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01. COOPERATION WITH TECHNICAL MANAGER

The shipboard Management shall cooperate with the Technical Manager, to facilitate his function and to acquire the best possible support from the organisation on shore.

Important areas of cooperation are:

- Budgeting

- Planning of maintenance

- Requisition of spare-parts.

- Purchasing

- Planning of future improvements

- Trouble shooting

- Reporting

- Definition and analysis of budget deviations

- Planning and execution of repairs, drydocking and modifications.

- Quality improvement through execution of meaningful inspections and quality audits.

- Follow-up of classification matters.

- Follow-up of certificates

- Safety matters

- Information and advise on technical problems.

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02. MAINTENANCE OBJECTIVES AND GENERAL INSTRUCTIONS

1. Maintenance policy

TGI policy is to maintain the ship to satisfactory standards in every respect, and to comply with applicable regulations, and international conventions such as Solas and Marpol, and with Client and TGI requirements, as follows:

SOLAS I-II A Requirements

“The condition of the ship and it’s equipment shall be maintained to conform with the provisions of the present regulations to ensure that the ship in all respects will remain fit to proceed to sea without danger to the ship and persons on board”.

Clients requirements

Safe and reliable transportation of the cargo, with a minimum of damages to, or loss of cargo.

TGI requirements are:

“To maintain the ship to high safety and operational standard, in order to minimise breakdowns and offhire-time while maintaining full seaworthiness and cargo handling ability at all times”.

2. General instruction

The condition of the ship and it’s machinery and equipment is vital to safe and efficient operation of the vessel.

For that reason and for the preservation of the values invested in the ship, it is most important to plan and execute systematic maintenance.

To accomplish good results it is essential that the Master and Senior Officers give this matter their keen personal attention, that they cooperate as a Shipboard Management Team, and coordinate fully with the Superintendent to obtain resources, and to use the resources to the best advantage.

3. Definitions

The Company for reasons of responsibility and budgeting distinguishes between maintenance, repairs and modifications, in the following procedures:

5.03 Maintenance

05. Repairs

08. Modifications

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03. MAINTENANCE SYSTEM

1. General operation and maintenance

Machinery operation and maintenance shall be conducted safely, efficiently and economically at all times, in strict conformance with existing laws, regulations and good engineering practices, under the direction of the Chief Engineer.

TGI and manufacturers instructions are to be followed in the operation and maintenance of machinery and equipment, which are to be checked frequently for proper operation when in use.

2. Maintenance responsibility

The Chief Engineer has the overall responsibility for maintenance throughout the vessel. He is required to maintain a comprehensive knowledge of maintenance and repair needs of all machinery both inside and outside of the engine spaces.

Maintenance of the paint system on the hull and special deck equipment such as cranes, derricks and cargo pumps, shall be carried out in close cooperation with the Chief Officer due to his special skills in this field.

Determination of priorities and planning of continuous maintenance shall be carried out by the Shipboard Management, consisting of Master, Chief Engineer, Chief Officer and First Assistance Engineer.

The planning shall comprise:

- The frequencies, sequences, performance, quality control, verification and documentation of the tasks performed.

- Feed-back to the office through condition reports and variation reports

- Review and processing of reports in the office in order to define corrective measures and measures for improvements as necessary.

- Reporting to TGI.

On the vessels equipped with a systematic maintenance system, the Chief Engineer shall ensure that the routines established in the system are followed, for keeping the planned maintenance record, and for submitting specified reports.

3. Inspection, measuring and test equipment

Calibration of the various inspection, measuring and test equipment onboard is an important part of the maintenance system and shall be carried out regularly or as indicated by the Manufacturers’ recommendations.

The calibration shall be documented either by entering the calibration date/result on the instrument itself, or in a separate log, or by filing of the relevant check-list.

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Inspection, measuring and test equipment onboard include but are not limited to:

- Oxygen analyser.

- Gas explosimeter

- Test equipment for pressure and temperature switches

- Indicating instrument for main and auxiliary engines.

- Remote reading of temperature in cargo tanks.

- Closed ullaging for cargo tanks.

- Pressure and temperature gauges/switches/regulating valves.

- Level switches including high level alarms for cargo tanks.

- Echo sounder

- Steering angle indicators

- Compass and gryro

- Smoke and heat detectors for fire alarm.

Reference is made to the Company Format file, Section 6.

Maintenance by vessel’s personnel

In general all maintenance of the vessel’s machinery and equipment are to be carried out by crew as far as capacity and capability allows.

4. Maintenance work by Riding Crews

If the machinery, hull or tanks are in need of extensive maintenance work requiring extra personnel to accompany the vessel for one or more voyages, this is to be discussed with the office of TGI on a case to case basis. See 5.06.

5. Shore assistance and service

In cases where shore expertise is needed all requests as far as practical are to be directed to TGI.. In cases of service to nautical equipment or in cases of minor repair where a request to TGI may delay the vessel the Master may arrange the necessary assistance locally.

After such services have been carried out TGI is to be informed of the extent and the result of the work at the first opportunity.

In cases of major breakdown or where more extensive assistance is needed TGI is always to be contacted as soon as possible for a mutual discussion of the best possible course of action.

When maintenance work or service to the vessel’s equipment, machinery or hull have been carried out by shorebased personnel the Master must obtain a signed timesheet stating the number of men and manhours involved in the work.

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A copy of the timesheets and a copy of the service report should be forwarded to TGI at first opportunity.

If on the other hand the service report is not available before vessel’s departure, Transkim Germi Isletmeciligi shall forward the report to the vessel when received.

Note! Timesheets and service reports shall be stamped with the vessel’s name and Owning Company when signing. See 5.06 of this Manual, “Procurement system”.

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04. SPARE PART SYSTEM

1. General

Systematic control of spare parts is an important part of the vessel’s maintenance system, and a vital element in the vessel’s emergency preparedness.

Further, lack of spare parts or missing control of spare part certificates and records may delay and complicate the maintenance and repairs, causing delays and time off-hire.

Therefore, it is of utmost importance that the record on the spare part inventories are kept up to date at all times, and that consumption is followed up by ordering new parts.

2. Responsibility

The Chief Engineer is responsible for the spare-part system.

3. Ordering

For certain parts the delivery time is quite long, and to avoid shortage onboard, the ship’s order should be forwarded to TGI office at the earliest opportunity, enabling the office to save forwarding expenses by arranging deliveries in the most favourable port. See also 5.40 of this Manual, “procurement system”.

4. Receiving control

On receipt spare parts shall be checked against requisitions and certificates to ascertain that they are as ordered.

Further they shall be visually inspected, and if necessary measured, to ascertain that they are not damaged during transport.

5.4.5 Storing

Spare parts shall be safely stored in such a way that they are easily accessible at all times, and be kept at the assigned permanent positions until removed for use. (Removal for inspection and overhaul excepted).

Used spare parts shall be segregated from new parts and clearly marked “used, defect”, “used , to be repaired”, “used, to be shipped for reconditioning”, as relevant.

Reconditioned spare parts required recertification prior to use.

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5.04.6 Landing

When spare parts, engine goods, etc. are sent ashore for return to the supplier, for repair or other reasons, the Company Format no. 521 shall accompany the consignment.

See also 5.40 of this manual, “Procurement system”.

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05. REPAIRS

When damages occur for reasons of accidents of wear and tear, the damages shall be repaired to re-establish the status prior to the damages.

Definition:

Repair is defined as work or installation which does not alter the ship’s specifications.

1. Purpose

This procedure is established to provide proper guidelines related to the conduct of repairs and to ensure that current regulations and recommendations are followed.

2. Responsibility

It is the responsibility of the shipboard Management to implement the procedure.

3. Work performance

Damage survey and damage report

Before damages are repaired, conditions permitting, a joint survey must be performed by Representatives of TGI, the Classification Society and the Leading Underwriters, to establish the cause and extent of the damage.

A damage report shall be issued with a precise description of the damages, documented with pictures if available, the reasons for the individual damages, time of occurrence and estimated cost of repair. The Master shall provide the Surveyors with Log Extracts.

If average repairs have been performed at sea, these shall be inspected by the Surveyors at first opportunity.

Repair planning

Minor repairs are planned and specified by the Shipboard Management, and is executed at the times and places found most suitable and is reported to TGI with all relevant information.

Major repairs requiring yard assistance, crane capacity or additional work teams, shall be planned and executed in cooperation with the ship’s Superintendent and the Classification Surveyor, in order to plan for the

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optimal time and place and use of resources, and to minimise off-hire time.

Plans for major repairs requiring off hire-time shall be submitted to the Technical Department for comments, prior to approval by the Technical Manager.

Repair specifications and bid invitations

On the basis of the damage survey, complete repair specifications shall be prepared, in order to verify cost estimates, and to issue bid invitations to yards.

Each item for repair shall be specified and be transmitted to the Technical Department.

The repair specifications and bid invitations are finalised and issued by the Technical Department.

Circumstances permitting TGI will, and the Underwriters may demand that bids are solicited from several yards, prior to conclusion of a repair contract.

Expenses for shifting or deviation from the ship’s position to the separate yards shall be added to the price offered by each yard. Owners expenses such as lub/fuel oil, Classification/Superintendent/Port/Agent expenses shall be added to the price offered.

TGI may exclude any bid if special conditions exists, and has the final choice of repair dockyard. This may, however, lead to a reduction in the Underwriters obligations.

Average reports

In connection with average repairs, TGI always require the following documentation:

-Statement of crew overtime related to the repairs performed at sea and in port.

-Statement of fuel consumption during stay at yard.

-Statement of consumption of water, lubrication oil and stores during stay at yard.

-Statement of disbursement by Master and others, including telephone, telegram and postage.

Expenses related to tank cleaning/gas freeing prior to arriving at the yard are partly or wholly compensated by the Underwriters. The following documentation is required:

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-Statement of consumption of fuel water, lub. oil and stores used for the purpose.

-Statement of wages including overtime, and food for personnel involved in the work.

-Statement of cost for gas free certification.

When calling at a port of refuge, the following additional documentation is required.

-Statement of wages and food during the general average repairs.

-Statement of wages and food during the stay in port of refuge and from the point of deviation and return.

-Statement of consumption of fuel, lub. oil etc. in the same period.

4. Verification

The ship’s Superintendent and/or the ship’s Management as well as the Classification Surveyor shall per form continuous inspection of the repairs performed by the yard, to verify that the quality of the work is in accordance

with the contract specifications.

If repairs are carried out on an average account, underwriter’s representative to be present.

5. Documentation

Damage repairs require documentation as follows:

-Log extracts.

-Photographs of damages.

-Statements related to recoverable disbursements prior to repair.

-Survey report from the Classification Society.

-Bids from dockyards

-Repair contract.

-Statements related to recoverable disbursements during repair.

-Inspection reports.

-Certifications related to maintenance of class and seaworthiness.

6. Updating

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The Master and Chief Engineer is requested to report any disagreement between the procedure and the actual requirements to execute qualified repairs.

Proposed changes of the procedure are transmitted to the Technical Manager for approval.

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06. REPAIRS IN PORT AND EN ROUTE

Purpose

Riding Crews may be used for maintenance work and repairs, en route and in port, in lieu of additional permanent Crew or Yard capacity, and in order to avoid delays that may affect sailing schedules, and cargo handling performance.

Job preparation by Technical Manager

The use of Riding Crews for maintenance shall normally be planned and included in yearly budgets, and be executed within budget limited.

For unbudgeted use due to unforeseen events such as breakdowns, the Technical Manager shall advise the Management of the estimated cost, and eventual anticipated time off-hire related to the repair, in order for him to arrange for necessary funds.

The Superintendent shall specify the qualification requirements relevant for the specific work to be performed, such as mechanical work, steel work, welding, surface treatment and electrical work, and obtain the Contractor’s estimate of cost involved.

Conditions allowing repairs shall not be initiated until allocation of funds is confirmed by the Owners.

Planning and control of work by Shipboard Management

It is imperative that all jobs performed on board by Riding Crews are well planned by the Ship Management, with emphasis on safety measures and effective use of the extra capacity, and that the jobs and the quality control is performed in compliance with the plan and applicable work procedures. See: 9.05 Quality Planning.

The Superintendent may issue guidelines to the Shipboard Management, to ascertain that technical and safety requirements are properly observed.

The Senior officer responsible for the job(s) shall step by step verify the work progress and that the approved procedures for the work and quality control are complied with. He shall also verify compliance with safety measures throughout.

Special precautions

Serious accidents too often occur in relation to this type of work, and too often the causes are incomplete planning and supervision.

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Therefore it is a Company requirement that work by Riding Crews is carefully monitored by the Shipboard Management, and that the following general instructions are adhered to:

-The Riding crew to be familiarised for Safety onboard.

-The Riding crews shall not be left to work independently over long periods.

-The Shipboard Management shall not allow extensive overtime over many successive days, in order to avoid incidents caused by lack of sufficient rest.

-As a general guideline the daily work hours shall not exceed an average of 12 hours for jobs lasting more than 3 consecutive days.

-Work in cargo and/or enclosed spaces involving gasfreeing and airing of tanks/holds require a work permit signed by the Master and the Senior Officer responsible. Further, such work requires continuous monitoring of atmospheric conditions, and positioning of back-up crew and equipment.

-For machinery work it involves controlled use of tools and lifting gear etc. to avoid injuries, and close supervision.

-All work plans for Riding Crews shall be approved by the Master.

Documentation

For work completed by Riding Crews, the following documentation shall be submitted to the Superintendent:

-Specification of work performed.

-Documentation of quality control performed

-Documentation of verification by Senior Officer(s), i.e. Chief Engineer, Chief Officer, First Engineer, Electrician.

-Photos, sketches, measures and other relevant information.

-Specification of material take-off

-Specification of spare-parts used

-Copies of approved timesheets

-Specification of cash advanced

-Evaluation of work quality

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Classification

Work performed affecting the classification status shall be surveyed at the earliest opportunity.

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07. PLANNING OF DRYDOCKING AND SHIPYARD WORK

Drydocking and repair lists for the next drydocking commences when the ship leaves a Shipyard on completion of a schedule drydocking.

The various items shall be fully described and specified on board, and passed to the technical Manager for review and comment. On copy of the specification to be filed onboard in the forthcoming docking files. A similar file shall be kept by the Technical Manager.

It is important that the time between drydocking is well used to prepare and plan, to consider options and obtain optimal value for the resources allocated, and to avoid ill-prepared last minute items.

The Technical Manager shall accumulate approved items in the period between drydockings, and ensure that they are included in bid invitations, as approved by the Management , to the selected Yard prior to drydocking.

General

Vessel shall prepare repair specifications for drydockings and other repair work when requested by TGI office.

Repair items shall be numbered according to the account numbering system:

6301. Repair of steel constructions

6302. Protection and underwater cleaning

6303. Loading and discharging equipment

6304. Steering gear and deck machinery

6305. Navigation and communication equipment

6306. Safety, fire and rescue equipment

6307. Main engine

6308. Main engine turbo chargers

6309. Auxiliary engines, emergency generator

6310. Propeller, propeller shaft and rudder

6311. Automation equipment

6312. Auxiliary machinery

6313. Boiler plant with pumps

6314. Pipelines and valves

6315. Electrical plant

6316. Inventory

The specification shall be written as detailed as possible enabling a shipyard to give a quotation without survey on the spot onboard. Give length x breadth x thickness for steel to be renewed (or number of kilos), give diameter, length, thickness and material of pipes to be renewed, etc…

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If it is difficult to know the extent of the repair, make assumptions as realistic as possible. Sketches to be used as much as possible.

The specification to be written in the English language.

Based on the specification prepared onboard, TGI office will prepare a repair specification which will be sent to a number of Shipyards for quotations.

TGI will add the parts relating to drydocking and general expenses and high pressure washing, blasting and painting. In additional TGI “General Conditions” for drydocking/repair will be added.

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5.10 INSPECTION AND AUDITS

1. Planned inspections by Technical Manager

Planned inspection is carried out by the Technical Manager in accordance with the inspection plans and scheduled dockings, with due allowances for sailing-schedules and routing of the vessel (s).

The planned inspections by Technical Manager shall be combined with auditing. On the yearly inspection plan every third inspection shall be substituted by quality audits.

2. Internal Quality Audits

Quality Audits of ships shall be initiated by Department Managers to obtain objective evidence of the implementation and adequacy of the quality system, with emphasis on the issues of safety, pollution prevention, and operational efficiency.

-Quality audits shall be carried out in accordance with the audit procedure, see 9.12.

-The Managing Director shall nominate the Auditor.

An audit is not an instrument to objectively determine conformance or non-conformance to systems, work procedures and regulations, the adequacy of the systems, and to determine the corrective measures to be applied for quality improvement.

5.10.3 Inspection and audits by others

Inspections and audits may be conducted by representatives from Authorities, Classification Societies or Charterers.

Such activities will be planned in advance and shall be approved by TGI.

Conducting the inspection

Inspection should only be carried out in the full knowledge of the Master and with his cooperation.

On boarding the ship the inspector reports directly to the Master in order to explain his intentions and objectives.

During the inspection of the ship, it is recommended that the inspector is accompanied at all times by a responsible person nominated by the Master.

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The inspector should be an observer only and should not interfere or become involved in the operation of the ship or be in any discussion between the ship and Terminal, Port Authorities etc.

On completion of the inspection, the inspector will report to the Master and discuss with him the findings of his inspection.

This will give the opportunity to clarify questions which may arise in the course of the inspection (e.g. compliance with Flag Regulations) before he leaves the ship.

The written list of deficiencies found and recommendations shall be left with the Master. This list shall be forwarded to the Technical Manager.

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10. MARITIME CERTIFICATES AND CLASSIFICATION STATUS

5.11.1 Purpose

This procedure presents a check list for the various surveys which is required by classification and maritime authorities and gives guidelines for ordering, performing and reporting as well as who is responsible for carrying out the surveys.

2. Definitions

Classification: Det Norske Veritas (NV)

Lloyds Register (LR)

Germanischer Lloyd (GL)

Bureau Veritas (BV)

American Bureau (AB)

Authorities: Norwegian Maritime Directorate

(Sjofartsdirektoratet) (SFD)

US Coast Guard (USCG)

Italian Authorities (RINA)

5.11.3 Description

The ship is responsible for checking when the various surveys are due and is also responsible for ordering representatives from classification and authorities to attend onboard for surveys. The office will assist when and where required.

The enclosed report “Certificates and Periodical Surveys” is to be sent to the office twice a year, 30th of June and 31st Decemeber.

A list of the classification society’s offices around the world including telex and telefax numbers is filed onboard. (No. 20 in “Ship’s Professional Library”, see Chapter 8.05)

Note!! Request for surveys shall be done directly to the classification society’s local office with copy to TGI, or only to TGI who will arrange the survey. Requests for surveys shall normally not be sent to the local port agent.

For the following certificates a survey is not required. Issuing and renewal will be arranged by the office:

-Certificate of Financial Responsibility (COFR)

(U.S. Coast Guard)

-Civil Liability Certificate (CLC)

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-TOVALOP Certificate

-Tonnage Certificates (International, Suez, Panama)

-Manning Plan

NB! Vessel shall notify TGI office well in advance about expiring date of the above certificates.

5.11.4 Unscheduled inspections by SFD and Port Authorities

These inspections will happen frequently. The inspection will mainly comprise checking of:

-the validity of vessel’s trading certificates,

-qualifications for crew,

-lifesaving and fire prevention equipment,

-oil discharge monitor

-navigation facilities including correction of charts up to date.

5. Inspections by shipper

Shippers (for example oil companies for the chemical tankers) will carry out extensive inspections especially with regard to ship’s capability to carry, load and discharge the cargo in question. However, the vessel’s technical condition in general as well as procedures for cargo handling and operation of the vessel will be evaluated.

See also this manual, chapter 5.12, “Inspection by Oil Companies”.

6. Inspections by insurance companies

The insurance companies are now requiring a survey before the vessel is accepted as insured in their company. Normally this survey is carried out when the ship is taken over, but regular surveys during operation will also occur.

7. Documentation

Company format 501

“Certificates and Periodical Survey” ( 3 pages)

5.11.8 Applicable rules for the oil and chemical trade

The following rules apply:

-Regulations for the Control of Pollution by Oil (Marpol Annex I).

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-Regulations for the Control of Pollution by Noxious Liquid Substance in Bulk. (Marpol Annex II).

-International Code for the construction and Equipment of Ships carrying Dangerous Chemicals in bulk. (The IBC and BCH codes).

-US Coast Guard Code of Federal Regulations 46 (Parts 140 to 155).

-US Coast Guard, Oil Pollution Act 1990 (OPA 90).

-Det Norske Veritas Rules: Oil Carriers, part 5, Chapter 3 and Chemical Carriers, Part 5, Chapter 4.

In addition the various countries may have their own rules and regulations which apply when trading on these countries.

5.11.9 Additional certificates and surveys for oil and chemical carriers

Class certificates and surveys

-Tanker Chemicals/oil, complete Every 5 years

-Tanker Chemicals/oil, intermediate Every 2.5 years

-Tanker Chemicals/oil, annual Every 5 years

-Inert Gas Plant, complete Every 5 years

-Inert Gas Plant, intermediate Every 2.5 years

-Procedures and Arrangements (P&A)

Manual Unlimited.

5.11.10 Statutory certificates and surveys

-IMO Chemical Code Annex II, complete Every 5 years

(Certificate of Fitness (COF)

-IMO Chemical Code Annex II, intermediate Every 2.5 years

-IMO Chemical Code Annex II, annual Every year.

5.11.11US Coast Guard Certificates and surveys

-Letter of Compliance (LOC), complete Every 2 years

-Letter of Compliance (LOC), annual Every year

-Certificate of Financial

Responsibility (COFR) Every 2 years

5.11.12 Registro Italiana Navale (RINA)

A survey may be required when a vessel is entering an Italian port. The certificate issued will normally be valid for one year.

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5.11.13 Insurance Certificates

Civil Liability Certificate (CLC) For Norwegian vessels: Unlimited

For other countries: Renewal every year

5.11.14 Certificates for crew

For chemical vessels it is required that Master, Chief Officer, Chief Engineer and first Assistant Engineer shall have participated in an advanced chemical course and an endorsement shall have been made in their seaman’s book accordingly. Other crewmembers who take part in cargo operations, shall have participated in a chemical course (lowest grade) and an endorsement shall have been made in their seaman’s book accordingly.

For oil tankers all crew participating in cargo operations shall have participated in a tanker safety course and an endorsement shall have been made in their seaman’s book accordingly.

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5.12 INSPECTION BY OIL COMPANIES

1. General

All oil companies today require a thorough inspection of tankers and chemical vessels before they are allowed to carry cargo for that oil company.

The inspection is carried out to confirm if the vessel is in compliance with the relevant international regulations and codes of practice prepared by the industry and in respect of responsible management of the vessel, safe operational practises and environmental protection.

After the initial approval half-yearly or yearly inspections are normally required.

2. Inspections

The inspectors of Exxon Chemicals in Europe are using a booklet of 140 pages as their checklist. The check points are listed in three categories:

-Statutory requirements.

-Recommended requirements

-Desirable requirements

The booklet “Inspection Report, Chemical Carriers”, Rev. 8: 2/92 from Distribution Standard Institutes is distributed to all TGI vessels.

When the vessel is informed that an oil company shall inspect the vessel, the check points as listed in the booklet shall be confirmed to be in order before the inspector arrives onboard.

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5.13 ANALYSES OF FUEL, LUB OIL AND BOILER WATER

5.13.1 Fuel oil analyses

Some of the vessels are entered into Det Norske Veritas fuel oil sampling system. The vessel will be advised in that respect.

These vessels shall send a sample of the fuel oil to NV laboratory at every bunkering. A sample of the diesel oil will normally not be required to be taken.

The result of the analyses with comments and/or instructions is sent directly to the vessels with copy to TGI. The result is checked by the technical department and filed for each vessel. If the result shows that the fuel oil is off-spec, the operator or TGI will lodge a claim against the fuel oil supplier.

2. Lubrication Oil Analyses

Lubricating oil samples for main engine system oil and for auxiliary machinery systems, including hydraulic oil for cargo operation as found necessary shall be sent to the lub. oil supplier, Chevron for analyses and comments at 3 month intervals.

Please remember always to fill in the latest details in this respect in corresponding “box” at the bottom of page 1 of the monthly engine report, even for months when no samples have been taken or sent.

3. Boiler and cooling water analysis

For the time being TGI is using Drew and Unitor for boiler and cooling water treatments.

Transkim Gemi Isletmeciligi has no signed contracts with any of the mentioned firms, i.e. we are free to choose/change between same (or others in the market) if/when so desired, prices and service taken into account.

Reporting

The vessels shall send boiler and cooling water treatment analyses to the office at the end of each month. TGI office will send the analyses to the Supplier, requesting timely qualified comments, allowing for eventual corrective measures without undue delay. Comments will be forwarded to the vessel when received.

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5.14 REPORTS FOR DECK AND ENGINE

The following reports shall be filled in and sent to the technical department of TGI as soon as possible after the month is finished:

- Engine Report Page 1 Company format no. 502

- Engine Report Page 2 Company format no. 503

- Work Report Engine Company format no. 504

- Indicating and Service Date Company format no. 505

- Piston Job Report (when done) Company format no. 506

- Crank shaft deflections for

Main and auxiliary engines

(at least every 3 months) Company format no. 507

- Impressed Current Report Manufacturer’s report format

(where applicable)

- Boiler and Cooling Water Chemical supplier’s format

Analysis Report

- Work Report Deck Company format no. 508

- Purging Report for Deep Well

Pumps Manufacturer’s report format

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20. CARGO PUMPS PURGING

Purpose and scope

The purpose of this procedure is to establish a system to check the cofferdams of the hydraulic operated deep well cargo pumps. The cofferdams shall always be purged before loading and discharging as describe in Manufacturer’s instruction manual.

Definitions

- Purging

Blowing of cofferdam of deep well pumps.

- Purging report

Standard report format as issued by Manufacturer. Result of purging of all deep well pumps to be filled in.

Responsibility

The Chief Officer is responsible for carrying out the purging.

Description

The cofferdams of the hydraulic operated cargo oil deep well pumps shall always be purged before loading and discharging of cargo as described in Manufacturer’s instruction manual.

If the purging reveals leakage into the cofferdam by cargo or hydraulic oil, action much be taken by ship’s personnel in order to rectify the leakage or load/discharge the cargo by the portable cargo pump.

Dates for purging, checking and control of all hydraulic operated cargo oil deep well pumps shall be recorded on checklist.

Documentation

Company format no. 510 be used.

The purging reports shall be filed in Standard Filing System Box 38 “Tank/Cargo Hold/Condition Report”.

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21. HEATING COILS AND ACCESSORIES CHECK

Purpose and scope

The purpose of this procedure is to establish a system to check the tightness of the heating coils in cargo tanks, attachment to tank sides and bottom, and valves, etc. in the heating system.

Definition

-Heating coils

Coils for heating of cargo permanently installed in cargo tanks.

Responsibility

The Chief Officer is responsible for carrying out the testing.

The Chief Officer is responsible for carrying out the repairs.

Description

The heating coils in cargo tanks to be tested by steam or compressed air at regular intervals, preferably at all times before loading cargo.

Leakages found shall be repaired before cargo is carried in observances of procedures for hot work etc.

Leaking components may be disconnected (if feasible), for repair on the poopdeck or engine room workshop.

Dates for testing of heating coils shall be recorded on checklist.

Documentation

Company format no. 511 shall be used.

The checklist shall be filed in Standard Filing System Box 38, Tank/Cargo Hold/Conditions Report.

|Chapter 5.21 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

22. CARGO TANK PRESSURE TEST AND CRACK REPAIRS

Purpose and scope

The purpose of this procedure is to establish a system to check the tightness of the cargo tanks and to record repairs of cracks and other deficiencies.

Definitions:

-Cargo tank pressure test

Pressure test of a cargo tank with the cargo itself or with water up to top of entrance hatch.

Tank’s bottom, bulkheads and top to be checked from empty tanks/deck.

-Crack repairs

Repairs of cracks or other deficiencies by welding, insert of plates, etc. by vessel’s crew or by external repair company.

Responsibility

The Chief Officer is responsible for carrying out the testing.

The Chief Engineer is responsible for carrying out the repair work.

Description

Pressure test of cargo tanks shall be carried out regularly.

Dates for pressure testing of cargo tanks shall be recorded on checklist.

Documentation

Company format no. 512 shall be used.

Repair of cracks and other deficiencies to be filed separately in Standard Filing System Box 38 “Tank/Cargo Hold/Condition Report”.

|Chapter 5.22 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

23. CARGO TANK WALL WASH TEST

Purpose and scope

The purpose of this procedure is to establish a system to check the cleanliness of a tank when special cargoes shall be carried.

Definition

-Wall wash test

Test method for checking if chlorides or other unacceptable products are attached to the tank walls.

Responsibility

The Chief Officer is responsible for carrying out the wall wash test.

Description

A wall wash test is carried out to check if the tank is sufficiently cleaned to carry the intended cargo.

Dates for wall wash tests carried out to be recorded on checklist.

Documentation

Company format no. 513 shall be used.

Checklist to be filed in Standard System Box 38, “Tank/Cargo Hold/Condition Report.”

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24. CARGO TANK COATING

Purpose and scope

The purpose of this procedure is to establish a system to control the coating in the cargo tanks to ensure that cargo is placed in tanks which have a condition of the coating which is satisfactory to the cargo to be carried.

Definitions

Coating in cargo tanks will normally consist of one of the three following systems:

- Zinc coating

- Epoxy coating

- Polyurethane coating

Responsibility

The Master is responsible for implementing this procedure and to instruct and supervise the officers involved in the inspection.

Description

Condition of coating for all cargo tanks shall be inspected at regular intervals min. two times a year. The checklist shall be filled in.

In addition the condition of the coating shall be inspected after every cargo carried and the report shall be filled in if any abnormal conditions occur.

Documentation

Company format no. 514 shall be used.

Cargo operation documents shall be filed in Standard Filing System Box 38 “Tank/Cargo Hold Condition Report.”

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25. CARGO HOSES, VAPOUR HOSES AND EQUIPMENT

Purpose and scope

The purpose of this procedure is to establish a system to control the suitability and condition of the vessel’s cargo loading and discharge hoses, vapour hoses and related equipment.

Definitions

Cargo hoses: Hoses used between the terminal’s and the vessel’s manifold or exclusively onboard the vessel for loading and discharging of cargo.

Vapour hoses: Hoses used between the terminal’s and the vessel’s manifold or exclusively onboard the vessel for receiving and supplying cargo related gas.

Equipment: Blind flanges,bolts, etc.

Responsibility

The Chief Officer is responsible for testing and inspection of the hoses.

The Master shall verify that all cargo and vapour hoses are marked for traceability and have valid certificates.

Description

Cargo and vapour hoses shall be tested for pressure and electrical continuity at regular intervals, minimum once a year, and the test pressure and date shall be painted on the hose itself. At the same time the hose shall be checked for possible deficiencies.

Dates for testing and inspection be recorded on checklist.

Special requirements from Charterers and Terminals to be observed and complied with.

Documentation

Company format no. 515 shall be used.

The certificates for cargo and vapour hoses to be filed in Standard Filing System Box 41 “Certificates for Instruments and Cargo Hoses.”

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26. GAS INDICATORS – CONTROL AND CALIBRATION

Purpose and scope

The purpose of this procedure is to establish a system to ensure that the gas indicators are working satisfactory and are showing correct values at all times.

Definitions

Oxygen analyser: Gas indicator for measuring the oxygen in tanks and in

Enclosed spaces.

Hydro carbon

Analyser: Gas indicator (explosive-meter) for measuring hydro-

Carbons in tanks and in enclosed spaces.

Responsibility

The Chief Officer is responsible for the control and calibration of the gas indicators.

Description

Proper working of the oxygen analyser shall be confirmed by checking the analyser against normal air (21% oxygen)

Proper working of the hydro-carbon analyser shall be confirmed by checking the analyser against a special test gas.

Manufacturer’s instructions shall be followed for both analysers.

Documentation

Dates for testing and inspection shall be recorded on Company format no. 516.

The certificates for the oxygen and the hydro-carbon analysers shall be filed in Standard Filing System Box 41 “Certificates for Instruments and Cargo Hoses.”

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40. PROCUREMENT SYSTEM

1. Purpose

This procedure describes TGI procurement system for purchasing stores, supplies and spare parts to the ships.

2. Orders made by the ship through the office

Standard Order Sheet, Company format no. 520 to be filled in onboard and sent to TGI office. On the Order Sheet the following to be filled in:

-ship’s name,

-date,

-account number (only one Order Sheet per account no.),

-order number – to be numbered continuously (1/96, 2/96,…) from no. 1 at the start of the year until year end. Thereafter starting at no. 1 the next year.

Order sheets not to be divided between deck and engine. State as much data as possible to enable the supplier to identify the components/items ordered.

The supplier shall be filled in if known. If not, the supplier will be filled in by TGI office. The order number shall also be filled in when ordering by telex or telefax.

A register for all order numbers shall be established and kept up to date onboard.

NOTE !

1. Forwarding of spare parts and equipment to the vessels normally takes a very long time. It is therefore important that the orders are sent to TGI office with ample time before the spares and equipment are needed.

2. Orders for provisions, lub oils, paint, and other stores which are to be delivered from a local shipchandler in a loading or discharging port,have to be sent to TGI office, normally 2 weeks in advance, but not less than 7 working days.

3. Orders made by the ship directly to shipchandlers, etc

The Master may purchase provisions, stores and supplies for an amount of USD5,000 per month without approval by TGI office.

The account number to be filled into the order and shipchandlers/suppliers must be requested to fill in this account number on their invoices and to issue only on invoice per account number.

|Chapter 5.40 |Revision 0 |Date 10.03.1998 |Page 1 of 2 |

NOTE!

It is the owning company (not TGI) who make the order. The name of the owning company tobe stamped on all order. Both the Master, the Chief Engineer and the Chief Officer are provided with such stamp.

There is to be only one order sheet per account number, i.e. more than one account number is not to occur on the same order sheet.

Order sheets are also used for components/items which are sent ashore for repair/reconditioning. An order number to be given and copy of order sheet to be sent to the office.

4. Orders made by the office

TGI office will from time to time carry out purchases without any order sheet from the ship. No order numbering system is used. Copy of order and invoice with account number will be sent to the ship.

TGI office is using the following system for numbering of order:

- 001-599 Orders from ship

- 600-699 Office – spares and equipment

- 700-799 Office – service work

- 800-899 Office – port agents

- 900 –999 Available

5. Monitoring of the orders

The office uses Company format no. 523 for monitoring of the orders. This form may also be utilised onboard the ship.

6. Forwarding

All spares and stores are normally sent onboard by airfreight. The ship agents are informed about airwaybill-number (AWB) and arrival.

When return of spares is required (for ex. When wrong delivery), Company Format 521 to be utilised.

7. Comparison with budget

Before any order is made a comparison with ship’s budget is to be carried out. If likely that the particular account number is exceeding the budget, a thorough evaluation has to be made if the order really is required. An explanation is required why the order had to made.

If the order is made locally in a port, for example from a shipchandler, and there is reason to believe that the budget will be exceeded, the office has to be informed about the overrun and the reasons.

A more thorough explanation is given in this manual, 5.80 Budgeting.

|Chapter 5.40 |Revision 0 |Date 10.03.1998 |Page 2 of 2 |

41. ORDERING AND INVOICE CONTROL

1. General

Generally ordering and purchasing by the vessel shall be carried out as follows:

ITEMS ORDERS TO BE SENT TO: APPROVAL OF INVOICE BY:

Paint TGI Office TGI Office

Lub. Oils TGI Office TGI Office

Provisions, other

Stores and supplier TGI Office TGI Office

Service navigation

And communication

Equipment TGI Office. TGI Office 1)

If urgent, service may be

Ordered directly from

Agent/local repair firm

(TGI office to be advised)

Service other

Equipment TGI Office TGI office 1)

Harbour repairs TGI Office TGI office 1)

1) Ship management shall approve timesheets and work reports and send same to TGI. See 5.03.5 “Shore assistance and service.”

2. Compliance with ship’s budget

All ordering shall be checked against the ship’s budget before ordering or purchasing is done.

When ordering, an explanation always to be given why the order is required if it is obvious that the budget is or will be exceeded.

When the ship management is ordering provisions, other stores and supplies as well as services, and the budget figures already are exceeded or it is obvious that the budget figures will be exceeded, a careful evaluation of the actual order be done. If possible the order to be reduced or postponed.

|Chapter 5.41 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

41. PURCHASE OF PAINT

1. Contract/price list International Paint

TGI has a contract with for purchasing paint in various ports around the world. We obtain a substantial rebate when ordering direct from International compared with purchasing through agents, shipchandlers, etc. Further there is a considerable variation in prices for the various ports, with best prices in the main ports such as Rotterdam, Singapore etc.

2. Ordering of paint

Ship is requested to order all paint through TGI’s office.

3. Drydocking

TGI will normally ask more paint companies for Tenders when painting ship’s bottom and hull at drydockings. Bottom and hull painting may therefore be of a different brand than painting for cargo holds, decks, etc.

|Chapter 4.42 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

42. INVENTORIES AND PROVISIONS

1. Purpose

This procedure describes the information required by TGI in connection with purchasing and consumption of provisions.

2. Description

At the end of each quarter an inventory list of the provisions to be carried out and the consumption in the period to be calculated.

Company format no. 522, “consumption Report Deck-, Engine and Mess/Galley Stores” shall be used.

Provisions in stock and the consumption are to be reported to TGI as soon as possible after the quarter is finished. This reporting will be part of the normal reporting after each quarter. It is not required to send a special account for provision to TGI, but it is recommended that a detailed account is used onboard for planning and monitoring purchasing of provisions.

It is not required to send copy of invoices/delivery notes from shipchandlers to the office. All shipchandlers will send their original invoices to TGI’s office signed and stamped by the Master/Chief Engineer.

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60. INSURANCE AND CLAIMS

All Marine Insurance have been covered on Norwegian Conditions through our Insurance Brokers, Sev. Dahl’s Assurancekontor A/S, Oslo, and placed with recognised Underwirters in Norway and abroad.

The Policies are renewed once a year. Prior to renewal the Insurance Brokers obtain premium offers from various insurance markets for our consideration for the purposes of keeping insurance costs at a reasonable level and on best possible conditions.

The Insurance Brokers collect claims from the Co-Underwriters and arrange for payment to be effected with the Owners when due.

|Chapter 5.60 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

61. HULL AND MACHINERY

Leading Claims Underwriter

Skibsassuranseforeningen UNITAS, Oslo, Norway.

Insurance Conditions

Norwegian Conditions according to the Norwegian Marine Insurance Plan of 1964 as amended by the Hull Policy, but subject to USD deductions as follows:

Deductibles

This is the amount which the Owners of the vessel has to cover for all and any accident. The insurance company will pay the approved costs above the deductible.

The deductibles will be fixed for one calendar year, and will be renegotiated at the end of evey year. For 1998 the deductibles will be as follows:

- For the “TOL” vessels:

About USD 100,000 for hull damages

About USD 180,000 for engine damages.

The hull deductibles also apply for the collision liability for touching fixed and floating objects.

Machinery damage deduction shall apply in connection with repairs of main engine with shafting, bearings and propeller, auxiliary engines, starting air tanks, exhaust pipes for main and auxiliary engines, el. Motors, generators, converters, steam boilers with flue outlet and internal chimney, condenser, coolers, preheaters, refrigeration machinery, steering gar, pumps, anchor windlass, winches, deck cranes, pipelines with valves and cocks, el. Panels and wires, futhermore paint and insulation of parts which as listed above.

Further information on the Insurance Conditions is available in the Norwegian Marine Insurance Manual of the Leading Hull Underwriter. This manual is kept on board.

It is important to note that third party liability resulting from collision or contact damages is covered by the Hull & Machinery Underwriters.

In order to simplify claims handling Skipsassuranseforeningen UNITAS , Oslo, has been appointed Leading Claims Underwriter. The appointment of UNITAS has been agreed upon by all Co-Underwriters involved in the Hull & Machinery Policy.

|Chapter 5.61 |Revision 0 |Date 10.03.1998 |Page 1 of 2 |

The Leading Claims Underwriter has authority to take necessary steps as regards claims handling and adjustment of claims with binding effect on the Co-Underwriters.

Consequently it is not necessary to inform all Co-Underwriters in case of an accident. It is sufficient to notify the Leading Claims Underwriter or one of their Representatives for damage survey or with a view to obtaining assistance.

For this purpose the Insurance Manual of the Leading Claims Underwriter is kept onboard containing their “List of Representatives” (No. 18 in Ship’s Professional Library, See Chapter 8.05)

It is important to note that the “List of Representatives” contains

“GUIDELINES TO THE MASTER IN CASE OF AVERAGE”

on pages 16-18 as follows:

1. Reporting

2. Salvage

3. General Average

4. Collision

5. Average survey and average repairs

6. Information for use at the claim settlement

|Chapter 5.61 |Revision |Date 10.03.1998 |Page 2 of 2 |

62. WAR RISKS AND LOSS OF HIRE

1. War risks insurance conditions

The vessels are entered with

Norwegian Shipowner’s Mutual War risks Insurance Association

On their war risks insurance conditions.

The policy conditions cover total loss, damage to the vessel and collision liability resulting from war and war-like operations including crew liability due to war risks.

War risks are excluded from Hull and Machinery Insurance and the P & I as well.

2. Loss of hire insurance conditions

No loss of hire insurance

|Chapter 5.62 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

63. PROTECTION AND INDEMNITY

5.63.1 P & I Insurance conditions

All vessels are entered in the London Steamship Owners’ Mutual Insurance Association Ltd. The manager for The London Steamship is A. Bilbrough & Co. Ltd., London.

The Policies cover different kind of “third party liability” like cargo claims, pollution liability, personal injury, crew liability, fines etc. Further information on insurance conditions is contained in the “Club Rules” issued by the different Clubs.

The booklet containing the “club Rules” and List of Correspondents are kept onboard. (No. 17 in “ship’s Professional Library”, see Chapter 8.05).

It is important to note that liabilities due to collision or contact with fixed or floating objects are excluded from the P & I Policy as such liabilities are covered by the Hull & Machinery Underwriters

2. P & I Claims handling

Reporting

In the event of oil spill, personal injury, cargo damage or other occurrences that might lead to a claim against the vessel, the Master should immediately consult the local P & I Representative. For this purpose the P & I Club’s List of Correspondents is kept on board.

It is essential to keep proper records in vessel’s Log books and report to the Managers.

The local P & I Correspondent will give advise on steps to be taken to inform Local Authorities, make arrangements for legal representation and the attendance of a Surveyor if necessary.

For further information reference is made to:

“The Master’s Role in collecting Evidence”. The Nautical Institute 1989. (No. 14 in “ship’s professional Library”, see Chapter 8.05). This publication represents a valuable contribution to the Master and Officers in their efforts to avert and minimise claims.

|Chapter 5.63 |Revision 0 |Date 10.03.1998 |Page 1 of 1 |

63. MARITIME ENQIRIES

1. As regards Norwegian ship, a maritime enquiry shall be held in the following instances according to the requirements in the Norwegian Ship Control Legislation (1994) page 31.

-When a person or persons have lost, or are assumed to have lost their lives, or have been seriously injured, caused by the operation of the ship, including man over board and cases of serious poisoning.

This requirement appliqués to all persons, whether on board or ashore, with the exception of accidents in port or roads which do not affect the Crew, Passengers or other persons sailing with the ship.

-When a collision has occurred, regardless of damage

-When a grounding or serious touching of bottom has occurred

-When the ship is lost

-In cases when the ship has suffered serious damage

-In cases when serious damage is caused by the cargo (Note: not on the cargo)

2. Notification of the Administration i.e. the Norwegian Maritime Directorate or its Representatives;

-The Owner or Master shall, when obligatory maritime enquiry applies in Norway, notify the local Maritime Inspector without delay.

-In foreign countries, without a resident Maritime Inspector, the notification is issued to the nearest relevant Norwegian consular or Diplomatic station.

-When an accident with very serious consequences has occurred, the Owner or Master should also notify Maritime directorate directly.

-Notification shall be issued using the format “Rapport om sjoulykke” (report of sea accident).

|Chapter 5.64 |Revised 0 |Date 10.03.1998 |Page 1 of 1 |

80. BUDGETING

1. TGI Budgets

The TGI budgeting system contains of the following parts:

*Ship budgets

*Company administration budget

Ship budgets

Since TGI are Ship Managers managing ships for several Owners we have to make budgets for the running costs of each vessel separately. As there is a different company behind each vessel, TGI must keep each vessel as a single unit.

TGI believe that the budgets for each vessel should be made out with close cooperation with the offices onboard. The administration ashore prepare some basic assumptions in close connection with the Owners. Then the vessel’s top officers prepare a suggestion to the budget and send it to the office. The office will upon receipt of this suggestion try, on basis of their experience and knowledge with each vessel, to make out the final budget. This will of course again involve the officers onboard and mostly the whole administration ashore.

The office is in the end responsible for the completion and submitting the budgets to the Owners.

Company administration budget

This budget is made on the basis of planned income of management of vessels and administrative costs (mostly personnel and communication costs).

The accountant is responsible for the completion of this budget

2. Budgeting schedule

The time schedule for completion of the vessel’s running costs budget is as follows:

By September 1 : Letter from the administration

Ashore with general assumptions for the

Preparation of the budgets for next year.

|Chapter 5.80 |Revision 0 |Date 10.03.1998 |Page 1 of 3 |

By November 1 : The budget from the vessels is received by

TGI office.

By December 1 : The budget is completed and presented to

Administration ashore for approval.

By December 15 : The budget is presented to the Owners

For approval.

By January 1 : The vessel has received a copy of the final

Budget with necessary comments.

It is very important to follow this time schedules. The Owners must be presented a budget for the running costs before start of the budget-year.

In TGI the budgeting process is a joint effort between the Ship management and most of the administration personnel in the office.

3. Budget assumptions

In the budgeting process a lot of assumptions have to be considered

Examples are:

Operational philosophy

-Technical and operational standard

-Relations to Charterers

-Safety level

-Class regulations

-Crew policy

-Insurance policy

General assumptions

-Exchange rate

-Inflation

Trading patterns with number of days at sea, ballast voyages, number of ports, etc.

-New installations and upgrading

-Change of crew (Travel expenses)

-Crew composition

-Rebates and price differences between countries

|Chapter 5.80 |Revision 0 |Date 10.03.1998 |Page 2 of 3 |

The office of TGI is responsible for preparing a letter to be sent onboard with these assumptions. Nevertheless it is important that the officers onboard familiarise themselves with these assumptions in order to be better prepared for the budget work.

Further it is necessary to have some background material in order to save time and to make realistic budgets. This material is often based on last year’s budgeting process or experience from previous years.

Other background material can be

-Price lists from Suppliers of Stores and spare parts

-Price lists from Agents

-Cost of Crew

-Engine reports with oil consumptions etc.

-New rules and regulations regarding safety etc.

It is important that the officers onboard discuss the contents of this material in order to eliminate errors and make sure that the budget is as realistic as possible.

4. References

-List of accounts for ship

operating expenses Company format 530

-Budget estimate Company format 531

-Budget estimate. Example Company format 532

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81. ACCOUNTING

1. Time Schedule

In order to give proper accounts to owners the office will need the following information/figures from each vessel latest by 15th January.

1. The vessels accounts with deviations from the budget, preferably with the use of form “account/budget” with comments about the deviations.

2. Stores onboard per 31st December and consumption during the year, preferably with the use of Company format no. 522, “consumption report deck, engine and mess/galley stores”.

3. Manning and cash accounts for December and/or other missing months.

Please note that all figures should be in USD and USD only.

2. Shipboard accounting

In order to make proper accounts on board it is necessary to have a certain system for the registration of invoices and costs. This shall be achieved by the use of an “Accounting registration sheet”, Company format no. 533, for each account.

Please note that all figures shall be in USD.

It is important that all invoices which shipchandlers etc. are presenting onboard, are checked and signed properly. This is to secure that goods are received, and that prices and delivery terms are as agreed.

As a rule please note that no papers should be signed if there is any doubt to the correctness.

It is also important that vouchers such as laundry bills and bills from shipchandlers etc. should be signed directly underneath the bill total to avoid the possibility of adding to the bill after being signed.

NOTE!

It is the owning Company (Not TGI) who made the order. The name of the owning Company is to be stamped on all orders and invoices. Both the Master and the Chief Engineer are provided with such stamp.

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3. Vessels account figures versus office figures

There are several reasons for differences between the figures on board and the figures registered at office ashore. Some of them are:

-The Ship Management and the office debit different account numbers.

-The office makes some accounting corrections like stock/consumptions adjustments, periodical adjustments and cost allocations.

-The account for damage repairs is adjusted for settlements from the insurance coverage.

With all these adjustments and allocations the Ship Management may feel a little frustrated over the differences in the figures between the office and the ship. After all the most important issue is that the trend of the figures is the same. There will always be differences in the book-keeping. It is of great importance that the Ship management themselves can follow the running costs and make corrections when necessary.

4. References

-Consumption report deck, engine

and mess/galley stores Company format 522

-Accounting registration sheet Company format 533

|Chapter 5.81 |Revision 0 |Date 10.03.1998 |Page 2 of 2 |

82. COST CONTROL AND BUDGET VARIATIONS

1. Continuous cost control

TGI believe that continuous checks of actual figures compared to budget are required in order to control the vessel’s operating costs. The following routine is to be followed:

Purchase according to budget

It is of extreme importance that the Top officers on board give an explanation when it is required to exceed the budget. This explanation should preferably be given before the budget is exceeded, but in any case as soon as possible afterwards.

TGI must explain to the Owners why the budgets are exceeded and we have no possibility to do so if no information from the ship is received.

When purchasing store/supplies and ordering repair/service in ports as well as ordering spare parts from the office, it has to be controlled/checked that this is covered by the budget. If not, explanation has to be sent to the office why it is required to exceed the budget.

Planned purchase and repairs/services of larger amount

Due to the above and in order to carry out cash planning in the owning Companies we have to required that the ship management inform the office according to the following procedures:

1. When planned purchases/repairs/services in a port will exceed a total of

USD10.000, - the office has to be informed in advance, say 2-3 days before:

Total Stores/Supplies ………………..

Total Repairs/Services ………………..

Total spare parts ………………..

Total New Installations (7801) ………………..

Total Damages (7802) ………………..

Total planned purchases this port: ============

2. If the planned purchases/repairs/services in the port will clearly exceed the budget, this has to be explained.

3. If the actual purchases/repairs/services in the port considerably exceeds the planned ones, the office has to be informed at once and reasons given.

|Chapter 5.82 |Revision 0 |Date 10.03.1998 |Paage 1 of 2 |

2. Quarterly follow-up with prognosis

Every quarter TGI reports the running costs to the Owners and compares them with budget figures. In order to explain variations from the budget the office needs information from each vessel regarding these figures.

The following routine is to be followed:

1. Company form no. 534, “Budget variation report”, shall be completed together with necessary appendices with explanations of the variations. It is very important that deviations from the budget are explained and that a prognosis for all accounts is made for the rest of the year.

2. Company format no. 522, “consumption report for deck, engine and mess/galley” shall be filled in. This format is used for stock-keeping.

3. The formats shall be sent to the office as soon as possible after the end of each quarter. They shall preferably be received by the office within April 10, July 10 and October 10 for each quarter and by January 15 for year end figures.

4. After the office has analysed the figures and compared them to the figures ashore, the office will provide the vessel with one final copy of the reports. This is the same figures that will be reported to the Owners.

Normally the Owners require these figures within April 15, July 15 and October 15 for each quarter and within February 1 for year end figures.

3. References

- Budget variation report Company format 534

- Budget variation format example Company format 535

- Consumption report for deck, Company format 522

engine and mess/galley

|Chapter 5.82 |Revision 0 |Date 10.03.1998 |Page 2 of 2 |

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