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Optional 5 years shipbuilders guarantee

FVH / AMS can provide with Raffles an optional 5 years guarantee to replace the normal 1 year guarantee that is provided as standard with a commercial vessel.

The normal 1 year guarantee will usually be based on 5% of the total basic purchase price (per apartment x 122) or about €14 million that is retained in cash by Raffles Ltd. / owners or at builders option  is secured by a bank guarantee or suitable bond issued in Raffles Ltd. favour for this amount.

The purpose of a standard 1 year guarantee and retention or bond as is normal shipbuilding practice is to ensure that FVH / AMS as builders correct any design and / or engineering deficiencies (not including fair wear and tear) discovered in the vessel during one year’s service from when legal delivery is completed. These items are to be independently confirmed by Lloyd’s Register surveyors acting on behalf of the owners and which includes, at FVH / AMS expense, dry docking the vessel for underwater hull inspection if this is deemed necessary by Lloyd’s Register.

With respect to the 1 year guarantee, Raffles subject the conditions of legal handover being complied with, has already been provisionally accepted into one of the largest Professional and Indemnity (P&I) insurance “clubs” in the world Steamship Mutual and who will also help the owners to ensure FVH / AMS “performance” of the vessels guarantee.

The optional 5 years guarantee extends the period for correcting such deficiencies (but still to be confirmed by Lloyd’s survey), for up to 5 years.

Noting that AMS, having the final responsibility for Raffles design and construction have professional indemnity insurance cover of €20 million in respect of Raffles, the 5 years guarantee will not be secured by cash or a guarantee but instead by FVH taking responsibility for managing the vessels daily operation, including arranging the crew for a similar period.

The written guarantee will cover any / all design and engineering faults / deficiencies in the 5 years period including their correction to Lloyd’s Register satisfaction and is supported by AMS professional indemnity insurance cover “run out” period.

It does not cover or include normal wear and tear / maintenance that is associated with the conservative, safe and professional operation of the vessel as indicated in section – “Exploration”.

FVH management of the vessel in this 5 years period is almost free but to defray part of its costs the 20% “profit” obtained from on-board retail sales including electricity and water charges will instead of all being used to contribute to defraying the ships costs, be divided 50/50 between FVH and the ship.

The crew in a 5 year guarantee period, although recruited by FVH remain the “servants of the owners” and are paid for as part of the normal ships operating costs.

A condition of the guarantee will be that FVH, together with the crew develop detailed ships operating cost records and various analysis of them, for these to be used in the subsequent operation of the vessel by the owners / their new managers.