1. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Bermuda Law & Practice Boston College Fall Semester 2002 MBA-MJ60001 Comparison of “Safe Haven” Countries: Legal & Business Factors of Establishing a Maritime Shipping Company Bermuda, Cayman Islands, Isle of Man, & Jersey by Frank Maniscalco Counselors at Law

2. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Summary of Discussion Definitions: Tax Avoidance vs. Tax Evasion Primary Concerns of Shipping Companies Country Legal & Business Overviews –B–Bermuda –C–Cayman Islands –I–Isle of Man –J–Jersey Special Factors of Bermuda Special Factors of The Cayman Islands Special Factors of The Isle of Man Special Factors of Jersey

3. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Tax Avoidance vs. Tax Evasion Tax Avoidance: Developing a Corporation’s Structure to Mitigate the Impact of Taxation on the Operation of the Business. Fiduciary Responsibility of the Executives to Maximize Shareholder Value. Tax Evasion: Criminal Intent to Conceal (i) the true ownership of funds; (ii) origins of funds; (iii) maintain control over the funds; and/or (iv) change the form of the funds (e.g. Money Laundering) Watch Dogs of Tax Evasion: –World-Wide, (OECD) Organization for Economic Cooperation & Development –United States, USA Patriot Act (USAPA) Title III (10-26-01) –Europe, European Union Tax Harmonization Initiatives

4. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Primary Concerns of Shipping Companies Establishing a Shipping Company & Registering the Ships –Tax on Profits –Tax on Tonnage –Yearly Fees –International Treaties –Trade Regulations & Restrictions –Economic Stability of Country of Origin –World-View of Country of Origin –Protection of Assets –Corporate Support Infrastructure –Legal Support –Manpower –Geographic Location

5. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Country Legal & Business Overviews: Bermuda Tax on Profits: No Taxes For “Special Purpose Entities” Tax on Tonnage: $ 3,000 to 5,000 +/- per Year Yearly Fees: $ 1,780 to 27,825 plus Tonnage Annually International Treaties: 6 Major Maritime Conventions/ No Int’l Arbitration Trade Regulations & Restrictions: UK Restrictions Economic Stability of Country of Origin: Deficit $166 M March 2001 World-View of Country of Origin: Neutral Protection of Assets: Red Ensign (British Navy) Corporate Support Infrastructure: Extremely Strong 10,000+ Int’l Companies Legal Support: Common Law Court System Manpower: 37,472 people low Geographic Location: Ideal for Transatlantic

6. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Country Legal & Business Overviews: Cayman Islands Tax on Profits: No Taxes For “Special Purpose Entities” Tax on Tonnage: Yes, ??? Match UK Yearly Fees: Yes, ??? Match UK International Treaties: 6 Treaties & 1 Tax Info Exchange w/ US Trade Regulations & Restrictions: Independent Economic Stability of Country of Origin: Surplus $ 100,000 World-View of Country of Origin: “uncooperative” by OECD Protection of Assets: Independent; Special Securities Protection Corporate Support Infrastructure: Normal, 66,000+ Offshore Co. Legal Support: Common Law Court System; Special Security of Assets Manpower: 26,849 people very low Geographic Location: Fair for Transatlantic

7. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Country Legal & Business Overviews: Isle of Man Tax on Profits: None Tax on Tonnage: None Yearly Fees: Annual Fee £ 400 +/- International Treaties: Non-EU member w/ 50+ Treaties Trade Regulations & Restrictions: None Economic Stability of Country of Origin: OECD “Harmful” World-View of Country of Origin: Negative Protection of Assets: Red Ensign (British Navy) Corporate Support Infrastructure: Strong: Proximity to UK Legal Support: English Common Law Manpower: 39,685 + Ireland & UK Strong Geographic Location: Ideal for Europe

8. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Country Legal & Business Overviews: Jersey Tax on Profits: 0.5% to 2% of Profits Tax on Tonnage: ??? Yearly Fees: ??? International Treaties: Non-EU member; Few Treaties Trade Regulations & Restrictions: UK Restrictions Economic Stability of Country of Origin: Deficit £7 Mil World-View of Country of Origin: OECD“ harmful” Fighting Protection of Assets: Red Ensign (British Navy) Corporate Support Infrastructure: Strong: Proximity to Europe Legal Support: English Common Law Manpower: 87,186 + UK & Europe; Strong Geographic Location: Ideal for Europe

9. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Special Factors of Bermuda Electronic Transaction Act of 1999: Allows for Agreements to be entered into online. Skilled Mariners within Work Force Mid-Atlantic Location Recent Bad Press: Re: Tyco and other Companies

10. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Special Factors of The Cayman Islands Secured Assets of Lender w/ Self Help thru “Golden Shares” Issued by a “Star Trust”. Creditor Friendly Arrangement LenderBorrower Cayman Co. # 1 Cayman Co. #2 STAR Trust Valuable Subs Golden Shares

11. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Special Factors of The Isle of Man By entering into over 50+ Trade Treaties Isle of Man Companies obtain preferential regulatory status for import/exports. Required adherence to more formal regulations for day-to-day operations due to number of treaties. Can Draw on Highly Qualified Mariners from Ireland and UK.

12. © Copyright Puritan Faust, LLC 2002. All Rights Reserved Special Factors of Jersey Activity pursuing “Cooperative” status with the OECD & the EU Tax Harmonization Initiative. Can Draw on Highly Qualified Mariners from Ireland and UK.

13. © Copyright Puritan Faust, LLC 2002. All Rights Reserved The End Counselors at Law Contact Information: Frank Maniscalco email: frank@puritanfaust.comfrank@puritanfaust.com URL: www.puritanfaust.comwww.puritanfaust.com Mobile: +1-617-312-5967 Address: 14 Park Avenue; 1 st Floor Winchester, Massachusetts 01890-2009 United States