The URL can be used to link to this page

Home My WebLink AboutFSD-026-25Staff Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: Special Council Date of Meeting: August 11, 2025 Report Number: FSD-026-25 Authored by: Trevor Pinn, Deputy CAO/Treasurer, Finance and Technology Submitted By: Trevor Pinn, Deputy CAO/Treasurer, Finance and Technology Reviewed By: Mary-Anne Dempster, CAO By-law Number: Resolution Number: CC-07-25 File Number: Report Subject: Elexicon Financing Strategy Update 2025 Recommendation: 1.That Report FSD-026-25, and any related delegations or communication items, be received for information; 2.That the Mayor be requested to phase-out Elexicon dividend and interest revenue from the operating budget in 2026 and 2027 and that the Deputy CAO/Treasurer be directed to put any future dividend and interest revenue from Elexicon into capital reserve funds to assist with financing future capital budgets; 3.That the Deputy CAO/Treasurer, as the Shareholder Representative, be authorized to approve the Memorandum of Understanding and any related documentation necessary to give effect thereto, on behalf of the Municipality, as substantially outlined in Report FSD-025-25, in a form satisfactory to the Deputy CAO/Solictor. Municipality of Clarington Page 2 Report FSD-026-25 Report Overview This report provides an update on pending shareholder transactions and a financial update including the 2024 financial statements. The Pickering and Ajax RFP to transact their shares is complete and at this time there are no pending share transactions. The 2024 Consolidated Financial Statements are included at Attachment 1 and shows an improving net income in 2024 compared to 2023. Elexicon has also completed customer surveys to complete a capitalization plan, this plan will require Elexicon to invest in the necessary infrastructure to service a growing customer base and maintain delivery reliance to existing customers. This investment plan will require significant capital financing. It is being recommended to continue the phase-out of the operating budget reliance on investment income from Elexicon. Future investments are recommended to go into capital reserves to assist with the Municipality’s asset management plan. 1. Background 1.1 Elexicon Corporation (“Elexicon”) is a holding company that is owned jointly by five municipal shareholders as follows: Shareholder Percentage Ownership Town of Ajax 21.828% Town of Belleville 9.044% Municipality of Clarington 9.248% City of Pickering 27.880% Town of Whitby 32.000% 1.2 Elexicon Energy Inc. (“Energy”) is a fully owned subsidiary of Elexicon. Energy is a rate regulated electricity distribution company that delivers electricity to over 180,000 customers throughout ten municipalities in Ontario. Municipality of Clarington Page 3 Report FSD-026-25 1.3 Elexicon was formed in 2019 through the merger of Veridian and Whitby Hydro and assumed the same operating territory as its predecessor organizations. 2. Potential Shareholder Transaction 2.1 Following the merger in April 2019, shareholders were not able to transact t heir shares for 18 months. Since that time there have been several potential shareholder transactions contemplated. 2021 Potential Sale by Pickering 2.2 On October 31, 2021, the City of Pickering approved report FIN 15 -21 “City Centre Financial and Legal Implications”. The City expressed at that time an interest to sell their shares in Elexicon as a way to partially fund the City Centre project. 2.3 In 2022, the City of Pickering indicated that it was no longer pursuing a sale of its shares. 2024 Request for Proposals by Pickering and Ajax for Shares in Elexicon 2.4 On July 3, 2024, the City of Pickering and the Town of Ajax issued a joint statement that noted that they had jointly retained Borden Ladner Gervais LLP (“BLG”) to undertake a non-binding request for proposal to explore the potential sale of their combined share ownership in Elexicon Corporation. 2.5 The Unanimous Shareholders’ Agreement (“the USA”) outlines the rights, responsibilities, timelines and processes that must occur when one or more shareholders wish to sell their shares. 2.6 The non-selling shareholders have the right of first refusal at the same price, terms and conditions of any potential sale. Further, any sale for a controlling share (more than 50%), the non-selling shareholders have the right to elect to also sell at the same terms, conditions and price (the “piggyback right”). 2.7 On July 18, 2025, Pickering notified Elexicon and the other shareholder representatives that the City had concluded the process started by the RFP and “has decided not to proceed with a sale at this time and has formally terminated the RFP process.” Ajax provided similar notification. Municipality of Clarington Page 4 Report FSD-026-25 3. Elexicon Financial Update Financial Statements 3.1 The Consolidated Financial Statements for Elexicon Corporation for the year ended December 31, 2024 are attached as Attachment #1. These statements are completed under International Financial Reporting Standards (IFRS) which is significantly different than the reporting requirements that the Municipality follows. 3.2 The Consolidated Balance Sheet includes both regulatory assets and liabilities, these do not necessarily offset and are shown specifically separate on the balance sheet. These amounts will be dealt with in the future through OEB orders. 3.3 The Corporation has seen a decrease in its current ratio (current assets/current liabilities) in 2024 and currently is approximately 0.64. A ratio below 1.0 means that current liabilities exceed current assets and may indicate liquidity concerns. However, cash and accounts receivable exceed accounts payable which indicate that the Corporation is able to meet its immediate obligations. 3.4 Total liabilities have increased in 2024 while shareholders’ equity decreased, this indicates a raising debt to equity ratio. The Ontario Energy Board has prescribed targets for debt to equity ratios and the capital structure of local distribution companies in Ontario. A raising debt to equity ratio may require shareholders to maintain equity within the company to maintain the required equity investment. 3.5 The consolidated Statement of Income and Comprehensive Income shows a net income of net movements in regulatory balances of $5.6 million which is $5 million higher than in 2023. This number is relevant to Council as it shows the net income after the impacts of rate regulation are factored in. 3.6 The 2023 net income was impacted by an unrealized loss on an interest rate swap which was $9.2 million higher than the unrealized loss in 2024. 3.7 During the year, Elexicon added over $81 million in property, plant and equipment which was primarily $30.8 million in the distribution system and $39.9 million in projects still under progress. This investment supports the earlier comments that investment in the distribution system is required to maintain the system and support the growing community that Elexicon serves. Capitalization Plan 3.8 In April and May of 2025, Elexicon sought input from its customers and stakeholders on their draft capital investment plan for 2027 to 2031. Municipality of Clarington Page 5 Report FSD-026-25 3.9 The investment plan addresses a number of challenges, including rapid growth that puts pressure on the existing electricity systems and requires additional resources and new solutions to manage effectively. 3.10 The plan will build electrical capacity to enable communities to grow, replacing aging and deteriorating infrastructure, improving resilience in the grid to extreme weather events, respond to increasing electrical demand (EV chargers etc) and manage rising costs. 3.11 The capital investment plan will form part of the rate application that Energy is required to file with the OEB to set future electrical rates. 3.12 The capital investment plan will require financing, in the form of debt or equity, to implement. 3.13 To fund the investment in the long-term sustainability of Energy, funds may be required to be kept within the corporation for self-financing. This will reduce dividend revenue to shareholders until the cost for these investments can be included in rates. 4. Financial Considerations 4.1 The investment in Elexicon consists of both fixed income (promissory notes that earn interest), and equity (shares that earn a dividend). The dividend revenue is subject to approval by the Board of Directors and is discretionary. Over the past several years we have seen declines to the dividend revenue, and with the anticipated capital investments expected over the next few years Staff anticipate income to be kept within Elexicon rather than being declared as a dividend. 4.2 The Municipality has already taken steps to eliminate the reliance on the Elexicon dividends to balance current budgetary needs. Dividends received in the future will be used to fund future capital and other one-time needs. This is prudent fiscal management as dividend revenues are not a guaranteed source of income and are dependent on several factors outside of the control of the Municipality. 4.3 Mitigating the impact of removing Elexicon investment income will be increased third - party investment income. Over the past five years, the Municipality has been more active in investments and has benefitted from investment revenues increasing higher than expected. It should be noted that investment revenues are not anticipated to remain at the 2024 level; however it is expected that an increase in investment revenues is sustainable. 4.4 Staff recommend the removal of Elexicon investments from the operating budget, offset by an increase in investment revenues. Any investment income from Elexicon should be put into capital reserves for future capital budget needs. Municipality of Clarington Page 6 Report FSD-026-25 5. Strategic Plan 5.1 Not Applicable. 6. Climate Change 6.1 Not Applicable 7. Concurrence Not Applicable. 8. Conclusion It is respectfully recommended that the Municipality complete the transition to fully remove the Elexicon investment income from the 2026 Budget Update and future investment income be placed into capital reserves. Staff Contact: Trevor Pinn, CPA, CA, Deputy CAO/Treasurer, 905-623-3379 ext.2602 or tpinn@clarington.net. Attachments: Attachment 1 – Elexicon Corporation 2024 Audited Financial Statements Interested Parties: The following interested parties will be notified of Council's decision:  Elexicon Corporation  City of Pickering  Town of Ajax  Town of Whitby  City of Belleville &RQVROLGDWHG)LQDQFLDO6WDWHPHQWVRI (/(;,&21&25325$7,21 $QG,QGHSHQGHQW$XGLWRU V5HSRUWWKHUHRQ <HDUHQGHG'HFHPEHU Attachment 1 to Report FSD-026-25 Attachment 1 to Report FSD-026-25 Attachment 1 to Report FSD-026-25 Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 &RQVROLGDWHG6WDWHPHQWRI&KDQJHVLQ(TXLW\ ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHUZLWKFRPSDUDWLYHLQIRUPDWLRQIRU 1HWLQFRPH DIWHU QHW %DODQFHPRYHPHQWVLQ2WKHU %DODQFH 'HFHPEHU UHJXODWRU\ FRPSUHKHQVLYH'LYLGHQGV'HFHPEHU EDODQFHVORVVSDLG 6KDUHFDSLWDO ± ± ± &RQWULEXWHGFDSLWDO±±± &RQWULEXWHGVXUSOXV ± ± ± $FFXPXODWHGRWKHU FRPSUHKHQVLYHLQFRPHORVV ± ± 5HWDLQHGHDUQLQJV ± ± 'LYLGHQGV ±± 7RWDOHTXLW\ 1HWLQFRPH DIWHU QHW %DODQFHPRYHPHQWVLQ2WKHU %DODQFH 'HFHPEHU UHJXODWRU\ FRPSUHKHQVLYH'LYLGHQGV'HFHPEHU EDODQFHVORVVSDLG 6KDUHFDSLWDO ± ± ± &RQWULEXWHGFDSLWDO±±± &RQWULEXWHGVXUSOXV ± ± ± $FFXPXODWHGRWKHU FRPSUHKHQVLYHLQFRPHORVV ± ± 5HWDLQHGHDUQLQJV ±± 'LYLGHQGV ±± 7RWDOHTXLW\ 6HHDFFRPSDQ\LQJQRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 &RQVROLGDWHG6WDWHPHQWRI&DVK)ORZV ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHUZLWKFRPSDUDWLYHLQIRUPDWLRQIRU 1RWHV &DVKSURYLGHGE\XVHGLQ 2SHUDWLQJDFWLYLWLHV 1HWLQFRPHDIWHUQHWPRYHPHQWVLQUHJXODWRU\ EDODQFHV 1HWPRYHPHQWVLQUHJXODWRU\EDODQFHV $GMXVWPHQWV 'HSUHFLDWLRQDQGDPRUWL]DWLRQ $PRUWL]DWLRQRIGHIHUUHGFRQWULEXWLRQV /RVVRQGLVSRVDOUHWLUHPHQWRISURSHUW\ SODQWDQGHTXLSPHQW (PSOR\HHIXWXUHEHQHILWV 8QUHDOL]HGORVVRQLQWHUHVWUDWHVZDSGHULYDWLYHV 5HDOL]HGJDLQRQLQWHUHVWUDWH VZDSGHULYDWLYHV± )LQDQFHLQFRPH )LQDQFHFRVWV ,QFRPHWD[H[SHQVH 2WKHU &DSLWDOFRQWULEXWLRQVUHFHLYHG 'HSRVLWVDQGGHYHORSHUREOLJDWLRQV ,QFRPHWD[HVSDLG ,QFRPHWD[HVUHFRYHUHG± &KDQJHVLQRSHUDWLQJZRUNLQJ FDSLWDO 1HWFDVKSURYLGHGE\RSHUDWLQJDFWLYLWLHV )LQDQFLQJDFWLYLWLHV ,QWHUHVWUHFHLYHG 5HSD\PHQWRIVKRUWWHUPGHEW ± 5HSD\PHQWRIORQJWHUPGHEW 3URFHHGVIURPVKRUWWHUPGHEW ± 3URFHHGVIURPORQJWHUPGHEW 3URFHHGVIURPVHWWOHPHQWRQLQWHUHVWUDWHVZDSGHULYDWLYHV ± 'LYLGHQGVSDLG ,QWHUHVWSDLG 1HWFDVKSURYLGHGE\ILQDQFLQJDFWLYLWLHV ,QYHVWLQJDFWLYLWLHV $GGLWLRQVWRSURSHUW\SODQWDQGHTXLSPHQW $GGLWLRQVWRLQWDQJLEOHDVVHWV 3URFHHGVIURPGLVSRVDORISURSHUW\SODQW DQGHTXLSPHQW ,QYHVWPHQWLQMRLQWYHQWXUH D 1HWFDVKXVHG LQLQYHVWLQJDFWLYLWLHV ,QFUHDVHLQFDVK &DVKEHJLQQLQJRI\HDU &DVKHQGRI\HDU 6HHDFFRPSDQ\LQJQRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 5HJXODWHGHQYLURQPHQW (( LV DQ HOHFWULFLW\ GLVWULEXWRU OLFHQVHG E\ WKH 2(% ,W LV UHJXODWHG E\ WKH 2(% XQGHU DXWKRULW\RIWKH Ontario Energy Board Act, 19987KH2(%LVFKDUJHGZLWKWKHUHVSRQVLELOLW\ RI DSSURYLQJ RU VHWWLQJ UDWHV IRU WKH GLVWULEXWLRQ RI HOHFWULFLW\ DQG WKH UHVSRQVLELOLW\ RI HQVXULQJWKDWGLVWULEXWLRQFRPSDQLHVIXOILOOREOLJDWLRQVWRFRQQHFWDQGVHUYLFHFXVWRPHUV (OHFWULFLW\GLVWULEXWLRQUDWHV (OHFWULFLW\ GLVWULEXWLRQ UDWHV LQFOXGH ERWK IL[HG PRQWKO\ UDWHV SHU FXVWRPHU DQG YDULDEOH UDWHVSHUN:KXVDJHRUN:GHPDQG7KHVHGLVWULEXWLRQUDWHVDUHVXEMHFWWRUHJXODWLRQE\ WKH2(% 7KH2(%¶VUHJXODWRU\IUDPHZRUNIRUHOHFWULFLW\GLVWULEXWRUVLVGHVLJQHGWRVXSSRUWWKHFRVW HIIHFWLYHSODQQLQJDQGRSHUDWLRQ RIWKHHOHFWULFLW\GLVWULEXWLRQQHWZRUNDQGWR SURYLGHDQ DSSURSULDWHDOLJQPHQWEHWZHHQ D VXVWDLQDEOHILQDQFLDOO\YLDEOH HOHFWULFLW\VHFWRUDQGWKH H[SHFWDWLRQVRIFXVWRPHUVIRUUHOLDEOHVHUYLFHDWDUHDVRQDEOHSULFH 5HYHQXH UHTXLUHPHQW LV W\SLFDOO\ HVWDEOLVKHG GXULQJ D &RVW RI 6HUYLFH ³&26´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ttachment 1 to Report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¶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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 0DWHULDODFFRXQWLQJSROLFLHVFRQWLQXHG ,IDFRQWUDFWFRQWDLQVPXOWLSOHSHUIRUPDQFHREOLJDWLRQVWKH&RUSRUDWLRQDOORFDWHVWKH WRWDO WUDQVDFWLRQ SULFH WR HDFK SHUIRUPDQFH REOLJDWLRQ LQ DQ DPRXQW EDVHG RQ WKH HVWLPDWHG UHODWLYH VWDQGDORQH VHOOLQJ SULFHV RI WKH SURPLVHG JRRGV RU VHUYLFHV XQGHUO\LQJ HDFK SHUIRUPDQFH REOLJDWLRQ :KHQ WKH &RUSRUDWLRQ LV FRQWUDFWHG WR FRQVWUXFWSURMHFWVWKH EXGJHWVDQG RYHUDOOWUDQVDFWLRQSULFHVDUHEXLOWXS XVLQJWKH &RUSRUDWLRQ V EHVW HVWLPDWH RI FRVWV DVVRFLDWHG WR FRPSOHWH WKHSURMHFWXVLQJ WKH DSSURSULDWHRYHUKHDGDQG VXEFRQWUDFWRUUDWHVIRU D JLYHQ SURMHFWDQGORFDWLRQ7KLV DSSURDFKWRHVWLPDWHWKHRYHUDOOFRVWVDQGDVVRFLDWHGUHYHQXHLVFRQVLGHUHGWKHPRVW DSSURSULDWHDVVHVVPHQWRIWKHVWDQGDORQHVHOOLQJSULFHIRUWKHDVVRFLDWHG SHUIRUPDQFH REOLJDWLRQV:KHUHFRVWVDUHGHWHUPLQHGWREHJUHDWHUWKDQWRWDOUHYHQXHORVVHVIURP DQ\FRQVWUXFWLRQFRQWUDFWVDUHUHFRJQL]HGLQIXOOLQWKH LQFRPHVWDWHPHQWLQWKH\HDUWKH ORVVEHFRPHVNQRZQ &RQWUDFW UHYHQXH LV UHFRJQL]HG LQ WKH FRQVROLGDWHG VWDWHPHQW RI LQFRPH DQG FRPSUHKHQVLYHLQFRPHDV WKH&RUSRUDWLRQVDWLVILHVWKHSHUIRUPDQFH REOLJDWLRQV XQGHU FRQWUDFW 7KLV VDWLVIDFWLRQ RFFXUV ZKHQ FRQWURO RI JRRG RU VHUYLFH WUDQVIHU WR WKH FXVWRPHU )RU HDFK SHUIRUPDQFH REOLJDWLRQ VDWLVILHG RYHU WLPH WKH &RUSRUDWLRQ UHFRJQL]HV UHYHQXH E\ PHDVXULQJ SURJUHVV WRZDUGV FRPSOHWH VDWLVIDFWLRQ RIWKDW SHUIRUPDQFH REOLJDWLRQ 8VLQJ RXWSXW RU LQSXW PHWKRGV EDVHG RQ WKH W\SH RIFRQWUDFW WKH &RUSRUDWLRQUHFRJQL]HVUHYHQXHEDVHG RQSURJUHVVWRZDUGVFRPSOHWHVDWLVIDFWLRQRI WKHWUDQVIHURIFRQWURORIWKHSURPLVHG JRRGVRUVHUYLFHV WRWKHFXVWRPHU5HYHQXH IURP IL[HG SULFH DQG FRVWSOXV FRQWUDFWV LV UHFRJQL]HG XVLQJ WKH LQSXW PHWKRG ZLWK UHIHUHQFH WR FRVWV LQFXUUHG )RU DJHQF\ UHODWLRQVKLSV VXFK DVFRQVWUXFWLRQ PDQDJHPHQWFRQWUDFWVZKHUHWKH&RUSRUDWLRQDFWV DVDQDJHQWIRULWVFXVWRPHUV IHH UHYHQXHRQO\LVUHFRJQL]HGJHQHUDOO\LQ DFFRUGDQFHZLWKWKH FRQWUDFWWHUPV6RPH FRQWUDFWVSDUWLFXODUO\PDLQWHQDQFHDQGVHUYLFHFRQWUDFWVGRQRWVSHFLI\WKHDPRXQWRI IL[HGFRQVLGHUDWLRQDWFRQWUDFW LQFHSWLRQ EXWZLOOKDYHDWUDQVDFWLRQSULFHDVVLJQHGWRLW RQFHDZRUNRUGHULVLVVXHG )RUWKHSXUSRVHRIUHYHQXHUHFRJQLWLRQ DQGGLVFORVXUHRQO\WKHWUDQVDFWLRQSULFHRI VHFXUHGZRUNDVHYLGHQFHGE\ZRUNRUGHUVZRXOGEH LQFOXGHGLQUHYHQXH 5HYHQXH IURP FRQWUDFW PRGLILFDWLRQV FRPPRQO\ UHIHUUHG WR DV FKDQJH RUGHUV DQG FODLPVLVUHFRJQL]HGWRWKH H[WHQWWKDWWKHFRQWUDFWPRGLILFDWLRQVKDYHEHHQDSSURYHG E\WKHFXVWRPHUDQGWKHDPRXQWFDQEHPHDVXUHGUHOLDEO\ Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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lectricity Act, 1998WKH&RUSRUDWLRQDQG(( DUHUHTXLUHG WRPDNHSD\PHQWVLQOLHX RIFRUSRUDWH LQFRPHWD[HV 3,/VWRWKH2QWDULR (OHFWULFLW\)LQDQFLDO&RUSRUDWLRQ7KHVHSD\PHQWVDUHFDOFXODWHGLQDFFRUGDQFHZLWKWKH UXOHVIRUFRPSXWLQJLQFRPH DQGRWKHUUHOHYDQWDPRXQWVFRQWDLQHG LQWKH,QFRPH 7D[$FW &DQDGDDQG WKH&RUSRUDWLRQV7D[ $FW2QWDULR DVPRGLILHGE\ WKHElectricity Act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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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³)LQDQFLDOLQVWUXPHQWV´DQG ,)56³)LQDQFLDO,QVWUXPHQWV'LVFORVXUH´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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 0DWHULDODFFRXQWLQJSROLFLHVFRQWLQXHG DPHQGPHQWVWR,)56DQGWRDIXUWKHUIRXUDFFRXQWLQJVWDQGDUGV 7KHDPHQGPHQWVWR,)56DGGUHVV x D FRQIOLFW EHWZHHQ ,)56 DQG ,)56 ³5HYHQXH IURP &RQWUDFWVZLWK &XVWRPHUV´RYHUWKHLQLWLDOPHDVXUHPHQWRIWUDGHUHFHLYDEOHVDQG x KRZD OHVVHH DFFRXQWVIRU WKHGHUHFRJQLWLRQRID OHDVHOLDELOLW\XQGHUSDUDJUDSK RI,)56 7KHDPHQGPHQWRQWUDGHUHFHLYDEOHV PD\UHTXLUHVRPHFRPSDQLHVWRFKDQJHWKHLU DFFRXQWLQJSROLF\ LY3UHVHQWDWLRQDQG'LVFORVXUHLQ)LQDQFLDO6WDWHPHQWV³,)56´ ,Q $SULO WKH ,$6% LVVXHG ,)56 ZKLFK UHSODFHV ,$6 DQG LQWURGXFHV QHZ UHTXLUHPHQWV IRU SUHVHQWDWLRQ DQG GLVFORVXUH LQ ILQDQFLDO VWDWHPHQWV HIIHFWLYH IRU DQQXDOSHULRGVEHJLQQLQJ RQRUDIWHU-DQXDU\ZLWKHDUO\ DGRSWLRQSHUPLWWHG 7KLVQHZVWDQGDUGLVWKHUHVXOWRIWKH VRFDOOHGSULPDU\ILQDQFLDOVWDWHPHQWVSURMHFWDQG DLPVDWLPSURYLQJKRZHQWLWLHVFRPPXQLFDWHLQWKHLUILQDQFLDOVWDWHPHQWVSULPDULO\WKH IROORZLQJ x WKHLQWURGXFWLRQRIFDWHJRULHVDQGGHILQHGVXEWRWDOVLQ WKHVWDWHPHQWRISURILWRU ORVVWKDWDLPDWDGGLWLRQDOUHOHYDQWLQIRUPDWLRQDQGSURYLGHDVWUXFWXUHIRUWKH VWDWHPHQWRISURILWRUORVVWKDWLVPRUHFRPSDUDEOHEHWZHHQHQWLWLHV x 7KH LQWURGXFWLRQ RI UHTXLUHPHQWV WR LPSURYH DJJUHJDWLRQ DQG GLVDJJUHJDWLRQ WKDWDLPDWDGGLWLRQDOUHOHYDQWLQIRUPDWLRQDQGHQVXUHWKDWPDWHULDOLQIRUPDWLRQ LVQRWREVFXUHG x 7KHLQWURGXFWLRQRIGLVFORVXUHV RQ0DQDJHPHQWGHILQHG3HUIRUPDQFH 0HDVXUHV 030VLQWKHQRWHVWRWKHILQDQFLDOVWDWHPHQWVWKDW DLPDWWUDQVSDUHQF\DQG GLVFLSOLQHLQWKHXVHRIVXFKPHDVXUHVDQGGLVFORVXUHVLQDVLQJOHORFDWLRQDQG x 7KHWDUJHWHGLPSURYHPHQWVWR6WDWHPHQWRI&DVK)ORZV³,$6´ZKLFKDLPV DW LPSURYHGFRPSDUDELOLW\EHWZHHQHQWLWLHV ,Q0D\ WKH,$6%LVVXHG,)56³6XEVLGLDULHVZLWKRXW3XEOLF$FFRXQWDELOLW\´ ZKLFKVLPSOLILHVILQDQFLDOUHSRUWLQJ IRUHOLJLEOHVXEVLGLDULHVE\DOORZLQJWKHPWRDSSO\ ,)56$FFRXQWLQJ6WDQGDUGVZLWKUHGXFHGGLVFORVXUHUHTXLUHPHQWV Attachment 1 to Report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± ± /DQGULJKWV ± ± %XLOGLQJV ± 'LVWULEXWLRQVWDWLRQHTXLSPHQW 'LVWULEXWLRQV\VWHP 0HWHUV 2IILFHHTXLSPHQW &RPSXWHUKDUGZDUH ± 9HKLFOHIOHHWD 5HQHZDEOHSRZHUJHQHUDWLRQ ± &RQVWUXFWLRQLQSURJUHVV ± Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 3URSHUW\SODQWDQGHTXLSPHQWFRQWLQXHG 'HFHPEHU$GGLWLRQV 'LVSRVDOV 'HFHPEHU GHSUHFLDWLRQ UHWLUHPHQWV $FFXPXODWHGGHSUHFLDWLRQ /DQGULJKWV ± %XLOGLQJV ± 'LVWULEXWLRQVWDWLRQHTXLSPHQW 'LVWULEXWLRQV\VWHP 0HWHUV 2IILFHHTXLSPHQW ± &RPSXWHUKDUGZDUH ± 9HKLFOHIOHHWD 5HQHZDEOHSRZHUJHQHUDWLRQ 1HWERRNYDOXH 'HFHPEHU 'HFHPEHU$GGLWLRQV 'LVSRVDOV 'HFHPEHU GHSUHFLDWLRQ UHWLUHPHQWV &RVW /DQG ± /DQGULJKWV ± ± %XLOGLQJV ± 'LVWULEXWLRQVWDWLRQHTXLSPHQW 'LVWULEXWLRQV\VWHP 0HWHUV 2IILFHHTXLSPHQW &RPSXWHUKDUGZDUH ± 9HKLFOHIOHHWD 5HQHZDEOHSRZHUJHQHUDWLRQ ± &RQVWUXFWLRQLQSURJUHVV Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 3URSHUW\SODQWDQGHTXLSPHQWFRQWLQXHG 'HFHPEHU$GGLWLRQV 'LVSRVDOV 'HFHPEHU GHSUHFLDWLRQ UHWLUHPHQWV $FFXPXODWHGGHSUHFLDWLRQ /DQGULJKWV ± %XLOGLQJV ± 'LVWULEXWLRQVWDWLRQHTXLSPHQW 'LVWULEXWLRQV\VWHP 0HWHUV 2IILFHHTXLSPHQW ± &RPSXWHUKDUGZDUH ± 9HKLFOHIOHHWD 5HQHZDEOHSRZHUJHQHUDWLRQ ± 1HWERRNYDOXH 5LJKWRIXVH DVVHWV UHODWHG WRWKH OHDVHG SURSHUWLHV WKDW GR QRW PHHW WKH GHILQLWLRQ RI LQYHVWPHQWSURSHUW\DUHSUHVHQWHGDV33 ( D,QFOXGHVYHKLFOHULJKWRIXVH DVVHWV DQG DFFXPXODWHGDPRUWL]DWLRQ 'XULQJWKH \HDUERUURZLQJ FRVWVRIZHUHFDSLWDOL]HGWR33 (DQGFUHGLWHG WRILQDQFHFRVWV:HLJKWHGDYHUDJHFRVWRIORQJWHUPERUURZLQJV LQ((QRWHLVXVHGIRU FDSLWDOL]LQJERUURZLQJFRVWV DVSDUWRI33 (ZLWKDQDYHUDJHUDWHRI $GGLWLRQVWRFRQVWUXFWLRQLQSURJUHVV DUHQHWRIWUDQVIHUVWRRWKHU33 (FDWHJRULHV Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU ,QWDQJLEOHDVVHWVDQGJRRGZLOO D,QWDQJLEOHDVVHWV 'HFHPEHU 'HFHPEHU$GGLWLRQV 'LVSRVDOV 'HFHPEHU DPRUWL]DWLRQ UHWLUHPHQWV &RVW $SSOLFDWLRQVRIWZDUHDQGRWKHU &RQVWUXFWLRQLQSURJUHVVUHODWHGWR DSSOLFDWLRQVRIWZDUHDQGRWKHU ± &DSLWDOFRQWULEXWLRQVQRWHE ± $FFXPXODWHGDPRUWL]DWLRQ $SSOLFDWLRQVRIWZDUHDQGRWKHU ± &DSLWDOFRQWULEXWLRQV ± ± 1HWERRNYDOXH 'HFHPEHU 'HFHPEHU$GGLWLRQV 'LVSRVDOV 'HFHPEHU DPRUWL]DWLRQ UHWLUHPHQWV &RVW $SSOLFDWLRQVRIWZDUHDQGRWKHU ± &RQVWUXFWLRQLQSURJUHVVUHODWHGWR DSSOLFDWLRQVRIWZDUHDQGRWKHU ± &DSLWDOFRQWULEXWLRQVQRWHE ± ± ± $FFXPXODWHGDPRUWL]DWLRQ $SSOLFDWLRQVRIWZDUHDQGRWKHU ± &DSLWDOFRQWULEXWLRQV ± ± 1HWERRNYDOXH ± Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU ,QWDQJLEOHDVVHWVDQGJRRGZLOOFRQWLQXHG 1RERUURZLQJ FRVWVZHUHFDSLWDOL]HGRQLQWDQJLEOHDVVHWVXQGHUGHYHORSPHQW LQRU $SSOLFDWLRQVRIWZDUHDQGRWKHULQFOXGHVH[WHUQDOO\ DFTXLUHGDV ZHOODVLQWHUQDOO\ JHQHUDWHG FRPSXWHUVRIWZDUH7KHUHPDLQLQJDPRUWL]DWLRQSHULRGLVEHWZHHQ RQHWRILYH\HDUV E*RRGZLOO 'HFHPEHU'HFHPEHU $GGLWLRQV ,PSDLUPHQW *RRGZLOO ± ±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ttachment 1 to Report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± ± 1RWH &ROOHFWLRQRIDFFRXQWE ± ± 1RWH ,)56WUDQVLWLRQDODGMXVWPHQWVF ± ± 1RWH $SSURYHGVHWWOHPHQWYDULDQFHVG ±\HDU )XWXUHVHWWOHPHQWYDULDQFHV 569$G ± 1RWH 2(%FRVWDVVHVVPHQWH ±± 1RWH (VWLPDWHGXVHIXOOLIHI±± 1RWH )XWXUHVHWWOHPHQWYDULDQFHV 5&9$J ±±1RWH /RFDWHVK ±±1RWH &ORXGL ±±±1RWH 2QHWLPH,)56FRQYHUVLRQFRVWVM±±1RWH 2WKHU± ± ± 1RWH ± 5HPDLQLQJ UHFRYHU\ %DODQFHVUHYHUVDO 'HFHPEHU DULVLQJLQ5HFRYHU\2WKHU 'HFHPEHU SHULRG WKH\HDU UHYHUVDOPRYHPHQWV \HDUV 'HIHUUHGWD[HVD ± ± 1RWH &ROOHFWLRQRIDFFRXQWE ±± 1RWH ,)56WUDQVLWLRQDODGMXVWPHQWVF ±± 1RWH $SSURYHGVHWWOHPHQWYDULDQFHVG \HDU )XWXUHVHWWOHPHQWYDULDQFHV 569$G 1RWH 2(%FRVWDVVHVVPHQWH ±± 1RWH (VWLPDWHGXVHIXOOLIHI±±1RWH )XWXUHVHWWOHPHQWYDULDQFHV 5&9$J ±±1RWH /RFDWHVK ± ±±1RWH /5$0 ± 2QHWLPH,)56FRQYHUVLRQFRVWVM±±1RWH ± Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 5HJXODWRU\EDODQFHVFRQWLQXHG &UHGLWEDODQFHVFRPSULVHWKHIROORZLQJ 5HPDLQLQJ UHFRYHU\ %DODQFHV UHYHUVDO 'HFHPEHU DULVLQJLQ5HFRYHU\2WKHU 'HFHPEHU SHULRG WKH\HDU UHYHUVDOPRYHPHQWV \HDUV 7D[UHODWHGYDULDQFHVN ± ± 1RWH 3ROHDWWDFKPHQWO ±± 1RWH 'HIHUUHGWD[HVD ± ± 1RWH 2WKHU±±1RWH ± ± 5HPDLQLQJ UHFRYHU\ %DODQFHV UHYHUVDO 'HFHPEHU DULVLQJLQ5HFRYHU\2WKHU 'HFHPEHU SHULRG WKH\HDU UHYHUVDOPRYHPHQWV \HDUV 7D[UHODWHGYDULDQFHVN ± ± 1RWH 3ROHDWWDFKPHQWO ±± 1RWH 'HIHUUHGWD[HVD ± ± 1RWH 2WKHU ± ± 1RWH ± ±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ttachment 1 to Report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otice of Amendments to Codes UHJDUGLQJWKH QRQSD\PHQW RI DFFRXQW VHUYLFH FKDUJHV IRU HOHFWULFLW\ GLVWULEXWRUV LQ ZKLFK WKH 2(% HOLPLQDWHGWKH&ROOHFWLRQRI$FFRXQWFKDUJH (OH[LFRQUHTXHVWHGDQHZ'HIHUUDODQG9DULDQFH$FFRXQWIRU9HULGLDQ 5DWH=RQHLQ LWV ,50 DSSOLFDWLRQ (% WR UHFRUG WKH ORVW UHYHQXHV DVVRFLDWHG ZLWK WKH HOLPLQDWLRQRIWKH&ROOHFWLRQ RI$FFRXQWFKDUJH7KLVUHJXODWRU\EDODQFHZLOOEHVRXJKWIRU GLVSRVLWLRQLQWKH&RUSRUDWLRQ VQH[W&26UHEDVLQJDSSOLFDWLRQRULQDIXWXUHVWDQGDORQH DSSOLFDWLRQ Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 5HJXODWRU\EDODQFHVFRQWLQXHG F ,)56WUDQVLWLRQDODGMXVWPHQWV &RPPHQFLQJ LQWKH&RUSRUDWLRQ¶V9HULGLDQ UDWH]RQHKDVUHFRUGHG UHJXODWRU\GHELW EDODQFHVDULVLQJIURPGHUHFRJQLWLRQRIDVVHWVXQGHU,)567KH:KLWE\UDWH]RQH GHDOWZLWK WKHGHUHFRJQLWLRQRIDVVHWV XQGHU,)56LQD 2(%SURFHHGLQJ ,IWKH:KLWE\UDWH]RQH FDOFXODWHG YDOXHH[FHHGVWKHDSSURYHGPDWHULDOLW\WKUHVKROGLQLWV2(%UDWHGHFLVLRQ LWPD\UHTXHVWWKHHVWDEOLVKPHQWRIDQHZGHIHUUDODQGYDULDQFHDFFRXQW 7KH &RUSRUDWLRQ¶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x 'LVSRVLWLRQRI FRVWSDVVWKURXJKDFFRXQWV³*URXS 'HIHUUDODQG 9DULDQFH$FFRXQWV´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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 5HJXODWRU\EDODQFHVFRQWLQXHG H 2(% FRVW DVVHVVPHQW 7KH%RDUGLVVXHG JXLGDQFHRQ)HEUXDU\SHUPLWWLQJHIIHFWLYH$SULOWKHXVH RI$FFRXQW2WKHU5HJXODWRU\$VVHW±6XE$FFRXQW 2(%&RVW $VVHVVPHQW 9DULDQFH WRUHFRUGDQ\PDWHULDOGLIIHUHQFHV EHWZHHQ2(%FRVWDVVHVVPHQWV FXUUHQWO\EXLOW LQWRUDWHV DQGFRVWDVVHVVPHQWVWKDW ZLOOUHVXOWIURPWKHDSSOLFDWLRQRIWKH QHZ&RVW$VVHVVPHQW 0RGHO³&$0´XQWLOWKHXWLOLW\¶VQH[WUHEDVLQJDSSOLFDWLRQ I(VWLPDWHGXVHIXOOLIH ,Q:KLWE\¶V$QQXDO,5$SSOLFDWLRQ (%WKH2(%DSSURYHGWKHXVHRID QHZ GHIHUUDO$FFRXQW6XEDFFRXQW &KDQJHVLQ(VWLPDWHG8VHIXO/LYHV WRUHFRUGWKH LPSDFWRIDFFRXQWLQJFKDQJHVWRGHSUHFLDWLRQ DVD GLUHFWUHVXOW RIFKDQJHVLQHVWLPDWHG XVHIXO OLYHV UHVXOWLQJ IURP :KLWE\ +\GUR¶V DQQXDO UHYLHZ UHTXLUHG XQGHU ,)56 SHU WKH GHSUHFLDEOH DVVHW VHFWLRQ RI ,$6 ±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etting Ontario Connected Act 62 7KLVUHJXODWRU\EDODQFH ZLOOEHVRXJKWIRUGLVSRVLWLRQLQ WKH&RUSRUDWLRQ VQH[W&26UHEDVLQJ DSSOLFDWLRQRULQD IXWXUHVWDQGDORQHDSSOLFDWLRQ Attachment 1 to Report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± 6XE ± $FFRXQW ± 3ROH $WWDFKPHQW 5HYHQXH 9DULDQFHWR EH XVHG IRU UHFRUGLQJ WKH LQFUHPHQWDOUHYHQXHDULVLQJIURPWKHFKDQJHVWRWKHSROHDWWDFKPHQWFKDUJHDSSOLFDEOHWR DOOOLFHQVHGHOHFWULFLW\GLVWULEXWRUV 7KLVUHJXODWRU\EDODQFH ZLOOEHVRXJKWIRU GLVSRVLWLRQLQ WKH&RUSRUDWLRQ VQH[W&26UHEDVLQJDSSOLFDWLRQRULQDIXWXUHVWDQGDORQHDSSOLFDWLRQ Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU ,QFRPHWD[HV 7KHSURYLVLRQ IRULQFRPHWD[HV GLIIHUVIURPWKHDPRXQWWKDWZRXOG KDYHEHHQUHFRUGHGXVLQJ WKH FRPELQHG &DQDGLDQ IHGHUDO DQG 2QWDULR VWDWXWRU\ LQFRPH WD[UDWH 7KH UHFRQFLOLDWLRQ EHWZHHQWKHVWDWXWRU\DQGHIIHFWLYHWD[UDWHVLVSURYLGHGDVIROORZV ,QFRPHEHIRUHLQFRPHWD[HV )HGHUDODQG2QWDULRVWDWXWRU\LQFRPHWD[UDWH 3URYLVLRQIRULQFRPHWD[HV DWVWDWXWRU\UDWH ,QFUHDVHGHFUHDVHUHVXOWLQJIURP 7HPSRUDU\GLIIHUHQFHVH[SHFWHGWREH UHFRYHUHGIURPFXVWRPHUV &XUUHQWSHULRGORVVHVIRUZKLFKQR GHIHUUHGWD[DVVHWLVUHFRJQL]HG 8QGHU SURYLGHG LQSULRUSHULRGV 2WKHU ,QFRPHWD[HVUHFRUGHGLQUHJXODWRU\ EDODQFHVPRYHPHQWV ,QFRPHWD[UHFRYHU\H[SHQVH (IIHFWLYHLQFRPHWD[ UDWH $OORFDWHG &XUUHQWH[SHQVH 'HIHUUHGH[SHQVHUHFRYHU\ ,QFRPHWD[HVUHFRUGHGLQUHJXODWRU\ EDODQFHVPRYHPHQWV 7RWDOLQFRPHWD[UHFRYHU\H[SHQVH Attachment 1 to Report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±± 'HIHUUHGWD[OLDELOLWLHV 7KH&RUSRUDWLRQKDVQRQFDSLWDOORVVHV IRULQFRPHWD[SXUSRVHVRIDYDLODEOHWRUHGXFH IXWXUH\HDUV LQFRPH IRUWD[SXUSRVHVWKDWZLOOH[SLUHEHWZHHQDQG7KHSRWHQWLDO GHIHUUHG WD[ EHQHILW RI WKHVH ORVVHV KDV QRW EHHQ UHFRJQL]HG VLQFH PDQDJHPHQW KDV GHWHUPLQHGWKDWLWLVSUREDEOHWKDWWKHVHDPRXQWVZLOOQRWEHUHDOL]HGLQWKHIRUHVHHDEOHIXWXUH Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report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¶V SURPLVVRU\ QRWH WR (967$57 ZLWK DFFUXHG LQWHUHVWDQGDOORXWVWDQGLQJ(967$57UHFHLYDEOHVIRUDGGLWLRQDOSURFHHGVRI(* KDV GD\VDIWHUWKHWUDQVDFWLRQ GDWHWRDVVLJQ UHPDLQLQJ FRQWUDFWV RYHUWR:\VHIRU DGGLWLRQDOFRQVLGHUDWLRQ2QFHWKHGD\SHULRGKDVHQGHGWKH DFWLYLW\LQ(*LVH[SHFWHG WREHPLQLPDO DVWKHUHVWUXFWXULQJSODQZLOOKDYHEHHQFRPSOHWHG Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU /RQJWHUPGHEW /RDQSD\DEOHWR7RZQRI&RERXUJ+ROGLQJ,QFPDWXULQJ RQ)HEUXDU\DWDUDWHRI /RQJWHUPGHEWIURPWKH%DQNPDWXULQJRQ 1RYHPEHUDWDUDWHRIQRWHE /RQJWHUPGHEWIURPWKH%DQNPDWXULQJRQ $XJXVWDWDUDWHRIQRWHE /RQJWHUPGHEWIURPWKH%DQNPDWXULQJRQ -XQHQRWHE ± /HVVFXUUHQWSRUWLRQ 6FKHGXOHGSULQFLSDOUHSD\PHQWVIRUWKHQH[WILYH\HDUVDQGWKHUHDIWHUDV RI'HFHPEHU 7KHUHDIWHU /HVVFXUUHQWSRUWLRQ Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU /RQJWHUPGHEWFRQWLQXHG 6FKHGXOHGLQWHUHVWSD\PHQWVIRUWKHQH[WILYH\HDUVDQGWKHUHDIWHUDVRI'HFHPEHU 7KHUHDIWHU ([SHFWHGZHLJKWHGDYHUDJHERUURZLQJFRVWV )LQDQFHFRVWVUHODWHGWRVKRUWWHUPGHEWORQJWHUPGHEWDQGRWKHUFRPSULVH ,QWHUHVWRQ 1RWHVSD\DEOHDQGORDQV &XVWRPHUGHSRVLWVDQGRWKHU /HVV &DSLWDOL]HGERUURZLQJFRVWV )LQDQFHLQFRPH Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU (PSOR\HHIXWXUHEHQHILWV FRQWLQXHG F6LJQLILFDQWDVVXPSWLRQV 'LVFRXQWUDWH XVHG +HDOWKFDUHFRVWVUDWHLQFUHDVHIRUQH[W\HDU 'HQWDOFDUHFRVWVUDWHLQFUHDVHIRUQH[W\HDU F6HQVLWLYLW\DQDO\VLV &KDQJHVLQNH\DVVXPSWLRQVZRXOGKDYHKDGWKHIROORZLQJHIIHFWRQWKHEHQHILWREOLJDWLRQ (VWLPDWHGYDOXHRI IXWXUHSD\PHQWV GLIIHUHQFH %DVH ± 'LVFRXQWUDWH RU RU +HDOWKDQGGHQWDOFRVWWUHQGUDWHV Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU 6KDUHFDSLWDO $XWKRUL]HG 8QOLPLWHG&RPPRQ6KDUHV ,VVXHG &RPPRQ6KDUHV 'LYLGHQGV 2Q )HEUXDU\ WKH %RDUG RI 'LUHFWRUV RI WKH &RUSRUDWLRQGHFODUHG GLYLGHQGV RI RQWKH LVVXHGDQGRXWVWDQGLQJ&RPPRQVKDUHVLQUHVSHFWRIWKHILVFDO\HDU 'LYLGHQGVDQGGLYLGHQGDGYDQFHVSDLGLQZHUHDQGLQFOXGHWKHIROORZLQJ x 4GLYLGHQGVRI x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ttachment 1 to Report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¶V WUDQVPLVVLRQV\VWHPLQ'HFHPEHU 7KH&RUSRUDWLRQHQWHUHG LQWRDFRQQHFWLRQDQG FRVW UHFRYHU\ DJUHHPHQW ZLWK +\GUR 2QH IRU WKH N9 WUDQVPLVVLRQ VXSSO\ WR WKH WUDQVIRUPHUVWDWLRQ7KHFRQVWUXFWLRQFRVWVDOORFDWHGWRWKH&RUSRUDWLRQIRUWKH WUDQVPLVVLRQ VXSSO\ SURMHFW DUH DQG D FDSLWDO FRQWULEXWLRQ RI ZDV UHTXLUHG GXH WR LQFUHDVHLQFRVWDQGORZHULQFUHPHQWDOORDGIRUHFDVW7KH&RUSRUDWLRQDFFUXHGDVDW 'HFHPEHU'HFHPEHUQLODQGUHFRJQL]HGWKLV DVDQLQWDQJLEOHDVVHW Attachment 1 to Report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ttachment 1 to Report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± D ,QFOXGHV UHFRQQHFWLRQGLVFRQQHFWLRQ FROOHFWLRQ DQG FKDQJHRI RFFXSDQF\ FKDUJHV IURP FXVWRPHUV Attachment 1 to Report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ttachment 1 to Report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ttachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG 8QGHUWKHVHDJUHHPHQWVWKH&RUSRUDWLRQDQGWKH%DQNKDYHWKHSHULRGLFH[FKDQJHRI SD\PHQWVZLWKRXWH[FKDQJLQJWKHQRWLRQDOSULQFLSDO DPRXQWRQZKLFKWKHSD\PHQWVDUH EDVHG7KLVHIIHFWLYHO\SURYLGHGWKH&RUSRUDWLRQZLWK D IL[HG UDWH ORDQZKLFKUHGXFHVWKH LPSDFWRIIOXFWXDWLQJLQWHUHVWUDWHV RQORQJWHUPGHEW7KH&RUSRUDWLRQGRHVQRW HQWHULQWR DQ\ VXFKILQDQFLDOLQVWUXPHQWIRUVSHFXODWLYHSXUSRVHV 7KH&RUSRUDWLRQLVDOVRH[SRVHGWRIOXFWXDWLRQV LQ LQWHUHVWUDWHV DV WKHUHJXODWHG UDWH RI UHWXUQ IRU WKH &RUSRUDWLRQ V GLVWULEXWLRQ EXVLQHVV LV GHULYHG XVLQJ D IRUPXODLF DSSURDFK ZKLFKLVLQSDUWEDVHGRQ WKHIRUHFDVW IRUORQJWHUP*RYHUQPHQW RI&DQDGD ERQG\LHOGV 7KLVUDWHRIUHWXUQLVDSSURYHGE\WKH2(%DVSDUWRIWKHDSSURYDORIGLVWULEXWLRQUDWHV F&UHGLWULVN )LQDQFLDODVVHWVFUHDWHFUHGLWULVNWKDWD FRXQWHUSDUW\ZLOOIDLOWRGLVFKDUJHDQ REOLJDWLRQ FDXVLQJDILQDQFLDOORVV7KH&RUSRUDWLRQ VGLVWULEXWLRQUHYHQXHLV HDUQHGRQ D EURDG EDVH RIFXVWRPHUV$V DUHVXOWWKH&RUSRUDWLRQGLGQRWHDUQDVLJQLILFDQWDPRXQWRIUHYHQXHIURP DQ\LQGLYLGXDOFXVWRPHU 7KHLQIODWLRQDU\SUHVVXUHVDQGDKLJKHULQWHUHVWUDWHHQYLURQPHQWFUHDWHDKLJKHUGHJUHHRI XQFHUWDLQW\ GXH WR HFRQRPLF DQG EXVLQHVV GLVUXSWLRQ 0DQDJHPHQW FRQVLGHUV FXUUHQW HFRQRPLFDQGFUHGLWFRQGLWLRQVLQUHYLVLQJWKHHVWLPDWHVDQGMXGJPHQWVXVHGLQSUHSDUDWLRQ RI WKH H[SHFWHG FUHGLW ORVVHV SURYLVLRQ RQ LWV DFFRXQWV UHFHLYDEOH EDODQFHV 7KH &RUSRUDWLRQDSSOLHVSURYLVLRQUDWHVEDVHGRQUHFHQWDQGFKDQJLQJWUHQGVWRFXVWRPHUDJLQJ EDODQFHVFXVWRPHUFROOHFWLRQSDWWHUQVDQGULVNRIFXVWRPHU GHIDXOWDQGKDVUHFRUGHG DQ LQFUHDVHWRWKHH[SHFWHGFUHGLWORVVDOORZDQFHRI7KHLPSDFW RIWKH2(% V PRUDWRULXP RQGLVFRQQHFWLRQVLPSDFWHGWKH&RUSRUDWLRQ VDELOLW\WRPLWLJDWHFUHGLWULVNIURPFXVWRPHU DFFRXQWVUHFHLYDEOHEDODQFHV 7KH&RUSRUDWLRQPDQDJHVFRXQWHUSDUW\ FUHGLWULVNWKURXJKYDULRXVWHFKQLTXHVLQFOXGLQJ OLPLWLQJWRWDOH[SRVXUHOHYHOVZLWKLQGLYLGXDOFRXQWHUSDUWLHVFRQVLVWHQWZLWKWKH&RUSRUDWLRQ V SROLFLHVDQGPRQLWRULQJWKHILQDQFLDOFRQGLWLRQRIFRXQWHUSDUWLHV 0DQDJHPHQW EHOLHYHV WKDW WKH FUHGLW ULVN RI DFFRXQWV UHFHLYDEOH LV OLPLWHG GXH WR WKH IROORZLQJUHDVRQV L7KHUHLVD EURDGEDVHRIFXVWRPHUVZLWK QRRQHFXVWRPHUWKDWDFFRXQWVIRUUHYHQXHRU DQDFFRXQWVUHFHLYDEOHEDODQFHLQH[FHVV RIRIWKHUHVSHFWLYHEDODQFH Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG LL7KH&RUSRUDWLRQDVSHUPLWWHGE\WKH2(% V5HWDLO6HWWOHPHQWDQG 'LVWULEXWLRQ6\VWHP &RGHPD\REWDLQD VHFXULW\GHSRVLWRU/&IURPFXVWRPHUVWRPLWLJDWHULVNRISD\PHQW GHIDXOW LLL7KH SHUFHQWDJH RI DFFRXQWV UHFHLYDEOH WKDW LV RXWVWDQGLQJ PRUH WKDQ GD\V LV DSSUR[LPDWHO\±RIWKHWRWDOQHWRXWVWDQGLQJEDODQFH LY7KH &RUSRUDWLRQ LQFOXGHV DQDPRXQW RI DFFRXQWV UHFHLYDEOHZULWHRIIV ZLWKLQ QHW LQFRPHIRUUDWHVHWWLQJSXUSRVHV ([SHFWHGFUHGLWULVNORVVHV $GGLWLRQDODOORZDQFHV :ULWHRIIV 3XUVXDQW WR WKHLU UHVSHFWLYH WHUPV DFFRXQWV UHFHLYDEOH DUH DJHG DV IROORZV DV DW 'HFHPEHU 7RWDODFFRXQWVUHFHLYDEOH /HVVH[SHFWHGFUHGLWORVVHV 7RWDODFFRXQWVUHFHLYDEOHQHW 2IZKLFK 8QELOOHGUHYHQXH 2XWVWDQGLQJOHVVWKDQGD\V 2XWVWDQGLQJGD\VEXWQRWPRUHWKDQGD\V 2XWVWDQGLQJGD\VEXWQRWPRUHWKDQGD\V 2XWVWDQGLQJGD\VEXWQRWPRUHWKDQGD\V 2XWVWDQGLQJPRUHWKDQGD\V /HVVH[SHFWHGFUHGLWORVVHV Attachment 1 to Report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± ± 6KRUWWHUPGHEWXQGLVFRXQWHGQRWH ± ± /RQJWHUPGHEWXQGLVFRXQWHG /HDVHVGLVFRXQWHG ± Attachment 1 to Report FSD-026-25 (/(;,&21&25325$7,21 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWVFRQWLQXHG ,QWKRXVDQGVRIGROODUV <HDUHQGHG'HFHPEHU )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG )LQDQFLDOFRPPLWPHQWVDVRI'HFHPEHU 'XH EHWZHHQ 'XHZLWKLQ RQHDQGILYH 'XHSDVW RQH\HDU\HDUVILYH\HDUV )LQDQFLDOOLDELOLWLHV $FFRXQWVSD\DEOHDQG DFFUXHGOLDELOLWLHVXQGLVFRXQWHG ± ± 6KRUWWHUPGHEWXQGLVFRXQWHGQRWH ± ± /RQJWHUPGHEWXQGLVFRXQWHG /HDVHVGLVFRXQWHG ±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x /HYHOXQDGMXVWHGTXRWHGSULFHVLQDFWLYHPDUNHWVIRULGHQWLFDODVVHWVRUOLDELOLWLHV x /HYHO LQSXWVRWKHUWKDQ TXRWHGSULFHV LQFOXGHGLQ /HYHO WKDWDUHREVHUYDEOHIRUWKH DVVHWRUOLDELOLW\HLWKHUGLUHFWO\ RULQGLUHFWO\DQG x /HYHOLQSXWVIRUDVVHWVDQGOLDELOLWLHVWKDWDUHQRWEDVHGRQREVHUYDEOHPDUNHWGDWD 7KHLQWHUHVWUDWHVZDSGHULYDWLYHVDUHDOO /HYHODVDW'HFHPEHU 7KHUHZHUHQRWUDQVIHUVEHWZHHQOHYHOV GXULQJWKH\HDU Attachment 1 to Report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± ± 6KRUWWHUPGHEW ± ± 7RWDO Attachment 1 to Report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ttachment 1 to Report FSD-026-25