQWKHILQDO\HDURIXSSHUSULPDU\HGXFDWLRQJUDGHWKHRWKHUVWXGLHVDUHEDVHGRQVWXGHQWVLQWKHILQDO\HDURIORZHUSULPDU\VFKRROLQJJUDGHVRU7KHPHWKRGVXVHGGLIIHUHGWRR
%DVKLUXVHGKLHUDUFKLFDOOLQHDUPRGHOOLQJ*RYLQGDDQG9DUJKHVHXVHG2/6UHJUHVVLRQDQG.LQJGRQXVHGVDPSOH
VHOHFWLYLW\FRUUHFWLRQPRGHOV7KHH[WHQWRIFRQWUROVIRUKRPHEDFNJURXQGGLIIHUHGDFURVVWKHVWXGLHVWRRDVZHOODV
7/28/2019 englishgprg-wps-071
25/38
ILIWKWKDWRIUHJXODUJRYHUQPHQWWHDFKHUVDODULHVDQGWKH\DUHRIWHQDVORZDVRQHWHQWKWKHVDODULHVRI
UHJXODUJRYHUQPHQWWHDFKHUV6XFKPDVVLYHSULYDWHSXEOLFVHJPHQWDWLRQLQWKHWHDFKHUODERXUPDUNHW
FDQH[LVWEHFDXVHRIH[FHVVVXSSO\RIHGXFDWHGLQGLYLGXDOVDQGEHFDXVHZKLOHWKHSULYDWHVHFWRUSD\V
PDUNHWZDJHVJRYHUQPHQWDQGDLGHGVFKRROVDODULHVDUHEXUHDXFUDWLFDOO\VHWPLQLPXPZDJHV&OHDUO\
WKHUHDUHKXJHHFRQRPLFUHQWVLQWKHVDODULHVRIJRYHUQPHQWVFKRROWHDFKHUV.LQJGRQDQG0X]DPPLO
FKDSWHUHVWLPDWHWKDWWKHLPSDFWRIWKH*RYHUQPHQWRI,QGLDV)LIWK3D\&RPPLVVLRQLQ
8WWDU3UDGHVKLQWKHODWHVZDVWRKLNHRYHUQLJKWDKLJKVFKRRO3ULQFLSDOVPRQWKO\SD\E\
DQGDVVLVWDQWWHDFKHUVSD\E\EHWZHHQDQGGHSHQGLQJRQWHDFKHUFDWHJRU\7KHDXWKRUV
VKRZWKHFHQWUDOUROHRIWHDFKHUXQLRQVLQVHFXULQJWKHVHVDODU\LQFUHDVHV
*RYHUQPHQWDQG1*2HGXFDWLRQLQLWLDWLYHV
:KLOHWKHGDWDSUHVHQWHGDERYHRQVWXGHQWOHDUQLQJOHYHOVWHDFKHUDEVHQWHHLVPDQGVFKRRO
IDFLOLWLHVSDLQWVTXLWHDJULPSLFWXUHRIWKHVWDWHRIVFKRROLQJTXDOLW\LQ,QGLDWKHUHDUHVHYHUDOUHDVRQV
IRUPRUHRSWLPLVPDERXWSURJUHVVRIVFKRROHGXFDWLRQLQWKHIXWXUH)LUVWO\DQXPEHURIUHFHQW
ILVFDOO\GHPDQGLQJSXEOLFHGXFDWLRQLQLWLDWLYHVVXJJHVWWKDW,QGLDKDVEHJXQLQHDUQHVWWRJLYHJUHDWHU
SULRULW\WRLPSURYLQJVFKRROHGXFDWLRQ6HFRQGO\DQXPEHURIHGXFDWLRQDO1*2VKDYHHPHUJHG
VXFKDV3UDWKDP'LJDQWDU$]LP3UHPML09)RXQGDWLRQDQGRWKHUVDQGVRPHKDYHDFTXLUHG
VXEVWDQWLDOVWDWXUHERWKLQWHUPVRIWKHLUFRQWULEXWLRQVWRHGXFDWLRQDOLPSURYHPHQWVLQDQXPEHURI
GLPHQVLRQVDVZHOODVLQWHUPVRIWKHLULQIOXHQFHDGYRFDF\YRLFHSXEOLFPHGLDSURILOHUHVHDUFK
FDSDFLW\DQGDELOLW\WRPRELOL]HIXQGVIRUHGXFDWLRQERWKIURPLQGLYLGXDOGRQRUVLQ,QGLDDQGDEURDG
DQGIURPWKH,QGLDQFRUSRUDWHVHFWRU%HORZZHFRQVLGHUVRPHRIWKHLPSRUWDQWLQLWLDWLYHVDQGWKHLU
LPSDFWRQHGXFDWLRQDORXWFRPHV
6DUYD6KLNVKD$EKL\DQ
7KH6DUYD6KLNVKD$EKL\DQ66$OLWHUDOO\&DPSDLJQIRU8QLYHUVDO(GXFDWLRQLV,QGLDV
IODJVKLSSURJUDPPHWRXQLYHUVDOL]HHOHPHQWDU\HGXFDWLRQJUDGHVWRE\WKH\HDU,WLVD
VFKHPHVSRQVRUHGE\WKH&HQWUDOJRYHUQPHQWWKDWLVIXQGHGRXWRIDUHYHQXHVIURPDQHZFHVVHTXDO
WRSHUFHQWRIDOOWD[HVZKLFKZDVLQWURGXFHGLQLQFUHDVHGWRLQ0DUFK66$
SURYLGHVDGGLWLRQDOIXQGLQJWRVWDWHVWRHQURORXWRIVFKRROFKLOGUHQDQGWRLPSURYHVFKRROTXDOLW\
66$IXQGVFLYLOZRUNVFDSSHGDWSHUFHQWRIWRWDOFRVWVDODULHVRIDGGLWLRQDOWHDFKHUVWRUHGXFH
ZKHWKHUVFKRRODQGWHDFKHUFKDUDFWHULVWLFVZHUHLQFOXGHGLQWKHDFKLHYHPHQWHTXDWLRQV)LQDOO\WKHFRVWVRISULYDWH
DQGSXEOLFVFKRROLQJZHUHFDOFXODWHGGLIIHUHQWO\LQWKHGLIIHUHQWVWXGLHV6HHVHFWLRQWLWOHG)LIWK3D\&RPPLVVLRQUHODWHGVWULNHVLQ&KDSWHUDQGDOVRVHHFKDSWHURI
.LQJGRQDQG0X]DPPLO7KHSD\LQFUHDVHFDPHLQWRHIIHFWUHWURVSHFWLYHO\IURPVW-DQXDU\
7/28/2019 englishgprg-wps-071
26/38
SXSLOWHDFKHUUDWLRWRHVWDEOLVKPHQWRIDOWHUQDWLYHVFKRROVDQGHGXFDWLRQJXDUDQWHHVFKHPH
(*6VFKRROVLQVPDOOKDELWDWLRQVHVWDEOLVKPHQWRIEORFNRUFOXVWHUOHYHOUHVRXUFHFHQWHUV
HVWDEOLVKPHQWRIEULGJHFRXUVHVIRUGURSRXWVLQVHUYLFHWUDLQLQJIRUWHDFKHUVDQGJUDQWVIRU
WHDFKLQJOHDUQLQJPDWHULDOV$VZHOODVWKHVHVXSSO\VLGHLQWHUYHQWLRQV66$LQFOXGHVGHPDQGVLGH
PHDVXUHVWRFORVHFDVWHDQGJHQGHUJDSVLQHGXFDWLRQ7KHVHLQFOXGHIUHHWH[WERRNVWRDOOIHPDOHDQG
ORZFDVWHVWXGHQWVVSHFLDOIDFLOLWLHVIRUJLUOVDQGJUDQWVWRGLVWULFWVWRVXSSRUWVWXGHQWVZLWK
GLVDELOLWLHV66$DOVRIXQGVDQDWLRQDOFRPSRQHQWFRYHULQJFDSDFLW\EXLOGLQJWHFKQLFDOVXSSRUW
ILQDQFLDOPDQDJHPHQWPRQLWRULQJDQGHYDOXDWLRQHWF
7RWKLVDXWKRUVNQRZOHGJHWKHUHLVQRULJRURXVHYDOXDWLRQRIWKHLPSDFWRIWKLVPDVVLYH
LQWHUYHQWLRQRULWVLQGLYLGXDOFRPSRQHQWVVRIDU7ZRUHFHQWLPSDFWHYDOXDWLRQVRIWKH'LVWULFW3ULPDU\
(GXFDWLRQ3URMHFWWKHSUHGHFHVVRUWR66$DQGTXLWHVLPLODUWRLWDUHE\6FKPLGZKRXVHVD
WUHDWPHQWLQWHQVLW\DSSURDFKDQG-DODQDQG*OLQVND\DZKRXVHDSURSHQVLW\VFRUHPDWFKLQJ
DSSURDFK7KHWUHDWPHQWLQWHQVLW\RIDFHUWDLQDJHJURXSLQDVSHFLILFGLVWULFWGHSHQGHGRQWKH\HDUV
'3(3ZDVLQSODFHDQGRQWKHQXPEHURI\HDUVWKDWWKHJURXSZDVLQVFKRROJRLQJDJHGXULQJWKLV
WLPHSHULRG:KLOHERWKVWXGLHVILQGVXEVWDQWLDOSURJUDPPHLPSDFWVDQGILQGWKDWLPSDFWVZHUH
JUHDWHUIRUORZFDVWHFKLOGUHQ6FKPLGILQGVWKDWHIIHFWVZHUHVWURQJHUIRUJLUOVEXW-DODQDQG
*OLQVND\DILQGWKH\ZHUHQHJOLJLEOHDOWKRXJKWKHODWWHUHYDOXDWHGWKHLPSDFWRIRQO\WKHILUVWSKDVHRI
WKH'3(3ZKLOH6FKPLGHYDOXDWHGWKHLPSDFWRIDOOWKUHHSKDVHV
0LGGD\PHDOVFKHPH
,QODWHWKH,QGLDQ6XSUHPH&RXUWGLUHFWHGDOOVWDWHVWRLPSOHPHQWWKH0LG'D\0HDO
6FKHPHE\SURYLGLQJHYHU\FKLOGLQHYHU\JRYHUQPHQWDQGJRYHUQPHQWDVVLVWHGSULPDU\VFKRROZLWKD
SUHSDUHGPLGGD\PHDOZLWKDPLQLPXPFRQWHQWRIFDORULHVDQGJUDPVRISURWHLQHDFKGD\
RIVFKRROIRUDPLQLPXPRIGD\V%\WKH0'0VFKHPHZDVQHDUXQLYHUVDOLQDOOVWDWHV
IROORZLQJSXEOLFPRELOL]DWLRQHIIRUWVWRHQFRXUDJHVWDWHVWRDFW7KLVLVDFHQWUDOO\IXQGHGVFKHPHLQ
WKDWWKHFHQWUDOJRYHUQPHQWSURYLGHVJUDLQVIXQGVWUDQVSRUWDWLRQDQGDOVRSD\VIRRGSUHSDUDWLRQFRVWV
WKRXJKWKHVWDWHJRYHUQPHQWLVUHVSRQVLEOHIRUSURYLGLQJWKHSK\VLFDOLQIUDVWUXFWXUHIRUFRRNLQJWKH
PHDOV7KRXJKLWLVQRW\HWIUHHRISUREOHPVRITXDOLW\DQGFRUUXSWLRQWKHIDFWWKDWPLGGD\PHDOV
KDYHEHFRPHDSDUWRIWKHGDLO\URXWLQHLQPRVWSULPDU\VFKRROVDFURVVWKHFRXQWU\LVDPDMRU
DFKLHYHPHQW.KHUD7KHVFKHPHSURYLGHVOXQFKWRDERXWPLOOLRQFKLOGUHQHYHU\VFKRRO
GD\DQGDVVXFKLVWKHODUJHVWVFKRROPHDOVFKHPHLQWKHZRUOG&HUWDLQVWDWHVKDYHJRQHEH\RQGWKH
PDQGDWHGVFRSHRIWKHVFKHPHIRULQVWDQFHLQ.HUDODDQG7DPLO1DGXWKHGHVWLWXWHDQGWKHDJHGDUH
DOORZHGWRWDNHWKH0'0DQGLQ*XMDUDWWKHVFKHPHFRYHUVFKLOGUHQIURP*UDGHVWRUDWKHUWKDQ
RQO\LQWKHSULPDU\JUDGHVWR
7/28/2019 englishgprg-wps-071
27/38
$OWKRXJKWKHUHDUHQRULJRURXVHYDOXDWLRQVHJUDQGRPL]HGH[SHULPHQWVWXGLHVRIWKHLPSDFW
RIWKLVVFKHPHRQFKLOGUHQVVFKRROHQUROPHQWDQGDWWHQGDQFHDQGRQQXWULWLRQDODQGKHDOWKVWDWXV
VHYHUDOPLFURVWXGLHVVXJJHVWPDMRULQFUHDVHVLQHQUROPHQWLPPHGLDWHO\DIWHUWKHLQWURGXFWLRQRIPLG
GD\PHDOVHJLQ%DUPHUGLVWULFWRI5DMDVWKDQLQ0DGK\D3UDGHVKDQGRWKHUODUJH
LQFUHDVHVLQ.DUQDWDND+RZHYHU'HDWRQDQG'Uq]HQRWHWKDWWKHFRQVXPSWLRQRIPLGGD\
PHDOVLQSULPDU\VFKRROVDSSHDUVWREHKHDYLO\XQGHUUHFRUGHGLQWKH1DWLRQDO6DPSOH6XUYH\166
GDWDPDNLQJLWKDUGWRYHULI\WKHLPSDFWRI0'0VRQVFKRRODWWHQGDQFHIURP166VXUYH\V
3DUDWHDFKHUVFKHPHV
)URPWKHPLGVVHYHUDOVWDWHVEHJDQXVLQJORZFRVWXQWUDLQHGWHDFKHUVNQRZQYDULRXVO\
DV6KLNVKDNDUPLV6KLNVKDPLWUDV9LG\D9ROXQWHHUVHWF%\DERXWVXFKSDUD
WHDFKHUVKDGEHHQDSSRLQWHGDQGE\WKHLUQXPEHUKDGULVHQWRDERXW*RYLQGDDQG
-RVHSKLQH7KHVFKHPHVKDYHEHHQH[SDQGLQJUDSLGO\VLQFHEHFDXVHIURPWKDW\HDU
VWDWHVFRXOGDSSRLQWFRQWUDFWWHDFKHUVZLWKFHQWUDOJRYHUQPHQWJUDQWV8QGHUWKHVHVFKHPHVSHUVRQV
ZLWKHGXFDWLRQDOTXDOLILFDWLRQUHTXLUHPHQWVEHORZWKRVHRIJRYHUQPHQWSULPDU\VFKRROUHJXODU
WHDFKHUVDUHHPSOR\HGRQVDODULHVWKDWDUHRQHILIWKWRRQHKDOIRIJRYHUQPHQWWHDFKHUVDODULHVLQ
RUGHUWRLH[SDQGVFKRROLQJLQDORZFRVWZD\WRVPDOOKDPOHWVZKLFKDUHXQVHUYHGE\UHJXODU
JRYHUQPHQWVFKRROVLLWRLQFUHDVHWKHQXPEHURILQVWUXFWRUVLQVLQJOHWHDFKHUVFKRROVDQGLLLWR
UHGXFHKLJKSXSLOWHDFKHUUDWLRV$OWKRXJKWKHPRGHOYDULHVIURPVWDWHWRVWDWHWKHSDUDWHDFKHUMREV
DUHW\SLFDOO\WHQDEOHIRUWHQPRQWKVSHU\HDUEXWDUHDQQXDOO\UHQHZDEOH
3DUDWHDFKHUVFKHPHVKDYHUDLVHGDQXPEHURIFRQFHUQVDERXWWKHHWKLFDOOHJDODQGSROLWLFDO
GLIILFXOWLHVRIVXVWDLQLQJWZRGLIIHUHQWVWDQGDUGVRIHPSOR\PHQWEHWZHHQUHJXODUWHDFKHUVDQGFRQWUDFW
WHDFKHUV6RPHDXWKRUVKDYHDOVRUDLVHGFRQFHUQVDERXWWKHTXDOLW\RIWHDFKLQJSURYLGHGE\WKHVHOHVV
TXDOLILHGLQVWUXFWRUV2WKHUVKDYHSRLQWHGWKDWSDUDWHDFKHUVPD\H[KLELWJUHDWHUDFFRXQWDELOLW\GXHWR
FORVHUFRPPXQLW\LQYROYHPHQWLQWKHLUUHFUXLWPHQWDQGGLVPLVVDODQGEHFDXVHRIWKHLPSHUPDQHQFHRI
WKHLUMREFRQWUDFWV'Uq]HDQG6HQEHOLHYHWKDWWKHFRQWULEXWLRQRIWKHVHORZFRVWVFKHPHVVR
IDULVXQFHUWDLQDQGWKDWLWLVSUHPDWXUHHLWKHUWRDSSODXGRUGLVPLVVWKHP:HDUHQRWDZDUHRIDQ\
VHULRXVHYDOXDWLRQVRIWKHVHVFKHPHVWKRXJKVHYHUDOPLFURVWXGLHVILQGWKDWOHDUQLQJDFKLHYHPHQWVRI
5DMDVWKDQKDGDOUHDG\LQLWLDWHGWKH6KLNVKD.DUPLHGXFDWLRQZRUNHUSURMHFWLQ6HYHUDOVWDWHVGHYLVHGWKHLURZQYHUVLRQVRI6KLNVKD.DUPLVLQWKHV)RUH[DPSOHXQGHULWV(GXFDWLRQ*XDUDQWHH6FKHPH0DGK\D3UDGHVKXWLOLVHGVXFKSDUDWHDFKHUVFDOOHGJXUXMLEXLOGLQJRQWKH$OWHUQDWLYH6FKRRO3URJUDPPHLQLWLDWHGLQE\DQ
1*2WKH5DMLY*DQGKL3UDWKPLF6KLNVKD0LVVLRQ*RYLQGD8WWDU3UDGHVKKDGDVKLNVKDPLWUDSURMHFW2WKHUVWDWHVWKDWXWLOL]HGSDUDWHDFKHUVRQDODUJHVFDOHLQWKHVZHUH$QGKUD3UDGHVK*XMDUDW+LPDFKDO3UDGHVKDQG:HVW%HQJDO
7/28/2019 englishgprg-wps-071
28/38
FKLOGUHQWDXJKWE\SDUDWHDFKHUVDQGUHJXODUWHDFKHUVDUHQRGLIIHUHQW/HFOHUFT*RYLQGDDQG
-RVHSKLQH3UDWLFKL7UXVW
3XEOLFSULYDWHSDUWQHUVKLSVLQHGXFDWLRQ
$VXEVWDQWLDOSXEOLFSULYDWHSDUWQHUVKLS333V\VWHPGRHVRSHUDWHLQ,QGLDDWOHDVWDWWKH
VHFRQGDU\DQGKLJKHUOHYHOVRIHGXFDWLRQ7KLVLVWKHV\VWHPRIJRYHUQPHQWJUDQWLQDLGWRSULYDWHO\
PDQDJHGVFKRROVNQRZQDVDLGHGVFKRROV,QWKHSHUFHQWDJHVKDUHRIDLGHGVFKRROVLQWRWDO
VFKRROVZDVDQGUHVSHFWLYHO\DWWKHVHFRQGDU\DQGKLJKHUVHFRQGDU\OHYHOVWKRXJKDW
WKHSULPDU\DQGPLGGOHOHYHOVLWZDVRQO\DQGUHVSHFWLYHO\%DVKLU+RZHYHU
RYHUWLPHODUJHO\GXHWRVXFFHVVLYHJRYHUQPHQWVFRQFHGLQJWHDFKHUXQLRQGHPDQGVDLGHGVFKRROV
KDYHEHFRPHPRUHDQGPRUHOLNHJRYHUQPHQWVFKRROVWKHLUWHDFKHUVDUHQRZSDLGGLUHFWO\E\WKHVWDWH
JRYHUQPHQWWUHDVXU\DWWKHVDPHXQLIRUPVDODU\UDWHVDVIRUJRYHUQPHQWVFKRROWHDFKHUVDQGDUH
UHFUXLWHGE\DJRYHUQPHQWDSSRLQWHGVHOHFWLRQFRPPLWWHHUDWKHUWKDQE\WKHVFKRRO$LGHGVFKRROV
DOVRKDYHWKHVDPHIHHSROLF\DVLQJRYHUQPHQWVFKRROV3HUKDSVQRWVXUSULVLQJO\OHDUQLQJ
DFKLHYHPHQWVLQDLGHGVFKRROVDUHVLPLODUWRWKRVHLQJRYHUQPHQWVFKRROVDQGVLJQLILFDQWO\ORZHUWKDQ
LQSULYDWHVFKRROVDIWHUFRQWUROOLQJIRUVWXGHQWLQWDNHDQGVHOHFWLRQELDV.LQJGRQE
7KHFXUUHQWGUDIW5LJKWWR(GXFDWLRQ%LOOXQGHUFRQVLGHUDWLRQDWWKH,QGLDQ3DUOLDPHQW
SURSRVHVWRHVWDEOLVKDQHZIRUPRI333LQHGXFDWLRQUHTXLULQJDOOSULYDWHVFKRROVWRJLYHRI
WKHLUSODFHVWRJRYHUQPHQWSDLGVWXGHQWVIURPGLVDGYDQWDJHGKRPHV7KLVPHDVXUHGRHVQRWSURSRVH
WRJLYHPRQH\WRWKHGLVDGYDQWDJHGVWXGHQWVWRDWWHQGDVFKRRORIWKHLUFKRLFHEXWUDWKHUSURSRVHVWR
JLYHPRQH\GLUHFWO\WRWKHSULYDWHVFKRROVWKDWDFFHSWWKHVWXGHQWV,QUHFHQW\HDUVLQFUHDVHGDGYRFDF\
LQIDYRXURI333VLQHGXFDWLRQLQYDULRXVFRXQWULHVKDVEHHQDVVRFLDWHGZLWKLQWURGXFWLRQRIVFKRRO
FKRLFHE\SDUHQWVW\SLFDOO\E\PHDQVRIVFKRROYRXFKHUV7KHUHFRPPHQGDWLRQVIRUGHFHQWUDOLVLQJ
UHIRUPLQ,QGLDLQFOXGLQJWKHFXUUHQWGUDIW5LJKWWR(GXFDWLRQELOOKDYHQHYHUVHULRXVO\LQFOXGHG
FRQVLGHUDWLRQRIWKHSRVVLELOLW\RISURYLGLQJVFKRROYRXFKHUVDVDZD\RIHPSRZHULQJHVSHFLDOO\
SRRUVWXGHQWVSDUHQWVDQGLPSURYLQJDFFRXQWDELOLW\RIVFKRROVDQGWHDFKHUVWRZDUGVVWXGHQWVDQG
SDUHQWV7KLVLVXQOLNHWKHVLWXDWLRQLQ&KLOH&RORPELD1HZ=HDODQG868.DQGVRPHRWKHU
FRXQWULHVZKHUHWKHUHKDVEHHQYLJRURXVGHEDWHDERXWDQGH[SHULPHQWDWLRQZLWKDOWHUQDWLYHVWRSXEOLF
VFKRROVVXFKDVVFKRROFKRLFHDQGRWKHUIRUPVRI333V7KHUHDUHVHYHUDOSRWHQWLDOH[SODQDWLRQVIRU
WKLVGLIIHUHQFHDQGDOVRVRPHFRQFHUQVDERXWVFKRROYRXFKHUVVFKHPHV.LQJGRQ9RXFKHUV
',6(7DEOHSXWVSDUDWHDFKHUQXPEHUVDW+RZHYHUWKLVLVOLNHO\WREHDQXQGHUHVWLPDWHDV',6(VFRYHUDJHH[FOXGHV(GXFDWLRQ*XDUDQWHH6FKHPHVFKRROVZKLFKDUHVWDIIHGH[FOXVLYHO\E\
7/28/2019 englishgprg-wps-071
29/38
ZRXOGEHDUDGLFDOUHIRUPRIWHDFKHUDQGVFKRROLQFHQWLYHVDQGRQHUHDVRQZK\WKH\KDYHQRWEHHQ
GHEDWHGLQ,QGLDFRXOGEHEHFDXVHRIWKHLUSHUFHLYHGSROLWLFDOLQIHDVLELOLW\DVWKH\ZRXOGEHUHVLVWHGE\
SRZHUIXOYHVWHGLQWHUHVWJURXSV
1*2HGXFDWLRQZRUN
:LGHVSUHDGHGXFDWLRQUHODWHGZRUNE\DODUJHQXPEHURI1*2VLQ,QGLDLVDUHODWLYHO\QHZ
SKHQRPHQRQEXWRQHZKLFKKDVJURZQUDSLGO\7KHLULPSRUWDQWFRQWULEXWLRQKDVEHHQQRWRQO\LQ
JUDVVURRWVHGXFDWLRQDOZRUNEXWDOVRLQWHUPVRIVXFFHVVIXODGYRFDF\IRUHGXFDWLRQDWWKHPDFUROHYHO
E\FRQWULEXWLQJWRQDWLRQDOHGXFDWLRQDOGHEDWHVDQGKHOSLQJWRPDNHHGXFDWLRQDFFHVVDQGTXDOLW\
SURPLQHQWSXEOLFLVVXHV)RULQVWDQFHWKHUROHRIWKH1*25LJKWWR)RRG&DPSDLJQDWERWKWKHPLFUR
DQGPDFUROHYHOVZDVFULWLFDOLQPRELOL]LQJSXEOLFRSLQLRQDQGEXLOGLQJSUHVVXUHIRUWKHUDSLG
LPSOHPHQWDWLRQRIWKHVFKRRO0LG'D\0HDOVFKHPHLQ,QGLDQVWDWHV6LPLODUO\3UDWKDPZKRVH
DLPLVWRKDYH(YHU\FKLOGLQVFKRRODQGOHDUQLQJZHOOGLGSLRQHHULQJZRUNLQWHVWLQJWKHOHDUQLQJ
DFKLHYHPHQWVRIHOHPHQWDU\VFKRRODJHFKLOGUHQLQ,QGLDQGLVWULFWVLQDQGSURGXFLQJDSXEOLF
UHSRUWLQ)HEUXDU\7KLVEURXJKWWKHZKROHLVVXHRIORZOHDUQLQJOHYHOVDQGORZVFKRROLQJ
TXDOLW\WRWKHIRUHLQSXEOLFDQGPHGLDGLVFXVVLRQLQ,QGLDDQGDOVRHQFRXUDJHGJUHDWHURSHQQHVVLQWKH
JRYHUQPHQWVSUHPLHUHGXFDWLRQDOUHVHDUFKLQVWLWXWLRQ1DWLRQDO&RXQFLOIRU(GXFDWLRQDO5HVHDUFK
DQG7UDLQLQJ1&(57ZKLFKLPPHGLDWHO\SXWLWVRZQUHSRUWRIOHDUQLQJWHVWVLQWKHSXEOLFGRPDLQ
WHVWVZKLFKKDGEHHQFDUULHGRXWLQ)LQDOO\ILHOGH[SHULPHQWVLQHGXFDWLRQDUHW\SLFDOO\PRUH
UHDGLO\IDFLOLWDWHGE\HGXFDWLRQDO1*2VRQDVPDOOVFDOHUDWKHUWKDQE\JRYHUQPHQWVDQGDVVXFK
SURYLGHLQYDOXDEOHRSSRUWXQLWLHVWRWHVWWKHFRVWHIIHFWLYHQHVVRISDUWLFXODUHGXFDWLRQDOLQWHUYHQWLRQV
7KH\FDQWKXVLQIRUPHGXFDWLRQSROLF\DVWRZKDWW\SHVRIHGXFDWLRQDOLQQRYDWLRQVDQGSROLFLHVJLYH
WKHJUHDWHVWLPSDFWVDWORZHVWFRVWV'XIOR1*2VRWKHUHGXFDWLRQDFWLYLWLHVDUHIDUWRR
QXPHURXVWRVXPPDULVHEXWLQFOXGHGHOLYHULQJEULGJHFRXUVHVWKDWSUHSDUHFKLOGUHQZKRGURSSHGRXW
RIVFKRROLQJHDUOLHUWRUHMRLQVFKRRODUUDQJLQJIRUVWUHHWFKLOGUHQWRVHWWOHZLWKIRVWHUSDUHQWVDQG
DWWHQGVFKRROVRUJDQLVLQJOHDUQLQJFDPSVIRUJLUOFKLOGUHQDQGIRUZRUNLQJFKLOGUHQDQGPDQ\RWKHU
HGXFDWLRQDOLQQRYDWLRQV
6RPHRIWKHODWWHUKDYHUHFHLYHGSURPLQHQWDWWHQWLRQLQUHFHQWWLPHV)RULQVWDQFH3UDWKDP
UXQVDODUJHVFDOH%DO6DNKLSURJUDPPHZKLFKSURYLGHVDQDVVLVWDQWWHDFKHUIRUUHPHGLDOWHDFKLQJRI
ZHDNFKLOGUHQLQJRYHUQPHQWVFKRROV$UDQGRPLVHGHYDOXDWLRQRIWKLVVFKHPHLQ*XMDUDWDQG
0XPEDLE\0,7V3RYHUW\$FWLRQ/DE%DQHUMHHHWDOVKRZHGWKDWLWGUDPDWLFDOO\LQFUHDVHG
OHDUQLQJE\IRFXVLQJRQLPSURYLQJEDVLFOLWHUDF\DQGQXPHUDF\VNLOOVDQGWKDWLWZDVYHU\FRVW
SDUDWHDFKHUV
7/28/2019 englishgprg-wps-071
30/38
HIIHFWLYH$QRWKHU1*26HYD0DQGLUUXQVSULPDU\VLQJOHWHDFKHUQRQIRUPDOHGXFDWLRQFHQWUHVLQ
WULEDOYLOODJHVLQ5DMDVWKDQDQGIDFHVWKHSUREOHPRIKLJKWHDFKHUDEVHQWHHLVP6HYD0DQGLUWULHGWR
LQFHQWLYL]HWHDFKHUVE\LQWURGXFLQJDQDWWHQGDQFHFRQWLQJHQWERQXVZKLFKZDVDIXQFWLRQRIWKH
QXPEHURIGD\VWKHWHDFKHUZDVSUHVHQWLQVFKRRO,WVHOHFWHGVFKRROVWRSDUWLFLSDWHLQDQ
H[SHULPHQWZKHUHWHDFKHUVLQVFKRROVZHUHJLYHQDFDPHUDZLWKDWDPSHUSURRIGDWHDQGWLPH
IXQFWLRQDQGLQVWUXFWHGKLPWRWDNHSLFWXUHVRIKLPVHOIZLWKKLVVWXGHQWVHYHU\GD\DWVFKRRORSHQLQJ
DQGFORVLQJWLPHWRSURYLGHSURRIRISUHVHQFH'XIORDQG+DQQDIRXQGWKDWWKHLQWHUYHQWLRQ
UHVXOWHGLQDQLPPHGLDWHDQGORQJODVWLQJLPSURYHPHQWLQWHDFKHUDWWHQGDQFHWKHDEVHQFHUDWHZDVFXW
IURPWRSHUFHQW'XHWRIHZHUDEVHQFHVWUHDWPHQWVFKRROVWDXJKWWKHHTXLYDOHQWRIFKLOG
GD\VPRUHSHUPRQWKWKDQFRPSDUDWRUVFKRROVUHVXOWLQJLQDVWDQGDUGGHYLDWLRQLQFUHDVHLQWHVW
VFRUHVDIWHURQH\HDU
&RQFOXVLRQV
7KLVSDSHUKDVVRXJKWWREXLOGDSLFWXUHRIVFKRROHGXFDWLRQLQ,QGLD6HFWLRQSODFHG,QGLDV
HGXFDWLRQDODFKLHYHPHQWVLQLQWHUQDWLRQDOSHUVSHFWLYHQRWLQJWKDWZKLOHLWGRHVUHODWLYHO\EHWWHUWKDQ
LWV6RXWK$VLDQQHLJKERXUV3DNLVWDQDQG%DQJODGHVKLQFHUWDLQHGXFDWLRQDOLQGLFDWRUVLWODJVVHULRXVO\
EHKLQGWKHRWKHUFRXQWULHVZLWKZKLFKLWLVLQFUHDVLQJO\FRPSDUHGVXFKDV%5,&HFRQRPLHVLQJHQHUDO
DQG&KLQDLQSDUWLFXODUHVSHFLDOO\LQWHUPVRIVHFRQGDU\VFKRROSDUWLFLSDWLRQDQG\RXWKOLWHUDF\UDWHV
6HFWLRQH[DPLQHGVFKRROLQJDFFHVVDQGTXDOLW\ILQGLQJWKDWWKHUHDUHVHYHUDOSRVLWLYHVLGHV
LQ,QGLDVHGXFDWLRQDOGHYHORSPHQW,WVSULPDU\VFKRROHQUROPHQWKDVFRPHFORVHWREHLQJXQLYHUVDO
DQGFXUUHQWDWWHQGDQFHUDWHVDVZHOODVOLWHUDF\UDWHVKDYHULVHQHQFRXUDJLQJO\LQUHFHQWWLPHV
+RZHYHU,QGLDQDFKLHYHPHQWVLQRWKHUUHVSHFWVOHDYHPXFKWREHGHVLUHG)LUVWO\VHFRQGDU\VFKRRO
SDUWLFLSDWLRQLVVWLOOORZDQGXQHTXDOO\GLVWULEXWHG6LQFHHFRQRPLFLQFHQWLYHVIRUDFTXLULQJVHFRQGDU\
VFKRROLQJDUHYHU\KLJKGHPDQGIRUVHFRQGDU\VFKRROLQJLVOLNHO\VWURQJVXJJHVWLQJWKDWJUHDWHU
SDUWLFLSDWLRQLVKLQGHUHGE\DFRPELQDWLRQRIFRQVWUDLQHGVXSSO\RIVHFRQGDU\VFKRROVDQGKRXVHKROG
FUHGLWFRQVWUDLQWV6HFRQGO\OHDUQLQJDFKLHYHPHQWVLQERWKSULPDU\DQGVHFRQGDU\VFKRROLQJDUHYHU\
ORZVLJQDOOLQJSRRUTXDOLW\VFKRROLQJ7KLUGO\DQGUHODWHGO\VFKRROIDFLOLWLHVLQSXWVDUHORZDQG
WHDFKHUDEVHQWHHLVPLVKLJK
6HFWLRQH[DPLQHGWKHUROHRIWKHSULYDWHVFKRROLQJVHFWRULQ,QGLD7KHVL]HRIWKLVVHFWRULV
JUHDWO\XQGHUHVWLPDWHGLQRIILFLDOSXEOLVKHGVWDWLVWLFVSDUWLFXODUO\DWWKHSULPDU\OHYHOGXHWR
H[FOXGLQJXQUHFRJQLVHGVFKRROVJLYHQWKDWPRUHWKDQRIDOOSULYDWHSULPDU\VFKRROVDUH
XQUHFRJQLVHG:KLOHKRXVHKROGGDWDRIIHUDWUXHUSLFWXUHQRUHFHQWKRXVHKROGVXUYH\VDUHDYDLODEOH
7/28/2019 englishgprg-wps-071
31/38
ZLWKGDWDRQHQUROPHQWE\VFKRROW\SHWRVKRZKRZSULYDWHVFKRROLQJKDVJURZQRYHUWLPH(YHQLI
ZHLJQRUHWKHQXPHURXVXQUHFRJQLVHGVFKRROVDQGORRNLQVWHDGDWUHFRJQLVHGVFKRROVRQO\LWLVFOHDU
WKDWWKHSULYDWHVFKRROLQJVHFWRULVJURZLQJH[WUHPHO\UDSLGO\LQXUEDQDUHDVDQGPRUHVORZO\LQUXUDO
DUHDV,WLVFOHDUWKDWSULYDWHVFKRROLQJLVXVHGE\SRRUIDPLOLHVWRR7KHOLWHUDWXUHRQWKHUHODWLYH
HIIHFWLYHQHVVRISULYDWHDQGSXEOLFVFKRROVLQ,QGLDVXJJHVWVWKDWSULYDWHVFKRROVDUHERWKPRUH
HIIHFWLYHLQLPSDUWLQJOHDUQLQJDQGGRVRDWDIUDFWLRQRIWKHXQLWFRVWRIJRYHUQPHQWVFKRROV7KH
PDMRUUHDVRQIRUSULYDWHVFKRROVKXJHFRVWDGYDQWDJHRYHUSXEOLFVFKRROVLVEHFDXVHWKH\FDQSD\
PDUNHWZDJHVZKLOHJRYHUQPHQWVFKRROWHDFKHUVEXUHDXFUDWLFDOO\VHWVDODULHVKDYHODUJHUHQWVLQWKHP
ZKLFKWHDFKHUXQLRQVKDYHIRXJKWKDUGWRVHFXUH7KHVSUHDGRIIHHFKDUJLQJSULYDWHVFKRROLQJ
UHSUHVHQWVJURZLQJLQHTXDOLW\RIRSSRUWXQLW\LQHGXFDWLRQ$OVRWKHSDWWHUQRIJURZWKRISULYDWH
VFKRROLQJLQXUEDQDUHDVIDVWHVWDWWKHSULPDU\OHYHOVORZHUDWWKHPLGGOHOHYHODQGVORZHVWDW
VHFRQGDU\OHYHOJLYHVFDXVHIRUHTXLW\FRQFHUQVVLQFHWKHFKLOGUHQRIWKHSRRUDUHEHVWUHSUHVHQWHGDW
WKHSULPDU\OHYHORIHGXFDWLRQDQGSURJUHVVLYHO\OHVVZHOOUHSUHVHQWHGDWIXUWKHUOHYHOV
/DVWO\VHFWLRQORRNHGDWVRPHSXEOLFHGXFDWLRQLQLWLDWLYHV7KH6DUYD6KLNVKD$EKL\DQ
PLGGD\PHDOVFKHPHDQGWKHSDUDWHDFKHUVFKHPHZHUHHDFKGLVFXVVHGEULHIO\8QIRUWXQDWHO\WKH
LPSDFWVRIWKHVHPDVVLYHLQWHUYHQWLRQVRURIWKHLUVXEFRPSRQHQWVRQFKLOGUHQVVFKRRODWWHQGDQFH
DQGOHDUQLQJRXWFRPHVKDYHQRWEHHQULJRURXVO\HYDOXDWHG7KLVLVQHFHVVDU\LIGHFLVLRQPDNHUVDUHWR
KRQHIXWXUHHGXFDWLRQSROLF\PDNLQJLQOLJKWRINQRZOHGJHDERXWWKHFRVWHIIHFWLYHQHVVRIDOWHUQDWLYH
LQWHUYHQWLRQV0RUHRYHUUDGLFDOPHDVXUHVWRLPSURYHWHDFKHUDQGVFKRROLQFHQWLYHVKDYHQRWEHHQ
FRQVLGHUHGLQ,QGLDSHUKDSVEHFDXVHWKH\VWDQGWRXSVHWSRZHUIXOYHVWHGLQWHUHVW:KLOHWKHH[LVWHQFH
RIILVFDOO\GHPDQGLQJHGXFDWLRQLQLWLDWLYHVDQGWKHLQWURGXFWLRQRIWKHWZRSHUFHQWHGXFDWLRQFHVVWR
IXQGWKHPWHVWLILHVWRWKH,QGLDQJRYHUQPHQWVLQFUHDVHGFRPPLWPHQWWRVFKRROHGXFDWLRQDQGJLYHV
JURXQGVIRURSWLPLVPDERXWWKHIXWXUHVHULRXVFKDOOHQJHVUHPDLQ
7/28/2019 englishgprg-wps-071
32/38
5HIHUHQFHV
%DUUR5REHUW-DQG/HH-RQJ:KD,QWHUQDWLRQDO'DWDRQ(GXFDWLRQDO$WWDLQPHQW8SGDWHVDQG
,PSOLFDWLRQV&,':RUNLQJ3DSHU1R+DUYDUG8QLYHUVLW\
'HDWRQ$QJXVDQG-HDQ'Uq]H7UDFNLQJ0LG'D\0HDOVLQ,QGLDQ6FKRROV'UDIWQRWHV0DUFK
FLWHGLQ.KHUD'Uq]H-HDQDQG*HHWD.LQJGRQ%LDVHVLQ(GXFDWLRQ6WDWLVWLFV7KH+LQGX0DUFK'Uq]H-HDQDQG$PDUW\D6HQ,QGLD'HYHORSPHQWDQG3DUWLFLSDWLRQ&ODUHQGRQ3UHVV2[IRUGDQG
'HOKL'XIOR(VWKHUDQG5HPD+DQQD,PSURYLQJ7HDFKHU$WWHQGDQFHLQ5XUDO,QGLDPLPHR3RYHUW\
$FWLRQ/DE0,7
'XUDLVDP\3&KDQJHVLQUHWXUQVWRHGXFDWLRQLQ,QGLDE\JHQGHUDJHFRKRUWDQGORFDWLRQ(FRQRPLFVRI(GXFDWLRQ5HYLHZ
+DQXVKHN(ULF7KH(FRQRPLFVRI6FKRRO4XDOLW\*HUPDQ(FRQRPLF5HYLHZ
+DQXVKHN(DQG/=KDQJ4XDOLW\FRQVLVWHQWHVWLPDWHVRILQWHUQDWLRQDOUHWXUQVWRVNLOO1%(5
:RUNLQJ3DSHUKWWSZZZQEHURUJSDSHUVZ1RYHPEHU
',6((OHPHQWDU\(GXFDWLRQLQ,QGLD$QDO\WLFDO5HSRUW'LVWULFW,QIRUPDWLRQ6\VWHPIRU(GXFDWLRQ1,(3$1HZ'HOKL
*OHZZH37KH5HOHYDQFHRI6WDQGDUG(VWLPDWHVRI5DWHVRI5HWXUQWR6FKRROLQJIRU(GXFDWLRQDO
3ROLF\$&ULWLFDO$VVHVVPHQW-RXUQDORI'HYHORSPHQW(FRQRPLFV*OHZZH36FKRROVDQG6NLOOVLQ'HYHORSLQJ&RXQWULHV(GXFDWLRQ3ROLFLHVDQG
6RFLRHFRQRPLF2XWFRPHV-RXUQDORI(FRQRPLF/LWHUDWXUH
*RYLQGD5DQG
7/28/2019 englishgprg-wps-071
33/38
.LQJGRQ*D3ULYDWH6FKRROLQJLQ,QGLD6L]H1DWXUHDQG(TXLW\(IIHFWV(FRQRPLFDQG3ROLWLFDO:HHNO\
.LQJGRQ*E7KH4XDOLW\DQG(IILFLHQF\RI3XEOLFDQG3ULYDWH6FKRROV$&DVH6WXG\RI8UEDQ,QGLD2[IRUG%XOOHWLQRI(FRQRPLFVDQG6WDWLVWLFV1R)HEUXDU\
.LQJGRQ*'RHVWKH/DERXU0DUNHW([SODLQ/RZHU)HPDOH6FKRROLQJLQ,QGLD"-RXUQDORI
'HYHORSPHQW6WXGLHV1R2FWREHU.LQJGRQ*DQG-HHPRO8QQL(GXFDWLRQDQG:RPHQV/DERXU0DUNHW2XWFRPHVLQ,QGLD(GXFDWLRQ
(FRQRPLFV1R$XJXVW.LQJGRQ*DQG00X]DPPLO7KH3ROLWLFDO(FRQRP\RI(GXFDWLRQLQ,QGLD7HDFKHU3ROLWLFVLQ
8WWDU3UDGHVK'HOKL2[IRUG8QLYHUVLW\3UHVV
.LQJGRQ*5&DVVHQ.0F1D\DQG/9LVDULD(GXFDWLRQDQG/LWHUDF\&KDSWHULQ7'\VRQ
5&DVVHQDQG/9LVDULDHGV7ZHQW\)LUVW&HQWXU\,QGLD3RSXODWLRQ(FRQRP\+XPDQ
'HYHORSPHQWDQGWKH(QYLURQPHQW2[IRUG8QLYHUVLW\3UHVV/RQGRQ.LQJGRQ*:KHUHKDVDOOWKH%LDV*RQH"'HWHFWLQJ*HQGHU%LDVLQWKH,QWUDKRXVHKROG
$OORFDWLRQRI(GXFDWLRQDO([SHQGLWXUHLQ5XUDO,QGLD(FRQRPLF'HYHORSPHQWDQG&XOWXUDO&KDQJH1R
.LQJGRQ*3ULYDWHDQG3XEOLF6FKRROLQJ7KH,QGLDQ([SHULHQFH:RUNLQJ3DSHU3(3*
3URJUDPRQ(GXFDWLRQ3ROLF\DQG*RYHUQDQFH+DUYDUG8QLYHUVLW\2FW)RUWKFRPLQJLQ&KDNUDEDUWL5DQG33HWHUVRQHGV6FKRRO&KRLFH,QWHUQDWLRQDO7KH/DWHVW(YLGHQFH+DUYDUG8QLYHUVLW\3UHVV
.UHPHU01&KDXGKXU\DQG)+5RJHUV.0XUDOLGKDUDQDQG-+DPPHU7HDFKHU$EVHQFH
LQ,QGLD$6QDSVKRW-RXUQDORIWKH(XURSHDQ(FRQRPLF$VVRFLDWLRQ9RO1R/HFOHUFT)UDQoRLV7KH,PSDFWRI(GXFDWLRQ3ROLF\5HIRUPVRQWKH(GXFDWLRQ6\VWHP$)LHOG
6WXG\RI(*6DQG2WKHU3ULPDU\6FKRROVLQ0DGK\D3UDGHVK&HQWUHGH6FLHQFHV+XPDLQHV'HOKL
3UDWKDP$6(5$QQXDO6WDWXVRI(GXFDWLRQ5HSRUW3UDWKDP1HZ'HOKL)HEUXDU\
3UDWKDP$6(5$QQXDO6WDWXVRI(GXFDWLRQ5HSRUW3UDWKDP1HZ'HOKL-DQXDU\3UDWLFKL7UXVW(GXFDWLRQ5HSRUWKWWSZZZDPDUW\DVHQQHWSUDWLFKLKWP
0+5'6HOHFWHG(GXFDWLRQ6WDWLVWLFV0LQLVWU\RI+XPDQ5HVRXUFH'HYHORSPHQW1HZ'HOKL
0XUDOLGKDUDQ.DQG0.UHPHU3ULYDWHDQG3XEOLF6FKRROVLQ5XUDO,QGLD0LPHR+DUYDUG8QLYHUVLW\0DUFK
3UREH7HDP3XEOLF5HSRUWRQ%DVLF(GXFDWLRQLQ,QGLD2[IRUG8QLYHUVLW\3UHVV1HZ'HOKL
3VDFKDURSRXORV*5HWXUQVWR,QYHVWPHQWLQ(GXFDWLRQ$*OREDO8SGDWH:RUOG'HYHORSPHQW
1&(57YDULRXV\HDUV$OO,QGLD(GXFDWLRQ6XUYH\>)RXUWK)LIWKDQG6L[WK@1DWLRQDO&RXQFLORI(GXFDWLRQDO5HVHDUFKDQG7UDLQLQJ1HZ'HOKL
7/28/2019 englishgprg-wps-071
34/38
1&(57D/HDUQLQJDFKLHYHPHQWRIVWXGHQWVDWWKHHQGRIFODVV9'HSDUWPHQWRI(GXFDWLRQDO0HDVXUHPHQWDQG(YDOXDWLRQ1DWLRQDO&RXQFLORI(GXFDWLRQDO5HVHDUFKDQG7UDLQLQJ1HZ'HOKL'RZQORDGDEOHIURPKWWSVVDQLFLQTXDOLW\HGXVXPPBH[HFDVS
1&(57E6HYHQWK$OO,QGLD(GXFDWLRQ6XUYH\REWDLQHGIURP
KWWSJRYXDQLFLQ16FKHGXOH'DWDPDLQDVS[5LERXG0
7/28/2019 englishgprg-wps-071
35/38
7/28/2019 englishgprg-wps-071
36/38
$SSHQGL[7DEOH
/HDUQLQJDFKLHYHPHQWLQJUDGHE\VXEMHFWDQGVWDWH
0HDQSHUFHQWDJHPDUN
(QYLURQPHQWDO6FLHQFH 0DWKHPDWLFV /DQJXDJH
6WDWH87
1XPEHURI
SXSLOV
PHDQ
PDUN
'LIIZLWK
QDWPHDQ
PHDQ
PDUN
'LIIZLWK
QDWPHDQ
PHDQ
PDUN
'LIIZLWK
QDWPHDQ $3 $VVDP %LKDU
&KDWWLVJDUK 'HOKL *XMDUDW +DUD\DQD +3 .DUQDWDND .HUDOD
03
0DKDUDVKWUD 2ULVVD 3XQMDE 5DMDVWKDQ 7DPLO1DGX
83 8WWDUDQFKDO :%
7RWDO
6RXUFH1&(57D
7/28/2019 englishgprg-wps-071
37/38
$SSHQGL[7DEOHD
*URZWKLQHQUROPHQWVE\OHYHODQGVFKRROW\SHLQ,QGLD
UHFRJQLVHGVFKRROVRQO\
,QGL
D5XUDORQO\
/HYH
O
1XPEHURIVWXGHQWVHQUROOHG
6FKRROW\SH
D
E
F
G
$EVROXWH
LQFUHDVH
HED
V
KDUHRI
WKHWRWDO
LQFUHDVH
IH[
$EVROXWH
LQFUHDVH
JFE
V
KDUHRI
WKHWRWDO
LQFUHDVH
KJ[
$EVROX
WH
LQFUHD
VH
LG
F
V
KDUHRI
WKHWRWDO
LQFUHDVH
ML[
3ULPDU
\
*
3$
38$
7RWDO
LQFUHDVH
[
-XQLRU
*
3$
38$
7RWDO
LQFUHDVH
[
6HFRQG
DU\
*
3$
38$
7RWDO
LQFUHDVH
[
6RXUFH1&(57)RXUWK$OO,QGLD(GX
FDWLRQ6XUYH\RI1&(57)LIWK$OO,QGLD(GXFDWLRQ6XUYH
\RIS
1&(57
6L[WK$OO
,QGLD(GXFDWLRQ6XUYH\RI)LJXUHV
IURP
WKH6HYHQWK$OO,QGLD(GXFDWLRQ
6XUYH\RIREWDLQHGIURP
KWWSJRYXDQ
LFLQ16FKHGXOH'DWDPDLQDVS[
7/28/2019 englishgprg-wps-071
38/38
$SSHQGL[7DEOHE
*URZWKLQHQUROPHQWVE\OHYHODQGVFKRROW\SHLQ,QGLD
UHFRJQLVHGVFKRROVRQO\
,QGLD8UEDQRQO\
O
1XPEHURIVWXGHQWVHQUROOHG
6FKRROW\SH
D
E
F
G
$EVROXWH
LQFUHDVH
HED
V
KDUHRI
WKHWRWDO
LQFUHDVH
IH[
$EVROXWH
LQFUHDVH
JFE
V
KDUHRI
WKHWRWDO
LQFUHDVH
KJ[
$EVROX
WH
LQFUHD
VH
LG
F
V
KDUHRI
WKHWRWDO
LQFUHDVH
ML[
\
*
3$
38$
7RWDO
LQFUHDVH
[
*
3$
38$
7RWDO
LQFUHDVH
[
DU\
*
3$
38$
7RWDO
LQFUHDVH
[
1&(57)RXUWK$OO,QGLD(GX
FDWLRQ6XUYH\RI1&(57)LIWK$OO,QGLD(GXFDWLRQ6XUYH
\RIS
1&(57
6L[WK$OO
(GXFDWLRQ6XUYH\RI)LJXUHV
IURP
WKH6HYHQWK$OO,QGLD(GXFDWLRQ
6XUYH\RIREWDLQHGIURP
KWWSJRYXDQ
LFLQ16FKHGXOH'DWDPDLQDVS[