)DUP&UHGLW$GPLQLVWUDWLRQ

$QQXDO3HUIRUPDQFH3ODQ

)LVFDO<HDUVDQG

6HSWHPEHU
&217(176

,QWURGXFWLRQ 

$JHQF\)XQFWLRQV

$JHQF\2XWFRPHVDQG3HUIRUPDQFH0HDVXUHV

6WUDWHJLF*RDOVDQG2EMHFWLYHVDQG0DQDJHPHQW)RFXV$UHDV

$JHQF\5HVRXUFHV 

%XGJHWDQG)7($OORFDWLRQE\6WUDWHJLF*RDOV 

)LQDQFLDO0DQDJHPHQW6\VWHP,QLWLDWLYH

,QIRUPDWLRQ5HVRXUFHV0DQDJHPHQW3ODQ 

3HUIRUPDQFH0HDVXUHPHQW6\VWHPDQG5HSRUWLQJ 

(YDOXDWLRQ3URFHVV

)&$/HDGHUVKLS7HDP&RQFXUUHQFH

$SSHQGLFHV

$SSHQGL[2*RDOVDQG2EMHFWLYHVDQG0DQDJHPHQW)RFXV$UHDV

ZLWK5HODWHG3HUIRUPDQFH0HDVXUHV $

$SSHQGL[2$JHQF\3HUIRUPDQFH0HDVXUHV $

$SSHQGL[2*ORVVDU\$
,QWURGXFWLRQ

7KLV)DUP&UHGLW$GPLQLVWUDWLRQ)&$RU$JHQF\$QQXDO3HUIRUPDQFH3ODQ3HUIRUPDQFH3ODQ

IRUILVFDO\HDUV)<DQGSURYLGHVLQIRUPDWLRQDERXWKRZWKH$JHQF\ZLOOFDUU\RXWWKH

JRDOV DQG REMHFWLYHV LQ WKH )&$ 6WUDWHJLF 3ODQ IRU )< ± DQG PHDVXUH WKH UHVXOWV

REWDLQHG E\ LWV RSHUDWLRQV  :H KDYH HVWDEOLVKHG VSHFLILF SHUIRUPDQFH JRDOV WKDW FOHDUO\

FRPPXQLFDWH WR FRQVWLWXHQWV DQG VWDII ZKDW ZH LQWHQG WR GR DQG KRZ ZH ZLOO PHDVXUH RXU

SHUIRUPDQFH

:HEHOLHYHWKDWWKH)DUP&UHGLW6\VWHP)&6RU6\VWHP

ZLOOFRQWLQXHWRSOD\DQLPSRUWDQWUROH

LQ DJULFXOWXUH LQWKH VW FHQWXU\  7R WKDW HQG )&$ ZLOO SURYLGH D UHJXODWRU\ HQYLURQPHQW WKDW

HQDEOHV WKH 6\VWHP WR PHHW UXUDO $PHULFD¶V FKDQJLQJ GHPDQGV IRU FUHGLW DQG RWKHU ILQDQFLDO

VHUYLFHV ZLWKLQ WKH DXWKRULWLHV HVWDEOLVKHG E\ &RQJUHVV

  ,Q GRLQJ VR WKH SULPDU\ IRFXV LV WR

HQVXUH WKH ORQJWHUP VDIHW\ DQG VRXQGQHVV RI WKH )&6 DQG GHYHORS UXOHV DQG SROLFLHV WKDW

UHVSHFWPDUNHWIRUFHV7KHVHFRPPLWPHQWVDUHFDSWXUHGLQWKH$JHQF\¶VPLVVLRQVWDWHPHQW

7KH)DUP&UHGLW$GPLQLVWUDWLRQZLOOSURPRWHDVDIHDQGVRXQGFRPSHWLWLYH

)DUP&UHGLW6\VWHPWRILQDQFHDJULFXOWXUHDQGUXUDO$PHULFDDVDXWKRUL]HG

E\&RQJUHVV

7KH SULQFLSOHV RI FXVWRPHU VHUYLFH SURGXFW TXDOLW\ HIIHFWLYH RSHUDWLRQV DQG FOHDU

FRPPXQLFDWLRQ DUH DW WKH KHDUW RI WKH $JHQF\¶V RSHUDWLQJ SKLORVRSK\  7KHVH SULQFLSOHV DUH

FRQVLVWHQWZLWKWKHREMHFWLYHVRIWKH*RYHUQPHQW3HUIRUPDQFHDQG5HVXOWV$FWRI5HVXOWV

$FWZKLFKHQFRXUDJHVRUJDQL]DWLRQVWRPDQDJHIRUUHVXOWVDQGKROGPDQDJHUVDFFRXQWDEOHIRU

H[HFXWLQJSURJUDPVWRDFKLHYHGHVLUHGRXWFRPHV

7KH$JHQF\SURYLGHV VWURQJ DQGHIIHFWLYH UHJXODWLRQWRIDFLOLWDWHWKH FKDQJHV)&6 LQVWLWXWLRQV

PXVW PDNH WR UHPDLQ FRPSHWLWLYH SURWHFW WKH SXEOLF LQWHUHVW E\ HQVXULQJ WKDW D UHJXODWHG

LQVWLWXWLRQ¶VDFWLYLWLHVDUHDXWKRUL]HGE\ODZDQGPRVWLPSRUWDQWO\SURPRWHDKLJKOHYHORISXEOLF

FRQILGHQFH LQWKH RYHUDOO VDIHW\ DQG VRXQGQHVV RI6\VWHP LQVWLWXWLRQV )&$¶V SROLF\ PDNLQJ

H[DPLQDWLRQ DQG RWKHU RYHUVLJKW DFWLYLWLHV UHODWH GLUHFWO\ WR FRQWUROOLQJ ULVN LQ 6\VWHP

LQVWLWXWLRQVWKHUHE\LQVWLOOLQJFRQILGHQFHWKDWWKH)&6RSHUDWHVVDIHO\DQGRQDVRXQGILQDQFLDO

IRXQGDWLRQ

$JULFXOWXUH LQ PXFK RI WKH V KDV HQMR\HG VWURQJ PDUNHWV IRU LWV SURGXFWV  7KH UHVXOWLQJ

LQFUHDVHLQIDUPLQFRPHDOORZHGIRULPSURYHGGHEWVHUYLFLQJ7KLVUHVXOWHGLQKLJKHUTXDOLW\ORDQ

SRUWIROLRV IRU PRVW )&6 LQVWLWXWLRQV DQG DORQJ ZLWK LPSURYHG PDQDJHPHQW SUDFWLFHV KDV

SURGXFHGVWURQJHU)&6HDUQLQJVDQGFDSLWDOSRVLWLRQV

)LQDQFLDO VWUHVV LQ DJULFXOWXUH PD\ LQFUHDVH LQ  KRZHYHU  7KH 86 'HSDUWPHQW RI

$JULFXOWXUH¶V86'$IRUHFDVWIRUQHWIDUPLQFRPHIRULVELOOLRQGRZQIURP$QG

PRUH WKDQ  SHUFHQW RI WKLV LQFRPH  ELOOLRQ ZLOO FRPH IURP *RYHUQPHQW SD\PHQWV WR

DJULFXOWXUH  86'$ KDV DGMXVWHG LWV FDVK UHFHLSWV IRUHFDVW GRZQZDUG GXH ODUJHO\ WR GHFOLQLQJ

YDOXHV RI SURGXFWLRQ DV D UHVXOW RI IDOOLQJ FRPPRGLW\ SULFHV  7KH DJULFXOWXUDO HFRQRP\ LV



 7KH)DUP&UHGLW6\VWHPLVD*RYHUQPHQWVSRQVRUHGHQWHUSULVHHVWDEOLVKHGWRSURYLGHFUHGLWDQGUHODWHGVHUYLFHV

WRDJULFXOWXUDODQGDTXDWLFSURGXFHUVWKHLUFRRSHUDWLYHVDQGUHODWHGEXVLQHVVHV,WLVVWUXFWXUHGDVDFRRSHUDWLYH

V\VWHPZLWKLWVERUURZHUVDVPHPEHUVVKDUHKROGHUV  7KH )DUP &UHGLW $FW RI  DV DPHQGHG $FW VHWV IRUWK WKH DXWKRULWLHV RI WKH 6\VWHP DQG HQXPHUDWHV WKH

DXWKRULWLHV RI )&$ DV WKH 6\VWHP¶V LQGHSHQGHQW UHJXODWRU  7KH $FW PDQGDWHV WKDW )&$ H[DPLQH 6\VWHP

LQVWLWXWLRQVIRUVDIHW\DQGVRXQGQHVVHQVXUH FRPSOLDQFHZLWKDOOODZVDQG UHJXODWLRQVDQGGHYHORSSROLFLHVDQG

UHJXODWLRQVWRFDUU\RXWWKHLQWHQWRIWKH$FW


H[SHULHQFLQJWKLVVWUHVVIRUVHYHUDOUHDVRQVLQFOXGLQJKLJKSURGXFWLRQZRUOGZLGHVDJJLQJH[SRUW

GHPDQGGXHWRILQDQFLDOVWUHVVLQ$VLDDSSUHFLDWLRQRIWKHGROODUUHODWLYHWRRWKHUFXUUHQFLHVDQG

XQIDYRUDEOHZHDWKHUFRQGLWLRQV£PRVWO\GURXJKW,WLVOLNHO\WKDWWKLVVWUHVVZLOOFRQWLQXHLQWR

:KLOH WKH 6\VWHP FRQWLQXHV WR HQMR\ JRRG ILQDQFLDO SHUIRUPDQFH UHDO ULVNV DUH HPHUJLQJ DQG

)&$PXVW SODQIRU DPRUH FKDOOHQJLQJ HQYLURQPHQW 7KH LQWHQW RIWKLV3HUIRUPDQFH3ODQ LVWR

PDLQWDLQ HIIHFWLYH 6\VWHP UHJXODWLRQ DQG RYHUVLJKW ZKLOH SRVLWLRQLQJ RXU RSHUDWLRQV WR EHVW

SUHSDUHWKH$JHQF\IRUDGRZQWXUQLQWKHDJULFXOWXUDOHFRQRPLFF\FOH7KURXJKWKLVSUHSDUDWLRQ

)&$LQLWVUROHDVUHJXODWRUFDQKHOSPLWLJDWHWKHHIIHFWVRIDQHFRQRPLFGRZQWXUQRQWKHVDIHW\

DQGVRXQGQHVVRIWKH)&6

7KH SHUIRUPDQFH JRDOV LQFOXGHG LQ WKH SHUIRUPDQFH PHDVXUHV WDEOHV LQ WKH VHFWLRQ HQWLWOHG

$JHQF\2XWFRPHVDQG3HUIRUPDQFH0HDVXUHVZHUHGHYHORSHGDIWHUFRQVLGHULQJWKHFXUUHQWDQG

SRWHQWLDOIXWXUHRSHUDWLQJHQYLURQPHQW6RPHRIWKHDFFRPSDQ\LQJSHUIRUPDQFHJRDOV LQGLFDWH

WKDWWKHEHVWRXWFRPHXQGHUDGYHUVHFRQGLWLRQVRUWKHEHVWUHVXOWWKDWWKH$JHQF\PD\DFKLHYHLV

PLWLJDWLRQRIGHWHULRUDWLRQ3HUIRUPDQFHLVDFKLHYHGERWKWKURXJKSUHSDULQJRI)&6LQVWLWXWLRQVIRU

DGYHUVLW\ ZLWK UHJXODWRU\ JXLGDQFH DQG WKH LQVWLWXWLRQV¶ UHVSRQGLQJ WR FULVHV ZLWK D EDODQFH RI

IRUEHDUDQFH DQG UHVWUXFWXULQJ VXSSRUWHG E\ FDSLWDO RU ORDQ ORVV UHVHUYHV VR WKDW WKH XOWLPDWH

FXVWRPHUVFDQUHVWRUHFDVKIORZDQGSURILWDELOLW\)&$KDVGHYHORSHGJRDOVIRUWKRVHPHDVXUHV

WKDWUHIOHFWWKHFKDOOHQJHVWKH)&6ZLOOEHIDFLQJLQDFKLHYLQJFRQWLQXHGSRVLWLYHSHUIRUPDQFH

7KH $JHQF\ DOVR FRQGXFWHG DQ DQDO\VLV WR GHWHUPLQH WKH UHVRXUFHV QHHGHG WR DFFRPSOLVK LWV

VWUDWHJLF JRDOV  7KH DOORFDWLRQ RI WKHVH UHVRXUFH QHHGV LV LQFOXGHG LQ D WDEOH LQ WKH VHFWLRQ

HQWLWOHG$JHQF\5HVRXUFHV

7KHLQIRUPDWLRQWKDWIROORZVSURYLGHVDGGLWLRQDOGHWDLORQWKHVSHFLILFSURFHVVHVWHFKQRORJLHVDQG

W\SHVRIUHVRXUFHVWKDWDUHQHHGHGWRDFKLHYH)&$¶VSHUIRUPDQFHJRDOV7KHSUHVHQWDWLRQRIWKLV

PDWHULDO LV GHVLJQHG WR HVWDEOLVK FOHDU OLQNDJHV EHWZHHQ WKH 6WUDWHJLF 3ODQ SHUIRUPDQFH

PHDVXUHVDQGJRDOVDQGEXGJHWDU\QHHGV


$JHQF\)XQFWLRQV

7R IXOILOO LWV PLVVLRQ WKH $JHQF\ SHUIRUPV WZR EDVLF IXQFWLRQV  LGHQWLI\LQJ ULVN DQG WDNLQJ

FRUUHFWLYH DFWLRQ DQG LVVXLQJ UHJXODWLRQV DQG SXEOLF SROLF\ WKDW JXLGH WKH )&6  7KHVH

IXQFWLRQV DUH VXSSRUWHG E\ DQG GLUHFWO\ OLQNHG WR RWKHU $JHQF\ DFWLYLWLHV VXFK DV WKH

PDQDJHPHQW RI PRQHWDU\ KXPDQ DQG LQIRUPDWLRQ UHVRXUFHV OHJDO FRXQVHO HFRQRPLF DQG

ILQDQFLDO DQDO\VLV DQG &RQJUHVVLRQDO DQG SXEOLF DIIDLUV  )&$¶V RUJDQL]DWLRQDO VWUXFWXUH LV

GHVLJQHG WR FKDQQHO FULWLFDO UHVRXUFHV LQWR WKHVH IXQFWLRQV WR DFKLHYH LWV PLVVLRQ  :KLOH WKH

$JHQF\¶V RIILFHV KDYH GLIIHUHQW UHVSRQVLELOLWLHVWKH\ ZRUN DV D WHDP WR FDUU\ RXW WKH $JHQF\¶V

PLVVLRQ

,GHQWLI\LQJ 5LVN DQG 7DNLQJ &RUUHFWLYH $FWLRQ2)&$ KDV VWDWXWRU\ DXWKRULW\ WR H[DPLQH DOO

)&6LQVWLWXWLRQVLQFOXGLQJWKH)HGHUDO$JULFXOWXUDO0RUWJDJH&RUSRUDWLRQ)DUPHU0DFDVZHOODV

WKH1DWLRQDO&RQVXPHU&RRSHUDWLYH%DQNZKLFKLVDQRQ6\VWHPHQWLW\$VRI2FWREHU

WKH)&6ZDV FRPSULVHGRI)DUP&UHGLWEDQNV  DVVRFLDWLRQV DQG  VHUYLFH FRUSRUDWLRQV

7KH )DUP &UHGLW 6\VWHP 5HIRUP $FW RI  5HIRUP $FW UHTXLUHV H[DPLQDWLRQ RI 6\VWHP

LQVWLWXWLRQVDWOHDVWRQFHHYHU\PRQWKV

+RZHYHU)&$EDVHVLWVH[DPLQDWLRQIUHTXHQF\RQ

WKHOHYHORIULVNFRQVHTXHQWO\KLJKHUULVN6\VWHPLQVWLWXWLRQVDUHH[DPLQHGPRUHIUHTXHQWO\)&$

H[DPLQHUV HYDOXDWH ULVN H[SRVXUHIURP D VDIHW\ DQG VRXQGQHVV SHUVSHFWLYH DQG GHWHUPLQHWKH

OHYHO RI FRPSOLDQFH ZLWK ODZV DQG UHJXODWLRQV $ FULWLFDO SDUW RI WKH H[DPLQDWLRQ SURFHVV LV WR

HQFRXUDJHLQVWLWXWLRQVWRWDNHSURPSWFRUUHFWLYHDFWLRQWRDGGUHVVLGHQWLILHGSUREOHPV)&$XVHV

FRUUHFWLYHDFWLRQVZKHQLWLGHQWLILHVSUREOHPVWKDWKLQGHUDQLQVWLWXWLRQ¶VVDIHW\DQGVRXQGQHVVRU

ZKHQWKHLQVWLWXWLRQLVQRWFRPSO\LQJZLWKODZVDQGUHJXODWLRQV

7KH $JHQF\ KDV VHYHUDO SURFHVVHV WR FRQWLQXRXVO\ LGHQWLI\ PRQLWRU HYDOXDWH DQG SURDFWLYHO\

DGGUHVVULVNLQWKH6\VWHP)&$LVVXHVD5HSRUWRI([DPLQDWLRQWRHYHU\LQVWLWXWLRQWKDWFRQWDLQV

DQ HYDOXDWLRQ RI LWV RYHUDOO FRQGLWLRQ DQG SHUIRUPDQFH  6WDII URXWLQHO\ GHYHORS ULVN SURILOHV RQ

LQGLYLGXDOLQVWLWXWLRQVWKDWSURYLGHFXUUHQWLQIRUPDWLRQWRWKH)&$%RDUGDQGPDQDJHPHQW)&$

DOVR KDV SURFHVVHV WR FROOHFW LQIRUPDWLRQ RQ HFRQRPLF WUHQGV DQG VLJQLILFDQW ORDQ SRUWIROLR

FRQFHQWUDWLRQVWKDWDUHXVHGWRKHOSVHWWKHVFRSHRIH[DPLQDWLRQV

7KH$JHQF\SURYLGHVERWKIRUPDODQGLQIRUPDOJXLGDQFHWR)&6LQVWLWXWLRQVWKURXJKH[DPLQDWLRQV

DQG OHWWHUV WR LQVWLWXWLRQ ERDUGV WKDW SURYLGH UHTXLUHPHQWV RU UHFRPPHQGDWLRQV IRU FRUUHFWLYH

DFWLRQV,QDGGLWLRQ)&$KDVDXWKRULW\WRLQLWLDWHDQHQIRUFHPHQWDFWLRQDJDLQVWDQ)&6LQVWLWXWLRQ

WKDWYLRODWHV VWDWXWRU\RU UHJXODWRU\ UHTXLUHPHQWVRUHQJDJHV LQDQ XQVDIH RU XQVRXQG SUDFWLFH

(QIRUFHPHQWDFWLRQVFDQLQFOXGHDJUHHPHQWVRUGHUVWRFHDVHDQGGHVLVWFLYLOPRQH\SHQDOWLHV

DQG RUGHUV RI UHPRYDO RU SURKLELWLRQ RI LQGLYLGXDOV IURP SDUWLFLSDWLRQ LQ WKH DIIDLUV RI DQ )&6

LQVWLWXWLRQ  ,I FRQGLWLRQV ZDUUDQW )&$ FDQ DOVR SODFH LQVWLWXWLRQV LQWR FRQVHUYDWRUVKLS RU

UHFHLYHUVKLS



 7ZR )DUP &UHGLW GLVWULFWV KDYH )HGHUDO /DQG %DQN $VVRFLDWLRQV )/%$V ZKLFK GR QRW KDYH GLUHFWOHQGLQJ

DXWKRULW\KHQFHWKH\FDUU\YHU\IHZDVVHWVLQWKHLURZQSRUWIROLRV)/%$VDUH UHTXLUHGWREHH[DPLQHGDWOHDVW

RQFHHYHU\PRQWKV


,VVXLQJ 5HJXODWLRQV DQG 3XEOLF 3ROLF\2)&$ KDV VWDWXWRU\ UHVSRQVLELOLW\ DQG UHJXODWRU\

DXWKRULW\WRHVWDEOLVKSROLF\WKURXJKWKHLQWHUSUHWDWLRQDQG LPSOHPHQWDWLRQRIWKH$FW7KH)&$

%RDUGLVVXHVUHJXODWLRQVDQGSROLF\VWDWHPHQWVWRSURPRWHVDIHW\DQGVRXQGQHVVLQWKH)&6DQG

FRPSOLDQFH ZLWK ODZVDQG UHJXODWLRQV)&$ LV DOVRWKH FKDUWHULQJ DXWKRULW\IRUWKH)&6 DQG LW

UHYLHZVDQGUXOHVRQFRUSRUDWHDSSOLFDWLRQVIRUPHUJHUVDQGFRQVROLGDWLRQVRI6\VWHPHQWLWLHV$

OLPLWHG QXPEHU RI 6\VWHP DFWLYLWLHV VXFK DV IXQGLQJ QHZ ILQDQFLDO VHUYLFHV DQG FHUWDLQ

LQYHVWPHQWVPXVWDOVRKDYH)&$SULRUDSSURYDO

7KH $JHQF\¶V UHJXODWLRQ DQG SROLF\ GHYHORSPHQW SURJUDP LV SURDFWLYH DQG SURJUHVVLYH ,W LV

GHVLJQHG WR LGHQWLI\ DQG DGGUHVV UHJXODWRU\ LVVXHV DW DQ HDUO\ VWDJH DQG WR LVVXH UXOHV WKDW

SHUPLWWKH6\VWHPWRUHPDLQFRPSHWLWLYHLQWKHPDUNHWSODFH$OWKRXJKSDUWRI)&$¶VUHJXODWRU\

DJHQGD LV GULYHQ E\ QHZ OHJLVODWLRQ PRVW RI WKH LPSHWXV IRU UHJXODWLRQV FRPHV IURP WKH

$JHQF\¶VVWDNHKROGHUVDQGWKH)&$%RDUG7KH)&$%RDUG¶V3ROLF\6WDWHPHQWRQ5HJXODWRU\

3KLORVRSK\ HQVXUHV WKDW UHJXODWLRQV DUH ZULWWHQ WR LPSOHPHQW WKH ODZ SURPRWH VDIHW\ DQG

VRXQGQHVVDQGQRWLPSRVHXQGXHEXUGHQ)&$XVHVDSURFHVVWKDWSURYLGHVDFRQVWDQWIORZ

RILGHDV7KH%RDUGXVHVLQIRUPDWLRQIURPVWDIIUHJXODWHGHQWLWLHVDQGWKHSXEOLFWRHVWDEOLVK

LWV UHJXODWRU\ DJHQGD DQG SULRULWL]H SURMHFWV  7KH %RDUG DOVR DSSURYHV D 5HJXODWRU\

3HUIRUPDQFH 3ODQ WR LPSURYH WKH $JHQF\¶V HIIHFWLYHQHVV LQ UHJXODWLRQ GHYHORSPHQW DQG

HQKDQFHFXVWRPHUVHUYLFHDQGSDUWLFLSDWLRQ

,QFUHDVLQJO\)&$XVHVFXVWRPHUVHUYLFHDQGIRFXVJURXSVWRVSHHGWKHUHJXODWLRQGHYHORSPHQW

SURFHVVDQGLQFUHDVHSXEOLFSDUWLFLSDWLRQ7RDFFRPSOLVKWKLVWKH$JHQF\XVHV

 )DVWWUDFNSURFHGXUHVWRKDQGOHQRQFRPSOH[LVVXHV

 $GYDQFH1RWLFHRI3URSRVHG5XOHPDNLQJ$1350RSWLRQVDQGUHYLHZVDOOUHJXODWRU\SURMHFWV

WRGHWHUPLQHLIQHJRWLDWHGUXOHPDNLQJLVDSSURSULDWH

 6SHFLDOFXVWRPHUIRFXVJURXSVWRUHFHLYHLQSXWDQGGLVFXVVHVUHJXODWRU\RSWLRQVSULRUWRUXOHV

EHLQJLVVXHG

 ([WHUQDOZRUNJURXSVWRSURYLGHLQSXWRUUHDFKFRQVHQVXVRQSURSRVHGUXOHVIRU)&$%RDUG

FRQVLGHUDWLRQDQG

 6\PSRVLXPVDQGPHHWLQJVWRDGGUHVVHPHUJLQJLVVXHV

:KHQTXLFNSROLF\FODULILFDWLRQLVUHTXLUHGIRU6\VWHPLQVWLWXWLRQVWKH$JHQF\LVVXHVERRNOHWWHUV

DQGVSHFLDOLQIRUPDWLRQPHPRUDQGDWRSURYLGHWLPHO\JXLGDQFH

5HJXODWRU\ DQG SROLF\ LVVXHV DUH DOVR KDQGOHG WKURXJK WKH DSSURYDO SURFHVV IRU FRUSRUDWH

PHUJHUV DQG FRQVROLGDWLRQV  7KLV SURFHVV HQWDLOV DQ HYDOXDWLRQ RI DQ LQVWLWXWLRQ¶V ILQDQFLDO

YLDELOLW\ WKH DGHTXDF\ RI GLVFORVXUH LQIRUPDWLRQ WR VWRFNKROGHUV DQG FRPSOLDQFH ZLWK DOO )&$

SROLFLHVDQGUHJXODWLRQVWKDWUHODWHWRWKHPHUJHURUFRQVROLGDWLRQ


$JHQF\2XWFRPHVDQG3HUIRUPDQFH0HDVXUHV

7RPHDVXUHKRZHIIHFWLYHO\WKH$JHQF\LVIXOILOOLQJLWVPLVVLRQWKH)&$%RDUGDQG/HDGHUVKLS

7HDPLGHQWLILHGWKHIROORZLQJIRXUNH\RXWFRPHV

 (IIHFWLYH5LVN,GHQWLILFDWLRQDQG&RUUHFWLYH$FWLRQ

 (IIHFWLYH5HJXODWLRQDQG3XEOLF3ROLF\

 (IIHFWLYHDQG(IILFLHQW$JHQF\$GPLQLVWUDWLRQ

 (IIHFWLYH([WHUQDO5HODWLRQVKLSV

7KHVHRXWFRPHVSURYLGHIRUDWKRURXJKDQGEDODQFHGV\VWHPRIPHDVXUHVWKDWVXSSRUWWKHWZR

EDVLF $JHQF\ IXQFWLRQV  7KH WDEOHV WKDW IROORZ FRQWDLQ WKH PHDVXUHV DVVRFLDWHG ZLWK HDFK

RXWFRPH DORQJ ZLWK WKH FRUUHVSRQGLQJ JRDOV DQG PDQDJHPHQW IRFXV DUHDV WKDW UHIOHFW WKH

$JHQF\¶VGHVLUHGOHYHORISHUIRUPDQFHIRU)<DQG

7ZRLPSRUWDQWFRQFHSWVDUHHPERGLHGLQWKH$JHQF\¶VSHUIRUPDQFHPHDVXUHPHQWV\VWHP)LUVW

LVWKHFRQFHSWRIWKHEDODQFHGVFRUHFDUG7KLVPHDQVWKDWQRRQHPHDVXUHE\LWVHOIVXIILFLHQWO\

PHDVXUHVDQRXWFRPH$EDODQFHGJURXSRIPHDVXUHVSURYLGHVLQIRUPDWLRQRQLQSXWVRXWSXWV

HIILFLHQF\ DQG PRVW LPSRUWDQW RXWFRPHV  )XUWKHU D EDODQFHG DSSURDFK DOORZV DQDO\VLV RI

ZKHWKHURUQRWDFKLHYLQJWKHRXWFRPHLVFRVWHIIHFWLYH

$QRWKHU VLJQLILFDQW SHUIRUPDQFH PHDVXUHPHQW FRQFHSW LV WKH UHFRJQLWLRQ RI OLPLWDWLRQV 7KH

$JHQF\ PD\ QRW KDYH FRPSOHWH FRQWURO RYHU DQ RXWFRPH EXW VWLOO PXVW DFFHSW DQ DSSURSULDWH

GHJUHH RI UHVSRQVLELOLW\ IRU WKH UHVXOWV  )RU H[DPSOH WKH EHVW RXWFRPHV IRU PHDVXULQJ WKH

$JHQF\¶VSHUIRUPDQFHPD\EHWKRVHWKDWUHODWHWRWKHVDIHW\DQGVRXQGQHVVRIWKH)&6&HUWDLQ

IDFWRUVDIIHFWLQJVDIHW\DQGVRXQGQHVVVXFKDVDGYHUVHHFRQRPLFWUHQGVFOHDUO\DUHEH\RQGWKH

$JHQF\¶VFRQWURO1HYHUWKHOHVVLWLVFULWLFDOWKDWZHLGHQWLI\WKDWRXWFRPHQRWHZKHUH)&$ODFNV

FRQWURORYHULWDQGEHDEOHWRH[SODLQKRZ)&$¶VDFWLYLWLHVLQIOXHQFHWKHRXWFRPH


(IIHFWLYH5LVN,GHQWLILFDWLRQDQG&RUUHFWLYH$FWLRQ27KHLGHQWLILHGPHDVXUHVUHODWHQRWRQO\WR

)&$¶VVWDWXWRU\H[DPLQDWLRQIUHTXHQF\UHTXLUHPHQWVEXWDOVRWRWKHUHVXOWVREWDLQHGWKURXJKWKH

$JHQF\¶V SURFHVVHV UHODWHG WR WKLV RXWFRPH  7KLV JURXS RI PHDVXUHV SURYLGHV D EDVLV IRU

FRQFOXGLQJ ZKHWKHU WKH $JHQF\ KDV LGHQWLILHG ULVNV DQG ZKHWKHU WKH 6\VWHP LQVWLWXWLRQV KDYH

WDNHQFRUUHFWLYHDFWLRQV

$*(1&</(9(/0($685(6 *2$/ %$6(/,1(

7KHQXPEHU RI GLUHFWOHQGHU LQVWLWXWLRQVZLWK DGYHUVHO\ FODVVLILHG DVVHWV

WRULVNIXQGVOHVVWKDQSHUFHQWGLYLGHGE\WKHWRWDOQXPEHURIGLUHFW

OHQGHULQVWLWXWLRQV

! 

7KH WRWDO DVVHWV RI GLUHFWOHQGHU LQVWLWXWLRQV ZLWK DGYHUVHO\ FODVVLILHG

DVVHWVWRULVNIXQGVOHVVWKDQSHUFHQWGLYLGHGE\WKHWRWDODVVHWVRI

GLUHFWOHQGHULQVWLWXWLRQV

! 

7KHQXPEHU RI GLUHFWOHQGHU LQVWLWXWLRQVZLWK DGYHUVHO\ FODVVLILHG DVVHWV

WR ULVNIXQGV JUHDWHUWKDQ  SHUFHQW ZLWK FRUUHFWLYH DFWLRQ SODQV WKDW

PLWLJDWHWKHH[FHVVLYHULVN

 

7KHWRWDODVVHWVRIGLUHFWOHQGHULQVWLWXWLRQV FRPSO\LQJZLWK DOOPLQLPXP

FDSLWDO UDWLRV SHUPDQHQW FDSLWDO UDWLR WRWDO VXUSOXV UDWLR FRUH VXUSOXV

UDWLR QHW FROODWHUDO UDWLR GLYLGHG E\ WKH WRWDO DVVHWV RI GLUHFWOHQGHU

LQVWLWXWLRQV

 

7KH\HDUDYHUDJHUHWXUQRQDYHUDJHDVVHWV52$$RI)&6LQVWLWXWLRQV ! 

7KH SHUFHQWDJH RI H[DPLQDWLRQV RI )&6 LQVWLWXWLRQV PHHWLQJ VWDWXWRU\

H[DPLQDWLRQIUHTXHQF\UHTXLUHPHQWV

 

&XVWRPHUDFFHSWDQFHRI)&$¶VH[DPLQDWLRQDQGVXSHUYLVRU\SURJUDPV

WKURXJK WKH DYHUDJH RI WKH UDWLQJV UHFHLYHG RQ WKH IROORZLQJ VXUYH\

TXHVWLRQVWRZLWKEHLQJWKHKLJKHVW

 7KHERDUGDQGPDQDJHPHQWEHOLHYHWKHILQGLQJVRIWKHH[DPLQDWLRQ

ZLOO DVVLVW RU KDYH DVVLVWHG WKH LQVWLWXWLRQ LQ FRUUHFWLQJ LGHQWLILHG

ZHDNQHVVHV

 

 7KH ERDUG DQG PDQDJHPHQW EHOLHYH WKH DFWLRQV UHTXLUHG E\ WKH

HQIRUFHPHQWGRFXPHQWZLOODVVLVWRUKDYHDVVLVWHGWKHLQVWLWXWLRQLQ

FRUUHFWLQJLGHQWLILHGZHDNQHVVHV%DVHOLQHGDWDLVQRWDSSOLFDEOHDW

EHFDXVHWKHVHZHUHQR)&6LQVWLWXWLRQVXQGHUHQIRUFHPHQW

DFWLRQ

7KH QXPEHU RI )&6 LQVWLWXWLRQV WKDW KDYH PLVVLRQFULWLFDO V\VWHP

IDLOXUHVFDXVHGE\\HDUUHODWHGSUREOHPV

7KH SHUFHQWDJH RI)&6 LQVWLWXWLRQV¶<. FRQWLQJHQF\ SODQV WKDW PHHW

WKHLQVWLWXWLRQ¶VQHHGVZKHQWKHLQVWLWXWLRQH[SHULHQFHVDSUREOHPLQD

FULWLFDO V\VWHP FDXVHG E\ GLVUXSWLRQV VXFK DV SRZHU RXWDJH RU

WHOHSKRQHV\VWHPVIDLOXUH







1$

1$

1$



 7KHIROORZLQJGHILQHVWKHV\PEROVDQGDEEUHYLDWLRQVXVHGWRGHVFULEHJRDOVLQWKHVHWDEOHVLVSHUFHQWLVOHVV

WKDQ!LVJUHDWHUWKDQLVOHVVWKDQRUHTXDOWR!LVJUHDWHUWKDQRUHTXDOWRDQG7%'LVWREHGHWHUPLQHG  5HSRUWHGSHUIRUPDQFHWKURXJK-XQH  7KH<HDUSKHQRPHQRQLVDRQHWLPHHYHQW+LVWRULFDOEDVHOLQHLVQRWDYDLODEOH


(IIHFWLYH5HJXODWLRQ DQG3XEOLF3ROLF\27KHHPSKDVLVRIWKLVJURXSRIPHDVXUHV LVQRW RQO\

WKDWUHJXODWRU\SURMHFWVDUHFRPSOHWHGRQWLPHEXWWKDWWKH\HPSOR\LQQRYDWLYHFXVWRPHUVHUYLFH

WHFKQLTXHV LQFUHDVH SXEOLF SDUWLFLSDWLRQ DQG PHHW UHJXODWRU\ REMHFWLYHV  (DFK UHJXODWLRQ DQG

SROLF\GLUHFWLYHLVLQWHQGHGWR

 (QKDQFHWKHVDIHW\DQGVRXQGQHVVRIUHJXODWHGHQWLWLHV

 5HGXFHXQQHFHVVDU\RSHUDWLRQDOEXUGHQV

 &OHDUO\GHILQHREMHFWLYHVDQGDGGUHVVVSHFLILFDOO\LGHQWLILHGULVNVDQGSUREOHPV

 *LYHKLJKSULRULW\WRLVVXHVWKDWSRVHWKHJUHDWHVWULVNZLWKLQWKH)&6

 (VWDEOLVKFOHDUVWDQGDUGVRUFODULI\H[LVWLQJOHJDOUHTXLUHPHQWVDQG

 2WKHUZLVHLPSURYHWKHDELOLW\RIUHJXODWHGHQWLWLHVWRIXOILOOWKHLUSXEOLFSXUSRVHREMHFWLYHV

$*(1&</(9(/0($685(6 *2$/ %$6(/,1(

7KH SHUFHQWDJH RI UHJXODWRU\ SURMHFWV FRPSOHWHG LQWKH %RDUGDSSURYHG

DQQXDO 5HJXODWRU\ 3HUIRUPDQFH 3ODQ  7KH EDVHOLQH LV WKH SURMHFWHG

DFFRPSOLVKPHQWIRU)<

! 

7KH SHUFHQWDJH RI UHJXODWLRQV FRPSOHWHG WKDW XWLOL]H 3VSHFLDO ́ FXVWRPHU

VHUYLFHIRFXVRUIHDWXUHV

7KHEDVHOLQHLVWKHSURMHFWHGDFFRPSOLVKPHQW

IRU)<

! 

7KHSHUFHQWDJHRIUHJXODWLRQVWKDWFXVWRPHUVEHOLHYHPHHWWKHUHJXODWLRQ¶V

RULJLQDO REMHFWLYHV  $ VXUYH\ DQG D QHZ SURFHVV WR REWDLQ GDWD IRU WKLV

PHDVXUHLVXQGHUGHYHORSPHQW7KHQHZSURFHVVZLOOEHSLORWWHVWHGGXULQJ

)<ZLWKLPSOHPHQWDWLRQH[SHFWHGLQ)<

7%' 1$

(IIHFWLYH DQG (IILFLHQW $JHQF\ $GPLQLVWUDWLRQ£7KH PHDVXUHV IRU WKLV RXWFRPH UHODWH WR

ILQDQFLDOLVVXHVDQG$JHQF\RSHUDWLRQV

$*(1&</(9(/0($685(6 *2$/ %$6(/,1(

2SLQLRQUHFHLYHGRQ)&$¶VILQDQFLDOVWDWHPHQWVLV8QTXDOLILHG <HV <HV

1XPEHURIPDWHULDOZHDNQHVVHVQRWHGLQWKH)HGHUDO0DQDJHUV¶)LQDQFLDO

,QWHJULW\$FWOHWWHUIURPWKH$JHQF\&KDLUPDQ&(2WRWKH3UHVLGHQW

 

&RVW RI )&$WR )&6 ERUURZHUV )&$¶V DFWXDO DVVHVVPHQWV GLYLGHG E\ 

\HDUDYHUDJHRIWRWDO6\VWHPDVVHWV

 



 6SHFLDO FXVWRPHU VHUYLFHIRFXV RUIHDWXUHV LQFOXGH 3IDVWWUDFN ́ LQWHULP DQG 3GLUHFW ́ILQDO UXOHV $1350 DFWLRQV

PHHWLQJVZLWKRUXVHRIFXVWRPHUIRFXVJURXSVSULRUWRSURSRVLQJQHZUXOHVWRZQPHHWLQJVKHDULQJVQHJRWLDWHG

UXOHPDNLQJ5HJ1HJHWF


(IIHFWLYH ([WHUQDO 5HODWLRQVKLSV27KHVH PHDVXUHV DVVHVV WKH $JHQF\¶V UHODWLRQVKLS DQG

UHVSRQVLYHQHVVWR&RQJUHVVDQGWKHSXEOLF

$*(1&</(9(/0($685(6 *2$/ %$6(/,1(

7KH SHUFHQWDJH RI LQTXLULHV DQG FRPSODLQWV IURP &RQJUHVV DQG WKH

JHQHUDOSXEOLFWKDW

 $UHDFNQRZOHGJHGZLWKLQGD\V  7%'

 'RQRW UHTXLUHVXSSOHPHQWDO UHVSRQVHVGXHWRLQDFFXUDWHRU

LQFRPSOHWHLQIRUPDWLRQ

 7%'

3HUFHQWDJHRIWKH$JHQF\¶VDQQXDOEXGJHWUHTXHVWDSSURYHGE\&RQJUHVV  

3HUFHQWDJH RI H[WHUQDO UHSRUWV LVVXHG RQ WLPH LQ DFFRUGDQFH ZLWK WKH

3XEOLFDWLRQ6FKHGXOH

 

7KH SHUIRUPDQFH PHDVXUHPHQW V\VWHP LQFRUSRUDWHV PHDVXUHV IRU DOO RIILFHV WKDW UROO XS WR

VXSSRUWWKH$JHQF\OHYHOPHDVXUHVGLVFXVVHGDERYH7KLVHQVXUHVWKDWWKH$JHQF\DVDZKROHLV

3SXOOLQJ WRJHWKHU ́ WRZDUG WKH VDPH JRDOV  $FFRUGLQJO\ LQWHUQDO FRQWUROV DV GLVFXVVHG LQ WKH

VHFWLRQ HQWLWOHG(YDOXDWLRQ 3URFHVV KDYH EHHQ GHYHORSHG IRU $JHQF\ RSHUDWLRQV WR KHOS NHHS

VWDIIIRFXVHGRQWKHGHVLUHGRXWFRPHV7KHVWUDWHJLFJRDOVREMHFWLYHVDQGPDQDJHPHQWIRFXV

DUHDVGLVFXVVHGLQWKHIROORZLQJVHFWLRQIXUWKHU)&$¶VHIIRUWVWRDWWDLQWKHVHRXWFRPHV



 7KHEDVHOLQHZLOOEHFDOFXODWHGIURPWKH&RUUHVSRQGHQFH7UDFNLQJ6\VWHPGDWDDQGPD\XVHVWDWLVWLFDOVDPSOLQJ

IRUHDFKFRUUHVSRQGHQFHFDWHJRU\


6WUDWHJLF*RDOVDQG2EMHFWLYHVDQG0DQDJHPHQW)RFXV$UHDV

2XU 6WUDWHJLF 3ODQ DQG DFFRPSDQ\LQJ JRDOV REMHFWLYHV DQG PDQDJHPHQW IRFXV DUHDV

GHPRQVWUDWHDVWURQJOLQNDJHWRWKHRXWFRPHVGHVFULEHGDERYH7KHJRDOVDQGREMHFWLYHVZLOO

KHOSWKH$JHQF\SRVLWLRQLWVHOIWRGHDOHIIHFWLYHO\ZLWKUDSLGFKDQJHVLQDJULFXOWXUHDQGWKH)&6

DWDWLPHZKHQHFRQRPLFFRQGLWLRQVPD\QRWEHDVIDYRUDEOHDVWKH\KDYHEHHQLQWKH UHFHQW

SDVW  7KLV 3SRVLWLRQLQJ ́ ZLOO DVVLVW XV LQ DFKLHYLQJ WKH SHUIRUPDQFH JRDOV SUHVHQWHG LQ WKH

SUHYLRXVVHFWLRQ0DQDJHPHQWIRFXVDUHDVZHUHDGGHGDVDQDGGHQGXPWRWKH6WUDWHJLF3ODQ

WRHPSKDVL]HWKHLPSRUWDQWUROHWKDWLQWHUQDORSHUDWLRQVDQGLPSURYHGFRPPXQLFDWLRQZLOOSOD\

LQFDUU\LQJRXWWKH$JHQF\¶VOHJLVODWLYHPDQGDWH:KHQFRPELQHGZLWKRQJRLQJSROLF\PDNLQJ

DQG VXSHUYLVRU\ SURJUDPV IRU WKH )&6 WKH VWUDWHJLF REMHFWLYHV IRU )< - ZLOO KHOS

HQVXUHWKH$JHQF\¶VORQJUDQJHVXFFHVVDQGWKHVXFFHVVRIWKHUHJXODWHGLQVWLWXWLRQV

7KH JRDOV LQWKH$JHQF\¶V6WUDWHJLF3ODQIRFXV RQ LPSOHPHQWLQJ SURJUDPVWKDW DUH VRXQG DQG

FRQVWUXFWLYHSURDFWLYHDQGSUHYHQWLYHDQG UHVSRQVLYHWRWKHFKDQJLQJQHHGVRIDJULFXOWXUHDQG

WKH )&6 7KHVH REMHFWLYHV DUH G\QDPLF EHFDXVH SULRULWLHV DUH H[SHFWHGWR FKDQJH RYHUWLPH

7KHUHIRUH VRPH REMHFWLYHV PD\ EH UHSODFHG E\ QHZ RQHV DV YDULRXV LVVXHV HPHUJH LQ HDFK

SODQQLQJF\FOH7KH$JHQF\¶VWZRVWUDWHJLFJRDOVDQGVLJQLILFDQWREMHFWLYHVIRU)<DUH

*RDO 6XSHUYLVHULVNLQWKH)DUP&UHGLW6\VWHPIRUWKHEHQHILWRIVWDNHKROGHUV

7KH FKLHI REMHFWLYH RI WKLV JRDO LV WR FRQWLQXH WR LPSURYH WKH KLJKTXDOLW\ H[DPLQDWLRQ DQG

VXSHUYLVRU\ SURJUDPV WKDW KDYH EURXJKW SRVLWLYH UHFRJQLWLRQ WR WKH $JHQF\  7KH IROORZLQJ

REMHFWLYHVKDYHEHHQLGHQWLILHG

 (QKDQFH WKH YDOXH DQG HIIHFWLYHQHVV RI )&$¶V ULVNEDVHG H[DPLQDWLRQ RYHUVLJKW DQG

FRUUHFWLRQRISUREOHPVLQ)&6LQVWLWXWLRQV

 (QVXUHWKDWLQIRUPDWLRQV\VWHPVRIWKH)&6DQG)&$DUHHIIHFWLYHLQGHOLYHULQJDSSURSULDWH

GDWDDQGDQDO\WLFDOWRROVLQWKH\HDUDQGEH\RQG

 (QKDQFHRSHUDWLRQVLQUHJXODWHGLQVWLWXWLRQVWKURXJKDSSURSULDWHJXLGDQFH

 (QVXUHWKDW)&$KDVWKHDSSURSULDWHWRROVWRDGGUHVVHPHUJLQJULVNLQWKH)&6


*RDO 0D[LPL]H RSSRUWXQLWLHV IRU WKH )DUP &UHGLW 6\VWHP WR SURYLGH FRPSHWLWLYH DQG

GHSHQGDEOHVHUYLFHVIRUDJULFXOWXUHDQGUXUDO$PHULFD

7KHREMHFWLYHVRIWKLVJRDOIRFXVRQGHYHORSLQJFUHDWLYHVROXWLRQVWRHPHUJLQJLVVXHVHQVXULQJDQ

DGHTXDWH VXSSO\ RI UHDVRQDEO\ SULFHG FUHGLW WR IDUPHUV UDQFKHUV DQG WKHLU FRRSHUDWLYHV

SURGXFLQJUXOHVWKDWDUHXVHUIULHQGO\UHGXFLQJUHJXODWRU\EXUGHQLPSURYLQJFRPPXQLFDWLRQZLWK

FXVWRPHUV DQG LQFUHDVLQJ SXEOLF LQYROYHPHQW LQ RXU UHJXODWLRQ DQG SROLF\ SURFHVVHV  7KH

REMHFWLYHVDUHWR

 (QFRXUDJH QHZ LQLWLDWLYHVWKDW KHOS)&6 LQVWLWXWLRQV VHUYHWKH HYROYLQJ QHHGV RI DJULFXOWXUH

DQGUXUDO$PHULFD

 3URPRWHEHWWHUFXVWRPHUVHUYLFHDWORZHVWFRVWWKURXJKVXSSRUWRIKHDOWK\FRPSHWLWLRQ

 (QVXUHWKDWWKH)&6KDVWKHDELOLW\WRFRPSHWHLQJOREDOPDUNHWV

 6XSSRUWWKHFRQWLQXDQFHRIWKH)&6DVD*RYHUQPHQWVSRQVRUHGHQWHUSULVHIRUDJULFXOWXUH

0DQDJHPHQW)RFXV$UHDV

7KHLPSRUWDQFHRIHIILFLHQWDQGHIIHFWLYHLQWHUQDORSHUDWLRQVFDQQRWEHRYHUHPSKDVL]HGDVWKH

$JHQF\ VHHNV WR FDUU\ RXW LWV OHJLVODWLYH PDQGDWH  7ZR RI WKH RXWFRPHV GLVFXVVHG HDUOLHU

£HIIHFWLYH DQG HIILFLHQW $JHQF\ DGPLQLVWUDWLRQ DQG HIIHFWLYH H[WHUQDO UHODWLRQVKLSV£EHDU RXW

WKLVIDFW7KHREMHFWLYHVDUH

 'HYHORSDQGLPSOHPHQWD\HDUKXPDQUHVRXUFHVSODQWRSURPRWHDQGPDQDJHRQHRI)&$¶V

JXLGLQJ SULQFLSOHV£WHDPZRUN DQG D SRVLWLYH SURGXFWLYH DQG IDPLO\IULHQGO\ ZRUN

HQYLURQPHQW

 'HYHORS DQG LPSOHPHQW D \HDUILQDQFLDO SODQ WR LGHQWLI\ UHVRXUFH QHHGV DQG DQDO\]H WKH

LPSDFWRQFRVWV6\VWHPDVVHVVPHQWVDQG$JHQF\HIIHFWLYHQHVV

 &RQWLQXHWRVWUHQJWKHQWKH$JHQF\¶VFRPPLWPHQWWRWKHEHQHILWVRILQIRUPDWLRQWHFKQRORJ\E\

LPSOHPHQWLQJDFWLRQVRIWKH,QIRUPDWLRQ5HVRXUFHV0DQDJHPHQW3ODQQRZLQLWVVL[WK\HDURI

LPSOHPHQWDWLRQ

 5HDIILUPWKH$JHQF\¶VFRPPLWPHQWWRLPSURYHGFRPPXQLFDWLRQZLWKDOOVWDNHKROGHUV

7KH YHKLFOH IRU LPSOHPHQWLQJ WKHVH REMHFWLYHV LV WKH RSHUDWLQJ DQG SHUIRUPDQFH SODQ RI HDFK

RIILFH  (DFK SODQ HVWDEOLVKHV D FOHDU GHVFULSWLRQ RI DQ RIILFH¶V UROH LQ KHOSLQJ WKH $JHQF\ WR

DFFRPSOLVK LWV ORQJUDQJH JRDOV $GGLWLRQDOO\ $SSHQGL[  GLVSOD\V WKH OLQNDJH RIWKH VWUDWHJLF

REMHFWLYHV WR WKH YDULRXV $JHQF\OHYHO PHDVXUHV GLVFXVVHG LQ WKH SUHYLRXV VHFWLRQ  7KH

HIIHFWLYHQHVVRIWKHVHREMHFWLYHVZLOOEHDVVHVVHGWKURXJKWKHDVVRFLDWHGSHUIRUPDQFHPHDVXUHV


$JHQF\5HVRXUFHV

7RFDUU\RXWLWVPLVVLRQDQGREWDLQWKHGHVLUHGRXWFRPHVDQGUHVXOWVWKH$JHQF\KDVUHTXHVWHG

DEXGJHWIRUGLUHFWDGPLQLVWUDWLYHH[SHQVHVRIPLOOLRQDQGPLOOLRQIRU)<DQG

)<UHVSHFWLYHO\SOXVUHLPEXUVDEOHH[SHQVHV7KHIROORZLQJWDEOHLQFOXGHVDGLVWULEXWLRQ

RIWKHEXGJHWE\PDMRUFDWHJRU\

%XGJHW&DWHJRULHV

)<

%RDUG$SSURYHG

%XGJHW

)<

3URSRVHG%XGJHW

&RPSHQVDWLRQ	EHQHILWV  

7UDYHO	WUDQVSRUWDWLRQ  

5HQWFRPPXQLFDWLRQV	XWLOLWLHV  

3ULQWLQJ	UHSURGXFWLRQ  

2WKHUVHUYLFHVFRQVXOWLQJ	RWKHU  

6XSSOLHV	PDWHULDOV  

(TXLSPHQW  

,QVXUDQFHFODLPVLQGHPQLWLHV  

8QGLVWULEXWHG$JHQF\UHVHUYH  

7RWDO  

/HVVUHLPEXUVDEOHDPRXQW  

'LUHFWDGPLQLVWUDWLYHH[SHQVHV  

$V LOOXVWUDWHG LQ WKH WDEOH )&$¶V DELOLW\ WR KROG WKH OLQH RQ H[SHQGLWXUHV LV OLPLWHG E\ WKH

VLJQLILFDQFHRISHUVRQQHOFRVWVLQWKHWRWDOEXGJHW7KHDQWLFLSDWHGFRVWVIRUVDODULHVEHQHILWV

DQG WKULIW VDYLQJV FRPSULVH DSSUR[LPDWHO\  DQG  SHUFHQW RI WKH )<  DQG )< 

EXGJHWV UHVSHFWLYHO\  +HQFH WKH SULPDU\ ZD\ )&$ PDQDJHV LWV EXGJHW LV WKURXJK VWDIILQJ

OHYHOV  7KH QXPEHU RI HPSOR\HHV KDV GHFOLQHG E\  IURP WKH SHDN OHYHO RI  IXOOWLPH

HTXLYDOHQWV )7(VLQ)<7KH)<DQG)<EXGJHWVDUHEDVHGRQDQG

 )7(V UHVSHFWLYHO\ ZKLFK LV ZHOO EHORZ )&$¶V )<  WDUJHW RI  )7(V WKDW ZH

HVWDEOLVKHGLQUHVSRQVHWRWKH1DWLRQDO3HUIRUPDQFH5HYLHZ¶VVWUHDPOLQLQJUHFRPPHQGDWLRQV

:HDUHFRPPLWWHGWRLPSURYLQJHIILFLHQF\DQGPLQLPL]LQJWKHFRVWEXUGHQRQ)&6ERUURZHUV7KH

EXGJHWDVDSHUFHQWDJHRIWKH6\VWHP¶VWRWDODVVHWVLVSURMHFWHGWREHDERXWEDVLVSRLQWVLQ)<

DQG)<DVFRPSDUHGZLWKDFWXDOH[SHQVHVRIEDVLVSRLQWVGXULQJWKHUHFHQW

SHDN\HDU7KHUHIRUHWKHFRPSDUDWLYHFRVWZLOOKDYHEHHQUHGXFHGE\DSSUR[LPDWHO\SHUFHQW

RYHUWKLVSHULRG

%XGJHWDQG)7($OORFDWLRQE\6WUDWHJLF*RDOV

7RHIIHFWLYHO\YLHZWKHOLQNDJHRIWKH6WUDWHJLF3ODQWRWKHEXGJHWZHKDYHDOORFDWHGWKHEXGJHWWR

)&$¶VWZRVWUDWHJLFJRDOVDVQRWHGLQWKHIROORZLQJWDEOH7RDFFRPSOLVKWKLVDQDVVXPSWLRQZDV

PDGH UHJDUGLQJ WKH DOORFDWLRQ RI PLVVLRQ VXSSRUW DFWLYLWLHV  7KHVH DFWLYLWLHV LQFOXGH WKH

PDQDJHPHQW RI PRQHWDU\ KXPDQ DQG LQIRUPDWLRQ UHVRXUFHV OHJDO FRXQVHO HFRQRPLF DQG

ILQDQFLDO DQDO\VLV DQG FRQJUHVVLRQDO DQG SXEOLF DIIDLUV  7KHVH DFWLYLWLHV FRQWULEXWH WR UHDFKLQJ

HDFKRIWKH$JHQF\¶VJRDOVEXWQRWQHFHVVDULO\LQDQHTXDOIDVKLRQ7KHUHIRUHWKHVHFRVWVDQG

WKH UHODWHG )7(V ZHUH DOORFDWHG WR WKH WZR JRDOV LQ SURSRUWLRQ WR WKH DPRXQW RI H[SHQGLWXUHV

KLVWRULFDOO\LQFXUUHGLQFDUU\LQJRXWRXUPLVVLRQ


5HVRXUFH$OORFDWLRQVE\6WUDWHJLF*RDOV'ROODUVLQ0LOOLRQV

*RDO *RDO 7RWDO

)<%RDUG$SSURYHG%XGJHW   

)<)7(V   

)<3URSRVHG%XGJHW   

)<)7(V   

)LQDQFLDO0DQDJHPHQW6\VWHP,QLWLDWLYH

$ILQDQFLDOPDQDJHPHQWV\VWHP)06ZDVDFTXLUHGLQ)<WRLQWHUIDFHZLWKDQGFDSLWDOL]H

RQ WKH H[LVWLQJ :LQGRZV 17 DQG 2UDFOH WHFKQRORJLHV WR DOORZ XVH RI UHODWLRQDO GDWDEDVHV

7KHVH GDWDEDVHV ZLOO SURYLGH WKH PHDQV WR FROOHFW WKH GDWD UHTXLUHG E\ WKH SHUIRUPDQFH

PHDVXUHPHQW V\VWHP  7KH\ ZLOO DOVR SURYLGH DFFHVV WR DFFXUDWH DQG WLPHO\ ILQDQFLDO

LQIRUPDWLRQIRU)06XVHUV

7KHQHZ)06ZLOOEHLPSOHPHQWHGIRU)<,WZLOOSHUPLW)&$WRPDLQWDLQFRPSOLDQFHZLWK

)HGHUDOUHSRUWLQJUHTXLUHPHQWVDQGZLOOSURYLGHDVVLVWDQFHWRPDQDJHPHQWLQLWVVWHZDUGVKLSRI

$JHQF\ILQDQFLDOUHVRXUFHV7KHQHZ)06ZLOOSURFHVVWUDQVDFWLRQVLQFRPSOLDQFHZLWK)HGHUDO

)LQDQFLDO $FFRXQWLQJ 6WDQGDUGV DQG WKH JXLGDQFH RI WKH 2IILFH RI 0DQDJHPHQW DQG %XGJHW

20%WKH*HQHUDO$FFRXQWLQJ2IILFH*$2DQGWKH'HSDUWPHQWRI7UHDVXU\

,QIRUPDWLRQ5HVRXUFHV0DQDJHPHQW3ODQ

,Q)<DQG)<ZHZLOOFRQWLQXHWRPDLQWDLQDQGLPSOHPHQWWKRVHWHFKQRORJLHVWKDWDLG

LQFDUU\LQJRXWRXUPLVVLRQPRUHHIILFLHQWO\DQGHIIHFWLYHO\&RVWFRQWDLQPHQWZLOO UHPDLQDKLJK

SULRULW\ DQG ZH ZLOO FRQVHUYH UHVRXUFHV E\ LQYHVWLQJ RQO\ LQ WHFKQRORJ\ WKDW SURYLGHV WKH EHVW

SRVVLEOHUHWXUQPHDVXUHGDJDLQVWWKH$JHQF\¶VVWUDWHJLFJRDOV

2XU HIIRUWV ZLOO FHQWHU RQ PDLQWDLQLQJ WKH LQIRUPDWLRQ WHFKQRORJ\ ,7 LQIUDVWUXFWXUH LQFOXGLQJ

FRPSOHWLQJ WKH <HDU  <. WUDQVLWLRQ  1HZ SURMHFW LQLWLDWLYHV ZLOO LQFOXGH GHOLYHULQJ

YLGHRFRQIHUHQFLQJ VHUYLFHVWR DOO )&$ RIILFHV DQG FRPSOHWLQJ SURMHFWVWKDW GLUHFWO\ VXSSRUW OLQH

IXQFWLRQV WR LQFOXGH WKH 2IILFH RI ([DPLQDWLRQ¶V ,QVWLWXWLRQ ([DPLQDWLRQ 3URJUDP HOHFWURQLF

&RQVROLGDWHG5HSRUWLQJ6\VWHP&DOO5HSRUWVXEPLVVLRQVDQG)DUP&UHGLW6\VWHPDFFHVVWRWKH

)&$YLDWKH,QWHUQHW

'XULQJWKH ± RSHUDWLQJ SHULRGWKH )&$ KDV DOORFDWHG IRU,7 SURMHFWV 7KLV

LQFOXGHV IXQGLQJ IRU GHYHORSPHQW DQG LPSOHPHQWDWLRQ RI  QHZ V\VWHPV WKDW KDYH EHHQ

DSSURYHGE\PDQDJHPHQW$QDGGLWLRQDOLVEXGJHWHGWRFRPSOHWHWKH,7SRUWLRQRIWKH

<.SURMHFW


3HUIRUPDQFH0HDVXUHPHQW6\VWHPDQG5HSRUWLQJ

7KH SHUIRUPDQFH PHDVXUHPHQW V\VWHP ZLOO EH XVHG WR DVVHVV WKH UHVXOWV REWDLQHG IURP WKH

$JHQF\¶V RSHUDWLRQV DQGWKH H[HFXWLRQ RIWKH )< - 6WUDWHJLF 3ODQ¶V REMHFWLYHV  7KH

V\VWHPZDVGHVLJQHGWRSURYLGHDEDODQFHGYLHZRIWKH$JHQF\¶VSHUIRUPDQFHFRQVLGHULQJLQSXWV

XVHGRXWSXWVSURGXFHGDQGRXWFRPHVRU UHVXOWVREWDLQHG7KH$JHQF\OHYHOPHDVXUHVZLOOEH

VXSSOHPHQWHGE\PHDVXUHVLQFOXGHGLQHDFKRIILFH¶VRSHUDWLQJDQGSHUIRUPDQFHSODQV

7KH ILQDO DVSHFW WR EH DGGUHVVHG LQ WKH V\VWHP¶V GHVLJQ LV UHSRUWLQJ  7KH $JHQF\ KDV

LQFRUSRUDWHGSHUIRUPDQFHPHDVXUHPHQWUHSRUWLQJLQWRLWVPDQDJHPHQWV\VWHPZLWKVHWUHSRUWLQJ

UHTXLUHPHQWV DQG DQDO\VHV  7KLV LQIRUPDWLRQ KDV EHFRPH DQ LQWHJUDO SDUW RI PDQDJLQJ WKH

$JHQF\¶VRQJRLQJRSHUDWLRQVDQGHQKDQFLQJLWVVWUDWHJLFSODQQLQJSURFHVV

6SRQVRUVKLSRIWKHLQIRUPDWLRQV\VWHPVXVHGWRFROOHFWDJJUHJDWHDQGDQDO\]HWKHGDWDLVYHVWHG

ZLWK $JHQF\ PDQDJHPHQW  5HVSRQVLELOLW\ IRU HDFK $JHQF\OHYHO PHDVXUH LV DVVLJQHG WR DQ

RIILFLDOIRUGHYHORSPHQWPDLQWHQDQFHDQDO\VLVDQGUHSRUWLQJSXUSRVHV7KHUHVSRQVLEOHRIILFLDOV

KDYH GHYHORSHG FRQWUROVWR SURYLGH UHDVRQDEOH DVVXUDQFHWKDWWKH GDWD LV DFFXUDWH DQGWKDW D

FRQVLVWHQW DSSURDFK LV XVHG RYHUWLPHWRPDNHWKH FDOFXODWLRQV(DFKPHDVXUH KDV D GHILQHG

UHSRUWLQJLQWHUYDODQGSUHVHQWDWLRQIRUPDW

7KH SHUIRUPDQFH PHDVXUHPHQW V\VWHP XVHV DQ LQWHJUDWHG DSSURDFK WR OLQN WKH $JHQF\OHYHO

PHDVXUHV LGHQWLILHG LQ WKLV 3HUIRUPDQFH 3ODQ WR PHDVXUHV GHYHORSHG IRU HDFK OHYHO LQ WKH

RUJDQL]DWLRQ  7KHVH PHDVXUHV KDYH EHHQ LQFRUSRUDWHG DV DSSURSULDWH LQWR WKH SHUIRUPDQFH

VWDQGDUGV RI HDFK HPSOR\HH /LQNLQJ WKH $JHQF\¶V JRDOV WR SHUIRUPDQFH PHDVXUHV DQG WKHQ

OLQNLQJ WKRVH PHDVXUHV WR VWDII SHUIRUPDQFH VWDQGDUGV PDNHV HYHU\ HPSOR\HH DZDUH RI DQG

LQYROYHGLQDFKLHYLQJ)&$¶VVWUDWHJLFJRDOVDQGREMHFWLYHV

(YDOXDWLRQ3URFHVV

)&$FXUUHQWO\KDVPRVWRIWKHQHFHVVDU\V\VWHPVLQSODFHWRSURGXFH UHOLDEOHSHUIRUPDQFHDQG

FRVW GDWD WR VHW JRDOV UHSRUW LQIRUPDWLRQ HYDOXDWH UHVXOWV DQG XOWLPDWHO\ HQVXUH $JHQF\

SHUIRUPDQFH:KHUHV\VWHPVGRQRWH[LVWRUDUHLQDGHTXDWHWRPHHW)&$¶VQHHGVDFWLRQSODQV

KDYHEHHQFUHDWHGIRUV\VWHPGHYHORSPHQW

7KH$JHQF\¶VFRQWUROV\VWHP

ZLOOEHXVHGWRDVVHVVWKHDFFXUDF\DQGLQWHJULW\RIWKHLQIRUPDWLRQ

V\VWHP 7KH FRQWURO V\VWHP FRQVLVWV RIWKUHH SDUWV VHOIDVVHVVPHQWV DXGLWV E\ WKH $JHQF\¶V

,QVSHFWRU*HQHUDODQGDXGLWVIURPH[WHUQDOSDUWLHVVXFKDVWKH$JHQF\¶VH[WHUQDODXGLWRURUWKH

*$2)LQGLQJVIURPDOORIWKHVHRSHUDWLRQDODVVHVVPHQWVZHUHFRQVLGHUHGLQWKHGHYHORSPHQWRI

WKHJRDOVDQGREMHFWLYHVRIWKH)&$6WUDWHJLF3ODQ



 )&$¶VFRQWUROV\VWHPFRPSOLHVZLWKWKH)HGHUDO0DQDJHUV¶)LQDQFLDO,QWHJULW\$FW)0),$3XE/ZKLFKZDV

HQDFWHGLQ86&7KH&RQJUHVVSDVVHGWKH)0),$WRUHDVVHUWWKHUHVSRQVLELOLW\RI)HGHUDOPDQDJHUV

IRURYHUDOOILQDQFLDOLQWHJULW\RISURJUDPVXQGHUWKHLUVXSHUYLVLRQDQGWRVWLPXODWHLQFUHDVHGDWWHQWLRQDWDOOOHYHOVZLWKLQ

DJHQFLHV DQG GHSDUWPHQWV WR WKH QHHG IRU VWUHQJWKHQLQJ LQWHUQDO DFFRXQWLQJ DQG DGPLQLVWUDWLYH FRQWUROV LQ )HGHUDO

SURJUDPVIXQFWLRQVDQGDFWLYLWLHV


)RU VHOIDVVHVVPHQWV 20% JXLGDQFH GLUHFWV SHULRGLF UHYLHZ DQG UHSRUWLQJ RQ WKH $JHQF\¶V

V\VWHPV IRU LQWHUQDO FRQWUROV ILQDQFLDO PDQDJHPHQW LQIRUPDWLRQ UHVRXUFHV PDQDJHPHQW DQG

EXGJHW FRQWURO  )&$ WHVWLQJ RI SHUIRUPDQFH PHDVXUHPHQW V\VWHPV LV LQFRUSRUDWHG LQWR WKH

$JHQF\¶VVHOIDVVHVVPHQWDVLWHPVIRUHYDOXDWLRQ)XUWKHUWKHVLJQLILFDQWILQGLQJVRUZHDNQHVVHV

LGHQWLILHGWKURXJKWKHVHOIDVVHVVPHQWDUHFRQVLGHUHGGXULQJWKHSODQQLQJSURFHVVDVSDUWRIWKH

LQWHUQDODVVHVVPHQWWKDWOLQNVLQWHUQDOFRQWUROILQGLQJVDQGWKH6WUDWHJLF3ODQREMHFWLYHV)LQDOO\

WKH $JHQF\ KDV DQ H[WHQVLYH VHW RI LQWHUQDO FRQWUROV ZLWK LQFUHDVLQJO\ WLJKWHU FRQWUROV DW

SURJUHVVLYHO\ ORZHU OHYHOV RIWKH RUJDQL]DWLRQWKDW DUH XVHGWR UHJXODUO\PRQLWRUWKH LQIRUPDWLRQ

V\VWHPV

2QDEURDGHU VFDOH)&$¶V,QVSHFWRU*HQHUDODQGH[WHUQDODXGLWRU URXWLQHO\HYDOXDWH VLJQLILFDQW

SRUWLRQVRIWKH$JHQF\¶VRSHUDWLRQVDQGLVVXHUHSRUWVRQWKHILQGLQJV7KH,QVSHFWRU*HQHUDOD

PHPEHU RI WKH $JHQF\¶V /HDGHUVKLS 7HDP NHHSV SURJUDP HYDOXDWLRQ LVVXHV EHIRUH $JHQF\

PDQDJHPHQW)LQDOO\WKH,QVSHFWRU*HQHUDO¶VVHPLDQQXDOUHSRUWVWR&RQJUHVVSURYLGHDYHKLFOH

IRU &RQJUHVVWR HYDOXDWH DQ\ LVVXH GLVDJUHHPHQW RU RWKHU SUREOHP LGHQWLILHG E\ WKH 2IILFH RI

,QVSHFWRU*HQHUDO
VSURJUDPHYDOXDWLRQV

5HJDUGLQJH[WHUQDODXGLWVWKH)&$%RDUGGHFLGHGWKDWWKH$JHQF\ZLOOYROXQWDULO\FRPSO\ZLWKWKH

&KLHI)LQDQFLDO2IILFHUV$FWRI86&$QH[WHUQDODXGLWRULVUHWDLQHGDQQXDOO\WR

SURYLGHRSLQLRQVRQ)&$¶VILQDQFLDOVWDWHPHQWVDQGRSHUDWLRQV7HVWLQJRIVHOHFWHGLQIRUPDWLRQ

V\VWHPVLVDUHJXODUSDUWRIWKHDXGLW$GGLWLRQDOO\)&$KDVSHULRGLFDOO\EHHQVXEMHFWWRDXGLWE\

WKH*$27KHILQGLQJVRIDQ\H[WHUQDODXGLWDUHFRQVLGHUHGLQ$JHQF\GHFLVLRQVDQGDFWLRQVWR

PDLQWDLQWKHLQWHJULW\RI)&$LQIRUPDWLRQV\VWHPV


)&$/($'(56+,37($0&21&855(1&(

3ROLF\PDNLQJLVYHVWHGLQDWKUHHPHPEHUERDUG)&$LVPDQDJHGE\WKH&KLHI([HFXWLYH2IILFHU

&(20HPEHUVRIWKH/HDGHUVKLS7HDPDUHFKDUJHGE\WKH&(2WRFDUU\RXWWKH)&$%RDUG¶V

PDQGDWHDQGLPSOHPHQWSURJUDPVDVSURYLGHGIRULQWKH$FWDQGWKH)&$6WUDWHJLF3ODQWKURXJK

WKLV$QQXDO3HUIRUPDQFH3ODQ

:HWKH/HDGHUVKLS7HDPRI)&$DUHFRPPLWWHGWRZRUNLQJZLWKWKHHPSOR\HHVRIRXU$JHQF\

DQGZLWKRXUFRQVWLWXHQWVWRDFKLHYHWKHUHVXOWVFDOOHGIRULQWKLV$QQXDO3HUIRUPDQFH3ODQ

0DUVKD3\OH0DUWLQ&KDLUPDQDQG&(2

)DUP&UHGLW$GPLQLVWUDWLRQ

(LOHHQ00F0DKRQ'LUHFWRU

2IILFHRI&RQJUHVVLRQDODQG3XEOLF $IIDLUV

(OGRQ:6WRHKU,QVSHFWRU*HQHUDO

2IILFHRI,QVSHFWRU*HQHUDO

5RODQG(6PLWK&KLHI([DPLQHU

2IILFHRI([DPLQDWLRQ

7KRPDV*0F.HQ]LH'LUHFWRU

2IILFHRI3ROLF\DQG$QDO\VLV

-HDQ1RRQDQ*HQHUDO&RXQVHO

2IILFHRI*HQHUDO&RXQVHO

'RQDOG3&ODUN'LUHFWRU

2IILFHRI5HVRXUFHV0DQDJHPHQW
$

$SSHQGL[2 *RDOV DQG 2EMHFWLYHV DQG 0DQDJHPHQW )RFXV $UHDV ZLWK 5HODWHG

3HUIRUPDQFH0HDVXUHV

*2$/ 683(59,6( 5,6. ,1 7+( )$50 &5(',7 6<67(0 )25 7+(

%(1(),72)67$.(+2/'(56

5HODWHG

0HDVXUHV

2EMHFWLYH (QKDQFH WKH YDOXH DQG HIIHFWLYHQHVV RI )&$¶V ULVNEDVHG

H[DPLQDWLRQRYHUVLJKWDQG FRUUHFWLRQRISUREOHPVLQ)&6

LQVWLWXWLRQV



2EMHFWLYH (QVXUH WKDW LQIRUPDWLRQ V\VWHPV RI WKH )&6 DQG )&$ DUH

HIIHFWLYHLQGHOLYHULQJDSSURSULDWHGDWD DQG DQDO\WLFDO WRROV

LQWKH\HDUDQGEH\RQG



2EMHFWLYH (QKDQFH RSHUDWLRQV LQ UHJXODWHG LQVWLWXWLRQV WKURXJK

DSSURSULDWHJXLGDQFH



2EMHFWLYH (QVXUH WKDW )&$ KDV WKH DSSURSULDWH WRROV WR DGGUHVV

HPHUJLQJULVNLQWKH)&6



*2$/ 0$;,0,=( 23325781,7,(6 )25 7+( )$50 &5(',7

6<67(0 72 3529,'( &203(7,7,9( $1' '(3(1'$%/(

6(59,&(6)25$*5,&8/785($1'585$/$0(5,&$

5HODWHG

0HDVXUHV

2EMHFWLYH (QFRXUDJH QHZ LQLWLDWLYHV WKDW KHOS )&6 LQVWLWXWLRQV VHUYH

WKHHYROYLQJQHHGVRIDJULFXOWXUHDQGUXUDO$PHULFD



2EMHFWLYH 3URPRWH EHWWHU FXVWRPHU VHUYLFH DW ORZHVW FRVW WKURXJK

VXSSRUWRIKHDOWK\FRPSHWLWLRQ



2EMHFWLYH (QVXUH WKDW WKH )&6 KDV WKH DELOLW\ WR FRPSHWH LQ JOREDO

PDUNHWV



2EMHFWLYH 6XSSRUW WKH FRQWLQXDQFH RI WKH )&6 DV D *RYHUQPHQW

VSRQVRUHGHQWHUSULVHIRUDJULFXOWXUH





 $QXPHULFOLVWLQJRIPHDVXUHVLVLQFOXGHGLQ$SSHQGL[7KHPHDVXUHVUHIHUHQFHGLQWKLVFROXPQDUHWKRVHZKRVH

UHVXOWVPD\EHDIIHFWHGE\WKHDIILOLDWHGREMHFWLYH
$

$SSHQGL[2 *RDOV DQG 2EMHFWLYHV DQG 0DQDJHPHQW )RFXV $UHDV ZLWK 5HODWHG

3HUIRUPDQFH0HDVXUHVFRQWLQXHG

0$1$*(0(17)2&86$5($6 (1+$1&()&$¶6())(&7,9(1(66

()),&,(1&<$1'(;7(51$/5(/$7,216+,36

5HODWHG

0HDVXUHV

2EMHFWLYH 'HYHORS DQGLPSOHPHQW D \HDU KXPDQ UHVRXUFHV SODQ WR

SURPRWH DQG PDQDJH RQH RI )&$¶V JXLGLQJ

SULQFLSOHV£SURPRWLQJWHDPZRUNDQGDSRVLWLYHSURGXFWLYH

DQGIDPLO\IULHQGO\ZRUNHQYLURQPHQW



2EMHFWLYH 'HYHORS DQG LPSOHPHQW D \HDU ILQDQFLDO SODQ WR LGHQWLI\

UHVRXUFH QHHGV DQG DQDO\]H WKH LPSDFW RQ FRVWV 6\VWHP

DVVHVVPHQWVDQG$JHQF\HIIHFWLYHQHVV



2EMHFWLYH &RQWLQXH WR VWUHQJWKHQ WKH $JHQF\¶V FRPPLWPHQW WR WKH

EHQHILWVRILQIRUPDWLRQWHFKQRORJ\E\LPSOHPHQWLQJDFWLRQV

RIWKH,QIRUPDWLRQ5HVRXUFHV0DQDJHPHQW3ODQQRZLQLWV

VL[WK\HDURILPSOHPHQWDWLRQ



2EMHFWLYH 5HDIILUP WKH$JHQF\¶V FRPPLWPHQW WRLPSURYHG FRPPXQL

FDWLRQZLWKDOOVWDNHKROGHUV

±


$

$SSHQGL[2 $JHQF\3HUIRUPDQFH0HDVXUHV

 7KH QXPEHU RI GLUHFWOHQGHU LQVWLWXWLRQV ZLWK DGYHUVHO\ FODVVLILHG DVVHWVWR ULVNIXQGV OHVV

WKDQSHUFHQWGLYLGHGE\WKHWRWDOQXPEHURIGLUHFWOHQGHULQVWLWXWLRQV

 7KHWRWDODVVHWVRIGLUHFWOHQGHULQVWLWXWLRQVZLWKDGYHUVHO\FODVVLILHGDVVHWVWRULVNIXQGVOHVV

WKDQSHUFHQWGLYLGHGE\WKHWRWDODVVHWVRIGLUHFWOHQGHULQVWLWXWLRQV

 7KHQXPEHURIGLUHFWOHQGHULQVWLWXWLRQVZLWKDGYHUVHO\FODVVLILHGDVVHWVWRULVNIXQGVJUHDWHU

WKDQSHUFHQWZLWKFRUUHFWLYHDFWLRQSODQVWKDWPLWLJDWHWKHH[FHVVLYHULVN

 7KH WRWDO DVVHWV RI GLUHFWOHQGHU LQVWLWXWLRQV FRPSO\LQJ ZLWK DOO PLQLPXP FDSLWDO UDWLRV

SHUPDQHQWFDSLWDOUDWLRWRWDOVXUSOXVUDWLRFRUHVXUSOXVUDWLRQHWFROODWHUDOUDWLRGLYLGHGE\

WKHWRWDODVVHWVRIGLUHFWOHQGHULQVWLWXWLRQV

 7KH\HDUDYHUDJHUHWXUQRQDYHUDJHDVVHWV52$$RI)&6LQVWLWXWLRQV

 7KHSHUFHQWDJHRIH[DPLQDWLRQVRI)&6LQVWLWXWLRQVPHHWLQJVWDWXWRU\H[DPLQDWLRQIUHTXHQF\

UHTXLUHPHQWV

 &XVWRPHUDFFHSWDQFHRI)&$¶VH[DPLQDWLRQDQGVXSHUYLVRU\SURJUDPVWKURXJKWKHDYHUDJH

RIWKHUDWLQJVUHFHLYHGRQWKHIROORZLQJVXUYH\TXHVWLRQVWRZLWKEHLQJWKHKLJKHVW

 7KH ERDUG DQG PDQDJHPHQW EHOLHYHWKHILQGLQJV RIWKH H[DPLQDWLRQ ZLOO DVVLVW RU KDYH

DVVLVWHGWKHLQVWLWXWLRQLQFRUUHFWLQJLGHQWLILHGZHDNQHVVHV

 7KHERDUGDQGPDQDJHPHQWEHOLHYHWKHDFWLRQVUHTXLUHGE\WKHHQIRUFHPHQWGRFXPHQWZLOO

DVVLVWRUKDYHDVVLVWHGWKHLQVWLWXWLRQLQFRUUHFWLQJLGHQWLILHGZHDNQHVVHV

 7KH SHUFHQWDJH RI UHJXODWRU\ SURMHFWV FRPSOHWHG FRPSDUHG WR SURMHFWV LQFOXGHG LQ WKH

%RDUGDSSURYHGDQQXDO5HJXODWRU\3HUIRUPDQFH3ODQ

 7KH SHUFHQWDJH RI UHJXODWLRQV FRPSOHWHG WKDW XWLOL]H 3VSHFLDO ́ FXVWRPHU VHUYLFH IRFXV RU

IHDWXUHV

 7KH SHUFHQWDJH RI UHJXODWLRQV WKDW FXVWRPHUV EHOLHYH PHHW WKH UHJXODWLRQ¶V RULJLQDO

REMHFWLYHV

 2SLQLRQUHFHLYHGRQ)&$¶VILQDQFLDOVWDWHPHQWVLV8QTXDOLILHG

 1XPEHURIPDWHULDOZHDNQHVVHVQRWHGLQWKH)HGHUDO0DQDJHUV¶)LQDQFLDO,QWHJULW\$FWOHWWHU

IURPWKH$JHQF\&KDLUPDQ&(2WRWKH3UHVLGHQW

 &RVWRI)&$WR)&6ERUURZHUV)&$¶VDFWXDODVVHVVPHQWVGLYLGHGE\WKH\HDUDYHUDJHRI

WRWDO6\VWHPDVVHWV

 7KHSHUFHQWDJHRILQTXLULHVDQGFRPSODLQWVIURP&RQJUHVVDQGWKHJHQHUDOSXEOLFWKDW

 $UHDFNQRZOHGJHGZLWKLQGD\V

 'RQRWUHTXLUHVXSSOHPHQWDOUHVSRQVHVGXHWRLQDFFXUDWHRULQFRPSOHWHLQIRUPDWLRQ

 3HUFHQWDJHRIWKH$JHQF\¶VDQQXDOEXGJHWUHTXHVWDSSURYHGE\&RQJUHVV

 3HUFHQWDJHRIH[WHUQDOUHSRUWVLVVXHGRQWLPHLQDFFRUGDQFHZLWKWKH3XEOLFDWLRQ6FKHGXOH

 7KHQXPEHURI)&6LQVWLWXWLRQVWKDWKDYHPLVVLRQFULWLFDO V\VWHPIDLOXUHV FDXVHGE\\HDU

UHODWHGSUREOHPV

 7KHSHUFHQWDJHRI)&6LQVWLWXWLRQV¶<.FRQWLQJHQF\SODQVWKDWPHHWWKHLQVWLWXWLRQ¶VQHHGV

ZKHQWKHLQVWLWXWLRQH[SHULHQFHVDSUREOHPLQDFULWLFDOV\VWHPFDXVHGE\GLVUXSWLRQVVXFK

DVSRZHURXWDJHRUWHOHSKRQHV\VWHPVIDLOXUH
$

$SSHQGL[2*ORVVDU\

$GYHUVHO\&ODVVLILHG$VVHWV 7KH 8QLIRUP &ODVVLILFDWLRQ 6\VWHP IRU ORDQV RU ORDQUHODWHG

DVVHWV FRQVLVWV RI ILYH FDWHJRULHV RI ULVN  DFFHSWDEOH RWKHU

DVVHWV HVSHFLDOO\ PHQWLRQHG VXEVWDQGDUG GRXEWIXO DQG ORVV

$GYHUVHO\FODVVLILHGLQFOXGHVORDQVRUSRUWLRQVRIORDQVSODFHGLQ

WKHVXEVWDQGDUGGRXEWIXODQGORVVFDWHJRULHV

$QQXDO3HUIRUPDQFH3ODQ $ SODQ WKDW DGGUHVVHV WKH RSHUDWLRQV RI DQ DJHQF\ DQG

HVWDEOLVKHV SHUIRUPDQFH PHDVXUHV DQG JRDOV IRU WKRVH

RSHUDWLRQV$GGLWLRQDOO\WKHSODQOLQNVWKHDQWLFLSDWHGDFWLYLWLHVRI

WKH$JHQF\WRWKHDOORFDWLRQRIUHVRXUFHV

%DODQFHG6FRUHFDUG $ FRQFHSW VWDWLQJ WKDW D PL[ RI LQSXW RXWSXW DQG RXWFRPH

SHUIRUPDQFH PHDVXUHV LV UHTXLUHG WR SURYLGH VWUXFWXUH WR DQ

RUJDQL]DWLRQ¶V RSHUDWLRQV DQG WR HQVXUH WKDW QR RQH DVSHFW

SHUIRUPVWRWKHGHWULPHQWRIDQRWKHUDWOHDVWQRWNQRZLQJO\

%DVHOLQH 7KH FDOFXODWHG OHYHO RI SHUIRUPDQFH IRU D PHDVXUH DW WKH

EHJLQQLQJ RI D PHDVXUHPHQW F\FOH  ,W LV XVHG WR FDOFXODWH

FKDQJHVLQSHUIRUPDQFHRYHUDSHULRGLQWLPH

%DVLV3RLQW 2QHRQHKXQGUHGWKRISHUFHQWSHUFHQW EDVLVSRLQWV

&RUH6XUSOXV5DWLR 7KH VXP RI DQ )&6 LQVWLWXWLRQ¶V XQGLVWULEXWHG HDUQLQJV

XQDOORFDWHGHDUQLQJV OHVVDQDVVRFLDWLRQ¶VQHWLQYHVWPHQWLQDQ

)&6 EDQN SHUSHWXDO VWRFN DQG TXDOLI\LQJ DOORFDWHG HTXLWLHV

GLYLGHGE\WKHLQVWLWXWLRQ¶V ULVNDGMXVWHGDVVHWV DGMXVWPHQWVDUH

PDGHEDVHGRQWKHULVNFKDUDFWHULVWLFVRIWKHDVVHW

'LUHFW/HQGHU,QVWLWXWLRQ $Q)&6LQVWLWXWLRQWKDWOHQGVWRERUURZHUVIURPLWVRZQUHVRXUFHV

7KLVGLIIHUVIURP)HGHUDO/DQG%DQN$VVRFLDWLRQV ZKLFK LQLWLDWH

DQGVHUYLFHORDQVRQEHKDOIRIDQ)&6EDQN

(IILFLHQF\0HDVXUHV 0HDVXUHVZKLFKHVWDEOLVK UHODWLRQVKLSVEHWZHHQLQSXWVRXWSXWV

DQGRUSURFHVVHV

(QIRUFHPHQW$FWLRQV 6XSHUYLVRU\RUDGPLQLVWUDWLYHDFWLRQVUHVXOWLQJIURPHQIRUFHPHQW

SRZHUV JUDQWHG WR )&$ IRU WKH SXUSRVH RI HIIHFWLQJ FRUUHFWLYH

DFWLRQ LQ )&6 LQVWLWXWLRQV  7KH DFWLRQV LQFOXGH IRUPDO

DJUHHPHQWVFHDVHDQGGHVLVWRUGHUVFLYLOPRQH\SHQDOWLHVDQG

RUGHUVRIUHPRYDORUSURKLELWLRQ

,QSXW0HDVXUHV 0HDVXUHV ZKLFK FDSWXUH WKH TXDQWLW\ RI UHVRXUFHV KXPDQ

ILQDQFLDOIDFLOLW\PDWHULDOWKDW DQ RUJDQL]DWLRQ XVHVWR SURGXFH

VHUYLFHV

1HW&ROODWHUDO5DWLR $Q)&6EDQN¶VQHWFROODWHUDOGLYLGHGE\LWVWRWDOOLDELOLWLHV

2XWFRPHV 7KHTXDQWLILHGUHVXOWVRULPSDFWRIDQRUJDQL]DWLRQ¶VRSHUDWLRQV

2XWSXWV 7KHJRRGVSURGXFHGDQGVHUYLFHVSURYLGHGE\DQRUJDQL]DWLRQRU

DXQLWRIWKHRUJDQL]DWLRQ

3HUIRUPDQFH*RDOV 7KH GHVLUHG WDUJHW OHYHO IRU WKH SURGXFW RI D SHUIRUPDQFH

PHDVXUH
$

$SSHQGL[2*ORVVDU\FRQWLQXHG

3HUIRUPDQFH0HDVXUHV ,QGLFDWRUVPHDVXUHV GHYHORSHG WR PRQLWRU WKH SHUIRUPDQFH RI WKH

RUJDQL]DWLRQ LQ D QXPEHU RI DUHDV UHODWLQJ WR LWV RSHUDWLRQV  7KH

PHDVXUHVQHHGWREHGHYHORSHGIRUDOO OHYHOVRIWKHRUJDQL]DWLRQDQG

EXLOWLQWRDQLQWHJUDWHGSHUIRUPDQFHPHDVXUHPHQWV\VWHP

3HUPDQHQW&DSLWDO5DWLR $Q )&6 LQVWLWXWLRQ¶V SHUPDQHQW FDSLWDO QHW ZRUWK PLQXV SURWHFWHG

VWRFNGLYLGHGE\WKHLQVWLWXWLRQ¶VULVNDGMXVWHGDVVHWVDGMXVWPHQWVDUH

PDGHEDVHGRQWKHULVNFKDUDFWHULVWLFVRIWKHDVVHW

3URJUDP3HUIRUPDQFH

5HSRUW

$ UHSRUW VXEPLWWHG WR WKH 3UHVLGHQW DQG WR &RQJUHVV WKDW HYDOXDWHV

$JHQF\ SHUIRUPDQFH DQG UHVXOWV UHODWLYH WR WKH SHUIRUPDQFH JRDOV

H[SUHVVHGLQWKH$JHQF\¶V$QQXDO3HUIRUPDQFH3ODQ

5HJXODWRU\3HUIRUPDQFH

3ODQ

7KH)&$%RDUGDSSURYHGOLVWRIUHJXODWRU\SURMHFWVZLWKWLPHIUDPHV

WREHXQGHUWDNHQGXULQJDILVFDO\HDU

5HVXOWV$FW *RYHUQPHQW 3HUIRUPDQFH DQG 5HVXOWV $FW RI   ,Q DGGLWLRQ WR

GHOLQHDWLQJH[SHFWDWLRQVIRUVRXQGPDQDJHPHQWSUDFWLFHVWKH5HVXOWV

$FW UHTXLUHVDJHQFLHVWRLVVXHD\HDUVWUDWHJLFSODQDSHUIRUPDQFH

SODQDQGDSHUIRUPDQFHUHSRUW

5LVN)XQGV $Q )&6 LQVWLWXWLRQ¶V QHW ZRUWK PLQXV SURWHFWHG VWRFN SOXV WKH

DOORZDQFHVIRUORDQDQGDFTXLUHGSURSHUW\ORVVHV

6WUDWHJLF3ODQ $ORQJUDQJHSODQWKDWSURYLGHVJRDOVDQGREMHFWLYHVIRUWKH$JHQF\WR

JXLGH IXWXUH RSHUDWLRQV DQG HVWDEOLVKHV D VWUDWHJLF GLUHFWLRQ IRU

FDUU\LQJRXWWKHPLVVLRQ

6WUDWHJLF3ODQQLQJ

3URFHVV

$Q HYDOXDWLRQ RI DQ RUJDQL]DWLRQ¶V RSHUDWLRQV LQ FRQMXQFWLRQ ZLWK WKH

PLVVLRQ DYDLODEOH UHVRXUFHV VWUDWHJLF YLVLRQ HQYLURQPHQWDO DVVXPS

WLRQVDQGSDVWSHUIRUPDQFH

7RWDO6XUSOXV5DWLR 7KH VXP RI DQ )&6 LQVWLWXWLRQ¶V XQGLVWULEXWHG HDUQLQJVXQDOORFDWHG

HDUQLQJV WKH SRUWLRQ RI WKH DVVRFLDWLRQ¶V QHW LQYHVWPHQW LQ DQ )&6

EDQNDOORZDEOHSHUWKHDOORWPHQWDJUHHPHQWDOORFDWHGHTXLWLHVZLWKD

SODQQHGUHYROYHPHQWRIDWOHDVW\HDUVDQGSHUSHWXDOVWRFNGLYLGHGE\

WKHLQVWLWXWLRQ¶V ULVNDGMXVWHGDVVHWV DGMXVWPHQWVDUHPDGHEDVHGRQ

WKHULVNFKDUDFWHULVWLFVRIWKHDVVHW