7


Funding
OUR FUNDING  INNOVATION - "SOFT INVESTMENT"

One of our volunteers is a senior investment consultant in a top 5 accounting group. He suggested that we could seek out donors or sponsors that could form a syndicate to purchase the vessel and then lease it back to Island Aid for a token amount for a fixed period. We suggest 10 years is a reasonable period for the "soft investment" partners to tie up their funds. The ship will be insured to protect the sponsor's capital.

The company stakeholders will not be paid any return on their investment.

Instead the company will spend any surplus on upgrading the vessel and on Island Aid community programs. An Indonesian limited liability company structure will protect investors/sponsors from any claims against the ship or the operators.  At the end of the lease period, the ship can either be placed back on the market or sold to Island Aid as appropriate. 

Donors interested in supporting our efforts but seeking a tax deduction can donate direct to Island Aid who in turn will can secure additional equity in the ship. To date Island Aid has secured 10% via a corporate donor and a private sponsor has secured 10% via a soft investment.
OWNERSHIP & OPERATIONS STRUCTURE

1. The Ship Owner Company (PT Lautan Megah Shipping or similar) will own 100% of the ship with 10% of shares valued at US$20,000. "Soft investors" can take up one or more parcels of shares... or all the remaining shares for that matter. The shipping company will not seek a profit or pay dividends to the shareholders. All surplus revenue will be re-invested in the ship. We will arrange for charter fees and outgoings to balance to manage tax liabilities. The prime purpose of the company is to formalize the ownership and protect the shareholders from claims of any kind.

2. Island Aid will charter the ship from PT LMS for a nominal fee for a 10 year period. Charter fees will be just enough to cover insurance and administration costs. Island Aid will be responsible for crew and maintenance costs.

3. Island Aid will hold some of the shares in PT LMS. This is already the case. Talisman decided to donate rather than worry about the long term overhead of involvement. They have indicated that they will continue to donate every year while we are active (they were one of our larger donors during Aceh. Donations of this kind will allow Island Aid to take up parcels of shares so at this point we hold one $20,000 block. Gerard Dykstra holds a second lot of $20,000. An additional donation has been received and we are using that for general on-going Island Aid operations. Future donations will allow Island Aid to increase its ownership by holding more shares. Soft investors can not claim a tax receipt for their investment of course.... but they recover their capital and so the cost for them is much lower. (the cost of loss of interest on the funds invested)

4. Soft investors in PT LMS will be repaid their capital at the end of the 10 year charter period. Island Aid will reserve right of first refusal at face value of shares. Should Island Aid be unable to purchase all shares, stake-holders will be asked to decide to either extend the charter period or to put the vessel on the open market.

5. Island Aid has a solid operational plan that could generate over $100,000 per year based on industry projections and the support from the MMTA. At very least Island Aid will be able to generate $20,000 per year. We may elect to place these funds in trust to eventually pay out the other shareholders or it is conceivable that we might pay out a shareholder before the 10 year term is complete (the company board would decide on that). The ultimate aim is for Island Aid to purchase 100% of the shares 10 years from now. In a way the soft investors are financing our purchase of the vessel at zero cost to Island Aid. This could be categorized as a zero interest loan with just the original capital repaid in a lump sum at full term.

6. PT LMS will insure the vessel so that the shareholders capital is safeguarded. The ship is worth at least twice the $200,000 target value we are seeking and once she is operating and repainted that value will hold well because she is a GRP vessel with no corrosion issues. Her machinery is very heavy duty and the best available and the light duty we have in mind  will not not subject her to loss of value. To build such a ship today would cost well in excess of $2 million.
DONOR / SOFT INVESTOR OPTIONS :

1. Direct Donation to Island Aid with 501(c)(3) receipt. (there is no limit on the amount but suggest a minimum of $20,000 for prominent logo placement*) Direct Donors are helping Island Aid to increase equity in the vessel.

2. Soft Investors can contribute a minimum of $20,000 for 10% of the issued shares (held by nominee) in a domestic Indonesian limited liability company established specifically to own the vessel. (PT Lautan Mega Shipping**)

3. Premium Soft Investors can contribute a minimum of $100,000 for 50% of issued shares in a PMA (foreign investment company) established specifically to own the vessel (suggest PT Lautan Mega Shipping**  PMA). $100,000 or more would secure naming rights for the vessel (ie "Companyname Solace" or similar) and a appropriately up-scaled logos***. (If the sponsor/investor prefers, we could establish this company in the US or their choice of domicile. This could bring some benefits via depreciation or other deductible expenses but the cost is much higher of course).
ISLAND AID CHARTER CONTRACT

PT Lautan Mega Shipping (domestic or PMA) will dry charter the vessel to Island Aid for 10 years at minimum rates and hold the beneficial rights to the insurance policy. After covering administration costs, the company will re-invest surplus charter fees in the vessel to cover maintenance and upgrades. The vessel will be sold to Island Aid at the end of the charter term and funds returned to all investors. Shares in PT Lautan Mega Shipping may be freely traded at 'market value' at any time during the Charter Contract if desired. Island Aid will be offered right of first refusal at face value.
*   For options 1 & 2 above, we envisage 10 equal sized corporate logos and website addresses (if required) painted prominently on the ships topsides and featured on crew and volunteer apparel. The logos will also appear on our a special section of Island Aid's website dedicated to the operation of the "Lautan Mega" throughout Indonesia. Our website designer David Willcox has volunteered to join the delivery voyage and produce a professional video documentary. Copies will be sent to all sponsors/investors.

** Tentative name pending Justice Dept Approval

*** Option 3 could be syndicated between 2 or more corporations so reducing the number of logos appearing on the ship and elsewhere. The first corporation to invest $100,000 or more would get naming rights.


For option 1. above, our US Bank details are:

Bank of the West
PO Box 4002
Concord, CA 94524 U.S.A.
+1 800 488 2265
Beneficiary: The Electric Lamb Mission (Island Aid)
SWIFT Code: BWSTUS66
Routing Number: 121100782
Our account number: 090-087-040

For Option 2 our Singapore Bank details are:

Citibank Singapore Ltd, Attn:IPB
Corresponding Bank: CR Citibank New York
for account of Citibank Singapore, SWIFT:
CITISGSGNo. 3607698
ABA No. 021000089
Attn: IPB

Beneficiary Name: Jane Liddon
Beneficiary Acct No.: 0-103751-004 USD
A "soft investor" is a term Island Aid uses to describe an investor who purchases equity in a company with no expectation of a dividend. This new term derives from the term "Soft Loan". A soft loan is a loan with a below-market rate of interest. This is also known as soft financing. Sometimes soft loans provide other concessions to borrowers, such as long repayment periods or interest holidays. Wikipedia Definition