5,90UDSSRUW
(YDOXDWLQJWKH%RQQ$JUHHPHQW
DQGVRPHNH\LVVXHV
0*-GHQ(O]HQDQG$3*GH0RRU
7KLVUHVHDUFKZDVFRQGXFWHGIRUWKH'XWFK0LQLVWU\RI(QYLURQPHQWDVSDUWRIWKH&OLPDWH
&KDQJH3ROLF\6XSSRUW3URMHFW02QGHUVWHXQLQJ.OLPDDWEHOHLG
5,9032%R[%$%LOWKRYHQWHOHSKRQHID[
5,90UHSRUW SDJHRI
$EVWUDFW
7KLVUHSRUWHYDOXDWHVWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH.\RWR
3URWRFRODVDJUHHGDWWKHUHVXPHGVHVVLRQRI&23LQ-XO\LQ%RQQ:HSXWRXUHYDOXDWLRQ
LQG\QDPLFSHUVSHFWLYHE\EUHDNLQJWKH&23SURFHVVGRZQLQWRWKUHHPDMRUVWHSVWKHSUH&23
YHUVLRQRIWKH.\RWR3URWRFROWKH86ZLWKGUDZDODQGWKH%RQQ$JUHHPHQW$FFRUGLQJWRWKH
HYDOXDWLRQWKH%RQQ$JUHHPHQWOHDGVWRDUHGXFWLRQRI0W&FRPSDUHGWRWKH0W&LQ
WKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRO$QQH[,HPLVVLRQVZLWKRXWWKH86ZLOOEHUHGXFHG
E\SHUFHQWEHORZEDVHOLQHMXVWEHORZWKHOHYHO$QQH[,HPLVVLRQVLQFOXGLQJWKH86ZLOO
LQFUHDVHE\SHUFHQW7KH86ZLWKGUDZDOKDVE\IDUWKHJUHDWHVWLPSDFWLQUHGXFLQJWKH
HQYLURQPHQWDOHIIHFWLYHQHVVRIWKH.\RWR3URWRFRO&RPSDUHGWRWKH86QRQSDUWLFLSDWLRQWKH
GHFLVLRQVLQWKH%RQQ$JUHHPHQWDQGLQSDUWLFXODURQVLQNVPD\EHFRQVLGHUHGDQDFFHSWDEOH
SULFHIRUUHDOLVLQJDSROLWLFDODJUHHPHQW$QRWKHUFRQVHTXHQFHRIWKH86ZLWKGUDZDOLVWKDW
SHUPLWGHPDQGLVVXEVWDQWLDOO\UHGXFHGDQGSHUPLWSULFHVZLOOGURSGUDPDWLFDOO\+RWDLU
EHFRPHVLQFUHDVLQJO\GRPLQDQWDQGPD\WKUHDWHQWKHYLDELOLW\RIWKH.\RWR0HFKDQLVPV
HVSHFLDOO\LQORZHUEDVHOLQHVFHQDULRV$VSULFHVDUHSXVKHGGRZQZDUGVDQGHYHQDSSURDFK]HUR
LWZRXOGEHLQWKHVHOOHU¶VLQWHUHVW)68WRH[HUFLVHPDUNHWSRZHU&XUWDLOLQJ)68SHUPLWVXSSO\
DQGEDQNLQJSHUFHQWRIWKHKRWDLULPSURYHVWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGJHQHUDWHV
SRVLWLYHILQDQFLDOEHQHILWVIRUERWKWKH)68DQGWKHQRQ$QQH[,FRXQWULHV$OWHUQDWLYHO\WKH
)68FRXOGFRQVLGHULPSRVLQJDPLQLPXPSHUPLWSULFH7KLVZRXOGRIIHUWKH)68WKHPRVW
DWWUDFWLYHILQDQFLDOLQFHQWLYHVEXWLWGRHVQRWLPSURYHWKHRYHUDOOHQYLURQPHQWDOSHUIRUPDQFH$
YROXQWDU\(8WDUJHWRISHUFHQWGRPHVWLFDFWLRQZRXOGZLSHRXWDQ\HPLVVLRQVPDUNHW
SRWHQWLDODQGVKRXOGQRWEHFRQVLGHUHGZLWKRXWFXUWDLOLQJSHUPLWVXSSO\$FRPELQDWLRQRID
YROXQWDU\(8WDUJHWDORQJZLWK)68EDQNLQJSHUFHQWRIKRWDLUZRXOGLQFUHDVHWRWDO$QQH[,
UHGXFWLRQVWR0W&DQGGRPHVWLFDFWLRQWRSHUFHQWEXWUDLVH$QQH[,FRVWVIRXUIROG
8OWLPDWHO\WKHPRVWSURPLVLQJVWUDWHJ\IRUHQKDQFLQJWKH.\RWR3URWRFROLVWRVHHNRSWLRQVIRU
86UHHQWU\2XUVLPXODWLRQVVKRZWKDWWKLVZRXOGLPSURYHWKHHQYLURQPHQWDOHIIHFWLYHQHVVDW
PRGHUDWHO\KLJKHUFRVWVZKLOHFUHDWLQJDVXIILFLHQWHPLVVLRQVPDUNHWSRWHQWLDO7KH%RQQ
$JUHHPHQWPHHWVPDQ\RIWKHSUHYLRXV86GHPDQGVDQGPD\HYHQEHFKDUDFWHULVHGDV86
IULHQGO\WKXVWKHFXUUHQWDJUHHPHQWOHDYHVWKHGRRURSHQIRU86UHHQWU\:KHWKHUWKHFXUUHQW
86DGPLQLVWUDWLRQZLOOLQGHHGUHMRLQWKH.\RWR3URWRFROLVODUJHO\GHWHUPLQHGE\WKHGRPHVWLF
SROLWLFDOHQYLURQPHQW
5,90UHSRUW SDJHRI
$FNQRZOHGJHPHQWV
7KLVVWXG\ZDVFRQGXFWHGDWWKH5,901DWLRQDO,QVWLWXWHRI3XEOLF+HDOWKDQGWKH(QYLURQPHQW
IRUWKH'XWFK0LQLVWU\RI(QYLURQPHQWZLWKLQWKH&OLPDWH&KDQJH3ROLF\6XSSRUWSURMHFW
02QGHUVWHXQLQJ.OLPDDWEHOHLG)LUVWRIDOOZHDUHLQGHEWHGWR3DWULFN&ULTXLRIWKH
8QLYHUVLW\RI*UHQREOH)UDQFHZKRLQVSLUHGDQGJXLGHGXVLQGHYHORSLQJRXUPRGHOOLQJ
IUDPHZRUN7KHDXWKRUVZRXOGOLNHWRWKDQN7RQ0DQGHUVRIWKH1HWKHUODQGV%XUHDXIRU
(FRQRPLF3ROLF\$QDO\VLV&3%DQG3HWHU.XLNPDQDQG*HUW-DQ1DEXXUVRI$OWHUUD*UHHQ
:RUOG5HVHDUFK:HDOVRWKDQNRXUFROOHDJXHVDWWKH5,90LQSDUWLFXODU0DUFHO%HUN%HUW
0HW]DQG-HOOHYDQ0LQQHQIRULPSURYLQJHDUOLHUGUDIWV:HDUHHVSHFLDOO\LQGHEWHGWR5LQHNH
2RVWHQULMNIRUGHYHORSLQJDVSHFLDOWRROWRDOORZHDV\OLQNDJHEHWZHHQWKH)$,5PRGHODQGWKH
(;&(/VRIWZDUHDQGODVWEXWQRWOHDVWWR5XWKGH:LMVIRUVPRRWKO\HGLWLQJRXU(QJOLVK
0RUHGHWDLOHGLQIRUPDWLRQFRQFHUQLQJWKLVHYDOXDWLRQFDQEHIRXQGLQWKHUHSRUW³(YDOXDWLQJWKH
%RQQ$JUHHPHQWDQGVRPHNH\LVVXHVDQ$QDO\VLVZLWKWKH)$,5PRGHO%DFNJURXQG
GRFXPHQW´'HQ(O]HQDQGGH0RRU
5,90UHSRUW SDJHRI
&RQWHQWV
6$0(19$77,1*
,1752'8&7,21
.(<(/(0(176,17+(%211$*5((0(17
 .
0 
 /
 
 &

 )

(9$/8$7,1*7+(%211$*5((0(17
 )

 (

 $

 1
. 0 
 5

(;$0,1,1*620(.(<,668(6 
 7

 (

 9
(8 
 :
86"
 2

&21&/86,216 
5()(5(1&(6
$33(1',;,'(7$,/('02'(/5(68/76 
$33(1',;,,'(7$,/('6,1.6(67,0$7(6
0$,/,1*/,67 
5,90UHSRUW SDJHRI
6DPHQYDWWLQJ
'H]HUDSSRUWDJHHYDOXHHUWKHWRQODQJVLQ%RQQEHUHLNWHDNNRRUGRYHUKHW.\RWR3URWRFRO+HW
DQDO\VHHUWGHPLOLHXHIIHFWLYLWHLWHQGHNRVWHQYDQKHWDNNRRUGUHGHQHUHQGYDQXLWGH
EHODQJULMNVWHIDVHQYDQKHWRQGHUKDQGHOLQJVSURFHVGHSUH&23YHUVLHYDQKHW3URWRFROGH
ZHLJHULQJYDQGH96KHW3URWRFROWHWHNHQHQHQKHW%RQQ$NNRRUG]HOI'HHYDOXDWLHODDW]LHQ
GDWKHW%RQQ$NNRRUGWRWHHQHPLVVLHUHGXFWLHYDQ0W&OHLGWRIWHZHOSURFHQWRQGHUKHW
UHIHUHQWLHSDG'LWLVYHHOODJHUGDQGH0W&LQGHSUH&23YHUVLHYDQKHW.\RWR3URWRFRO
'HHPLVVLHVYDQGH$QQH[,ODQGHQ]RQGHUGH96NRPHQGDDUPHHQHWLHWVRQGHUKHWQLYHDXYDQ
XLWPDDUPHWGH96UXLPSURFHQWHUERYHQ+HWWHUXJWUHNNHQYDQGH96KHHIWYHUUHZHJ
GHJURRWVWHLQYORHGRSGHYHUPLQGHUGHPLOLHXHIIHFWLYLWHLWYDQKHW.\RWR3URWRFRO+LHUPHH
YHUJHOHNHQNXQQHQGHEHVOLVVLQJHQLQKHW%RQQ$NNRRUGPHWQDPHRYHUVLQNVZRUGHQJH]LHQ
DOVHHQDFFHSWDEHOHSULMVRPHHQSROLWLHNDNNRRUGWHNULMJHQ=RQGHUGH96HFKWHU]DOGHYUDDJ
QDDUHPLVVLHUHFKWHQVWHUNGDOHQHQGDDUGRRUGHSULMVRSGHLQWHUQDWLRQDOHHPLVVLHPDUNW+RWDLU
ZRUGWHHQ]HHUGRPLQDQWSUREOHHPPHWQDPHLQODJHUHJURHLVFHQDULR¶VHQNDQ]HOIVGH
RQWZLNNHOLQJYDQGHHPLVVLHPDUNWRQGHUPLMQHQRPGDWGHSULMVQDDUQXOGUHLJWWHJDDQ+HWOLJWLQ
GHYHUZDFKWLQJGDWGHHQLJHDDQELHGHUODQGHQXLWGHYRRUPDOLJ6RYLHW8QLH)68
PDUNWPDFKW]DOXLWRHIHQHQGRRUYROXPHRISULMVFRQWUROH(HQKDOYHULQJYDQKHW)68DDQERGYDQ
KRWDLUGRRUGH]HWHEDQNHQ]DOHUWRHOHLGHQGDWGHPLOLHXHIIHFWLYLWHLWZRUGWYHUVWHUNWWHUZLMO
WHJHOLMNGHILQDQFLsOHRSEUHQJVWHQYRRUGH)68HQQLHW$QQH[,ODQGHQ]XOOHQVWLMJHQ+HW
LQVWHOOHQYDQHHQPLQLPXPSULMVGDDUHQWHJHQ]DOGHPLOLHXHIIHFWLYLWHLWQLHWWHQJRHGHNRPHQ
PDDUELHGWGH)68ZHOGHPHHVWDDQWUHNNHOLMNHILQDQFLsOHSHUVSHFWLHYHQ(HQYULMZLOOLJH(8
GRHOVWHOOLQJRPGHKHOIWYDQKDDUHPLVVLHUHGXFWLHVELQQHQODQGVWHUHDOLVHUHQRQGHUPLMQWGH
RQWZLNNHOLQJYDQHHQLQWHUQDWLRQDOHHPLVVLHPDUNWHQPRHWLQFRPELQDWLHPHWHHQEHSHUNLQJYDQ
KHWDDQERGZRUGHQEHVFKRXZG6DPHQPHWKHWEDQNHQYDQSURFHQWYDQ)68KRWDLUNDQGLW
GHPLOLHXHIIHFWLYLWHLWYDQKHW%RQQ$NNRRUGYHUVWHUNHQGRRUGDW$QQH[,HPLVVLHUHGXFWLHV
ZRUGHQRSJHVFKURHIGWRW0W&HQELQQHQODQGVHDFWLHWRWSURFHQW'DDUVWDDWWHJHQRYHUGDW
GHWRWDOHNRVWHQHHQIDFWRUYLHU]XOOHQWRHQHPHQ8LWHLQGHOLMNLVGHKHUWRHWUHGLQJYDQGH96GH
PHHVWYHHOEHORYHQGHVWUDWHJLHRPKHW.\RWR3URWRFROWHYHUVWHUNHQ'LW]DOGHPLOLHX
HIIHFWLYLWHLWYHUEHWHUHQHQWHJHOLMNYROGRHQGHPDUNWSRWHQWLHHOELHGHQYRRULQWHUQDWLRQDOH
HPLVVLHKDQGHO+HW%RQQ$NNRRUGELHGWYROGRHQGHUXLPWHYRRUKHUWRHWUHGLQJYDQGH96PHGH
RPGDWYHHOEHODQJULMNHRQGHUGHOHQRYHUHHQNRPHQPHWHHUGHUH96HLVHQ'HVRQGDQNV]DO
IHLWHOLMNHKHUWRHWUHGLQJYRRUDOZRUGHQEHSDDOGGRRUGHELQQHQODQGVHSROLWLHNHRPJHYLQJ
5,90UHSRUW SDJHRI
,QWURGXFWLRQ
2Q'HFHPEHUWKH3DUWLHVDWWKHWKLUGVHVVLRQRIWKH&RQIHUHQFHRIWKH3DUWLHV&23
WRWKH8QLWHG1DWLRQV)UDPHZRUN&RQYHQWLRQRQ&OLPDWH&KDQJH81)&&&LQ.\RWRDJUHHGWR
WKH.\RWR3URWRFRO81)&&&)RXU\HDUVODWHUWKHUGRI-XO\UHIOHFWVDQRWKHU
ODQGPDUNLQLQWHUQDWLRQDOFOLPDWHFKDQJHSROLF\'HOHJDWHVRIWKHUHVXPHGVHVVLRQRI&23LQ
%RQQDSSURYHGDSROLWLFDODJUHHPHQWRQDQXPEHURINH\LPSOHPHQWDWLRQLVVXHVRIWKH.\RWR
3URWRFROZKLFKPD\SDYHWKHZD\WRZDUGVUDWLILFDWLRQLQDWWKH-RKDQQHVEXUJ6XPPLWRQ
6XVWDLQDEOH'HYHORSPHQW
7KH%RQQ$JUHHPHQWKDVVHHQDGLIILFXOWELUWK
3DUWLHVKDGIDLOHGWRFORVHDGHDOHDUOLHUDWWKH
ILUVWVHVVLRQRI&23LQ7KH+DJXH'XULQJWKHSUHSDUDWLRQVIRUWKHIROORZXSWKHQHZ86
DGPLQLVWUDWLRQGHFODUHGWKH.\RWR3URWRFROWREHIDWDOO\IODZHGDQGDQQRXQFHGWKDWWKH86
ZRXOGQRWDJUHHWRDQ\RXWFRPHRIWKHUHVXPHGVHVVLRQRI&23<HWDIWHUILHUFHQHJRWLDWLRQV
DOO3DUWLHVLQ%RQQH[FHSWWKH86DJUHHGWRWKHFRPSURPLVHGUDIWHGE\WKHSUHVLGHQWRI&23
3URQN6RPHSUDLVHGWKHIDFWWKDWVHYHUDONH\3DUWLHVKDGVKRZQVXUSULVLQJIOH[LELOLW\LQWKHLU
SRVLWLRQVWRFORVHWKHGHDO2WKHUVKRZHYHUZHUHFULWLFDORIWKHJHQHURXVRIIHUVWKDWKDGVWULSSHG
WKH.\RWR3URWRFRORILWVHQYLURQPHQWDOPHDQLQJ
7KLVUHSRUWGHDOVZLWKWKHIROORZLQJTXHVWLRQV:KDWKDVEHHQDFFRPSOLVKHGDW%RQQ":KDWLV
WKHHQYLURQPHQWDODQGHFRQRPLFVLJQLILFDQFHRIWKHDJUHHPHQW"$UHWKHUHLPSRUWDQWLVVXHVWKDW
QHHGWREHIXUWKHUDGGUHVVHG"6HFWLRQEULHIO\VXPPDULVHVWKHPDLQHOHPHQWVRIWKH%RQQ
$JUHHPHQW1H[W6HFWLRQH[DPLQHVLWVHQYLURQPHQWDODQGHFRQRPLFLPSOLFDWLRQV:HZLOO
DQDO\VHWKH$JUHHPHQWIURPDG\QDPLFSHUVSHFWLYHE\EUHDNLQJGRZQWKHLQWHUQDWLRQDOSURFHVV
LQWRWKHPDLQVWHSVWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFROWKHZLWKGUDZDORIWKH86DQG
WKHILQDOGHFLVLRQVDVDJUHHGLQ%RQQ6HFWLRQH[SORUHVVRPHNH\LVVXHVVXFKDVWKHGRPLQDQFH
RIKRWDLU)68PDUNHWSRZHUDQGWKHVXEMHFWRIVXSSOHPHQWDULW\:HZLOODOVRVLPXODWHWKH
PHDQLQJRIWKHFXUUHQW%RQQ$JUHHPHQWZLWKWKHSDUWLFLSDWLRQRIWKH86DQGEULHIO\GLVFXVVWKH
SRWHQWLDODQGLPSDFWVRIUHHQWU\RIWKH86)LQDOO\6HFWLRQZLOOSUHVHQWWKHPDLQFRQFOXVLRQV

:HUHIHUWR81)&&&D
5,90UHSRUW SDJHRI
.H\HOHPHQWVLQWKH%RQQ$JUHHPHQW
7KHSROLWLFDODJUHHPHQWLQ%RQQ81)&&&DVKRZVFRPSURPLVHVRQWKHIROORZLQJPDMRU
DUHDV
.\RWR0HFKDQLVPV
/DQGXVHODQGXVHFKDQJHDQGIRUHVWU\VLQNV
&RPSOLDQFH
)LQDQFLQJIRUGHYHORSLQJFRXQWULHV
7KHIROORZLQJVHFWLRQEULHIO\GHVFULEHVWKHPDLQHOHPHQWVRIWKH%RQQ$JUHHPHQWLQWKHVHIRXU
DUHDV
 .\RWR0HFKDQLVPV
$QLPSRUWDQWHOHPHQWLQWKH%RQQ$JUHHPHQWLQYROYHVWKHDEVHQFHRIDTXDQWLWDWLYHFDSRQ
HPLVVLRQVWUDGLQJWKHVRFDOOHGVXSSOHPHQWDULW\LVVXH8SWRWKH%RQQPHHWLQJWKHLQWHUQDWLRQDO
QHJRWLDWLRQVKDGFRQFHQWUDWHGRQVHWWLQJDTXDQWLWDWLYHFDSRQWKHXVHRIWKH.\RWR0HFKDQLVPV
E\$QQH[,FRXQWULHV7KH(8LQSDUWLFXODUZDVVWURQJO\LQIDYRXURIVXFKFDSVSURSRVLQJWKDW
DWOHDVWKDOIRIWKHUHGXFWLRQHIIRUWZRXOGKDYHWREHGRQHGRPHVWLFDOO\7KH%RQQ$JUHHPHQW
QRZLQFOXGHVRQO\DTXDOLWDWLYHDSSURDFKE\VWDWLQJWKDW³GRPHVWLFDFWLRQVKDOOWKXVFRQVWLWXWHD
VLJQLILFDQWHOHPHQWRIWKHHIIRUW´E\HDFK$QQH[,3DUW\
$QRWKHUGHFLVLRQUHOHYDQWWRLQWHUQDWLRQDOHPLVVLRQVWUDGLQJUHODWHVWRWKHFRPPLWPHQWSHULRG
UHVHUYH7KLVUHVHUYHLQWHQGVWRSUHYHQWDFRXQWU\RYHUVHOOLQJZKLFKPD\UHVXOWLQWRQRQ
FRPSOLDQFH&RXQWULHVDUHREOLJHGWRPDLQWDLQDFRPPLWPHQWSHULRGUHVHUYHZKLFKVKRXOGQRW
GURSEHORZSHUFHQWRIWKDWFRXQWU\¶VHPLVVLRQEXGJHWDVVLJQHGDPRXQWVRUSHUFHQWRI
ILYHWLPHVWKHPRVWUHFHQWO\UHYLHZHGLQYHQWRU\ZKLFKHYHULVORZHVW7KHIRUPHUFRQGLWLRQRI
SHUFHQWRIWKHHPLVVLRQEXGJHWLVSUREDEO\HIIHFWLYHIRUQHWEX\HUVPRVWLQGXVWULDOLVHG
FRXQWULHV)RUQHWVHOOHUVDQGFRXQWULHVZLWKODUJHDPRXQWVRIKRWDLUOLNH5XVVLDWKHODWWHU
FRQGLWLRQZLWKLWVPRVWUHFHQWO\UHYLHZHGLQYHQWRU\DSSOLHVDQGVXJJHVWVWKDWWKHFRXQWU\FDQQRW
WUDGHPRUHWKDQWKHIDOOLQHPLVVLRQVEHORZLWVHPLVVLRQEXGJHWDURXQGWKHWLPHRIWKHILUVW
FRPPLWPHQWSHULRG
$VUHJDUGV-RLQW,PSOHPHQWDWLRQFRXQWULHVKDYHDJUHHGWR³UHIUDLQIURPXVLQJHPLVVLRQ
UHGXFWLRQXQLWVJHQHUDWHGIURPQXFOHDUIDFLOLWLHV´$VLPLODUFRQGLWLRQDOVRDSSOLHVWRWKH&OHDQ
'HYHORSPHQW0HFKDQLVP&'0)XUWKHUPRUHVPDOOVFDOHDFWLYLWLHVIRFXVHGRQUHQHZDEOH
HQHUJ\DQGHIILFLHQF\DUHJLYHQDSUHIHUHQWLDOWUHDWPHQWXQGHUWKH&'0WKURXJKWKH
GHYHORSPHQWRIVLPSOLILHGFRQGLWLRQVDQGSURFHGXUHV$IIRUHVWDWLRQDQGUHIRUHVWDWLRQDUHHOLJLEOH
IRU&'0LQWKHILUVWFRPPLWPHQWSHULRGFDSSHGWRSHUFHQWRI$QQH[,EDVH\HDUHPLVVLRQV
VHH6HFWLRQ )LQDOO\DSHUFHQWVKDUHRISURFHHGVZLOOEHOHYLHGXSRQ&'0SURMHFWVDQG
VHUYHDVDIXQGLQJPHFKDQLVPWRWKH$GDSWDWLRQ)XQGVHH6HFWLRQ

7KH(58VIURP-RLQW,PSOHPHQWDWLRQDUHH[FOXGHGIURPWKLVFRPPLWPHQWSHULRGUHVHUYH(58VFRQVWLWXWH
FHUWLILHGHPLVVLRQUHGXFWLRQVDOUHDG\UHDOLVHGDQGDUHGHGXFWHGIURPDVHOOHUFRXQWU\¶VDVVLJQHGDPRXQWV
$IIRUHVWDWLRQLVGHILQHGDVGLUHFWKXPDQLQGXFHGFRQYHUVLRQRIODQGWKDWKDVQRWEHHQIRUHVWHGIRUDWOHDVW\HDUV
5HIRUHVWDWLRQLVGHILQHGDVGLUHFWKXPDQLQGXFHGFRQYHUVLRQRISUHYLRXVO\IRUHVWHGODQGEXWWKDWKDVEHHQFRQYHUWHG
WRQRQIRUHVWODQGDQGUHFRQYHUWHGWRIRUHVWODQGGLGQRWFRQWDLQIRUHVWRQ6HH81)&&&EIRU
WKHH[DFW/8/8&)GHILQLWLRQV
5,90UHSRUW SDJHRI
 /DQGXVHODQGXVHFKDQJHDQGIRUHVWU\
7KHLVVXHRIVLQNVZDVDWWKHYHU\KHDUWRIWKHLQWHUQDWLRQDOQHJRWLDWLRQV(DUOLHUQHJRWLDWLRQVLQ
WKH+DJXHIDLOHGWR\LHOGDFRPSURPLVHEXWLQ%RQQWKH3DUWLHVZHUHVXFFHVVIXOLQFORVLQJDQ
DJUHHPHQWRQWKHUXOHVDQGPRGDOLWLHVRQDFWLYLWLHVUHODWHGWRODQGXVHODQGXVHFKDQJHDQG
IRUHVWU\/8/8&)7KHPDLQGHFLVLRQVLQFOXGH
7KHDFFRXQWLQJH[FOXGHVFDUERQUHPRYDOUHVXOWLQJIURPDHOHYDWHG&2 FRQFHQWUDWLRQV
DERYHWKHSUHLQGXVWULDOOHYHOELQGLUHFWQLWURJHQGHSRVLWLRQDQGFRQJRLQJFDUERQVWRFN
LQFUHDVHGXHWRWKHDJHLQJHIIHFWRIPDQ\IRUHVWV
$IIRUHVWDWLRQUHIRUHVWDWLRQDQGGHIRUHVWDWLRQVKDOOEHGHILQHGRQWKHEDVLVRIDFKDQJHLQ
ODQGXVH7KLVLPSOLHVWKDWFHUWDLQUHIRUHVWDWLRQDFWLYLWLHVDUHH[FOXGHGIURPWKHDFFRXQWLQJ
IUDPHZRUN7KHUHDUHQRFDSVRQFDUERQFUHGLWVIURPDIIRUHVWDWLRQDQGUHIRUHVWDWLRQ
DFWLYLWLHVIRU$QQH[,FRXQWULHV$UWLFOH
'HIRUHVWDWLRQXQGHU$UWLFOHPD\QRWEHJUHDWHUWKDQDIIRUHVWDWLRQDQGUHIRUHVWDWLRQRQWKH
VDPHXQLWRIODQG7KLVPD\LPSO\DPRUHODQGEDVHGDFFRXQWLQJV\VWHPUHGXFLQJWKHWRWDO
VLQNSRWHQWLDO
&RXQWULHVPD\FKRRVHWRDSSO\DQ\RUDOORIWKHDFWLYLWLHVXQGHU$UWLFOHIRUHVW
PDQDJHPHQWFURSODQGPDQDJHPHQWJUD]LQJODQGPDQDJHPHQWDQGUHYHJHWDWLRQKRZHYHU
WKH\PXVWIL[WKHLUFKRLFHSULRUWRWKHVWDUWRIWKHILUVWFRPPLWPHQWSHULRG$3DUW\VKDOO
GHPRQVWUDWHWKDWVXFKDFWLYLWLHVKDYHRFFXUUHGVLQFHDQGDUHKXPDQLQGXFHG
$Q\$5'GHELWPD\EHFRPSHQVDWHGE\IRUHVWPDQDJHPHQWXSWR0W&
&RXQWULHVPD\FODLPFUHGLWVIURPIRUHVWPDQDJHPHQWWRPHHWWKHLUUHGXFWLRQFRPPLWPHQWV
EXWWKLVLVFDSSHGWRFRXQWU\VSHFLILFOLPLWVDVJLYHQLQ$SSHQGL[=ZKLFKWRWDO0W&SHU
\HDU
&RXQWULHVPD\DOVRFODLPFUHGLWVIRUDJULFXOWXUDOODQGPDQDJHPHQWDQGUHYHJHWDWLRQ
DFWLYLWLHVRQDQHWQHWDFFRXQWLQJEDVLVZLWKRXWDQH[SOLFLWFDS
$IIRUHVWDWLRQDQGUHIRUHVWDWLRQSURMHFWVLQGHYHORSLQJFRXQWULHVDUHHOLJLEOHIRU&'0XSWRD
FDSRISHUFHQWRIDFRXQWU\¶VEDVH\HDUHPLVVLRQVZKLFKVXJJHVWDWRWDORI0W&SHU
\HDU
7KHVHGHFLVLRQVRQWKHXVHRIVLQNFUHGLWVKDYHDGLUHFWLPSDFWRQWKHHQYLURQPHQWDO
HIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH.\RWR3URWRFRO6HFWLRQRIIHUVDPRUHGHWDLOHG
H[DPLQDWLRQRIWKHVH/8/8&)GHFLVLRQV
 &RPSOLDQFH
1HJRWLDWLRQVWXUQHGRXWWREHGLIILFXOWRQWKHVXEMHFWRIFRPSOLDQFH$SDUWIURPGHFLGLQJXSRQ
SURFHGXUHVDQGJRYHUQLQJERGLHVWKHGLVFXVVLRQIRFXVHGRQZKHWKHURUQRWDQGKRZWRLQFOXGH
SHQDOWLHVIRUQRQFRPSOLDQFH&RXQWULHVDJUHHGLQ%RQQWRFKRRVHDPRUH³UHZDUGLQJ´DSSURDFK
DQGWRVHWIRUWKHILUVWFRPPLWPHQWSHULRGDWDVRFDOOHGUHVWRUDWLRQUDWHRIPHDQLQJWKDW
SHUFHQWRIWKHH[FHVVZRXOGEHVXEWUDFWHGIURPWKHDVVLJQHGDPRXQWVLQWKHVHFRQGFRPPLWPHQW
SHULRG3DUWLHVLQQRQFRPSOLDQFHZHUHDOVRWRGHYHORSDFRPSOLDQFHSODQDQGDUHVXVSHQGHG
IURPXVLQJWKH.\RWR0HFKDQLVPVXQWLOFRPSOLDQFHLVUHVWRUHG

7KLVLQFOXGHV0W&IRUWKH86KHQFHWKHWRWDOZRXOGEH0W&ZLWKRXWWKH86VHHVHFWLRQ-,FDQDOVREH
XVHGWRDFKLHYHWKHFRPPLWPHQWEXWVXEMHFWWRWKHFDSVDVJLYHQLQ$SSHQGL[=
7KHQHWQHWDFFRXQWLQJDSSURDFKLVEDVHGRQFRPSDULQJWKHQHWHPLVVLRQVLQWKHILUVWFRPPLWPHQWSHULRGZLWKWKH
QHWHPLVVLRQVLQ
:LWKRXWWKH86WKLVFDSUXQVXSWR0W&SHU\HDUVHHVHFWLRQ
5,90UHSRUW SDJHRI
 )LQDQFLQJIRUGHYHORSLQJFRXQWULHV
7KH%RQQ$JUHHPHQWLQFOXGHVWKUHHQHZIXQGV
6SHFLDO&OLPDWH&KDQJH)XQGFRPSOHPHQWDU\WR*()UHVRXUFHVDQGELODWHUDODQG
PXOWLODWHUDOIXQGLQJDQGWDUJHWHGDWDGDSWDWLRQWHFKQRORJ\WUDQVIHUPLWLJDWLRQDQG
GHYHORSLQJFRXQWU\¶VDFWLYLWLHVWRGLYHUVLI\WKHHFRQRP\
/HDVW'HYHORSHG&RXQWULHV)XQGWRVXSSRUWDZRUNSURJUDPPHIRUWKHOHDVWGHYHORSLQJ
FRXQWULHVLQFOXGLQJ1DWLRQDO$GDSWDWLRQ3URJUDPPHVRI$FWLRQ
$GDSWDWLRQ)XQGWRILQDQFHFRQFUHWHDGDSWDWLRQSURMHFWVDQGSURJUDPPHVLQGHYHORSLQJ
FRXQWULHVWKDWKDYHEHFRPH3DUWLHVWRWKH3URWRFRO
7KH$GDSWDWLRQ)XQGLVILQDQFHGE\DPRQJRWKHUVDSHUFHQWVKDUHRISURFHHGVRQ&'0
SURMHFWV7KH%RQQ$JUHHPHQWH[SOLFLWO\VWLSXODWHVWKDWWKHSXEOLFUHVRXUFHVIRU&'0ZRXOGQRW
UHVXOWLQDGLYHUVLRQWREHFRXQWHGDVRIILFLDOGHYHORSPHQWDVVLVWDQFH2WKHUFRQWULEXWLRQVIRUWKLV
)XQGDUHWKHSOHGJHRIVHYHUDO$QQH[,FRXQWULHV(8&DQDGD,FHODQG1HZ=HDODQG1RUZD\
DQG6ZLW]HUODQGWRFRQWULEXWHPLOOLRQDQQXDOO\E\
5,90UHSRUW SDJHRI
(YDOXDWLQJWKH%RQQ$JUHHPHQW
7KH%RQQ$JUHHPHQWLVWKHUHVXOWRIDQLQWHUQDWLRQDOSURFHVVWKDWKDVILQDOO\FXOPLQDWHGLQD
SROLWLFDOGHDODWWKHUHVXPHGVHVVLRQRI&23LQ%RQQ:HZLOOEUHDNWKLVLQWHUQDWLRQDOSURFHVV
GRZQLQWRWKUHHPDMRUVWHSV7KHVWDUWLQJSRLQWIRURXUHYDOXDWLRQLVWKHSUH&23YHUVLRQRIWKH
.\RWR3URWRFROWKDWLQFOXGHVQRH[SOLFLWTXDQWLWDWLYHFDSVRQHPLVVLRQVWUDGLQJDVZHOODV86
SDUWLFLSDWLRQ $IWHUWKHILUVWVHVVLRQRI&23LQ7KH+DJXHZKHUHQRFRQVHQVXVZDVUHDFKHG
WKHQHZO\HOHFWHG86JRYHUQPHQWGHFODUHGWKH.\RWR3URWRFRO³IDWDOO\IODZHG´DQGVWHSSHGRXW
RIWKHQHJRWLDWLRQVRQWKH.\RWR3URWRFRO7KLV86ZLWKGUDZDOLVDPDMRUIDFWRULQH[DPLQLQJWKH
HQYLURQPHQWDOYDOXHRIWKH%RQQ$JUHHPHQW)LQDOO\WKH%RQQ$JUHHPHQWLWVHOILQSDUWLFXODU
WKHGHFLVLRQVRQVLQNVPDUNVWKHODVWVWHSLQRXUHYDOXDWLRQ
 )UDPHZRUNDQGDVVXPSWLRQV
:HHYDOXDWHWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH.\RWR3URWRFRO
ZLWKWKHKHOSRIWKH)$,5PRGHO7KLVPRGHOKDVEHHQGHVLJQHGWRTXDQWLWDWLYHO\H[SORUHDUDQJH
RIDOWHUQDWLYHSROLF\RSWLRQVIRULQWHUQDWLRQDOFOLPDWHFKDQJHUHJLPHV
)$,5DOVRLQFOXGHVDFRVW
PRGXOHZLWKPDUJLQDODEDWHPHQWFXUYHVZKLFKFDQEHXVHGWRGHWHUPLQHPDUJLQDODQGWRWDO
DEDWHPHQWFRVWVDQGH[DPLQHWKHJDLQVRIHPLVVLRQVWUDGLQJ$PDUJLQDODEDWHPHQWFXUYH
0$&UHIOHFWVWKHDGGLWLRQDOFRVWVRIUHGXFLQJWKHODVWXQLWRIFDUERQDQGGLIIHUVSHUFRXQWU\
7KH)$,5FRVWPRGXOHXVHVWKH0$&VIURPWKH:RUOG6FDQPRGHODG\QDPLFPXOWLVHFWRU
PXOWLUHJLRQFRPSXWDEOHJHQHUDOHTXLOLEULXPPRGHO&3%)$,5FDOFXODWHVWKHPDUNHW
FOHDULQJHTXLOLEULXPSHUPLWSULFHXQGHUGLIIHUHQWUHJXODWLRQVFKHPHVE\XVLQJWKHSURSHUWLHVRI
WKHDJJUHJDWHGSHUPLWVXSSO\DQGGHPDQGFXUYHV
)LJXUHVKRZVWKHGHPDQGDQGVXSSO\FXUYHVRISHUPLWWUDGLQJIRUWKHSUH&23YHUVLRQRIWKH
.\RWR3URWRFRODQGLQFOXGHV86SDUWLFLSDWLRQ7KHVXSSO\FXUYHVWDUWVIURPDSRLQWMXVWEHORZ
0W&7KLVTXDQWLW\FDQEHVXSSOLHGDWQRFRVWDQGUHIOHFWVWKHVRFDOOHGKRWDLU 7KH
PD[LPXPGHPDQGLVHTXDOWRWKHVXPRIWRWDO$QQH[,FRPPLWPHQWVDQGLQWHUVHFWVWKH
KRUL]RQWDOD[LVDW0W&7KLVHVWLPDWHLVEDVHGRQWKH$%VFHQDULRVHH)LJXUH7KH
PDUNHWIRUHPLVVLRQVWUDGLQJ-,DQG&'0LVGHWHUPLQHGE\WKHSRLQWZKHUHGHPDQGPHHWV
VXSSO\,Q)LJXUHWKLVLVDWDSULFHRI86W&ZLWKDERXW0W&WUDGHGRQWKH
LQWHUQDWLRQDOPDUNHW

5HVXOWVZLWKRXWHPLVVLRQVWUDGLQJZLOODOVREHJLYHQWRGHPRQVWUDWHWKHVLJQLILFDQFHRIWKH.\RWR0HFKDQLVPV
:HXVHWKHQHZYHUVLRQRI)$,5)UDPHZRUNWR$VVHVV,QWHUQDWLRQDO5HJLPHVIRUGLIIHUHQWLDWLRQRIIXWXUH
FRPPLWPHQWVZKLFKFDQEHGRZQORDGHGIURPHDUO\DWKWWSZZZULYPQO)$,56HHDOVR'HQ(O]HQHWDO
DQG'HQ(O]HQDQG%RWK
$JUHDWDGYDQWDJHRIXVLQJ0$&VLVWKDWLWFOHDUO\VKRZVWKHHIIHFWVRISHUPLWWUDGLQJ+RZHYHUWKHUHDUHVRPH
OLPLWDWLRQVDVZHOO&DUERQOHDNDJHFDQQRWEHWDNHQLQWRDFFRXQW)XUWKHUPRUH0$&VRQO\UHIOHFWWRWDODEDWHPHQW
FRVWVEXWQRWWKHZHOIDUHORVVHV6HH'HQ(O]HQDQGGH0RRU
7KHVDPHPHWKRGRORJ\LVXVHGDVLQWKH$63(1VRIWZDUH&ULTXLHWDO&ULTXL
+RWDLULVGHILQHGDVWKHSRVLWLYHGLIIHUHQFHEHWZHHQWKHDVVLJQHGDPRXQWVDQGDFWXDOHPLVVLRQVXQGHUEXVLQHVVDV
XVXDOFRQGLWLRQV7KLVHVWLPDWHRIKRWDLULVEDVHGRQFXUUHQWHPLVVLRQVSURMHFWLRQVVHHVHFWLRQ
7KHDPRXQWRIKRWDLULV0W&ZKLOHHPLVVLRQVWUDGLQJDQG&'0UXQXSWR0W&
5,90UHSRUW SDJHRI
)LJXUH 3HUPLWGHPDQGDQGVXSSO\FXUYHVIRUWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRO
LQFOXGLQJ86SDUWLFLSDWLRQ
7KHHYDOXDWLRQIRFXVHVRQWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH%RQQ
$JUHHPHQWLQWKHILUVWFRPPLWPHQWSHULRGLH:HXVHWKHIROORZLQJLQGLFDWRUVWR
UHIOHFWWKHHQYLURQPHQWDOHIIHFWLYHQHVV
$QQH[,DEDWHPHQWUHIHUVWRWKHWRWDODPRXQW
RI&2 HPLVVLRQUHGXFWLRQVSHU\HDUZLWKLQ
$QQH[,FRXQWULHVLHUHGXFWLRQVWKURXJKGRPHVWLFSROLFLHVLQWHUQDWLRQDOHPLVVLRQVWUDGLQJ
-RLQW,PSOHPHQWDWLRQ-,DQG&OHDQ'HYHORSPHQW0HFKDQLVP&'07KHDEDWHPHQW
HIIRUWVDUHJLYHQLQDEVROXWHWHUPVUHODWLYHWREDVHOLQHHPLVVLRQVDQGFRPSDUHGWR
OHYHOV
'RPHVWLFDEDWHPHQWLQGLFDWHVKRZPXFK$QQH[,FRXQWULHVUHGXFH&2 HPLVVLRQV
GRPHVWLFDOO\LIWKH\VWULFWO\IROORZDOHDVWFRVWDSSURDFKLWLVH[SUHVVHGLQSHUFHQWDJHRIWRWDO
UHGXFWLRQV2EYLRXVO\WKHUHPDLQGHUZLOOEHUHDOLVHGWKURXJKWKH.\RWR0HFKDQLVPV
(FRQRPLFHIILFLHQF\LVPHDVXUHGDVIROORZV
$EDWHPHQWFRVWVLQ86IRU$QQH[,FRXQWULHVWRFRPSO\ZLWKWKHLU.\RWRFRPPLWPHQWV
1HWUHYHQXHVIURPHPLVVLRQVWUDGLQJLQ86UHIOHFWWKHQHWILQDQFLDOJDLQVDVVRFLDWHG
ZLWKWKH.\RWR0HFKDQLVPVLHJURVVUHYHQXHVPLQXVWKHFRVWV
,QWHUQDWLRQDOSHUPLWSULFHUHIOHFWVWKHH[SHFWHGDYHUDJHFOHDULQJSULFHLQWKHLQWHUQDWLRQDO
SHUPLWPDUNHWRYHUWKHFRPPLWPHQWSHULRG

5HVXOWVZLOOEHJLYHQERWKZLWKDQGZLWKRXWWKH86ZKHUHDSSURSULDWH
0
25
50
75
10 0
12 5
0 100 200 300 400 500 600 700 800 900 1000 1100
MtC
$90/tC
Kyoto with USA - demand
Kyoto with USA - supply
5,90UHSRUW SDJHRI
%R[(YDOXDWLRQDQGPRGHODVVXPSWLRQV
-XVWOLNHPRVWRIWKHPRGHOV)$,5IRFXVHVRQ&2 RQO\DQGKHQFHDEDWHPHQWFRVWVRQO\UHIOHFW&2
UHGXFWLRQV7KHFRVWVRIUHGXFLQJQRQ&2 HPLVVLRQVDUHQRWLQFOXGHGDQGWKHUHIRUHWRWDODEDWHPHQWFRVWVIRU
UHGXFLQJ&2 HTXLYDOHQWHPLVVLRQVZLOOEHKLJKHU$OWKRXJKWKHQRQ&2 HPLVVLRQVDFFRXQWIRUDERXWSHU
FHQWRIWKHRYHUDOOEDVH\HDUHPLVVLRQVZHHVWLPDWHWRWDOFRVWVRIDEDWLQJDOOJUHHQKRXVHJDVHPLVVLRQV
LQFOXGLQJQRQ&2 ZLOORQO\EHSHUFHQWKLJKHUVLQFHWKHRSWLRQVWRUHGXFHQRQ&2 HPLVVLRQVDUH
DVVXPHGWREHPRUHFRVWHIIHFWLYHWKDQHQHUJ\&2 DEDWHPHQWRSWLRQV)$,5XVHVPDUJLQDODEDWHPHQWFXUYHV
IURPWKH:RUOG6FDQPRGHO
7KH,0$*(LPSOHPHQWDWLRQRIWKH$%VFHQDULRLVRXUUHIHUHQFHVFHQDULR,0$*(WHDP 7KLV
VFHQDULRUHIOHFWVKLJKHFRQRPLFJURZWKZLWKUDSLGLQWURGXFWLRQRIQHZDQGPRUHHIILFLHQWWHFKQRORJLHVVHH
%R[
7UDQVDFWLRQFRVWVDVVRFLDWHGZLWKWKHXVHRIWKH.\RWR0HFKDQLVPVDUHVHWDWSHUFHQW
7KH&'0DFFHVVLELOLW\IDFWRUUHIOHFWVWKHRSHUDWLRQDODYDLODELOLW\RIYLDEOH&'0SURMHFWVDQGLVVHWDWSHU
FHQWRIWKHWKHRUHWLFDOPD[LPXP
7KH.\RWRWDUJHWV&2 DVVLJQHGDPRXQWVDUHFDOFXODWHGE\DSSO\LQJWKH.\RWRHPLVVLRQVUHGXFWLRQV
IRUPXODWHGRQWKH&2 HPLVVLRQVHVWLPDWHV
7KHLQWHUSUHWDWLRQRIWKH%RQQ$JUHHPHQWDVGHVFULEHGLQ&KDSWHU
)$2HVWLPDWHVDUHXVHGIRUFDUERQFUHGLWVIURP$UWDIIRUHVWDWLRQUHIRUHVWDWLRQDQGGHIRUHVWDWLRQ$UW
IRUHVWPDQDJHPHQWDQG$UWDJULFXOWXUDOPDQDJHPHQW&DUERQFUHGLWVIURPIRUHVWPDQDJHPHQWKDYHEHHQLI
QHFHVVDU\FDSSHGH[FHSWIRU-DSDQ&DQDGD*UHHFH,WDO\3RUWXJDO6ORYHQLD6SDLQ6ZLW]HUODQG8QLWHG
.LQJGRPDQGWKH86ZKHUHZHXVHGWKHUHSRUWHGYDOXHVLQ$SSHQGL[=81)&&&D)RUPRUHGHWDLOV
ZHUHIHUWR$SSHQGL[,,
&DUERQFUHGLWVIURPVLQNVDUHLQFRUSRUDWHGE\DGGLQJWKHVHFUHGLWVWRWKH&2 DVVLJQHGDPRXQWV
6LQNFUHGLWVDUHDVVXPHGWREHPRUHFRVWHIIHFWLYHWKDQFUHGLWVIURPHQHUJ\UHODWHGHPLVVLRQUHGXFWLRQV
UHFHQWUHVHDUFKVXJJHVWVWKDWFRPPRQVLQNVSURMHFWVLQQRQ$QQH[,FRXQWULHVPD\FRVWDURXQG86W&2
7KHFRVWVUHODWHGWRWKHLPSOHPHQWDWLRQRI$5'SURMHFWVDQGIRUHVWPDQDJHPHQWLQ$QQH[,DVZHOODVXQGHU
&'0DUHDVVXPHGWREHQHJOLJLEOH
 (QYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\
:HHYDOXDWHWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\LQHDFKRIWKHVWHSV
OHDGLQJWRWKH%RQQ$JUHHPHQW7DEOHSUHVHQWVWKHUHVXOWV,WUHLOOXVWUDWHVWKHHFRQRPLF
VLJQLILFDQFHRIWKH.\RWR0HFKDQLVPVWRVXEVWDQWLDOO\FXWGRZQWKHFRVWVRIWKH.\RWR3URWRFRO
IURP86ELOOLRQWR86ELOOLRQOHVVWKDQSHUFHQWRI*'3:KHQLQFOXGLQJ86
SDUWLFLSDWLRQWKHLQWHUQDWLRQDOHPLVVLRQVWUDGLQJPDUNHWFOHDUVDWDSULFHRI86W&VHHDOVR
)LJXUH7KHLQGXVWULDOLVHG$QQH[,FRXQWULHVUHDOLVHVOLJKWO\PRUHWKDQKDOIRIWKHLU
FRPPLWPHQWVDEURDGDQGSHUFHQWDWKRPH7KH)RUPHU6RYLHW8QLRQ)68GRPLQDWHV
SHUPLWVXSSO\DQGWUDGHV0W&LQHPLVVLRQDQGSURMHFWFUHGLWV

)RUPRUHGHWDLOVRIWKHDQDO\VLVDQGWKHPHWKRGRORJ\ZHUHIHUWR'HQ(O]HQDQGGH0RRU
7KHKLVWRULFDOUHJLRQDO&2 HPLVVLRQVIURPIRVVLOIXHOFRPEXVWLRQDQGFHPHQWSURGXFWLRQH[FOXGLQJHPLVVLRQV
IURPEXQNHUVDUHEDVHGRQWKH&',$&GDWDVHW)RUWKHSHULRGZHXVHWKHJURZWKWUDMHFWRULHVDVJLYHQE\
WKH,0$*($%VFHQDULR
5,90UHSRUW SDJHRI
7DEOH(QYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH%RQQ$JUHHPHQW
(QYLURQPHQWDOHIIHFWLYHQHVV (FRQRPLFHIILFLHQF\
$QQH[,
DEDWHPHQW
LQGH[ 
0W&
$QQH[,HPLVVLRQV
FRPSDUHGWR
OHYHOV
'RPHVWLF
UHGXFWLRQ
$QQH[,
,QWHUQDW
3HUPLW
SULFH
86W&
$QQH[,FRVWV
LQGH[ 
E86
,QGH[ 0W& ([FO86 ,QFO86 ,QGH[ E86
.3ZLWK86ZR,(7        
.3ZLWK86ZLWK,(7        
.3ZR86ZLWK,(7        
%RQQ$JUHHPHQW      
7KH.\RWR3URWRFRO.3ZLWKRXW86DQGLQFOXGLQJVLQNVIURP/8/8&)DQGZLWK,QWHUQDWLRQDO(PLVVLRQV
7UDGLQJ
$VWKH86DFFRXQWVIRUURXJKO\KDOIRIWRWDO$QQH[,UHGXFWLRQFRPPLWPHQWVWKH86ZLWKGUDZDO
KDVDGUDPDWLFLPSDFWRQWKHHQYLURQPHQWDOHIIHFWLYHQHVVRIWKH.\RWR3URWRFRO7RWDODEDWHPHQW
LVUHGXFHGVXEVWDQWLDOO\WRDOHYHORIRQO\SHUFHQWEHORZEDVHOLQHOHYHOVLQVWHDGRISHUFHQW
ZLWK86SDUWLFLSDWLRQ$QRWKHUFRQVHTXHQFHRIWKH86ZLWKGUDZDOLVWKDWWKHGHPDQGIRUSHUPLWV
FROODSVHVDQGWKHSHUPLWSULFHGURSVWR86W&8QGHUWKHDVVXPSWLRQRIDOHDVWFRVW
DSSURDFKWKHLQGXVWULDOLVHGFRXQWULHVZLOOFXWGRZQRQWKHLUGRPHVWLFDEDWHPHQWHIIRUWVWROHVV
WKDQDTXDUWHURIWRWDOFRPPLWPHQWVDQGLQFUHDVHWKHLUXVHRIWKH.\RWR0HFKDQLVPV7KHIDOOLQ
SHUPLWSULFHVUHGXFHVWRWDOFRVWVIRU$QQH[,FRXQWULHVE\RYHUSHUFHQWWR86ELOOLRQDQ
LQVLJQLILFDQWSRUWLRQRI*'3SHUFHQW
&RPSDUHGWRWKH86ZLWKGUDZDOWKHGHFLVLRQVLQWKH%RQQ$JUHHPHQWDQGLQSDUWLFXODURQVLQNV
KDYHDUHODWLYHO\PLQRULPSDFWRQWKHHQYLURQPHQWDOHIIHFWLYHQHVVRIWKH.\RWR3URWRFRO
7KH
³SULFH´IRUWKLVDJUHHPHQWLVDQRWKHUORZHU$QQH[,DEDWHPHQWHIIRUWRI0W&,WGRHV
KRZHYHUIXUWKHUUHGXFHGHPDQGIRUHPLVVLRQVSHUPLWVDQGWKHSHUPLWSULFHGURSVWR86W&
'RPHVWLFDEDWHPHQWDFFRXQWVIRURQHVHYHQWKRIWRWDOUHGXFWLRQV7KXVFRPSDUHGWRWKH86
ZLWKGUDZDOWKHGHFLVLRQVRQVLQNVPD\EHFRQVLGHUHGDQDFFHSWDEOHFRPSURPLVHIRUUHDFKLQJD
SROLWLFDODJUHHPHQWVHHDOVR6HFWLRQ
6XPPLQJXSWKH%RQQ$JUHHPHQWUHGXFHVWRWDO$QQH[,DEDWHPHQWH[FOXGLQJWKH86HPLVVLRQV
E\0W&ZKLFKLPSOLHVDUHGXFWLRQRISHUFHQWEHORZEDVHOLQHDQGDSHUFHQWUHGXFWLRQ
XQGHUWKHOHYHORI,QFOXGLQJWKH86KRZHYHUWRWDO$QQH[,HPLVVLRQVHQGXSRYHUSHU
FHQWDERYHOHYHOV
7KHSUH&23YHUVLRQRIWKH3URWRFROLVH[SHFWHGWRUHGXFHHPLVVLRQV
E\0W&7KHGLIIHUHQFHLVDOPRVWHQWLUHO\H[SODLQHGE\WKH86ZLWKGUDZDOIURPWKH.\RWR
3URWRFRODQGRQO\DOLWWOHE\WKHGHFLVLRQVUHODWHGWRVLQNV7RWDOFRVWVRIWKHFXUUHQW%RQQ
$JUHHPHQWIRU$QQH[,FRXQWULHVDPRXQWWR86ELOOLRQZKLFKLVOHVVWKDQSHUFHQWRI
*'3

,QRXUFDOFXODWLRQVZHDGGWKHFDUERQFUHGLWVIURPVLQNVWRWKH&2 DVVLJQHGDPRXQWVDQGFRPSDUHWKH$QQH[,
&2
HPLVVLRQUHGXFWLRQZLWKRXU&2 EDVH\HDUHPLVVLRQV7KLVOHDGVWRWKHUHGXFWLRQRI±SHUFHQW
FRPSDUHGWR+RZHYHUWKLVLVGLIIHUHQWWKDQWKH±SHUFHQWUHGXFWLRQDVUHSRUWHGLQ7DEOHVLQFHWKHUHZH
FDOFXODWHZLWK&2
HTXLYDOHQWEDVH\HDUHPLVVLRQVDQGDGGWKHFDUERQFUHGLWVIURPVLQNVWRWKH&2 HTXLYDOHQW
DVVLJQHGDPRXQWV
7KHUHTXLUHPHQWVRQWKHFRPPLWPHQWSHULRGUHVHUYHGRQRWHIIHFWLYHO\UHVWULFW)68SHUPLWVDOHV
2XURXWFRPHVIDOOLQWRWKHPLGGOHUDQJHRISHUPLWSULFHDQGWUDGLQJYROXPHSURJQRVHVDVUHSRUWHGLQ*UWWHU

7KHUHVXOWVDOVRLPSO\WKDWWKHFRQWULEXWLRQRIWKH%RQQ$JUHHPHQWWRGHFUHDVHWKHJDSEHWZHHQ$QQH[,DQGQRQ
$QQH[,SHUFDSLWD&2
HPLVVLRQVLVUDWKHUOLPLWHG,QWKHUDWLR$QQH[,YHUVXVQRQ$QQH[,SHUFDSLWD&2
HPLVVLRQVFRPHVRXWFRPSDUHGWRIRUWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRO$JDLQWKH86
ZLWKGUDZDOLVRIPDMRULQIOXHQFH
5,90UHSRUW SDJHRI
)LJXUH3HUPLWGHPDQGDQGVXSSO\FXUYHVIRUWKHPDMRUVWHSVWRZDUGVWKH%RQQ$JUHHPHQW
)LJXUHYLVXDOLVHVWKHGLIIHUHQWVWHSVOHDGLQJWRWKH%RQQ$JUHHPHQW,WVKRZVWKHVKLIWLQ
SHUPLWGHPDQGDQGVXSSO\FXUYHV$VWKHGHPDQGFXUYHLVFRQWLQXRXVO\SXVKHGGRZQE\WKH86
ZLWKGUDZDODQGGHFLVLRQVRQVLQNVWKHSHUPLWSULFHGURSVWR86W&7KHTXDQWLW\WUDGHGRQ
WKHPDUNHWDPRXQWVWRVRPH0W&'HFRPSRVLWLRQRIWKHSHUPLWPDUNHWVKRZVWKDWSHU
FHQWFRQFHUQVKRWDLU0W&DERXWSHUFHQWRU0W&-RLQW,PSOHPHQWDWLRQZKLOH
DOPRVWSHUFHQWRU0W&DUHVLQNFUHGLWVWKURXJKWKH&'0
 $VVHVVLQJWKHGHFLVLRQVRQVLQNV
$WWKHILUVWVHVVLRQRI&23LQ7KH+DJXHWKHQHJRWLDWLRQVRQVLQNVSURYHGWREHDQ
LQVXSHUDEOHEDUULHUWRUHDFKLQWHUQDWLRQDOFRQVHQVXV7KHUHIRUHPDQ\UHJDUGWKHGHFLVLRQRQ
VLQNVLQ%RQQDVDPDMRUDFKLHYHPHQW:KDWKDVEHHQGHFLGHGDQGZKDWDUHWKHLPSOLFDWLRQV"
7KH.\RWR3URWRFRODOORZVWKHIROORZLQJDFWLYLWLHVUHODWHGWRODQGXVHODQGXVHFKDQJHDQG
IRUHVWU\/8/8&)WREHFRXQWHGDVGRPHVWLFVLQNV
 $UWLFOHDIIRUHVWDWLRQUHIRUHVWDWLRQDQGGHIRUHVWDWLRQ$5'
 $UWLFOHIRUHVWPDQDJHPHQW
 $UWLFOHDJULFXOWXUDOPDQDJHPHQWFURSODQGPDQDJHPHQWJUD]LQJODQGPDQDJHPHQW
UHYHJHWDWLRQDQGFRQVHUYDWLRQDFWLYLWLHV
7KH%RQQ$JUHHPHQWIXUWKHUDOORZV
 DIIRUHVWDWLRQDQGUHIRUHVWDWLRQSURMHFWVWREHHOLJLEOHXQGHU&'0LQQRQ$QQH[,FRXQWULHV
FDSSHGDWDOHYHOSHUFHQWRIEDVH\HDUHPLVVLRQV
7KH%RQQ$JUHHPHQWOLPLWVWKHVLQNSRWHQWLDOLQWKHUHVSHFWWKDWRQO\GLUHFWKXPDQLQGXFHG
DFWLYLWLHVFDQEHVHOHFWHG&RXQWULHVKDYHWRGHPRQVWUDWHWKDWWKHVHDFWLYLWLHVKDYHRFFXUUHGVLQFH

7KHVXSSO\FXUYHVIRUWKH.\RWR3URWRFROZLWKWKH86DQGZLWKRXWWKH86DUHWKHVDPH
0
25
50
75
10 0
12 5
0 100 200 300 400 500 600 700 800 900 1000 1100 MtC
$90/tC
Kyoto with USA - demand
Kyoto with USA - supply
Kyoto without USA - demand
Kyoto without USA - supply
Bonn Agreement - supply
Bon Agreement - demand
5,90UHSRUW SDJHRI
DQGDUHKXPDQLQGXFHG 7DEOHVKRZVUHJLRQDOHVWLPDWHVRQWKHDERYHPHQWLRQHGVLQNV
UHODWHGDFWLYLWLHVLQWKH%RQQ$JUHHPHQWEDVHGRQ)$2GDWDVHHDOVR%R[
7DEOH (VWLPDWHGDFKLHYDEOHFDUERQFUHGLWVIURP/8/8&)DFWLYLWLHVXQGHU$UWLFOH
DQG&'0
'RPHVWLFVLQNVFUHGLWV &'0
VLQNV
$QQH[,
FRXQWULHV
%DVH
\HDU
FDUERQ
FUHGLWV
IURP
$5'
FDUERQ
FUHGLWVIURP
IRUHVW
PDQDJHPHQW
$SS=
FDUERQ
FUHGLWVIURP
DJULFXOWXUDO
PDQDJHPHQW
QRFDS
7R
WDO
VLQNV
&'0
SURMHFWV
IRUQRQ
$QQH[,
7RWDO
FDUERQ
FUHGLWV

EDVH
\HDU
&RUUHFWHG
DVVLJQHG
DPRXQWV
$UW $UW $UW $UW
0W&\U 0W&\U 0W&\U 0W&\U 0W&\U 0W&\U 0W&\U %DVH\HDU

&DQDGD         
86         
:HVWHUQ(XURSH         
(DVWHUQ(XURSH         
)68         
2FHDQLD         
-DSDQ         
7RWDOZLWK86         
7RWDOZR86        

%DVH\HDUHPLVVLRQVDUHEDVHGRQWKH3URQNSURSRVDODW&23LQ7KH+DJXH3URQN
6RXUFH)$2GDWD7%)5$
:LWKRXWWKH86WKHFDUERQFUHGLWVIURPVLQNVUHODWHGDFWLYLWLHVWRWDODERXW0W&SHU\HDU
WKUHHTXDUWHUVDUHGRPHVWLFVLQNVPDLQO\IURPIRUHVWPDQDJHPHQWZKLOHWKHUHPDLQLQJTXDUWHU
VWHPVIURP&'0SURMHFWV7KLVLVMXVWRYHUSHUFHQWRIEDVH\HDUHPLVVLRQVDQGVOLJKWO\DERYH
WKHPLQLPXPSRWHQWLDODVUHSRUWHGLQ9DQ0LQQHQHWDO7UDQVODWLQJWKHVLQNVGHFLVLRQV
LQWR³FRUUHFWHG´DVVLJQHGDPRXQWVVKRZVWKDW$QQH[,HPLVVLRQVZLWKRXWWKH86ZLOOFRPHRXW
MXVWEHORZWKHOHYHO
:KHQFRQIURQWLQJWKHUHJLRQDOQXPEHUVZLWK)$2GDWD7DEOHVKRZVWKDW&DQDGD$XVWUDOLD
1HZ=HDODQGDQG-DSDQKDYHEHHQJHQHURXVO\WUHDWHGLQWKHLUGRPHVWLFVLQNVSRWHQWLDOVHHDOVR
7DEOH,,LQ$SSHQGL[,,IRUPRUHGHWDLOV7KHWRWDOFUHGLWVIRUWKHVHFRXQWULHVDPRXQWWRSHU
FHQWRUPRUHRIEDVH\HDUHPLVVLRQV-DSDQDQG&DQDGDLQSDUWLFXODUKDYHEHHQJUDQWHGPDQ\
PRUHFUHGLWVIRUIRUHVWPDQDJHPHQWWKDQRQWKHEDVLVRI)$2GDWDLHDOPRVWDQG0W&
PRUHFUHGLWV,QWHUHVWLQJO\DVLPLODUREVHUYDWLRQFDQEHPDGHIRUWKH86ZKLFKKDVEHHQJLYHQ
DQDPRXQWRI0W&ZRUWKRIFUHGLWVIURPIRUHVWPDQDJHPHQWWZLFHDVPXFKFRPSDUHGZLWK
)$2GDWD2QWKHRWKHUKDQGWKHFDSRQFDUERQFUHGLWVIURPIRUHVWPDQDJHPHQWIRU5XVVLDLQ
$SSHQGL[=LVZHOOXQGHUWKHSRWHQWLDODERXW0W&EDVHGRQ)$2GDWD )RU:HVWHUQ
(XURSHFUHGLWVIURPVLQNVDUHLQOLQHZLWK)$2GDWDDQGDFFRXQWIRUOHVVWKDQSHUFHQWRI
EDVH\HDUHPLVVLRQV,QFRQFOXVLRQWKHWRWDODPRXQWRIVLQNFUHGLWVDOORZHGDUHMXVWDERYHWKH
PLQLPXPSRWHQWLDODQGVOLJKWO\OHVVWKDQZKDWFRXOGKDYHEHHQH[SHFWHGIURP)$2GDWD

,QGLUHFWKXPDQLQGXFHGFDUERQUHPRYDOVWKURXJK&2 DQG1IHUWLOL]DWLRQDUHH[FOXGHGIURPWKHDFFRXQWLQJ
IUDPHZRUN
([SUHVVHGLQ&2 HPLVVLRQVWKLVZRXOGEH±SHUFHQWFRPSDUHGWR6HHIRRWQRWHIRUPRUHGHWDLOV
:KHQXVLQJWKHGDWDVXEPLWWHGE\3DUWLHVRQ$XJXVW7DEOH3URQN3URSRVDOIRUIRUHVWPDQDJHPHQW
DIWHUGLVFRXQWWKHREVHUYDWLRQRIJHQHURXVWUHDWPHQWDOVRKROGVIRU&DQDGDDQG-DSDQEXWQRWIRUWKH86ZKLFK
UHSRUWV0W&7KH0W&LQ$SSHQGL[=UHIOHFWWKHDYHUDJHRI)$2GDWDDQGGDWDSURYLGHGE\3DUWLHV)RUWKH
5XVVLDQ)HGHUDWLRQWKHYDOXHLQ$SSHQGL[=FRUUHVSRQGVZLWKWKHGDWDSURYLGHGE\3DUWLHV7DEOH3URQN
3URSRVDODIWHUGLVFRXQW6HH$SSHQGL[,,IRUPRUHGHWDLOV
5,90UHSRUW SDJHRI
 1HWILQDQFLDOUHYHQXHVIURPWKH.\RWR0HFKDQLVPV
,WLVLQWHUHVWLQJWRQRWHWKHILQDQFLDOLPSOLFDWLRQVRIWKHGLIIHUHQWVWHSVWRZDUGVWKH%RQQ
$JUHHPHQWDUHIRUFRXQWULHVVXFKDVWKH)RUPHU6RYLHW8QLRQ)68,QDGGLWLRQIRUQRQ$QQH[
,FRXQWULHVVHYHUDOIXQGVKDYHEHHQFUHDWHGWRILQDQFHFHUWDLQJRDOVLQFOXGLQJWKH$GDSWDWLRQ
)XQGVHH6HFWLRQ7KLV)XQGLVDPRQJRWKHUVILQDQFHGWKURXJKDSHUFHQWVKDUHRI
SURFHHGVRQ&'0SURMHFWV7DEOHVKRZVWKHQHWILQDQFLDOUHYHQXHVDVVRFLDWHGZLWKWKH.\RWR
0HFKDQLVPV
7DEOH1HWUHYHQXHVIURPWKH.\RWR0HFKDQLVPVIRU)68DQGQRQ$QQH[,FRXQWULHV
SHUPLWSULFH )68
YROXPHUHYHQXHV
1RQ$QQH[,FRXQWULHV
YROXPHUHYHQXHV
86W& 0W& E86 0W& E86
.3ZLWK86ZLWK,(7     
.3ZR86ZLWK,(7     
7KH%RQQ$JUHHPHQW    
.\RWR3URWRFROZLWKRXW86LQFOXGLQJVLQNVIURP/8/8&)DQGZLWK,QWHUQDWLRQDO(PLVVLRQV7UDGLQJ
,QFOXGLQJ0W&VLQNVIURP&'0
,QFOXGLQJRISURFHHGVRQ&'0
7DEOHFOHDUO\VKRZVKRZWKHQHWILQDQFLDOUHYHQXHVIRUWKH)68DQGQRQ$QQH[,FRXQWULHV
DUHUHGXFHGGUDPDWLFDOO\DVDUHVXOWRIWKH86ZLWKGUDZDO,QWKHSUH&23YHUVLRQRIWKH
.\RWR3URWRFROWKH)68GRPLQDWHVSHUPLWVXSSO\DQGZRXOGWUDGH0W&LQHPLVVLRQDQG
SURMHFWFUHGLWV7KHILQDQFLDOUHYHQXHVIRUWKH)68ZRXOGEHVXEVWDQWLDOUXQQLQJXSWRQHDUO\
86ELOOLRQRUFORVHWRSHUFHQWRI*'3$VWKH86GHFLVLRQWRZLWKGUDZIURPWKH.\RWR
3URWRFROLPSOLHVDPDMRUUHGXFWLRQLQSHUPLWGHPDQGWKHFRQVHTXHQFHIRUWKH)68LVWKDWLW
ZRXOGWUDGHPXFKOHVVDWDIDUORZHUSHUPLWSULFH1HWILQDQFLDOUHYHQXHVDUHVODVKHGWR86
ELOOLRQRUSHUFHQW*'3)LQDOO\WKH%RQQ$JUHHPHQWLPSOLHVDIXUWKHUUHGXFWLRQLQSHUPLW
GHPDQGDQGUHYHQXHVGURSWR86ELOOLRQRUSHUFHQWRI*'37KLVLVQRWHYHQWKHZRUVW
FDVHIRUWKH)68%DVHOLQHVFHQDULRVZLWKORZHUHPLVVLRQVVXFKDVLQ%VHH%R[PD\
SURGXFHQRILQDQFLDOJDLQVDWDOO7KHRQO\ZD\WRJHW³UHYHQXH´WKHQLVWRFXUWDLOVXSSO\DQG
EDQNWKHKRWDLUDVFUHGLWVIRUEHWWHUWLPHVVHH6HFWLRQ
7KH86ZLWKGUDZDODOVRKDVGUDPDWLFLPSOLFDWLRQVIRUWKHILQDQFLDOUHYHQXHVIRUQRQ$QQH[,
FRXQWULHV7KHYROXPHWUDGHGWKURXJKWKH&'0LVPRUHWKDQKDOYHGWR0W&LQFOXGLQJVLQNV
DQGWKLVUHGXFHVWKHRULJLQDOO\SURMHFWHG86ELOOLRQLQUHYHQXHVWR86ELOOLRQ
$OWKRXJKWKHGHFLVLRQWRLQFOXGHVLQNVLQWKH&'0SURGXFHVVRPHILQDQFLDOEHQHILWVIRUQRQ
$QQH[,FRXQWULHVWKHORZHUSULFHIRU&'0FUHGLWVRXWZHLJKVWKLVHIIHFWDQGEULQJVWRWDO
ILQDQFLDOUHYHQXHVIRUQRQ$QQH[,FRXQWULHVWR86ELOOLRQ
 5REXVWQHVVRIUHVXOWV
7KLVVHFWLRQLQYHVWLJDWHVWRZKDWH[WHQWWKHUHVXOWVGHSHQGRQNH\DVVXPSWLRQVDQGPRGHO
SDUDPHWHUV:HH[DPLQHWKHLPSDFWRIGLIIHUHQWEDVHOLQHVFHQDULRVDQGPDUJLQDODEDWHPHQW
FXUYHVDQGGLIIHUHQWDVVXPSWLRQVFRQFHUQLQJWKH&'0DFFHVVLELOLW\IDFWRUDQGWUDQVDFWLRQFRVWV
7DEOHSUHVHQWVWKHUHVXOWVIRUWKH%RQQ$JUHHPHQWDQGVKRZVWKDWWKHUHVXOWVRIRXUHYDOXDWLRQ
DUHIDLUO\UREXVW2QO\WKHEDVHOLQHVFHQDULRVPD\DIIHFWWKHUHVXOWVWKHRWKHUIDFWRUVKDYHRQO\D
PDUJLQDOLPSDFW
5,90UHSRUW SDJHRI
7DEOH (QYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH%RQQ$JUHHPHQWLQGLIIHUHQW
VFHQDULRVDQGXQGHUGLIIHUHQWDVVXPSWLRQV
5REXVWQHVVRIUHVXOWV (QYLURQPHQWDOHIIHFWLYHQHVV (FRQRPLFHIILFLHQF\
$QQH[,
$EDWHPHQW
'RPHVWLF
UHGXFWLRQ
$QQH[,
$QQH[,HPLVVLRQV
FRPSDUHGWR
OHYHOV
,QWHUQDWLRQDO
SHUPLWSULFH
$QQH[,FRVWV
*W& ([FO86 ,QFO86 86W& E86
%RQQ$JUHHPHQW     
%DVHOLQHVFHQDULRV
 $% !%VFHQDULR
 $% !$VFHQDULR






0DUJLQDO$EDWHPHQW&XUYHV
 :RUOG6FDQ !3ROHV
VDPH  VDPH VDPH  
&'0
  ! VDPH  VDPH VDPH 
7UDQVDFWLRQFRVWV
  !
  !
VDPH
VDPH


VDPH
VDPH
VDPH
VDPH




2YHUDOO
 $% !/2:
 $% !+,*+









UHIHUHQFHFDVH%DVHOLQH$%0$&:RUOG6FDQ&'07$&
/2:%DVHOLQH%0$&:RUOG6FDQ&'07$&
+,*+%DVHOLQH$%0$&3ROHV&'07$&
%DVHOLQHHPLVVLRQV
2XUHYDOXDWLRQXVHGWKH,3&&65(6$%VFHQDULRDVWKHUHIHUHQFH7KLVVFHQDULRFDQEH
FKDUDFWHULVHGE\LQFUHDVLQJO\JOREDOLVDWLRQLQZKLFKWHFKQRORJLFDOGHYHORSPHQWVDQGHFRQRPLF
JURZWKDUHTXLWHUDSLGVHH%R[(PLVVLRQVDUHUHODWLYHO\KLJK2WKHUVFHQDULRVGLIIHUPDLQO\
LQWKHLURULHQWDWLRQRQLQWHUQDWLRQDOGHYHORSPHQWVDQGVXVWDLQDELOLW\7KH$VFHQDULRIRU
H[DPSOHGLIIHUVIURPDQ$%ZRUOGLQWKDWUHJLRQVDUHPXFKPRUHVHOIRULHQWHGDQG
LQWHUQDWLRQDOGHYHORSPHQWVDUHIUDJPHQWHG(FRQRPLFJURZWKLVORZHUDQGJOREDOHPLVVLRQVDUH
DOVRVRPHZKDWORZHU7KH%VFHQDULRRQWKHRWKHUKDQGUHIOHFWVDJOREDORULHQWDWLRQVLPLODU
WR$EXWKDVDPXFKVWURQJHUHPSKDVLVRQHQYLURQPHQWDODQGVRFLDOGHYHORSPHQW$VD
FRQVHTXHQFHHPLVVLRQVDUHPXFKORZHU)LJXUHLOOXVWUDWHVJUDSKLFDOO\WKHG\QDPLFSURFHVV
WRZDUGVWKH%RQQ$JUHHPHQWIRUWKUHHGLIIHUHQWVFHQDULRV
)LJXUHVKRZVFOHDUO\WKDWWKHFRVWVRIWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRODUHYHU\
GLIIHUHQWLQWKHWKUHHVFHQDULRV,WDOVRLOOXVWUDWHVWKHVWURQJLPSDFWRIWKH86ZLWKGUDZDORQ
$QQH[,HPLVVLRQUHGXFWLRQVDQGFRPSOLDQFHFRVWV,QDOOVFHQDULRVWKH%RQQ$JUHHPHQWZLOO
OHDGWRDVKDUSLQFUHDVHLQ$QQH[,HPLVVLRQVLQFOXGLQJWKH86UHODWLYHWR:LWKRXWWKH
86KRZHYHUHPLVVLRQVZLOOVOLJKWO\GHFUHDVHUHODWLYHWR

1RZWKHUHLVDVXUSOXVRIKRWDLURQWKHSHUPLWPDUNHWVHHDOVR7DEOHDQGRQO\DSDUWSHUFHQWRIWKHKRWDLU
LVEHLQJWUDGHG7KLVLPSOLHVWKDWWKHWRWDO$QQH[,HPLVVLRQUHGXFWLRQVZLWKRXWWKH86DVDSHUFHQWDJHRI
HPLVVLRQVFKDQJHVIURP±SHUFHQWDOOKRWDLUEHLQJWUDGHGLQWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFROVHH
7DEOHWR±SHUFHQW$VLPLODUDUJXPHQWFDQEHPDGHIRU$EXWQRZSHUFHQWRIWKHKRWDLULVEHLQJWUDGHG
6HHDOVR6HFWLRQ
5,90UHSRUW SDJHRI
)LJXUH(QYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH%RQQ$JUHHPHQWLQWKUHH
GLIIHUHQWVFHQDULRVIRUWKHWKUHHFDVHV
FDVHVDQGFRUUHVSRQGZLWK7DEOH.3ZLWK,(7.3ZR86.3ZR86DQGLQFOVLQNV
7KHULJKWKDQGVLGHRI)LJXUHVKRZVLQDEVROXWHWHUPVWKDWWKHHPLVVLRQUHGXFWLRQEXUGHQRI
WKH%RQQ$JUHHPHQWLVUHGXFHGWR0W&,QWKH$DQG%VFHQDULRVKRZHYHUEDVHOLQH
HPLVVLRQVFRPHRXWHYHQEHORZWKH.\RWRWDUJHWVDQG$QQH[,DEDWHPHQWLVUHGXFHGWRQHDU
]HUR
$FRQVHTXHQFHRIORZHUEDVHOLQHHPLVVLRQVLVWKDWKRWDLUEHFRPHVVRGRPLQDQWWKDWLWPD\
GUDVWLFDOO\UHGXFHSHUPLWGHPDQGDQGGULYHSULFHVGRZQWR]HUR,QIDFWVXFKDVLWXDWLRQPD\
HIIHFWLYHO\ZLSHRXWWKHSHUPLWPDUNHW$UDWLRQDOUHDFWLRQIRUWKH)68ZRXOGWKHQEHWRFXUWDLO
VXSSO\RIHPLVVLRQSHUPLWVWRUDLVHSULFHVDQGLQFUHDVHUHYHQXHV7KLVLVVXHZLOOEHGLVFXVVHG
H[WHQVLYHO\LQ6HFWLRQ
%R[7KH,3&&65(6VFHQDULRV
7KH,3&&65(6VFHQDULRFDQEHFKDUDFWHULVHGDVIROORZV1DNLFHQRYLFHWDO
$GHVFULEHVDIXWXUHZRUOGRIVXEVWDQWLDOUHGXFWLRQLQUHJLRQDOGLIIHUHQFHVLQSHUFDSLWDLQFRPH
$UHIOHFWVDKHWHURJHQHRXVZRUOGZLWKVHOIUHOLDQFHDQGSUHVHUYDWLRQRIORFDOLGHQWLWLHVDVWKHXQGHUO\LQJWKHPH
)HUWLOLW\SDWWHUQVDFURVVUHJLRQVFRQYHUJHVORZO\ZKLFKUHVXOWVLQKLJKSRSXODWLRQJURZWK(FRQRPLF
GHYHORSPHQWLVUHJLRQDOO\RULHQWHGDQGSHUFDSLWDHFRQRPLFJURZWKDQGWHFKQRORJLFDOFKDQJHDUHPRUH
IUDJPHQWHGDQGVORZHUWKDQLQWKHRWKHUVFHQDULRV
%DVVXPHVFRQWLQXLQJJOREDOLVDWLRQDQGHFRQRPLFJURZWKEXWZLWKDVWURQJIRFXVRQWKHHQYLURQPHQWDODQG
VRFLDODVSHFWV,WUHSUHVHQWVDEDODQFHGWUDQVIRUPHGµPRGHUQLVDWLRQ¶SURFHVV*RYHUQDQFHDWDOOOHYHOVDQG
UHJXODWHGIRUPVRIPDUNHWFDSLWDOLVPDUHVHHQDVWKHZD\IRUZDUGDQGLQFOXGHVWKHVWUHQJWKHQLQJRI1*2V
%GHVFULEHVDZRUOGLQZKLFKWKHHPSKDVLVLVRQORFDOVROXWLRQVWRHFRQRPLFVRFLDODQGHQYLURQPHQWDO
VXVWDLQDELOLW\,WLVDZRUOGZLWKPRGHUDWHSRSXODWLRQJURZWKLQWHUPHGLDWHOHYHOVRIHFRQRPLFGHYHORSPHQWDQG
OHVVUDSLGDQGPRUHGLYHUVHWHFKQRORJLFDOFKDQJHWKDQLQWKH%DQG$VWRU\OLQHV
0DUJLQDODEDWHPHQWFXUYHV
7KHPDUJLQDODEDWHPHQWFXUYHV0$&VGHWHUPLQHWRWDOFRPSOLDQFHFRVWVIRU$QQH[,FRXQWULHV
$OWKRXJKZHKDYHXVHGWKH0$&VIURP:RUOG6FDQZHKDYHDOVRH[DPLQHGWKHLPSDFWRIXVLQJ
FRVWFXUYHVIURPWKH32/(6PRGHOVHH7DEOH+RZHYHUWKLVKDVRQO\OLWWOHLPSDFWRQ
5,90UHSRUW SDJHRI
HQYLURQPHQWDOHIIHFWLYHQHVV7RWDODEDWHPHQWLVVLPLODUEXWWKHSHUPLWSULFHLVDERXWWZLFHDV
KLJKDWDOHYHORI86W& $VDUHVXOWWRWDODEDWHPHQWFRVWVDUHKLJKHU
&'0DFFHVVLELOLW\
'LIIHUHQWDVVXPSWLRQVFRQFHUQLQJWKHYLDELOLW\RI&'0SURMHFWVVKRZWKHLPSDFWLVDOVRVPDOO
DOWKRXJKODUJHUWKDQDVVXPSWLRQVFRQFHUQLQJ0$&V$KLJKHUDFFHVVLELOLW\IDFWRUVXJJHVWVPRUH
&'0SURMHFWVDQGWKLVZRXOGUHGXFHWKHSHUPLWSULFHWR86W&7RWDOFRVWVIRU$QQH[,
FRXQWULHVIDOOWR86ELOOLRQ'RPHVWLFDEDWHPHQWZLOOEHUHGXFHGWRSHUFHQWRIWRWDO
FRPPLWPHQWV/LNHZLVHDORZHU&'0DFFHVVLELOLW\IDFWRUZLOOLQFUHDVHWKHSULFHDQGPD\OHDG
WRKLJKHU$QQH[,FRVWV
7UDQVDFWLRQFRVWV
7KHUHVXOWVVKRZWKDWGLIIHUHQWDVVXPSWLRQVRQWUDQVDFWLRQFRVWVKDYHDQLQVLJQLILFDQWLPSDFWRQ
WKHUHVXOWV

$SSDUHQWO\WKH0$&VIURPWKH32/(6PRGHODSSHDUWREHVRPHZKDWKLJKHUWKDQWKH0$&VIURP:RUOG6FDQEXW
WKHVKDSHVDUHURXJKO\VLPLODU$QH[SODQDWLRQLVWKDW:RUOG6FDQGRHVQRWWDNHWKHLQHUWLDRIWKHHQHUJ\V\VWHPLQWR
DFFRXQWZKLFKXQGHUHVWLPDWHVWRWDODEDWHPHQWFRVWV7KHHQHUJ\PRGHO3ROHVGRHVDFFRXQWIRUWKLVLQHUWLDZKLFK
EHVLGHVPRGHOGLIIHUHQFHVH[SODLQVWKHGRXEOLQJRIDEDWHPHQWFRVWVFRPSDUHGWR:RUOG6FDQ
,QRXU)$,5PRGHOWKHSHUPLWSULFHYDULHVIURP86W&IRUDFFHVVLELOLW\WR86W&IRU
DFFHVVLELOLW\
5,90UHSRUW SDJHRI
([DPLQLQJVRPHNH\LVVXHV
7KHHYDOXDWLRQRIWKH%RQQ$JUHHPHQWLQWKHSUHYLRXVVHFWLRQKDVUHYHDOHGWKUHHPDMRULVVXHV
IRUIXUWKHUDQDO\VLV+RWDLUPD\EHFRPHH[WUHPHO\GRPLQDQWDQGHYHQWKUHDWHQWKHYLDELOLW\RI
WKH.\RWR0HFKDQLVPV,QWKLVVHFWLRQZHZLOOIXUWKHUH[DPLQHWKHLPSRUWDQFHDQGLPSDFWRI
KRWDLU7KHDQDO\VLVZLOOVKRZWKDWLWZRXOGEHLQWKHLQWHUHVWRIPDMRUVHOOHUVRIHPLVVLRQ
SHUPLWVWKDWLVWKH)68WRH[HUFLVHPDUNHWSRZHU,QWKLVFRQWH[WZHZLOOH[SORUHZKDWKDSSHQV
LIWKH)68LVFDSDEOHRIH[HUFLVLQJPDUNHWSRZHUERWKWKURXJKYROXPHDQGSULFHFRQWUROV
$QRWKHURXWFRPHRIWKHHYDOXDWLRQLVWKDWGRPHVWLFHIIRUWVDFFRXQWIRURQO\RQHVHYHQWKRIWRWDO
FRPPLWPHQWVZHOOXQGHUWKHSHUFHQWVXSSOHPHQWDULW\WDUJHWLQSUHYLRXVFOLPDWHFKDQJH
GLVFXVVLRQV7KH(8LQSDUWLFXODUZDVVWURQJO\LQIDYRXURIUHDOLVLQJDWOHDVWSHUFHQWRI
UHGXFWLRQFRPPLWPHQWVDWKRPH$OWKRXJKWKHFXUUHQW%RQQ$JUHHPHQWGRHVQRWFRPSULVHD
TXDQWLWDWLYHFDSVHH6HFWLRQZHZLOOH[DPLQHZKDWZRXOGKDSSHQLIWKH(8ZHUHWR
YROXQWDULO\VWLFNWRWKHSHUFHQWWDUJHWIRUGRPHVWLFHPLVVLRQUHGXFWLRQ
)LQDOO\ZHZLOODVVHVVWKHVLJQLILFDQFHRI86QRQSDUWLFLSDWLRQE\VLPXODWLQJZKDWWKHRXWFRPH
RIWKH%RQQ$JUHHPHQWZRXOGEHLIWKH86ZHUHWRUHMRLQWKH3URWRFRO:HZLOODUJXHWKDWWKH
FXUUHQWDJUHHPHQWPHHWVPDQ\RIWKHSUHYLRXV86GHPDQGVDQGRSHQVWKHGRRUIRU86UHHQWU\
 7KHLPSRUWDQFHDQGLPSDFWRIKRWDLU
$VFRPPRQXQGHUO\LQJIDFWRURIDOODQDO\VHVLVWKHSURMHFWLRQRIKRWDLUIRUWKH)68(FRQRPLHV
LQWUDQVLWLRQLQSDUWLFXODUFRXQWULHVEHORQJLQJWRWKH)68KDYHEHHQIDFHGZLWKDQHFRQRPLF
GRZQWXUQLQWKHHDUO\VZKLFKKDVFDXVHGDVKDUSGHFOLQHLQHPLVVLRQV$OWKRXJKLWZDV
H[SHFWHGWKDWHPLVVLRQVZRXOGVWDUWWRULVHDVVRRQDVHFRQRPLFJURZWKSLFNHGXSWKHUHFRYHU\
KDVQRWDV\HWKDSSHQHG*LYHQWKH.\RWRWDUJHWVWKLVKDVFUHDWHGDVXEVWDQWLDODPRXQWRIVR
FDOOHGKRWDLU
2XUPRGHOHVWLPDWHVKRWDLULQDUDQJHRIWR0W&GHSHQGLQJRQWKHVFHQDULRVHHDOVR
7DEOH7KLVUDQJHLVWRSHUFHQWEHORZOHYHOV2XUHVWLPDWHVFRPSDUHYHU\ZHOO
ZLWKUHFHQWHQHUJ\GHPDQGIRUHFDVWVDPRQJRWKHUVE\WKH5XVVLDQ1DWLRQDO(QHUJ\6WUDWHJ\
7KHIRUPHUSUHGLFWV&2 HPLVVLRQVLQDWSHUFHQWVHH.RUSSRRDQG9UROLMN
XQGHUWKHOHYHOZKLOHWKH,($SUHVHQWVDUDQJHDOPRVWLGHQWLFDOWR)$,5
7DEOH1HW$QQH[,SHUPLWGHPDQG0W&LQWKUHHVFHQDULRV
%RQQ$JUHHPHQW $% $ %
$QQH[,PLQXV)68GHPDQG   
+RW$LU   
6LQNV   
1HW$QQH[,GHPDQG   
+RWDLULQ
.3ZLWK86ZLWK,(7   
.3ZR86ZLWK,(7   !
%RQQ$JUHHPHQW  ! !
([FOXGLQJVLQNVRI)68,QFOXGLQJVLQNVRI)68VHH6HFWLRQ
5,90UHSRUW SDJHRI
$IWHUWKH86ZLWKGUDZDOIURPWKH.\RWR3URWRFROWKHSHUPLWGHPDQGE\$QQH[,FRXQWULHVKDV
EHHQVXEVWDQWLDOO\UHGXFHGDQGKRWDLUEHFRPHVH[WUHPHO\GRPLQDQW7KLVKDSSHQVLQDOO
VFHQDULRVLQIDFWKRWDLUPD\HYHQH[FHHGSHUFHQWRIWKH$QQH[,GHPDQGLQFDVHRIORZ
HPLVVLRQVEDVHOLQHV7KLVH[FHVVVXSSO\RYHU$QQH[,GHPDQGGULYHVSULFHVGRZQWR]HURDQG
VXFKDVLWXDWLRQZRXOGVHULRXVO\XQGHUPLQHWKHGHYHORSPHQWRIDQLQWHUQDWLRQDOSHUPLWPDUNHW
,WLVGLIILFXOWWRLPDJLQHZKDWWKLVZRXOGPHDQLQSUDFWLFH,QWKHRU\DVLWXDWLRQRI]HURSULFHDQG
DG\VIXQFWLRQDOPDUNHWLVXQOLNHO\WRRFFXUVLQFHWKLVLVDOVRFOHDUO\QRWLQWKHLQWHUHVWRIWKH
VHOOHUVWKHPVHOYHVWKH)68DQGQRQ$QQH[,FRXQWULHV$UDWLRQDOUHDFWLRQIRUWKHGRPLQDQW
VHOOHURQWKHPDUNHWLH)68ZRXOGEHWRH[HUFLVHPDUNHWSRZHUE\OLPLWLQJWKHVXSSO\RIKRW
DLUDQGEDQNLWIRUEHWWHUWLPHV%R[H[SODLQVWKDWWKH)68ZRXOGPD[LPLVHQHWILQDQFLDO
UHYHQXHVIURPSHUPLWWUDGLQJE\OLPLWLQJKRWDLUVXSSO\E\DERXWSHUFHQWGHSHQGLQJRQWKH
EDVHOLQH
 ([HUFLVLQJPDUNHWSRZHU
,QWKHSUHYLRXVVHFWLRQLWZDVFRQFOXGHGWKDWDG\VIXQFWLRQDOLQWHUQDWLRQDOHPLVVLRQVPDUNHWZLWK
]HURSULFHVLVQRWLQWKHLQWHUHVWRIWKHVHOOHUVRQWKHSHUPLWPDUNHWLHWKH)68DQGQRQ$QQH[,
FRXQWULHV,WZRXOGEHUDWLRQDOIRUWKHGRPLQDQWVHOOHU)68WRH[HUFLVHPDUNHWSRZHUDQGHQJDJH
XSRQVWUDWHJLHVWRZDUGVPD[LPLVLQJWKHUHYHQXHVIURPSHUPLWVDOHV7KHUDWLRQDOHIRUVXFK
EHKDYLRXULVTXLWHVLPSOH$ORZSULFHLQWKHILUVWFRPPLWPHQWSHULRGZLOOLQGXFHVHOOHUVWRGHIHU
SDUWRIWKHLUHPLVVLRQEXGJHWVIRUXVHLQVXEVHTXHQWSHULRGV7KLVEDQNLQJLVFHUWDLQO\DWWUDFWLYH
LIRQHH[SHFWVDPXFKKLJKHUSHUPLWSULFHLQWKHIXWXUHGXHWRIRUH[DPSOHUHHQWU\E\RWKHU
R[)RUPHU6RYLHW8QLRQZLOOEHQHILWIURPOLPLWLQJDQGEDQNLQJKRWDLUVXSSO\
$VDGRPLQDQWVHOOHURQWKHSHUPLWPDUNHW
WKH)68LVLQWKHRU\FDSDEOHRIH[HUFLVLQJ
PDUNHWSRZHUIRUH[DPSOHE\OLPLWLQJWKH
VXSSO\RIKRWDLUWRWKHLQWHUQDWLRQDO
HPLVVLRQVPDUNHW$ORZHUSHUPLWVXSSO\ZLOO
LQFUHDVHWKHSHUPLWSULFHDQGDVDUHVXOW
2(&'FRXQWULHVZLOOFKRRVHWRUHGXFHPRUH
DWKRPHDQGGHFUHDVHSHUPLWLPSRUWV7KH
LPSDFWRQILQDQFLDOUHYHQXHVIRUWKH)68
GHSHQGVRQZKHWKHUWKHKLJKHUSHUPLWSULFH
ZLOORXWZHLJKWKHORZHUYROXPHRISHUPLW
VDOHV
)LJXUHVKRZVWKHLPSDFWRIGLIIHUHQWOHYHOV
RIKRWDLUVXSSO\RQWKHSHUPLWSULFHDQGWKH
UHYHQXHVIRUWKH)687KHILQDQFLDOJDLQVIRU
WKH)68DUHPD[LPLVHGZKHQSHUFHQWRI
KRWDLUVXSSO\LVEDQNHGLQWKH$%VFHQDULR
XSWRSHUFHQWLQWKH$DQG%
VFHQDULRV+HQFHLWLVLQWKHRZQLQWHUHVWRI
WKH)68WROLPLWKRWDLUVXSSO\7KHQRQ
$QQH[,FRXQWULHVEHQHILWLQGLUHFWO\E\WKH
KLJKHUSHUPLWSULFH2WKHU&'0DFFHVVLELOLW\
IDFWRUVGRQRWFKDQJHWKHRSWLPXPYDOXHVIRU
)68
)
LJXUH7KHUHYHQXHVRIWKH)68DQGQRQ$QQH[,
FRXQWULHVDQGWKHLQWHUQDWLRQDOSHUPLWSULFHLQWKH$%
VFHQDULRIRUGLIIHUHQWSHUFHQWDJHVRIKRWDLUWUDGHG
010203040506070809010 0
5,90UHSRUW SDJHRI
FRXQWULHVWRWKH.\RWR3URWRFRORUPRUHVWULQJHQWHPLVVLRQWDUJHWVLQWKHVHFRQGFRPPLWPHQW
SHULRG
:HZLOOH[DPLQHZKDWKDSSHQVLIWKH)68LVFDSDEOHRIH[HUFLVLQJPDUNHWSRZHUWKURXJK
YROXPHDQGSULFHFRQWUROV,QWKHILUVWRSWLRQYROXPHFRQWUROZHDVVXPHWKH)68EDQNVSHU
FHQWRIWKHKRWDLUVXSSO\WRWKHVHFRQGFRPPLWPHQWSHULRG7KLVZRXOGPD[LPLVH)68
UHYHQXHVVHH%R[,QWKHVHFRQGRSWLRQSULFHFRQWUROZHDVVXPHWKH)68LVFDSDEOHRI
LPSRVLQJDPLQLPXPSHUPLWSULFHRI86W&7DEOHSUHVHQWVWKHUHVXOWVRIWKHVHZKDWLI
VLWXDWLRQVDQGFRPSDUHVWKHPZLWKWKH%RQQ$JUHHPHQW
7DEOH 7KHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH%RQQ$JUHHPHQW
FRPSDUHGWRVHYHUDOZKDWLIVLWXDWLRQV
(QYLURQPHQWDOHIIHFWLYHQHVV (FRQRPLFHIILFLHQF\
$QQH[,
$EDWHPHQW
LQGH[ 
0W&
'RPHVWLF
UHGXFWLRQ
$QQH[,
$QQH[,
HPLVVLRQV
FRPSDUHGWR
OHYHOV
,QWHUQD
WLRQDO
SHUPLW
SULFH
$QQH[,
FRVWVLQGH[
E86
,QGH[ 0W& H[FO86 LQFO86 86W& ,QGH[ E86
.3ZLWK86ZLWK,(7        
%RQQ$JUHHPHQW%$      
%$YROXPHFRQWUROEDQNLQJ
KRWDLUVXSSO\
       
%$SULFHFRQWUROPLQLPXP
SHUPLWSULFHRI86W&
       
%$(8WDUJHWDQG
EDQNLQJKRWDLUVXSSO\
       
%$86UHHQWU\        
$VVXSSO\LVOLPLWHGWKHLQWHUQDWLRQDOSHUPLWSULFHLQFUHDVHVIURPWR86W&3HUPLWV
EHFRPHPRUHH[SHQVLYHDQG$QQH[,FRXQWULHVWXUQPRUHWRGRPHVWLFHIIRUWVIRUDEDWHPHQW
7RWDODEDWHPHQWFRVWVDOPRVWWULSOHLQFRPSDULVRQZLWKWKHFXUUHQW%RQQ$JUHHPHQW6WLOOWKH
FRVWVDUHSHUFHQWEHORZWKHFRVWOHYHORIWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRO7KH
ZLQQHUVDUHWKH)68DQGWKHHQYLURQPHQW7KH)68EHQHILWVILQDQFLDOO\DQGVHHVLWVUHYHQXHV
LQFUHDVHIURP86WRELOOLRQQHDUO\SHUFHQWRI*'37KHHQYLURQPHQWDOVRSURILWVDV
WRWDODEDWHPHQWLQFUHDVHVWR0W&FRPSDUHGWRWKH0W&RIWKHFXUUHQW%RQQ$JUHHPHQW
WKHVKDUHRIGRPHVWLFDEDWHPHQWGRXEOHVWRSHUFHQWRIWRWDOFRPPLWPHQWV$QQH[,HPLVVLRQV
ZLWKRXWWKH86QRZFRPHRXWSHUFHQWXQGHUWKHOHYHO7RWDO$QQH[,HPLVVLRQVZLWKWKH
86UHDFKDOHYHORIDERXWSHUFHQWDERYHOHYHOV
0DUNHWSRZHUFRXOGDOVREHLPSRVHGWKURXJKDPLQLPXPSHUPLWSULFH7KLVZRXOGKDYHWKHHIIHFW
RIHQVXULQJWKH)68DVZHOODVQRQ$QQH[,FRXQWULHVUHFHLYHDFFHSWDEOHSULFHVIRUWKHLUSHUPLW
VDOHVZKLOHDOVRVWLPXODWLQJGRPHVWLFDFWLRQE\$QQH[,FRXQWULHV:HKDYHVLPXODWHGZKDWZLOO
KDSSHQLIWKH)68LVFDSDEOHRIIL[LQJWKHSULFHOHYHODW86W&VHH7DEOH7RWDO$QQH[,
HPLVVLRQUHGXFWLRQVUHPDLQWKHVDPHDVXQGHUWKH%RQQ$JUHHPHQWDVSDUWRIWKHKRWDLULVVWLOO
EHLQJWUDGHG+RZHYHUWKHKLJKHUPLQLPXPSULFHHQFRXUDJHVFRXQWULHVWRDEDWHPRUHDWKRPH
ZKLFKUDLVHVWKHVKDUHRIGRPHVWLFDFWLRQDVDSHUFHQWDJHRIWRWDOUHGXFWLRQV$VDUHVXOWWRWDOFRVWV
LQFUHDVHDOWKRXJKOHVVZKHQFRPSDUHGWROLPLWLQJKRWDLUVXSSO\DQGZHOOXQGHUWKHSUH&23
YHUVLRQRIWKH.\RWR3URWRFRO
:LWKUHJDUGWRWKHILQDQFLDOUHYHQXHVEDQNLQJSHUFHQWRIKRWDLUVXSSO\LPSOLHVDUHGXFWLRQLQ
WKHYROXPHRI)68SHUPLWVDOHVE\DERXWSHUFHQWVHH7DEOH+RZHYHUWKLVLVPRUHWKDQ

0DQQDQG5LFKHOVSRLQWDWWKHLPSRUWDQFHRIWKHVHIDFWRUVIRUWKHOHYHORIEDQNLQJDQGWKHFDUERQSHUPLW
SULFH+RZHYHUWKHVHIDFWRUVDUHSUHVHQWO\XQNQRZQDQGVSHFXODWLYHDQGWKHUHIRUHQRWWDNHQLQWRDFFRXQW
5,90UHSRUW SDJHRI
RIIVHWE\WKHKLJKHUSHUPLWSULFHDQGPRUHUHYHQXHVIURP-,SURMHFWV8OWLPDWHO\UHYHQXHVIRUWKH
)68DPRXQWWRRYHU86ELOOLRQDQDOPRVWRQHWKLUGLQFUHDVHFRPSDUHGWRWKH%RQQ$JUHHPHQW
$PLQLPXPSULFHRI86W&LVHYHQPRUHEHQHILFLDOWRWKH)68DVWKHSURILWPDUJLQRQSHUPLW
VDOHVLVPXFKKLJKHU7RWDO)68UHYHQXHVVWDJJHUXSWR86ELOOLRQ7KHILQDQFLDOUHYHQXHVIRU
QRQ$QQH[,FRXQWULHVDUHVRPHZKDWGLIIHUHQW7KHVDOHVRIVLQNFUHGLWVXQGHU&'0UHPDLQWKH
VDPHVLQFHZHDVVXPHWKDWWKHVHSURMHFWVDUHHFRQRPLFDOO\EHQHILFLDODERYHHQHUJ\UHODWHG&'0
SURMHFWV+RZHYHUWKHYROXPHRIVDOHVRI&'0HQHUJ\SURMHFWVPRUHWKDQGRXEOHVDQGIXUWKHU
EHQHILWVIURPWKHKLJKHUSULFHRQWKHLQWHUQDWLRQDOPDUNHWERRVWLQJVDOHVXSWRQHDUO\86ELOOLRQ
:LWKDPLQLPXPSHUPLWSULFHWKHYDVWDPRXQWRI)68SHUPLWVDOHVSXVKHVWKHH[SRUWVRIHQHUJ\
UHODWHG&'0SURMHFWVRIIWKHPDUNHW7KHUHYHQXHVIRUQRQ$QQH[,FRXQWULHVFRPHRQO\IURPWKH
VDOHVRIVLQNVFUHGLWVXQGHUWKH&'0
7DEOH 1HWILQDQFLDOUHYHQXHVDQGYROXPHVRISHUPLWWUDGLQJIRUWKH%RQQ$JUHHPHQW
FRPSDUHGWRVHYHUDOZKDWLIVLWXDWLRQV
)68
1RQ$QQH[,
$% % $% %
YROXPH UHYHQ
YROXPH
UHYHQ YROXPH UHYHQXH YROXPH UHYHQ
0W& E86 0W& E86 0W& E86 0W& E86
%RQQ$JUHHPHQW%$      
%$YROXPHFRQWUROEDQNLQJ
KRWDLUVXSSO\
       
%$SULFHFRQWUROPLQLPXP
SHUPLWSULFH86W&
       
%$(8WDUJHWDQG
EDQNLQJKRWDLUVXSSO\
       
%$86UHHQWU\        
7KHYROXPHRI&'0VDOHVLQFOXGHV0W&IURPVLQNVXQGHU&'0
,QFRQFOXVLRQERWKW\SHVRIH[HUFLVLQJPDUNHWSRZHUKDYHYDULRXVLPSDFWVRQWKH%RQQ$JUHHPHQW
/LPLWLQJDQGEDQNLQJKRWDLUVXSSO\LPSURYHVWKHHQYLURQPHQWDOHIIHFWLYHQHVVRIWKH.\RWR
3URWRFROEXWDOVROHDGVWRDWKUHHIROGLQFUHDVHLQ$QQH[,DEDWHPHQWFRVWV$WWKHVDPHWLPH
EDQNLQJDOVRJHQHUDWHVSRVLWLYHILQDQFLDOEHQHILWVIRUERWKWKH)68DQGWKHQRQ$QQH[,FRXQWULHV
,PSRVLQJDPLQLPXPSULFHGRHVQRWLPSURYHWKHRYHUDOOHQYLURQPHQWDO$QQH[,SHUIRUPDQFH
DOWKRXJKGRPHVWLFDEDWHPHQWDVDSHUFHQWDJHRIWRWDOUHGXFWLRQVLQFUHDVHV,WLQFUHDVHV$QQH[,
FRVWVVXEVWDQWLDOO\DOWKRXJKVOLJKWO\OHVVWKDQEDQNLQJEXWRIIHUVWKH)68WKHEHVWILQDQFLDO
LQFHQWLYHV$FRPPRQFRQFOXVLRQLVWKDWWRWDODEDWHPHQWFRVWVZLOOQRWEHUHGXFHGE\WKH86
ZLWKGUDZDODVPXFKDVFXUUHQWO\H[SHFWHGDVVXPLQJWKH)68ZLOOLQGHHGH[HUFLVHVRPHW\SHRI
PDUNHWSRZHU
 9ROXQWDU\(8WDUJHWIRUGRPHVWLFUHGXFWLRQ
7KH%RQQ$JUHHPHQWFRPSULVHVQRTXDQWLWDWLYHFDSVRQHPLVVLRQVWUDGLQJ+RZHYHUWKLVVR
FDOOHGVXSSOHPHQWDULW\LVVXHKDVEHHQRIPDMRULPSRUWDQFHLQWKHVXEVHTXHQWLQWHUQDWLRQDO
QHJRWLDWLRQV7KH.\RWR3URWRFROVWLSXODWHVWKDW3DUWLHVPD\SDUWLFLSDWHLQHPLVVLRQVWUDGLQJEXW
WKDWVXFKWUDGLQJVKRXOGVXSSOHPHQWGRPHVWLFDEDWHPHQWPHDVXUHV7KH(8LQSDUWLFXODUKDV
EHHQDVWURQJDGYRFDWHRILPSRVLQJFRQFUHWHFHLOLQJVRQSHUPLWWUDGLQJLQRUGHUWRHQFRXUDJH
GRPHVWLFDFWLRQV$OWKRXJKWKH%RQQ$JUHHPHQWLQFOXGHVQRTXDQWLWDWLYHFDSRQSHUPLWLPSRUWV
ZHKDYHVLPXODWHGZKDWWKHLPSDFWZRXOGEHLIWKH(8YROXQWDULO\GHFLGHVWRUHDOLVHSHUFHQW
RIWKHLURZQFRPPLWPHQWVGRPHVWLFDOO\

7KHUHVXOWVDUHGLIIHUHQWLQWKH%VFHQDULR%RWKWKH)68DQGQRQ$QQH[,FRXQWULHVJDLQIURPDPLQLPXPSHUPLW
SULFHRI86W&FRPSDUHGWROLPLWLQJKRWDLUVXSSO\E\SHUFHQW7KHH[SODQDWLRQLVWKDWWKHPLQLPXPSHUPLW
SULFHPRUHWKDQFRPSHQVDWHVWKHORVVHVLQWKHH[SRUWYROXPHVIRUQRQ$QQH[,
5,90UHSRUW SDJHRI
7KHRXWFRPHQRWVKRZQLQ7DEOHGHPRQVWUDWHVWKDWWKLVZRXOGZLSHRXWDOPRVWDOO$QQH[,
SHUPLWGHPDQGDQGEULQJGRZQWKHSHUPLWSULFHWR]HUR3XUVXLQJDYROXQWDU\SHUFHQWWDUJHW
IRUGRPHVWLFUHGXFWLRQZLOOWKHUHIRUHXQGHUPLQHDQ\HPLVVLRQVPDUNHWSRWHQWLDODQGVKRXOGQRW
EHFRQVLGHUHGZLWKRXWFXUWDLOLQJSHUPLWVXSSO\:HKDYHWKHUHIRUHH[DPLQHGWKHLPSDFWVRID
YROXQWDU\(8WDUJHWRISHUFHQWGRPHVWLFDFWLRQWRJHWKHUZLWKDVLWXDWLRQLQZKLFKWKH)68
ZRXOGOLPLWDQGEDQNSHUFHQWRIKRWDLUVXSSO\ 7KLVZKDWLIVLWXDWLRQZRXOGGULYHWKH
SHUPLWSULFHXSIURPDERXWWR86W&7KHHQYLURQPHQWDOHIIHFWLYHQHVVLVLPSURYHGDV
WRWDOUHGXFWLRQVLQFUHDVHWR0W&DQGGRPHVWLFDFWLRQRI$QQH[,FRXQWULHVH[FHHGVWKH
SHUFHQW(PLVVLRQVZLOOEHSHUFHQWEHORZEDVHOLQHZLWKRXW86HPLVVLRQVZKLFKLVVLPLODUWR
SHUFHQWXQGHUOHYHOV7RWDODEDWHPHQWFRVWVIRU$QQH[,FRXQWULHVLQFUHDVHVXEVWDQWLDOO\
WRRYHU86ELOOLRQFRPSDUHGWRMXVWRYHU86ELOOLRQIRUWKH%RQQ$JUHHPHQWZLWKRXWFDSV
RQSHUPLWWUDGLQJ
7KHILQDQFLDOLPSOLFDWLRQVRIWKLVZKDWLIVLWXDWLRQDUHGLIIHUHQWIRUWKH)68DQGQRQ$QQH[,
FRXQWULHVVHH7DEOH7KHILQDQFLDOJDLQVIRUWKH)68DUHDERXWSHUFHQWORZHUFRPSDUHGWR
WKH%RQQ$JUHHPHQW$SSDUHQWO\WKHVKDUSGHFUHDVHLQWKHYROXPHRISHUPLWVDOHVIURPDPXFK
ORZHU(8GHPDQGRXWZHLJKVWKHHIIHFWRIDKLJKHUSHUPLWSULFHDVDUHVXOWRIOLPLWLQJKRWDLU
VXSSO\7KHQRQ$QQH[,FRXQWULHVRQWKHRWKHUKDQGSURILWDV&'0VDOHVDUHERRVWHGWR
QHDUO\86ELOOLRQDIRXUIROGRIWKHJDLQVXQGHUWKHXQUHVWULFWHG%RQQ$JUHHPHQW
 :KDWDERXWUHHQWU\RIWKH86"
7KHSUHYLRXVDQDO\VHVKDYHGHPRQVWUDWHGWKHNH\LPSRUWDQFHRIQRQ86SDUWLFLSDWLRQLQWKH
.\RWR3URWRFRO,WLVLQWHUHVWLQJWRVHHZKDWWKHRXWFRPHRIWKH%RQQ$JUHHPHQWZRXOGEHLIWKH
86UHMRLQVWKH3URWRFRO7KHUHVXOWVLQ7DEOHVKRZWKDWWKH86UHHQWU\ZRXOGVLJQLILFDQWO\
LPSURYHWKHHQYLURQPHQWDOHIIHFWLYHQHVVRIWKH.\RWR3URWRFRO(PLVVLRQUHGXFWLRQVZRXOGUXQ
XSWRQHDUO\0W&IRXUIROGWKHFXUUHQW%RQQ$JUHHPHQWDOWKRXJKVWLOOOHVVWKDQWKHSUH&23
YHUVLRQRIWKH.\RWR3URWRFRO7KLVLVWKHUHVXOWRIWKHGHFLVLRQVRQVLQNVWKDWDOORZVWKH86WR
FRXQWDOPRVW0W&DVHPLVVLRQV7RWDO$QQH[,HPLVVLRQVHQGXSSHUFHQWEHORZEDVHOLQH
OHYHOVDQGDERXWSHUFHQWXQGHUWKHOHYHORI
$QRWKHULPSRUWDQWHIIHFWRI86UHHQWU\LVWKDWLWVWUHQJWKHQVWKHLQWHUQDWLRQDOHPLVVLRQVPDUNHW
E\VWURQJO\UDLVLQJSHUPLWGHPDQG7KHSHUPLWSULFHWULSOHVXSWR86W&7KLVSULFHLQFUHDVH
UHVXOWVLQPRUHGRPHVWLFDEDWHPHQWDWSHUFHQWRIWRWDOFRPPLWPHQWV+LJKHUSULFHVRQWKH
LQWHUQDWLRQDOPDUNHWDQGPRUHH[SHQVLYHGRPHVWLFDFWLRQVXEVWDQWLDOO\LQFUHDVH$QQH[,
DEDWHPHQWFRVWVIURP86WRELOOLRQVWLOOOHVVWKDQSHUFHQWRI*'37KLVFRVWOHYHOLV
DOVRDERXWSHUFHQWEHORZWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRO1HWILQDQFLDO
UHYHQXHVWRWKH)68UXQXSWR86ELOOLRQRUSHUFHQWRI*'31RQ$QQH[,FRXQWULHV
ZRXOGVLJQLILFDQWO\EHQHILWIURP86UHHQWU\DVWKHVDOHVRI&'0FUHGLWVZLOODOPRVWGRXEOHWR
QHDUO\86ELOOLRQ
7KHFRQFOXVLRQLVWKDW86UHHQWU\ZLOOEHRINH\HQYLURQPHQWDOLPSRUWDQFHDQGZRXOGLPSO\D
ILUPHUVWHSIRUZDUGLQOLPLWLQJJOREDOHPLVVLRQV$OWKRXJKWKHFXUUHQW86DGPLQLVWUDWLRQVHHPV
GHWHUPLQHGLQLWVSUHIHUHQFHIRUDOWHUQDWLYHVWRWKH.\RWR3URWRFROWKH%RQQ$JUHHPHQWRIIHUV

7KLVSHUFHQWOLPLWDWLRQRIKRWDLUVXSSO\LVFORVHWRWKHRSWLPXPYDOXHRISHUFHQWWKDWPD[LPLVHVQHW)68
UHYHQXHVJLYHQWKHSHUFHQW(8WDUJHW8QGHUWKLVRSWLPXPYDOXHWKHQHWUHYHQXHVIRUWKH)68JLYHQWKLVSHU
FHQW(8WDUJHWZLOOEHWKHVDPHDVQHWUHYHQXHVXQGHUWKH%RQQ$JUHHPHQWVHH'HQ(O]HQDQGGH0RRU
,QWKH%VFHQDULRWKLVSDWWHUQLVGLIIHUHQWDVWKHQERWK)68DQGQRQ$QQH[,ZRXOGJDLQLQWKHUHVWULFWHGPDUNHW
ZKLFKLVHYLGHQWVLQFHWKHUHLVQRHTXLOLEULXPSULFHLQWKHXQUHVWULFWHGPDUNHW
5,90UHSRUW SDJHRI
DPSOHVFRSHIRU86UHHQWU\7KHGHFLVLRQVXQGHUO\LQJWKH%RQQ$JUHHPHQWODUJHO\PHHW
SUHYLRXV86GHPDQGVRQNH\LVVXHVDQGPD\HYHQEHFKDUDFWHULVHGDV86IULHQGO\)RUH[DPSOH
WKHVLQNVSURYLVLRQIRUWKH86LVPRUHWKDQZKDWFRXOGKDYHEHHQH[SHFWHGIURPRIILFLDO)$2
GDWDVHH6HFWLRQ$OVRWKHDEVHQFHRIDTXDQWLWDWLYHDQGPDQGDWRU\FDSRQSHUPLWWUDGLQJ
VXSSOHPHQWDULW\FRUUHVSRQGVZLWK86LQWHUHVWV8OWLPDWHO\86DEDWHPHQWFRVWVZRXOGEH
PXFKORZHUWKDQHQYLVLRQHGLQWKHSUH&23RIWKH.\RWR3URWRFRODERXWSHUFHQWDWDOHYHO
RIQHDUO\86ELOOLRQ&RQVLGHULQJWKHVHDGYDQWDJHVWKH%RQQ$JUHHPHQWOHDYHVWKHGRRU
RSHQIRU86UHHQWU\:KHWKHUWKH86ZLOOLQGHHGUHMRLQWKH.\RWR3URWRFROZLOOEHODUJHO\
GHWHUPLQHGE\WKHGRPHVWLFSROLWLFDOHQYLURQPHQW
 2YHUYLHZRIFDVHV
)LJXUHVXPPDULVHVWKHYDULRXVFDVHVLQDJUDSKLFRYHUYLHZ,WVKRZVDJDLQKRZIDUWKH%RQQ
$JUHHPHQWLVIURPWKHSUH&23YHUVLRQRIWKH.\RWR3URWRFRODQGWKDW86ZLWKGUDZDOKDV
EHHQE\IDUWKHODUJHVWLQIOXHQFHLQWKLVSURFHVV)LJXUHDOVRFOHDUO\GHPRQVWUDWHVWKH
VLJQLILFDQFHDQGLPSDFWRIWKHYDULRXVZKDWLIVLWXDWLRQV$PLQLPXPSULFHZLOOKDUGO\DIIHFWWKH
HQYLURQPHQWDOSHUIRUPDQFHRIWKH.\RWR3URWRFRODOWKRXJKLWPD\VWUHQJWKHQWKHHPLVVLRQV
PDUNHWDQGRIIHUVWKHPRVWDWWUDFWLYHILQDQFLDOLQFHQWLYHVIRUWKH)68/LPLWLQJDQGEDQNLQJKRW
DLUVXSSO\GRHVLPSURYHWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHYHQVXEVWDQWLDOO\PRUHLQ
FRQMXQFWLRQZLWKDQ(8YROXQWDU\WDUJHWIRUSHUFHQWGRPHVWLFDFWLRQ$86UHHQWU\IXUWKHU
HQKDQFHVWKHHQYLURQPHQWDOSHUIRUPDQFHRIWKH.\RWR3URWRFRODQGEULQJVLWPXFKFORVHUWRWKH
RULJLQDOVLWXDWLRQ86UHHQWU\ZLOODOVRVWUHQJWKHQWKHHPLVVLRQVPDUNHW
)LJXUH (QYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKHPDMRUVWHSVOHDGLQJWRWKH
%RQQ$JUHHPHQWDQGWKHYDULRXVµZKDWLI¶FDVHVIRUWKH$%VFHQDULR
&DVHV
 3UH&23YHUVLRQRIWKH.\RWR3URWRFRO
ZLWKWKH86
 3UH&23YHUVLRQRIWKH.\RWR3URWRFRO
ZLWKRXWWKH86
 %RQQ$JUHHPHQW%$
 %$YROXPHFRQWUROEDQNLQJKRW
DLU
 %$SULFHFRQWUROPLQLPXPSHUPLW
SULFHRI86W&
 %$(8WDUJHWEDQNLQJKRW
DLUVXSSO\
 %$86UHHQWU\
5,90UHSRUW SDJHRI
&RQFOXVLRQV
7KLVUHSRUWHYDOXDWHVWKHHQYLURQPHQWDOHIIHFWLYHQHVVDQGHFRQRPLFHIILFLHQF\RIWKH.\RWR
3URWRFRODVDJUHHGDWWKHUHVXPHGVHVVLRQRI&23LQ%RQQ7KH%RQQ$JUHHPHQWLVWKH
FXOPLQDWLRQRIDWXUEXOHQWLQWHUQDWLRQDOQHJRWLDWLQJSURFHVVZLWKVRPHPDMRUVWHSVWKHSUH&23
YHUVLRQRIWKH.\RWR3URWRFROWKHZLWKGUDZDORIWKH86DQGWKHILQDOGHFLVLRQVDVDJUHHGLQ
%RQQ2XUHYDOXDWLRQIRFXVHVRQWKHVHWKUHHVWHSV:HKDYHIXUWKHUH[SORUHGVHYHUDOZKDWLI
VLWXDWLRQVWRLGHQWLI\LPSRUWDQWLVVXHVWKDWPD\QHHGIXUWKHUDWWHQWLRQ
7KH%RQQ$JUHHPHQWSRLQWVWRDUHGXFWLRQRI0W&FRPSDUHGWRWKH0W&LQWKH
SUH&23YHUVLRQRIWKH.\RWR3URWRFRO7KH%RQQ$JUHHPHQWLPSOLHVDQHPLVVLRQOHYHO
RISHUFHQWEHORZEDVHOLQHDQGMXVWXQGHUWKHOHYHORIZLWKRXW86HPLVVLRQV
7KH86ZLWKGUDZDOKDVEHHQE\IDUWKHJUHDWHVWLPSDFWLQUHGXFLQJWKHHQYLURQPHQWDO
HIIHFWLYHQHVVRIWKH.\RWR3URWRFRO7RWDO$QQH[,HPLVVLRQVLQFOXGLQJWKH86FRPHRXW
SHUFHQWDERYHWKHOHYHO
7KHGHFLVLRQVRQVLQNVIXUWKHUUHGXFHWKHHQYLURQPHQWDOHIIHFWLYHQHVVDOWKRXJKWKHLPSDFWLV
FRPSDUDWLYHO\VPDOO,QIDFWFRPSDUHGWRWKH86ZLWKGUDZDOWKHGHFLVLRQVRQVLQNVLQWKH
%RQQ$JUHHPHQWPD\EHFRQVLGHUHGDQDFFHSWDEOHSULFHIRUDSROLWLFDODJUHHPHQW
+RZHYHUZLWKRXWDPDMRUEX\HUOLNHWKH86SHUPLWGHPDQGLVVLJQLILFDQWO\UHGXFHGDQGDVD
FRQVHTXHQFHSHUPLWSULFHVPD\GURSWRDURXQG86W&+RWDLUEHFRPHVLQFUHDVLQJO\
GRPLQDQWDQGPD\WKUHDWHQWKHYLDELOLW\RIWKH.\RWR0HFKDQLVPV
7KHUHVXOWVDUHIDLUO\UREXVWDQGGHSHQGPDLQO\RQEDVHOLQHVFHQDULRV/RZHUHFRQRPLF
JURZWKDQGORZHUHPLVVLRQVIXUWKHUUHGXFHSHUPLWGHPDQGDQGEULQJSULFHVGRZQWR]HUR
$VKRWDLUSXVKHVSULFHVGRZQZDUGVLWZRXOGEHLQWKHGRPLQDQWVHOOHU¶VLQWHUHVWWKH)68
WRFXUWDLOVXSSO\DQGEDQNWKHKRWDLU/LPLWLQJDQGEDQNLQJKRWDLUVXSSO\LPSURYHVWKH
HQYLURQPHQWDOHIIHFWLYHQHVVDQGJHQHUDWHVSRVLWLYHILQDQFLDOEHQHILWVIRUERWKWKH)68DQG
WKHQRQ$QQH[,FRXQWULHV$OWHUQDWLYHO\WKH)68FRXOGH[HUFLVHPDUNHWSRZHUE\LPSRVLQJ
DPLQLPXPSHUPLWSULFH7KLVZRXOGRIIHUWKH)68WKHEHVWILQDQFLDOLQFHQWLYHVEXWGRHVQRW
LPSURYHWKHRYHUDOOHQYLURQPHQWDOSHUIRUPDQFH
$YROXQWDU\(8WDUJHWRISHUFHQWGRPHVWLFDFWLRQZRXOGZLSHRXWDQ\HPLVVLRQVPDUNHW
SRWHQWLDODQGVKRXOGQRWEHFRQVLGHUHGZLWKRXWFXUWDLOLQJSHUPLWVXSSO\$SHUFHQW(8
WDUJHWFRPELQHGZLWKFXUWDLOLQJDQGEDQNLQJSHUFHQWRIKRWDLUVXSSO\LPSURYHVWKH
HQYLURQPHQWDOHIIHFWLYHQHVVE\LQFUHDVLQJWRWDO$QQH[,UHGXFWLRQVWR0W&DQGGRPHVWLF
DFWLRQWRSHUFHQW+RZHYHUWKLVZRXOGDOVRLQFUHDVHDEDWHPHQWFRVWVVXEVWDQWLDOO\QRW
RQO\IRUWKH(8EXWDOVRIRURWKHU$QQH[,FRXQWULHVE\DIRXUIROGWRRYHU86ELOOLRQ
7KH%RQQ$JUHHPHQWOHDYHVWKHGRRURSHQIRU86UHHQWU\7KHGHFLVLRQVRQNH\LVVXHVPHHW
PDQ\RIWKHSUHYLRXV86GHPDQGVDQGPD\HYHQEHFKDUDFWHULVHGDV86IULHQGO\$EDWHPHQW
FRVWVIRUWKH86DUHDOVROHVVWKDQ86ELOOLRQVOLJKWO\RYHUSHUFHQWRI*'3
&RQVLGHULQJWKHVHDGYDQWDJHVWKH%RQQ$JUHHPHQWRIIHUVDPSOHVFRSHIRU86UHHQWU\
:KHWKHUWKHFXUUHQW86DGPLQLVWUDWLRQZLOOLQGHHGUHMRLQWKH.\RWR3URWRFROVHHPVODUJHO\D
PDWWHURIWKHGRPHVWLFSROLWLFDOHQYLURQPHQW
5,90UHSRUW SDJHRI
5HIHUHQFHV
&3%:RUOG6FDQWKH&RUHYHUVLRQ&3%1HWKHUODQGV%XUHDXIRU(FRQRPLF3ROLF\
$QDO\VLV7KH+DJXHWKH1HWKHUODQGV
&ULTXL30LPD6DQG9LJXLHU/0DUJLQDODEDWHPHQWFRVWVRI&2
HPLVVLRQUHGXFWLRQV
JHRJUDSKLFDOIOH[LELOLW\DQGFRQFUHWHFHLOLQJVDQDVVHVVPHQWXVLQJWKH32/(6PRGHO(QHUJ\
3ROLF\SS
&ULTXL3%HIRUH&23%OXHSULQWVIRUWKHLQWHUQDWLRQDOFOLPDWHQHJRWLDWLRQ&DVHVWXGLHV
ZLWKWKH$63(1VGVRIWZDUHDQGWKH3ROHVPRGHO0$&FXUYHV,(3(805&156830)
*UHQREOH)UDQFH
(OOHUPDQ$''HFDX[$$QDO\VLVRI3RVW.\RWR&2
HPLVVLRQVWUDGLQJXVLQJPDUJLQDO
DEDWHPHQWFXUYHV0,7-RLQW3URJUDPRQWKH6FLHQFHDQG3ROLF\RI*OREDO&KDQJH5HSRUW1R
&DPEULGJH0$
(O]HQ0*-GHQ%HUN00%RWK6)DEHU$2RVWHQULMN5)$,5$Q
LQWHUDFWLYHPRGHOWRH[SORUHRSWLRQVIRUGLIIHUHQWLDWLRQRIIXWXUHFRPPLWPHQWVLQLQWHUQDWLRQDO
FOLPDWHSROLF\PDNLQJ5HSRUWQU1DWLRQDO,QVWLWXWHRI3XEOLF+HDOWKDQGWKH
(QYLURQPHQWDO5,90%LOWKRYHQWKH1HWKHUODQGV)$,5FDQEHGRZQORDGHGYLD
KWWSZZZULYPQO)$,5
(O]HQ0*-GHQDQG%RWK6$QDO\VLQJHPLVVLRQVWUDGLQJDQGDEDWHPHQWFRVWVZLWK
)$,5XVLQJWKH7,0(5DQG:RUOG6FDQ0DUJLQDO$EDWHPHQW&XUYHV0$&V1DWLRQDO
,QVWLWXWHRI3XEOLF+HDOWKDQGWKH(QYLURQPHQWDO5,90%LOWKRYHQWKH1HWKHUODQGVLQ
SUHSDUDWLRQ
(O]HQ0*-GHQDQGGH0RRU$3*(YDOXDWLQJWKH%RQQ$JUHHPHQW$QDQDO\VLV
ZLWKWKH)$,5PRGHO%DFNJURXQGGRFXPHQW1DWLRQDO,QVWLWXWHRI3XEOLF+HDOWKDQGWKH
(QYLURQPHQWDO5,90%LOWKRYHQWKH1HWKHUODQGVLQSUHSDUDWLRQ
*UWWHU-07KH*+*PDUNHWDIWHU%RQQ-RLQW,PSOHPHQWDWLRQ4XDUWHUO\YROQR
S
,0$*(WHDP7KH,0$*(LPSOHPHQWDWLRQRIWKH,3&&65(6VFHQDULRV$
FRPSUHKHQVLYHDQDO\VLVRIHPLVVLRQVFOLPDWHFKDQJHDQGLPSDFWVLQWKHVWFHQWXU\5,90&'
520SXEOLFDWLRQ1DWLRQDO,QVWLWXWHIRU3XEOLF+HDOWKDQGWKH(QYLURQPHQW%LOWKRYHQ
WKH1HWKHUODQGV
.RUSSRR$DQG9UROLMN&(QHUJ\DQG&OLPDWH5XVVLDQ±(XURSHDQ3DUWQHUVKLSV
0RVFRZ:RUNVKRSUHSRUW5,,$0D\
0DQQ$6DQG5*5LFKHOV865HMHFWLRQRIWKH.\RWR3URWRFROWKHLPSDFWRQ
FRPSOLDQFHFRVWVDQG&2HPLVVLRQV3DSHUSUHVHQWHGDWWKH6WDQIRUG8QLYHUVLW\0RGHOOLQJ
)RUXP(0)0HHWLQJRQ%XUGHQ6KDULQJDQG&RVWVRI0LWLJDWLRQ6QRZPDVV&RORUDGR
$XJXVWGUDIW
5,90UHSRUW SDJHRI
0HW]%%HUN00.RN0YDQ0LQQHQ-GH0RRU$3*DQG)DEHU$)URP
.\RWRWR7KH+DJXH(XURSHDQSHUVSHFWLYHVRQPDNLQJWKH.\RWR3URWRFROZRUN,QWHUQDWLRQDO
(QYLURQPHQWDO$JUHHPHQWV3ROLWLFV/DZDQG(FRQRPLFVSS
0LQQHQ-YDQ,HUODQG(YDQDQG1DEXXUV*-6LQNVDVDQLQWHUQDWLRQDOFOLPDWH
FKDQJHPLWLJDWLRQRSWLRQ,Q*XSWD-(9DQ,HUODQG0.RN(GV2SWLRQVIRU
LQWHUQDWLRQDOFOLPDWHSROLF\((OJDU3UHVV/RQGRQIRUWKFRPLQJ
1DNLFHQRYLF1$OFDPR-'DYLV*9ULHV+-GH)HQKDP-HWDO6SHFLDO5HSRUW
RQ(PLVVLRQV6FHQDULRVDVSHFLDO5HSRUWRI:RUNLQJ*URXS,,,RIWKH,3&&&DPEULGJH
8QLYHUVLW\3UHVV
3URQN -  1HZ 3URSRVDOV E\ WKH 3UHVLGHQW RI &23 $SULO  7KH +DJXH WKH
1HWKHUODQGVSS
7%)5$)RUHVW5HVRXUFHVRI(XURSH&,61RUWK$PHULFD$XVWUDOLD-DSDQDQG1HZ
=HDODQG(&(7,06381(&()$27HPSHUDWHDQG%RUHDO)RUHVW5HVRXUFHV$VVHVVPHQW
3URJUDPPH
81)&&&7KH.\RWR3URWRFROWRWKH&RQYHQWLRQRQ&OLPDWH&KDQJH&OLPDWH&KDQJH
6HFUHWDULDW81(381(3,8&-XQH
81)&&&6XEPLVVLRQE\*HUPDQ\RQ%HKDOIRIWKH(XURSHDQ&RPPXQLW\LWV0HPEHU
6WDWHVDQG&URDWLD%XOJDULD&]HFK5HSXEOLF(VWRQLD+XQJDU\/DWYLD/LWKXDQLD3RODQG
6ORYDN5HSXEOLFDQG6ORYHQLDRQ(PLVVLRQWUDGLQJ$UW.3
81)&&&D5HYLHZRIWKHLPSOHPHQWDWLRQRIFRPPLWPHQWVDQGRIRWKHUSURYLVLRQVRIWKH
FRQYHQWLRQSUHSDUDWLRQVIRUWKHILUVWVHVVLRQRIWKHFRQIHUHQFHRIWKH3DUWLHVVHUYLQJDVWKH
PHHWLQJRIWKH3DUWLHVWRWKH.\RWR3URWRFRO'HFLVLRQ&3'HFLVLRQ&3
,PSOHPHQWDWLRQRIWKH%XHQRV$LUHV3ODQRI$FWLRQ)&&&3/
81)&&&E3UHSDUDWLRQVIRUWKHILUVWVHVVLRQRIWKHFRQIHUHQFHRIWKH3DUWLHVVHUYLQJDV
WKHPHHWLQJRIWKH3DUWLHVWRWKH.\RWR3URWRFRO'HFLVLRQ&30DWWHUVUHODWLQJWR/DQG
8VH/DQG8VH&KDQJHDQG)RUHVWU\'UDIWGHFLVLRQ&3)&&&3/
5,90UHSRUW SDJHRI
$SS HQ GL[, 'H WDLOHGP RGHOUHVXOWV
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKHSUH&23YHUVLRQRIWKH.\RWRSURWRFROLQFOXGLQJ86SDUWLFLSDWLRQUHIHUHQFHFDVH
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKHSUH&23YHUVLRQRIWKH.\RWRSURWRFROZLWKRXW86SDUWLFLSDWLRQUHIHUHQFHFDVH
5,90UHSRUW SDJHRI
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKH%RQQ$JUHHPHQWUHIHUHQFHFDVH
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKHEDQNLQJRIKRWDLUIRUWKH$%VFHQDULRFDVH
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKH86W&PLQLPXPSHUPLWSULFHIRUWKH$%VFHQDULRFDVH
5,90UHSRUW SDJHRI
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRU(8WDUJHWEDQNLQJRIKRWDLUIRUWKH$%VFHQDULRFDVHE
7DEOH,(PLVVLRQVWUDGLQJDEDWHPHQWDQGFRVWVIRUWKH%RQQ$JUHHPHQWZLWKWKHSDUWLFLSDWLRQRI86IRUWKH$%VFHQDULRFDVH
5,90UHSRUW SDJHRI
$SSHQGL[,,'HWDLOHGVLQNVHVWLPDWHV
7DEOH,,(VWLPDWHVRIHPLVVLRQVE\VRXUFHVDQGUHPRYDOVE\VLQNVXQGHU$UWLFOHDQG
EDVHGRQ)$2GDWDDFFRXQWLQJIRUWKH/8/8&)FDSVDVDJUHHGLQ%RQQ

+HUHZHXVHWKH)$2GDWD7%)5$DVUHSRUWHGLQ7DEOHRI3URQN$OWKRXJK3URQNLV
UHIHUULQJWR$QQH[%SDJHWKHQXPEHUVLQ7DEOHGRQRWFRUUHVSRQGZLWKWKHUHSRUWHG)$2GDWDLQ
$QQH[%,QSDUWLFXODUIRU&DQDGD,WDO\5XVVLDDQG86WKHVHDUHKLJKHU6LQFHZHDOUHDG\XVHWKH
$SSHQGL[=YDOXHVIRUWKHVHUHJLRQVWKHILQDOFDUERQFUHGLWVIURPIRUHVWPDQDJHPHQWGRQRWFKDQJHE\
XVLQJWKHXSGDWHG)$2GDWD
)RU-DSDQ&DQDGD*UHHFH,WDO\3RUWXJDO6ORYHQLD6SDLQ6ZLW]HUODQG8QLWHG.LQJGRPDQGWKH86
WKHYDOXHVDVJLYHQLQ$SSHQGL[=DUHXVHG
5,90UHSRUW SDJHRI
0DLOLQ JOLVW
5,90
 'KU+3RQW
 'KU1'YDQ(JPRQG
 'KU)/DQJHZHJ
 'KU50DDV
 'KU$YDQGHU*LHVVHQ
 0Z-+RHNVWUD
 'KU'YDQ/LWK
 'KU%0HW]
 'KU2-YDQ*HUZHQ
'KU-2XGH/RKXLV
'KU5YDQGHQ:LMQJDDUW
9520
'KU-3URQN
0Z06LQW
0Z7)RJHOEHUJ
0Z+%HUVHH
0Z(7ULQHV
0Z7=ZDUWHSRRUWWH
'KU-/HQVWUD
'KU/0H\HU
'KU00XOGHUV
'KU+1LHXZHQKXLV
'KU-9LV
'KU+GH:DDO
'KU<GH%RHU
'KU+%DDLMHQ
'KU5%ULHVNRUQ
'KU&0RRQV
'KU+6LSV
'KU)9OLHJ
(=
0Z$-RUULWVPD
'KU5%HPHU
'KU+%URXZHU
'KU,'HPDQGW
'KU37RSV
'KU+GH*URHQH
'KU++HLMNHUV
0Z/GH0DDW
'KU'3LHWHUPDDW
'KU3YDQ6OREEH
'KU0%ODQVRQ+HQNHPDQV
5,90UHSRUW SDJHRI
%LEOLRWKHHN
&3%
'KU70DQGHUV
'KU37DQJ
(&1
'KU0%HHOGPDQ
'KU-YDQ6LMP
0Z69DQ5RRLMHQ
5,90
 $IGHOLQJ019L
 ,0$*(JURHS
$IGHOLQJ&,0
$IGHOLQJ/$(
$IGHOLQJ//2
$IGHOLQJ019
$XWHXUV
 'HSRW1HGHUODQGVH3XEOLFDWLHVHQ1HGHUODQGVH%LEOLRJUDILH
 6%'9RRUOLFKWLQJ3XEOLF5HODWLRQV5,90
 %XUHDX5DSSRUWHQUHJLVWUDWLH5,90
 %LEOLRWKHHN5,90
%XUHDX5DSSRUWHQEHKHHU5,90
5HVHUYHH[HPSODUHQ