Edgar Filing: INTERNATIONAL SHIPHOLDING CORP

form10ka20071.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 2-63322

INTERNATIONAL SHIPHOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

11 North Water Street, Mobile, Alabama

(Address of principal executive offices)

36-2989662

(I.R.S. Employer

Identification No.)

36602

(Zip Code)

(251)-243-9100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Common Stock, $1 Par Value New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes o		No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.


Yes		No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes þ		No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o		No þ

Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2007, based upon the closing price of the common stock as reported by the New York Stock Exchange on such date, was approximately $96,267,951.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


Class Common Stock, $1 par value,		Outstanding at March 31, 2008 7,675,142 shares

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A amends Item 9A and Item 15 in the report on Form 10-K of International Shipholding Corporation (“the Company”) for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission on March 13, 2008, and presents only the items of the report that are being amended. This Form 10-K/A does not reflect events occurring after the filing of the original report or modify or update disclosures affected by subsequent events.

In November of 2006, the Company sold its entire 26.1% equity interest in Belden Shipholding PTE LTD (“BSH”), an investment holding company, which through its subsidiaries managed a fleet of cement carriers. BSH acquired our previous interest in Belden Cement Holding Inc. (“BCH) in January of 2006. As described in further detail below, on December 11, 2007, we filed with the Commission full audited BCH financial statements for the year ended December 31, 2005 and partial unaudited BSH financial statements for the nine months ended September 30, 2006. Following discussions with the Commission’s staff regarding the scope of its filing obligations, the Company agreed to refile the 2005 audited financial statements for BCH and 2006 partial unaudited financial statements for BSH herewith as part of its report on Form 10-K for the fiscal year ended December 31, 2007.

The 2006 unaudited financial statements were previously provided to us by the management of BSH and are prepared in accordance with Singapore Financial Reporting Standards, except that they do not include any footnote disclosures. They are not prepared in accordance with U. S. Generally Accepted Accounting Principles and as such should not be relied upon.

Additionally, the Company has reaffirmed the effectiveness of its disclosure controls and procedures, as described further in the supplemental disclosure included under Item 9A below.

This Amendment No. 1 does not change any other information set forth in the original filing of The Company’s Form 10-K for the year ended December 31, 2007. However, in accordance with Rule 12b-15, Amendment No. 1, filed on April 29, 2008, includes new Rule 13a-14(a) certifications as Exhibits 31.1 and 31.2 and new Rule 13a-14(b) certifications as Exhibits 32.1 and 32.2.

ITEM 9A. CONTROLS AND PROCEDURES

From time to time, we make substantial investments in other transportation companies. If the investments are large enough to meet certain financial “significance” tests, the federal securities laws obligate us to include in our periodic reports financial statements of these companies. Most recently, we have held substantial investments in Dry Bulk Cape Holding, Inc. (since 2003) and Belden Shipholding Pte Ltd. and its predecessor, Belden Cement Holding, Inc. (between 1999 and November 2006, when we divested our interest). In our annual reports on Form 10-K, we have filed financial statements for Dry Bulk each year since we acquired our interest. Our investment in Belden was not large enough in recent years to require us to file Belden’s financial statements, except for the year ended December 31, 2005, when one of Belden’s nonrecurring transactions generated income that caused Belden to be financially “significant” to us under the federal securities laws. Consequently we filed as part of our annual report on Form 10-K for the year ended December 31, 2005 audited financial statements of Belden as of and for the period ended December 31, 2005.

In August 2007, the staff of the Securities and Exchange Commission sent us a letter commenting on our periodic reports, including a comment inquiring as to whether we had filed in our annual report on Form 10-K for the year ended December 31, 2006 all financial statements of Belden required under the federal securities laws. We took the position that our requirement to file Belden financial statements lapsed upon the sale of our interest in Belden. We further took the position that complete information on Belden was no longer readily available to us and, in any event, was not material to our investors, particularly in light of our prior filing of audited Belden financial statements in our prior annual report. Following our receipt of the August 2007 letter from the Commission’s staff, we exchanged over a dozen letters with the staff in which we discussed our filing obligations and requested relief from filing full financial statements for Belden for the year ended December 31, 2004 and the nine months ended September 30, 2006. On December 11, 2007, we re-filed with the Commission full audited Belden financial statements for the year ended December 31, 2005 and filed partial unaudited Belden financial statements for the above-referenced periods ending in 2004 and 2006. While awaiting a response from the staff to our request for waivers of certain filing requirements regarding Belden, on March 13, 2008, we filed our annual report on Form 10-K for the year ended December 31, 2007. This report did not include at that time any further financial statements of Belden, but did disclose the pendency of our requests for waivers from the Commission. Following our receipt of a letter from the Commission’s staff in early April 2008, granting us requested waivers, we agreed to file this amendment to include as a part of our 2007 annual report on Form 10-K the 2005 audited and 2006 unaudited financial statements of Belden that we initially filed on December 11, 2007.

Following this Commission review process, our CEO and CFO have reassessed the effectiveness of our disclosure controls and procedures, which we maintain in accordance with Rule 13a-15 promulgated by the Commission under the Securities Exchange Act of 1934. In connection therewith, management determined that, after discussion with its legal advisers, at all times throughout this process it believed in good faith that the Company had a supportable basis for not including additional Belden financial statements in its 2006 and 2007 annual reports prior to the dates that the Company made supplemental filings in response to requests from the Commission’s staff. Based on this determination and reassessment, our CEO and CFO have re-affirmed their prior conclusion that our disclosure controls and procedures were effective as of December 31, 2007 in providing reasonable assurance that they have been timely alerted of material information required to be filed in our 2007 annual report. We have determined, however, that if we are presented in the future with similar disclosure issues regarding our investments in other companies, we will confer with the Commission’s staff to reach mutual understandings regarding the scope of our disclosure requirements.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following financial statements, schedules and exhibits are filed as part of this report:

(a) 1. Financial Statement Schedules

(i)	The following financial statements of BCH are included on pages A-1 through A-7 of this Form 10-K/A pursuant to Rule 3-09 of Regulation S-X:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheet at December 31, 2005

Consolidated Statement of Income for the year ended December 31, 2005

Consolidated Statement of Changes in Stockholders’ Investment for the year ended December 31, 2005

Consolidated Statement of Cash Flows for the year ended December 31, 2005

Notes to the Financial Statements

(ii)	The following financial statements of BSH are included on pages B-1 through B-2 of this Form 10-K/A pursuant to Rule 3-09 of Regulation S-X; These statements are unaudited and do not comply with U.S. generally accepted accounting principles.

Consolidated Balance Sheet at September 30, 2006

Consolidated Profit and Loss Account Statement for the nine months ended September 30, 2006

Exhibits

(3.1)

Restated Certificate of Incorporation of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3.1 to the Registrant's Form 10-Q for the quarterly period ended September 30, 2004 and incorporated herein by reference)

(3.2)

By-Laws of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3.2 to the Registrant's Form 10-Q for the quarterly period ended September 30, 2004 and incorporated herein by reference)

(4.1)

Specimen of Common Stock Certificate (filed as an exhibit to the Registrant's Form 8-A filed with the Securities and Exchange Commission on April 25, 1980 and incorporated herein by reference)

(10.1)

Credit Agreement, dated as of September 30, 2003, by and among LCI Shipholdings, Inc. and Central Gulf Lines, Inc., as Joint and Several Borrowers, the banks and financial institutions listed therein, as Lenders, HSBC Bank PLC, as Facility Agent, DnB NOR Bank ASA, as Documentation Agent, Deutsche Schiffsbank Aktiengesellschaft, as Security Trustee, and the Registrant, as Guarantor (filed with the Securities and Exchange Commission as Exhibit 10.2 to Pre-Effective Amendment No. 2, dated December 10, 2004 and filed with the Securities and Exchange Commission on December 10, 2004, to the Registrant's Registration Statement on Form S-1 (Registration No. 333-120161) and incorporated herein by reference)

(10.2)

Credit Agreement, dated as of December 6, 2004, by and among LCI Shipholdings, Inc., Central Gulf Lines, Inc. and Waterman Steamship Corporation, as Borrowers, the banks and financial institutions listed therein, as Lenders, Whitney National Bank, as Administrative Agent, Security Trustee and Arranger, and the Registrant, Enterprise Ship Company, Inc., Sulphur Carriers, Inc., Gulf South Shipping PTE Ltd. and CG Railway, Inc., as Guarantors (filed with the Securities and Exchange Commission as Exhibit 10.3 to Pre-Effective Amendment No. 2, dated December 10, 2004 and filed with the Securities and Exchange Commission on December 10, 2004, to the Registrant's Registration Statement on Form S-1 (Registration No. 333-120161) and incorporated herein by reference)

(10.3)

Credit Agreement, dated September 26, 2005, by and among Central Gulf Lines, Inc., as Borrower, the banks and financial institutions listed therein, as Lenders, DnB NOR Bank ASA, as Facility Agent and Arranger, and Deutsche Schiffsbank Aktiengesellschaft, as Security Trustee and Arranger, and the Registrant, as Guarantor (filed with the Securities and Exchange Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated September 30, 2005 and incorporated herein by reference)

(10.4)

Credit Agreement, dated December 13, 2005, by and among CG Railway, Inc., as Borrower, the investment company, Liberty Community Ventures III, L.L.C., as Lender, and the Registrant, as Guarantor

(10.5)

Consulting Agreement, dated January 1, 2006, between the Registrant and Niels W. Johnsen (filed with the Securities and Exchange Commission as Exhibit 10.5 to the Registrant's Form 10-K for the annual period ended December 31, 2005 and incorporated herein by reference)

(10.6)

Consulting Agreement, dated April 30, 2007, between the Registrant and Erik F. Johnsen (filed with the Securities and Exchange Commission as Exhibit 10.6 to the Registrant’s Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

(10.7)

International Shipholding Corporation Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 10.5 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

(10.8)

Form of Stock Option Agreement for the Grant of Non-Qualified Stock Options under the International Shipholding Corporation Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 10.6 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

(10.9)

Description of Life Insurance Benefits Provided by the Registrant to Niels W. Johnsen and Erik F. Johnsen Plan (filed with the Securities and Exchange Commission as Exhibit 10.8 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

(10.10)

Memorandum of Agreement of the Registrant, dated as of August 24, 2007, providing for the Registrant’s purchase of one 6400 CEU Panamanian flagged pure car and truck carrier (filed with the Securities and Exchange Commission as Exhibit 10.10 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference) (Confidential treatment requested on certain portions of this exhibit. An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)

(10.11)

Loan Agreement, dated as of September 10, 2007, by and amongWaterman Steamship Corporation, as borrower, the Registrant, as guarantor, DnB NOR Bank ASA, as facility agent and security trustee. (filed with the Securities and Exchange Commission as Exhibit 10.11 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

(10.12)

SHIPSALES Agreement, dated as of September 21, 2007, by and between East Gulf Shipholding, Inc., as buyer, and Clio Marine Inc., as seller. (filed with the Securities and Exchange Commission as Exhibit 10.12 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference) (Confidential treatment requested on certain portions of this exhibit. An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)

(10.13)

Facility Agreement, dated as of January 23, 2008, by and among East Gulf Shipholding, Inc., as borrower, the Registrant, as guarantor, the banks and financial institutions party thereto, as lenders, DnB NOR Bank ASA, as facility agent, and Deutsche Schiffsbank Aktiengesellschaft, as security trustee. (filed with the Securities and Exchange Commission as Exhibit 10.13 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

(31.1)

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

(31.2)

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

(32.1)

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

(32.2)

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

*	Submitted electronically herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNATIONAL SHIPHOLDING CORPORATION

(Registrant)

April 30, 2008

/s/ Manuel G. Estrada

Manuel G. Estrada

Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Belden Cement Holding Inc.

We have audited the accompanying consolidated balance sheet of Belden Cement Holding Inc. (the “Group”) as of December 31, 2005 and the related consolidated statements of income, changes in stockholders' investment, and cash flows for the year then ended. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Group's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2005, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

New Orleans, Louisiana

June 2, 2006

A-1

BELDEN CEMENT HOLDING INC.
CONSOLIDATED BALANCE SHEET
As of December 31, 2005

ASSETS

Current Assets:
Cash and Cash Equivalents	$	610,517
Due from Related Parties		37,325
Prepaid Expenses		103,712
Total Current Assets		751,554

Investment in Unconsolidated Entity		45,124

Property and Equipment, at Cost:
Machinery Equipment		305,287
Furniture and Equipment		57,723
		363,010
Less - Accumulated Depreciation		(169,431	)
		193,579

Due from Related Parties		22,946,954

	$	23,937,211

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities:
Accrued Liabilities	$	134,789
Due to Related Parties		496,737
Total Current Liabilities		631,526

Stockholders' Investment:
Common Stock, $50.00 Par Value, 230 Shares
Authorized at December 31, 2005		11,500
Additional Paid-In Capital		9,980,348
Retained Earnings		13,350,221
Accumulated Other Comprehensive Loss		(36,384	)
		23,305,685

	$	23,937,211

The accompanying notes are an integral part of these statements.

A-2

BELDEN CEMENT HOLDING INC.
CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2005



Revenues	$	13,252,759

Operating Expenses		(5,829,825	)

Depreciation		(3,896,347	)

Gross Profit		3,526,587

Administrative and General Expenses		(1,370,690	)

Gain on Sale of Assets		6,186,552

Operating Income		8,342,449

Interest and Other:
Interest Expense		(1,899,389	)
Investment Income		105,423
Other Income		80,528
		(1,713,438	)

Net Income	$	6,629,011

The accompanying notes are an integral part of these statements.

A-3

BELDEN CEMENT HOLDING INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ INVESTMENT
For the Year Ended December 31, 2005

							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive
	Stock		Capital		Earnings		Loss			Total

Balance at December 31, 2004	$	11,500	$	9,980,348	$	6,721,210	$	(31,053	)	$	16,682,005

Comprehensive Income:

Net Income for Year Ended December 31, 2005		-		-		6,629,011		-			6,629,011

Other Comprehensive Loss:
Foreign Currency Translation Adjustments		-		-		-		(5,331	)		(5,331	)

Total Comprehensive Income											6,623,680

Balance at December 31, 2005	$	11,500	$	9,980,348	$	13,350,221	$	(36,384	)	$	23,305,685

The accompanying notes are an integral part of these statements.

A-4

BELDEN CEMENT HOLDING INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005


Cash Flows from Operating Activities:
Net Income	$	6,629,011
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation		3,896,347
Amortization of Deferred Charges		725,609
Gain on Sale of Assets		(6,186,552	)
Translation Gain		(5,331	)
Changes in:
Accounts Receivable		227,590
Deferred Drydocking Charges		(962,180	)
Due from Unconsolidated Entity		224,470
Due from Shareholders		2,010,000
Accrued Liabilities		(571,113	)
Due to Related Parties		268,571
Net Cash Provided by Operating Activities		6,256,422

Cash Flows from Investing Activities:
Purchase of Property and Equipment		(995,191	)
Proceeds from Sale of Vessels		54,375,000
Cash Transfer on Disposal of Subsidiaries		(544,971	)
Net Cash Provided by Investing Activities		52,834,838

Cash Flows from Financing Activities:
Due from Related Parties		(7,357,321	)
Repayment of Long-term Debt		(44,948,585	)
Proceeds from Long-term Debt		2,087,504
Repayment of Loan from Shareholders		(11,110,585	)
Dividends Paid		(801,905	)
Net Cash Used by Financing Activities		(62,130,892	)

Net Change in Cash and Cash Equivalents		(3,039,632	)
Cash and Cash Equivalents at Beginning of Year		3,650,149

Cash and Cash Equivalents at End of Year	$	610,517

The accompanying notes are an integral part of these statements.

A-5

BELDEN CEMENT HOLDING INC.

Notes to the Financial Statements – December 31, 2005

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The accompanying consolidated financial statements include the accounts of Belden Cement Holding Inc. (“BCHI”) (incorporated in the Republic of Panama) and its majority-owned subsidiaries. In this report, the terms “we,” “us,” “our,” and “the Company” refer to BCHI and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Our policy is to consolidate all subsidiaries in which we hold a greater than 50% voting interest or otherwise exercise significant influence over operating and financial activities. We use the equity method to account for investments in entities in which we hold a 20% to 50% voting interest and the cost method to account for investments in entities in which we hold less than 20% voting interest and in which we cannot exercise significant influence over operating and financial activities.

The financial statements are presented in United States dollars, which is also the measurement currency of the Company and its subsidiary. The financial statements are not presented in the currency of the country in which the holding company is domiciled as most of our transactions are denominated in US dollar.

Nature of Operations

The principal activity of BCHI is that of an investment holding company. The principal activities of the subsidiaries of BCHI include ship ownership and commercial ship management and brokering.

Use of Estimates

The preparation of financial statements in conformity with accounting principals generally accepted in the United States requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Foreign Currency Transactions

Certain of our revenues and expenses are converted into or denominated in foreign currencies. All exchange adjustments are charged or credited to income in the year incurred.

Property

For financial reporting purposes, our property and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 2 to 18 years. The cost of an asset comprises its purchase price or construction cost and any directly attributable costs of bringing the asset to working condition for its intended use. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets; therefore future depreciation expense could be revised.

Costs of all major property additions and betterments are capitalized. Ordinary maintenance and repair costs are expensed as incurred. Interest and finance costs relating to property and equipment under construction are capitalized to properly reflect the cost of assets acquired. No interest was capitalized in 2005.

During 2005, we recognized a net gain of $6,186,552 from the sale of all of our vessels.

We monitor all of our fixed assets for impairment and perform an impairment analysis in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” when triggering events or circumstances indicate a fixed asset may be impaired.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

A-6

BELDEN CEMENT HOLDING INC.

Notes to the Financial Statements – December 31, 2005

Revenue Recognition

Revenue from charter of vessels is recognized on a straight-line basis over the year of the charter and after providing for off-service days. Revenue from management and technical consultancy service is recognized upon completion of services rendered.

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” Provisions for income taxes include deferred income taxes that are provided on items of income and expense, which affect taxable income in one period and financial statement income in another.

Deferred Charges

We defer certain costs related to the drydocking of our vessels. Deferred drydocking costs are capitalized as incurred and amortized on a straight-line basis over the period between drydockings.

NOTE 2 – UNCONSOLIDATED ENTITIES

We have a 40% interest in Belden Ship Management Inc., which manages our vessels.

NOTE 3 – TRANSACTIONS WITH RELATED PARTIES

We sold certain of our vessels to Belden Shipholding Pte Ltd for $39.9 million in 2005, resulting in a gain of $1.2 million. We also sold certain of our subsidiaries to Belden Shipholding Pte Ltd for $9.7 million. We have a receivable due from Belden Shipholding Pte Ltd for $22.9 million as of December 31, 2005. The receivable is unsecured and interest free. Belden Shipholding Pte Ltd has the option at any time to repay the full amount or in part. We do not expect to be repaid this amount in the next twelve months.

NOTE 4 – INCOME TAX

The Company is not liable for income tax in the countries that it operates in. As of December 31, 2005, we had unutilized tax losses of approximately $145,000 available to offset against future taxable profits subject to agreement with the Income Tax Authorities and compliance with the relevant provisions of the Income Tax Act. The potential deferred tax asset arising from these unutilized tax losses has not been recognized in the financial statements.

NOTE 5 – SUPPLEMENTAL CASH FLOW INFORMATION

Interest Paid

During 2005, we paid $1,268,137 of interest.

Notes Receivable

During 2005, we sold certain vessels to a related party for $39.9 million in the form of a receivable. We also sold certain of our subsidiaries to the same related party for $9.7 million in the form of a receivable.

NOTE 6 – SUBSEQUENT EVENTS

In January of 2006, Belden Shipholding Pte Ltd acquired all of the shares of the Company for $12 million.

A-7

Belden Shipholding PTE LTD and its Subsidiaries
Balance Sheet at 30 September 2006
Unaudited

	US$
Non-current assets
Property, plant and equipment	$	91,764,168
Investment in an associate company		45,124
Loan to an affiliated company		12,366

Current assets
Other receivables and prepayments		3,250,484
Loan to an employee		16,828
Cash and bank balances		1,858,173
		5,125,485

Current liabilities
Other creditors and accruals		277,081
Charter hire income received in advance		1,262,139
Bank loans (secured)		2,500,000
		4,039,220

Net current assets/(liabilities)		1,086,265

Non-current liabilities
Bank Loans (secured)		(103,796,356	)
Net assets	$	17,557,943

Capital and reserves
Share capital	$	230,000
Reserves		17,327,943
	$	17,557,943

B-1

Belden Shipholding PTE LTD and its Subsidiaries
Consolidated Profit and Loss Account
For the nine months ended September 30, 2006
Unaudited

	US$

Revenue	$	24,498,804
Other income		1,442,886
Depreciation of property, plant and equipment		(4,940,637	)
Amortization of deferred expenses		(775,480	)
Vessel operating costs		(10,359,676	)
Legal fees and consultation fees		(80,521	)
Commission expenses		(299,357	)
Office rental		(39,756	)
Staff costs		(687,628	)
Communication Expenses		(185,386	)
Other operating expenses		(873,039	)

Profit from operations		7,700,210

Finance costs		(4,422,951	)

Profit before taxation		3,277,259

Taxation		-
Profit after taxation		3,277,259

B-2