fadt tpp submission final - australian chamber of commerce ... · 6hqdwh )ruhljq $iidluv...

$: fadt tpp submission final - Australian Chamber of Commerce ... · 6hqdwh )ruhljq $iidluv 'hihqfh dqg 7udgh 5hihuhqfhv &rpplwwhh 733 lqtxlu\ 'dwh vxeplwwhg 2fwrehu$
6HQDWH)RUHLJQ$IIDLUV'HIHQFHDQG7UDGH5HIHUHQFHV&RPPLWWHH733LQTXLU\'DWHVXEPLWWHG2FWREHU

6HQDWH)RUHLJQ$IIDLUV'HIHQFHDQG7UDGH5HIHUHQFHV&RPPLWWHH733LQTXLU\ ± 'DWHVXEPLWWHG2FWREHU

:25.,1*)25%86,1(66:25.,1*)25$8675$/,$

7HOHSKRQH(PDLOLQIR#DFFLDVQDX:HEVLWHZZZDFFLDVQDX

&$1%(55$2)),&(&RPPHUFH+RXVH/HYHO%ULVEDQH$YHQXH%DUWRQ$&732 %2;.LQJVWRQ$&7

0(/%2851(2)),&(/HYHO&ROOLQV6WUHHW0HOERXUQH9,&32%2;&ROOLQV6WUHHW(DVW0HOERXUQH9,&

6<'1(<2)),&(/HYHO$UWKXU6WUHHW1RUWK6\GQH\16:/RFNHG%DJ1RUWK6\GQH\16:

$%1$XVWUDOLDQ&KDPEHURI&RPPHUFHDQG,QGXVWU\

7KLVZRUNLVFRS\ULJKW1RSDUWRIWKLVSXEOLFDWLRQPD\EHUHSURGXFHGRUXVHGLQDQ\ZD\ZLWKRXWDFNQRZOHGJHPHQWWRWKH$XVWUDOLDQ&KDPEHURI&RPPHUFHDQG,QGXVWU\

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


([HFXWLYH6XPPDU\

7KH7UDQV3DFLILF3DUWQHUVKLSDOORZVEXVLQHVVHVWREHQHILWIURPORZHUWDULIIVDQGJUHDWHUFODULW\DQGFHUWDLQW\RIWUDGHUXOHV

7KH$XVWUDOLDQ&KDPEHURI&RPPHUFH DQG,QGXVWU\VXSSRUWVWKHQHJRWLDWLRQRIWUHDWLHVWKDWHQFRXUDJHSURVSHULW\LQ$XVWUDOLDDQGDEURDG,QGLYLGXDOWUHDWLHVVKRXOGDFFHOHUDWHUHJLRQDODQGJOREDOWUDGHOLEHUDOLVDWLRQVHUYLQJDVEXLOGLQJEORFNVIRUDQLPSURYHGPXOWLODWHUDOWUDGLQJV\VWHP7RDFKLHYHWKLVZHVXSSRUWGRPHVWLFSROLF\PHDVXUHVWKDWLPSURYHWKHQHJRWLDWLRQDQGPRQLWRULQJRIWUHDWLHV7KLVZD\WUHDWLHVKDYHJUHDWHUSRWHQWLDOWRGHOLYHUWKHLUIRUHFDVWHFRQRPLFEHQHILWV

7KHXVHRIWUHDWLHVE\$XVWUDOLDQEXVLQHVVHVVKRXOGJXLGHIXWXUHWUHDW\DFWLYLW\$XVWUDOLD¶VOLPLWHGGRPHVWLFFRQVXOWDWLRQGXULQJWUDGHQHJRWLDWLRQVPHDQVWKDWWUHDWLHVRIWHQFRQWDLQSURYLVLRQVWKDWVWDNHKROGHUVLQFOXGLQJEXVLQHVVDUHRQO\DZDUHRIDIWHUWKHWUHDW\QHJRWLDWLRQVDUHFRQFOXGHG7KLVODFNRIWUDQVSDUHQF\FDQOHDGWRPLVXQGHUVWDQGLQJDQGDODUPLVWSROLWLFLVDWLRQRIWUHDW\SURYLVLRQV

0DQ\EXVLQHVVHVUHSRUWGLIILFXOWLHVXQGHUVWDQGLQJUHJXODWRU\GLYHUJHQFHDPRQJ$XVWUDOLDQWUDGHDJUHHPHQWV7KLVFDQFUHDWHDGPLQLVWUDWLYHEDUULHUVIRUWUDGHUVWKDWFRXOGKDYHEHHQDYRLGHGLIWKH\ZHUHLGHQWLILHGGXULQJQHJRWLDWLRQV6XFKVWXPEOLQJEORFNVDGGWRUHGWDSHDQGSURPSWEXVLQHVVHVWRXVHWLPHFRQVXPLQJZRUNDURXQGV7KLVPDNHVWKHDIIHFWHGWUDGHWUHDWLHVOHVVGHVLUDEOH

)RULWWRVXFFHHGLQ$XVWUDOLDWKH733UHTXLUHVDVWURQJIRXQGDWLRQRIXQGHUVWDQGLQJDQGVXSSRUWE\WKH$XVWUDOLDQSHRSOH7KLVZLOOEHEHWWHUDFKLHYHGWKURXJKDVVHVVPHQWE\WKH3URGXFWLYLW\&RPPLVVLRQDWDUP¶VOHQJWKIURPQHJRWLDWRUV

7KHIXQFWLRQRIWUDGHDQGLQYHVWPHQWOLEHUDOLVDWLRQDQGWKHGLIIHUHQFHVEHWZHHQ³IUHHWUDGH´DQG³SUHIHUHQWLDOWUDGH´QHHGWREHEHWWHUXQGHUVWRRG

,WLVFRXQWHUSURGXFWLYHIRU3UHIHUHQWLDO7UDGH$JUHHPHQWVWREHSURPRWHGXVLQJDPHUFDQWLOLVWDSSURDFK*RYHUQPHQWQHHGV WRH[SODLQWRWKHSXEOLFWKDWERWKSRVLWLYHDQG QHJDWLYHLPSDFWVFRPHIURPWUDGHDQGLQYHVWPHQWOLEHUDOLVDWLRQ$FNQRZOHGJLQJWKDWWKHUHDUH³ORVHUV´LQWKHVKRUWWHUPLVDQLPSRUWDQWVWHSLQEXLOGLQJHPSDWK\ZLWKWKHSXEOLFDQGGXULQJWKHWUDQVLWLRQDOMRXUQH\WRSURVSHULW\EURXJKWDERXWE\OLEHUDOLVHGWUDGH

,IWKH733GRHVQRWHQWHULQWRIRUFHWKH$XVWUDOLDQ*RYHUQPHQWVKRXOGXQLODWHUDOO\DSSO\WKHGRPHVWLFUHIRUPVHQYLVLRQHG7KLVZRXOGUHGXFHFRVWVDQGUHGWDSHKHOSLQJ$XVWUDOLDQILUPVWRUHPDLQJOREDOO\FRPSHWLWLYH


5HFRPPHQGDWLRQV

5HFRPPHQGDWLRQ

$QLQGHSHQGHQW*RYHUQPHQWERG\WKDWLVDUPVOHQJWKIURPQHJRWLDWLRQV± VXFKDVWKH3URGXFWLYLW\&RPPLVVLRQ± VKRXOGSUHSDUHWKHWUDGHWUHDW\1DWLRQDO,QWHUHVW$QDO\VLV1,$DQG5HJXODWRU\,PSDFW6WDWHPHQW5,6GRFXPHQWVWKDWDUHSURYLGHGWRWKH-RLQW6WDQGLQJ&RPPLWWHHRQ7UHDWLHVDQGWDEOHGLQ3DUOLDPHQW6XFKDERG\VKRXOGEHWDVNHGZLWKREMHFWLYHO\SUHSDULQJERWKGRFXPHQWVRQWKHEDVLVRIRSWLPDOOLNHO\DQGPLQLPXPRXWFRPHVRIFRQFOXGLQJDQGLPSOHPHQWLQJDJLYHQWUDGHWUHDW\$ERG\VRWDVNHGPXVWEHDEOHWRJLYHIUDQNDQGIHDUOHVVDGYLFHWRERWKWKH-RLQW6WDQGLQJ&RPPLWWHHRQ7UHDWLHVDQGWKH3DUOLDPHQWZLWKUHJDUGWRWKHUHDOHFRQRPLFEHQHILWVDQGFRVWVRIFRQFOXGLQJDJLYHQWUDGHWUHDW\

5HFRPPHQGDWLRQ7KH3URGXFWLYLW\&RPPLVVLRQ± RUVLPLODULQGHSHQGHQWERG\DWDUPVOHQJWKIURPQHJRWLDWLRQV±VKRXOGEHWDVNHGZLWKDQ REMHFWLYHUHJXODUUHYLHZDQGUHSRUWRQWKHSHUIRUPDQFHRIDOOLQIRUFH$XVWUDOLDQWUDGHWUHDWLHVFRPSDULQJWKHHFRQRPLFREMHFWLYHVFLWHGDWWKHLUFRPPHQFHPHQW7KHUHSRUWVKRXOGEHPDGHDYDLODEOHWRWKHSXEOLFLQIXOO

5HFRPPHQGDWLRQ7KHGLUHFWFRVWVWRWKH$XVWUDOLDQ*RYHUQPHQWIRUWKHFRQGXFWRIWUHDW\QHJRWLDWLRQVVKRXOGEHWUDQVSDUHQWO\UHSRUWHGWRWKHSDUOLDPHQWWKURXJKWKHDQQXDOEXGJHWSURFHVVVRWKDWWKH$XVWUDOLDQFRPPXQLW\LVDZDUHRIWKHLQYHVWPHQWEHLQJPDGHE\WKH*RYHUQPHQWWRVHFXUHDQ\JLYHQWUHDW\

5HFRPPHQGDWLRQ7KDWWKH*RYHUQPHQWVKRXOGH[DPLQHWKHPHULWVRIUHWDLQLQJFXUUHQWELODWHUDODJUHHPHQWVZKHUHWKH\KDYHEHHQVXSHUVHGHG E\ODUJHUDQGPRUHPRGHUQDJUHHPHQWVFRYHULQJWKHVDPH3DUWLHV

5HFRPPHQGDWLRQ7KH*RYHUQPHQWVKRXOGLQWURGXFHDQHQKDQFHGFRQVXOWDWLYHSURFHGXUHIRUWKHGHYHORSPHQWRILPSURYHGWUDGHWUHDWLHVZKLFKZRXOGDOORZUHSUHVHQWDWLYHERGLHVWRUHJLVWHUIRUDFFHVVWRWKHGUDIWWUHDW\WH[WZLWKLQWKHWHUPVRIWKHUHOHYDQWFRQILGHQWLDOLW\DJUHHPHQWVLQRUGHUWRSURYLGHDGYLFHWRQHJRWLDWRUVWKURXJKRXWWKHQHJRWLDWLRQSURFHVV


5HFRPPHQGDWLRQ7KDW$XVWUDOLDVKRXOGFKDPSLRQDZRUNSURJUDPPHDWWKH:RUOG7UDGH2UJDQLVDWLRQOHYHODQG:RUOG&XVWRPV2UJDQLVDWLRQWRVHHNDJOREDODJUHHPHQWRQFRQVLVWHQWUXOHVDQGSURFHGXUHVIRUSUHIHUHQWLDODQGQRQSUHIHUHQWLDOERUGHUFURVVLQJDUUDQJHPHQWVZLWKLQWKHFRQWH[WRIWKH:727UDGH)DFLOLWDWLRQ$JUHHPHQW

5HFRPPHQGDWLRQ

7KH*RYHUQPHQWPXVWLQVWUXFWLWVQHJRWLDWRUVWRHQVXUHWKDWQHZUHJLRQDODJUHHPHQWV733DQG5HJLRQDO&RPSUHKHQVLYH(FRQRPLF3DUWQHUVKLS 5&(3KDUPRQLVHWKHH[LVWLQJSUDFWLFHVRIWKHSUHFHGLQJELODWHUDODJUHHPHQWVDQG$XVWUDOLD$6($1 1HZ=HDODQG)UHH7UDGH$JUHHPHQW$1=)7$DQGDOVRHPEUDFHWKH:727UDGH)DFLOLWDWLRQ$JUHHPHQWDQGWKHSURYLVLRQVRIWKH5HYLVHG.\RWR&RQYHQWLRQRI6LPSOLILFDWLRQDQG+DUPRQLVDWLRQRI&XVWRPV3URFHGXUHV±LQFOXGLQJ$QQH[.± 5XOHVRIRULJLQ

5HFRPPHQGDWLRQ

7KDWWKH$XVWUDOLDQ*RYHUQPHQWUHVLVWVDQ\FDOOVWRLQFUHDVHSURWHFWLRQVRQ,QWHOOHFWXDO3URSHUW\DVDUHVXOWRI733HQWU\LQWRIRUFHDFWLRQV

5HFRPPHQGDWLRQ

7KDWWKH*RYHUQPHQWFRPPLW WRXQLODWHUDOO\UHPRYLQJ H[LVWLQJEDUULHUVWRWUDGHDQGLQYHVWPHQWWRHQDEOHIXOOEHQHILWVWRIORZWRWKH$XVWUDOLDQHFRQRP\


7DEOHRI&RQWHQWV &RQWULEXWLRQWRHFRQRPLFSURVSHULW\IURPOLEHUDOLVHGWUDGH

7KHSURPLVHDQGWKHGHOLYHU\RIRXUH[LVWLQJ3UHIHUHQWLDO7UDGH$JUHHPHQWV

7UHDW\0DNLQJ$SSDUDWXV 0RQLWRULQJWUDGHWUHDWLHVWRHQVXUHSHUIRUPDQFH 7HUPLQDWLRQRIVPDOOHUWUDGHWUHDWLHVZKHUHVXSHUVHGHGE\LPSURYHGUHJLRQDODJUHHPHQWV

'LVFORVXUHRIGUDIWWH[WWRSUHUHJLVWHUHGUHSUHVHQWDWLYHJURXSV

,VVXHVRILQWHUHVW 867UDGH3URPRWLRQV$XWKRULW\&HUWLILFDWLRQ (FRQRPLFVWXGLHV

6SHFLILF&KDSWHULVVXHV &KDSWHU5XOHVRI2ULJLQDQG2ULJLQ3URFHGXUHV &KDSWHU,QYHVWPHQW &KDSWHU,QWHOOHFWXDO3URSHUW\

8QLODWHUDO$FWLRQ2SSRUWXQLWLHV

$QQH[$UHDVZKHUH86´FHUWLILFDWLRQµFRXOGEHDSSOLHGWRVHHNDGGLWLRQDO´FRPSOLDQFHµIRU$XVWUDOLDQHQWU\LQWRIRUFH 1DWLRQDO7UDGH(VWLPDWHV5HSRUW2Q)RUHLJQ7UDGH%DUULHUV 6DQLWDU\$QG3K\WRVDQLWDU\%DUULHUV *RYHUQPHQW3URFXUHPHQW ,QWHOOHFWXDO3URSHUW\5LJKWV3URWHFWLRQ

$ERXWWKH$XVWUDOLDQ&KDPEHU


&RQWULEXWLRQWRHFRQRPLFSURVSHULW\IURPOLEHUDOLVHGWUDGH

$XVWUDOLDLVDQDWLRQZKRVHHFRQRPLFSHUIRUPDQFHLVLQH[WULFDEO\OLQNHGWRRXUHQJDJHPHQWZLWKWKHZRUOG$VFDQEHVHHQLQWKHFKDUWEHORZ ZHDUHKHDYLO\GHSHQGHQWRQERWKLPSRUWVDQGH[SRUWV6LQFHLPSRUWVKDYHJURZQVWURQJO\DQGDUHEHFRPLQJDQLQFUHDVLQJO\ODUJHFRPSRQHQWRIRXUEDODQFHRIWUDGH

)LJXUH$XVWUDOLDQ7UDGH,QGLFDWRUV

6RXUFH')$7DQGWKH$XVWUDOLDQ&KDPEHU

)LJXUH %DODQFHRI*RRGVDQGVHUYLFHVWUDGH

6RXUFH$%6,QWHUQDWLRQDO7UDGHLQ*RRGVDQG6HUYLFHV$XVWUDOLD


7KLVLVLPSRUWDQWEHFDXVHZKLOHWKH*RYHUQPHQWKDVFKRVHQWRIRFXVRQRXUH[SRUWSHUIRUPDQFHLPSRUWVDUHLPSRUWDQWFRPSRQHQWVRIHYHU\$XVWUDOLDQH[SRUW7KDWLV RXUPLQHUDOVH[SRUWVDUHGHSHQGHQWRQLPSRUWVRIPDFKLQHU\DQGIXHORXUDJULFXOWXUDOH[SRUWVDUHGHSHQGHQWRQLPSRUWHGIHUWLOLVHUDQGJHUPSODVPRXUVHUYLFHVH[SRUWVUHO\XSRQLPSRUWHGFRPSXWHUVDQGVRIWZDUHHWF,WLVLPSRUWDQWIRUDOOWRUHFRJQLVHWKDWUHGXFLQJWKHFRVWVRILPSRUWVDVVLVWVRXUHFRQRP\WRUHPDLQFRPSHWLWLYH

7KH$XVWUDOLDQ*RYHUQPHQWFRQWUROVWKHOHYHOVRIWUDGHUHVWULFWLRQVFRVWVWKDWZHPDLQWDLQZLWKLQRXUHFRQRP\WDULIIVEDUULHUVWRHQWU\IRUSHRSOHDQGLQYHVWPHQWHWF7KHVHFDQEHUHGXFHGE\WKHJRYHUQPHQWZLWKRXWWKHQHHGWRQHJRWLDWHZLWKDQ\RWKHUFRXQWU\6XFKDFWLRQVDUHFRQWUROOHG³XQLODWHUDOO\´

6RZKHQWKHJRYHUQPHQWVSHDNVRIDGYDQFLQJ³IUHHWUDGH´LWLVLPSRUWDQWWRUHIOHFWXSRQWKRVHWKLQJVWKDWWKH*RYHUQPHQWFDQFRQWURODQGWKHFRVWVWKDWDUHUHWDLQHGDQGLPSRVHGRQRXUHFRQRP\ZKLOHZHQHJRWLDWHZLWKRWKHUV6XFKFRQWLQXHGUHWHQWLRQRIFRVWVUHGXFHVHFRQRPLFJURZWKDQGFRPSHWLWLYHQHVVRIWKH$XVWUDOLDQHFRQRP\

'XULQJWKHVDQGVWKH*RYHUQPHQWUHFRJQLVHGWKDWGRPHVWLFUHIRUPVDQGXQLODWHUDOWDULIIOLEHUDOLVDWLRQZHUHWKHNH\VWRGULYLQJHFRQRPLFJURZWKDQGOLIWLQJSURGXFWLYLW\,WDOVRSXUVXHGDQDFWLYHLQWHUQDWLRQDOHQJDJHPHQWLQPXOWLODWHUDOUHIRUPVWKURXJKWKH:72SURFHVV± UHVXOWLQJ LQWKH8UXJXD\5RXQGFRQFOXVLRQLQDQGFRPPHQFHPHQWRIWKH'RKD5RXQGLQ

(DUOLHUWKLV\HDUWKH3URGXFWLYLW\&RPPLVVLRQQRWHGWKDW

3URGXFWLYLW\DQG$XVWUDOLDVUHODWLYHHFRQRPLFZHDOWK

,QUHFHQW\HDUVGHVSLWHFRPSDUDWLYHO\ORZ0)3JURZWK$XVWUDOLDKDVPDLQWDLQHGLWVSRVLWLRQLQWKHUDQNRISHUFDSLWD*'3UHODWLYHWRRWKHUGHYHORSHGHFRQRPLHV,QWKH$XVWUDOLDQHFRQRP\ZDVUDQNHGWK LQSHUFDSLWD*'3DPRQJ2(&'FRXQWULHVEHKLQG/X[HPEXUJWKH8QLWHG6WDWHV,FHODQGDQG1RUZD\

$XVWUDOLDKHOGVLPLODUSRVLWLRQVLQWKHVEXWLWVUDQNLQJVOLSSHGRYHUWKHIROORZLQJWZRDQGDKDOIGHFDGHV,WGURSSHGWRWK LQDQGDJDLQLQDQG

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

ϭ ŚƚƚƉǁǁǁƉĐŐŽǀĂƵƌĞƐĞĂƌĐŚŽŶŐŽŝŶŐƉƌŽĚƵĐƚŝǀŝƚǇͲƵƉĚĂƚĞƉĐͲƉƌŽĚƵĐƚŝǀŝƚǇͲƵƉĚĂƚĞͲϮϬϭϲĐŽŵƉĂƌŝŶŐͲĂƵƐƚƌĂůŝĂƐͲƉƌŽĚƵĐƚŝǀŝƚǇͲƉĞƌĨŽƌŵĂŶĐĞ


'XULQJWKHSDVWGHFDGHWUDGHOLEHUDOLVDWLRQERWKXQLODWHUDOO\DQGZLWKLQWKH:72KDVVWDOOHG,QVWHDG$XVWUDOLDDQGPDQ\RWKHUFRXQWULHVKDVSXUVXHGHIIRUWVYLDELODWHUDODQGUHJLRQDOSUHIHUHQWLDOWUDGHDJUHHPHQWV7KHVHSUHIHUHQWLDOWUDGHDJUHHPHQWVDUHZLGHO\DFNQRZOHGJHGDVD³WKLUGEHVW´RSWLRQDQGLWLVLPSRUWDQWWKDWZHUHIOHFWXSRQWKHPDVDFRPSRQHQWRI$XVWUDOLD¶VHFRQRPLFDUFKLWHFWXUHDVWKH*RYHUQPHQWVHHNVZD\VWROLIWSURGXFWLYLW\DQGJURZWK,QWKLVUHVSHFWZHZHOFRPH WKH7UHDVXUHU¶VUHFHQWHQJDJHPHQWRIWKH3URGXFWLYLW\&RPPLVVLRQWRDGYLVHRQRSWLRQVIRU$XVWUDOLDVSURGXFWLYLW\SHUIRUPDQFH

³)UHHWUDGH´ RQO\FRPHVIURPWZRVRXUFHV

8QLODWHUDODFWLRQVZLWKZKLFKDQDWLRQVHWVLWVRZQUXOHVDERXWKRZLWZLOOGHDOZLWKDOORWKHUVDQG

0XOWLODWHUDODJUHHPHQWVZKHUHWKHZKROHZRUOGDJUHHVWRDFWLQXQLVRQ

7KLVZDVDFNQRZOHGJHGE\')$7LQWKHWHVWLPRQ\RI')$7V&KLHI1HJRWLDWRU IRUWKH7330V(OL]DEHWK:DUGDWWKHRULJLQDO-6&27KHDULQJVRQ)HEUXDU\ HPSKDVLVDGGHG

2YHUWKHODVWWKUHHGHFDGHV$XVWUDOLDVWUDGHSROLF\SXUVXHGE\VXFFHVVLYHJRYHUQPHQWVKDVUHIOHFWHGWKHSKLORVRSK\ZKLFKXQGHUSLQVRXUEURDGHUGRPHVWLFHFRQRPLFSROLF\VHWWLQJVRSHQQHVVFRPSHWLWLYHQHVVDQGIOH[LELOLW\$XVWUDOLDVSXUVXLWRIPRUHRSHQWUDGHLQYHVWPHQWDQGPRYHPHQWRISHRSOHDQGLGHDVDFURVVERUGHUVIXQGDPHQWDOO\LVDPHDQVWRHQVXUH$XVWUDOLDUHWDLQVDFRPSHWLWLYHHQYLURQPHQWWKDWGULYHVSURGXFWLYLW\DQGWKHHIILFLHQWXWLOLVDWLRQ RIUHVRXUFHVZLWKLQWKH$XVWUDOLDQHFRQRP\$QRSHQWUDGHHFRQRP\LQVKRUWVWLPXODWHVHFRQRPLFDFWLYLW\DQGFUHDWHVMREV

$XVWUDOLDKDVDOUHDG\VHHQWKHEHQHILWRIVXEVWDQWLDOOLEHUDOLVDWLRQRILWVRZQWUDGHEDUULHUVWDNHQDFURVVWKHODVWVHYHUDOGHFDGHV:HNQRZWKDWXQLODWHUDOUHIRUPVSD\VWKHJUHDWHVWGLYLGHQGV%XWEHQHILWVDOVRDFFUXHWR$XVWUDOLDIURPWKHUHGXFWLRQRIEDUULHUVWRWUDGHDQGLQYHVWPHQWLQWKHHFRQRPLHVRIRXUWUDGLQJSDUWQHUVSDUWLFXODUO\LQWKH$VLD3DFLILFUHJLRQ)RUDVORQJDV$XVWUDOLDVFRPPHUFLDOLQWHUHVWVDUHOLNHO\WRUHPDLQIRFXVHGLQWKLVG\QDPLFUHJLRQWKDWZLOOGULYHJOREDOJURZWKLQWKHVWFHQWXU\RXUWUDGHSROLFLHVZLOOEHIRFXVHGRQSURPRWLQJRSHQHFRQRPLHVLQWKDWUHJLRQDVDSULRULW\

3UHIHUHQWLDO7UDGH$JUHHPHQWV 37$ GRQRW FRQWULEXWHWRIUHHWUDGH%\WKHLUQDWXUHWKH\DUHDVHWRIGLVFULPLQDWRU\WHUPVZLWKZKLFKSDUWLHVZLOOGHDOZLWKHDFKRWKHUDWWKHH[FOXVLRQRIRWKHUV2QFH

Ϯ

ŚƚƚƉƉĂƌůŝŶĨŽĂƉŚŐŽǀĂƵƉĂƌů/ŶĨŽƐĞĂƌĐŚĚŝƐƉůĂǇĚŝƐƉůĂǇǁϯƉĚďсKDD/dd^ŝĚсĐŽŵŵŝƚƚĞĞƐйϮ&ĐŽŵŵũŶƚйϮ&ĚϳĞϲďĐďϮͲϭϮϵϰͲϰĞϮϱͲĂĂϭĨͲϰϱĂϴϰϱϭϴĐϳϳďйϮ&ϬϬϬϭƋƵĞƌǇс/ĚйϯйϮϮĐŽŵŵŝƚƚĞĞƐйϮ&ĐŽŵŵũŶƚйϮ&ĚϳĞϲďĐďϮͲϭϮϵϰͲϰĞϮϱͲĂĂϭĨͲϰϱĂϴϰϱϭϴĐϳϳďйϮ&ϬϬϬϬйϮϮ


VXFKDQDJUHHPHQWLVFRPSOHWHGWKHUHVXOWLVWKDWZKLOHVRPHOLEHUDOLVDWLRQRIWUDGHDQGLQYHVWPHQWPD\RFFXURWKHUEDUULHUVWRWUDGHDUHUHWDLQHGDQGVRPHQHZRQHVLQWURGXFHG

7KH3URGXFWLYLW\&RPPLVVLRQUHIOHFWVXSRQWKLVLVVXHLQLWVDQQXDO7UDGHDQG$VVLVWDQFH5HYLHZ$SDUWIURPWKHFRVWVWRWD[SD\HUVRIWKHDVVLVWDQFHSURYLGHGWR$XVWUDOLDQLQGXVWU\WKURXJKYDULRXVPHDQVWKH3URGXFWLYLW\&RPPLVVLRQQRWHGLQLWVUHSRUWWKDW3UHIHUHQWLDOWUDGHDJUHHPHQWVDGGWRWKHFRPSOH[LW\DQGFRVWRILQWHUQDWLRQDOWUDGHWKURXJKVXEVWDQWLDOO\GLIIHUHQWVHWVRIUXOHVRIRULJLQYDU\LQJFRYHUDJHRIVHUYLFHVDQGSRWHQWLDOO\FRVWO\LQWHOOHFWXDOSURSHUW\SURWHFWLRQVDQGLQYHVWRUVWDWHGLVSXWHVHWWOHPHQWSURYLVLRQV

x 7KHHPHUJLQJDQGJURZLQJSRWHQWLDOIRUWUDGHSUHIHUHQFHVWRLPSRVHQHWFRVWVRQWKHFRPPXQLW\SUHVHQWVDFRPSHOOLQJFDVHIRUWKHILQDOWH[WRIDQDJUHHPHQWWREHULJRURXVO\DQDO\VHGEHIRUH VLJQLQJ$QDO\VLVXQGHUWDNHQIRUWKH-DSDQ$XVWUDOLDDJUHHPHQW UHYHDOVDZLGHDQGFRQFHUQLQJJDSFRPSDUHGWRWKH&RPPLVVLRQVYLHZRIULJRURXVDVVHVVPHQW

:KLOHZHOFRPLQJWKHFRQFOXVLRQRIWKH733QHJRWLDWLRQVDQGWKHSURFHVVIRUHQWU\LQWRIRUFHWKH$XVWUDOLDQ&KDPEHU KDVSUHYLRXVO\IODJJHGRXULQFUHDVLQJFRQFHUQV RYHUWKHFUHDWLRQRIPRUHFRPSOH[DQGGLYHUVHGLVFULPLQDWRU\WUDGLQJDQGLQYHVWPHQWDUUDQJHPHQWVZKLFKDUHDWRGGVZLWKWKHLGHDORIIUHHWUDGH5DLVLQJVXFKFRQFHUQVLVQRWDQWLWUDGHEXWLQIDFWLQGHIHQFHRIIUHHWUDGH

%LODWHUDODQGUHJLRQDODJUHHPHQWVPD\ZHOOKDYHEHQHILWVEXWXQOHVVWKH\DUHKDUPRQLVHGDQGFUHDWHWKHIRXQGDWLRQV RIDQHYHQWXDOPXOWLODWHUDODJUHHPHQWWKHQWKH\FDQXQGHUPLQHIUHHWUDGH%XVLQHVVHVUHSUHVHQWHGE\$&&,ZDQWWRVXSSRUWHIIRUWVWRRSHQXSWKH$XVWUDOLDQHFRQRP\WREHPRUHFRPSHWLWLYHDQGFKDPSLRQDJUHHPHQWVZKLFKKDYHWKLVDLP,QRUGHUWRGRWKLVWKHUH QHHGVWREHLQGHSHQGHQWHFRQRPLFDVVHVVPHQWVRIWKHRXWFRPHVRIWKHILQDOQHJRWLDWLRQ

$VWKH3URGXFWLYLW\&RPPLVVLRQKDVLGHQWLILHGLQLWVDQQXDO7UDGHDQG$VVLVWDQFH5HYLHZ DQGWKHUHSRUWLQWR$XVWUDOLD¶V%LODWHUDODQG5HJLRQDO7UDGH$JUHHPHQWVDORQJZLWK'U6KLUR$UPVWURQJ¶VUHYLHZRIWKH$XVWUDOLD± 86)7$DIWHU\HDUVLQVRFDOOHG³IUHHWUDGHDJUHHPHQWV´PD\ZHOOKDYHDQHJDWLYHLPSDFWRQWKH$XVWUDOLDQHFRQRP\,WLVLPSRUWDQWWKDWWKLVLQTXLU\ VHHNDSSURSULDWHDGYLFHRQWKHHFRQRPLFFRVWVDQGEHQHILWVDVDFRPSRQHQWRILWVLQTXLU\LQWRWKLVDJUHHPHQW

:HHQFRXUDJHWKHLQTXLU\WRFRQVLGHU5HFRPPHQGDWLRQRIWKHUHFHQW6HQDWH,QTXLU\LQWR$XVWUDOLD¶V7UHDW\ 0DNLQJ3URFHVV

7KHFRPPLWWHHUHFRPPHQGVWKDW1DWLRQDO,QWHUHVW$QDO\VHV1,$VEHSUHSDUHGE\DQLQGHSHQGHQWERG\VXFKDVWKH3URGXFWLYLW\&RPPLVVLRQDQGZKHUHYHUSRVVLEOHSUHVHQWHGWRWKHJRYHUQPHQWEHIRUHDQDJUHHPHQWLVDXWKRULVHGE\FDELQHWIRUVLJQDWXUH1,$VVKRXOGEHFRPSUHKHQVLYHDQGDGGUHVVVSHFLILFDOO\WKHIRUHVHHDEOHHQYLURQPHQWDOKHDOWKDQGKXPDQULJKWVHIIHFWVRIDWUHDW\

ϯ ŚƚƚƉǁǁǁƉĐŐŽǀĂƵƌĞƐĞĂƌĐŚŽŶŐŽŝŶŐƚƌĂĚĞͲĂƐƐŝƐƚĂŶĐĞϮϬϭϯͲϭϰ


7KHSURPLVHDQGWKHGHOLYHU\ RIRXUH[LVWLQJ3UHIHUHQWLDO7UDGH$JUHHPHQWV

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

'XULQJWKHQHJRWLDWLRQSKDVHWKH*RYHUQPHQWRIWKHGD\DQGWKHUHVSRQVLEOH0LQLVWHUDGYRFDWHLQVXSSRUWRIWKHQHJRWLDWLRQVDQGKLJKOLJKWRXWFRPHVIRUWKHQDWLRQ7KHSURRILVLQWKHSXGGLQJ$WUDGHDJUHHPHQWZLOOEHJRRGLILQGXVWU\UHDOLVHVLWVEHQHILWVLQSUDFWLFHDQGQDWLRQDOSURVSHULW\LVLPSURYHG

7KH$XVWUDOLDQ&KDPEHU KDVVXUYH\HGRXUPHPEHUVIRUWKHODVWWKUHH\HDUVDQGLGHQWLILHGWKDWGHVSLWHWKHKXJHHIIRUWEHLQJH[SHQGHGLQQHJRWLDWLRQRISUHIHUHQWLDODJUHHPHQWVPDQ\EXVLQHVVHVDUHHLWKHUXQDZDUHRIWKHDJUHHPHQWVRUILQGWKHPWRRGLIILFXOWWRXVHWREHRIVLJQLILFDQWEHQHILW

6HHH[WUDFWDVIROORZV

([WUDFWIURPWKH$XVWUDOLDQ&KDPEHU·V7UDGH3ROLF\6XUYH\

5HVSRQGHQWVZHUHDVNHGWRUDWHWKHLUOHYHORIFRQFHUQUHJDUGLQJDZLGHUDQJHRIWUDGHLVVXHV7KHUHVXOWVVKRZWKDWLQOLQHZLWKWKHDQGUHVXOWVRYHUDOOLQWHUQDWLRQDOFRPSHWLWLYHQHVVUHGWDSHDQGDKLJKH[FKDQJHUDWHUHPDLQWKHWRSWKUHHWUDGH LVVXHVIRUEXVLQHVVHV2YHUWKUHHTXDUWHUVSHUFHQWVWDWHGRYHUDOOLQWHUQDWLRQDOFRPSHWLWLYHQHVVWREHHLWKHUDPDMRURUPRGHUDWHFRQFHUQ$URXQGWKUHHILIWKVRIWKRVHVXUYH\HGQRWHGUHGWDSHSHUFHQWDQGDKLJKH[FKDQJHUDWHSHUFHQWDVVHFRQGDQGWKLUGLPSHGLPHQWV7KHWRSILYHWUDGHLVVXHVLQWKHSHULRGRIDUHOLVWHGLQ7DEOH

ϰ ƵƐƚƌĂůŝĂŶŚĂŵďĞƌdƌĂĚĞWŽůŝĐǇ^ƵƌǀĞǇϮϬϭϰϮϬϭϱĂŶĚϮϬϭϲ


7DEOH7RSILYHWUDGHLVVXHV

2YHUDOOLQWHUQDWLRQDOFRPSHWLWLYHQHVV



5HGWDSH ([FKDQJHUDWHWRRKLJK

([FKDQJHUDWHWRRKLJK

([FKDQJHUDWHWRRKLJK

&RPSOH[LW\RIUXOHVDQGUHGWDSHIRULQWHUQDWLRQDOWUDGH

&RPSOH[LW\RIUXOHVDQGUHGWDSHIRULQWHUQDWLRQDOWUDGH

$ELOLW\WRVHUYLFHLQWHUQDWLRQDOPDUNHWV

&XVWRPVDQGERUGHUFURVVLQJFRVWV

$ELOLW\WRVHUYLFHLQWHUQDWLRQDOPDUNHWV

0DUNHW HQWU\DFFHVVHJDELOLW\WRSURFXUHYLVDVFRVWRIPDUNHWSUHVHQFH

1RQWDULIIEDUULHUVVXFKDVUHJXODWLRQRUVWDQGDUGV

&XVWRPVDQGERUGHUFURVVLQJFRVWV

%DVHGRQWKHWRWDOSHUFHQWDJHRIPDMRUDQGPRGHUDWHFRQFHUQ

x %86,1(66(6·81'(567$1',1*$1'87,/,6$7,212)75$'($*5((0(176

%XVLQHVVHVZHUHDVNHGDERXWWKHLUXQGHUVWDQGLQJDQGXWLOLVDWLRQRIDOLVWRIJHQHUDOWUDGHDQGIUHHWUDGHDJUHHPHQWV)7$V7KHUHVXOWVVKRZWKDWWKHPDMRULW\RIEXVLQHVVHVFRQWLQXHGWRQRWXQGHUVWDQGDQGQRWXVH)7$V7KHSURSRUWLRQRIEXVLQHVVHVXQGHUVWDQGLQJJHQHUDOWUDGHDQG)7$VUDQJHGIURPSHUFHQWWRSHUFHQW7KHILJXUHIRUEXVLQHVVHVXVLQJJHQHUDOWUDGHDQG)7$VUDQJHGIURPSHUFHQWWRSHUFHQW0RVWQRWDEO\WKHKLJKHVWUDWHRI EXVLQHVVHVVXUYH\HGERWKXQGHUVWDQGLQJDQGXVLQJJHQHUDOWUDGHDQG)7$VZDVRQO\SHUFHQW

7KHPRVWZHOOXQGHUVWRRGDJUHHPHQWUHSRUWHGZDVWKH$XVWUDOLD8QLWHG6WDWHV)7$ZLWKDUHVXOWRISHUFHQW7KLVZDVIROORZHGE\WKH&KLQD$XVWUDOLD)7$SHUFHQWDQGWKH$6($1$XVWUDOLD1HZ=HDODQG)7$SHUFHQW7KH$XVWUDOLD8QLWHG6WDWHV)7$&KLQD$XVWUDOLD)7$DQG$6($1$XVWUDOLD1HZ=HDODQG)7$ZHUHDOVRWKHPRVWVHFRQGPRVWDQGWKLUGPRVWXWLOLVHGUHVSHFWLYHO\E\DOOEXVLQHVVHVVXUYH\HG

7KHOHDVWXQGHUVWRRGDQGOHDVWXVHGDJUHHPHQWZDVWKH:72DJUHHPHQWPRVWIDYRXUHGQDWLRQSURYLVLRQZLWKQHDUO\DKDOIRIEXVLQHVVHVSHUFHQWVWDWLQJWKH\GRQRWXVHWKLVDJUHHPHQWDQGSHUFHQWDFNQRZOHGJLQJWKDWWKLV)7$LVQRWUHOHYDQWWRWKHP7KLVLVVXUSULVLQJJLYHQ


$XVWUDOLDKDVEHHQD:72PHPEHUVLQFH-DQXDU\DQGDPHPEHURI*$77VLQFH2FWREHU,WPD\UHIOHFWWKHDXWRPDWLFQDWXUHRILWVSURYLVLRQVPHDQLQJEXVLQHVVHVXVHLWZLWKRXWNQRZLQJ

7DEOH5DWLQJRIEXVLQHVVHV·XQGHUVWDQGLQJRIJHQHUDOWUDGHDQGIUHHWUDGHDJUHHPHQWV² $OOEXVLQHVV

,XQGHUVWDQGLWDQG,XVHLW

,XQGHUVWDQGLWEXW,GRQWXVHLW

, GRQWXQGHUVWDQGLWEXW,XVHLW

,GRQ¶WXQGHUVWDQGLW,GRQWXVHLW

7KLV)7$LVQRWUHOHYDQWWRPH

$6($1$XVWUDOLD1HZ=HDODQG)7$

$XVWUDOLD&KLOH)7$

$XVWUDOLD1HZ=HDODQG&ORVHU(FRQRPLF5HODWLRQV

$XVWUDOLD8QLWHG6WDWHV)7$

0DOD\VLD$XVWUDOLD)7$

6LQJDSRUH$XVWUDOLD)7$

-DSDQ$XVWUDOLD(FRQRPLF3DUWQHUVKLS$JUHHPHQW

.RUHD$XVWUDOLD)7$

&KLQD$XVWUDOLD)7$QRW\HWLQIRUFH

7KDLODQG$XVWUDOLD)7$

:72$JUHHPHQWPRVWIDYRXUHGQDWLRQSURYLVLRQV

5HJDUGLQJWKHTXDOLWDWLYHUHVSRQVHVPDQDJHUVZHUHDVNHGZKHWKHUWKH\XVHGDQ\RIWKHIUHHWUDGHDJUHHPHQWV0RVWPDQDJHUVUHSRUWHGWKDWWKH\GLGQRWXVHWKHLQIRUFH)7$V:KHQDVNHGZK\WKH\GLGQRWXVHWKHLQIRUFH)7$VRPHPDQDJHUVVWDWHGWKDWWKH\ZHUHQRWDZDUHRIWKH)7$)RUH[DPSOHWKHRZQHURIDZKROHVDOHILUPVWDWHG³,UHDOO\GRQ¶WNQRZKRZWKH\ZRUN´0DQDJHU2ZQHU&DVH7KHUHZDVDOVRODFNRIXQGHUVWDQGLQJDERXWWKHVWDWXVRIVRPH)7$VDQGWKHRSSRUWXQLWLHVEHQHILWVWKH\SURYLGHG


:HOO$XVWUDGHKDVQ¶WHYHQJRWWKURXJKWRVLJQLQJLWVR«\RXMXVWJHWERJJHGGRZQLQDOOWKHGHWDLOV«2EYLRXVO\WKHUH¶VIUHHWUDGHDJUHHPHQWVWKHUH¶VDORWRIDGVRQ79«0DQDJLQJ'LUHFWRU&DVH

7KH2ZQHURIDILUPLQWKHDJULFXOWXUHIRUHVWU\DQGILVKHULHVLQGXVWU\DOVRQRWHGWKDWLWZLOOWDNHWLPHEHIRUHWKHEHQHILWVRI)7$VDUHNQRZQSRLQWLQJRXWWKDWIUHHWUDGHDJUHHPHQWVLPSDFWEXVLQHVVHVGLIIHUHQWO\&DVH

,WWDNHVVRPHWLPHIRUWKHUHDOEHQHILWRIIUHHWUDGHDJUHHPHQWVWREHFRPHNQRZQDQGWKDW¶VQRWEHLQJFULWLFDORIDQ\RQHEHLQJVHFUHWLYHRUDQ\WKLQJOLNHWKDW,WMXVWWDNHVVRPHWLPHRQFHWKHWUDGHDJUHHPHQWKDVEHHQVLJQHGVHDOHGDQGGHOLYHUHGDQGWKHPDUNHW¶VEHHQRSHQHGXSWRUHDOO\XQGHUVWDQGZKDWLPSDFWWKH\¶UHJRLQJWRKDYHRYHUWKH\HDUVDQGZKDWLPSDFWWKH\¶UHJRLQJWRKDYH6RPHEXVLQHVVHVFDQKDYHDYHU\TXLFNDQGUHDODGYDQWDJHRWKHUEXVLQHVVHVZLOOKDYHWRXQGHUVWDQGEHWWHUKRZLWRSHUDWHVZKHQLWJRHVULJKWWKURXJKWKHZKROHWKHZKROHVXSSO\FKDLQ2ZQHU&DVH

(1'2)(;75$&7

*LYHQWKHDERYHH[WUDFWDQGLQ WKHLQWHUHVWVRIHQVXULQJWKHVODWHGJRDOVRIWUDGHWUHDWLHVDUHDFKLHYHGLWLVLPSRUWDQWWRDVNTXHVWLRQVDVWRKRZWUDGHWUHDW\ SURPLVHVDUHEHLQJLPSOHPHQWHGDQGPHDVXUHGLQUHDOWHUPV

,WLVZRUWKUHIOHFWLQJRQWKHWUDGHSHUIRUPDQFHRIWKH733FRXQWULHVZLWKZKLFKZHKDYHH[LVWLQJELODWHUDODQGUHJLRQDODJUHHPHQWV7KHFKDUWVEHORZLQGLFDWHRXUKLVWRULFWUDGHLQJRRGVDQGVHUYLFHVZLWKWKH733SDUWLHVDORQJZLWKDWRWDOJURXSLQJRI$6($1,QHDFKFKDUWWKH EOXHOLQHUHSUHVHQWV$XVWUDOLDQLPSRUWVWKHUHGOLQHUHSUHVHQWV$XVWUDOLDQH[SRUWVDQGWKHYHUWLFDOOLQHLQVRPHFKDUWVUHSUHVHQWVZKHQDQH[LVWLQJELODWHUDORUUHJLRQDODJUHHPHQWFDPHLQWRIRUFHDSSUR[LPDWHO\&KLQDDQG6WK.RUHDDUHDOVRLQFOXGHGIRU FRPSDULVRQDVWKH\DUHQRW733SDUWLHV


)LJXUH %LODWHUDOWUDGHLQ*RRGVDQG6HUYLFHVIRU733FRXQWULHV$6($1&KLQDDQG6WK.RUHD


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³([SRUW$JUHHPHQWV´LVPLVOHDGLQJ

7UHDW\0DNLQJ$SSDUDWXV

7UDGHWUHDW\JRDOVDQGWKHHFRQRPLFEHQHILWVWKH\SURPLVHDUHIXOO\VXSSRUWHGE\WKH$XVWUDOLDQ&KDPEHURI&RPPHUFHDQG,QGXVWU\ DQGDSSODXGHGE\WKHEXVLQHVVFRPPXQLW\LQJHQHUDO+RZHYHUZKDWLVQRW DOZD\V FOHDULVKRZWKHYDVWDUUD\RIFRPPLWPHQWVLQDWUDGHWUHDW\DUHWREHJLYHQSUDFWLFDOHIIHFWLQWKHGRPHVWLFEXVLQHVVHQYLURQPHQW 7KHODFNRIGHWDLO± WKHODFNRIDQVZHUVDVWR³KRZ´ WKHHFRQRPLFJDLQVDUHDFKLHYHG± DOORZVURRPIRUFRQIXVLRQ DQGSROLWLFLVDWLRQ E\YHVWHGLQWHUHVWVWU\LQJWRSURWHFWFXUUHQWO\SULYLOHJHGSRVLWLRQVRISRRUO\H[SODLQHGWUHDW\SURYLVLRQV7KLVULVNVEOXQWLQJWKHSRVLWLYHLQWHQGHGHIIHFWVRIWUDGHWUHDWLHVDQGUHGXFLQJSXEOLFVXSSRUWIRUWKHP


,WLVQRWFOHDUKRZ$XVWUDOLD¶VDFWLYHWUDGHWUHDWLHVDUHWUDFNLQJLQWHUPVRINH\SHUIRUPDQFHDQGRQJRLQJQDWLRQDOEHQHILW,WLVGLIILFXOWWRILQGUHOLDEOHGDWD±RQZKDWOHYHORIWUDGHLQJRRGVDQGVHUYLFHVLVEHLQJDFKLHYHGXQGHUHDFKRI$XVWUDOLD¶VDFWLYHWUDGHWUHDWLHVRUZKHWKHUWKHHFRQRPLFSURPLVHVPDGHDWWKHLUFRPPHQFHPHQWDUHEHLQJPHW7KHUHVKRXOGEHDUHJXODUUHYLHZE\DQLQGHSHQGHQWERG\WRPDNHVXUHZKDWLVSURPLVHGLVEHLQJGHOLYHUHG

(YHQWKRXJK$XVWUDOLDQWUDGHWUHDWLHVFRQWDLQDQ DUUD\RIJRDOVDFURVVDODUJHUDQJHRIVHFWRUVWKHEXONRIUHJXODWRU\WUDQVIRUPDWLRQVIRUPRVWWUDGHWUHDWLHVLQ$XVWUDOLDDSSHDUWREHPRVWO\PRGHUDWHDPHQGPHQWVWRWKH&XVWRPV$FW IRUJRRGVEHLQJLPSRUWHGLQWR$XVWUDOLD,WDSSHDUVWKDWLPSOHPHQWDWLRQRIWKH733WUHDW\LQWKH$XVWUDOLDQEXVLQHVVHQYLURQPHQWLVPDGHXSRIOLPLWHGFKDQJHVWRRXU&XVWRPVOHJLVODWLRQIRUJRRGVFRPLQJLQWR$XVWUDOLD

([WUDFWRI')$7ZHEVLWHRQ7UHDW\0DNLQJ 3URFHVVHPSKDVLVDGGHGKWWSZZZGIDWJRYDXLQWHUQDWLRQDOUHODWLRQVWUHDWLHVWUHDW\PDNLQJSURFHVVSDJHVWUHDW\PDNLQJSURFHVVDVS[

'RDOOWUHDWLHVUHTXLUHOHJLVODWLRQWRRSHUDWHLQ$XVWUDOLD"

7KHJHQHUDOSRVLWLRQXQGHU$XVWUDOLDQODZLVWKDWWUHDWLHVZKLFK$XVWUDOLDKDVMRLQHGDSDUWIURPWKRVHWHUPLQDWLQJDVWDWHRIZDUDUHQRWGLUHFWO\DQGDXWRPDWLFDOO\LQFRUSRUDWHGLQWR$XVWUDOLDQODZ6LJQDWXUHDQGUDWLILFDWLRQGRQRWRIWKHPVHOYHVPDNHWUHDWLHVRSHUDWHGRPHVWLFDOO\,QWKHDEVHQFHRIOHJLVODWLRQWUHDWLHVFDQQRWLPSRVHREOLJDWLRQVRQLQGLYLGXDOVQRUFUHDWHULJKWVLQGRPHVWLFODZ

,ILWLVWKHFDVHDVGHVFULEHGE\')$7DERYHWKDW³VLJQDWXUHDQGUDWLILFDWLRQGRQRWRIWKHPVHOYHVPDNHWUHDWLHVRSHUDWHGRPHVWLFDOO\´WKHQWKHRSHUDWLRQDOUHPDLQGHULVDSSDUHQWO\UHOLDQWRQH[HFXWLYHSRZHULQDQXQH[SODLQHGIUDPHZRUN

7KLVOHDGVWRRXUSURSRVDOIRUDV\VWHPRIEHWWHUFRQVXOWDWLRQZLWKUHSUHVHQWDWLYHVWDNHKROGHUVWKDWLVGHVFULEHGEHORZDQGRXUIROORZLQJUHFRPPHQGDWLRQVRQWKHLPSRUWDQFHRILQGHSHQGHQWERGLHVPRQLWRULQJWUDGHWUHDWLHVDWDUPVOHQJWK

ϱ ƵƐƚŽŵƐŵĞŶĚŵĞŶƚ;dƌĂŶƐͲWĂĐŝĨŝĐWĂƌƚŶĞƌƐŚŝƉ/ŵƉůĞŵĞŶƚĂƚŝŽŶͿŝůůΎƵƐƚŽŵƐdĂƌŝĨĨŵĞŶĚŵĞŶƚ;dƌĂŶƐͲWĂĐŝĨŝĐWĂƌƚŶĞƌƐŚŝƉ/ŵƉůĞŵĞŶƚĂƚŝŽŶͿŝůůΎͲ ĂŵĞŶĚƚŚĞƵƐƚŽŵƐĐƚϭϵϬϭĂŶĚƚŚĞƵƐƚŽŵƐdĂƌŝĨĨĐƚϭϵϵϱƚŽŝŵƉůĞŵĞŶƚƚŚĞdƌĂŶƐͲWĂĐŝĨŝĐWĂƌƚŶĞƌƐŚŝƉ;dWWͿ

5HFRPPHQGDWLRQ

$QLQGHSHQGHQW*RYHUQPHQWERG\WKDWLVDUPVOHQJWKIURPQHJRWLDWLRQV± VXFKDVWKH3URGXFWLYLW\&RPPLVVLRQ± VKRXOGSUHSDUHWKHWUDGHWUHDW\1DWLRQDO,QWHUHVW$QDO\VLV1,$DQG5HJXODWRU\,PSDFW6WDWHPHQW5,6GRFXPHQWVWKDWDUHSURYLGHGWRWKH-RLQW6WDQGLQJ&RPPLWWHHRQ7UHDWLHVDQGWDEOHGLQ3DUOLDPHQW6XFKDERG\VKRXOGEHWDVNHGZLWKREMHFWLYHO\


0RQLWRULQJWUDGHWUHDWLHVWRHQVXUHSHUIRUPDQFH

7KH$XVWUDOLDQ&KDPEHU EHOLHYHVLWLVFUXFLDOIRUWUDGHWUHDWLHVWREHPRQLWRUHGFRQWLQXRXVO\GXULQJWKHLURSHUDWLRQWRHQVXUHWKHLUNH\HFRQRPLFDQGVRFLDOREMHFWLYHVFRQWLQXHWREHPHW:HQRWHWKH3URGXFWLYLW\&RPPLVVLRQKDVUHFRPPHQGHGWKLVRYHUVLJKWIXQFWLRQQXPHURXVWLPHVLQLWVUHSRUWV

$VWKHFRVWRI LQWHUQDWLRQDO QHJRWLDWLRQVWKDWFDQJRRQIRU\HDUVLVVXEVWDQWLDOWRWKH$XVWUDOLDQWD[SD\HULWLVDQDWXUDOH[SHFWDWLRQRIWKHEXVLQHVVFRPPXQLW\WKDWWKHHFRQRPLFEHQHILWVRIWKHVHWUHDWLHVVKRXOGEHPRQLWRUHGRQDQRQJRLQJEDVLVE\DQLQGHSHQGHQWERG\VXFKDVWKH3URGXFWLYLW\&RPPLVVLRQ7KLVZLOODOVRVHUYHWRWDLORU$XVWUDOLDVFRPPLWPHQWVDQGREOLJDWLRQVXQGHUWKHVHW\SHVRIWUHDWLHVKHOSLQJQHJRWLDWLRQVWDQFHVGHYHORSDQGLPSURYHZLWKWKHFKDQJLQJWUDGLQJODQGVFDSH

6XFKWUDQVSDUHQF\ZLOODOVRHQDEOHWKH*RYHUQPHQWWRDVVHVVWKHHIIHFWLYHQHVVRIRXUELODWHUDODQGUHJLRQDOWUHDW\QHJRWLDWLQJWHDPVLQVHFXULQJRXWFRPHVWKDWLPSURYH$XVWUDOLDQ¶VSURVSHULW\

7HUPLQDWLRQ RI VPDOOHU WUDGH WUHDWLHV ZKHUH VXSHUVHGHG E\LPSURYHGUHJLRQDODJUHHPHQWV

7KH733LVDODUJHUHJLRQDODJUHHPHQW± VRPHWLPHVWHUPHGD³PHJDUHJLRQDODJUHHPHQW´,WLVLPSRUWDQWWKDWZHFRQVLGHUWKH733LQWKHFRQWH[WRIRXUDJJUHJDWHWUDGLQJDUUDQJHPHQWVDQGQRW

SUHSDULQJERWKGRFXPHQWVRQWKHEDVLVRIRSWLPDOOLNHO\DQGPLQLPXPRXWFRPHVRIFRQFOXGLQJDQGLPSOHPHQWLQJDJLYHQWUDGHWUHDW\$ERG\VRWDVNHGPXVWEHDEOHWRJLYHIUDQNDQGIHDUOHVVDGYLFHWRERWKWKH-RLQW6WDQGLQJ&RPPLWWHHRQ7UHDWLHVDQGWKH3DUOLDPHQWZLWKUHJDUGWRWKHUHDOHFRQRPLFEHQHILWVDQGFRVWVRIFRQFOXGLQJDJLYHQWUDGHWUHDW\

5HFRPPHQGDWLRQ7KH3URGXFWLYLW\&RPPLVVLRQ± RUVLPLODULQGHSHQGHQWERG\DWDUPVOHQJWKIURPQHJRWLDWLRQV±VKRXOGEHWDVNHGZLWKDQ REMHFWLYHUHJXODUUHYLHZDQGUHSRUWRQWKHSHUIRUPDQFHRIDOOLQIRUFH$XVWUDOLDQWUDGHWUHDWLHVFRPSDULQJWKHHFRQRPLFREMHFWLYHVFLWHGDWWKHLUFRPPHQFHPHQW7KHUHSRUWVKRXOGEHPDGHDYDLODEOHWRWKHSXEOLFLQIXOO

5HFRPPHQGDWLRQ7KHGLUHFWFRVWVWRWKH$XVWUDOLDQ*RYHUQPHQWIRUWKHFRQGXFWRIWUHDW\QHJRWLDWLRQVVKRXOGEHWUDQVSDUHQWO\UHSRUWHGWRWKHSDUOLDPHQWWKURXJKWKHDQQXDOEXGJHWSURFHVVVRWKDWWKH$XVWUDOLDQFRPPXQLW\LVDZDUHRIWKHLQYHVWPHQWEHLQJPDGHE\WKH*RYHUQPHQWWRVHFXUHDQ\JLYHQWUHDW\


DVDVWDQGDORQHDJUHHPHQW7KHODUJHQXPEHURILQWHUQDWLRQDOWUDGHUHODWHGWUHDWLHVLVRIWHQUHIHUUHGWRDVWKH³QRRGOHERZO´ZKLFKSURYLGHVDJUDSKLFLPDJHRIWKHFRPSOH[LQWHUWZLQHGDQGRYHUODSSLQJQDWXUHRIELODWHUDODQGUHJLRQDOWUDGHDJUHHPHQWV,WLVLPSHUDWLYHWKDW$XVWUDOLDPRQLWRUVYLDWKHPHDQVUHFRPPHQGHGDERYHVLWXDWLRQVLQZKLFKQHZO\FUHDWHGUHJLRQDOWUDGHWUHDWLHVHQGXSRYHUODSSLQJWUDGLQJSDUWQHUFRXQWULHVZLWKZKRPZHDOUHDG\KDYHDFWLYHELODWHUDOWUDGHWUHDWLHV7KLVZLOOHQVXUHQRXQQHFHVVDU\FRQIOLFWRIREOLJDWLRQVRFFXUVDQGXOWLPDWHO\FXWVGRZQRQUHGWDSHIRUEXVLQHVVLQERWKHFRQRPLHV

&RQVROLGDWLRQRIELODWHUDODJUHHPHQWVLQWRQHZHUUHJLRQDODJUHHPHQWVLQVXFKVLWXDWLRQVLVXOWLPDWHO\DGHVLUDEOHHQGLQWKHREMHFWLYHRIEXLOGLQJWRZDUGVDQHYHQWXDOJOREDOPXOWLODWHUDOWUDGLQJV\VWHP:HZRXOG KRSHWKDWQHZUHJLRQDODJUHHPHQWVZRXOGH[FHHGROGHUELODWHUDODJUHHPHQWVLQWKHLUDPELWLRQDQGEHQHILW$QLOOXVWUDWLRQRIWKHRYHUODSEHWZHHQUHJLRQDOPXOWLODWHUDOWUDGHWUHDWLHVDQGH[LVWLQJELODWHUDOWUDGHWUHDWLHVLVDVIROORZV


&RXQWU\

$$1=

$&

6$ $86

7$ -$ 0$

.$

&+$

$1=

733

5&(3

,$

&(3

$

7\SH0XOWLODW

%LODW

&KLOH

%LODW

6LQJ

DSRUH

%LODW

86$

%LODW7K

DLODQG

%LODW

-DSD

Q

%LODW

0DOD\VLD

%LODW

5HS

RI.

RUHD

%LODW

&KLQD

%LODW

1HZ

=HDODQ

G

0XOWLODW

5DWLILFDWLRQ

SHQG

LQJ

0XOWLODW8

QGHU

QHJ

%LODW

,QGR

QHVLD

8QP

GHU1

HJ

%UXQHL ; ; ;

0\DQPDU ; ;

&DPERGLD ; ;

,QGRQHVLD ; ; ;

/DRV ; ;

0DOD\VLD ; ; ; ;

3KLOLSSLQHV ; ;

6LQJDSRUH ; ; ; ;

7KDLODQG ; ; ;

9LHWQDP ; ; ;

1HZ=OQG ; ; ; ;

86$ ; ;

&DQDGD ;

0H[LFR ;

&KLOH ; ;

3HUX ;

-DSDQ ; ; ;

&KLQD ; ;

,QGLD ;

5HSRI.RUHD

; ; ;

7KHWDEOHDERYHLQGLFDWHVWKHFRXQWULHVLQYROYHGRUSRWHQWLDOO\LQYROYHGLQUHJLRQDOWUDGHWUHDWLHVZLWK$XVWUDOLD$$1=)7$ $6($1$XVWUDOLD1HZ=HDODQG)UHH7UDGH$UHDFDPHLQWRIRUFHLQDQGLV$XVWUDOLD¶VPRVWFRPSUHKHQVLYHWUDGHDJUHHPHQW ,WGRHVQRWLQFOXGH:720)1WUDGH

,QSUHYLRXVVXEPLVVLRQV WKH$XVWUDOLDQ&KDPEHU KDVKLJKOLJKWHGWKDWIRUPDQ\RIRXUWUDGLQJSDUWQHUVZHQRZRUZLOOVRRQKDYHDWOHDVWWKUHHHJ&KLOHDQGDVPDQ\RIILYHHJ0DOD\VLDDJUHHPHQWVFRYHULQJWUDGHZLWKWKHVDPHFRXQWU\LQFOXVLYHRIWKH³PRVWIDYRXUHGQDWLRQ´VWDWXVRI:72PHPEHUV± WKHPRVWFRPPRQIRUPRIWUDGHUXOHVEHWZHHQPHPEHUVWDWHV

&RQVROLGDWLRQRUWHUPLQDWLRQRIDQ\ELODWHUDOWUDGHWUHDW\WKDWLVVXSHUVHGHG E\DQHZHUUHJLRQDOWUHDW\LVLPSRUWDQWWRVLPSOLI\LQJWUDGH7KLVLVEHFDXVHHDFKRIWKHVHDJUHHPHQWVFRQWDLQVDJUHHPHQWVSHFLILFXQLTXH FRPSOLDQFHUXOHVWKDWSURYLGHWKHIUDPHZRUNZLWKLQZKLFKWKHFRPPHUFLDOVHFWRUFDQDFFHVVWKHEHQHILWVRIWKHWUDGHDJUHHPHQWDQGH[FOXGHRWKHUVIURPWKHVHDGYDQWDJHV


$FURVVWKHVHDJUHHPHQWVWKHUHDUHDUDQJHRIDGPLQLVWUDWLYHLQVWUXPHQWVLQWHUPVRIERWKWKHPHWKRGVIRUFDOFXODWLRQWRGHWHUPLQHRULJLQDQGDOVRWKHGRFXPHQWDU\UHTXLUHPHQWV$XVWUDOLDQFRPSDQLHVPXVWEHDZDUHRIWKHGLIIHUHQFHVLQRUGHUWRWDNHDGYDQWDJHRIWKHWHUPVRIWKHDJUHHPHQWDQGWKHGRFXPHQWDU\UHTXLUHPHQWV7KHUHTXLUHPHQWIRUNQRZOHGJHRIHDFKDJUHHPHQWDQGWKHGRFXPHQWKDQGOLQJSURFHVVDGGVVLJQLILFDQWFRVWVWREXVLQHVV0RQLWRULQJIRUSRWHQWLDOFRQVROLGDWLRQRIELODWHUDOWUDGHWUHDWLHV± RUWKHLUWHUPLQDWLRQ± ZKHUHDVXEVHTXHQWRYHUODSSLQJUHJLRQDOWUDGHDJUHHPHQWEHWWHUVWKHWHUPVRIWKHRULJLQDOELODWHUDOLVWKHUHIRUHGHVLUDEOHIRUWUDGHIDFLOLWDWLRQJHQHUDOO\DQGLQWKHUHJLRQDOFRQWH[W

'LVFORVXUHRIGUDIWWH[WWRSUHUHJLVWHUHG UHSUHVHQWDWLYHJURXSV

7UDGHUHODWHGWUHDWLHVDUHXVXDOO\QHJRWLDWHGLQVHFUHWDQGFRYHUHGE\DFRQILGHQWLDOLW\DJUHHPHQW,WLVYHU\GLIILFXOWWRXQGHUVWDQGWKHH[DFWWHUPVEHLQJQHJRWLDWHGGHVSLWH³SXEOLFFRQVXOWDWLRQV´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

$XVWUDOLDKDVHOHYHQ FRQFOXGHGWUDGH WUHDWLHVWKDWDUHSUHVHQWO\LQRSHUDWLRQ(DFKWUHDW\ZDVQHJRWLDWHGRQDQLQGLYLGXDOEDVLV$VDUHVXOWRIWKHGLIIHUHQFHVLQQHJRWLDWLRQWLPLQJVHDFKWUHDW\UHFHLYHVWKHKDOOPDUNVRIWKHSROLWLFDOHQYLURQPHQWXQLTXHWRWKHWLPHDSDUWLFXODUSURYLVLRQRUVHFWLRQLVQHJRWLDWHG&KDSWHUVDUH³ORFNHGLQ´DOVRDWDSRLQWLQWLPHDQGWKHUHIRUHLQWHUQDOFRPSRQHQWVRIWUDGHWUHDWLHVGRQRWQHFHVVDULO\GHYHORSWRJHWKHUDWWKHVDPHSDFH 7KLVOHDYHV$XVWUDOLDQWUDGHWUHDWLHVSURQHWRLPSHUIHFWLRQVRUGLVWRUWLRQVWKDWDUHQRWDOWRJHWKHUUHVSRQVLYHWRWKHFRQWHPSRUDU\WUDGLQJODQGVFDSH$OORIWKHPRQFHLQIRUFHDQGZLWKWUHDW\WH[WFHPHQWHGGLUHFWO\DIIHFWFRQWHPSRUDU\ HOHPHQWVRI$XVWUDOLDQEXVLQHVVDQGEURDGVHFWRUVRI$XVWUDOLDQVRFLHW\

,WLVIRUWKLVUHDVRQWKDWWKH$XVWUDOLDQ&KDPEHU KDVSUHYLRXVO\DUJXHGWKDWWKHGUDIWWUHDW\WH[WPXVWEHPDGHDYDLODEOHDWOHDVWWRDFFUHGLWHGUHSUHVHQWDWLYHJURXSVRIVWDNHKROGHUVRQDFRQWLQXRXVEDVLVDVLWHYROYHVRYHUWLPH:HHQYLVLRQVXFKDV\VWHPZRXOGEHVLPLODUWRWKH8QLWHG6WDWHV¶DFFUHGLWHGDGYLVHUFRPPLWWHHDUUDQJHPHQWVZKLFKKDYHEHHQPDQDJHGE\WKH

5HFRPPHQGDWLRQ7KDWWKH*RYHUQPHQWVKRXOGH[DPLQHWKHPHULWVRIUHWDLQLQJFXUUHQWELODWHUDODJUHHPHQWVZKHUHWKH\KDYHEHHQVXSHUVHGHGE\ODUJHUDQGPRUHPRGHUQDJUHHPHQWVFRYHULQJWKHVDPH3DUWLHV


2IILFHRIWKH8QLWHG6WDWHV7UDGH5HSUHVHQWDWLYHVLQFH 7KLVZLOODVVLVWLQLURQLQJRXWXQLQWHQGHGSUREOHPVDQGHQVXUHQHJRWLDWRUVNHHSUHWXUQLQJWRWKHWRXFKVWRQHRIWKHVHFWRUVRI$XVWUDOLDQVRFLHW\ZKRDUHVXSSRVHGWRXVHDQGEHQHILWIURPWKHWUHDW\,WDOVRHQVXUHVWKDWSURYLVLRQVRIWUDGHWUHDWLHVDUHXSWRGDWHDQGDUHDFWXDOO\JRLQJWREHXVHIXOIRUEXVLQHVVLQWKHPRGHUQWUDGLQJHQYLURQPHQW

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

7KH$XVWUDOLDQ&KDPEHU KDVEHHQSOHDVHGWREHSDUWRIWKH³%XVLQHVV3DUWQHUVKLS*URXS´ZKLFKLVVXSSRUWLQJWKHQHJRWLDWLRQRIWKH,QGRQHVLD± $XVWUDOLD&RPSUHKHQVLYH(FRQRPLF3DUWQHUVKLS$JUHHPHQW,$&(3$DQGZHEHOLHYHWKDWVXFKPRGHOVFRXOGEHGHSOR\HGIRUDOOIXWXUHELODWHUDODQGUHJLRQQHJRWLDWLRQV

ϲ h^dZKĨĨŝĐĞŽĨ/ŶƚĞƌŐŽǀĞƌŶŵĞŶƚĂůĨĨĂŝƌƐΘŶŐĂŐĞŵĞŶƚ;/WͿф ŚƚƚƉƐƵƐƚƌŐŽǀĂďŽƵƚͲƵƐĂĚǀŝƐŽƌǇͲĐŽŵŵŝƚƚĞĞƐх

5HFRPPHQGDWLRQ7KH*RYHUQPHQWVKRXOGLQWURGXFHDQHQKDQFHGFRQVXOWDWLYHSURFHGXUHIRUWKHGHYHORSPHQWRILPSURYHGWUDGHWUHDWLHVZKLFKZRXOGDOORZUHSUHVHQWDWLYHERGLHVWRUHJLVWHUIRUDFFHVVWRWKHGUDIWWUHDW\WH[WZLWKLQWKHWHUPVRIWKHUHOHYDQWFRQILGHQWLDOLW\DJUHHPHQWVLQRUGHUWRSURYLGHDGYLFHWRQHJRWLDWRUVWKURXJKRXWWKHQHJRWLDWLRQSURFHVV


,VVXHVRILQWHUHVW

867UDGH3URPRWLRQV$XWKRULW\&HUWLILFDWLRQ

7KH 867UDGH3ULRULWLHV$FWRI6ZKLFKZDVSDVVHGLQ0D\ WRHVWDEOLVKDQHZJUDQWRI)DVW7UDFN$XWKRULW\IRUWKH733LQFOXGHV6HFD

&2168/7$7,21635,2572(175<,172)25&(± 3ULRUWRH[FKDQJLQJQRWHVSURYLGLQJIRUWKHHQWU\LQWRIRUFHRIDWUDGHDJUHHPHQWWKH8QLWHG6WDWHV7UDGH5HSUHVHQWDWLYHVKDOOFRQVXOWFORVHO\DQGRQDWLPHO\EDVLVZLWK0HPEHUVRI&RQJUHVVDQGFRPPLWWHHVDVVSHFLILHGLQSDUDJUDSKDQGNHHSWKHPIXOO\DSSULVHGRIWKHPHDVXUHVDWUDGLQJSDUWQHUKDVWDNHQWRFRPSO\ZLWKWKRVHSURYLVLRQVRIWKHDJUHHPHQWWKDWDUHWRWDNHHIIHFWRQWKHGDWHWKDWWKHDJUHHPHQWHQWHUVLQWRIRUFH

7KLVLVDSURFHVVFRPPRQO\WHUPHG³&HUWLILFDWLRQ´,QSUDFWLFHWKH863UHVLGHQWZLWKKROGVIRUPDOZULWWHQQRWLILFDWLRQWRDQRWKHUSDUW\WRDWUDGHDJUHHPHQWWKDWWKH86KDVVDWLVILHG LWVGRPHVWLFDSSURYDOSURFHVVHVXQWLOWKH86FHUWLILHVWKHRWKHUSDUW\KDVDOWHUHGWKDWSDUW\¶VGRPHVWLFODZVDQGSROLFLHVWRVDWLVI\86H[SHFWDWLRQVRIZKDWLVQHHGHGWRFRPSO\ZLWKWKHIUHHWUDGHDJUHHPHQW)7$

7KH733LVWKHILUVWWUHDW\WRFRPHIRU FRQVLGHUDWLRQXQGHUWKH867UDGH3URPRWLRQV$XWKRULW\DQGZHXUJHWKHLQTXLU\WRFRQVLGHUWKHLPSOLFDWLRQVRIWKLVIRU$XVWUDOLDLQUDWLI\LQJWKH733 7KLVPHDQVWKDWHYHQLIWKH86&RQJUHVVKDVDSSURYHGWKH733 DQGWKDWRWKHUFRXQWU\KDVVDWLVILHGLWVRZQGRPHVWLFDSSURYDOSURFHVVHVLWZRQ¶WFRPHLQWRIRUFHEHWZHHQWKH86DQGDQRWKHUFRXQWU\XQOHVVDQGXQWLOWKH86FHUWLILHVWKHRWKHUFRXQWU\¶VLPSOHPHQWDWLRQ?

7KLVFHUWLILFDWLRQSURFHVVSRWHQWLDOO\JLYHVWKH86 OHYHUDJHWRUHZULWHWKHWHUPV WKHSDUWLHVUHDFKHGGXULQJWKHQHJRWLDWLRQVDQGVHFXUHDGGLWLRQDOFRQFHVVLRQVDIWHUVLJQLQJ 1RRWKHUFRXQWU\KDVWKLVSRZHU7KDWLVWKH86FDQEHVHHQWREH³ILUVWDPRQJHTXDOV´

(YHU\SDUW\UHWDLQVLWVVRYHUHLJQULJKWWRGHFLGHLWVRZQODZVDQGSROLFLHVDQGVWDQGE\LWVLQWHUSUHWDWLRQEXWH[HUFLVLQJLWVVRYHUHLJQW\PD\FRPHDWDSULFH,IWKH86UHIXVHVWRFHUWLI\FRPSOLDQFHLQDELODWHUDO)7$WKHRWKHUFRXQWU\LVXQDEOHWRHQMR\DQ\EHQHILWVLWVHFXUHGIURPWKH86VXFKDV ORZHUWDULIIV

7KLVSRZHUZDVSUHYLRXVO\H[HUFLVHGLQWKHUDWLILFDWLRQRIWKH$XVWUDOLD± 86)7$ZKHUHWKH$XVWUDOLDQ&RS\ULJKW/HJLVODWLRQ$PHQGPHQW%LOOZKLFKZDVLQWURGXFHGDIWHUWKH86ZDVGLVVDWLVILHGZLWKWKH$XVWUDOLDQ*RYHUQPHQW¶V86)UHH7UDGH$JUHHPHQW,PSOHPHQWLQJ$FW86)7$,$

$OLVWRISRWHQWLDODUHDVZKHUHWKH86PD\VHHNDGGLWLRQDOQHJRWLDWLRQVLQRUGHUIRU$XVWUDOLDWREHFRPH³FHUWLILHG´LVSURYLGHGLQ$QQH[


(FRQRPLFVWXGLHV

7KH3URGXFWLYLW\&RPPLVVLRQUHJXODUO\ DQGWKH6HQDWH,QTXLU\LQWR$XVWUDOLD¶V7UHDW\0DNLQJ3URFHVV%OLQGDJUHHPHQWUHIRUPLQJ$XVWUDOLDVWUHDW\PDNLQJSURFHVV UHFRPPHQGHG

5HFRPPHQGDWLRQ

7KHFRPPLWWHHUHFRPPHQGVWKDWDFRVWEHQHILWDQDO\VLVRIWUDGHDJUHHPHQWVEHXQGHUWDNHQE\DQLQGHSHQGHQWERG\VXFKDVWKH3URGXFWLYLW\&RPPLVVLRQDQGWDEOHGLQSDUOLDPHQWSULRUWRWKHFRPPHQFHPHQWRIQHJRWLDWLRQVRUDVVRRQDVLVSUDFWLFDEOHDIWHUZDUGV7KHFRVWEHQHILWDQDO\VLVVKRXOGLQIRUPWKHJRYHUQPHQWVDSSURDFKWRQHJRWLDWLRQV

7KHFRPPLWWHHIXUWKHUUHFRPPHQGVWKDWx WUHDWLHVQHJRWLDWHGRYHUPDQ\\HDUVEHWKHVXEMHFWRIDVXSSOHPHQWDU\FRVWEHQHILW

DQDO\VLVWRZDUGVWKHHQGRIQHJRWLDWLRQVDQG

x VWDWHPHQWV RISULRULWLHVDQGREMHFWLYHVDQGFRVWEHQHILWDQDO\VHVVWDQGDXWRPDWLFDOO\UHIHUUHGWRWKH-RLQW6WDQGLQJ&RPPLWWHHRQ7UHDWLHVIRULQTXLU\DQGUHSRUWXSRQWKHLUSUHVHQWDWLRQWRSDUOLDPHQW

1RVXFKVWXG\KDVEHHQGRQHIRUWKH733IURPDQ$XVWUDOLDQSHUVSHFWLYH1RWH$XVWUDOLDDOUHDG\KDVELODWHUDODJUHHPHQWVZLWKHLJKWRIWKHQHJRWLDWLQJSDUWLHVDQGVR733LVLQFUHPHQWDOWRXVDVRSSRVHGWRWKH86ZKLFKGRHVQ¶WKDYHVXFKH[WHQVLYHH[LVWLQJFRQQHFWLRQV

5HOHYDQWLQWHUQDWLRQDOVWXGLHVLQFOXGH

x $3HWHUVRQ,QVWLWXWH VWXG\7KH(FRQRPLF(IIHFWVRIWKH7UDQV3DFLILF3DUWQHUVKLS1HZ(VWLPDWHV FRPSOHWHGIRUWKH:RUOG%DQNVKRZVWKDW

R ,QWHUPVRIWKH733VEURDGHULPSDFWWKHGHDOZRXOGOHDGWRDSHUFHQWLQFUHDVHLQWKHUHJLRQVUHDOLQFRPHE\7KHSURMHFWHGSHUFHQWLQFUHDVHIRUWKH86LVWKHVPDOOHVWRXWRIDQ\733FRXQWULHV

R 7KHELJJHVWZLQQHUVZRXOGEH9LHWQDP0DOD\VLDDQG%UXQHLZLWKSURMHFWHGLQFUHDVHVLQUHDOLQFRPHRISHUFHQWSHUFHQWDQGSHUFHQWUHVSHFWLYHO\$IWHUWKH86$XVWUDOLDKDVWKHQH[WORZHVWSURMHFWHGUHDOLQFRPHJURZWKDWSHUFHQWIROORZHGE\0H[LFRZLWKSHUFHQWJURZWK

x $FRUUHVSRQGLQJVWXG\ 7UDGLQJ'RZQ8QHPSOR\PHQW,QHTXDOLW\DQG2WKHU5LVNVRIWKH7UDQV3DFLILF3DUWQHUVKLS$JUHHPHQW E\7XIWV8QLYHUVLW\ VKRZVKLJKOHYHOVRISRWHQWLDOMREGHVWUXFWLRQILQGLQJWKDW

R 7KH733ZRXOGOHDGWRHPSOR\PHQWORVVHVLQDOOFRXQWULHVWRWDOOLQJORVWMREV$XVWUDOLDLVHVWLPDWHGWRORVHDERXWMREV

ϳ ŚƚƚƉƐƉŝŝĞĐŽŵƉƵďůŝĐĂƚŝŽŶƐǁƉǁƉϭϲͲϮƉĚĨϴ ŚƚƚƉǁǁǁĂƐĞƚƵĨƚƐĞĚƵŐĚĂĞWƵďƐǁƉϭϲͲϬϭĂƉĂůĚŽͲ/ǌƵƌŝĞƚĂdWWͺ^ƉĚĨ


R 7KH733ZRXOGOHDGWRKLJKHULQHTXDOLW\ZLWKDORZHU ODERXUVKDUHRIQDWLRQDOLQFRPH

R 7KH733ZRXOGOHDGWRORVVHVLQ*'3DQGHPSOR\PHQWLQQRQ733FRXQWULHV,QODUJHSDUWWKHORVVLQ*'3SHUFHQWDQGHPSOR\PHQWDPRQJQRQ733GHYHORSHGFRXQWULHVZRXOGEHGXHWRORVVHVLQ(XURSHZKLOHGHYHORSLQJFRXQWU\ORVVHVLQ*'3DQGHPSOR\PHQWPLOOLRQZRXOGUHIOHFWSRVVLEOHORVVHVLQ&KLQDDQG,QGLD

%RWKVWXGLHVZHUHFRQGXFWHGIURPD86VWDQGSRLQWDQGERWKDUHVXEMHFWWRWKHDVVXPSWLRQVPDGHZLWKLQWKHPRGHOV7KHSRLQWLVWKDWZLWKRXWDQ$XVWUDOLDQVWXG\XQGHUWDNHQE\DQDSSURSULDWHLQGHSHQGHQWJURXSLWLVGLIILFXOWWRIXOO\XQGHUVWDQGWKHLPSOLFDWLRQVIRURXUHFRQRP\

3UHYLRXVZRUNE\WKH3URGXFWLYLW\&RPPLVVLRQDQG6KLUR$UPVWURQJKDYHKLJKOLJKWHGWKHSRWHQWLDOIRUVRPHDJUHHPHQWVWRFUHDWHDGUDJRQRXUHFRQRP\

6SHFLILF&KDSWHULVVXHV8QOHVVGLVFXVVHGEHORZWKH$XVWUDOLDQ&KDPEHUHLWKHUVXSSRUWVWKHFKDSWHUVRUKDVQRFRPPHQWWRPDNH

&KDSWHU5XOHVRI2ULJLQDQG2ULJLQ3URFHGXUHV

&UHDWLQJQRYHODQGGLYHUJHQWUHJXODWRU\UHTXLUHPHQWVIRUH[SRUWHUVDQGSURGXFHUVLQFUHDVHVUHGWDSH 733LQWURGXFHV\HWDQRWKHUVHWRIUXOHVDQGFRPSOLDQFHIRU$XVWUDOLDQLPSRUWHUVDQGH[SRUWHUV

7KH$XVWUDOLDQ&KDPEHU¶V FRQFHUQVDUHIRXQGHGRQWKHH[SHULHQFHRI$XVWUDOLDQH[SRUWHUVDQGWKHLUFODLPVZLWKFRXQWHUSDUW\FXVWRPVLQSUHFHGHQWWUDGHWUHDWLHV7KHULVNVWRZKLFKZHUHIHUDUHRIYDOLGFODLPVEHLQJUHMHFWHGLQWKHGHVWLQDWLRQFRXQWU\RIQRQSDUW\JRRGVEHLQJFODLPHGIRUSUHIHUHQWLDOWUHDWPHQWDQGWR$XVWUDOLDQH[SRUWHUVRIH[SRVXUHWRGLUHFWLQYHVWLJDWLRQE\IRUHLJQ&XVWRPVDXWKRULWLHV

2XUSRVLWLRQLVEDVHGRQWKHSUDFWLFDOTXHVWLRQVDULVLQJIURPWKHW\SHRILVVXHV$XVWUDOLDQEXVLQHVVHVIDFHHYHU\GD\ZKHQHQJDJLQJLQWUDGHDQGKRZDQH[SRUWHUWDNHVDGYDQWDJHRIWKHSUHIHUHQFHVFRQIHUUHGLQDWUDGHWUHDW\7KLVOHDGVWRVLPSOHTXHVWLRQVVXFKDV

x +RZGRHVDFRPSDQ\PDNHDFODLPIRUSUHIHUHQFH"x :KDWKDSSHQVWRWKH$XVWUDOLDQH[SRUWHUZKHQDYDOLGFODLPIRUSUHIHUHQWLDOWDULIIWUHDWPHQW

LVXQIDLUO\UHMHFWHG"x :KRUHSUHVHQWVWKHH[SRUWHU"x :KDWDUHWKHDJUHHGWLPHIUDPHVIRUFRPPHUFLDOO\UHVSRQVLYHGLVSXWHUHVROXWLRQRIWKH

H[SRUWHU¶VFODLPIRUSUHIHUHQFHVRWKDWDGGLWLRQDOFRVWVDUHQRWLQFXUUHG"


x :KREHDUVOLDELOLW\IRUFRVWVDQGORVVLIWKHH[SRUWHU¶VFODLPZDVSHUIHFWO\YDOLGEXWDQDGPLQLVWUDWLYHRYHUVLJKWFDXVHVDGHOD\"

x :KDWSUHYHQWVQRQSDUW\JRRGVIURPEHLQJFODLPHG"x :KDWSUHYHQWVFULPLQDOQHWZRUNVIURPVHHNLQJWRXWLOLVHWKHWUHDW\"

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

$XVWUDOLDKDVQRZQHJRWLDWHGWUHDWLHVHLWKHUELODWHUDORUUHJLRQDO(DFKRQHRIWKHVHVRIDUKDVFRQWDLQHGDGLIIHUHQWVHWRIUXOHVDQGSURFHGXUHVIRUWKHLUXVH,IELODWHUDOWUDGHWUHDWLHVDUHLQWHULPPHDVXUHVRUµEXLOGLQJEORFNV¶RQWKHSDWKWRDQHYHQWXDODJUHHPHQWDWWKHPXOWLODWHUDOOHYHOWKHQSURFHGXUHVIRUWUDGHUVFRQWDLQHGZLWKLQWKHVHW\SHVRIDJUHHPHQWVPXVWEHKDUPRQLVHGLQWKHKRUL]RQWDOVHQVHLQRUGHUWRIDFLOLWDWHWUDGHQRZDQGXQGHUDIXWXUHPXOWLODWHUDOGHDO

7KHUHFHQWSXEOLFLQWHUHVWLQWKHRULJLQRISURGXFWVEULQJVWKHVHUXOHVDQGWKHZD\WKH\DUHDSSOLHGLQWUDGHWUHDWLHVLQWRIRFXV,QRUGHUWRFODLPSUHIHUHQWLDOWHUPVXQGHUWKHWUHDW\H[SRUWHUVPXVWVDWLVI\WKHDSSURSULDWHFRQGLWLRQVLQFDOFXODWLQJWKH³RULJLQ´RIWKHJRRGV7KHVHFODLPVDUHWKHQVFUXWLQLVHGE\WKHFRXQWHUSDUW\*RYHUQPHQWERUGHUFRQWURODXWKRULWLHV$WSUHVHQWDOOWUDGHWUHDWLHVDUHVLOHQWDERXWZKDWKDSSHQVZKHQWKHFRXQWHUSDUW\*RYHUQPHQWDJHQFLHVUHIXVHWRKRQRXUWKHWUHDW\+RZHYHUHDFKRQHRI$XVWUDOLD¶VWUDGHWUHDWLHVSURYLGHVDXWKRULW\IRUWKHLQYHVWLJDWLRQRIFODLPVIRUSUHIHUHQWLDODFFHVVE\$XVWUDOLDQH[SRUWHUVWREHGLUHFWO\FRQGXFWHGE\WKHDJHQFLHVRIDIRUHLJQ*RYHUQPHQW

733XWLOLVHVDV\VWHPRIVHOIGHFODUDWLRQIRUFODLPLQJSUHIHUHQWLDOWUHDWPHQWLQWKHFRXQWU\RILPSRUW7KH')$71DWLRQDO,QWHUHVW$VVHVVPHQWFODLPVWKDWWKHYDOXHRIORZHUFRVWVWR$XVWUDOLDQH[SRUWHUVLV DQQXDOO\:HFRQWHQGWKDWWKLVLQIRUPDWLRQLVLQFRUUHFWLQWKDWZKLOHLWPD\UHSUHVHQWDOHYHORIVDYLQJVLQRQHDUHDLWIDLOVWRFRQVLGHUDGGLWLRQDOFRVWVIRUERWKLPSRUWHUVDQGH[SRUWHUV

)LUVWO\WKHFDOFXODWLRQLVLQFRUUHFW([SRUWHUVDUHQRWUHTXLUHGWRSURYLGHDQ\LQIRUPDWLRQDERXWRULJLQLQRUGHUWRH[SRUWJRRGVXQGHUSUHIHUHQWLDODJUHHPHQWV,WLVWKHLPSRUWLQJFRXQWU\ZKLFKUHTXLUHVLQIRUPDWLRQWREHSURYLGHGLQRUGHUWRSURYLGHDSSURSULDWHLQIRUPDWLRQZLWKZKLFKWRFODLPWKHSUHIHUHQWLDOWHUPV%HFDXVHRIMXULVGLFWLRQDOFRQWUROVWKHUHVSRQVLELOLW\IRUWKLVUHVWVZLWKWKHLPSRUWHUQRWWKHH[SRUWHU7KHLPSRUWHULVWKHQUHTXLUHGWRVXEVWDQWLDWHWKHLUFODLPZLWKUHDVRQDEOH


HYLGHQFHRIWKHLUFODLP+LVWRULFDOO\WKLVLVVXSSRUWHGYLDWKHSURYLVLRQRID*RYHUQPHQWLVVXHGFHUWLILFDWH RIRULJLQWRWKHH[SRUWHU

:KHQFRXQWULHVQHJRWLDWHVRFDOOHG³VHOIFHUWLILFDWLRQ´ZKDWWKH\DUHGRLQJLVVD\LQJWKDWWKHLUGRPHVWLFERUGHUDJHQFLHVZLOOQRZDOORZLPSRUWHUV WRVHOIGHFODUHWKHFRPSOLDQFHZLWKWKHWHUPVRIDQ\JLYHQDJUHHPHQW7KLVLVLQ IDFWWKHVWDWXVTXR7KHQWKHLVVXHEHFRPHVZKDWDUHWKH³VDIHKDUERXUV´WKDWLPSRUWHUVFDQXVHLQRUGHUWRVDWLVI\WKHHYLGHQWLDU\UHTXLUHPHQWVIRUFODLPLQJSUHIHUHQFHLHDUHGXFWLRQLQERUGHUWD[DWLRQZLWKRXWLQFXUULQJOLDELOLW\IRUIDOVHDQGPLVOHDGLQJVWDWHPHQWVDQGDVVRFLDWHGSHQDOWLHV7KHLPSRUWHUZLOOWKHQVHHN³DSSURSULDWH´LQIRUPDWLRQIURPWKHVXSSO\FKDLQDVWKHLPSRUWHUPD\QRWEHGLUHFWO\LQWRXFKZLWKWKHRULJLQDOH[SRUWHU7KHV\VWHPUHTXLUHVGRFXPHQWDU\HYLGHQFHWKDWKDVOHJDOVWDQGLQJ 5HO\LQJRQWKHZRUGRIRWKHUVZLWKLQWKHVXSSO\FKDLQLVQRWDOHJDOGHIHQFH7KHSUHVHQFHRIDQH[SRUWHU¶V*RYHUQPHQWLVVXHGFHUWLILFDWLRQDWWHVWLQJWRWKHRULJLQRIWKHJRRGVKDVOHJDOZHLJKWDQGVRLVDYDOXHGGRFXPHQWWKDWKDVVXSSRUWHGLQWHUQDWLRQDOWUDGHIRUFHQWXULHV

8QGHU733WKLVV\VWHPLVXSKHOGZLWKWKHH[FHSWLRQWKDWWKHLPSRUWHUPD\VHOIGHFODUHWKHRULJLQRIWKHJRRGV+RZHYHU&KDSWHUFRQILUPVWKDWWKHLPSRUWHULVLQDSRVLWLRQRIOLDELOLW\DQGZLOOQHHGWRSURYLGHUHDVRQDEOHHYLGHQFH:HKDYHKHOGGLVFXVVLRQVZLWKUHSUHVHQWDWLYHVRIWKH86*RYHUQPHQWZKHUHWKH\FRQILUPHGWKDWWKHOLNHO\UHVSRQVHLQWKH86$ZLOOEHKLJKHUERQGOHYHOVLQRUGHUWRFRYHUWKHULVNVRIPLVGHFODUDWLRQDQGWKH\H[SHFWWKDWLPSRUWHUVZLOOEHUHTXLUHGWRLQFUHDVHWKHLULQVXUDQFHFRYHUDJH,QWHUPVRIWKH³UHDVRQDEOH´SURYLVLRQRILQIRUPDWLRQLWZDVFRQILUPHGWKDWWKHLPSRUWHUZLOOQHHGWRKDYHKLJKGHJUHHRIYLVLELOLW\RIWKHSURFHVVRIPDQXIDFWXUHRIWKHJRRGVDQGWKHORJLVWLFVFKDLQLQRUGHUWRVDWLVI\WKHSUHIHUHQWLDOLPSRUWUHTXLUHPHQWVRIWKH7337KHVHFRVWVZLOOEHSDVVHGWKURXJKRXWWKHVXSSO\FKDLQ

:HQRWHWKDWZHKDYHH[SHULHQFHGWKDWWKH86'HSWRI+RPHODQG6HFXULW\KDYHUHTXHVWHGWKHH[SRUWHUWRSURGXFHDFHUWLILFDWHRIRULJLQLQSUHYLRXVLQYHVWLJDWLRQVXQGHU$86)7$DQGWKDWFHUWLILFDWHRIRULJLQLVVXDQFHKDVLQFUHDVHGXSWR XQGHU-$(3$DQGRWKHUDJUHHPHQWVZKHUHVXFKDV\VWHPDOVRH[LVWV

,WLVWKHUHIRUHXQOLNHO\WKDWWKH³VDYLQJV´VXJJHVWHGE\')$7LQWKH1,$DUHUHDOLVWLF

)LQDOO\ZHQRWHWKDW$XVWUDOLDQ*RYHUQPHQWUHSUHVHQWDWLYHVDUHUHSRUWHGLQPLQXWHVRIWKH:72&RPPLWWHHRQ5XOHVRI2ULJLQ PHHWLQJRI$SULO DVHPSKDVLVDGGHG

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


PHPEHUVKLSWRWKH:72,QDGGLWLRQLWZDVQRORQJHUUHOHYDQWWRDWWULEXWHWKHRULJLQRIDSURGXFWWRDVLQJOHFRXQWU\/LQNLQJPDUNVRIRULJLQWRKDUPRQL]HGUXOHVRIRULJLQFRXOGEHTXLWHPLVOHDGLQJLQDFRQWH[WZKHUHLQSXWVFDPHIURPDOORYHUWKHZRUOGDQGLQZKLFKILUPVZHUHJOREDOL]HG7KLVFDOOHGIRUDFDUHIXODVVHVVPHQWRIZKHWKHUKDUPRQL]HGUXOHVZRXOGEHDXVHIXOWRRORUQRW+LVGHOHJDWLRQVWRRGUHDG\WRH[SORUHQHZLGHDVDQGWRZRUNZLWKRWKHUGHOHJDWLRQVWRDQVZHUWKRVHTXHVWLRQV

:KLOHWKHVHFRPPHQWVDUHPDGHLQWKHFRQWH[WRIQRQSUHIHUHQWLDOWUDGHDQGGRPHVWLFFRQVXPHUODZWKHODFNRID:72FRQVLVWHQWVHWIRUUXOHVDQGSURFHGXUHVLVJLYLQJOLFHQFHWR*RYHUQPHQWVWRDSSO\QRYHODQGGLYHUJHQWV\VWHPVRIUXOHVDQGSURFHGXUHVIRUSUHIHUHQWLDOWUDGH)URPWKHFRPPHUFLDOSHUVSHFWLYHEXVLQHVVGRHVQ¶WGLIIHUHQWLDWHWKH³ZK\´DVSHFW7KH\MXVWGHDOZLWKWKHFRPSOLDQFHLVVXHV

7KH$XVWUDOLDQ&KDPEHU KDVFKDPSLRQHGWKHPDLQWHQDQFHRIWKHJOREDOO\HVWDEOLVKHGV\VWHPVRIQDWLRQDOO\FHUWLILHGRULJLQDQGWKHJOREDOUXOHVIRUFDOFXODWLRQFRQWDLQHGZLWKLQWKH5HYLVHG.\RWR&RQYHQWLRQRI6LPSOLILFDWLRQDQG+DUPRQLVDWLRQRI&XVWRPV3URFHGXUHV± DQRWKHUWUHDW\WRZKLFK$XVWUDOLDKDVDFFHGHGZLWKWKHH[FHSWLRQRILWV$QQH[.± 5XOHVRIRULJLQ

,QRUGHUWRDYRLG DUHSHDWRIWKHPLVWDNHVRISUHYLRXVQHJRWLDWLRQVLQGHYHORSLQJ\HWIXUWKHUGLYHUJHQWVHWVRIUXOHVDQGDGPLQLVWUDWLYHSURFHGXUHV WKH*RYHUQPHQWPXVWLQVWUXFWLWVQHJRWLDWRUVWRHQVXUHWKDWWKHVHUHJLRQDODJUHHPHQWV

L KDUPRQLVHWKHH[LVWLQJSUDFWLFHVRIWKHSUHFHGLQJ0)1WUDGHLL HPEUDFHWKH:727UDGH)DFLOLWDWLRQ$JUHHPHQWDQGWKHSURYLVLRQVRIWKH5HYLVHG

.\RWR&RQYHQWLRQRI6LPSOLILFDWLRQDQG+DUPRQLVDWLRQRI&XVWRPV3URFHGXUHV±LQFOXGLQJ$QQH[.± 5XOHVRIRULJLQ

5HFRPPHQGDWLRQ7KDW$XVWUDOLDVKRXOGFKDPSLRQDZRUNSURJUDPPHDWWKH:RUOG7UDGH2UJDQLVDWLRQOHYHODQG:RUOG&XVWRPV2UJDQLVDWLRQWRVHHNDJOREDODJUHHPHQWRQFRQVLVWHQWUXOHVDQGSURFHGXUHVIRUSUHIHUHQWLDODQGQRQSUHIHUHQWLDOERUGHUFURVVLQJDUUDQJHPHQWVZLWKLQWKHFRQWH[WRIWKH:727UDGH)DFLOLWDWLRQ$JUHHPHQW


&KDSWHU,QYHVWPHQW

7KH$XVWUDOLDQ&KDPEHUZHOFRPHVWKHVLJQLILFDQWLQERXQGLQYHVWPHQWOLEHUDOLVDWLRQZKLFKZLOOEHEHQHILFLDOWRIRUHLJQLQYHVWRUVDQG$XVWUDOLDQLQYHVWPHQWUHFLSLHQWV8QGHUWKH733V0)1SURYLVLRQVLWZRXOGDSSHDUWKDWDOO7333DUWLHVZLOOQRZEHJUDQWHGWKHHTXLYDOHQW),5%WKUHVKROGVDVHQMR\HGE\ WKH86&KLOHDQG1=DOUHDG\7KDWLV

,QYHVWPHQW² QHZ),5%WKUHVKROGV$VWKH*'3LPSOLFLWSULFHGHIODWRUGLGQRWLQFUHDVHWKLV\HDUWKHPRQHWDU\WKUHVKROGVLQWKHWDEOHEHORZZLOOUHPDLQLQSODFHLQ

1RQODQGSURSRVDOV

,QYHVWRU $FWLRQ 7KUHVKROG² PRUHWKDQ

)URP)7$SDUWQHUFRXQWULHVWKDWKDYHWKHKLJKHUWKUHVKROGD

$FTXLVLWLRQVLQQRQVHQVLWLYHEXVLQHVVHV

PLOOLRQ

$FTXLVLWLRQVLQVHQVLWLYHEXVLQHVVHV

PLOOLRQ

0HGLDVHFWRU

$JULEXVLQHVVHV

)RU&KLOH1HZ=HDODQGDQG8QLWHG6WDWHV PLOOLRQ

)RU&KLQD-DSDQDQG.RUHDPLOOLRQEDVHGRQWKHYDOXHRIWKHFRQVLGHUDWLRQIRUWKHDFTXLVLWLRQDQGWKHWRWDOYDOXHRIRWKHULQWHUHVWVKHOGE\WKHIRUHLJQSHUVRQ>ZLWKDVVRFLDWHV@LQWKHHQWLW\

)RUHLJQJRYHUQPHQWLQYHVWRUV

$OOGLUHFWLQWHUHVWVLQDQ$XVWUDOLDQHQWLW\RU$XVWUDOLDQEXVLQHVV

6WDUWLQJDQHZ$XVWUDOLDQEXVLQHVV

ϵ ŚƚƚƉƐĨŝƌďŐŽǀĂƵĞǆĞŵƉƚŝŽŶͲƚŚƌĞƐŚŽůĚƐŵŽŶĞƚĂƌǇͲƚŚƌĞƐŚŽůĚƐ

5HFRPPHQGDWLRQ

7KH*RYHUQPHQWPXVWLQVWUXFWLWVQHJRWLDWRUVWRHQVXUHWKDWQHZUHJLRQDODJUHHPHQWV733DQG5HJLRQDO&RPSUHKHQVLYH(FRQRPLF3DUWQHUVKLS 5&(3KDUPRQLVHWKHH[LVWLQJSUDFWLFHVRIWKHSUHFHGLQJELODWHUDODJUHHPHQWVDQG$XVWUDOLD$6($1 1HZ=HDODQG)UHH7UDGH$JUHHPHQW$1=)7$DQGDOVRHPEUDFHWKH:727UDGH)DFLOLWDWLRQ$JUHHPHQWDQGWKHSURYLVLRQVRIWKH5HYLVHG.\RWR&RQYHQWLRQRI6LPSOLILFDWLRQDQG+DUPRQLVDWLRQRI&XVWRPV3URFHGXUHV±LQFOXGLQJ$QQH[.± 5XOHVRIRULJLQ


/DQGSURSRVDOV

,QYHVWRU $FWLRQ 7KUHVKROG² PRUHWKDQ

$OOLQYHVWRUV 5HVLGHQWLDOODQG

3ULYDWHO\RZQHGLQYHVWRUVIURP)7$SDUWQHUFRXQWULHVWKDWKDYHWKHKLJKHUWKUHVKROGD

$JULFXOWXUDOODQG

)RU&KLOH1HZ=HDODQGDQG8QLWHG6WDWHV PLOOLRQ

)RU&KLQD-DSDQ.RUHD PLOOLRQFXPXODWLYH

9DFDQWFRPPHUFLDOODQG

'HYHORSHGFRPPHUFLDOODQG

PLOOLRQ

0LQLQJDQGSURGXFWLRQWHQHPHQWV

)RU&KLOH1HZ=HDODQGDQG8QLWHG6WDWHVPLOOLRQ

2WKHUV

)RUHLJQJRYHUQPHQWLQYHVWRUV $Q\LQWHUHVWLQODQG

D$JUHHPHQWFRXQWU\LQYHVWRUVDUH&KLOHDQ&KLQHVH -DSDQHVH1HZ=HDODQG6RXWK.RUHDQDQG8QLWHG6WDWHVLQYHVWRUVH[FHSWIRUHLJQJRYHUQPHQWLQYHVWRUV

6HQVLWLYHEXVLQHVVHVLQFOXGHPHGLDWHOHFRPPXQLFDWLRQVWUDQVSRUWGHIHQFHDQGPLOLWDU\UHODWHGLQGXVWULHVDQGDFWLYLWLHVHQFU\SWLRQDQGVHFXULWLHVWHFKQRORJLHVDQGFRPPXQLFDWLRQVV\VWHPVDQGWKHH[WUDFWLRQRIXUDQLXPRUSOXWRQLXPRUWKHRSHUDWLRQRIQXFOHDUIDFLOLWLHV

)RULQYHVWPHQWLQWKHPHGLDVHFWRUDKROGLQJRIDWOHDVWILYH SHUFHQWUHTXLUHVQRWLILFDWLRQDQGSULRUDSSURYDOUHJDUGOHVVRIWKHYDOXHRILQYHVWPHQW

2QFHWKH&KLQD$XVWUDOLD)UHH7UDGH$JUHHPHQWHQWHUVLQWRIRUFH

/RZWKUHVKROGODQGLQFOXGHVPLQHVDQGFULWLFDOLQIUDVWUXFWXUHIRUH[DPSOHDQDLUSRUWRUSRUW

&KDSWHU,QWHOOHFWXDO3URSHUW\

'XULQJ7KH$XVWUDOLDQ*RYHUQPHQWDVNHGWKH3URGXFWLYLW\&RPPLVVLRQWRXQGHUWDNHDPRQWKSXEOLFLQTXLU\LQWR$XVWUDOLDVLQWHOOHFWXDOSURSHUW\V\VWHP7KLVLQTXLU\LVQRZFRPSOHWHEXWWKHILQDOUHSRUWKDVQRWEHHQUHOHDVHGDWWKHWLPHRIZULWLQJ

7KH3URGXFWLYLW\&RPPLVVLRQLVWDVNHGZLWKUHFRPPHQGLQJFKDQJHVWRWKHFXUUHQWV\VWHPWRLPSURYHWKHRYHUDOOZHOOEHLQJRI$XVWUDOLDQVRFLHW\WKH&RPPLVVLRQZDVWRKDYHUHJDUGWR


x LQFHQWLYHVIRULQQRYDWLRQDQGLQYHVWPHQWLQFOXGLQJIUHHGRPWREXLOGRQH[LVWLQJLQQRYDWLRQx $XVWUDOLDVLQWHUQDWLRQDOWUDGHREOLJDWLRQVx WKHUHODWLYHFRQWULEXWLRQRILQWHOOHFWXDOSURSHUW\WRWKH$XVWUDOLDQHFRQRP\x WKHHFRQRP\ZLGHDQGGLVWULEXWLRQDOFRQVHTXHQFHVRIUHFRPPHQGDWLRQVLQFOXGLQJWKHLU

LPSDFWVRQWUDGHDQGFRPSHWLWLRQx HQVXULQJWKHLQWHOOHFWXDOSURSHUW\V\VWHPZLOOEHHIILFLHQWDQGUREXVWWKURXJKWLPHLQOLJKWRI

HFRQRPLFFKDQJHVx KRZSURSRVHGFKDQJHVILWZLWKRUPD\UHTXLUHFKDQJHVWRRWKHUH[LVWLQJUHJXODWLRQRU

IRUPVRIDVVLVWDQFHx WKHUHOHYDQWILQGLQJVDQGUHFRPPHQGDWLRQVRIUHFHQWO\FRPSOHWHGUHYLHZV

,QWHOOHFWXDOSURSHUW\SROLF\FDQFRQWULEXWHWRDPRUHFRPSHWLWLYHHFRQRP\EHQHILWLQJERWKEXVLQHVVHVDQGFRQVXPHUVE\SURPRWLQJLQQRYDWLRQSURGXFWLYLW\DQGDFFHVVWRPDUNHWV6WURQJLQWHOOHFWXDOSURSHUW\SROLF\SURYLGHVDQLQFHQWLYHWRLQQRYDWHDQGSUHYHQWVRWKHUVIURPIUHHULGLQJZLWKRXWFRQWULEXWLQJWRWKHFRVWV+RZHYHURYHUO\VWURQJLQWHOOHFWXDOSURSHUW\UXOHVFDQVWLIOHLQQRYDWLRQDQGSUHYHQWYDOXDEOHLGHDVIURPEHLQJIXOO\H[SORLWHG

7KH$XVWUDOLDQ&KDPEHUEHOLHYHVWKDW$XVWUDOLD¶VLQWHOOHFWXDOSURSHUW\ UHJLPHEDODQFHVLWVFRQIOLFWLQJREMHFWLYHVUHODWLYHO\ZHOOEXWWKHUHLVVWLOOVFRSHIRUIXUWKHUUHIRUP2XULGHDVRQWKLVDUHFRQWDLQHGLQRXUVXEPLVVLRQWRWKH3URGXFWLYLW\&RPPLVVLRQVLQTXLU\

,QSDUWLFXODU$XVWUDOLD¶VLQWHOOHFWXDOSURSHUW\V\VWHPSUHVHQWVFKDOOHQJHVIRUVPDOODQGPHGLXPHQWHUSULVHV60(VWKDWRIWHQODFNWKHUHVRXUFHVWRDSSO\IRUHQIRUFHRUGHIHQGWKHLUSURSHUW\ULJKWV$VDUHVXOW60(VXVHWKHLQWHOOHFWXDOSURSHUW\V\VWHPIDUOHVVWKDQODUJHUILUPV

7KH$XVWUDOLDQ&KDPEHU¶VLQLWLDOVXEPLVVLRQPDGHUHFRPPHQGDWLRQVUHODWLQJWRx &RPSHQVDWLRQIRUULJKWVKROGHUVLPSDFWHGE\UHIRUPVx 3HUVRQDORUGRPHVWLFXVHRIFRS\ULJKWHGPDWHULDOx ,QWURGXFWLRQRIIDLUXVHH[FHSWLRQVx )L[HGWHUPH[FHSWLRQVDVDQDOWHUQDWLYHWRIDLUXVHH[FHSWLRQVx 7KLUGSDUW\XVHRIFRS\ULJKWHGPDWHULDOx 3DUDOOHOLPSRUWVx &RPSOH[LW\x $VVHVVPHQWGHOD\Vx ,QQRYDWLRQSDWHQWV

:HZHOFRPHWKH$XVWUDOLDQ*RYHUQPHQW¶VUHVLVWDQFHWRFDOOVIRULQFUHDVHG,3WHUPVSDUWLFXODUO\RQ%LRORJLFVDVQHJRWLDWHGLQWKHDJUHHPHQWKRZHYHUZHDUHFRQFHUQHGWKDWWKH86ZLOODWWHPSWWRUHQHJRWLDWHWKHVHSURYLVLRQVZLWKLQWKHFHUWLILFDWLRQHIIRUWVSRVWUDWLILFDWLRQ

ϭϬ ŚƚƚƉƐϭϯͲĂĐĐŝĐĚŶĂƐƉĞĚŝĂŶĞƚƐŝƚĞƐĚĞĨĂƵůƚĨŝůĞƐƵƉůŽĂĚĞĚͲĐŽŶƚĞŶƚĨŝĞůĚͺĨͺĐŽŶƚĞŶƚͺĨŝůĞƉĐͺŝŶƋƵŝƌǇͺŝŶƚŽͺŝƉͺĚƌĂĨƚͺƌĞƉŽƌƚͺƐƵďŵŝƐƐŝŽŶͺũƵŶĞͺϮϬϭϲƉĚĨ


:HDUHDOVRFRQFHUQHGWKDWWKH733PD\LQIDFWFUHDWH³UHJXODWRU\FKLOO´LQ$XVWUDOLDDQGGLVFRXUDJHWKH*RYHUQPHQWIURPIXUWKHUOLEHUDOLVLQJWKH$XVWUDOLDQ,3HQYLURQPHQWDVPD\EHUHFRPPHQGHGE\WKH3URGXFWLYLW\&RPPLVVLRQ

8QLODWHUDO$FWLRQ2SSRUWXQLWLHV$WSUHVHQWWKHUHDUHOHYHOVRIXQFHUWDLQW\DERXWWKHOLNHO\UDWLILFDWLRQRIWKH733DFURVVDOORIWKHQHJRWLDWLQJSDUWLHV7KH$XVWUDOLDQ*RYHUQPHQWVKRXOGFRQVLGHUDOWHUQDWHSDWKZD\VIRUWUDGHDQGLQYHVWPHQWOLEHUDOLVDWLRQXQGHUWKHSRWHQWLDOVFHQDULRVRIERWKHQWU\LQWRIRUFHRUQRWIRUWKH733

,QWKHHQG$XVWUDOLDKDVDOUHDG\QHJRWLDWHGWRXQGHUWDNHIXUWKHUOLEHUDOLVDWLRQRIRXURZQWDULIIVDQGLQYHVWPHQWUHJLPHVSOXVRWKHUDUHDVFRYHUHGE\WKH733$XVWUDOLDLVDOVRQHJRWLDWLQJDUDQJHRIRWKHUDJUHHPHQWVLQFOXGLQJWKH5HJLRQDO&RPSUHKHQVLYH(FRQRPLF3DUWQHUVKLS5&(3DQGQXPHURXVELODWHUDOV:HLPDJLQHWKDWWKHWHUPVRIWKH733ZLOOEHWKHEDVLVIRU³ODQGLQJ]RQHV´IRUWKHVHRWKHUQHJRWLDWLRQV

7KH$XVWUDOLDQ*RYHUQPHQWFDQQRZXQLODWHUDOO\DSSO\WKHVHWHUPVHYHQLIWKH733QHYHUHQWHUVLQWRIRUFH7KHUHLVOLWWOHSRLQWUHWDLQLQJFRVWVDQGEDUULHUVLQRUGHUWRXVHWKHPDVWUDGLQJSRLQWVLQQHJRWLDWLRQVZKLOHDOOWKHZKLOHWKH\FRQWLQXHWRDGGXQQHFHVVDU\FRVWVWRRXUHFRQRP\5HPRYLQJWKHGRPHVWLFEDUULHUV$XVWUDOLDQFRPSDQLHVEHFRPHPRUHFRPSHWLWLYH

5HFRPPHQGDWLRQ

7KDWWKH$XVWUDOLDQ*RYHUQPHQWUHVLVWVDQ\FDOOVWRLQFUHDVHSURWHFWLRQVRQ,QWHOOHFWXDO3URSHUW\DVDUHVXOWRI733HQWU\LQWR IRUFHDFWLRQV

5HFRPPHQGDWLRQ

7KDWWKH*RYHUQPHQWFRPPLW WRXQLODWHUDOO\UHPRYLQJ H[LVWLQJEDUULHUVWRWUDGHDQGLQYHVWPHQWWRHQDEOHIXOOEHQHILWVWRIORZWRWKH$XVWUDOLDQHFRQRP\


$QQH[$UHDVZKHUH86³FHUWLILFDWLRQ´FRXOGEHDSSOLHGWRVHHNDGGLWLRQDO³FRPSOLDQFH´IRU$XVWUDOLDQHQWU\LQWRIRUFH

7KH867UDGH5HSUHVHQWDWLYH¶VRIILFHSXEOLVKHVDQDQQXDODVVHVVPHQWRIDUHDVWKH\UHJDUGDVEDUULHUVWRWUDGHLQIRUHLJQFRXQWULHV)URPWKLVZHFDQVHHWKHIROORZLQJLWHPVZKLFKWKH86*RYHUQPHQWPD\VHHNWRDGGUHVVLQWKH³FHUWLILFDWLRQ´SURFHVV

1DWLRQDO 7UDGH (VWLPDWHV 5HSRUW 2Q )RUHLJQ 7UDGH%DUULHUV

7(&+1,&$/%$55,(567275$'(6$1,7$5<$1'3+<726$1,7$5<%$55,(56

6DQLWDU\$QG3K\WRVDQLWDU\%DUULHUV

$QLPDO+HDOWK

%HHIDQG%HHI3URGXFWV

$XVWUDOLDUHTXLUHVFRPSOHWLRQRIDFRPSOH[DSSURYDOSURFHVV EHIRUHLWZLOOSHUPLWWKHLPSRUWDWLRQRIERYLQH SURGXFWVIURPDFRXQWU\WKDWKDVUHSRUWHGDQ\LQGLJHQRXVFDVHVRIERYLQHVSRQJLIRUPHQFHSKDORSDWK\ %6(8QGHU$XVWUDOLD¶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¶VLPSRUWUHTXLUHPHQWVLQGLFDWLQJWKDWEHHIIURPWKH8QLWHG6WDWHVPHHWV WKHQHJOLJLEOH%6(ULVNUHTXLUHPHQWVRIWKH:RUOG2UJDQL]DWLRQIRU$QLPDO+HDOWK2,(DQGFDQEH LPSRUWHGVXEMHFWWRVSHFLILFLPSRUWFRQGLWLRQV86DQG$XVWUDOLDQRIILFLDOVDUHFXUUHQWO\FRRUGLQDWLQJ VSHFLILFZRUGLQJIRUUHTXLUHGH[SRUWFHUWLILFDWHVIRUKHDWWUHDWHGVKHOIVWDEOHEHHISURGXFWVIURPWKH8QLWHG 6WDWHVDIWHUZKLFKWKHH[SRUWRIWKHVHSURGXFWVIURPWKH8QLWHG6WDWHVWR$XVWUDOLDZLOOEHDEOHWR UHVXPH

ϭϭ ŚƚƚƉƐƵƐƚƌŐŽǀƐŝƚĞƐĚĞĨĂƵůƚĨŝůĞƐϮϬϭϲͲEdͲZĞƉŽƌƚͲ&/E>ƉĚĨ


)RUIUHVKFKLOOHGRUIUR]HQEHHIDQGEHHISURGXFWVLQ'HFHPEHUWKH$XVWUDOLDQJRYHUQPHQW DQQRXQFHGWKHVWDUWRIDUHYLHZRILWVLPSRUWUHTXLUHPHQWVIRUWKUHHFRXQWULHVWKDWKDYHDSSOLHGIRUHOLJLELOLW\ WRH[SRUWWR$XVWUDOLDWKH8QLWHG6WDWHV-DSDQDQGWKH1HWKHUODQGV7KLVUHYLHZZLOOFRQVLGHUIUHVKFKLOOHG RUIUR]HQEHHIDQGEHHISURGXFWVVXFKDVPHDWERQHDQGRIIDORIFDWWOHEXIIDORDQGELVRQ7KHVWDUWRI WKLVUHYLHZLVDQHFHVVDU\VWHSLQWKHSURFHVVRIIXOO\UHRSHQLQJWKH$XVWUDOLDQPDUNHWWR86EHHI7KH 8QLWHG6WDWHVZLOOFRQWLQXHWRXUJH$XVWUDOLDWRRSHQLWVPDUNHWIXOO\WR86EHHIDQGEHHISURGXFWVEDVHG RQVFLHQFHWKH2,(JXLGHOLQHVDQGWKH8QLWHG6WDWHV¶QHJOLJLEOHULVNVWDWXVIRU%6(

3RUN

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

3RXOWU\

$XVWUDOLDFXUUHQWO\SURKLELWVLPSRUWVRIXQFRRNHGSRXOWU\PHDWIURP DOOFRXQWULHVH[FHSW1HZ=HDODQG

:KLOHFRRNHGSRXOWU\PHDWSURGXFWVPD\EHLPSRUWHGWKHFXUUHQWLPSRUWFRQGLWLRQVDVVHWRXWLQDQLPSRUW ULVNDQDO\VLVUHTXLUHWKDWLPSRUWHGSRXOWU\PHDWSURGXFWVPXVWEHFRRNHGWRDPLQLPXPFRUHWHPSHUDWXUH RI&IRUPLQXWHVRUWKHHTXLYDOHQW7KLVWHPSHUDWXUHUHTXLUHPHQWGRHVQRWSHUPLWLPSRUWDWLRQRI FRRNHGSURGXFWWKDWLVVXLWDEOHIRUVDOHLQUHVWDXUDQWVRUGHOLFDWHVVHQVWKXVOLPLWLQJFRPPHUFLDO RSSRUWXQLWLHV

,Q$XVWUDOLDLQLWLDWHGDQHYDOXDWLRQRIZKHWKHULWZRXOGJUDQWDFFHVVIRU86FRRNHGWXUNH\PHDWWR WKH$XVWUDOLDQPDUNHWXQGHUDPHQGHGLPSRUWFRQGLWLRQV7KH$XVWUDOLDQJRYHUQPHQWLVFXUUHQWO\ FRQGXFWLQJDQLPSRUWULVNDQDO\VLVWRDVVHVVWKLVLVVXH7KH8QLWHG6WDWHVKDVLGHQWLILHGUHVROXWLRQRIWKLV LVVXHDVDKLJKSULRULW\DQGFRQWLQXHVWRZRUNZLWK$XVWUDOLDWRJDLQPHDQLQJIXOFRPPHUFLDOPDUNHWDFFHVV IRUFRRNHGWXUNH\PHDW

3ODQW+HDOWK

6WRQH)UXLW


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

$SSOHV

$XVWUDOLDFXUUHQWO\SURKLELWVWKHLPSRUWDWLRQRIDSSOHVIURPWKH8QLWHG6WDWHVEDVHGRQFRQFHUQVDERXWILUH EOLJKWDQGRWKHUSHVWV7KH86*RYHUQPHQWDQG86VWDNHKROGHUVKDYHHQJDJHGZLWK$XVWUDOLDQRIILFLDOV WRGHPRQVWUDWHWKDW86PDWXUHV\PSWRPOHVVDSSOHVSRVHQRULVNRIWUDQVPLVVLRQRIILUHEOLJKW,Q2FWREHU $XVWUDOLDSXEOLVKHGDSHVWULVNDQDO\VLVIRUDSSOHVIURPWKH8QLWHG6WDWHVDQGLGHQWLILHGWKUHH DGGLWLRQDOIXQJDOSDWKRJHQVRIFRQFHUQWR$XVWUDOLDQUHJXODWRU\DXWKRULWLHV$XVWUDOLDKDVLQGLFDWHGWKDWLQ OLJKWRIWKH86*RYHUQPHQW¶VSURYLVLRQRIDGGLWLRQDOLQIRUPDWLRQWR$XVWUDOLDLQ'HFHPEHU $XVWUDOLDZLOOVKRUWO\UHVXPHZRUNRQDSUHYLRXVO\FRPPHQFHGLPSRUWULVNDQDO\VLVIRUDSSOHVIURPWKH 8QLWHG6WDWHV7KH8QLWHG6WDWHVFRQWLQXHVWRZRUNWRREWDLQDFFHVVWR$XVWUDOLD¶VPDUNHWIRUDSSOHVZKLFK LVDSULRULW\LWHPIRUWKH8QLWHG6WDWHV

*RYHUQPHQW3URFXUHPHQW

8QGHUWKH$86)7$WKH$XVWUDOLDQJRYHUQPHQWRSHQHGLWVPDUNHWIRUFRYHUHGJRYHUQPHQWSURFXUHPHQWWR 86VXSSOLHUVHOLPLQDWLQJSUHIHUHQFHVIRUGRPHVWLFVXSSOLHUVDQGFRPPLWWLQJWRXVHIDLUDQGWUDQVSDUHQW SURFXUHPHQWSURFHGXUHV,QWKH7UDQV3DFLILF3DUWQHUVKLS733$XVWUDOLDKDVPDGHVLPLODUJRYHUQPHQW SURFXUHPHQWFRPPLWPHQWVWRWKH8QLWHG6WDWHVDQGRWKHU733SDUWQHUV

$XVWUDOLDEHJDQQHJRWLDWLRQVWRMRLQWKH:RUOG7UDGH2UJDQL]DWLRQ¶VSOXULODWHUDO$JUHHPHQWRQ*RYHUQPHQW 3URFXUHPHQW*3$LQ-XQH

,QWHOOHFWXDO3URSHUW\5LJKWV3URWHFWLRQ

$XVWUDOLDJHQHUDOO\SURYLGHVVWURQJLQWHOOHFWXDOSURSHUW\ULJKWV,35SURWHFWLRQDQGHQIRUFHPHQWWKURXJK OHJLVODWLRQWKDWDPRQJRWKHUWKLQJVFULPLQDOL]HVFRS\ULJKWSLUDF\DQGWUDGHPDUNFRXQWHUIHLWLQJ8QGHUWKH $86)7$$XVWUDOLDPXVWSURYLGHWKDWDSKDUPDFHXWLFDOSURGXFWSDWHQWRZQHUEHQRWLILHGRIDUHTXHVWIRU PDUNHWLQJDSSURYDOE\DWKLUGSDUW\IRUDSURGXFWFODLPHGE\


WKDWSDWHQW86DQG$XVWUDOLDQ SKDUPDFHXWLFDOFRPSDQLHVKDYHH[SUHVVHGFRQFHUQVDERXWGHOD\VLQWKLVQRWLILFDWLRQSURFHVV

8QGHU WKH733$JUHHPHQWZKLFKVHWVVWURQJDQGEDODQFHGVWDQGDUGVRQ,35SURWHFWLRQDQGHQIRUFHPHQW $XVWUDOLDKDVFRPPLWWHGWRPRUHUREXVWVWDQGDUGVIRULWV,35UHJLPH7KH8QLWHG6WDWHVFRQWLQXHVWRZRUN ZLWK$XVWUDOLDWRDGGUHVV,35LVVXHVWKURXJK733LPSOHPHQWDWLRQDVZHOODVWKURXJKELODWHUDOHQJDJHPHQW


$ERXWWKH$XVWUDOLDQ&KDPEHU7KH$XVWUDOLDQ&KDPEHURI&RPPHUFHDQG,QGXVWU\VSHDNVRQEHKDOIRI$XVWUDOLDQEXVLQHVVDWKRPHDQGDEURDG

2XUPHPEHUVKLSFRPSULVHVDOOVWDWHDQGWHUULWRU\FKDPEHUVRIFRPPHUFHDQGGR]HQVRIQDWLRQDOLQGXVWU\DVVRFLDWLRQV,QGLYLGXDOEXVLQHVVHVDOVRJHWLQYROYHGWKURXJKRXU%XVLQHVV/HDGHUV&RXQFLO

:HUHSUHVHQWPRUHWKDQEXVLQHVVHVRIDOOVL]HVDFURVVDOOLQGXVWULHVDQGDOOSDUWVRIWKHFRXQWU\PDNLQJXV$XVWUDOLD¶VPRVWUHSUHVHQWDWLYHEXVLQHVVRUJDQLVDWLRQ

7KH$XVWUDOLDQ&KDPEHUVWULYHVWRPDNH$XVWUDOLDDJUHDWSODFHWRGREXVLQHVVLQRUGHUWRLPSURYHHYHU\RQHVVWDQGDUGRIOLYLQJ

:HVHHNWRFUHDWHDQHQYLURQPHQWLQZKLFKEXVLQHVVSHRSOHHPSOR\HHVDQGLQGHSHQGHQWFRQWUDFWRUVFDQDFKLHYHWKHLUSRWHQWLDODVSDUWRIDG\QDPLFSULYDWHVHFWRU:HHQFRXUDJHHQWUHSUHQHXUVKLSDQGLQQRYDWLRQWRDFKLHYHSURVSHULW\HFRQRPLFJURZWKDQGMREV

:HIRFXVRQLVVXHVWKDWLPSDFWRQEXVLQHVVLQFOXGLQJHFRQRPLFVWUDGHZRUNSODFHUHODWLRQVZRUNKHDOWKDQGVDIHW\ DQGHPSOR\PHQWHGXFDWLRQDQGWUDLQLQJ

:HDGYRFDWHIRU$XVWUDOLDQEXVLQHVVLQSXEOLFGHEDWHDQGWRSROLF\GHFLVLRQPDNHUVLQFOXGLQJPLQLVWHUVVKDGRZPLQLVWHUVRWKHUPHPEHUVRISDUOLDPHQWPLQLVWHULDOSROLF\DGYLVRUVSXEOLFVHUYDQWVUHJXODWRUVDQGRWKHUQDWLRQDODJHQFLHV :HDOVRUHSUHVHQW$XVWUDOLDQEXVLQHVVLQLQWHUQDWLRQDOIRUXPV

:HUHSUHVHQWWKHEURDGLQWHUHVWVRIWKHSULYDWHVHFWRUUDWKHUWKDQLQGLYLGXDOFOLHQWVRUDQDUURZVHFWLRQDOLQWHUHVW


$XVWUDOLDQ&KDPEHU 0HPEHUV$8675$/,$1 &+$0%(5 0(0%(56 %86,1(66 6$ &$1%(55$ %86,1(66 &+$0%(5 &+$0%(5 2) &200(5&(

1257+(51 7(55,725< &+$0%(5 2) &200(5&( ,1'8675< 48((16/$1' &+$0%(5 2) &200(5&(

,1'8675< :(67(51 $8675$/,$ 1(: 6287+ :$/(6 %86,1(66 &+$0%(5 7$60$1,$1 &+$0%(5 2)

&200(5&( ,1'8675< 9,&725,$1¶ &+$0%(5 2) &200(5&( ,1'8675< 0(0%(5 1$7,21$/ ,1'8675<

$662&,$7,216 $&&25' ± +<*,(1( &260(7,& 63(&,$/7< 352'8&76 ,1'8675< $*(' $1' &20081,7<

6(59,&(6 $8675$/,$ $,5 &21',7,21,1* 0(&+$1,&$/ &2175$&7256¶ $662&,$7,21 $662&,$7,21 2)

),1$1&,$/ $'9,6(56 $662&,$7,21 2) ,1'(3(1'(17 6&+22/6 2) 16: $8675$/,$1 68%6&5,37,21

7(/(9,6,21 $1' 5$',2 $662&,$7,21 $8675$/,$1 %(9(5$*(6 &281&,/ /,0,7(' $8675$/,$1 '(17$/

$662&,$7,21 $8675$/,$1 '(17$/ ,1'8675< $662&,$7,21 $8675$/,$1 )('(5$7,21 2) (03/2<(56

,1'8675,(6 $8675$/,$1 )('(5$7,21 2) 75$9(/ $*(176 $8675$/,$1 )22' *52&(5< &281&,/

$8675$/,$1 +27(/6 $662&,$7,21 $8675$/,$1 ,17(51$7,21$/ $,5/,1(6 23(5$7,216 *5283

$8675$/,$1 0$'( &$03$,*1 /,0,7(' $8675$/,$1 0,1(6 0(7$/6 $662&,$7,21 $8675$/,$1 3$,17

0$18)$&785(56¶ )('(5$7,21$8675$/,$15(&25',1* ,1'8675<$662&,$7,21 $8675$/,$15(7$,/(56 ¶

$662&,$7,21 $8675$/,$1 6(/) 0(',&$7,21 ,1'8675< $8675$/,$1 67((/ ,167,787( $8675$/,$1

7285,60 $:$5'6 $8675$/,$1 7285,60 (;3257 &281&,/ $8675$/,$1 9(7(5,1$5< $662&,$7,21 %86

,1'8675< &21)('(5$7,21 %86,1(66 &281&,/ 2) &223(5$7,9(6 $1' 0878$/6 &$5$9$1 ,1'8675<

$662&,$7,21 2) $8675$/,$ &(0(17 &21&5(7( $1' $**5(*$7(6 $8675$/,$ &+,5235$&7256

$662&,$7,21 2) $8675$/,$ &2168/7 $8675$/,$ &86720(5 2:1(' %$1.,1* $662&,$7,21 &58,6(

/,1(6 ,17(51$7,21$/ $662&,$7,21 ',5(&7 6(//,1* $662&,$7,21 2) $8675$/,$ (&272856,0

$8675$/,$(;+,%,7,21$1'(9(17 $662&,$7,212)$8675$/$6,$),71(66$8675$/,$ +286,1*,1'8675<

$662&,$7,21 +,5( $1' 5(17$/ ,1'8675< $662&,$7,21 /7' /$5*( )250$7 5(7$,/ $662&,$7,21 /,9(

3(5)250$1&( $8675$/,$ 0$67(5 %8,/'(56 $8675$/,$ 0$67(5 3/80%(56· 0(&+$1,&$/ 6(59,&(6

$662&,$7,21 2) $8675$/,$ 0(',&$/ 7(&+12/2*< $662&,$7,21 2) $8675$/,$ 0(',&,1(6 $8675$/,$

1$7,21$/ ',6$%,/,7< 6(59,&(6 1$7,21$/ (/(&75,&$/ &20081,&$7,216 $662&,$7,21 1$7,21$/

(03/2<0(17 6(59,&(6 $662&,$7,21 1$7,21$/ ),5( ,1'8675< $662&,$7,21 1$7,21$/ 5(7$,/

$662&,$7,21 1$7,21$/ 52$' $1' 02725,676· $662&,$7,21 16: 7$;, &281&,/ 1$7,21$/ 21/,1(

5(7$,/ $662&,$7,21 2,/ ,1'8675< ,1'8675,$/ $662&,$7,21 287'225 0(',$ $662&,$7,21 3+$50$&<

*8,/' 2) $8675$/,$ 3+212*5$3+,& 3(5)250$1&( &203$1< 2) $8675$/,$ 3/$67,&6 &+(0,&$/6

,1'8675,(6 $662&,$7,21 35,17,1* ,1'8675,(6 $662&,$7,21 2) $8675$/,$ 5(67$85$17 &$7(5,1*

$8675$/,$ 5(&58,70(17 &2168/7,1* 6(59,&(6 $662&,$7,21 6&5((1 352'8&(56 $8675$/,$ 7+(

7$;,167,787( 9,&725,$1$87202%,/( &+$0%(52)&200(5&(

fadt tpp submission final - australian chamber of commerce ... · 6hqdwh )ruhljq $iidluv...

Documents