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COMMERCIAL YACHT CHARTERING STRUCTURES

Principal features: In order to enjoy various tax advantages, we have developed structures that enable yachts to be operated on commercial rather than private terms. To do this we use both companies and partnerships, depending upon the direct tax status and domicile of the client. Some advantages of this structure are as follows: VAT mitigation on both acquisition and operational costs Benefit in kind tax planning Inheritance tax planning by using an overlying trust Confidentiality The purchase of a yacht within the European Union for commercial purposes can be structured in such a way that will allow any VAT paid on acquisition to be recovered. The Isle of Man (IOM) currently has a corporate tax rate of 0% and allows its tax resident companies to operate within the EU indirect tax regime, VAT system and trade freely within the EU. An IOM company or UK LLP is therefore able to acquire, import or obtain zero rated supplies from within the EU. In addition, if any VAT is paid on acquisition in the UK, the IOM customs provide quick, straight forward and well understood recovery procedures.

The main features of these yacht structures are as follows: IOM company or UK LLP (the owner) to be set up The owner registers for VAT in IOM, with the intention of commercially chartering the yacht The owner purchases the yacht without paying any VAT (because it is either an intra-EU community supply or an import into the EU of commercial goods) Acquisition of the yacht can be completed without sailing the yacht to the IOM (where the VAT registration has been established) The owner accounts for VAT and reclaims the VAT on the same VAT return, hence there is no cash movement IOM customs issue a VAT paid certificate for an EU acquisition, to be retained by the yacht The yacht must be commercially registered. Registration can be anywhere in the world but the appropriate selection normally depends on a number of factors such as residency of owner, cost, legislation, tax and flag state credibility. The majority of our advice recommends registration in a Red Ensign* jurisdiction (see next page) Yachts must be chartered to third parties Input VAT is recoverable on most administrative and operational expenses Charter of the yacht with crew will be treated as a zero-rated supply We may also recommend employing the crew via our offshore crew employment vehicle under a crew services agreement in order to minimise exposure to EU social contributions

Vistra Group Management SA / February 2009 / 1 of 4 This document must be read in conjunction with our Legal and Regulatory notice at http://www.vistra.com/notices

* Red Ensign Jurisdictions are as follows: Category1 (Unlimited Tonnage) - UK - Bermuda - Cayman Islands - Isle of Man - Gibraltar Category 2 (150 GRT maximum (commercial) and 400GRT maximum (private)) - Jersey - Guernsey - BVI - Anguilla - Monserrat - St Helina - Turks and Caicos Vistra provides specific advice taking into account the circumstances and requirements of each client and their yacht. Once the structure is established and the VAT accounted for we are able to provide on-going support in terms of management of yacht expenses, preparation of accounts and financial reports. We ensure that all regulatory obligations of both the yacht and its owner are catered for. This includes provision of employment contracts, tax efficient payroll services, and a wide variety of support services to the captain and owner. Please see the attached structure chart which sets out the various elements of the structure that need to come together in order to cater for all operational and tax liabilities arising from this kind of structure.

Fees: One off structure fee: This will vary per yacht depending on size, complexity and nature of the structure. Factors such as the owners requirement to secure finance also have a significant impact on this fee. All structure fees are Payable 50% on engagement and 50% on provision of ships registry and VAT documentation. This fee would typically include the following: Establish a new company or LLP VAT registration Registration of yacht and flag state documentation Manage handover of yacht to owner Acquire and account for VAT and provide relevant documentation Review of/assistance with insurance documentation Employment contracts for all crew Engage ISM/Mini ISM manager

Vistra Group Management SA / February 2009 / 2 of 4 This document must be read in conjunction with our Legal and Regulatory notice at http://www.vistra.com/notices

Ongoing management fees: Estimated on size of remit, yacht and crew payroll, full quotation available on request. These fees would typically include the following: Crew: Issuing Powers of Attorney to Captain/crew, as required Maintaining crew records Issuing replacement crew contracts Preparing relevant minutes and statutory documentation Ensure compliance with minimum safe manning requirements and assist with flag state endorsements Banking and Payments: Issue Corporate credit/debit card to Captain (and possibly chef) Payment of crew salaries Payment of yacht expenses Secure transfers and management of ships cash (globally) Advice to suppliers on VAT treatment on fuel, spares and maintenance

Bookkeeping and Accounts Reconciliation of all yacht expenses (petty cash, credit card, supplier invoices) Preparing relevant minutes and statutory documentation General bookkeeping services, including monthly bank reconciliations Preparation of annual accounts Reporting of expenses as per client requirements VAT Agency Services Preparation and submission of quarterly VAT returns Liaising with suppliers and VAT authorities Effecting payments of VAT N.B. Any work performed outside a specified remit, such as responding to insurance claims, crew claims, reviewing crew salaries etc will be charged on a time spent basis at a rate corresponding with the level of expertise required. Our time charges vary from 50 to 300 per hour. Annual fees: Annual directors responsibility fee: 1,500 + any annual government disbursements.

Vistra Group Management SA / February 2009 / 3 of 4 This document must be read in conjunction with our Legal and Regulatory notice at http://www.vistra.com/notices

Trust/Beneficial Owner

Crew services agreement with Vistra

Company/Partnership

VAT Agency Agreement

Crew

Central Agency / Charter Marketing Agreement

Charter Agreements

Charter Broker (Third party or Vistra)

Charter Agreements

Payments

Payments

Beneficial Owner

Third Parties

Vistra Group Management SA / February 2009 / 4 of 4 This document must be read in conjunction with our Legal and Regulatory notice at http://www.vistra.com/notices

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