ML14229A068

Official Exhibit - NRC-001-00-BD01 - Statement of Position (Redacted)

ML14229A068
Person / Time
Site:	Aerotest
Issue date:	06/13/2014
From:	Amitava Ghosh, Uttal S, Jeremy Wachutka NRC/OGC
To:	Atomic Safety and Licensing Board Panel
SECY RAS
References
RAS 26037, ASLBP 14-931-01-LT-BD01, 50-228-LT
Download: ML14229A068 (32)

Text

15&

6XEPLWWHG-XQH

35235,(7$5<,1)250$7,21

81,7('67$7(62)$0(5,&$

18&/($55(*8/$725<&200,66,21



%()25(7+(35(6,',1*2)),&(5

$720,&6$)(7<$1'/,&(16,1*%2$5'



,QWKH0DWWHURI    

      

$(527(6723(5$7,216,1&   'RFNHW1R/7

      

$HURWHVW5DGLRJUDSK\DQG   

5HVHDUFK5HDFWRU     

      













15&67$)),1,7,$/:5,77(167$7(0(172)326,7,21

5(*$5',1*'(1,$/2)7+(,1',5(&7/,&(16(75$16)(5

2)7+($(527(675$',2*5$3+<$1'5(6($5&+5($&725









United States Nuclear Regulatory Commission Official Hearing Exhibit

 AEROTEST OPERATIONS, INC.

In the Matter of:

 (Aerotest Radiography and Research Reactor)

ASLBP #: 14-931-01-LT-BD01

 Docket #: 05000228

 Exhibit #: NRC-001-00-BD01 Identified: 8/12/2014

 Admitted: 8/12/2014 Withdrawn:

Rejected: Stricken:

 Other:









$QLWD*KRVK

6XVDQ8WWDO

-HUHP\:DFKXWND



&RXQVHOIRU15&6WDII









-XQH









35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21

L

7$%/(2)&217(176







            3DJH



,1752'8&7,21

%$&.*5281'

',6&866,21

, /HJDO6WDQGDUGV

,, 7KH6WDII¶V'HQLDORIWKH,QGLUHFW/LFHQVH7UDQVIHU$SSOLFDWLRQ6KRXOG%H8SKHOG

%HFDXVHWKH&RPSDQLHV'R1RW6DWLVI\WKH&RPPLVVLRQ¶V)LQDQFLDO4XDOLILFDWLRQV

5HTXLUHPHQWV

$ 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\3RVVHVVWKH)XQGV1HFHVVDU\

WR&RYHU(VWLPDWHG2SHUDWLRQ&RVWVIRUWKH3HULRGRIWKH/LFHQVH7KURXJK

)XQGLQJ&RPPLWPHQWV

% 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFH

RI2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU(VWLPDWHG2SHUDWLRQ&RVWVIRU

WKH3HULRGRIWKH/LFHQVH%HFDXVHWKHLU5HYHQXH3URMHFWLRQV$UH

6SHFXODWLYHDQG8QUHDVRQDEOH

 5HYHQXHIURP&RPPHUFLDO6HUYLFHV

 5HYHQXHIURP5HVHDUFK

 5HYHQXH)URP7UDLQLQJ$FWLYLWLHV

 7RWDO3URMHFWHG5HYHQXH

& 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFH

RI2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU(VWLPDWHG2SHUDWLRQ&RVWVIRU

WKH3HULRGRIWKH/LFHQVH%HFDXVH7KHLU&RVWDQG5HYHQXH3URMHFWLRQV

'R1RW$FFRXQWIRUWKH'LVFRYHU\RI'DPDJHG)XHO(OHPHQWVDWWKH

$555

' 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFH

RI2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU)XHO6WRUDJH&RVWV8QWLOWKH

'2(¶V$FFHSWDQFHRIWKH)XHOLQ

&21&/86,21













35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21

-XQH



81,7('67$7(62)$0(5,&$

18&/($55(*8/$725<&200,66,21



%()25(7+(35(6,',1*2)),&(5

$720,&6$)(7<$1'/,&(16,1*%2$5'



,QWKH0DWWHURI    

      

$(527(6723(5$7,216,1&   'RFNHW1R/7

      

$HURWHVW5DGLRJUDSK\DQG   

5HVHDUFK5HDFWRU     





15&67$)),1,7,$/:5,77(167$7(0(172)326,7,21

5(*$5',1*'(1,$/2)7+(,1',5(&7/,&(16(75$16)(5

2)7+($(527(675$',2*5$3+<$1'5(6($5&+5($&725



,1752'8&7,21

3XUVXDQWWR&)5 D  DQGWKH3UHVLGLQJ2IILFHU¶V0D\DQG0D\

RUGHUVLQWKLVSURFHHGLQJWKH861XFOHDU5HJXODWRU\&RPPLVVLRQ 15& VWDII 6WDII 

KHUHE\VXEPLWVLWVLQLWLDOZULWWHQVWDWHPHQWRISRVLWLRQFRQFHUQLQJWKHFODLPE\$HURWHVW

2SHUDWLRQV,QF $HURWHVW DQG1XFOHDU/DE\ULQWK//& 1XFOHDU/DE\ULQWK  FROOHFWLYHO\WKH

&RPSDQLHV WKDWWKH6WDIILPSURSHUO\GHQLHGWKH&RPSDQLHV¶DSSOLFDWLRQIRUWKHLQGLUHFWWUDQVIHU

RIWKH$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU $555 OLFHQVHWR1XFOHDU/DE\ULQWKRQWKH

JURXQGVWKDWWKHDSSOLFDWLRQGLGQRWVDWLVI\WKH&RPPLVVLRQ¶VILQDQFLDOTXDOLILFDWLRQV

UHTXLUHPHQWV7KH6WDII¶VVWDWHPHQWRISRVLWLRQLVVXSSRUWHGE\WKHZULWWHQWHVWLPRQ\DQG

DIILGDYLWVRI0V-RFHO\Q/LDQDQG0V$QQHOLHVH6LPPRQV ([KLELW15& DQG0U

$OH[DQGHU$GDPV-U ([KLELW15& DQGWKHH[KLELWVFLWHGWKHUHLQ)RUWKHUHDVRQVVHW

IRUWKEHORZDQGLQWKHVXSSRUWLQJWHVWLPRQ\WKH6WDIIUHVSHFWIXOO\VXEPLWVWKDWWKH&RPSDQLHV¶





0HPRUDQGXPDQG2UGHU ,QLWLDO6FKHGXOLQJ2UGHUDQG$GPLQLVWUDWLYH'LUHFWLYHV  0D\ 

XQSXEOLVKHG  $JHQF\ZLGH'RFXPHQWV$FFHVVDQG0DQDJHPHQW6\VWHP $'$06 $FFHVVLRQ1R

0/$ 0HPRUDQGXPDQG2UGHU 5XOLQJRQ$GPLVVLELOLW\RI$UHDVRI&RQWURYHUV\  0D\

  XQSXEOLVKHG  $'$06$FFHVVLRQ1R0/$ 

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



FODLPLVXQVXSSRUWHGDQGODFNVPHULW$FFRUGLQJO\WKH6WDII¶VGHQLDORIWKHLQGLUHFWOLFHQVH

WUDQVIHUVKRXOGEHXSKHOG

%$&.*5281'

 7KLVPDWWHUDULVHVIURP$HURWHVWDQG1XFOHDU/DE\ULQWK¶V0D\DSSOLFDWLRQIRUDQ

LQGLUHFWOLFHQVHWUDQVIHURI)DFLOLW\2SHUDWLQJ/LFHQVH1R5IRUWKH$555 $SSOLFDWLRQ 7KH

$555LVDFRPPHUFLDOQRQSRZHUUHDFWRUORFDWHGQHDU6DQ5DPRQ&DOLIRUQLD$HURWHVW

FXUUHQWO\KROGVWKHRSHUDWLQJOLFHQVHIRUWKH$555$HURWHVWLVDZKROO\RZQHGVXEVLGLDU\RI

2($$HURVSDFH,QF 2($$HURVSDFH ZKLFKLVDZKROO\RZQHGVXEVLGLDU\RI2($,QF 2($ 

ZKLFKLVDZKROO\RZQHGVXEVLGLDU\RI$XWROLY$63,QF $XWROLY$63 ZKLFKLVDZKROO\RZQHG

VXEVLGLDU\RI$XWROLY,QF $XWROLY 7KHRZQHUVKLSRI$HURWHVWFKDQJHGZKHQ$XWROLY$63

DFTXLUHGDOORXWVWDQGLQJVKDUHVRI2($LQ$XWROLYLVDFRPSDQ\KHDGTXDUWHUHGLQ

6ZHGHQDQGLQFRUSRUDWHGLQ'HODZDUH7KLVRZQHUVKLSFKDQJHFRQVWLWXWHGDQLQGLUHFWOLFHQVH

WUDQVIHURIWKH$555WR$XWROLYEXWLWZDVQRWWKHVXEMHFWRIDQDSSOLFDWLRQIRUSULRU15&

DSSURYDODVLVUHTXLUHGE\&)5WKHUHIRUHWKHWUDQVIHUZDVQHLWKHUUHYLHZHGQRU

DSSURYHGE\WKH15&6XEVHTXHQWO\LQWKH15&GLUHFWHG$HURWHVWDQG$XWROLYWR





6HH/HWWHUIURP'DULR%ULVLJKHOOD3UHVLGHQW$HURWHVW2SHUDWLRQV,QFDQG'U'DYLG0

6ODXJKWHU&KLHI([HFXWLYH2IILFHU1XFOHDU/DE\ULQWK//&WR15&'RFXPHQW&RQWURO'HVN$SSOLFDWLRQ

IRU$SSURYDORI,QGLUHFW7UDQVIHURI&RQWURORI/LFHQVH3XUVXDQWWR&)5 0D\ 

>([KLELW15&@$WWDFKPHQWV>([KLELWV15&DQG15& 3 @ $SSOLFDWLRQ 7KH³ 3 'LQDQ

H[KLELWQXPEHUGHQRWHVWKDWWKHH[KLELWFRQWDLQVSURSULHWDU\LQIRUPDWLRQ



6HH$HURWHVW2SHUDWLRQV,QF'RFNHW1R$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU

$555 $PHQGPHQWWR)DFLOLW\2SHUDWLQJ/LFHQVH$PHQGPHQW1R/LFHQVH1R5>([KLELW15&

@ $555/LFHQVH 



6HH/HWWHUIURP0LFKDHO6$QGHUVRQ9LFH3UHVLGHQWIRU/HJDO$IIDLUVDQG*HQHUDO&RXQVHO

$XWROLY,QFWR'DYLG0DWKHZV'LUHFWRU155DQG0DUYLQ0HQGRQFD6HQLRU3URMHFW0DQDJHU155

15&'LYHVWLWXUH3ODQ5HJDUGLQJ,QGLUHFW7UDQVIHURIWKH$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU

$555  -DQ >([KLELW15&@



6HHLG



6HH/HWWHUIURP6DQGUD/:DUUHQ0DQDJHU$HURWHVW2SHUDWLRQV,QFWR'LUHFWRU15515&

$SU >([KLELW15&@



6HH/HWWHUIURP/HG\DUG%0DUVK15&WR5D\7VXNLPXUD3UHVLGHQW$HURWHVW2SHUDWLRQV

,QF7UDQVIHURI2ZQHUVKLS 2FW >([KLELW15&@

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



GHYHORSDSODQIRUIXOORUSDUWLDOGLYHVWLWXUHWRHQVXUHWKDWWKH$555LVQRWZKROO\RZQHGGLUHFWO\

RULQGLUHFWO\E\$XWROLY,QUHVSRQVH$XWROLYGHFLGHGWRSXUVXHWKHVDOHRI$HURWHVW

 2Q0D\WKH&RPSDQLHVVXEPLWWHGDQDSSOLFDWLRQWRWKH15&VHHNLQJLWV

FRQVHQWWRWKHLQGLUHFWOLFHQVHWUDQVIHURIWKH$555WKURXJKWKHDFTXLVLWLRQRI$HURWHVWE\

1XFOHDU/DE\ULQWK2Q-XO\WKH6WDIILQIRUPHGWKH&RPSDQLHVWKDWLWZDVXQDEOHWR

FRPSOHWHLWVDFFHSWDQFHUHYLHZZLWKRXWDGGLWLRQDOLQIRUPDWLRQ7KH&RPSDQLHVSURYLGHGWKHLU

UHVSRQVHRQ-XO\:LWKWKLVUHVSRQVHWKH6WDIIDFFHSWHGWKHOLFHQVHWUDQVIHU

DSSOLFDWLRQIRUUHYLHZ7KH6WDIIUHTXHVWHGDGGLWLRQDOLQIRUPDWLRQRQ6HSWHPEHU

7KH&RPSDQLHVUHVSRQGHGRQ2FWREHU7KH)HGHUDO5HJLVWHUQRWLFHRI15&





6HH/HWWHUIURP'DYLG%0DWWKHZV15&WR0LFKDHO$QGHUVRQ*HQHUDO&RXQVHO$XWROLYDQG

5D\57VXNLPXUD3UHVLGHQW$HURWHVW2SHUDWLRQV,QF'LYHVWLWXUH3ODQ5HJDUGLQJ,QGLUHFW7UDQVIHURI

WKH$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU $555 WR$XWROLY$63,QFDQG$XWROLY,QF 2FW

 >([KLELW15&@



6HH/HWWHUIURP0LFKDHO$QGHUVRQ9LFH3UHVLGHQWIRU/HJDO$IIDLUVDQG*HQHUDO&RXQVHO

$XWROLYWR'DYLG0DWKHZV15&5('LYHVWLWXUH3ODQ5HJDUGLQJ,QGLUHFW7UDQVIHURIWKH$HURWHVW

5DGLRJUDSK\DQG5HVHDUFK5HDFWRU $555 WR$XWROLY$63,QFDQG$XWROLY,QF 'HF >([KLELW

15&@



([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



6HH/HWWHUIURP-HVVLH4XLFKRFKR15&WR'DULR%ULVLJKHOOD3UHVLGHQW$HURWHVW2SHUDWLRQV

,QFDQG'DYLG06ODXJKWHU&KLHI([HFXWLYH2IILFHU1XFOHDU/DE\ULQWK//&5HTXHVWWR$HURWHVW

2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&WR6XSSOHPHQWWKH/LFHQVH7UDQVIHU$SSOLFDWLRQ -XO\

 >([KLELW15&@(QFORVXUH5HTXLUHG6XSSOHPHQWDO,QIRUPDWLRQ)RU7KH15&$FFHSWDQFH

5HYLHZRIWKH/LFHQVH7UDQVIHU$SSOLFDWLRQV:KLFK:DV6XEPLWWHGE\$HURWHVWDQG1XFOHDU/DE\ULQWK

-XO\ >([KLELW15&@ 5$, 



6HH/HWWHUIURP-D\6LOEHUJ&RXQVHO$HURWHVW2SHUDWLRQV,QFWR15&'RFXPHQW&RQWURO

'HVN5HVSRQVHWR5HTXHVWWR$HURWHVW2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&WR6XSSOHPHQWWKH

/LFHQVH7UDQVIHU$SSOLFDWLRQ -XO\ >([KLELWV15&15& 3 @ 5$,5HVSRQVH 



6HH/HWWHUIURP$OH[DQGHU$GDPV15&WR'DULR%ULVLJKHOOD3UHVLGHQW$HURWHVW2SHUDWLRQV

,QFDQG'DYLG06ODXJKWHU&KLHI([HFXWLYH2IILFHU1XFOHDU/DE\ULQWK//&$FFHSWDQFHRI5HTXHVWHG

/LFHQVH7UDQVIHU$SSOLFDWLRQ $XJ >([KLELW15&@



6HH/HWWHUIURP$OH[DQGHU$GDPV15&WR'DULR%ULVLJKHOOD3UHVLGHQW$HURWHVW2SHUDWLRQV

,QFDQG'DYLG06ODXJKWHU&KLHI([HFXWLYH2IILFHU1XFOHDU/DE\ULQWK//&5HTXHVWIRU$GGLWLRQDO

,QIRUPDWLRQ5H$SSOLFDWLRQIRU$SSURYDORI,QGLUHFW7UDQVIHURI&RQWURORI/LFHQVHRI$HURWHVW

5DGLRJUDSK\DQG5HVHDUFK5HDFWRU3XUVXDQWWR&)5 6HSW >([KLELW15&@

(QFORVXUH5HTXHVWIRU$GGLWLRQDO,QIRUPDWLRQ5HJDUGLQJWKH,QGLUHFW/LFHQVH7UDQVIHU$HURWHVW

5DGLRJUDSK\DQG5HVHDUFK5HDFWRU)DFLOLW\2SHUDWLQJ/LFHQVH1R5'RFNHW1R 6HSW

 >([KLELWV15&DQG15& 3 @ 5$, 



6HH/HWWHUIURP-D\6LOEHUJ&RXQVHO$HURWHVW2SHUDWLRQV,QFWR15&'RFXPHQW&RQWURO

'HVN5HVSRQVHWR5HTXHVWIRU$GGLWLRQDO,QIRUPDWLRQ5H$SSOLFDWLRQIRU$SSURYDORI,QGLUHFW7UDQVIHURI

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



FRQVLGHUDWLRQRIWKHLQGLUHFWOLFHQVHWUDQVIHUDSSOLFDWLRQZDVSXEOLVKHGRQ'HFHPEHU

7KH6WDIIUHTXHVWHGDGGLWLRQDOLQIRUPDWLRQRQ'HFHPEHU$SXEOLFPHHWLQJZDVKHOG

RQ'HFHPEHUWRGLVFXVVWKLVUHTXHVWZLWKWKH&RPSDQLHV7KH&RPSDQLHV

UHVSRQGHGWRWKH6WDII¶V'HFHPEHUUHTXHVWIRUDGGLWLRQDOLQIRUPDWLRQRQ-DQXDU\

 7KH6WDIIHYDOXDWHGWKHLQIRUPDWLRQSURYLGHGLQWKH$SSOLFDWLRQDVZHOODVWKHLQIRUPDWLRQ

SURYLGHGLQUHVSRQVHWRWKH6WDII¶VUHTXHVWVIRUDGGLWLRQDOLQIRUPDWLRQ 5$,V $IWHUFRQVLGHULQJ

WKHUHDVRQDEOHQHVVRIWKHSURYLGHGHVWLPDWHGRSHUDWLQJFRVWVWKHUHDVRQDEOHQHVVRIWKH

SURYLGHGILQDQFLDOSURMHFWLRQVDQGWKHLUXQGHUO\LQJDVVXPSWLRQVDQGWKHVHQVLWLYLW\RIWKH

SURYLGHGUHYHQXHSURMHFWLRQVDPRQJRWKHUWKLQJVWKH6WDIIFRQFOXGHGWKDW³QHLWKHU$HURWHVWQRU

1XFOHDU/DE\ULQWKPHHWVWKHILQDQFLDOTXDOLILFDWLRQUHTXLUHPHQWVXQGHU&)5 I EHFDXVH

WKH\KDYHQRWGHPRQVWUDWHGWKDWWKH\SRVVHVVRUKDYHUHDVRQDEOHDVVXUDQFHRIREWDLQLQJWKH

IXQGVQHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLQJFRVWVIRUWKHSHULRGRIWKHOLFHQVH'$FFRUGLQJO\

RQ-XO\WKH6WDIIGHQLHGWKH&RPSDQLHV¶LQGLUHFWOLFHQVHWUDQVIHUDSSOLFDWLRQEHFDXVH

³WKH15&GRHVQRWKDYHUHDVRQDEOHDVVXUDQFHDVUHTXLUHGE\&)5WKDW1XFOHDU



&RQWURORI/LFHQVHRI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU3XUVXDQWWR&)5 2FW

 >([KLELWV15&DQG15& 3 @ 5$,5HVSRQVH 



6HH$HURWHVW2SHUDWLRQV,QF&RQVLGHUDWLRQRI,QGLUHFW7UDQVIHUDQG&RQIRUPLQJ$PHQGPHQW

)HG5HJ 'HF >([KLELW15&@



6HH/HWWHUIURP$OH[DQGHU$GDPV15&WR'DULR%ULVLJKHOOD3UHVLGHQW$HURWHVW2SHUDWLRQV

,QFDQG'DYLG06ODXJKWHU&KLHI([HFXWLYH2IILFHU1XFOHDU/DE\ULQWK//&5HTXHVWIRU$GGLWLRQDO

,QIRUPDWLRQ5H$SSOLFDWLRQIRU$SSURYDORI,QGLUHFW7UDQVIHURI&RQWURORI/LFHQVHRI$HURWHVW

5DGLRJUDSK\DQG5HVHDUFK5HDFWRU3XUVXDQWWR&)5 'HF >([KLELW15&@

(QFORVXUH2IILFHRI1XFOHDU5HDFWRU5HJXODWLRQ5HTXHVWIRU$GGLWLRQDO,QIRUPDWLRQ5H$SSOLFDWLRQIRU

,QGLUHFW/LFHQVH7UDQVIHURI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU)DFLOL\2SHUDWLQJ/LFHQVH1R

5'RFNHW1R 'HF >([KLELWV15&DQG15& 3  5$, 



6HH6XPPDU\RI'HFHPEHU0HHWLQJZLWK$HURWHVW2SHUDWLRQV,QFDQG1XFOHDU

/DE\ULQWK//&2QWKH5HTXHVWIRU$GGLWLRQDO,QIRUPDWLRQRQWKH3URSRVHG,QGLUHFW/LFHQVH7UDQVIHU

$SSOLFDWLRQRIWKH$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU -DQ >([KLELW15&@



6HH/HWWHUIURP-D\6LOEHUJ&RXQVHO$HURWHVW2SHUDWLRQV,QFWRWKH15&'RFXPHQW&RQWURO

'HVN5HVSRQVHWR5HTXHVWIRU$GGLWLRQDO,QIRUPDWLRQ5H$SSOLFDWLRQIRU$SSURYDORI,QGLUHFW7UDQVIHURI

&RQWURORI/LFHQVHRI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU3XUVXDQWWR&)5 -DQ

 >([KLELWV15&DQG15& 3 @ 5$,5HVSRQVH 



6DIHW\(YDOXDWLRQE\WKH2IILFHRI1XFOHDU5HDFWRU5HJXODWLRQ,QGLUHFW/LFHQVH7UDQVIHURI

$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU'XHWRWKH3URSRVHG$FTXLVLWLRQRI$HURWHVW2SHUDWLRQV

,QFE\1XFOHDU/DE\ULQWK//&)DFLOLW\2SHUDWLQJ/LFHQVH1R5'RFNHW1R -XO 

>([KLELWV15&DWDQG15& 3 DW@ 6DIHW\(YDOXDWLRQ 6( 

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



/DE\ULQWK//&ZRXOGKDYHVXIILFLHQWIXQGLQJWRFRQGXFWWKHDFWLYLWLHVDXWKRUL]HGE\WKH$555

OLFHQVHLIWKHOLFHQVHZHUHWUDQVIHUUHG'

 2Q$XJXVW$HURWHVWDQG1XFOHDU/DE\ULQWKILOHGZLWKWKH&RPPLVVLRQDMRLQW

GHPDQGIRUDKHDULQJRQLQWHUDOLDWKH15&¶VGHQLDORIWKHLQGLUHFWOLFHQVHWUDQVIHU

DSSOLFDWLRQ2Q$SULOWKH&RPPLVVLRQJUDQWHGWKH&RPSDQLHV¶UHTXHVWIRUDKHDULQJ

RQWKH6WDII¶VGHQLDORIWKHLULQGLUHFWOLFHQVHWUDQVIHUDSSOLFDWLRQDQGGLUHFWHGWKH&RPSDQLHVWR

ILOHDVWDWHPHQWRXWOLQLQJWKHLUDUHDVRIFRQWURYHUV\UHJDUGLQJWKHGHQLDOZLWKWKH3UHVLGLQJ

2IILFHU2Q$SULOWKH&RPSDQLHVVXEPLWWHGWKHLUSURSRVHGDUHDVRIFRQWURYHUV\

7KH6WDIIILOHGLWVUHVSRQVHRQ0D\

 2Q0D\WKH3UHVLGLQJ2IILFHULVVXHGDQRUGHUUHVSRQGLQJWRWKH&RPSDQLHV¶

DQGWKH6WDII¶VILOLQJVUHJDUGLQJWKHDUHDVRIFRQWURYHUV\7KLVRUGHUKHOGWKDWWKHDUHDVRI

OLWLJDEOHFRQWURYHUV\LQWKLVSURFHHGLQJDUHOLPLWHGWRWKHIROORZLQJWZRLVVXHV  ZKHWKHUWKH





/HWWHUIURP(ULF-/HHGV15&WR0LFKDHO$QGHUVRQ3UHVLGHQW$HURWHVW2SHUDWLRQV,QF

'HQLDORI/LFHQVH5HQHZDO'HQLDORI/LFHQVH7UDQVIHUDQG,VVXDQFHRI2UGHUWR0RGLI\/LFHQVH1R5

WR3URKLELW2SHUDWLRQRIWKH$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU)DFLOLW\2SHUDWLQJ/LFHQVH

1R5 -XO\ >([KLELW15&@



-RLQW'HPDQGIRU+HDULQJRQ'HQLDORI/LFHQVH5HQHZDODQG,QGLUHFW/LFHQVH7UDQVIHU

5HJDUGLQJ$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU)DFLOLW\2SHUDWLQJ/LFHQVH1R5 $XJ

  $'$06$FFHVVLRQ1R0/$  -RLQW'HPDQG 

7KH-RLQW'HPDQGDOVRGHPDQGHGDKHDULQJRQWKH15&¶VGHQLDORIDOLFHQVHUHQHZDOUHTXHVWIRU

WKH$555DQGLQDVHSDUDWHILOLQJRQ$XJXVWWKH&RPSDQLHVMRLQWO\GHPDQGHGDKHDULQJLQ

UHVSRQVHWRDQ15&RUGHUSURKLELWLQJRSHUDWLRQRIWKH$5556HH-RLQW$QVZHUWRDQG'HPDQGIRU

+HDULQJRQ2UGHU3URKLELWLQJ2SHUDWLRQRI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU)DFLOLW\

2SHUDWLQJ/LFHQVH1R5 $XJ  $'$06$FFHVVLRQ1R0/$ 

7KH&RPPLVVLRQGHQLHGWKH&RPSDQLHV¶UHTXHVWWRFRQVROLGDWHWKHVHWZRGHPDQGVZLWKWKHLU

LQGLUHFWOLFHQVHWUDQVIHUGHPDQGDQGGHIHUUHGFRQVLGHUDWLRQRIWKHVHWZRGHPDQGVSHQGLQJFRPSOHWLRQRI

WKHLQGLUHFWOLFHQVHWUDQVIHUGHPDQG$HURWHVW2SHUDWLRQV,QF $HURWHVW5DGLRJUDSK\DQG5HVHDUFK

5HDFWRU &/,15&BBBB $SU  VOLSRSDW 



$HURWHVW&/,15&DWBB VOLSRSDW 



$HURWHVW2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&¶V6WDWHPHQWRI$UHDVRI&RQWURYHUV\

5HJDUGLQJ'HQLDORI,QGLUHFW/LFHQVH7UDQVIHURI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU $SU

  $'$06$FFHVVLRQ1R0/$ 



15&6WDII5HVSRQVHWR$HURWHVW2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&¶V6WDWHPHQWRI

$UHDVRI&RQWURYHUV\5HJDUGLQJ'HQLDORI,QGLUHFW/LFHQVH7UDQVIHURI$HURWHVW5DGLRJUDSK\DQG

5HVHDUFK5HDFWRU 0D\  $'$06$FFHVVLRQ1R0/$ 



0HPRUDQGXPDQG2UGHU 5XOLQJRQ$GPLVVLELOLW\RI$UHDVRI&RQWURYHUV\  0D\ 

XQSXEOLVKHG  $'$06$FFHVVLRQ1R0/$ 

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



6WDIIFRUUHFWO\GHWHUPLQHGWKDWWKH&RPSDQLHVIDLOHGWRGHPRQVWUDWHWKDWWKH\SRVVHVVRUKDYH

UHDVRQDEOHDVVXUDQFHRIREWDLQLQJWKHIXQGVQHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLQJFRVWVIRU

WKHSHULRGRIWKHOLFHQVHDQG  ZKHWKHUWKH6WDIIFRUUHFWO\GHWHUPLQHGWKDWWKH&RPSDQLHV

IDLOHGWRSURYLGHUHDVRQDEOHDVVXUDQFHWKDWWKH\KDGVXIILFLHQWIXQGVWRFRYHUWKHDQQXDOFRVWV

IRUVWRULQJVSHQWIXHOXQWLOWKH'HSDUWPHQWRI(QHUJ\ '2( DFFHSWVWKHIXHO

',6&866,21

, /HJDO6WDQGDUGV



 3XUVXDQWWR6HFWLRQFRIWKH$WRPLF(QHUJ\$FWRIDVDPHQGHG $($ 

$HURWHVWLVDXWKRUL]HGWRSRVVHVVXVHDQGRSHUDWHWKH$555DVDXWLOL]DWLRQIDFLOLW\WKDWLV

³XVHIXOLQWKHFRQGXFWRIUHVHDUFKDQGGHYHORSPHQWDFWLYLWLHV'7KLVDXWKRUL]DWLRQPD\QRWEH

³WUDQVIHUUHGDVVLJQHGRULQDQ\PDQQHUGLVSRVHGRIHLWKHUYROXQWDULO\RULQYROXQWDULO\GLUHFWO\RU

LQGLUHFWO\WKURXJKWUDQVIHURIFRQWURORIDQ\OLFHQVHWRDQ\SHUVRQXQOHVVWKH&RPPLVVLRQVKDOO

DIWHUVHFXULQJIXOOLQIRUPDWLRQILQGWKDWWKHWUDQVIHULVLQDFFRUGDQFHZLWKWKHSURYLVLRQVRI>WKH

$($@DQGVKDOOJLYHLWVFRQVHQWLQZULWLQJ'$($

7KH&RPPLVVLRQUHJXODWLRQJRYHUQLQJOLFHQVHWUDQVIHUVLV&)5ZKLFK

VWDWHVWKDWDQDSSOLFDWLRQIRUOLFHQVHWUDQVIHUVKDOOLQFOXGH³DVPXFKRIWKHLQIRUPDWLRQ

GHVFULEHGLQDQGRIWKLVSDUWZLWKUHVSHFWWRWKHLGHQWLW\DQGWHFKQLFDODQG

ILQDQFLDOTXDOLILFDWLRQVRIWKHSURSRVHGWUDQVIHUHHDVZRXOGEHUHTXLUHGE\WKRVHVHFWLRQVLIWKH

DSSOLFDWLRQZHUHIRUDQLQLWLDOOLFHQVH'&)5 E  L 8SRQUHYLHZLQJWKLV

LQIRUPDWLRQWKH&RPPLVVLRQZLOODSSURYHDQDSSOLFDWLRQIRUWKHWUDQVIHURIDOLFHQVHLIWKH

&RPPLVVLRQGHWHUPLQHVWKDW³WKHSURSRVHGWUDQVIHUHHLVTXDOLILHGWREHWKHKROGHURIWKH

OLFHQVH'DQG³WKHOLFHQVHLVRWKHUZLVHFRQVLVWHQWZLWKDSSOLFDEOHSURYLVLRQVRIODZUHJXODWLRQV

DQGRUGHUVLVVXHGE\WKH&RPPLVVLRQSXUVXDQWWKHUHWR'&)5 F 





,GDW7KHVHWZRLVVXHVWUDFNWKHWZRFRQFOXVLRQVWKDWWKH6WDIIUHOLHGXSRQIRUGHQ\LQJWKH

LQGLUHFWOLFHQVHWUDQVIHUDSSOLFDWLRQ6HH([KLELWV15& 6( DWDQG15& 3  6( DW



6HHDOVR&)5 F 

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



2QHRIWKHUHTXLUHPHQWVIRUERWKDQLQLWLDO$($FOLFHQVHDQGDWUDQVIHURIVXFKD

OLFHQVHLVWKHILQDQFLDOTXDOLILFDWLRQVUHTXLUHPHQWRI$($DZKLFKLVFRGLILHGE\WKH

&RPPLVVLRQ¶VUHJXODWLRQVDW&)5 I 7KLVUHJXODWLRQUHTXLUHVWKHVXEPLVVLRQRI

³LQIRUPDWLRQVXIILFLHQWWRGHPRQVWUDWHWRWKH&RPPLVVLRQWKHILQDQFLDOTXDOLILFDWLRQRIWKH

DSSOLFDQWWRFDUU\RXWLQDFFRUGDQFHZLWKUHJXODWLRQVLQWKLVFKDSWHUWKHDFWLYLWLHVIRUZKLFKWKH

SHUPLWRUOLFHQVHLVVRXJKW'&)5 I 6SHFLILFDOO\WKHDSSOLFDQWPXVWVXEPLW

LQIRUPDWLRQ³WKDWGHPRQVWUDWHVWKHDSSOLFDQWSRVVHVVHVRUKDVUHDVRQDEOHDVVXUDQFHRI

REWDLQLQJWKHIXQGVQHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLRQFRVWVIRUWKHSHULRGRIWKHOLFHQVH'

&)5 I  

7KH&RPPLVVLRQKDVVWDWHGWKDWWKH³IXQGDPHQWDOSXUSRVH'RILWVILQDQFLDOTXDOLILFDWLRQV

UHTXLUHPHQWLV³WKHSURWHFWLRQRISXEOLFKHDOWKDQGVDIHW\DQGWKHFRPPRQGHIHQVHDQG

VHFXULW\',QGHHGWKH&RPPLVVLRQ¶VUHJXODWLRQVFRGLI\LQJWKHILQDQFLDOTXDOLILFDWLRQV

UHTXLUHPHQW³UHFRJQL]HWKDWXQGHUIXQGLQJFDQDIIHFWSODQWVDIHW\'EHFDXVH³DOLFHQVHHLQ

ILQDQFLDOO\VWUDLWHQHGFLUFXPVWDQFHVZRXOGEHXQGHUPRUHSUHVVXUHWRFRPPLWVDIHW\YLRODWLRQV

RUWDNHVDIHW\µVKRUWFXWV¶WKDQRQHLQJRRGILQDQFLDOVKDSH'

&RQVHTXHQWO\&)5 I ³SUHVFULEHVLQGHWDLOSUHFLVHO\ZKDWDUHDFWRUOLFHQVH

DSSOLFDQWPXVWGHPRQVWUDWH'7KLVLQFOXGHV³HVWLPDWHVIRUWRWDODQQXDORSHUDWLQJFRVWVIRU

HDFKRIWKHILUVWILYH\HDUVRIRSHUDWLRQRIWKHIDFLOLW\'DQG³WKHVRXUFH V RIIXQGVWRFRYHUWKHVH

FRVWV'&)5 I  8VLQJ³SURMHFWLRQVRIIXWXUHUHYHQXHLVDW\SLFDOPHWKRGIRU

OLFHQVHDSSOLFDQWVWRGHPRQVWUDWHWKDWWKH\FDQPHHWFRVWV'+RZHYHUMXVWWKHVXEPLVVLRQRI

\HDUFRVWVDQGUHYHQXHSURMHFWLRQVLVQRWVXIILFLHQWZKHWKHUWKHVHSURMHFWLRQVDUHUHDVRQDEOH





/RXLVLDQD(QHUJ\6HUYLFHV/3 &ODLERUQH(QULFKPHQW&HQWHU &/,15&

  TXRWLQJ)LQDQFLDO4XDOLILFDWLRQV)HG5HJ -XO\ 



*XOI6WDWHV8WLOLWLHV&R 5LYHU%HQG6WDWLRQ8QLW &/,15&   LQWHUQDO

TXRWDWLRQVDQGFLWDWLRQVRPLWWHG 



3ULYDWH)XHO6WRUDJH//& ,QGHSHQGHQW6SHQW)XHO6WRUDJH,QVWDOODWLRQ &/,15&

   FLWLQJ&)5 I DQG&)53DUW$SSHQGL[& 



3ULYDWH)XHO6WRUDJH//& ,QGHSHQGHQW6SHQW)XHO6WRUDJH,QVWDOODWLRQ &/,15&

  

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



LV³>D@OZD\VLQTXHVWLRQXQGHUVHFWLRQ I  '7KXVWKHNLQGVRILVVXHVWKH15&W\SLFDOO\

FRQVLGHUVLQOLFHQVHWUDQVIHUFDVHVDUHZKHWKHUFRVWHVWLPDWHVDUHXQUHDOLVWLFRUUHYHQXHVDUH

LQVXIILFLHQW$UHDOLVWLFFRVWHVWLPDWHLVRQHWKDW³LQGLFDWHVWKDWWKHOLFHQVHHµXQGHUVWDQGVLWV

IXQGLQJFRPPLWPHQWDQGKDVVHULRXVO\FRQVLGHUHGWKHIDFWRUVWKDWZLOOFRQWULEXWHWRWKHH[SHQVH

RIWKHSURMHFWLWLVXQGHUWDNLQJ¶'

0RUHRYHUD³QHZO\IRUPHGHQWLW\'LVDOVRVXEMHFWWRWKH³VWULFWHU'ILQDQFLDOUHTXLUHPHQWV

RI&)5 I  ZKLFKUHTXLUHVDQHZO\IRUPHGHQWLW\WRVXEPLWDGGLWLRQDO

LQIRUPDWLRQVKRZLQJ  ³>W@KHOHJDODQGILQDQFLDOUHODWLRQVKLSVLWKDVRUSURSRVHVWRKDYHZLWKLWV

VWRFNKROGHUVRURZQHUV'  ³>W@KHVWRFNKROGHUV RURZQHUV ILQDQFLDODELOLW\WRPHHWDQ\

FRQWUDFWXDOREOLJDWLRQWRWKHHQWLW\ZKLFKWKH\KDYHLQFXUUHGRUSURSRVHGWRLQFXU'DQG  ³>D@Q\

RWKHULQIRUPDWLRQFRQVLGHUHGQHFHVVDU\E\WKH&RPPLVVLRQWRHQDEOHLWWRGHWHUPLQHWKH

DSSOLFDQW VILQDQFLDOTXDOLILFDWLRQ')LQDOO\LIWKH&RPPLVVLRQFRQVLGHUVLWDSSURSULDWHWKH

&RPPLVVLRQPD\UHTXHVWDGGLWLRQDOILQDQFLDOLQIRUPDWLRQLQFOXGLQJ³LQIRUPDWLRQUHJDUGLQJD

OLFHQVHH¶VDELOLW\WRFRQWLQXHWKHFRQGXFWRIWKHDFWLYLWLHVDXWKRUL]HGE\WKHOLFHQVHDQGWR

GHFRPPLVVLRQWKHIDFLOLW\'&)5 I  

&KDSWHU³)LQDQFLDO4XDOLILFDWLRQV'RI185(*³*XLGHOLQHVIRU3UHSDULQJDQG

5HYLHZLQJ$SSOLFDWLRQVIRUWKH/LFHQVLQJRI1RQ3RZHU5HDFWRUV'3DUWSURYLGHVJXLGHOLQHV

IRUWKH6WDIIGHWHUPLQDWLRQRIZKHWKHUDOLFHQVHHRUDSSOLFDQWLVILQDQFLDOO\TXDOLILHGWRRZQ





1RUWK$WODQWLF(QHUJ\6HUYLFH&RUS 6HDEURRN6WDWLRQ8QLW &/,15&

 



3DFLILF*DVDQG(OHFWULF&R 'LDEOR&DQ\RQ3RZHU3ODQW8QLWVDQG &/,15&

  



3)6&/,15&DW TXRWLQJ/RXLVLDQD(QHUJ\6HUYLFHV/3 &ODLERUQH

(QULFKPHQW&HQWHU &/,15&  



3RZHU$XWKRULW\RIWKH6WDWHRI1HZ<RUNDQG(QWHUJ\1XFOHDU)LW]3DWULFN//&(QWHUJ\

1XFOHDU,QGLDQ3RLQW//&DQG(QWHUJ\1XFOHDU2SHUDWLRQV,QF -DPHV$)LW]3DWULFN1XFOHDU3RZHU

3ODQWDQG,QGLDQ3RLQW1XFOHDU*HQHUDWLQJ8QLW1R &/,15&  



6HH185(*3DUW*XLGHOLQHVIRU3UHSDULQJDQG5HYLHZLQJ$SSOLFDWLRQVIRUWKH

/LFHQVLQJRI1RQ3RZHU5HDFWRUV6WDQGDUG5HYLHZ3ODQDQG$FFHSWDQFH&ULWHULD )HE >([KLELW

15&DW+/-@ 185(*3DUW 

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



RSHUDWHDQGGHFRPPLVVLRQDQRQSRZHUUHDFWRU7KH6WDII¶VUHYLHZSURFHVVLQFOXGHV

FRQILUPLQJWKDWWKHOLFHQVHHRUDSSOLFDQWSURYLGHGDQHVWLPDWHRIWKHILUVW\HDUVRIRSHUDWLQJ

FRVWDQGKDVJLYHQDUHOLDEOHEDVLVIRUWKHHVWLPDWHVXFKDVSDVRSHUDWLQJFRVWVRUFRVWVRI

RSHUDWLQJVLPLODUIDFLOLWLHV7KH\HDUHVWLPDWHVVKRXOGEHVXIILFLHQWO\GHWDLOHGWRVKRZ

FDWHJRULHVRIVSHQGLQJVXFKDVVDODULHVEHQHILWVDQGRYHUKHDGHTXLSPHQWDQGVXSSOLHV 

7KHOLFHQVHHRUDSSOLFDQWVKRXOGDOVRGLVFXVVWKHVRXUFHVRIIXQGLQJIRURSHUDWLQJFRVWV

WKHDPRXQWRIIXQGLQJWKDWLVFRPPLWWHGDQGWKHDPRXQWWKDWLVSRWHQWLDOO\DYDLODEOH7KH

DSSOLFDQWVKRXOGDOVRFRQILUPFRPPLWWHGVRXUFHVDQGGLVFXVVFRQGLWLRQVXQGHUZKLFKSRWHQWLDO

VRXUFHVRIIXQGLQJZRXOGEHFRPHFRPPLWWHGDQGKRZWKHIDFLOLW\FDQEHVDIHO\RSHUDWHGLIVRPH

SRWHQWLDOVRXUFHVRIIXQGLQJDUHQRWUHDOL]HG,IWKHVRXUFHRIIXQGLQJLVQRWFRPPLWWHGWKH

OLFHQVHHRUDSSOLFDQWVKRXOGGLVFXVVWKHSUREDELOLW\RIDFTXLULQJWKHIXQGVDQGWKHSRWHQWLDO

VRXUFHRIWKHIXQGV7KHOLFHQVHHRUDSSOLFDQWVKRXOGDOVRGLVFXVVWKHSRVVLELOLW\RIRSHUDWLQJ

WKHIDFLOLW\ZLWKRXWWKLVIXQGLQJ7KHOLFHQVHHRUDSSOLFDQWVKRXOGSURYLGHVXSSRUWLQJ

GRFXPHQWDWLRQIRUIXQGLQJWKDWLVFRPPLWWHG





7KH&RPSDQLHVKDYHVXJJHVWHGWKDW185(*5HY³6WDQGDUG5HYLHZ3ODQRQ3RZHU

5HDFWRU/LFHQVHH)LQDQFLDO4XDOLILFDWLRQVDQG'HFRPPLVVLRQLQJ)XQGLQJ$VVXUDQFH' 'HF 

$'$06$FFHVVLRQ1R0/ LVDSSOLFDEOHWRWKH6WDII¶VUHYLHZIRUWKH$555$HURWHVW

2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&¶V6WDWHPHQWRI$UHDVRI&RQWURYHUV\5HJDUGLQJ'HQLDORI

,QGLUHFW/LFHQVH7UDQVIHURI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRU $SU  $'$06

$FFHVVLRQ1R0/$ DW7KLVDVVHUWLRQLVLQFRUUHFW185(*LVDSSOLFDEOHWRSRZHU

UHDFWRUVZKHUHDVWKH$555LVDQRQSRZHUUHDFWRU7KHUHIRUHWKH6WDII¶VUHYLHZUHODWHGWRWKH$555

ZDVSURSHUO\JXLGHGE\185(*DQGQRW185(*6HH([KLELW15& /LDQ 6LPPRQV

7HVWLPRQ\ DW



6HH([KLELW15& 185(*3DUW DW



6HH185(*3DUW*XLGHOLQHVIRU3UHSDULQJDQG5HYLHZLQJ$SSOLFDWLRQVIRUWKH

/LFHQVLQJRI1RQ3RZHU5HDFWRUV)RUPDWDQG&RQWHQW )HE >([KLELW15&DW+/-@

185(*3DUW 



6HH([KLELW15& 185(*3DUW DW



6HH([KLELW15& 185(*3DUW DW



6HH([KLELW15& 185(*3DUW DW



,G



,G

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



$VIRUWKHOHYHORIDVVXUDQFHWKDWWKH&RPPLVVLRQUHTXLUHVIRUWKHDSSOLFDQW¶VDELOLW\WR

PHHWLWVILQDQFLDOREOLJDWLRQVWKH&RPPLVVLRQKDVVWDWHGWKDWLWVVWDQGDUGLV

OHVVWKDQWKHH[WUHPHO\KLJKDVVXUDQFHWKH&RPPLVVLRQUHTXLUHV

UHJDUGLQJWKHVDIHW\RIUHDFWRUGHVLJQFRQVWUXFWLRQDQG

RSHUDWLRQ7KH&RPPLVVLRQZLOODFFHSWILQDQFLDODVVXUDQFHV

EDVHGRQSODXVLEOHDVVXPSWLRQVDQGIRUHFDVWVHYHQWKRXJKWKH

SRVVLELOLW\LVQRWLQVLJQLILFDQWWKDWWKLQJVZLOOWXUQRXWOHVVIDYRUDEO\

WKDQH[SHFWHG7KXVWKHPHUHFDVWLQJRIGRXEWRQVRPHDVSHFWV

RISURSRVHGIXQGLQJSODQVLVQRWE\LWVHOIVXIILFLHQWWRGHIHDWD

ILQGLQJRIUHDVRQDEOHDVVXUDQFH



$WWKHVDPHWLPHWKRXJKIXQGLQJSODQVWKDWUHO\RQDVVXPSWLRQV

VHULRXVO\DWRGGVZLWKJRYHUQLQJUHDOLWLHVZLOOQRWEHGHHPHG

DFFHSWDEOHVLPSO\EHFDXVHWKHLUIRUPPDWFKHVSODQVGHVFULEHGLQ

WKHUHJXODWLRQV>7KHUHIRUH@ZHFDQQRWEUXVKDVLGH

HFRQRPLFDOO\EDVHGVDIHW\FRQFHUQV>VXFKDVWKDWWKHDSSOLFDQW¶V

FRVWDQGUHYHQXHHVWLPDWHVIDLOWRSURYLGHWKHUHTXLUHGDVVXUDQFH

EHFDXVHWKH\GRQRWUHIOHFWDUHDOLVWLFRXWORRNIRUWKHDSSOLFDQWRU

IRUWKHQXFOHDUSRZHULQGXVWU\LQWKHUHJLRQ@>+RZHYHUVXFK

DUJXPHQWV@XOWLPDWHO\ZLOOSUHYDLORQO\LI>WKH\@FDQGHPRQVWUDWH

UHOHYDQWXQFHUWDLQWLHVVLJQLILFDQWO\JUHDWHUWKDQWKRVHWKDWXVXDOO\

FORXGEXVLQHVVRXWORRNV



,QFRQFOXVLRQLWLVQRWWKH15& V³GXW\RUGHVLUHWRPLFURPDQDJHWKHILQDQFHVRILWV

OLFHQVHHV'7KXVWKH&RPPLVVLRQGRHVQRWUHTXLUH³DEVROXWHFHUWDLQW\LQWKHILQDQFLDODUHD'

DQGUHFRJQL]HVWKDW³µ>V@SHFXODWLRQ¶RIVRPHVRUWLVXQDYRLGDEOHZKHQWKHLVVXHDWVWDNH

FRQFHUQVSUHGLFWLYHMXGJPHQWVDERXWDQDSSOLFDQW VIXWXUHILQDQFLDOFDSDELOLWLHV' +RZHYHUWKH

DSSOLFDQWVWLOOEHDUVWKHEXUGHQWRVKRZE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDWLWPHHWVWKH

&RPPLVVLRQ¶VILQDQFLDOTXDOLILFDWLRQVUXOH7KLVPHDQVWKDWWKHDSSOLFDQW¶VFRVWDQGUHYHQXH

SURMHFWLRQVPXVWQRWUHO\RQDVVXPSWLRQVVHULRXVO\DWRGGVZLWKJRYHUQLQJUHDOLWLHVDQGPXVWQRW





6HDEURRN&/,15&DW HPSKDVLVDGGHG 



3)6&/,15&DW



3RZHU$XWKRULW\RIWKH6WDWHRI1HZ<RUNDQG(QWHUJ\1XFOHDU)LW]SDWULFN//&(QWHUJ\

1XFOHDU,QGLDQ3RLQW//&DQG(QWHUJ\1XFOHDU2SHUDWLRQV,QF -DPHV$)LW]3DWULFN1XFOHDU3RZHU

3ODQW,QGLDQ3RLQW8QLW &/,15&   LQWHUQDOTXRWDWLRQVRPLWWHG 



6HDEURRN&/,15&DW



)LW]SDWULFN&/,15&DW FLWLQJ+\GUR5HVRXUFHV,QF 32%R[5LR

5DQFKR10 &/,15&  &RPPRQZHDOWK(GLVRQ&R =LRQ6WDWLRQ

8QLWVDQG $/$%15&  

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



LQYROYHXQFHUWDLQWLHVVLJQLILFDQWO\JUHDWHUWKDQWKRVHWKDWXVXDOO\FORXGEXVLQHVVRXWORRNV

$GGLWLRQDOO\WKHDSSOLFDQWPXVWGHPRQVWUDWHWKDWLWLVH[WUHPHO\XQOLNHO\WKDWWKHUHZLOOEH

XQGHUIXQGLQJWKDWZLOOOHDGWRDKHDOWKVDIHW\RUDFRPPRQGHIHQVHRUVHFXULW\ULVN

,, 7KH6WDII¶V'HQLDORIWKH,QGLUHFW/LFHQVH7UDQVIHU$SSOLFDWLRQ6KRXOG%H8SKHOG

%HFDXVHWKH&RPSDQLHV'R1RW6DWLVI\WKH&RPPLVVLRQ¶V)LQDQFLDO4XDOLILFDWLRQV

5HTXLUHPHQWV



7KH&RPSDQLHVDUJXHWKDWWKH\KDYHSURYLGHGDQDGHTXDWHVKRZLQJRIILQDQFLDO

TXDOLILFDWLRQVLQWKHLU$SSOLFDWLRQDQGWKUHHUHVSRQVHVWR6WDII5$,V+RZHYHUWKH&RPSDQLHV

KDYHQRWVXEPLWWHGLQIRUPDWLRQVXIILFLHQWWRGHPRQVWUDWHWKHLUILQDQFLDOTXDOLILFDWLRQVWRFDUU\

RXWLQDFFRUGDQFHZLWKWKH&RPPLVVLRQ¶VUHJXODWLRQVWKHDFWLYLWLHVIRUZKLFKWKH$555LV

OLFHQVHGEHFDXVHWKH\KDYHQRWGHPRQVWUDWHGWKDWWKH\SRVVHVVRUKDYHUHDVRQDEOHDVVXUDQFH

RIREWDLQLQJWKHIXQGVQHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLRQFRVWVIRUWKHSHULRGRIWKHOLFHQVH

,QVWHDGWKH&RPSDQLHVEDVHWKHLUILQDQFLDOTXDOLILFDWLRQVRQ  DIXQGLQJFRPPLWPHQWWKDW

FRYHUVRQO\WKHILUVWPRQWKVRIRSHUDWLQJFRVWV  VSHFXODWLYHDQGXQUHDVRQDEOHUHYHQXH

SURMHFWLRQVIRU\HDUVWZRWKURXJKILYH  FRVWDQGUHYHQXHSURMHFWLRQVWKDWGRQRWWDNHLQWR

FRQVLGHUDWLRQWKHSRVVLELOLW\RIDGGLWLRQDOFRVWVUHODWHGWRUHSODFHPHQWRIGDPDJHGIXHO

HOHPHQWVDQG  WKHDVVXPSWLRQWKDWWKH&RPSDQLHVZLOODFFXPXODWHHQRXJKIXQGVIURPDIXHO

VWRUDJHIHHDVVHVVHGDJDLQVW$555RSHUDWLRQVLQRUGHUWRFRYHUIXHOVWRUDJHFRVWVXQWLO

7KXVWKH&RPSDQLHV¶VKRZLQJRIILQDQFLDOTXDOLILFDWLRQVLVLQVXIILFLHQWEHFDXVHDVGLVFXVVHG

EHORZWKH\³UHO\RQDVVXPSWLRQV>WKDWDUH@VHULRXVO\DWRGGVZLWKJRYHUQLQJUHDOLWLHV'DQGGRQRW

UHVROYHXQFHUWDLQWLHVVXUURXQGLQJWKHWUDQVIHUWKDWUHPDLQ³VLJQLILFDQWO\JUHDWHUWKDQWKRVHWKDW

XVXDOO\FORXGEXVLQHVVRXWORRNV'





6HDEURRN&/,15&DW



/(6&/,15&DW



$HURWHVW2SHUDWLRQV,QFDQG1XFOHDU/DE\ULQWK//&¶V6WDWHPHQWRI$UHDVRI&RQWURYHUV\

5HJDUGLQJ'HQLDORI,QGLUHFW/LFHQVH7UDQVIHURI$HURWHVW5DGLRJUDSK\DQG5HVHDUFK5HDFWRUDW

$SU  $'$06$FFHVVLRQ1R0/$ 



6HDEURRN&/,15&DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



7DNHQWRJHWKHUWKHLQIRUPDWLRQSURYLGHGE\WKH&RPSDQLHVLVLQVXIILFLHQWWR

GHPRQVWUDWHWKDWWKHSURSRVHGLQGLUHFWOLFHQVHWUDQVIHUZLOOQRWSRVHDULVNWRWKHSXEOLFKHDOWK

DQGVDIHW\RUWKHFRPPRQGHIHQVHRUVHFXULW\7KHUHIRUHWKH6WDIISURSHUO\FRQFOXGHGWKDW

WKH&RPSDQLHVGLGQRWGHPRQVWUDWHWKDWWKH\KDYHUHDVRQDEOHDVVXUDQFHRIREWDLQLQJWKHIXQGV

QHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLRQFRVWVIRUWKHSHULRGRIWKHOLFHQVHDVUHTXLUHGE\

&)5 I  $FFRUGLQJO\WKH6WDII¶VGHQLDORIWKH&RPSDQLHV¶LQGLUHFWOLFHQVHWUDQVIHU

DSSOLFDWLRQVKRXOGEHXSKHOGDVEHLQJFRQVLVWHQWZLWKWKH$($WKH&RPPLVVLRQ¶VUHJXODWLRQV

DQGWKH&RPPLVVLRQ¶VFDVHODZ

$ 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\3RVVHVVWKH)XQGV1HFHVVDU\WR&RYHU

(VWLPDWHG2SHUDWLRQ&RVWVIRUWKH3HULRGRIWKH/LFHQVH7KURXJK)XQGLQJ&RPPLWPHQWV



7KH&RPSDQLHVSURYLGHGWKHIROORZLQJLQIRUPDWLRQLQRUGHUWRDWWHPSWWRVDWLVI\WKH

&RPPLVVLRQ¶VILQDQFLDOTXDOLILFDWLRQVUHTXLUHPHQW7KH\VWDWHGWKDW³>D@OOOLDELOLWLHVUHJDUGLQJWKH

PDQDJHPHQWVWRUDJHUHPRYDODQGGLVSRVDORIWKHQXFOHDUIXHOORFDWHGDWWKHIDFLOLW\DVZHOODV

OLDELOLWLHVDVVRFLDWHGZLWKWKHGHFRPPLVVLRQLQJRIWKHVLWHZRXOGEHWUDQVIHUUHGWR1XFOHDU

/DE\ULQWK',QRUGHUWRHQVXUHWKDW1XFOHDU/DE\ULQWKFRXOGVDWLVI\WKHVHREOLJDWLRQV$XWROLYDW

WKHWLPHRIWKHSURSRVHGLQGLUHFWOLFHQVHWUDQVIHUFRPPLWWHGWRFRQWULEXWHIXQGVIRUD

GHFRPPLVVLRQLQJWUXVWDVZHOODVIXQGV³VXIILFLHQWWRIXQGDSSUR[LPDWHO\WZHOYHPRQWKVRI

RSHUDWLQJH[SHQVHVGXULQJWKHUHVWDUWRIWKHIDFLOLW\DQGLWVUHVXPSWLRQRIFRPPHUFLDO

RSHUDWLRQV'



$XWROLY¶VGHFRPPLVVLRQLQJWUXVWIXQGFRPPLWPHQWWRWDOHG 

DQGZDVEDVHGRQDQHVWLPDWHRIWKHDPRXQWWKDWGHFRPPLVVLRQLQJWKH$555ZRXOGFRVW





/(6&/,15&DW



([KLELWV15& 6( DWDQG15& 3  6( DW



([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



,G6HHDOVR([KLELW15& 3  5$,5HVSRQVH DW ³7KHSURYLGHV$HURWHVW

ZLWKPRQWKVRIRSHUDWLQJH[SHQVHVWRUHWXUQWKHIDFLOLW\WRRSHUDWLRQDOVWDWXVFDSDEOHRISURYLGLQJ

FXVWRPHUVHUYLFHV7KHVHH[SHQVHVLQFOXGHVDODULHVDQGEHQHILWVIRUILYHSHRSOHWD[HVXWLOLWLHVSKRQH

RIILFHVXSSOLHVPDLQWHQDQFHDQGLQVXUDQFH' 



([KLELW15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



H[FOXGLQJVSHQWIXHOPDQDJHPHQWDQGUHPRYDODQGWUDQVSRUWRIWKHVSHQWIXHOE\WKH'2(

$XWROLY¶VFRPPLWPHQWWRIXQGWKHILUVW\HDURIRSHUDWLQJH[SHQVHVWRWDOHG 



,Q

DGGLWLRQWKHSURIRUPDEDODQFHVKHHWIRU1XFOHDU/DE\ULQWKVKRZHGFXUUHQWDVVHWVRI 





$GGLWLRQDOO\$HURWHVWKDVDFRQWUDFWZLWKWKH'2(VSHFLI\LQJWKHIHHIRUFDVNXVH

WUDQVSRUWDWLRQDQGGLVSRVDORIIXHODW 

'2(UHSUHVHQWDWLYHVDOVRSURYLGHGDFRVWHVWLPDWHRI IRU

FDQLVWHUVDSSURYHGIRUWUDQVSRUWRIGDPDJHGIXHOHOHPHQWVZLWKLQWKHFDVNV,QRUGHUWR

DGGUHVVWKLVREOLJDWLRQ$XWROLYDOVRFRPPLWWHGWRWUDQVIHU WRDWUXVW

IXQGVLPLODUWRWKHIXQGXVHGIRUGHFRPPLVVLRQLQJDWFORVLQJ)LQDOO\WKH&RPSDQLHVVWDWHG

WKDW1XFOHDU/DE\ULQWKZRXOGPDLQWDLQD OLQHRIFUHGLWWREHXVHGLQWKHHYHQWWKDW

IXWXUHXSGDWHVWRWKHGHFRPPLVVLRQLQJFRVWHVWLPDWHRUGHFRPPLVVLRQLQJIXQGSHUIRUPDQFH

UHVXOWVLQDVKRUWIDOORIWKHGHFRPPLVVLRQLQJIXQG¶VEDODQFH

7KH&RPPLVVLRQ¶VILQDQFLDOTXDOLILFDWLRQVUHJXODWLRQDW&)5 I  UHTXLUHV

DQDSSOLFDQWWRSURYLGHVRXUFHVRIIXQGVWRFRYHUWKHWRWDODQQXDORSHUDWLQJFRVWVIRUHDFKRIWKH

ILUVWILYH\HDUVRIRSHUDWLRQ$VQRWHGDERYHEHVLGHVWKH 

DOORIZKLFKWKH&RPSDQLHVKDYHFODLPHGDUHEHLQJPDLQWDLQHG

IRUWKHSXUSRVHRIGHFRPPLVVLRQLQJWKH&RPSDQLHVKDYHRQO\LGHQWLILHGRQHVRXUFHRI





6HH([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



6HH([KLELW15& 3  5$,5HVSRQVH DW



([KLELW15& 3  5$,5HVSRQVH DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



,G



,G



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



FRPPLWWHGIXQGVWRFRYHURSHUDWLQJH[SHQVHVWKDWLVWKH IRUWKH$555¶V\HDURQH

VWDIILQJFRVWV%DVHGRQWKLVVKRZLQJWKH&RPSDQLHVFDQQRWVDWLVI\&)5 I  E\

PHDQVRIFRPPLWWHGVRXUFHVRIIXQGV

% 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFHRI

2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU(VWLPDWHG2SHUDWLRQ&RVWVIRUWKH3HULRGRI

WKH/LFHQVH%HFDXVHWKHLU5HYHQXH3URMHFWLRQV$UH6SHFXODWLYHDQG8QUHDVRQDEOH



,QVWHDGRILGHQWLI\LQJFRPPLWWHGVRXUFHVRIIXQGVWKH&RPSDQLHVLGHQWLI\WKHUHYHQXHWR

EHJHQHUDWHGE\WKH$555DVWKHVRXUFHRIIXQGVIRURSHUDWLRQFRVWVEH\RQG\HDURQH7R

VXSSRUWWKLVFODLPWKH&RPSDQLHVSURYLGHGFRVWDQGUHYHQXHSURMHFWLRQVIRU\HDUVWZRWKURXJK

ILYH7KH&RPSDQLHVVWDWHGWKDWWKH\ZRXOGJHQHUDWHUHYHQXHIURPWKUHHDUHDV  

FRPPHUFLDOVHUYLFHV  UHVHDUFKDQG  WUDLQLQJDFWLYLWLHV+RZHYHUDVH[SODLQHGEHORZ

XVLQJWKHLQIRUPDWLRQSURYLGHGE\WKH&RPSDQLHVWKH6WDIIFRXOGQRWGHWHUPLQHWKDWWKH

&RPSDQLHV¶UHYHQXHSURMHFWLRQVZHUHUHDVRQDEOHDQGEDVHGRQSODXVLEOHDVVXPSWLRQVDQG

IRUHFDVWV7KXVWKH6WDIIFRQFOXGHGWKDWWKH&RPSDQLHVGLGQRWGHPRQVWUDWHWKDWWKH\KDYH

UHDVRQDEOHDVVXUDQFHRIREWDLQLQJWKHIXQGVQHFHVVDU\WRFRYHUHVWLPDWHGRSHUDWLRQFRVWVIRU

WKHSHULRGRIWKHOLFHQVH

 5HYHQXHIURP&RPPHUFLDO6HUYLFHV

 



 











6HH([KLELW15& 3  5$,5HVSRQVH DW



([KLELW15& 3  5$,5HVSRQVH DW



([KLELWV15& 6( DWDQG15& 3  6( DW



([KLELW15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



 





+RZHYHUWKH6WDIIGLGQRWFRQVLGHUWKLVLQIRUPDWLRQ

EHFDXVHDFFRUGLQJWRWKHJXLGDQFHLQ185(*DSSOLFDQWVVKRXOGFRQILUPFRPPLWWHG

IXQGLQJVRXUFHVDQGGLVFXVVFRQGLWLRQVXQGHUZKLFKSRWHQWLDOIXQGLQJVRXUFHVZRXOGEHFRPH

FRPPLWWHGDQGKRZWKHIDFLOLW\FDQEHVDIHO\RSHUDWHGLIVRPHSRWHQWLDOIXQGLQJVRXUFHVDUHQRW

UHDOL]HG

 

 





 





7KHUHIRUHEDVHGRQWKLVPLQLPDOLQIRUPDWLRQ

WKH6WDIIFRXOGQRWGHWHUPLQHZKHWKHUWKH&RPSDQLHV¶UHYHQXHSURMHFWLRQVZHUHUHDVRQDEOHDQG

EDVHGRQSODXVLEOHDVVXPSWLRQVDQGIRUHFDVWV2QWKHFRQWUDU\WKH6WDIIGHWHUPLQHGWKDWWKH

XQFHUWDLQWLHVLQYROYHGLQWKH&RPSDQLHV¶UHYHQXHSURMHFWLRQZHUHVLJQLILFDQWO\JUHDWHUWKDQ

WKRVHXVXDOO\LQYROYHGLQEXVLQHVVRXWORRNV7KXVWKLVDWWHPSWE\WKH&RPSDQLHVWR





,G



,G



([KLELW15& 185(*3DUW DW([KLELW15& /LDQ 6LPPRQV

7HVWLPRQ\ DW



([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



GHPRQVWUDWHWKDWWKH\KDGUHDVRQDEOHDVVXUDQFHRIREWDLQLQJWKHIXQGVQHFHVVDU\WRFRYHU

FRVWVZDVLQVXIILFLHQWWRVDWLVI\WKH&RPPLVVLRQ¶VILQDQFLDOTXDOLILFDWLRQVUHJXODWLRQV

,QRUGHUWRDGGUHVVWKLVLQVXIILFLHQF\RIWKHVRXUFHVRIIXQGVIRUWKHLUSURMHFWHGUHYHQXH

WKH&RPSDQLHVVXEVHTXHQWO\SURYLGHGWKH6WDIIZLWK GRFXPHQWVLQWKHIRUPRIOHWWHUVDQG

HPDLOVZKLFKWKH\GHVFULEHGDV³FXVWRPHUOHWWHUVRILQWHQW'15&6WDIISUDFWLFHLVWRDVVHVV

OHWWHUVRILQWHQW6SHFLILFDOO\185(*GLUHFWVWKH6WDIIWRHYDOXDWHDQGFRPPHQWRQWKH

DFWLYLWLHVFRQVLGHUHGWREHFRPPHUFLDODFWLYLWLHVDWDQRQSRZHUUHDFWRU7KH6WDIIGLGQRW

KRZHYHUFRQVLGHUWKHVHGRFXPHQWVWRDFWXDOO\EHOHWWHUVRILQWHQWEHFDXVHEDVHGRQWKHLU

ODQJXDJHDQGWKHQRQRSHUDWLRQDOVWDWXVRIWKH$555WKH\GLGQRWUHIOHFWDQLQWHQWRQWKHSDUW

RIWKHLUDXWKRUVWRHQWHULQWRDIRUPDODJUHHPHQWHLWKHURQWKHLURZQEHKDOIRURQEHKDOIRIWKH

EXVLQHVVHVZLWKZKLFKWKH\ZHUHDVVRFLDWHGZLWK$HURWHVW1HYHUWKHOHVVWKH6WDIIHYDOXDWHG

WKHVHGRFXPHQWVDVDEDVLVIRUSRWHQWLDOIXWXUHUHYHQXHV

$VSDUWRIWKLVHYDOXDWLRQWKH6WDIIGHWHUPLQHGWKDW RIWKHGRFXPHQWVZHUHGDWHG

SULRUWRWKHVKXWGRZQRIWKH$555RQ2FWREHU7KH6WDIIFRQFOXGHGWKDWWKHVH

GRFXPHQWVGLGQRWQHFHVVDULO\GHPRQVWUDWHSRWHQWLDOIXWXUHUHYHQXHVEHFDXVHWKH\ZHUH

SUHGLFDWHGRQDQHHGIRUWKH$555¶VVHUYLFHVDQGWKH&RPSDQLHVKDGQRWGHPRQVWUDWHGWKDW

WKHDXWKRUVRIWKHVHOHWWHUVVWLOOQHHGHGWKH$555¶VVHUYLFHVDQGKDYHQRWIRXQGUHSODFHPHQW

VHUYLFHVVLQFHWKHVKXWGRZQRIWKH$5558VLQJWKHUHPDLQLQJ GRFXPHQWVDQGDVVXPSWLRQV

WKDWZHUHWKHPRVWIDYRUDEOHWRWKH&RPSDQLHVWKH6WDIIGHYHORSHGUHYHQXHSURMHFWLRQVIRUWKH

$555¶VSRWHQWLDOFRPPHUFLDOVHUYLFHVDQGSRWHQWLDOWUDLQLQJVHUYLFHV:LWKUHVSHFWWRSURMHFWHG

$555UHYHQXHIURPFRPPHUFLDOVHUYLFHVWKH6WDIIUHOLHGRQKLVWRULFGDWDSURYLGHGE\WKH

&RPSDQLHVIRU 





6HH([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



([KLELW15& 185(*3DUW DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



7KLV

ZDVWKHPRVWSURMHFWHGUHYHQXHIURPFRPPHUFLDOVHUYLFHVWKDWWKH6WDIIFRXOGHVWLPDWHEHFDXVH

WKLVZDVWKHRQO\UHOHYDQWLQIRUPDWLRQWKDWWKH&RPSDQLHVKDGVXEPLWWHGWRWKH15&

,QRUGHUWRFDOFXODWHWKHSRWHQWLDOUHYHQXHIURP DQG

EHFDXVHWKH&RPSDQLHVGLGQRWVXEPLWFOHDUVXSSRUWLQJGRFXPHQWVWRGHPRQVWUDWHWKHLU

SRWHQWLDOUHYHQXHIURPFRPPHUFLDOVHUYLFHVWKH6WDIIKDGWRPDNHVHYHUDODVVXPSWLRQV 







7KHEXUGHQLVRQWKHDSSOLFDQWWRMXVWLI\LWVFRVWDQGUHYHQXHSURMHFWLRQVEH\RQG

VLPSO\OLVWLQJWKRVHSURMHFWLRQVDQGWKHVHGRFXPHQWVLQQRZD\H[SODLQHGWKH&RPSDQLHV¶

UHYHQXHSURMHFWLRQV 



*LYHQWKHVHDVVXPSWLRQVWKLVUHYHQXHSURMHFWLRQZDVKLJKO\

VSHFXODWLYHEXWLWDOORZHGWKH6WDIIWRJHQHUDWHDYDOXHIRUSRWHQWLDOUHYHQXHIRUWKH$555¶V

FRPPHUFLDOVHUYLFHVWKDWFRXOGEHFRPSDUHGWKH$555¶VHVWLPDWHGFRVWV



 











6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



)LW]SDWULFN&/,15&DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



6HHLG



6HH([KLELW15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



7KHUHIRUH

WKH&RPSDQLHV¶UHVHDUFKUHYHQXHSURMHFWLRQZDVXQFHUWDLQDQGWKH6WDIIGLGQRWKDYHVXIILFLHQW

LQIRUPDWLRQRQZKLFKWREDVHDILQGLQJWKDWWKLVUHVHDUFKUHYHQXHSURMHFWLRQZDVUHDVRQDEOHDQG

EDVHGRQSODXVLEOHDVVXPSWLRQVDQGIRUHFDVWV

 5HYHQXH)URP7UDLQLQJ$FWLYLWLHV

LWKUHVSHFWWRSURMHFWHGUHYHQXHIURPWUDLQLQJWKH&RPSDQLHVVWDWHGWKDWWKHSURMHFWHG

UHYHQXHIRUWUDLQLQJZDV 

 



 

%HFDXVHWKHSURMHFWHGUHYHQXHIRUWUDLQLQJ 

ZDVOHVVWKDQWKHDFWXDOUHYHQXHLQ WKH6WDIIIRXQGWKHUHYHQXHSURMHFWLRQWREH

UHDVRQDEOH

 7RWDO3URMHFWHG5HYHQXH

 %DVHGRQWKH6WDIIUHYHQXHSURMHFWLRQVGHYHORSHGIURPWKHLQIRUPDWLRQVXEPLWWHGE\WKH

&RPSDQLHVWKH6WDIIGHWHUPLQHGWKDWLQWKHHYHQWWKDWWKH$555UHWXUQVWRIXOOFRPPHUFLDO

RSHUDWLRQLWVWRWDOUHYHQXHIRU\HDUWZRZRXOGEHDSSUR[LPDWHO\ 7KLVYDOXHLVHTXDO

WRSURMHFWHGFRPPHUFLDOVHUYLFHVUHYHQXHRIDSSUR[LPDWHO\ DQGSURMHFWHGWUDLQLQJ

UHYHQXHRIDSSUR[LPDWHO\ 7KLVYDOXHLVVLJQLILFDQWO\OHVVWKDQWKHORZHVWSURMHFWHG

DQQXDORSHUDWLRQFRVWIRUWKH$555RI 7KLVLVQRWDQHVWLPDWHRIZKDW$HURWHVWFRXOG

PDNHLQ\HDUWZREXWUDWKHUDVXPPDWLRQRIDOORIWKHVRXUFHVRIUHYHQXHVXSSRUWHGE\





([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW([KLELWV15& 6( DWDQG15&

 3  6( DW



([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW([KLELWV15& 6( DWDQG

15& 3  6( DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



GRFXPHQWDWLRQSURYLGHGE\WKH&RPSDQLHV8OWLPDWHO\WKH&RPSDQLHVEHDUWKHEXUGHQRI

GHPRQVWUDWLQJWKDWSURMHFWHGUHYHQXHZLOOFRYHUHVWLPDWHGFRVWV+RZHYHUEDVHGRQO\RQWKH

LQIRUPDWLRQSURYLGHGE\WKH&RPSDQLHVWKLVZDVWKHPRVWUHYHQXHWKDWFRXOGEHSURMHFWHGZLWK

UHDVRQDEOHDVVXUDQFHDQGLWLVLQVXIILFLHQWWRFRYHURSHUDWLRQFRVWV

 $VH[SODLQHGLQ6HFWLRQ,,$DERYHWKHRQO\FRPPLWWHGVRXUFHRIIXQGVIRURSHUDWLQJ

H[SHQVHVZHUH$XWROLY¶VFRQWULEXWLRQRI WRWKHILUVW\HDURIRSHUDWLQJFRVWV7KH

&RPSDQLHVDOVRVWDWHGWKDW1XFOHDU/DE\ULQWKZLOOPDLQWDLQD OLQHRIFUHGLWWREHXVHG

LQWKHHYHQWWKDWIXWXUHXSGDWHVWRWKHGHFRPPLVVLRQLQJFRVWHVWLPDWHRUGHFRPPLVVLRQLQJIXQG

SHUIRUPDQFHUHVXOWVLQDVKRUWIDOORIWKHGHFRPPLVVLRQLQJIXQG¶VEDODQFH+RZHYHUWKH

&RPSDQLHVGLGQRWVSHFLI\ 



1HYHUWKHOHVVWKH6WDIIFRQVHUYDWLYHO\HYDOXDWHG

WKH OLQHRIFUHGLWDJDLQVWWKH&RPSDQLHV¶RSHUDWLQJH[SHQVHV$GGLWLRQDOO\DV

GHVFULEHGDERYHWKH6WDIIGHWHUPLQHGWKDWWKHSRWHQWLDOUHYHQXHEDVHGRQWKH$555¶V

FRPPHUFLDOVHUYLFHVDQGWUDLQLQJVHUYLFHVZDVGHWHUPLQHGWREHDSSUR[LPDWHO\ 

 7KH&RPSDQLHVVWDWHGWKDWWKH$555¶VWRWDOHVWLPDWHGRSHUDWLQJFRVWVIRUWKHILUVWILYH

\HDUVLV %DVHGRQWKH6WDII¶VHYDOXDWLRQWKHWRWDOHVWLPDWHGUHYHQXHIRUWKHVH

VDPHILYH\HDUVLVDSSUR[LPDWHO\ 



7KXVWKHWRWDOUHYHQXHVEDVHGRQWKH

VRXUFHVRIIXQGVSURYLGHGE\WKH&RPSDQLHV ZRXOGEHVLJQLILFDQWO\OHVVDQG

LQVXIILFLHQWWRFRYHUWKHILUVWILYH\HDUVRIRSHUDWLQJFRVWVDVGHWHUPLQHGE\WKH&RPSDQLHV

7KHUHIRUHWKH6WDIISURSHUO\GHWHUPLQHGWKDWWKH&RPSDQLHVGLGQRWSURYLGH





6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



([KLELW15& 3  5$,5HVSRQVH DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW([KLELW15& 3  5$,5HVSRQVH

 DW



6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



VRXUFHVRIIXQGVWRFRYHUWKHWRWDODQQXDORSHUDWLQJFRVWVIRUHDFKRIWKHILUVWILYH\HDUVRI

RSHUDWLRQVDVUHTXLUHGE\&)5 I  

& 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFHRI

2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU(VWLPDWHG2SHUDWLRQ&RVWVIRUWKH3HULRGRI

WKH/LFHQVH%HFDXVH7KHLU&RVWDQG5HYHQXH3URMHFWLRQV'R1RW$FFRXQWIRUWKH

'LVFRYHU\RI'DPDJHG)XHO(OHPHQWVDWWKH$555



 7KH&RPSDQLHV¶DVVHUWLRQWKDWWKH$555¶VFRVWVZLOOEHFRYHUHGE\UHYHQXHLQ\HDUV

WZRWKURXJKILYHLVDOVRLQVXIILFLHQWWRGHPRQVWUDWHILQDQFLDOTXDOLILFDWLRQVIRUWKHOLIHRIWKH

$555OLFHQVHEHFDXVHLWGRHVQRWDFFRXQWIRUWKHSRWHQWLDOFRVWDQGUHYHQXHLPSDFWVRIWKH

GLVFRYHU\RIIXHOHOHPHQWVZLWKVLJQLILFDQWGHIHFWVRQWKHIXWXUHRSHUDWLRQVRIWKHIDFLOLW\

'XULQJDSHUFHQWLQVSHFWLRQRILWVIXHOHOHPHQWVIURP'HFHPEHU$HURWHVW

GLVFRYHUHGWKDWDWRWDORIRILWVDOXPLQXPFODGIXHOHOHPHQWVFRXOGQRWEHUHPRYHGIURP

WKHUHDFWRUFRUHEHFDXVHWKH\ZHUHVZROOHQLQGLDPHWHU8VLQJDQXQGHUZDWHUYLGHRFDPHUD

$HURWHVWGHWHUPLQHGWKDWIRXURIWKHVHDOXPLQXPIXHOHOHPHQWVKDGFUDFNHGFODGGLQJ:KHQ

DIXHOHOHPHQW¶VFODGGLQJLVFUDFNHGUDGLRDFWLYHILVVLRQSURGXFWVZLWKLQWKHIXHOFDQSRWHQWLDOO\

HVFDSHWKHIXHO$HURWHVWVXEVHTXHQWO\GHWHUPLQHGWKDWDWRWDORIRIWKH$555¶VDOXPLQXP

IXHOHOHPHQWVKDGFUDFNHGFODGGLQJLQFOXGLQJDQDOXPLQXPIXHOHOHPHQWWKDWKDGEHHQ





6HH([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW



6HH([KLELWV15& 6( DWDQG15& 3  6( DW



$HURWHVWSRVVHVVHVDOXPLQXPFODGIXHOHOHPHQWVDQGVWDLQOHVVVWHHOFODGIXHOHOHPHQWV

([KLELW15& $GDPV7HVWLPRQ\ DW7KHVWDLQOHVVVWHHOFODGIXHOHOHPHQWVDUHQHZHUSURYLGHD

VLJQLILFDQWLQFUHDVHLQVDIHW\PDUJLQVDQGKDYHODUJHO\UHSODFHGWKHDOXPLQXPFODGIXHOHOHPHQWVZKLFK

DUHQRORQJHUPDQXIDFWXUHG,GDW2QO\DOXPLQXPFODGIXHOHOHPHQWVDWWKH$555KDYHH[KLELWHG

VLJQLILFDQWGHIHFWV6HHLGDW



/HWWHUIURP6DQGUD:DUUHQ*HQHUDO0DQDJHU$HURWHVW2SHUDWLRQV,QFWR6S\URV7UDLIRURV

15& -DQ >([KLELW15&@DW



/HWWHUIURP*UHJRU\%RZPDQ15&WR6DQGUD:DUUHQ*HQHUDO0DQDJHU$HURWHVW

2SHUDWLRQV,QF15&1RQ5RXWLQH,QVSHFWLRQ5HSRUW1R $XJ >([KLELW

15&@DW



([KLELW15& $GDPV7HVWLPRQ\ DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



SUHYLRXVO\WDNHQRXWRIVHUYLFHLQ7KHGLVFRYHU\RIVXFKDODUJHQXPEHURIFUDFNHG

UHVHDUFKUHDFWRUIXHOHOHPHQWVLVXQXVXDO

7KH$5557HFKQLFDO6SHFLILFDWLRQVVWDWHWKDWWKH$555³VKDOOQRWEHRSHUDWHG

ZKHUHYHUWKHUHDUHVLJQLILFDQWGHIHFWVLQIXHOHOHPHQWV'7KH$5557HFKQLFDO

6SHFLILFDWLRQVGRQRWGHILQHWKHWHUP³VLJQLILFDQWGHIHFWV'$HURWHVWVWDWHGWKDWWKHFODGGLQJ

FUDFNVLQLWVDOXPLQXPIXHOHOHPHQWVZHUH³FHUWDLQO\VLJQLILFDQWGHIHFWV'DQGSURFHHGHGWR

VHJUHJDWHWKHFUDFNHGDOXPLQXPIXHOHOHPHQWVLQFDQLVWHUVDWWKHERWWRPRIWKH$555UHDFWRU

SRRO+LVWRULFDOO\WKH6WDIIKDVFRQVLGHUHGIXHOHOHPHQWVWREHVLJQLILFDQWO\GHIHFWLYHLIWKH\

DUHUHOHDVLQJILVVLRQSURGXFWVGRQRWPHHWWKH*HQHUDO$WRPLFVVWDWHGOLPLWVRQDFFHSWDEOH

FKDQJHLQERZDQGOHQJWKRUH[KLELWREVHUYDEOHFODGGLQJGHIHFWV7KLVZRXOGLQFOXGHERWK

IXHOHOHPHQWVWKDWDUHFUDFNHGDQGIXHOHOHPHQWVWKDWDUHVZROOHQVRWKDWWKH\FDQQRWEH

UHPRYHGIURPWKHFRUH

%DVHGRQWKHUHFHQWGLVFRYHU\RIFUDFNHGDOXPLQXPIXHOHOHPHQWVDQGVZROOHQ

DOXPLQXPIXHOHOHPHQWVDWWKH$555DQGWKHSURKLELWLRQDJDLQVWRSHUDWLQJWKH$555ZLWKIXHO

HOHPHQWVZLWKVLJQLILFDQWGHIHFWVLWLVXQFHUWDLQZKHWKHURUIRUKRZORQJWKH$555PD\RSHUDWH

7KH$555UHTXLUHVDSSUR[LPDWHO\IXHOHOHPHQWVWRRSHUDWH$HURWHVWSRVVHVVHVIXHO

HOHPHQWVRIZKLFKDUHWKHROGHUDOXPLQXPFODGIXHOHOHPHQWVDQGDUHWKHQHZHU





,G



,GDW



([KLELW15& $55576 DW



([KLELW15&DW



/HWWHUIURP*UHJRU\%RZPDQ15&WR6DQGUD:DUUHQ*HQHUDO0DQDJHU$HURWHVW

2SHUDWLRQV,QF15&1RQ5RXWLQH,QVSHFWLRQ5HSRUW1R -DQ >([KLELW15&

@DW



([KLELW15& $GDPV7HVWLPRQ\ DW



,G



,GDW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



VWDLQOHVVVWHHOFODGIXHOHOHPHQWV RIZKLFKZHUHQHZDQGXQXVHG +RZHYHURIWKHVH

DOXPLQXPIXHOHOHPHQWVDUHFUDFNHGDQGDQDGGLWLRQDODSSUR[LPDWHO\DUHVZROOHQ7KLV

OHDYHVWKH$555ZLWKDSRWHQWLDOO\XVDEOHIXHOLQYHQWRU\RIDERXWIXHOHOHPHQWV$OWKRXJK

WKLVLVDSSUR[LPDWHO\HQRXJKIXHOWRRSHUDWHWKH$555LWLVXQFHUWDLQZKHWKHUDQ\PRUHRIWKH

$555¶VIXHOHOHPHQWVKDYH\HWWREHGLVFRYHUHGVLJQLILFDQWGHIHFWVRUZKHWKHUJLYHQWKHLU

VKDUHGGHVLJQDQGRSHUDWLRQDOKLVWRU\DGGLWLRQDORIWKH$555¶VUHPDLQLQJDOXPLQXPIXHO

HOHPHQWVZLOOGHYHORSVLJQLILFDQWGHIHFWVLQWKHIXWXUH

 5HIHUULQJWRWKH15&LQVSHFWLRQUHSRUWGHWDLOLQJWKHGLVFRYHU\RIWKHFUDFNHG

DOXPLQXPIXHOHOHPHQWVDWWKH$555WKH6WDIIDVNHGWKH&RPSDQLHVZKHWKHUWKLVGLVFRYHU\

DIIHFWHGWKHRSHUDWLQJFRQGLWLRQRIWKH$555DQGWKH$555¶VFRVWDQGUHYHQXHSURMHFWLRQV

7KH6WDIIDOVRDVNHGWKH&RPSDQLHVWRHVWLPDWHWKHQXPEHURIIXHOHOHPHQWVWKDWZRXOGQHHGWR

EHUHSODFHGLQWKHIXWXUHDQGWKHDVVRFLDWHGFRVWV7KH&RPSDQLHVUHVSRQGHGWKDWWKH

OLFHQVHWUDQVIHUWUDQVDFWLRQZRXOGQRWFORVHXQWLOWKH$555LV³IXOO\RSHUDWLRQDO'DQGWKHUHIRUH

WKDWWKHFXUUHQWOLFHQVHHZRXOGSD\FRVWVDVVRFLDWHGZLWKWKHIXHO7KH&RPSDQLHVDOVR

VWDWHGWKDWWKH\ZHUHHYDOXDWLQJWKHIXHOVLWXDWLRQEXWWKDWWKLVHYDOXDWLRQZRXOGQRWEH

FRPSOHWHGXQWLOWKHHQGRI0DUFK%DVHGRQWKLVH[SODQDWLRQWKH&RPSDQLHVGLGQRW





/HWWHUIURP6DQGUD:DUUHQ*HQHUDO0DQDJHU$HURWHVW2SHUDWLRQV,QFWR6S\URV7UDLIRURV

15& $XJ >([KLELW15&@DW



([KLELW15& $GDPV7HVWLPRQ\ DW



$IWHUWKHGHYHORSPHQWRIWKH6WDII¶VVDIHW\HYDOXDWLRQGXULQJWKHOLFHQVHH¶VQH[WURXWLQHIXHO

LQVSHFWLRQIURP-XO\WKHOLFHQVHHGLVFRYHUHGWZRPRUHDOXPLQXPIXHOHOHPHQWVZLWKFUDFNV

IRUDWRWDORIFUDFNHGDOXPLQXPIXHOHOHPHQWVWKDWKDYHEHHQGLVFRYHUHG6HH([KLELW15&DW

7KHVHWZRHOHPHQWVKDYHQRW\HWEHHQSODFHGLQFDQLVWHUVLQRUGHUWRDOORZIRUDGGLWLRQDOREVHUYDWLRQE\

WKHOLFHQVHH,GDW7KLVSRWHQWLDOO\GHFUHDVHVWKH$555¶VWRWDOXVDEOHIXHOLQYHQWRU\WRIXHO

HOHPHQWV



([KLELW15& $GDPV7HVWLPRQ\ DW



([KLELWV15& 5$, DWDQG15& 3  5$, DW



([KLELWV15& 5$, DWDQG15& 3  5$, DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



FKDQJHWKHLUFRVWDQGUHYHQXHSURMHFWLRQVLQOLJKWRIWKHGLVFRYHU\RIWKHGDPDJHGIXHO

HOHPHQWV7KH&RPSDQLHVDOVRQHYHUSURYLGHGDQHYDOXDWLRQRIWKHIXHOVLWXDWLRQWRWKH6WDII

7KH&RPPLVVLRQKDVVWDWHGWKDWDUHDOLVWLFFRVWHVWLPDWHLVRQHWKDW³LQGLFDWHVWKDWWKH

OLFHQVHHµXQGHUVWDQGVLWVIXQGLQJFRPPLWPHQWDQGKDVVHULRXVO\FRQVLGHUHGWKHIDFWRUVWKDWZLOO

FRQWULEXWHWRWKHH[SHQVHRIWKHSURMHFWLWLVXQGHUWDNLQJ¶',QUHVSRQVHWR6WDIITXHVWLRQLQJ

UHJDUGLQJWKHGLVFRYHULHVRIDODUJHQXPEHURIVLJQLILFDQWGHIHFWVLQWKH$555¶VIXHO

VSHFLILFDOO\FODGGLQJFUDFNLQJLQDOXPLQXPIXHOHOHPHQWVDQGVZHOOLQJLQDSSUR[LPDWHO\

DOXPLQXPIXHOHOHPHQWVRXWRIDWRWDORIRQO\DOXPLQXPIXHOHOHPHQWVWKH&RPSDQLHVRQO\

VWDWHGWKDWZLOOEHIXOO\RSHUDWLRQDOEHIRUHWKHOLFHQVHWUDQVIHU7KLVVWDWHPHQWGRHVQRWFODULI\

KRZWKHLVVXHRIFRVWDVVRFLDWHGZLWKWKH$555¶VDOXPLQXPIXHOHOHPHQWVZLOOEHUHVROYHG

7KHUHVWLOOUHPDLQVWKHSRVVLELOLW\WKDWWKH$555ZLOOLQFXUIXWXUHFRVWVUHODWHGWRWKH

UHSODFHPHQWRIDOXPLQXPIXHOHOHPHQWV7KH&RPSDQLHVDFFRXQWIRUIXHOUHSODFHPHQWFRVWV

YLDD³IXHOFUHGLW'IHHDVVHVVHGDJDLQVW$555RSHUDWLRQVEXWWKLVFRVWLVEDVHGRQKLVWRULFDO

GDWDDQGWKH&RPSDQLHVKDYHQRWLQGLFDWHGZKHWKHUWKLVFRVWKDVEHHQUHHYDOXDWHGLQOLJKWRI

WKHUHFHQWGLVFRYHULHVRIIXHOHOHPHQWVZLWKVLJQLILFDQWGHIHFWV7KHUHIRUHZLWKRXWPRUH

LQIRUPDWLRQUHJDUGLQJWKH&RPSDQLHV¶SURMHFWLRQVRIIXHOFRVWVDQGLWVVRXUFHVRIIXQGVWRFRYHU

WKHVHFRVWVWKH6WDIIFRXOGQRWGHWHUPLQHZKHWKHUWKH&RPSDQLHVKDGVHULRXVO\FRQVLGHUHGWKH

IDFWRUVWKDWZLOOFRQWULEXWHWRWKHH[SHQVHRIWKHSURMHFWLWLVXQGHUWDNLQJ&RQVHTXHQWO\WKH





([KLELW15& $GDPV7HVWLPRQ\ DW



3)6&/,15&DW TXRWLQJ/(6&/,15&DW 



6HH([KLELW15& $GDPV7HVWLPRQ\ DW H[SODLQLQJWKDWLWLVXQFHUWDLQZKHWKHUDQG

IRUKRZORQJWKH$555ZLOOEHDEOHWRRSHUDWHZLWKLWVIXHORQKDQGDQGWKDWUHSODFHPHQWIXHOZLOOQRW

EHFRPHDYDLODEOHXQWLODSSUR[LPDWHO\DQGDWDFRVWRIDWOHDVWSHUIXHOHOHPHQW 



6HH([KLELWV15& $SSOLFDWLRQ DWDQG15& 3 DW([KLELWV15& 5$,

5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



([KLELW15& /LDQ 6LPPRQV7HVWLPRQ\ DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



6WDIIGHQLHGWKHLQGLUHFWOLFHQVHWUDQVIHUDSSOLFDWLRQLQSDUWEHFDXVHWKHIXWXUHRSHUDWLRQVRIWKH

$555LVXQFHUWDLQGXHWRWKHVWDWXVRIWKH$555DQGLWVGDPDJHGIXHO

' 7KH&RPSDQLHV'R1RW'HPRQVWUDWHWKDW7KH\+DYH5HDVRQDEOH$VVXUDQFHRI

2EWDLQLQJWKH)XQGV1HFHVVDU\WR&RYHU)XHO6WRUDJH&RVWV8QWLOWKH'2(¶V

$FFHSWDQFHRIWKH)XHOLQ



$FFRUGLQJWR&)5 I  WKH&RPPLVVLRQPD\UHTXHVWWKDWWKH&RPSDQLHV

VXEPLWDGGLWLRQDORUPRUHGHWDLOHGLQIRUPDWLRQUHVSHFWLQJWKHLUILQDQFLDODUUDQJHPHQWVDQG

VWDWXVRIIXQGVLQFOXGLQJLQIRUPDWLRQUHJDUGLQJWKHLUDELOLW\WRFRQWLQXHWKHFRQGXFWRIWKH

DFWLYLWLHVDXWKRUL]HGE\WKHOLFHQVHDQGWRGHFRPPLVVLRQWKHIDFLOLW\3XUVXDQWWRWKLVDXWKRULW\

WKH6WDIIDVNHGWKH&RPSDQLHVWRSURYLGHLQIRUPDWLRQWRGHPRQVWUDWHWKHLUDELOLW\WRIXQGIXHO

VWRUDJHXQWLO+RZHYHUDVGLVFXVVHGEHORZEDVHGRQWKHLQIRUPDWLRQSURYLGHGE\WKH

&RPSDQLHVWKH6WDIIZDVXQDEOHWRGHWHUPLQHWKDWWKHUHZLOOEHVXIILFLHQWIXQGVWRFRYHUWKH

DQQXDOFRVWRIIXHOVWRUDJHXQWLOWKH'2(DFFHSWVWKHIXHOLQ

7KH$SSOLFDWLRQGRHVQRWGLVFXVVWKHFRVWVRUWKHVRXUFHRIIXQGLQJIRUPDQDJLQJWKH

VWRUDJHRIWKHVSHQWIXHODWWKH$555IURPWKHHQGRILWVFRPPHUFLDORSHUDWLRQVSURMHFWHGE\

WKH&RPSDQLHVWREHWRZKHQLWLVSURMHFWHGWKDWWKH'2(ZLOOWDNHSRVVHVVLRQRI

WKHIXHO7KH$SSOLFDWLRQRQO\VWDWHVWKDWGHFRPPLVVLRQLQJZLOOEHDFFRPSOLVKHGE\³0RGLILHG

6$)6725'ZKHUHE\WKHGHFRPPLVVLRQLQJFRQWUDFWRUZLOOSHUIRUPWKHSUHOLPLQDU\SRUWLRQRIWKH

GHFRPPLVVLRQLQJWRSXWWKH$555LQDVDIHFRQGLWLRQDQGWKHQHLJKWHHQPRQWKVDIWHUUHPRYDO

RIWKHIXHOZLOOFRPSOHWHWKHGHFRPPLVVLRQLQJ7KXVWKH$SSOLFDWLRQQHLWKHUDFFRXQWVIRUWKH

FRVWVQRUWKHIXQGVWRFRYHUWKHFRVWVWRPDLQWDLQWKH$555LQVDIHVWRUDJHEHWZHHQWKH





,G([KLELWV15& 6( DWDQG15& 3  6( DW



6HH([KLELWV15& 5$, DWDQG15& 3  5$, DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



6HH([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



6HH([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



FRQWUDFWRU¶VFRQGXFWRIWKHSUHOLPLQDU\GHFRPPLVVLRQLQJWDVNVDQGLWVFRQGXFWRIWKHUHPDLQLQJ

GHFRPPLVVLRQLQJWDVNVRQFHWKHVSHQWIXHOLVUHPRYHG

5HFRJQL]LQJWKLVJDSLQIXQGLQJWKH6WDIIUHTXHVWHGWKDWWKH&RPSDQLHVSURYLGHD

VFKHGXOHRIDQQXDOH[SHQVHVLQFOXGLQJVDIHVWRUDJHFRVWV,QUHVSRQVHWKH&RPSDQLHVRQO\

VWDWHGWKDWWKHGHFRPPLVVLRQLQJFRVWHVWLPDWHGLGQRWLQFOXGHVDIHVWRUDJH6XEVHTXHQWO\

WKH6WDIIUHTXHVWHGWKDWWKH&RPSDQLHVSURYLGH³LWHPL]HGHVWLPDWHGDQQXDOIXHOVWRUDJHFRVWV

LQFOXGLQJEXWQRWOLPLWHGWRKHDOWKSK\VLFLVWVVHFXULW\RYHUKHDGFRVWLQVXUDQFHHWFXQWLO

DQGLQIRUPDWLRQWRGHPRQVWUDWH1XFOHDU/DE\ULQWK¶VILQDQFLDODELOLW\WRSURYLGHIXQGLQJIRUIXHO

VWRUDJH'7KH&RPSDQLHVUHVSRQGHGWKDWWKHDQQXDOFRVWVDVVRFLDWHGZLWKIXHOVWRUDJHDUH

DQGWKDWWKHVHIXQGVZLOOEHFROOHFWHGWKURXJKDIXHOVWRUDJHIHHDVVHVVHGDJDLQVW

UHYHQXHIURP$555VHUYLFHVVXFKWKDWIXQGVIRU\HDUVRIVWRUDJHFRVWVZLOOEHDYDLODEOHWR

FRYHUWKHWLPHSHULRGEHWZHHQUHDFWRUFORVXUHLQDQGIXHODFFHSWDQFHE\WKH'2(LQ



7KH&RPSDQLHV¶LGHQWLILFDWLRQRIDSHUFHQWDJHRIUHYHQXHJHQHUDWHGEHWZHHQUHVWDUWLQJ

FRPPHUFLDORSHUDWLRQVDWWKH$555DQGRSHUDWLQJXQWLOLVLQVXIILFLHQWEHFDXVHLWLVEDVHG

RQWKHDVVXPSWLRQWKDWWKH$555ZLOORSHUDWHXQWLODQGWKHXQFHUWDLQWLHVVXUURXQGLQJWKLV

DVVXPSWLRQDUHVLJQLILFDQWO\JUHDWHUWKDQWKRVHWKDWXVXDOO\FORXGEXVLQHVVRXWORRNV

6SHFLILFDOO\VLQFHWKH&RPSDQLHVFDQQRWGHPRQVWUDWHWKDWWKH\ZLOOKDYHVXIILFLHQWIXQGVWR

FRYHUWKHRSHUDWLRQFRVWVRIWKH$555IRUHYHQWKHILUVWILYH\HDUVRIRSHUDWLRQWKH\DIRUWLRUL

FDQQRWGHPRQVWUDWHWKHDELOLW\WRFRYHUWKHRSHUDWLRQFRVWVXQWLO*LYHQWKDWWKH

&RPSDQLHVKDYHRQO\SURYLGHGFRPPLWWHGVRXUFHVRIIXQGVWRFRYHUWKH$555¶V\HDURQH

RSHUDWLRQFRVWVKDYHQRWSURYLGHGHQRXJKLQIRUPDWLRQWRGHPRQVWUDWHWKDWSURMHFWHGUHYHQXH





([KLELWV15& 5$, DWDQG15& 3  5$, DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



([KLELWV15& 5$, DWDQG15& 3  5$, DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



ZLOOEHJUHDWHUWKDQHVWLPDWHGFRVWVIRU\HDUVWZRWKURXJKILYHDQGKDYHQRWGHPRQVWUDWHGWKDW

WKH\KDYHVHULRXVO\FRQVLGHUHGWKHIXHOFRVWVWKDWPD\FRQWULEXWHWRWKHH[SHQVHRIRSHUDWLQJ

WKH$555WKH&RPSDQLHV¶PHUHDVVHUWLRQWKDWWKH$555ZLOORSHUDWHXQWLOLQRUGHUWR

DFFXPXODWHDVXIILFLHQWVSHQWIXHOPDQDJHPHQWIXQGLVQRWDVXIILFLHQWVKRZLQJRIILQDQFLDO

TXDOLILFDWLRQV

(YHQWKH&RPSDQLHVUHFRJQL]HWKHXQFHUWDLQW\RIWKHLUILQDQFLDOSURMHFWLRQVDQGVHHNWR

DOOD\WKLVXQFHUWDLQW\E\VWDWLQJWKDW³>L@I$HURWHVWLVXQDEOHWRREWDLQFXVWRPHUVVXIILFLHQWWR

RIIVHWRSHUDWLRQDOFRVWVDQGLWH[KDXVWVLWVFRPPLWWHGRSHUDWLRQDOIXQGVWKHQ$HURWHVWZRXOG

FRPPHQFHGHFRPPLVVLRQLQJXQOHVVLWLVDEOHWRREWDLQIXUWKHUIXQGVWRPDLQWDLQLWVRSHUDWLRQDO

VWDWXV'+RZHYHUWKLVSRVLWLRQWKDWWKHLPSODXVLELOLW\RIWKHLUUHYHQXHSURMHFWLRQVLVRIQR

SUDFWLFDOFRQVHTXHQFHLVFRQWUDU\WRWKHREOLJDWLRQVWKDW1XFOHDU/DE\ULQWKDQGLWVVXEVLGLDU\

$HURWHVWZRXOGDVVXPHLIWKHLQGLUHFWOLFHQVHWUDQVIHUZHUHWREHJUDQWHG6SHFLILFDOO\LQWKHLU

$SSOLFDWLRQWKH&RPSDQLHVUHFRJQL]HWKDWRQFHWKHOLFHQVHLVWUDQVIHUUHG$HURWHVWDQG

1XFOHDU/DE\ULQWKZLOODVVXPHDOOOLDELOLWLHVLQFOXGLQJWKRVHUHJDUGLQJWKHPDQDJHPHQWDQG

VWRUDJHRIWKH$555¶VQXFOHDUIXHO7KH\IXUWKHUUHFRJQL]HWKDWWKHRQO\ZD\WKDWWKHLU

EXVLQHVVSODQFDQDFFRXQWIRUWKHLUVSHQWIXHOVWRUDJHOLDELOLW\LVLIWKH$555RSHUDWHVXQWLO

DQGFROOHFWVDIXHOVWRUDJHIHHDVSDUWRIWKHVHRSHUDWLRQV

7KHVHWZRSRVLWLRQVWDNHQE\WKH&RPSDQLHVQDPHO\  WKDWWKH\FRXOGVKXWGRZQWKH

$555DWDQ\WLPHDQG  WKDWWKH\PXVWRSHUDWHWKH$555XQWLODUHLUUHFRQFLODEO\

FRQWUDGLFWRU\)RULQVWDQFHLIWKH&RPSDQLHVZHUHXQDEOHWRREWDLQVXIILFLHQWUHYHQXHDQG

H[KDXVWHGWKHLUFRPPLWWHGRSHUDWLRQDOIXQGVDWWKHHQGRI\HDURQHWKHQVLPSO\

GHFRPPLVVLRQLQJZRXOGQRWDGGUHVVDOORIWKHLUOLDELOLWLHVEHFDXVHWKH&RPSDQLHVZRXOGVWLOOEH

OLDEOHIRUVSHQWIXHOVWRUDJHIURPWKHGDWHRIVKXWGRZQWRLQDGGLWLRQWRWKHSHULRGRIWLPH





([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW



([KLELWV15& $SSOLFDWLRQ DWDQG15& 3  $SSOLFDWLRQ DW



([KLELWV15& 5$,5HVSRQVH DWDQG15& 3  5$,5HVSRQVH DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



IURPWRIRUDWRWDORIDSSUR[LPDWHO\\HDUVDWDFRVWRIDSSUR[LPDWHO\SHU

\HDU$VDUHVXOWRIVXFKDSUHPDWXUHVKXWGRZQWKH&RPSDQLHVZRXOGQRWKDYHKDGWKH

RSSRUWXQLW\DFFXPXODWHVXIILFLHQWIXQGVWRFRYHUWKHVHFRVWV7KHUHIRUHWKH&RPSDQLHVFRXOG

SRWHQWLDOO\H[SHULHQFHDODUJHOLDELOLW\DQGQRIXQGVZLWKZKLFKWRSD\LW%DVHGRQWKHVH

FRQVLGHUDWLRQVWKH6WDIIUHDVRQDEO\FRQFOXGHGWKDWLWFRXOGQRWGHWHUPLQHIURPWKH

GRFXPHQWDWLRQSURYLGHGE\WKH&RPSDQLHVWKDWWKHUHZLOOEHVXIILFLHQWIXQGVWRFRYHUWKHDQQXDO

FRVWRIIXHOVWRUDJHXQWLOWKH'2(DFFHSWVWKHIXHO

&21&/86,21

 )RUWKHIRUHJRLQJUHDVRQVWKH6WDII¶VGHQLDORIWKHSURSRVHGLQGLUHFWOLFHQVHWUDQVIHU

VKRXOGEHXSKHOG

5HVSHFWIXOO\VXEPLWWHG



       6LJQHG HOHFWURQLFDOO\ E\



$QLWD*KRVK

&RXQVHOIRUWKH15&6WDII

861XFOHDU5HJXODWRU\&RPPLVVLRQ

2IILFHRIWKH*HQHUDO&RXQVHO

0DLO6WRS2'

DVKLQJWRQ'&

7HOHSKRQH  

(PDLO$QLWD*KRVK#QUFJRY



([HFXWHGLQ$FFRUGZLWK&)5 G 



6XVDQ/8WWDO

&RXQVHOIRUWKH15&6WDII

861XFOHDU5HJXODWRU\&RPPLVVLRQ

2IILFHRIWKH*HQHUDO&RXQVHO

0DLO6WRS2'

DVKLQJWRQ'&

7HOHSKRQH  

(PDLO6XVDQ8WWDO#QUFJRY



([HFXWHGLQ$FFRUGZLWK&)5 G 



-HUHP\/:DFKXWND

       &RXQVHOIRUWKH15&6WDII





6HH([KLELWV15& 6( DWDQG15& 3  6( DW

35235,(7$5<,1)250$7,21

35235,(7$5<,1)250$7,21



       861XFOHDU5HJXODWRU\&RPPLVVLRQ

       2IILFHRIWKH*HQHUDO&RXQVHO

0DLO6WRS2'

       :DVKLQJWRQ'&

       7HOHSKRQH  

       (PDLO-HUHP\:DFKXWND#QUFJRY





'DWHGDW5RFNYLOOH0DU\ODQG

WKLVWKGD\RI-XQH



35235,(7$5<,1)250$7,21

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE PRESIDING OFFICER ATOMIC SAFETY AND LICENSING BOARD In the Matter of )

)

AEROTEST OPERATIONS, INC. ) Docket No. 50-228-LT

)

(Aerotest Radiography and Research )

Reactor) )

CERTIFICATE OF SERVICE I hereby certify that copies of the foregoing NRC STAFF INITIAL WRITTEN STATEMENT OF POSITION REGARDING DENIAL OF THE INDIRECT LICENSE TRANSFER OF THE AEROTEST RADIOGRAPHY AND RESEARCH REACTOR (Exhibit NRC-001), NRC Staff Exhibits NRC-002 through NRC-044, and the NRC Staff exhibit list have been served upon the Electronic Information Exchange, in the above-captioned proceedings, this 13th day of June, 2014.

/Signed (electronically) by/

Anita Ghosh Counsel for NRC Staff U.S. Nuclear Regulatory Commission Office of the General Counsel Mail Stop O15-D21 Washington, DC 20555 Telephone: (301) 415-4113 E-mail: Anita.Ghosh@nrc.gov Dated at Rockville, Maryland this 13th day of June, 2014