September 21, 2005

The IMF Center of the International Monetary Fund, in partnership with the U.S.'s National
Council on Economic Education (NCEE), has launched an instructional program for
secondary school students about the effects of globalization and the importance of
understanding the dynamics of the global economy. Thinking Globally: Effective Lessons for
Teaching about the Interdependent World Economy are eight classroom-tested lessons on
globalization, comparative advantage, economic growth, exchange rates, and other
international topics.

Lessons #1 and 2 focus on the IMF and its role in the global economy.

Lesson #1: Ten Basic Questions about Globalization focuses on the history, impact and future
implications of living in a globalized economic system.

Lesson #2: What is the IMF and What Does it Do? Introduces the IMF and its role in fostering global
economic stability through monetary and financial cooperation.

Lessons #3-8, on trade, international organizations, currencies and foreign

exchange, are previously-released lesson plans produced by NCEE.

Lesson #3: Why People Trade Students participate in a trading simulation and use this experience to
discover the benefits of free trade.

Lesson #4: Comparative Advantage and Trade in a Global Economy Students observe or participate
in a role-play situation in which one person is better at both of two activities.

Lesson #5: "Hey, Hey! Ho, Ho! Why Do We Need the WTO?" Several activities are used to introduce
students to six international institutions that play important economic roles, especially in the areas of
international trade, finance and development.

Lesson #6: Why are Some Nations Wealthy? Students work in groups to examine data from several
nations regarding size, natural resources and population.

Lesson #7: Foreign Currencies and Foreign Exchange Students participate in a simulated foreign
exchange market. Provides an opportunity for students to use supply and demand analysis to explain
how flexible exchange rates are established in currency markets.

Lesson #8: Exchange Rates: Money around the World Students participate in two auctions to
demonstrate the determination of flexible exchange rates and the need for foreign currency to
purchase goods from other countries.

See also:
Press Release: IMF Launches Lesson Plans for Secondary School Economics Teachers,
September 21, 2005 (http://www.imf.org/external/np/sec/pr/2005/pr05211.htm)

Lesson plans #1-8 are available in PDF format here:

http://www.imf.org/external/np/exr/center/econed/index.htm#think
/HVVRQ:KDW,VWKH,QWHUQDWLRQDO0RQHWDU\)XQG
DQG:KDW'RHV,W'R"

 /,"1
/" Ê WLRQSUREOHPV,QWKHVHZD\VWKH,0)VHHNV
WRSURPRWHORQJWHUPJURZWKDQGLPSURYHWKH
(FRQRPLFV VWDQGDUGRIOLYLQJIRUSHRSOHLQLWVPHPEHU
7KH,QWHUQDWLRQDO0RQHWDU\)XQG,0)LV FRXQWULHV
DILQDQFLDOLQVWLWXWLRQWKDWZRUNVWRKHOSLWV
PHPEHUFRXQWULHVLPSURYHWKHLUHFRQRPLHVLQ
SDUWWKURXJKVWDELOL]LQJH[FKDQJHUDWHVDQG

"

*/-
DGGUHVVLQJEDODQFHRISD\PHQWVSUREOHPV %DODQFHRISD\PHQWV
0RVWRIWKHFRXQWULHVLQWKHZRUOGEHORQJWR )LQDQFLDOFULVLV
WKH,0)DVRILWKDGPHPEHUV ,QIODWLRQ
$OWKRXJKWKHGHWDLOVRILWVSROLFLHVDUHFRPSOH[ 3RYHUW\
DQGVRPHZKDWDEVWUDFWKLJKVFKRROVWXGHQWV 5ROHRI,QWHUQDWLRQDO0RQHWDU\)XQG
FDQXQGHUVWDQGWKHEDVLFLQWHQWDQGSXUSRVH 7UDQVLWLRQHFRQRP\
RIWKH,0)E\ORRNLQJDWH[DPSOHVRILWVSUR
JUDPV7KH,0)LVIUHTXHQWO\LQWKHQHZVDQG
" /
/Ê-/

,-
KDYLQJDEDVLFXQGHUVWDQGLQJRIZKDWLWLVDQG
ZKDWLWGRHVFDQKHOSWRGHP\VWLI\WKHVXEMHFW
RIWKHJOREDOHFRQRP\
5HDVRQLQJ
:KHQLQWHUQDWLRQDOWUDGHDQGRWKHULQWHUQD
WLRQDOILQDQFLDOWUDQVDFWLRQVWDNHSODFHFXU
UHQF\KDVWREHH[FKDQJHGVRPHZKHUHDORQJ
WKHZD\$EXVLQHVVSHUVRQLQ%UD]LOZKR
H[SRUWVFRIIHHEHDQVZDQWVWREHSDLGHLWKHU
LQWKH%UD]LOLDQFXUUHQF\WKHUHDORULQDFXU
UHQF\WKDWFDQHDVLO\EHH[FKDQJHGIRUWKH
UHDO7KLVEXVLQHVVSHUVRQZRXOGSUREDEO\EH
KDSS\WREHSDLGLQ86GROODUVHXURVRU\HQ
VLQFHPRVWEDQNVLQ%UD]LOZLOOH[FKDQJHWKHVH
FXUUHQFLHVIRUUHDLV7KHUHIRUHWKHFRXQWU\
/6
-
WKDWLPSRUWVWKHVHFRIIHHEHDQVZDQWVWRKDYH
DUHVHUYHRI86GROODUVHXURVRU\HQLQLWV
EDQNVWRXVHWRSD\WKHH[SRUWHULQ%UD]LODQG
IRURWKHUJRRGVDQGVHUYLFHVLWLPSRUWVIURP
DEURDG
&RXQWULHVIDFHSUREOHPVZKHQWKH\GRQRW
KDYHHQRXJKIRUHLJQFXUUHQF\UHVHUYHVWRSD\
EDFNIRUHLJQGHEWVDQGWRVXSSRUWWKHFXUUHQF\
H[FKDQJHLPSRUWHUVLQWKHLUFRXQWU\UHTXLUHWR
SXUFKDVHJRRGVDQGVHUYLFHVIURPDEURDG7KH
 ,QVWLWXWLRQVHYROYHLQPDUNHWHFRQRPLHV
WRKHOSLQGLYLGXDOVDQGJURXSVDFFRPSOLVK
WKHLUJRDOV%DQNVODERUXQLRQVFRUSRUD
WLRQVOHJDOV\VWHPVDQGQRWIRUSURILW
RUJDQL]DWLRQVDUHH[DPSOHVRILPSRUWDQW
LQVWLWXWLRQV$GLIIHUHQWNLQGRILQVWLWXWLRQ
FOHDUO\GHILQHGDQGZHOOHQIRUFHGSURSHUW\
ULJKWVLVHVVHQWLDOWRDPDUNHWHFRQRP\
 ,QYHVWPHQWLQIDFWRULHVPDFKLQHU\QHZ
WHFKQRORJ\DQGWKHKHDOWKHGXFDWLRQDQG
WUDLQLQJRISHRSOHFDQUDLVHIXWXUHVWDQ
GDUGVRIOLYLQJ
" 
7KHVWXGHQWVZLOO
 ([SODLQWKHEDVLFUROHDQGIXQFWLRQVRIWKH
,QWHUQDWLRQDO0RQHWDU\)XQG
 7DNHSDUWLQDJURXSDFWLYLW\LQYROYLQJILYH
FRXQWU\FDVHVWXGLHVDQGWKH,0)
 6XPPDUL]HLQIRUPDWLRQDERXWILYHFRXQ
WULHVDQGWKHLU,0)VXSSRUWHGSURJUDPV

--" Ê
-
,*/"
,0)SURYLGHVORDQVWRKHOSFRXQWULHVRYHUFRPH
DWHPSRUDU\VKRUWIDOOLQIRUHLJQFXUUHQF\,W 7KHVWXGHQWVOHDUQDERXWWKHEDVLFUROHDQG
DOVRSURYLGHVSROLF\DGYLFHDQGWHFKQLFDODVVLV IXQFWLRQVRIWKH,QWHUQDWLRQDO0RQHWDU\)XQG
WDQFHWRKHOSZLWKPDFURHFRQRPLFVWDELOL]D WKURXJKUHDGLQJFDVHVWXGLHVDERXW,0)VXS
SRUWHGSURJUDPVLQ%DUEDGRV(VWRQLD.RUHD

‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1< 
/(6621:+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"

7XUNH\DQG8JDQGD,QVPDOOJURXSVWKH\
SUHSDUHDQGSUHVHQWDSRVWHUVXPPDUL]LQJWKH
FDVHVWXG\WRWKHFODVV
1RWH7KHPDWHULDOXVHGLQWKLVOHVVRQLVSUL
PDULO\IURPWKH,0):HEVLWHKWWSZZZLPI
UHQF\GHYDOXDWLRQHFRQRPLFJURZWK(XURSHDQ
8QLRQH[FKDQJHUDWHVILVFDOSROLF\IRUHLJQ
LQYHVWPHQWJRYHUQPHQWEXGJHWGHILFLW*'3
*'3SHUFDSLWDLQIODWLRQPDFURHFRQRPLFSROL
FLHVPDUNHWHFRQRPLFV\VWHPPRQHWDU\SROLF\
RUJDQGSUHVHQWVWKHYLHZSRLQWRIWKH,0)
7KLVOHVVRQGRHVQRWDGGUHVVFRQWURYHUVLHVDQG
FULWLFLVPVRIWKH,0))RUWKH,0)SHUVSHFWLYH
RQWKHFULWLFLVPVIROORZWKHOLQNVRQLWV:HE
VLWHWR´)RU6WXGHQWVµDQGWKHQWR´)$4VµDQG
VHHWKHTXHVWLRQ´+RZGRHVWKH,0)UHVSRQGWR
FRPPRQFULWLFLVPV"µ
/
Ê,
+1,
SHJJHGH[FKDQJHUDWHSODQQHGHFRQRPLFV\V
WHPDQGWD[ORRSKROHV,I\RXUVWXGHQWVDUH
QRWIDPLOLDUZLWKWKHVHWHUPV\RXPD\ZLVK
WRKDYHWKHGHILQLWLRQVDYDLODEOH(FRQRPLFV
GLFWLRQDULHVDUHDYDLODEOHRQWKH:HEVLWHRI
WKH$PHULFDQ(FRQRPLF$VVRFLDWLRQXQGHU
´5HVRXUFHVIRU(FRQRPLVWVµDWKWWSZZZYDQ
GHUELOWHGX$($

 $VNWKHVWXGHQWVZKDWWKH\NQRZRUZKDW
PLQXWHV WKH\KDYHKHDUGDERXWWKH,QWHUQDWLRQDO

/
,
-
 9LVXDO
 (QRXJKFRSLHVRI$FWLYLW\$(VRWKDW
HDFKVWXGHQWKDVRQHFDVHVWXG\)RU
H[DPSOHPDNHVL[FRSLHVRI$FWLYLW\$
(IRUDFODVVRIVWXGHQWVVLQFHWKHUH
DUHILYHFDVHVWXGLHV
 )LYHODUJHVKHHWVRIEXWFKHUSDSHURU
VRPHWKLQJFRPSDUDEOHVXFKDVILYHODUJH
0RQHWDU\)XQG,0)$QVZHUVZLOO
YDU\6RPHVWXGHQWVPD\KDYHKHDUG
RI,0)VXSSRUWHGSURJUDPVLQGLIIHU
HQWFRXQWULHV2WKHUVPD\EHDZDUH
RISURWHVWVDJDLQVWWKH,0)DQGRWKHU
JOREDORUJDQL]DWLRQVVXFKDVWKH
:RUOG%DQN2WKHUVWXGHQWVPD\QRW
KDYHKHDUGRIWKH,0)RUPD\FRQIXVH
LWZLWKRWKHURUJDQL]DWLRQV

 'LVSOD\9LVXDO´:KDW,VWKH
,QWHUQDWLRQDO0RQHWDU\)XQGDQG:KDW
VKHHWVRIFRQVWUXFWLRQSDSHUFRORUIXO 'RHV,W'R"µ5HDGWKHILUVWWKUHHTXHV
PDUNHUVRUPRUHDQGWDSHWRKDQJ WLRQVDQGEULHIO\GLVFXVVWKHDQVZHUVZLWK
SRVWHUVRQWKHFODVVURRPZDOO8VLQJ WKHVWXGHQWV%ULHIDQVZHUVWRWKHTXHV
ODUJHVKHHWVRISDSHUDQGPRUHPDUNHUV WLRQVDUHSURYLGHGEHORZPRUHGHWDLOFDQ
ZLOOHQDEOHVHYHUDOVWXGHQWVWRZRUNRQD EHIRXQGDWKWWSZZZLPIRUJ
SRVWHUDWRQHWLPH   $:KDWLVWKH,QWHUQDWLRQDO0RQHWDU\
)XQG"7KH,QWHUQDWLRQDO0RQHWDU\
 2SWLRQDO$ODUJHZDOOPDSDQGRUFRS
LHVRIZRUOGPDSVWRGLVWULEXWHWRWKH
VWXGHQWV<RXFDQILQGZRUOGPDSVRQ
WKH,QWHUQHWDWKWWSZZZOLEXWH[DV
HGXPDSVZRUOGKWPORUDWKWWSZZZFLD
JRYFLDSXEOLFDWLRQVPDSVSXEPDSVSROLWL
FDOBZRUOGKWP
  %:KDWDUHWKHSXUSRVHVRIWKH,0)"
*,"
)XQGIUHTXHQWO\FDOOHGWKH,0)LV
DQLQGHSHQGHQWDJHQF\RIWKH8QLWHG
1DWLRQVV\VWHPHVWDEOLVKHGLQWR
SURPRWHWKHKHDOWKRIWKHZRUOGHFRQR
P\0RVWRIWKHFRXQWULHVLQWKHZRUOG
EHORQJWRWKH,0)DVRILWKDG
PHPEHUV
7KH,0)·VPDLQSXUSRVHVLQFOXGH
1,
1RWH7KHFDVHVWXGLHVLQWKLVOHVVRQXVHWKH
IROORZLQJHFRQRPLFWHUPVWKDWDUHQRWGLUHFWO\
GHILQHGLQWKHOHVVRQ$VLDQILQDQFLDOFULVLV
EDODQFHRISD\PHQWVGHILFLWDQGVXUSOXVFHQ
WUDOEDQNFRPPXQLVPFXUUHQF\ERDUGFXU
LPSURYLQJWKHKHDOWKRIWKHZRUOG
HFRQRP\E\SURPRWLQJWKHH[SDQVLRQ
RIZRUOGWUDGHSURPRWLQJWKHVWDELO
LW\RIH[FKDQJHUDWHVDQGKHOSLQJ
FRXQWULHVFRUUHFWEDODQFHRISD\PHQWV
SUREOHPV$FRXQWU\·VEDODQFHRI

 ‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1<
 :+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"/(6621

SD\PHQWVLVDPHDVXUHRIWKHPRQH\
IORZLQJLQDQGRXWRIWKHFRXQWU\GXU
LQJD\HDU,IPRUHPRQH\IORZVRXW
WKDQLQWKHFRXQWU\UXQVDEDODQFH
RISD\PHQWVGHILFLWDQGPD\QRWKDYH
HQRXJKIRUHLJQFXUUHQF\UHVHUYHVWR
ILQDQFHLPSRUWVDQGWRSD\RIIIRUHLJQ
DSRVWHUVXPPDUL]LQJSRLQWVIURPWKHLU
FDVHVWXG\:KHQWKH\KDYHILQLVKHGWKH
SRVWHUVHDFKJURXSZLOOKDYHWKUHHWRILYH
PLQXWHVWRSUHVHQWLWVSRVWHUWRWKHFODVV
(QFRXUDJHWKHVWXGHQWVWRDGGUHVVWKHGLI
IHUHQWVHFWLRQVRIWKHFDVHVWXG\RQWKHLU
SRVWHU:KDWFRXQWU\DUHWKH\VWXG\LQJ"
GHEWV :KDWZDVWKHSUREOHP":KDWGLGWKH,0)
  &+RZGRHVWKH,0)ZRUNWRDFFRP
SOLVKLWVSXUSRVHV"7KH,0)PRQLWRUV
HFRQRPLFGHYHORSPHQWVDQGSROLFLHV
RILWVPHPEHUFRXQWULHV,WSURYLGHV
SROLF\DGYLFHWRPHPEHUFRXQWULHV
WRKHOSWKHPZLWKSUREOHPVLQWKHLU
HFRQRPLHV,WOHQGVPRQH\WRPHPEHU
FRXQWULHVZLWKEDODQFHRISD\PHQWV
SUREOHPVWRKHOSUHGXFHSRYHUW\DQG
WRDGGUHVVRWKHUHFRQRPLFSUREOHPV,W
SURYLGHVWHFKQLFDODVVLVWDQFHWRPHP
EHUFRXQWULHVWKDWQHHGKHOSZLWKPDF
URHFRQRPLFSROLFLHV
 5HDG4XHVWLRQ'RQ9LVXDO:KDWDUH
VRPHH[DPSOHVRIKRZWKH,0)KDVWULHG
GR":KDWZHUHWKHUHVXOWV"
 127(6WXGHQWSRVWHUVWHQGWREHYDULHG
DQGFUHDWLYH+RZHYHULIDJURXSKDVWURX
EOHJHWWLQJVWDUWHGVXJJHVWWKDWWKHVWX
GHQWVGLYLGHWKHSDSHULQWRIRXUVHFWLRQV
DQGGHYRWHRQHVHFWLRQWRHDFKSDUWRIWKH
FDVHVWXG\0RUHWKDQRQHVWXGHQWFDQ
ZRUNRQWKHSRVWHUDWRQHWLPH<RXPD\
ZLVKWRDSSRLQWVWXGHQWVLQHDFKJURXSWR
EHWKHOHDGHUWKHSULPDU\SUHVHQWHUDQG
WKHOLDLVRQZLWKWKHWHDFKHU
 :KHQWKHJURXSVKDYHILQLVKHGWKHSRVW
HUVFDOORQHDFKJURXSWRSUHVHQWLWV
SRVWHUDQGFDVHVWXG\7DSHWKHILQLVKHG
SRVWHUVWRWKHERDUGRUZDOO
WRKHOSFRXQWULHV"$QQRXQFHWKDWWKH
VWXGHQWVZLOOSURYLGHWKHDQVZHUWRWKLV
"-1,
TXHVWLRQ7KH\ZLOOOHDUQPRUHDERXWWKH
,0)DQGLWVSURJUDPVWKURXJKUHDGLQJ
FDVHVWXGLHVDERXWFRXQWULHVWKDWKDYH
UHFHLYHG,0)DVVLVWDQFHIRUGLIIHUHQW
SUREOHPV8VLQJDZRUOGPDSLIDYDLODEOH
ORFDWHWKHFRXQWULHVRI%DUEDGRV(VWRQLD
6RXWK.RUHD7XUNH\DQG8JDQGD7HOO
WKHVWXGHQWVWKDWWKHVHDUHWKHFRXQWULHV
WKH\ZLOOVWXG\'LYLGHWKHFODVVLQWRILYH
JURXSVDQGJLYHHDFKJURXSFRSLHVRIRQH
RIWKHFDVHVWXGLHVIURP$FWLYLW\$(
 127(7KHVWXGHQWVFDQORFDWHPRUH
LQIRUPDWLRQDERXWWKHVHFRXQWULHVDW
KWWSZZZLPIRUJ6HH´,QIRUPDWLRQE\
6XPPDUL]HWKHOHVVRQE\DJDLQGLVSOD\LQJ
9LVXDO7KLVWLPHFDOORQWKHVWXGHQWVWR
DQVZHUWKHTXHVWLRQVEDVHGRQZKDWWKH\
OHDUQHGIURPUHDGLQJWKHFDVHVWXGLHVDQG
OLVWHQLQJWRWKHSUHVHQWDWLRQV$QVZHUVWR
4XHVWLRQ'VKRXOGLQFOXGHGHWDLOVIURP
WKHFDVHVWXGLHV%DUEDGRVKDGDEDODQFH
RISD\PHQWVSUREOHP(VWRQLDQHHGHGKHOS
WRPDNHWKHWUDQVLWLRQIURPDSODQQHG
WRDPDUNHWHFRQRP\.RUHDQHHGHGKHOS
LQUHFRYHULQJIURPWKH$VLDQILQDQFLDO
FULVLV7XUNH\KDGWRGHFUHDVHORQJWHUP
LQIODWLRQDQG8JDQGDQHHGHGKHOSWR
&RXQWU\$=µKWWSZZZZRUOGEDQNRUJ UHGXFHLWVIRUHLJQGHEW7KH,0)RIIHUHG
6HH´&RXQWULHVDQG5HJLRQVµDQGKWWS DGYLFHWHFKQLFDODVVLVWDQFHDQGORDQV
ZZZFLDJRY6HH´7KH:RUOG)DFWERRNµ
 *LYHHDFKJURXSDVKHHWRIEXWFKHUSDSHU
RUDODUJHVKHHWRIFRQVWUXFWLRQSDSHU3XW
VHYHUDOFRORUHGPDUNHUVLQDFHQWUDODUHD
IRUDOOJURXSVWRXVH7HOOWKHVWXGHQWVWKDW
WKH\ZLOOKDYHDERXWPLQXWHVWRUHDG
DQGGLVFXVVWKHLUFDVHVWXG\DQGPDNH
7KH,0)VXSSRUWHGSURJUDPVGHVFULEHG
JHQHUDOO\HQFRXUDJHGFRXQWULHVWRGHYHORS
IUHHPDUNHWLQVWLWXWLRQVWRUHGXFHWKHVL]H
RIWKHH[FHVVLYHJRYHUQPHQWGHILFLWVDQG
WRFRQGXFWSUXGHQWPRQHWDU\SROLFLHV
$OORIWKHSURJUDPVGHVFULEHGZHUHVXF
FHVVIXOWRVRPHH[WHQW+RZHYHULWVKRXOG
EHHPSKDVL]HGWKDWLQDJOREDOHFRQRP\

‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1< 
/(6621:+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"

PDFURHFRQRPLFSROLFLHVDUHFRPSOH[DQG
FDQEHDIIHFWHGE\PDQ\IRUFHVRXWVLGHRI
WKHFRQWURORIWKHDXWKRULWLHV1RSROLFLHV
LQFOXGLQJWKRVHSURPRWHGE\WKH,0)FDQ
EHH[SHFWHGWRZRUNDOORIWKHWLPH

 ‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1<
 :+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"/(6621

9,68$/
:+$7,67+(,17(51$7,21$/021(7$5<)81'$1'
:+$7'2(6,7'2"

$:KDWLVWKH,QWHUQDWLRQDO0RQHWDU\)XQG"

%:KDWDUHWKHSXUSRVHVRIWKH,0)"

&+RZGRHVWKH,0)ZRUNWRDFFRPSOLVK
LWVSXUSRVHV"

':KDWDUHVRPHH[DPSOHVRIKRZWKH,0)KDV
WULHGWRKHOSFRXQWULHV"

‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1< 
/(6621:+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"

$&7,9,7<$
&$6(678'<%$5%$'26$1'
7+(,17(51$7,21$/021(7$5<)81',0)
7KH&RXQWU\
%DUEDGRVLVD&DULEEHDQLVODQGFRXQWU\ORFDWHGLQWKH1RUWK$WODQWLF2FHDQ,WZDVXQLQKDELWHGZKHQWKH%ULWLVK
VHWWOHGLWLQ6ODYHVZRUNHGRQFRORQLDOVXJDUSODQWDWLRQVXQWLOVODYHU\ZDVDEROLVKHGLQ%DUEDGRV
EHFDPHLQGHSHQGHQWIURP%ULWDLQLQDQGKDVEHHQSROLWLFDOO\VWDEOHVLQFHWKHQ+LVWRULFDOO\WKHHFRQRP\
ZDVGHSHQGHQWRQWKHSURGXFWLRQRIVXJDUFDQHEXWGXULQJWKHVWRXULVPDQGOLJKWPDQXIDFWXULQJEHFDPH
PRUHLPSRUWDQW%DUEDGRVDOVRSURYLGHVILQDQFLDOVHUYLFHVIRUIRUHLJQEXVLQHVVHVZKLFKKHOSVWREULQJLQIRUHLJQ
FXUUHQF\

7KH3UREOHP
7KHEDODQFHRISD\PHQWV%23LVDUHFRUGRIDOOWKHPRQH\FRPLQJLQWRDFRXQWU\IURPDEURDGDQGDOOWKH
PRQH\JRLQJRXWRIDFRXQWU\WRRWKHUFRXQWULHVGXULQJDVSHFLILFWLPHSHULRGXVXDOO\RQH\HDU)RUH[DPSOH
PRQH\FRPHVLQWR%DUEDGRVZKHQWRXULVWVVSHQGPRQH\WKHUHDQGZKHQRWKHUFRXQWULHVLPSRUWVXJDUIURP
%DUEDGRV0RQH\JRHVRXWZKHQSHRSOHLQ%DUEDGRVEX\IRUHLJQJRRGVRUPDNHLQYHVWPHQWVLQRWKHUFRXQWULHV

,QWKHHDUO\VWKH%23GHILFLWLQFUHDVHGVKDUSO\PRUHPRQH\ZDVJRLQJRXWRI%DUEDGRVWKDQFRPLQJLQ
7KLVZDVGXHLQSDUWWRDGURSLQWRXULVPDQGDODUJHLQFUHDVHLQWKHJRYHUQPHQWEXGJHWGHILFLW7KHUHZHUHQ·W
HQRXJKIRUHLJQFXUUHQF\UHVHUYHVWRSD\IRUWKHLPSRUWVDQGRWKHUDVVHWVWKDWSHRSOHLQ%DUEDGRVZDQWHGWREX\
IURPDEURDG,QIODWLRQZDVRQWKHULVHHFRQRPLFJURZWKZDVVWDJQDQWDQGXQHPSOR\PHQWZDVKLJK%DUEDGRV
VRXJKWKHOSIURPWKH,0)

7KH,0)VXSSRUWHG3URJUDP
%DUEDGRVUHTXHVWHGILQDQFLDODVVLVWDQFHIURPWKH,0)ZKLFKLVQRUPDOO\JUDQWHGLIWKHJRYHUQPHQWLPSOHPHQWV
DQHFRQRPLFUHIRUPSURJUDPGHVLJQHGWRHOLPLQDWHWKHXQGHUO\LQJSUREOHPVRYHUWLPH7KH,0)VXSSRUWHGSUR
JUDPLQ%DUEDGRVIRFXVHGRQLPSURYLQJWKHHFRQRP\WKURXJKVRXQGILVFDODQGPRQHWDU\SROLFLHVDQGRQKHOSLQJ
WRPDNHWKHFRXQWU\·VEXVLQHVVHVPRUHFRPSHWLWLYHLQWKHZRUOG7KHJRYHUQPHQWWLJKWHQHGILVFDOSROLF\E\GUDVWL
FDOO\FXWWLQJLWVVSHQGLQJDQGLPSURYLQJWKHHIILFLHQF\RIWKHWD[V\VWHP:DJHVRIJRYHUQPHQWZRUNHUVZHUHFXW
DQGVRPHJRYHUQPHQWZRUNHUVZHUHODLGRIIDQGHQFRXUDJHGWRILQGZRUNLQWKHSULYDWHVHFWRU7KLVDFWLRQZDV
ODWHUUXOHGLOOHJDODQGWKHJRYHUQPHQWKDGWRUHVWRUHZDJHVZKHQWKHHFRQRP\LPSURYHG7KHFHQWUDOEDQNXVHG
PRQHWDU\SROLF\WRUDLVHLQWHUHVWUDWHVWKLVDFWLRQGLVFRXUDJHGH[FHVVLYHVSHQGLQJDQGUHGXFHGLQIODWLRQ,QWKH
SULYDWHVHFWRUDZDJHSURJUDPZKLFKNHSWODERUFRVWVGRZQZDVLPSOHPHQWHG7KLVPHDQWWKDW%DUEDGRVFRXOG
NHHSGRZQWKHSULFHVRILWVH[SRUWVDQGFRPSHWHEHWWHUZLWKRWKHUFRXQWULHV,WVORZSULFHVDOVRDWWUDFWHGWRXU
LVWV$OORIWKHVHPHDVXUHVZHUHGHVLJQHGWRFXUWDLOLQIODWLRQDQGLPSURYHORQJWHUPHFRQRPLFJURZWK7KLVZRXOG
DWWUDFWPRUHIRUHLJQFXUUHQF\WR%DUEDGRVE\LQFUHDVLQJH[SRUWVWRXULVPDQGIRUHLJQLQYHVWPHQWDQGZRXOGKHOS
WREULQJDQHQGWRWKHXQVXVWDLQDEOH%23GHILFLW

$OWKRXJKVRPHRIWKHVHPHDVXUHVVRXQGKDUVKDQGPLJKWEHXQSRSXODUWKHUHDUHVHOGRPPDQ\RSWLRQVIRUFRU
UHFWLQJD%23GHILFLW2QHSRVVLEOHDOWHUQDWLYHZRXOGKDYHEHHQIRU%DUEDGRVWRGHYDOXHLWVFXUUHQF\UHVXOWLQJLQ
ORZHUSULFHVIRUWRXULVWVLQ%DUEDGRVDQGWKRVHEX\LQJ%DUEDGRV·H[SRUWV+RZHYHUWKHJRYHUQPHQWZDVFRPPLW
WHGWRPDLQWDLQLQJWKHYDOXHRIWKH%DUEDGRVGROODUZKLFKZDVSHJJHGWRWKH86GROODU

7KH2XWFRPHV
%DUEDGRVDQGWKH,0)DFKLHYHGWKHGHVLUHGJRDOVLQDUHODWLYHO\VKRUWSHULRGRIWLPH7KH%23GHILFLWWXUQHGLQWR
DVXUSOXVDQGUHVHUYHVRILQWHUQDWLRQDOFXUUHQF\LQFUHDVHGLQGXHWRLQFUHDVHGWRXULVPIURP(XURSHDQG
DGURSLQJRYHUQPHQWVSHQGLQJDQGWKHDVVRFLDWHGLPSRUWV$SURJUDPZDVLQLWLDWHGWRUHYLYHWKHVXJDULQGXV
WU\WRLQFUHDVHH[SRUWV$OWKRXJKWKHUHZHUHLQLWLDOGHFOLQHVLQ*'3ZLWKUHVXOWLQJLQFUHDVHVLQXQHPSOR\PHQW
GXHWRWKHGHFUHDVHLQWKHVL]HRIWKHJRYHUQPHQWVHFWRU*'3JURZWKSLFNHGXSE\,QIODWLRQIHOOWRD
YHU\PDQDJHDEOHUDWHRIRQHSHUFHQW+RZHYHUWKHUHLVDOZD\VDSRVVLELOLW\WKDWSUREOHPVZLOODULVHDJDLQLQWKH
IXWXUHEHFDXVHWKH%DUEDGRVHFRQRP\UHOLHVKHDYLO\RQWRXULVPZKLFKKDVLWVXSVDQGGRZQV

 ‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1<
 :+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"/(6621

$&7,9,7<%
&$6(678'<(6721,$$1'
7+(,17(51$7,21$/021(7$5<)81',0)

7KH&RXQWU\
(VWRQLDLVDQ(DVWHUQ(XURSHDQFRXQWU\ERUGHUHGE\WKH%DOWLF6HD/DWYLDDQG5XVVLD(VWRQLDZDVIRUFHGLQWR
WKH6RYLHW8QLRQLQDQGUHPDLQHGXQGHUFRPPXQLVWFRQWUROXQWLOZKHQWKH6RYLHW8QLRQEURNHXS
$ORQJZLWKRWKHUIRUPHU6RYLHW5HSXEOLFV(VWRQLDLVDWUDQVLWLRQHFRQRP\LWLVLQWKHSURFHVVRIFKDQJLQJIURP
DSODQQHGHFRQRPLFV\VWHPWRDPDUNHWHFRQRPLFV\VWHP(VWRQLDLVFRQVLGHUHGRQHRIWKHPRVWHFRQRPLFDOO\IUHH
DQGVXFFHVVIXOIRUPHU6RYLHW5HSXEOLFVDQGZDVDGPLWWHGWRWKH(XURSHDQ8QLRQLQ

7KH3UREOHP
7KHHDUO\\HDUVRIWUDQVLWLRQZHUHGLIILFXOWLQ(VWRQLDDQGWKHRWKHUIRUPHU6RYLHW5HSXEOLFV7KHHFRQRP\H[SH
ULHQFHGSHUFHQWLQIODWLRQLQD\HDUDIWHUWKHHFRQRP\VZLWFKHGWRDIUHHPDUNHWV\VWHP7KLVPHDQV
WKDWRQDYHUDJHZKDWFRVW(VWRQLDQNURRQVLQFRVWNURRQVLQ3URGXFWLRQIHOOSHUFHQW
UHVXOWLQJLQGHFOLQHVLQLQFRPH+RZHYHUXQHPSOR\PHQWZDVQRWDVKLJKDVH[SHFWHGGXHWRHPLJUDWLRQWR
:HVWHUQFRXQWULHV(VWRQLD·VSUREOHPVZHUHFDXVHGLQSDUWE\WKHVKRFNVDVVRFLDWHGZLWKWKHEUHDNLQWKHWUDGH
DQGILQDQFLDOOLQNVWKDWKDGH[LVWHGZLWKLQWKH6RYLHW8QLRQDQGWKHODJLQHVWDEOLVKLQJDIXQFWLRQLQJPDUNHW
HFRQRP\$OWKRXJK(VWRQLDQVGHVSHUDWHO\ZDQWHGWRKDYHDIUHHPDUNHWHFRQRP\WKH\ODFNHGWKHVNLOOVH[SHUL
HQFHDQGLQVWLWXWLRQVQHFHVVDU\IRUVXFKDQHFRQRP\WRIXQFWLRQ

7KH,0)VXSSRUWHG3URJUDP
,WKDVEHHQDFKDOOHQJHIRUWKH,0)WRKHOS(VWRQLDDQGRWKHUIRUPHUFRPPXQLVWFRXQWULHVUHRULHQWWKHLUHFRQR
PLHVWRZDUGPDUNHWV\VWHPVDQGEHFRPHLQWHJUDWHGLQWRWKHJOREDOHFRQRP\7KH,0)SURYLGHVDGYLFHDQGDVVLV
WDQFHWRKHOSOLEHUDOL]HDQGSULYDWL]HWKHHFRQRPLHVWRHQGSULFHFRQWUROVDQGUHSODFHJRYHUQPHQWRZQHUVKLSZLWK
SULYDWHRZQHUVKLS7KH,0)DOVRSURYLGHVDGYLFHDQGDVVLVWDQFHWRKHOSVWDELOL]HWKHHFRQRPLHVE\FRQWUROOLQJ
LQIODWLRQDQGXQHPSOR\PHQWDQGSURPRWLQJHFRQRPLFJURZWK7KH,0)DVVLVWVLQUHVWUXFWXULQJWKHHFRQRPLHVE\
JXLGLQJWKHSURFHVVRIHVWDEOLVKLQJLQVWLWXWLRQVVXFKDVEDQNVWKDWDUHQHFHVVDU\LIWKHQHZPDUNHWVDUHWRIXQF
WLRQ

7KHILUVW,0)VXSSRUWHGSURJUDPIRU(VWRQLDZDVDSSURYHGLQDQGZDVDLPHGDWPDFURHFRQRPLFVWDELOL]D
WLRQDQGWKHHVWDEOLVKPHQWRILQVWLWXWLRQVWRHDVHWKHWUDQVLWLRQWRDPDUNHWHFRQRPLFV\VWHP7KH,0)SURYLGHG
ORDQVSROLF\DGYLFHDQGWHFKQLFDODVVLVWDQFH(VWRQLDHVWDEOLVKHGDFXUUHQF\ERDUGWRFRQWUROWKHPRQH\VXS
SO\DQGVWDELOL]HLWVQHZFXUUHQF\WKURXJKDIL[HGOLQNZLWKWKH'HXWVFKHPDUNWKH*HUPDQFXUUHQF\DWWKDW
WLPH(VWRQLDDOVRDYRLGHGKDYLQJDJRYHUQPHQWEXGJHWGHILFLWIRUDQXPEHURI\HDUVDQGLQWURGXFHGDSROLF\WR
UHVWUDLQZDJHLQFUHDVHV7KLVSROLF\NHSWGRZQEXVLQHVVFRVWVDQGSULFHVRIJRRGVIRUH[SRUWZKLFKHQFRXUDJHG
RWKHUFRXQWULHVWRLPSRUWJRRGVIURP(VWRQLD

7KHVHFRQGSKDVHRIWKH,0)VXSSRUWHGSURJUDPVIRU(VWRQLDWRRNSODFHIURPWKURXJKDQGZDV
GLUHFWHGWRZDUGLQFUHDVLQJHFRQRPLFJURZWK$IWHU,0)DVVLVWDQFHFRQVLVWHGRQO\RIDGYLFHDQGWHFKQLFDO
DVVLVWDQFH(VWRQLDGLGQRWQHHGWRGUDZRQWKHORDQIXQGVDYDLODEOH)URPWKURXJKWKHJRDOVZHUHWR
FRQWLQXHWRKHOSWKH(VWRQLDQHFRQRP\GHYHORSDQGTXDOLI\IRUDGPLVVLRQLQWRWKH(XURSHDQ8QLRQ

7KH2XWFRPHV
(VWRQLDLVYLHZHGDVKDYLQJVXFFHVVIXOO\PDGHWKHWUDQVLWLRQIURPDSODQQHGWRDPDUNHWHFRQRP\ZKLOHEULQJLQJ
LQIODWLRQXQGHUFRQWURODQGSURPRWLQJHFRQRPLFJURZWK(VWRQLD·VUDWHRILQIODWLRQIHOOWRSHUFHQWLQDQG
DVRIZDVOHVVWKDQSHUFHQW7KHVXFFHVVLQFXUWDLOLQJLQIODWLRQLVDWWULEXWHGWRWKHVXFFHVVIXORSHUDWLRQVRI
WKHFXUUHQF\ERDUG&RPSDUHGWRRWKHUWUDQVLWLRQHFRQRPLHVUHDO*'3UHFRYHUHGIURPLWVLQLWLDOGHFOLQHVTXLFNO\
DQGDVRIZDVLQFUHDVLQJDWUDWHVDYHUDJLQJSHUFHQWDQQXDOO\'HVSLWHLWVVXFFHVVHVLQWKH,0)ZDV
FRQFHUQHGDERXW(VWRQLD·VODUJHFXUUHQWDFFRXQWGHILFLW7KLVPHDQVWKDW(VWRQLDZDVVSHQGLQJPRUHRQLPSRUWV
WKDQLWHDUQHGE\H[SRUWLQJJRRGV

‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1< 
/(6621:+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"

$&7,9,7<&
&$6(678'<6287+.25($$1'
7+(,17(51$7,21$/021(7$5<)81',0)
7KH&RXQWU\
7KH5HSXEOLFRI.RUHDVRPHWLPHVFDOOHG6RXWK.RUHDLVDQ(DVW$VLDQFRXQWU\RQWKHVRXWKHUQKDOIRIWKH
.RUHDQSHQLQVXOD,WEHFDPHDFRXQWU\DIWHU:RUOG:DU,,ZKHQLWZDVVHSDUDWHGIURPFRPPXQLVWFRQWUROOHG
1RUWK.RUHD6RXWK.RUHDDORQJZLWK7DLZDQ6LQJDSRUHDQG+RQJ.RQJLVRQHRIWKHIRXU´$VLDQ7LJHUVµFRXQ
WULHVWKDWH[SHULHQFHGYHU\UDSLGHFRQRPLFJURZWKIURPWKHVWKURXJK6RXWK.RUHD·V*'3SHUFDSLWDLV
WLPHVKLJKHUWKDQ1RUWK.RUHD·VDQGLVHTXDOWRWKDWRIVRPH(XURSHDQ8QLRQFRXQWULHV

7KH3UREOHP
$Q$VLDQILQDQFLDOFULVLVWRRNSODFHLQ,WEHJDQLQ7KDLODQGDQGUDSLGO\VSUHDGWRRWKHUFRXQWULHV
LQFOXGLQJ.RUHD7KLVFULVLVH[SRVHGPDQ\XQGHUO\LQJZHDNQHVVHVLQWKH.RUHDQHFRQRP\ZKLFKZDVGRPLQDWHG
E\ODUJHJRYHUQPHQWJXLGHGFRQJORPHUDWHVFDOOHGFKDHEROV,QSDUWEHFDXVHWKHUHZDVOLWWOHSXEOLFLQIRUPDWLRQRQ
WKHVHFRQJORPHUDWHV·PDQDJHPHQWDQGWKHLUUHDOILQDQFLDOVLWXDWLRQLQYHVWRUVORVWFRQILGHQFHLQ.RUHDDQGZLWK
GUHZPRQH\IURP.RUHDQVWRFNVDQGRWKHUDVVHWV7KHVWRFNPDUNHWSOXQJHGDQGWKHFRXQWU\IHOOLQWRDVHYHUH
UHFHVVLRQ7KHFXUUHQF\WKHZRQGHSUHFLDWHGDQGWKHUHZDVDVLJQLILFDQWULVNRILQIODWLRQ0DQ\RIWKHFKDHEROV
ZHQWEDQNUXSW.RUHDVRXJKWKHOSIURPWKH,0)LQ1RYHPEHULQWKHIRUPRIDWKUHH\HDUVWDQGE\DUUDQJH
PHQWDORDQWKDWWKHFRXQWU\FRXOGERUURZIURPDVQHHGHG

7KH,0)VXSSRUWHG3URJUDP
2Q'HFHPEHUWKH,0)DSSURYHG.RUHD·VUHTXHVWIRUDORDQWRVXSSRUWHFRQRPLFUHIRUPV7KH,0)SUR
YLGHGDVVLVWDQFHXQGHUWKH(PHUJHQF\)LQDQFLQJ0HFKDQLVPZKLFKDOORZHG.RUHDWRUHFHLYHWKHPRQH\YHU\
TXLFNO\EHFDXVHRIWKHFULVLV7KHUHIRUPVZHUHGHVLJQHGWRKHOS.RUHDUHFRYHUIURPWKH$VLDQILQDQFLDOFULVLV
DQGWRFRUUHFWVRPHRIWKHXQGHUO\LQJSUREOHPVLQLWVHFRQRP\2YHUDOOREMHFWLYHVRIWKH,0)VXSSRUWHGSURJUDP
LQFOXGHGUHVWRULQJWKHFRQILGHQFHRILQYHVWRUVLQWKHHFRQRP\UHVWRULQJ*'3JURZWKFRQWDLQLQJLQIODWLRQDQG
EXLOGLQJXSUHVHUYHVRILQWHUQDWLRQDOFXUUHQFLHV5HVSRQGLQJWRDGYLFHIURPWKH,0)WKHJRYHUQPHQWSOHGJHGWR
FRQGXFWPRQHWDU\SROLF\WRDLPIRUDQLQIODWLRQUDWHRISHUFHQWDQGWRVWDELOL]HWKHYDOXHRIWKHZRQWRNHHS
JRYHUQPHQWVSHQGLQJXQGHUFRQWURODQGWRHQFRXUDJHIUHHUWUDGHE\HOLPLQDWLQJVXEVLGLHVWRGRPHVWLFEXVLQHVVHV
WKDWSURWHFWHGWKHPIURPIRUHLJQFRPSHWLWLRQ

7RUHIRUPWKHILQDQFLDODQGEXVLQHVVVHFWRUVRIWKHHFRQRP\EDQNVRWKHUILQDQFLDOLQVWLWXWLRQVDQGEXVLQHVVHV
WKDWZHUHIDLOLQJZHUHFORVHGUDWKHUWKDQVXSSRUWHGE\WKHJRYHUQPHQW)LQDQFLDOVXSHUYLVLRQDQGDFFRXQWLQJ
SUDFWLFHVZHUHUDLVHGWRLQWHUQDWLRQDOVWDQGDUGV)LQDQFLDOVWDWHPHQWVZHUHRSHQWRDXGLWVE\LQWHUQDWLRQDOO\UHF
RJQL]HGILUPV)RUHLJQLQYHVWPHQWZDVDOORZHGLQEXVLQHVVHVZKHUHLWKDGEHHQSURKLELWHG

7KH2XWFRPHV
.RUHDLPSOHPHQWHGVWURQJUHIRUPVDQGPDFURHFRQRPLFSROLFLHVUHFRPPHQGHGE\WKH,0)$VDUHVXOWLWVHFR
QRPLFJURZWKSLFNHGXSTXLFNO\DQGLQIODWLRQZDVNHSWLQFKHFN.RUHDGLGQRWERUURZDOOWKHIXQGVDYDLODEOH
XQGHUWKHORDQDJUHHPHQWDQGDFWXDOO\UHSDLGVXEVWDQWLDODPRXQWVHDUOLHUWKDQVFKHGXOHG

7KH$VLDQILQDQFLDOFULVLVSUHVHQWHGDQHZVLWXDWLRQIRUWKH,0)0DQ\SHRSOHLQFOXGLQJWKRVHLQVLGHWKH,0)
EHOLHYHWKDWLQWKHIXWXUHPRUHVKRXOGEHGRQHWRGHDOZLWKXQGHUO\LQJHFRQRPLFZHDNQHVVHVZLWKWKHJRDORISUH
YHQWLQJFULVHV:KHWKHUWKLVLVDOZD\VSRVVLEOHLVDGLIILFXOWTXHVWLRQ

 ‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1<
 :+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"/(6621

$&7,9,7<'
&$6(678'<785.(<$1'
7+(,17(51$7,21$/021(7$5<)81',0)
7KH&RXQWU\
7XUNH\LVORFDWHGLQERWK(XURSHDQG$VLDDWWKHQRUWKHDVWHQGRIWKH0HGLWHUUDQHDQ6HD0RGHUQ7XUNH\ZDV
IRXQGHGLQIURPSDUWVRIWKHIRUPHU2WWRPDQ(PSLUH7KHUHZHUHVHYHUDOPLOLWDU\FRXSVLQ7XUNH\GXULQJ
WKHWZHQWLHWKFHQWXU\EXWFLYLOLDQJRYHUQPHQWVZHUHDOZD\VDEOHWRUHJDLQSROLWLFDOSRZHU7XUNH\·VHFRQRP\LV
DPL[RIPRGHUQLQGXVWU\DQGWUDGLWLRQDODJULFXOWXUHWKDWDFFRXQWVIRUSHUFHQWRI7XUNLVKHPSOR\PHQW$VRI
7XUNH\ZDVVWULYLQJWRXQGHUWDNHWKHOHJDODQGHFRQRPLFUHIRUPVQHFHVVDU\WRTXDOLI\IRUPHPEHUVKLSLQ
WKH(XURSHDQ8QLRQ

7KH3UREOHP
+LJKDQGYRODWLOHLQIODWLRQKDVEHHQ7XUNH\·VPDLQHFRQRPLFSUREOHP6LQFHDERXWLWKDVDYHUDJHGEHWZHHQ
DQGSHUFHQWSHU\HDUZLWKSHDNVRIRYHUSHUFHQW$QDQQXDOLQIODWLRQUDWHRISHUFHQWPHDQV
WKDWWKHDYHUDJHOHYHORISULFHVGRXEOHVHYHU\\HDU7KLVKLJKUDWHRILQIODWLRQUHVXOWHGIURPORRVHILVFDOSROLF\
LQFOXGLQJRYHUO\JHQHURXVVRFLDOVHFXULW\EHQHILWVDQGODUJHDJULFXOWXUDOVXEVLGLHV7KHVHSD\PHQWVOHGWRYHU\
ODUJHJRYHUQPHQWEXGJHWGHILFLWV:KHQDJRYHUQPHQWVSHQGVPRUHWKDQLWWDNHVLQIURPWD[UHYHQXHVLWKDV
EXGJHWGHILFLWVZKLFKQHHGWREHILQDQFHG,Q7XUNH\WKLVKDVEHHQGRQHWKURXJKORDQVIURPIRUHLJQHUVDQGE\
WKHFHQWUDOEDQNSULQWLQJPRQH\ZKLFKFDXVHVLQIODWLRQ,QWKHVLWEHFDPHHYLGHQWWRHFRQRPLVWVSULYDWH
EXVLQHVVHVDQGWKH,0)WKDWDUHGXFWLRQLQLQIODWLRQZRXOGJUHDWO\EHQHILWWKH7XUNLVKHFRQRP\/RZHULQIODWLRQ
ZRXOGOHDGWRLQFUHDVHGFRQILGHQFHLQWKHHFRQRP\PRUHIRUHLJQLQYHVWPHQWDQGKLJKHUDQGPRUHVWDEOHHFRQRPLF
JURZWK

7KH,0)VXSSRUWHG3URJUDP
6LQFH7XUNH\KDVKDGDVHULHVRI,0)VXSSRUWHGSURJUDPVGHVLJQHGWRFRQWUROLQIODWLRQDQGVWUHQJWKHQWKH
HFRQRP\$QDPELWLRXVVHWRIUHIRUPVZLWK,0)ORDQVDQGDVVLVWDQFHKDGJRRGLQLWLDOUHVXOWV%XWE\WKH
SUREOHPVRILQFUHDVLQJLQIODWLRQDQGDQLQFUHDVLQJJRYHUQPHQWGHILFLWDURVHDJDLQ7KLVIDLOXUHZDVGXHLQSDUW
WRWKH7XUNLVKJRYHUQPHQW·VLQDELOLW\WRFRQWUROVSHQGLQJDVSUHVFULEHGLQWKH,0)SODQ%HWZHHQDQG
7XUNH\DQGWKH,0)WULHGDQXPEHURIWLPHVWRDJUHHRQDSURJUDPWRFRQWUROLQIODWLRQ7KHVHSURJUDPVZHUHQRW
VXFFHVVIXOLQLWLDOO\EHFDXVHWKH\ZHUHQRWLPSOHPHQWHGIXOO\EXWVLQFHUHVXOWVKDYHEHHQPRUHSRVLWLYH

7KHVHPRUHVXFFHVVIXOUHIRUPVKDYHLQFOXGHGDWWHPSWVWRUHGXFHJRYHUQPHQWVSHQGLQJE\UHGXFLQJWKHVL]HRI
WKHJRYHUQPHQWZRUNIRUFHSULYDWL]LQJEXVLQHVVHVIRUPHUO\RZQHGE\WKHJRYHUQPHQWUHVWUDLQLQJJRYHUQPHQW
ZRUNHUV·SD\LQFUHDVHVDQGUHIRUPLQJWKHVRFLDOVHFXULW\V\VWHP(IIRUWVKDYHDOVREHHQXQGHUZD\WRUHIRUPWKH
WD[V\VWHPWRFORVHWD[ORRSKROHVDQGLPSURYHWKHHIILFLHQF\RIWD[FROOHFWLRQV,QWKHVHZD\VWKHJRYHUQPHQWKDV
ORZHUHGLWVGHILFLWE\GHFUHDVLQJVSHQGLQJDQGLQFUHDVLQJWD[UHYHQXHV,QDGGLWLRQWKHFHQWUDOEDQNKDVEHHQ
JUDQWHGLQGHSHQGHQFHDQGJLYHQSULFHVWDELOLW\DVLWVSULPDU\REMHFWLYHDQGKDVEHHQIUHHGIURPWKHREOLJDWLRQRI
SULQWLQJPRQH\WRILQDQFHWKHEXGJHWGHILFLW)LQDOO\WKH,0)JUDQWHGVXEVWDQWLDOILQDQFLDODVVLVWDQFHWRVXSSRUW
7XUNH\·VEDODQFHRISD\PHQWV

7KH,0)VXSSRUWHGSURJUDPVWRLPSURYHILVFDOSROLF\DQGORZHULQIODWLRQLQ7XUNH\KDYHEHHQFULWLFL]HGEHFDXVH
WKH\KDYHWDNHQDORQJWLPHWRWDNHHIIHFW2XWVLGHHYHQWVVXFKDVSROLWLFDOWXUPRLOLQKDYHKLQGHUHGWKH
HIIRUWVDQGDWWLPHVWKHJRYHUQPHQWKDVQRWEHHQIXOO\VXSSRUWLYHRIWKHSURSRVHGUHIRUPV+RZHYHUVLQFH
WKHUHIRUPVKDYHEHHQPRUHIXOO\LPSOHPHQWHGDQGDSSHDUWREHZRUNLQJ

7KH2XWFRPHV
7XUNH\·V*'3JURZWKDYHUDJHGDKHDOWK\SHUFHQWLQDQGLQIODWLRQGHFUHDVHGIURPSHUFHQWLQ
WROHVVWKDQSHUFHQWLQ7KLVVXFFHVVLVDWWULEXWHGWR7XUNH\·VIROORZLQJWKHVWURQJPDFURHFRQRPLFVWDELOL
]DWLRQSROLFLHVVXSSRUWHGE\WKH,0)&RQFHUQVRYHUILVFDOSROLF\UHPDLQKRZHYHUEHFDXVH7XUNH\·VJRYHUQPHQW
GHEWLVVWLOOKLJK

‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1< 
/(6621:+$7,67+(,17(51$7,21$/021(7$5<)81'$1':+$7'2(6,7'2"

$&7,9,7<(
&$6(678'<8*$1'$$1'
7+(,17(51$7,21$/021(7$5<)81',0)

7KH&RXQWU\
8JDQGDLVDODQGORFNHGFRXQWU\LQ(DVW$IULFDZLWKDWURXEOHGKLVWRU\,WZDVD%ULWLVKFRORQ\XQWLO)URP
WRLWVOHDGHUVZHUHNQRZQIRUKXPDQULJKWVDEXVHVFDXVLQJWKHGHDWKRIRYHUDKDOIPLOOLRQRILWV
SHRSOH+RZHYHUVLQFHFRPLQJWRSRZHULQ3UHVLGHQW<RZHUL0XVHYHQLKDVLQWURGXFHGUHIRUPVLPSURYHG
WKHFRXQWU\·VKXPDQULJKWVUHFRUGDQGLQWURGXFHG,0)VXSSRUWHGSURJUDPVWKDWJUHDWO\LPSURYHGWKHHFRQRP\
'HVSLWHWKLVSURJUHVV8JDQGDIDFHVPDQ\FKDOOHQJHV

7KH3UREOHP
,QDQG8JDQGDVRXJKWWKHKHOSRIWKH,0)WRUHGXFHWKHODUJHGHEWVWKDWLWRZHGWRIRUHLJQFRXQWULHV
DQGEDQNV:KHQDFRXQWU\KDVDIRUHLJQGHEWLWKDVWRSD\LQWHUHVWRQWKHGHEWDVZHOODVSDUWRIWKHSULQFLSDO
HYHU\\HDU7KLVPHDQWWKDW8JDQGDFRXOGQRWXVHWKLVPRQH\WRSD\IRUFOHDQZDWHUPHGLFLQHHGXFDWLRQDQG
URDGPDLQWHQDQFH8JDQGD·VODUJHGHEWDOVRPHDQWWKDWIRUHLJQSULYDWHLQYHVWRUVZHUHXQOLNHO\WRZDQWWRLQYHVW
LQWKHFRXQWU\EHFDXVHRIWKHULVNWKDWWKH\ZRXOGQRWJHWWKHLUPRQH\EDFN,WZDVLPSRUWDQWIRU8JDQGDWR
UHGXFHWKHDPRXQWRILWVIRUHLJQGHEWVRLWFRXOGXVHWKHPRQH\WRILJKWSRYHUW\8JDQGDZDVRQHRIWKHSRRUHVW
FRXQWULHVLQWKHZRUOGZLWKDQHVWLPDWHGSHUFHQWRILWVSRSXODWLRQOLYLQJLQSRYHUW\7KHSUREOHPRISRYHUW\LQ
8JDQGDLVUHODWHGWRSUREOHPVLQHGXFDWLRQDQGKHDOWK0DQ\FKLOGUHQGURSRXWRIVFKRROGXHWRDODFNRIPRQH\
7KHUHDUHZLGHVSUHDGKHDOWKSUREOHPVGXHWROLPLWHGDFFHVVWRFOHDQZDWHUGRFWRUVPHGLFLQHDQGWUDQVSRUWDWLRQ

7KH,0)VXSSRUWHG3URJUDP
,Q8JDQGDZDVRQHRIWKHILUVWFRXQWULHVWRTXDOLI\IRU,0)DVVLVWDQFHXQGHUWKH+HDYLO\,QGHEWHG3RRU
&RXQWU\+,3&SURJUDP8QGHUWKLVSURJUDPIRUHLJQFRXQWULHVDQGEDQNVDJUHHWRFXWWKHDPRXQWDFRXQWU\
RZHVWKHPE\DODUJHDPRXQWSURYLGHGWKHFRXQWU\HIIHFWLYHO\LPSOHPHQWVDQDQWLSRYHUW\SURJUDP8JDQGDTXDO
LILHGIRUWKH,0)+,3&SURJUDPEHFDXVHLWGHPRQVWUDWHGWKDWLWIROORZHGJRRGHFRQRPLFSROLFLHVGXULQJWKHWKUHH
\HDUSHULRGSULRUWR2QHRIWKHPDLQJRDOVRIWKLVSURJUDPLVWRJLYHFRXQWULHVGHEWUHOLHIPHDQLQJWKH\GR
QRWQHHGWRSD\EDFNVRPHSULRUORDQVVRWKH\KDYHPRUHPRQH\WRVSHQGRQUHGXFLQJSRYHUW\DQGSURPRWLQJ
HFRQRPLFJURZWK

$VDUHVXOWRIWKH+,3&SURJUDP8JDQGDFRPPLWWHGWRVXSSRUWHFRQRPLFJURZWKDQGWRPDNHVXUHWKDWSRRUSHR
SOHGLUHFWO\EHQHILWHGIURPWKHLPSURYHGHFRQRP\(FRQRPLFJURZWKFDQKHOSUHGXFHSRYHUW\EHFDXVHLWUHVXOWVLQ
PRUHMREVKLJKHULQFRPHVDQGPRUHJRRGVDQGVHUYLFHVIRUWKHSRSXODWLRQ8JDQGD·VSRYHUW\UHGXFWLRQSURJUDPV
LQFOXGHGSULYDWL]LQJEXVLQHVVHVWKDWKDGEHHQUXQE\WKHJRYHUQPHQWLPSURYLQJFRPPXQLFDWLRQDQGWUDQVSRUWD
WLRQQHWZRUNVKHOSLQJH[SRUWLQGXVWULHVFRIIHHLV8JDQGD·VFKLHIH[SRUWDQGSURYLGLQJXQLYHUVDODFFHVVWRKHDOWK
FDUHDQGHGXFDWLRQ7KH8JDQGDQJRYHUQPHQWDOVRFUHDWHGD3RYHUW\$FWLRQ)XQGDVSDUWRILWVEXGJHWWRPRQL
WRUDQWLSRYHUW\SURJUDPVFDUULHGRXWXQGHUWKH+,3&SURJUDP7KLVPDNHVLWHDV\WRHQVXUHWKDW8JDQGDXVHG
WKHPRQH\LWVDYHGIURPWKHGHEWUHGXFWLRQRQKHDOWKHGXFDWLRQDQGRWKHUSRYHUW\UHGXFWLRQSURJUDPV%HFDXVH
8JDQGDPHWDOOWKHFRPPLWPHQWVXQGHUWKH+,3&SURJUDPLQLWZDVRQHRIWKHILUVWFRXQWULHVWRUHFHLYHD
VXEVWDQWLDOUHGXFWLRQLQLWVIRUHLJQGHEWXQGHUDQHQKDQFHG+,3&GHEWUHOLHISURJUDP

7KH2XWFRPHV
7KHRXWFRPHVRI8JDQGD·VHIIRUWVWRUHGXFHSRYHUW\ZLWKLQWKH,0)VXSSRUWHGSURJUDPDQGZLWKWKHVXSSRUW
RIIRUHLJQFRXQWULHVDQGEDQNVDUHHQFRXUDJLQJDQG8JDQGDLVYLHZHGDVDVXFFHVVIXOPRGHOIRUWKH,0)+,3&
SURJUDP$VRI8JDQGDZDVH[SHULHQFLQJVWURQJHFRQRPLFJURZWKORZLQIODWLRQDQGLQFUHDVHVLQH[SRUWV
6WDWLVWLFVVKRZWKDWSRYHUW\KDGEHHQUHGXFHGRYHUWKHSDVW\HDUVRUVR)XUWKHUPRUHVXSSRUWIURPWKH,0)
LQFOXGLQJWKH+,3&KHOSHG8JDQGDWRJDLQFUHGLELOLW\DPRQJRWKHULQWHUQDWLRQDOGRQRUVWKDWDUHQRZSURYLGLQJ
YHU\VLJQLILFDQWDLGWR8JDQGD'HVSLWHWKHVHJDLQV8JDQGDLVVWLOODSRRUFRXQWU\IDFLQJSUREOHPVZLWK+,9
$,'6UHEHOIRUFHVDQGJRYHUQPHQWFRUUXSWLRQ0XFKKDVEHHQDFFRPSOLVKHGDQGPXFKUHPDLQVWREHGRQH

 ‹1$7,21$/&281&,/21(&2120,&('8&$7,211(:<25.1<