Setting up a shipping company
for further trading in Azov-Black Sea Basin
(New building project 5000 DWT)

Setting up a shipping company
for further trading in Azov-Black Sea Basin
(Second-hand vessels 9000 DWT)

«Setting up a shipping company
for further trading in Azov-Black Sea Basin
(New building project 5000 DWT)»

Moscow
may 2005

Full version of project you can find in included file

The project's target — setting up the work of a cargo transporting shipping company and the return of the means invested in acquiring vessels and receiving profits.

5 new 5000 DWT vessels are planned to be acquired for realizing the project within a year. Vessel commence trading after immediate delivery to buyers when purchased.

The acquisitions and the beginnings of the exploitation schedule:
1 vessel — acquire in 1st quarter of the 1st year, exploitation from 1st quarter of the 2nd year;
2 vessel — acquire in 2nd quarter of the 1st year, exploitation from 2nd quarter of the 2nd year;
3 vessel — acquire in 3rd quarter of the 1st year, exploitation from 3rd quarter of the 2nd year;
4 vessel — acquire in 4th quarter of the 1st year, exploitation from 4th quarter of the 2nd year;
5 vessel — acquire in 1st quarter of the 2nd year, exploitation from 1st quarter of the 3rd year.

The cost of a new 5000 DWT dead weight carrying capacity vessel — 7000 thousand USD.

Investments in acquiring of 5 vessels will be 35,000 thousand USD in one year.

Total investments — 36,600 thousand dollars. (including the technical support and the working capital investments).

In this document the planned period of working of a shipping company is 10 years. The Company will forward different cargoes from the ports of the Azov-Black Sea Basin

Planned figures of the operational activities of the new Company

The approximate total cargo turnover — 520 thousand tons a year for 5 vessels.

The annual profit minus the broker's commission (the Net-freight) — 17 680 thousand USD.

The income from the vessel exploitation — 12 558 thousand USD a year.

One voyage's income will be 111 thousand USD (on a metal freight example),

One vessel's income will be 6.9 thousand USD a day.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) — 11390 thousand USD.

The company's net profit — 9 940 thousand USD without loan interests.

The company's business profitability — 56 %, which is a norm for shipping business.

To finance the project a loan of 35049 thousand USD is planned to be raised to fund investments in vessel acquiring (35000 thousand USD) and to invest in the working capitals of the first two vessels (49 thousand USD.).

The loan schedule

Loan conditions:

• Getting a loan - within the 1st year (in five instalments for vessel acquisition agreements);
• The loan re-payment period - 6 years (from 2nd till 6th year of the project);
• The loan interest - 8 % annually;
• The interest accruement - annually from 1st year of the project during 6 years;
• Interest payment - annually from 2nd year during 5 years taking into account reinvesting the interest for the 1st year.

The sum of the interest paid off - 12408 thousand USD.

• Planned figuresw of the investment evaluation
• Return on Investment (ROI) — 31,1 %
• Payback period (PP) — 3,8 years (without the cost of borrowed means)
• Internal rate of Return (IRR) — 33,5 %
• Net Project Value (NPV) — 44613 thousand USD
• Discounted Payback Period (DPP) — 6,6 years (at the discount coefficient — 13%)

The attractiveness of investing in shipping assets

• The business's high profitability now and in mid-term perspective;
• The absence of political risks in countries (the possibility to manage the assets from anywhere in the world as well as the business's subordination to one of the most developed democratic jurisdictions - the British one);
• Diversified industry risks (the independence from the conjunctures in particular raw material markets due to the possibility of using the shipping assets practically for all types of dry cargoes);
• The absence of taxation;
• The high liquidity of shipping assets (the possibility to sell vessels quickly at the market prices).

SWOT