Farahhead Holding Ltd. was newly incorporated in Cyprus as the holding company of Arcadia. The company is controlled by a group of investors including a party directly affiliated with Seatankers Management Co. Ltd in Cyprus. This group has indirectly major investment in shipping companies like Frontline, Golar LNG and Golden Ocean.
Mitsui will maintain its worldwide oil trading network through our four base positions in Singapore, USA, Tokyo and London by concluding an alliance agreement with Arcadia upon the share transfer. We will continue our current business with Arcadia and are scheduled to place our representative in their office to seek further business expansion with them. We will keep our capability in terms of trading, marketing and intelligence through the alliance while limiting our risk exposure. Our management policy with regard to the two other subsidiaries specialized in oil trading, Mitsui Oil (Asia) Pte. Ltd. in Singapore and Westport Petroleum Ltd. in the United States of America, remains unchanged.
Arcadia was established in London in 1988 as a 100% subsidiary of Mitsui & Co., Ltd. While the world oil demand and that of Japan are over 80 million barrels per day and 5 mil barrels per day respectively, Arcadia has been trading about 800,000 barrels per day of physical crude oil as well as a sizable volume of future oil and oil derivatives. While it recorded its highest profit in history of about US$57 million after tax in the fiscal year ended March 2005, its expanding activity under booming oil prices have exposed us to larger risks such as the market risk and will require more of our management resources. As a result of the overall review with Arcadia's business model and our business portfolio, we have come to the conclusion that it would be in the interest of both Mitsui and Arcadia to sell the company to the new owner while its performance is stable. In relation to the share sale of Arcadia, we expect that the influence on the consolidated results will be insignificant.
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