Worldscale Association (London) Limited1 WORLDSCALE New Worldwide Tanker Nominal Freight Scale Structure and Uses

Worldscale Association (London) Limited2 Introduction Standard cost for carrying oil between ports on standard vessel to standard formula Standard cost for carrying oil between ports on standard vessel to standard formula NOMINAL basis to standardise format and application NOMINAL basis to standardise format and application Incorporates all costs, directly where possible Incorporates all costs, directly where possible Otherwise by Fixed or Variable Differentials or Charterers’ Account Otherwise by Fixed or Variable Differentials or Charterers’ Account Clear instructions as to basis Clear instructions as to basis Neutral to market, run by non-profit, non- shareholding, middle-man structures Neutral to market, run by non-profit, non- shareholding, middle-man structures

Worldscale Association (London) Limited3 Freight Scales - History Concept of freight schedules is more than 60 years old Concept of freight schedules is more than 60 years old Originated in WW2 by UK and US governments Originated in WW2 by UK and US governments Abiding principal is that Owners should receive the same net daily revenue irrespective of voyage performed Abiding principal is that Owners should receive the same net daily revenue irrespective of voyage performed

Worldscale Association (London) Limited4 Structure of Worldscale Based around nominal trading voyages of a notional standard vessel. Based around nominal trading voyages of a notional standard vessel. Definitions of terms used, assumptions made and any specific applications. Definitions of terms used, assumptions made and any specific applications. Calculations based on the costs involved in the Standard Vessel performing a round voyage on the target voyage. Calculations based on the costs involved in the Standard Vessel performing a round voyage on the target voyage.

Worldscale Association (London) Limited5 Structure of Worldscale Structured to give the same net daily returns for the standard vessel regardless of voyage performed at 100% of the nominal freight rate. Structured to give the same net daily returns for the standard vessel regardless of voyage performed at 100% of the nominal freight rate. Produced by two non-profit making organisations ensuring independence from external bias and narrow market views. Produced by two non-profit making organisations ensuring independence from external bias and narrow market views.

Worldscale Association (London) Limited6 Simpson, Spence & Young Limited Simpson, Spence & Young Limited H. Clarkson & Company Limited H. Clarkson & Company Limited Galbraith’s Limited Galbraith’s Limited E.A.Gibson Shipbrokers Limited E.A.Gibson Shipbrokers Limited Braemar Seascope Limited Braemar Seascope Limited ACM Shipping Limited ACM Shipping Limited

Worldscale Association (London) Limited7 Worldscale Association (NYC) Inc McQuilling Brokerage Partners Inc McQuilling Brokerage Partners Inc Mallory Jones Lynch Flynn & Associates Inc Mallory Jones Lynch Flynn & Associates Inc Odin Marine Odin Marine Poten & Partners Inc Poten & Partners Inc Charles R. Weber Company Charles R. Weber Company Dietz & Associates Inc Dietz & Associates Inc

Worldscale Association (London) Limited8 WORLDSCALE – Basics 1 Constitutes an Index of Reference Rates with common calculation factors Constitutes an Index of Reference Rates with common calculation factors Expressed in USD per Tonne of Cargo Carried Expressed in USD per Tonne of Cargo Carried Updated in January each year for changes to bunker prices, port charges and exchange rates Updated in January each year for changes to bunker prices, port charges and exchange rates Worldscale book contains 50,000 rates and web-site has over 300,000 rates Worldscale book contains 50,000 rates and web-site has over 300,000 rates Further rates available from the Associations Further rates available from the Associations Available on annual subscription basis only Available on annual subscription basis only

Worldscale Association (London) Limited9 WORLDSCALE – Basics 2 Amendments published when significant changes occur to port charges and are effective from a specified date Amendments published when significant changes occur to port charges and are effective from a specified date Actual market rates are expressed as a percentage of the published rates by common agreement of users Actual market rates are expressed as a percentage of the published rates by common agreement of users Market rates are determined by negotiation between the owner and charterer Market rates are determined by negotiation between the owner and charterer

Worldscale Association (London) Limited10 Why use a freight scale? Standard of Reference Standard of Reference Ease of conducting business Ease of conducting business Geographical options included Geographical options included Applies to different cargo types Applies to different cargo types Faster response to quotations Faster response to quotations Standardised format Standardised format Market Index System Market Index System Common Understanding of terminology Common Understanding of terminology Financial risk reduction Financial risk reduction Freight invoicing simplified Freight invoicing simplified

Worldscale Association (London) Limited11 Reasons to use - Physical Standard reference system Standard reference system Provides market index system Provides market index system Freight payment mechanism Freight payment mechanism Negotiating tool Negotiating tool Settlement tool Settlement tool

Worldscale Association (London) Limited12 Reasons to use - Other Statistical - Market Analysis Statistical - Market Analysis - Comparative Trends - Comparative Trends Fiscal - AFRA Output Fiscal - AFRA Output - Transfer Pricing - Transfer Pricing - Contract Pricing - Contract Pricing Freight Futures – Settlement Rates Freight Futures – Settlement Rates

Worldscale Association (London) Limited13 Subscribers to Worldscale London * New York * Includes: Owners, Charterers, Traders, Oil Companies, Government departments, Banks, Futures traders, Lawyers, P&I companies, etc, etc

Worldscale Association (London) Limited14 Market Penetration – Spot Fixtures Non WS * WS * % WS * Source: Clarkson Research

Worldscale Association (London) Limited15 ECA Bunkers – Current Basis Reflect additional cost of Low Sulphur/Gasoil in ECAs Reflect additional cost of Low Sulphur/Gasoil in ECAs Cost calculated as a per mile value for each mile steamed in an ECA (Laden & Ballast) Cost calculated as a per mile value for each mile steamed in an ECA (Laden & Ballast) Miles steamed negotiable and includes laden and ballast miles. Miles steamed negotiable and includes laden and ballast miles.

Worldscale Association (London) Limited16 ECA Bunkers - Options Nothing in Scale – fully negotiable Nothing in Scale – fully negotiable Change base fuel to MGO if enough usage worldwide – not sufficient coverage currently Change base fuel to MGO if enough usage worldwide – not sufficient coverage currently Uplift in flat rates based on ECA mileages – not currently technically feasible in software system – potential upgrade planned for 2016 Uplift in flat rates based on ECA mileages – not currently technically feasible in software system – potential upgrade planned for 2016 Fixed Differential System to cover actual usage at local bunker rates – allows possibility of change if rapid price change on introduction of new ECA zones – current option Fixed Differential System to cover actual usage at local bunker rates – allows possibility of change if rapid price change on introduction of new ECA zones – current option

Worldscale Association (London) Limited17 Bunker Prices - General Current system adopted in revamp of scale in 1980’s to increase transparency in relation to bunker prices Current system adopted in revamp of scale in 1980’s to increase transparency in relation to bunker prices Requested by INTERTANKO, amongst others Requested by INTERTANKO, amongst others Replaced opaque system of average price per voyage of 50% of regional prices at first load and first discharge ports on voyage Replaced opaque system of average price per voyage of 50% of regional prices at first load and first discharge ports on voyage Partially solved time lag of data gathering when biannual publication as data used was for two periods prior to current one Partially solved time lag of data gathering when biannual publication as data used was for two periods prior to current one Single price published in the Schedule to allow negotiations regarding price changes for current voyages Single price published in the Schedule to allow negotiations regarding price changes for current voyages

Worldscale Association (London) Limited18 Drawbacks due to the loss of Worldscale No Standard of Reference No Standard of Reference Ease of conducting business reduced Ease of conducting business reduced Geographical options unspecified Geographical options unspecified Different approach for different cargo types Different approach for different cargo types Speed of response to quotations reduced Speed of response to quotations reduced No Standardised format No Standardised format No Market Index System No Market Index System Common Understanding of terminology lost Common Understanding of terminology lost Financial risk increased Financial risk increased Freight invoicing less simple Freight invoicing less simple Market monitoring less transparent Market monitoring less transparent