The development, management, and operations of the first Golf Club/Resort in Ukraine is being undertaken by Golden Gate Golf Club. Details of this project are described herein.

Since achieving independence only a few short years ago, Ukraine has been in the process of rapidly rejoining the world community through economic adjustments. The government has overhauled its business and investment laws which have resulted in the private sector playing a more and more important role in attracting increased foreign trade and investment. Despite growing pain problems, visitors and businessmen alike who have been traveling to the country over the past 9 years observe that positive changes can be seen practically everywhere.

Our company, Golden Gate Golf Club (GGGC) plans to tap this exciting potential by being a leader in the emerging tourism and recreation industry of the Kiev area. In doing so, it is expected that the benefits of its success will be significant in economic terms, but will also benefit the people of the area as a whole.

Specifically, there has been much interest in the Kiev area itself, not only is this one of the most beautiful cities in Europe, but it is also the capital of Ukraine and a major business center.  As world businessmen and women visits the area's proposed business centers they also generate much interest in the surrounding areas. This interest will translate into demands for leisure facilities as well as tourist attraction, but most importantly they will bring increased revenues while raising overall living standards in the area. The company, Golden Gate Golf Club, plans to immediately tap this exciting potential by being the first to develop a sports and recreation facility built around one of sport’s most important environment, namely a golf course. In doing so, it is expected that the benefits of its success will not only be looked upon in terms of the excellent monetary returns that will be possible, but also for the new sense of pride that the project will bring to the country as a whole.  As the world sports authorities are looking into making golf an Olympic event, this no longer becomes a matter of boasting, but one of real national interest.

Hence, Golden Gate Golf Club is entering a lucrative market both from the standpoint of initial membership sales, yearly dues, a multitude of services, and daily use revenue. The fees and charges are presently competitively priced in comparison with similar golf courses in the European region (in terms of overall size and amenities offered) with introductory prices starting at US$ 9,000.00 with discounts of up to 35%.  This membership fee is expected to grow to $12,000.00 to $15,000.00 after the first 400 – 500 members are signed up.  Memberships for both the golf course and country club will be marketed through various marketing channels including direct sales, local advertisement, and tour packaging through local travel agencies. Further, the company will sponsor events for the proposed hotel, villa, banquet facilities and restaurant facilities marketing.

The target market for prospective members will consist of the growing number of foreign businessmen residing in the Kiev region, the large number of foreign businessmen traveling to Kiev, as well as visitors and locals interested in playing golf at an international resort located in a spectacular natural setting such as that of Golden Gate Golf Club. The target market is in keeping with the current foreign makeup of the proposed membership of GGGC. Specifically, the initial proposed distribution of overall membership is expected to be 70-80% as ex-patriate foreigners, and 20-30% locals. Gradually this proportion will change as the local population takes to the sport, and eventually we expect the ratio to be 60% local and 40% ex-patriates and visitors.

The Company will further benefit by the lack of entertainment and resort facilities in the Kiev region, as GGGC will be the first scheduled golf course development in area. Thus, the Company's early entry into this tourism and recreation industry will allow it to become the leader in Ukraine's fast growing industries.

The associated risks of the project will be mitigated through the implementation of preventive management systems and early warning reporting.

The monthly dues as well as substantial revenues from food and beverage sales will generate a positive operational cash flow, while a positive financial cash flow generated from new membership fees will be used to auto‑finance the anticipated expansion.

Against the backdrop of Ukraine’s rapidly entering into a robust tourism expansion period, the demand for quality resort destinations has grown much faster than ever anticipated. New Hotels such as the St. Sophia Intercontinental, a new Radisson, an updated 5 star Hotel Ukraina, and several others will be the basis of this tourist expansion. In addition, many new and renovated hotels and guesthouses that have been opened in the major cities throughout the country, serving foreign businessmen and tourists alike will add to this flow. In response to the need to develop large scale recreational facilities for a more upwardly mobile local population, with an even more focused demand by foreign residents and visitors for specialized facilities such as golf courses, country retreats and rural/historical resort destination sites the sponsors of this business venture, consisting of leading Ukrainian and foreign businessmen and government officials, have agreed to combine ideas and resources to create a new destination resort project to be developed at Koncha Zaspa.

The project consists of the total development of a unique 86-hectare (215 acre) parcel of land surrounded by 3 tributaries of the Dnipro River which is one of the world’s mightiest rivers and which runs through Kiev and Koncha Zaspa.

The facilities to be constructed at this location will include an 18 hole golf course, plus the renovation of existing Ukrainian resort structures into a Western style club house facility, a 3-4 star 50 room resort hotel (golf lodge) (or condominium style duplex villas), and amenities such as banquet facilities, tennis, water sports, horseback riding, health club, etc.  It is also anticipated that as the project takes hold, we will obtain permission for additional development of additional luxury villas on lands leased by the Company or on adjacent lands. The projects also includes a riverfront sand beach and potential marina, plus complete infrastructure and support facilities. In addition to developing and operating the resort complex.  There are also plans to develop further activities in the area such as fishing, hunting, etc since the project is adjacent to park lands that are suitable for such activities.

The project will be able to minimize its construction, operating, and start-up costs through several economical programs.  These include extensive use of local labor, agricultural talent, design talent, management pool, and renovation of existing facilities.

This project consists of a corporate structure called Golden Gate Golf Club (GGGC) which is a Limited Liability company and which holds a lease on the land needed for the golf course development.  This company also holds the rights of first refusal on the purchase of the adjacent property which presently consists of an old and not used Ukrainian resort. GGGC, was formed as a limited liability corporation with several individuals as shareholders and with one of the shareholders holding a majority share in the company. The shareholders in the company at the present time are listed in the attached Addendum 1.

The land is leased for 49 years with specific terms of use as a golf club only.  The land is presently a protected zone, which prevents the building at present of any structures on the property itself, but without any restrictions as to the use of this land for golf purposes.  

The adjacent resort property will be purchased in order to provide the needed services for the golfing members and for general clubhouse activities. These will  include: restaurant, banquet halls, lodging facilities, locker rooms, full health club, tennis courts and swimming pool, water sports, etc.

The company consists of partners that have going concerns in Ukraine or are in public service.  The activities of the public service individuals do not conflict or adversely affect the status of the project. The main shareholder is the president of  a company involved in construction and development in the Kiev (Kyiv) area. He has worked on similar projects in the U.S., Japan, Indonesia, Thailand, Vietnam, Korea, Turkey, Philippines, and other countries around the world. A list of projects is attached as Addendum 2a and 2b.  Other individuals have been directly involved in building, designing, and supplying materials.

During the construction and pre‑opening period, the Company will begin selling a certain number of memberships in the proposed golf course to generate early cash flow to reduce the financing requirements. Through its initial membership drive it has already developed commitments from some 50 persons interested in joining the Club.  These comprise mainly expatriates working in Kyiv.

GGGC was created in February 2000 by five individuals for the sole purpose of establishing a golf course in Koncha Zaspa. The majority shareholder of the company has been involved in golf projects for over 15 years.  In Ukraine, he has been seeking the proper venue and the best area to develop such a project. 

Since there are presently no companies that have been involved in the construction of golf courses in Ukraine, the task of finding, coordinating, and constructing the golf course will be sub-contracted to other companies.

Golf Course: - GGGC has contracted with Pro-W (Ukraine) to construct an 18-hole golf course on lands leased to GGGC.  Pro-W (Ukraine) is presently proceeding with the design, approvals, and eventual construction of the course.  GGGC will be conducting an extensive membership drive to attract members to the golf course and pay back Pro-W (Ukraine) for the above services and to continue with the financing of the clubhouse structures. The present debt to Pro-W (Ukraine) is reflected in the Cash Flow statement.

Golf Course Supervision and Professional Training – Pro-W (Ukraine) has already made arrangements with the Moscow Country Club (a major resort with a course designed by Robert Trent Jones Jr.) to provide assistance in the training of individuals as well as golf teachers for GGGC.  The MCC has also given preliminary approval to provide supervisory personnel for the golf course operations and maintenance.  Some equipment will also be able to be quickly purchased through this club.

Golf Club Structures – (Clubhouse, restaurants, bars, health club, hotel complex, tennis courts, villas, shops, etc.) – The existing structures and facilities, valued at $500,000 but which will require substantial investments to reconstruct the project or to tear it down and  rebuild it have the potential to become a fabulous resort. The renovation and additions planned for this project are the main reason for the requirement of the investments.

Irrigation and Maintenance  - Initial contacts and arrangements have been made with regional Rainbird manufacturer’s representatives for the possible construction and maintenance of the golf course irrigation requirements.  Local institute have also expressed interest in getting involved in this aspect of the work.

In absence of an established real estate market for land (recent developments with respect to laws and proposed regulations point in the direction that this issue is being addressed, the result of which will be that the Company will likely control significant valuable land holdings) the valuation of the land holdings for the project was based on similar land usage rights in the area. Since the Golf Course lands are leased for 49 years, it is difficult to give an actual or reasonable valuation to the lands leased to GGGC.  Therefore the full valuation of the land can only come from appraising the land usage as a golf course. At present, the land value is estimated to be anywhere from $2 million to as much as $16 million.  This is based on the 49 year lease.  Once land laws become effective, these figures will likely change.

The estimated cost of constructing the golf course using local capabilities is in the $600,000.00 range.  This is based on using local labor, local equipment, local irrigation piping and pumps, but imported sprinkler heads and controls. Seeds will be all imported and will be the fast growing variety.

The second structure in the overall Golf Club operations is the golf clubhouse and ancillary services.  This portion of the project will provide all the services and facilities for the Golden Gate Golf Club. The existing facilities include buildings, lands and certain rights that are valued at $0.6 million.  The renovation of the facilities are estimated to be in the range of $1.2 to $4.9 million depending on the amount of additional work and structures that are to be included in the project.  Financing of the operations is presently being conducted by Pro-W (Ukraine) with additional financing expected from interested investors and subsequently from the sale of memberships.

Investor financing would be the optimum solution for this type of operation since it would assure the quickest and largest possible attraction of members to the “first golf resort” in Ukraine.  If a fully operational resort can be in place by the summer of the year 2003, then the estimated number of members can climb to over 1500.  Many of the “additional” members are expected to be from the local Ukrainian community. The difference in this additional group of members on the financial picture of the club can reach $8 million in additional initial membership fees.  This  is based on a discounted membership fee of $8,000.00, which is still lower than the anticipated $9,000.00 regular fee that is expected to be reached after the club opens.  However, if our estimates and our projections prove to be correct, then we can expect to be able to raise membership fees to the $15,000.00 range after the first 800 to 1000 members have been signed up.

Since membership sales is the major factor in the development of this type of project, we can foresee and project the following:

a)     Early memberships.  To date we have a firm commitment from approximately 50 to 75 individuals (mostly Korean and Japanese) that if the project starts they are ready to purchase memberships.  The minimum requirements to “show” these potential members the seriousness of the project is to: 1) open a driving range (with all the amenities and equipment of a good driving range and a small area for snacks, drinks, etc); 2) start irrigation layout work on the golf course; 3) start the construction of the greens; 4) start renovation of the Baza or the construction of Clubhouse facilities.

b)     Early Memberships – second phase.  This is the group of memberships that will be sold to the expatriate community because of the deeply discounted prices.  We anticipate that we need to sell memberships discounted from the $9,000.00 regular fee to approximately $5,000.00 to $5,500.00 to attract this group of members.  This should form our second group of members until we reach 300 or 400 members. 

c)      Third Phase.  Once the level of memberships reaches the 300 or 400 level there should be serious construction activity on the project and the discount levels for memberships will no longer be needed.  At this stage, we can start selling memberships at the full $9,000.00 price with perhaps a maximum of a 10% discount. 

d)     Fourth Phase.  Once the membership level reaches 1000 members we can increase the membership price to the $12,000.00 to $15,000.00 range. 

e)     Final Phase.  Once a 1500 level of memberships is reached (and we expect this will happen within one year to 18 months), and if there are no other courses being constructed in the vicinity, then we can safely assume that a $20,000.00 membership level fee is not out of the question.  This is the stage when we anticipate that the local population (particularly the well-to-do Ukrainian business people) will want to become members.

Walter Prochorenko, General Director of Pro-W (Ukraine) and Golden Gate Golf Club is a U.S. businessman with International experience and connections.  He was the president and/or majority shareholder of several U.S. companies dealing in International Trade, consulting, and construction of overseas projects.  At one point, the company of which Mr. Prochorenko was President, had 14 offices around the world working on a multitude of major construction projects, some reaching into the $100 million value range.  Mr. Prochorenko is a Graduate of the City University of New York with most of his post-graduate course work in International Business completed.  He has also been a major investor in various projects in the Kyiv area.

Mr. Prochorenko is expected to take over as General Manager of GGGC during the construction and operations phases.  Mr. Prochorenko will have a contract with GGGC for 3 years with an option to extend if required.  His functions will include: overseeing the construction of the golf course, club house, and auxiliary facilities. Once the construction phase is completed, Mr. Prochorenko will run the Golf Club and Resort with the assistance of individuals listed below. 

Abedin Eising – General Director of Trading House Yaroslav and partner in GGGC.  Mr. Eising is a successful Ukrainian businessman whose company operations include trade, transportation, construction and other activities.  At present Mr Eising is the General Director of the structure that owns the Baza adjacent to the golf course lands.  Since he is also a construction executive, much of the construction work can be accomplished through this organization. Particularly since they are most familiar with the structures and can obtain fast approvals and permits.

Pandelis E. Kouris – VP and General Manager of the Hotel, and Food and Beverage Division.  Mr. Pandelis Kouris is a successful restauranteur in Kyiv.  He is an exceptional businessperson who was able to build up several businesses in the Kyiv area that included several first class restaurants, a food and beverage business, and a cruise ship manning and training business. Mr. Pandelis is expected to run the GGGC hotel, restaurant, and banquet operations.

Lina Artemyshyn – Managing Director of Pro-W (Ukraine).  Ms. Artemyshyn owns her own consulting firm (International Financial Consulting Group), which has been conducting consulting work in Kyiv for banks, government agencies, companies, and various other institutions for the past 7 years. She also manages the day-to-day operations of Pro-W (Ukraine) in the consulting, real estate, and constructions fields.

At GGGC,  Ms. Artemyshyn will act as Financial Director.

Stanislav Adamenko – Architect.  This individual has been involved in most of the biggest government projects in Ukraine.  Among these are:  Restoration of the Mariansky Palace;  Palats Ukraina (concert hall and convention hall); Offices and residences of the Presidents of Ukraine (Kravchuk and Kuchma). Mr. Adamenko has indicated an interest in becoming the general architect for GGGC on the project and acting as the project manager for construction.

Victor Gerasimenko, Volodymyr Venger, and Vasyl Semibratskyj – these individuals are involved in the Government Liason portion of the project.  They now and will in the future, assist us in the endless maze of Ukrainian bureaucracy and in the obtaining of the proper documents, permits, approvals, rights, etc.

Golf Superintendent - (most likely hired from a club in the Russia, the USA, Europe, or Asia).  The Moscow Country Club has indicated an interest in providing assistance in filling this position.  This most important position is expected to be filled in the construction phase, or at the latest, in the early stages of the operations.

Maintenance Manager, Greens-keepers, Irrigation Engineer, Electrical Engineer, etc.  – These positions will be filled from individuals from Local Institutes, industries, and with the assistance of the Moscow Country Club.

Sales and Marketing Director -  This position will be filled by an individual from the local ex-patriate community or from local executives.  Several candidates are already being considered.

PR Director.  -  A local PR director that has worked for Pro-W (Ukraine) will be hired to provide assistance in the ever-important Public Relations functions with the Ukrainian press and media.  We already have excellent access to the local journalists organizations, unions, and press clubs.

Discussions have already started for the establishment of Professional Management companies for both the Golf Club operations, and possible Hotel Management Services.  This option will be considered if the investors will require a “Luxury” or “First Class” operation that would preclude the hiring of local talent for operations of the club.

At the present time, there is only one 5 star hotel in all of Ukraine and no golf course resorts or projects.  Under these circumstances, there is a strong possibility that outside (foreign) sourcing will be required to run a very high-class operation. Local talent is just not available for such a project.   However, we do not foresee the need for a 5 star operation for the first golf resort in Ukraine.  If the investor has other thoughts or ideas regarding this, they can certainly be accommodated, but our recommendation is that GGGC be constructed and operated as a 3-1/2 to 4 star resort.

If outside management would be required, it is still too early in the project to make any firm commitments to any one specific group since many factors will have to be considered.  One of the major factors is the Hotel/Resort Management Company’s ability to operate in Ukraine since none of the Hotel/Resort Management Companies have been able to do so to date.  Part of the reason for this is that there have been no similar facilities built or operated in Ukraine, but also because almost all Ukrainian Hotel operations continue to be run by the former Soviet hotel management services.  Privatization has been slow in this industry although many new small hotels have sprung up all over Ukraine.  Recently only the “Hotel Ukraina” has made it to 5 star status but they are being operated by locals with general management from France.

However, it is anticipated that with all the interest that has so far been expressed in the project, that there will be no problem finding the proper local management or a management company to run the operations.

The recent implementation of liberalized foreign investment laws and the relaxation of visa regulations for tourists form part of a general Ukrainian opening‑up to the world. In the next few years we expect Ukraine to emerge as a country offering a wealth of opportunities to the international business community.

Ukraine still has large and as yet unexploited potential (such as natural resources, labor, and capital accumulated among the population), coupled with well established and increasingly new and expanding relations with many other countries.  President Kuchma has been actively pursuing political, social, and economic relations with many countries around the world.  He has actively and extensively traveled to the far corners of the globe to establish or secure ties with former and newly found partners in all kinds of industries.

Many people fail to appreciate that Ukraine is the same size and has the same population as France.  It is also a highly industrialized nation with vast natural resources.  Its population is well-educated hard working and eager to enter in to a new area of world markets and economies.

Many European countries are starting to appreciate the vast potential that Ukraine has to offer and have made very serious moves to invest in Ukraine’s industry.  As such this has brought a great number of foreign diplomats, managers, entrepreneurs, workers, business people, bankers, etc. to test the industrial and economic waters of this great nation. 

This phenomenon is not limited only to guests from the USA and European nations, as business people from China, Japan, Hong Kong, Korea, Indonesia, Lebanon, Egypt, U.A.E., India, etc. have also been coming to Kyiv and other industrialized areas of Ukraine.

After the breakup of the Soviet Union, Ukraine found itself in a difficult position economically and even politically.  During the Soviet era, it had achieved a tremendous amount of success as one of the main suppliers of materials, technology, sophisticated goods, armaments, and technical labor to the Soviet partners.  This came suddenly to an end in 1991 and Ukraine was faced with having to find its own markets but without the expertise to do so.  One of the primary reasons for this dilemma was that upper management in the Soviet system was usually found in Russia and particularly Moscow.  Now, Ukraine had to find its own methods of operating, managing, marketing, and achieving economic stability. 

This does not come without a price and that price has been hyperinflation, unemployment, closing of factories and a serious downturn in the economy.  Fortunately, Ukrainians are a hardy lot and have a tremendous amount of perseverance and tenacity.  The country is reorganizing its priorities and is well on the way to becoming a serious market economy. In order to achieve this, Ukraine will require assistance from the Western countries but to attain this it will have to also cater to Western needs.  To attract Western financing, management expertise, and technical know-how, Ukrainian government agencies and private companies will have to assure that Westerners have sufficient Western style housing, office space, communications, and even leisure facilities.

This is where the concept of establishing a Golf Course in Ukraine becomes so important.  Managers from the U.S. Asia, and even Europe have become accustomed to playing golf as a means of relaxation, as a leisure activity, and even as a conduit for achieving business related goals.  Golf Courses are no longer seen as a bourgeois activity, but rather as either another forum for conducting business or as a means of rewarding hard working executives and allowing them a measure of relaxation from their tedious tasks.

The total area of Ukraine is approximately 232,046 square miles or the size of France.  The population of Ukraine is 49 million people, which is also similar to that of France.  This makes Ukraine larger than Poland, Hungary, the Czech Republic, and Slovakia combined. Geographically, Almost the entire country of Ukraine is a vast flat plain, with elevations generally below 300 m (about 984 ft). The Carpathian Mountains intrude at the extreme west, and on the southern coast of the Crimean Peninsula are the Crimean Mountains. The highest point in Ukraine is Mt. Hoverla  in the Carpathians, with an elevation of 2061 m (about 6762 ft). Most major rivers flow south to the Black Sea; they include the Dnipro River in central Ukraine, the Southern Bug and Dnister rivers in the west, the Donetsk River in the east, and the Danube in the far south.

The climate of Ukraine is temperate continental, with a subtropical Mediterranean climate prevalent on the southern portions of the Crimean Peninsula. The average monthly temperature in winter ranges from -8deg to 2deg C (17.6deg to 35.6deg F), while summer temperatures average 17deg to 25deg C (62.6deg to 77deg F). The Black Sea coast is subject to freezing, and no Ukrainian port is permanently ice-free. Precipitation generally decreases from north to south; it is greatest in the Carpathians, where it exceeds more than 1500 mm (58.5 in) per year, and least in the coastal lowlands of the Black Sea, where it averages less than 300 mm (11.7 in) per year.

It is expected that the Golf Resort will operate year round as it does in Moscow and Warsaw.  The golf course itself can operate from early spring (April) until late autumn (until the first snows of November).  Since the soil is sandy, it does not become as hard as in some of the northern climates of the USA or Europe where a miss-hit can feel like hitting concrete.  Thus a 7 to 8 month usage of the golf course is not only expected but almost guaranteed. 

The hotel, restaurant, banquet, and health club facilities are expected to operate year round.  Due to a lack of such facilities in the area, and a large wealthy population in the immediate vicinity, we expect that the winter months may actually be more active than the rest of the year for these services.

Having a population of 49,000,000 in 2000, Ukraine is the second most populous country of the former USSR. Russia being the most populous. Ukrainians constitute 75 percent of the population. Ukrainian, a Slavic language closely related to Russian and Polish, is the official language, although Russian is widely spoken. Russians constitute 20 percent of the population. Other minorities living in Ukraine include Byelorusians, Moldovans, Hungarians, Bulgarians, Poles, and Crimean Tatars. Most of the Tatars were forcibly transported to Central Asia in 1944 for anti-Soviet activities during World War II. Christian Orthodoxy is the predominant religion in the country, although western Ukrainians are Catholic, as are the Hungarian and Polish minorities. Protestantism, Islam, and Judaism are also practiced.

Ukraine is an urbanized society, with more than two-thirds of the population living in cities and towns. Kyiv, the capital, is the largest city in Ukraine, with a population of 2,750,000 in 1990. Other large cities include Kharkiv (1,800,000), Dnipropetrovsk (1,200,000), Odessa (1,100,000), Donetsk (1,100,000), Lviv (800,000), and Mariopol (500,000). Population growth, however, is low. The growth rate during the late 1980s and now into the 1990s continues to be the lowest in all of Europe. Health standards, such as life expectancy, are generally high and are improving after a substantial decline.

With a population of approximately 2,750,000 inhabitants, Kyiv, the capital of Ukraine is the center of the national and regional governments and a major business center.  It is a beautiful city with wide streets, old historic building, numerous churches, many of which are gold domed, and many historical sites too numerous to mention in this document.  Kyiv has been undergoing major restoration of many of its buildings that have become unkempt due to lack of proper maintenance. 

In the past 5 years Kyiv has seen a tremendous growth in private enterprise with many new clubs, restaurants, casinos, hotels, and business facilities being opened. Albeit there is still no 5 star nor major hotel chain hotel in Kyiv, but this is expected to change soon with the advent of a new administration.

Kyiv has also been one of Ukraine’s major industrial centers but now it is going through a transformation phase, which will require revamping and refurbishing many of its factories.  During the Soviet era, Ukraine and Kyiv were major military-industrial complex, which is now being slowly transformed and converted to commercial enterprises. 

Many Western companies, particularly those from Germany, Holland, Sweden, Italy, Finland, Switzerland, Austria, and the UK have arrived in Ukraine and have established serious presences in Kyiv.  American and Canadian companies, as well as those from the Far East are also making serious attempts at establishing factories and enterprises in this region.

With the arrival of these companies, there has been a tremendous demand for offices, housing, and entertainment and leisure facilities.  Kyiv is blessed with a beautiful, wide river that runs through the middle of it and which supplies water and power to the city.  It is also a wonderful place for relaxing and traveling to other area of Ukraine.  This is also where our company has decided to utilize one of the river’s most beautiful islands as a facility to provide relaxation and camaraderie in a sporting establishment.

The clientele for GGGC is expected to consist mostly of western business people and diplomats during the early stages, with growth in Ukrainian memberships starting slower, but eventually become a larger client base.

The Western clientele can be divided into four distinct groups.  The first is the over 8,000 western business people and diplomats living and working in Ukraine on a full-time basis.  The second includes those businessmen who come to Ukraine on short-term business, currently numbering more than 1 million annually, and continuing to rise with increasing volumes of foreign investments.  The third Western market comprises those western firms, which hold business meetings and rent villas in the country for weekend events; there are few attractive outdoor venues currently available or soon likely to be available in the Kyiv region, so GGGC can be expected to be a popular event location.  The fourth segment consists of individuals from Eastern and Western Europe where there is already an established tradition among certain business and social circles of traveling on golf tours, and attending special golf tournaments.

Despite the great demand for recreation represented by these four groups, the Kyiv area is notably lacking modern facilities for recreation, let alone for playing golf.  Moreover, there are limited other venues for socializing at the business level outside the office.

Ukrainian clientele can be categorized as either businessmen and employees of Ukrainian firms and commercial banks, or as the firms and banks themselves.  Evidence for the likely support of Ukrainian clientele, despite their current lack of access to golf facilities, can be found in the success of golf clubs built in generally similar market conditions in Russia (3 in Moscow, 1 in St. Petersburg), and in the growing international appeal of the sport as well.

There is no direct competition for golf clubs in Ukraine.  At present there are no known golf courses under construction, however there are 2 in the development stages (presently “on hold”) in the Kyiv area.  Even if there should be a golf course planned in the near future, it is unlikely that a complete facility will be built with the variety of activities and amenities that GGGC will provide.  Even in the event a different site could be found and developed, based on recent land price developments within the Greater Kyiv area, such a facility would have to charge prices much higher than the GGGC in order to recover its investments.

Marketing research and reviews of standard international practices have been used to formulate a detailed GGGC marketing strategy, as outlined below in brief:

A-    Advertising and Promotion.  The promotion of GGGC will begin heavy and be maintained not just in Kyiv, but throughout Ukraine, and in selected markets in Europe and the US.  Billboards and magazines in Kyiv will carry regular advertisements, a public relations company in Kyiv will be hired, brochures and a quarterly newsletter will distributed, and sales agents will be used for US locations.  Special events for members and candidate members will be held both at GGGC and at locations in Kyiv, and the media will be encouraged to cover GGGC events, although it is expected that they will be newsworthy enough in themselves to attract press.  Direct mailings will also be utilized, with a list of 20,000 contacts expected to generate up to 5,000 prospects in the first two years of operation. The goal during this first year will be to develop a membership base of 300 to 750 new members (with 500 being the average number).

B-    Forms of Membership.  There will be four forms of membership available:

(1)   Honorary Members. Those members who are distinguished and highly respected within the international community and who have accepted the special invitation from the Directors of GGGC.

(2)   Individual Members. Those who formally apply for Individual Membership and who are granted the status as such by a Resolution of the Directors of GGGC.

(3)  Corporate Members. These organizations which formally apply for Corporate Membership and are granted the status as such by a Resolution of the Directors. One unit of Corporate Membership consists of three persons (Corporate Nominees). Such nominees may be changed at any time as the Corporate Member may decide; however, official approval from the Board of Directors is necessary for all such Nominee changes. A one-time service fee will be charged for this service.

(4)  Associate Members. Those who are the Spouse of either an Honorary Member, an Individual Member, or a Nominee of a Corporate Member: and who are given the status as such by a Resolution of a Member or Nominee under 21 years of age.

C- Hotel Marketing Strategy.  In order to attract potential hotel guests to GGGC, a hotel marketing efforts will be incorporated within the overall marketing strategies of the Golf Club.  All new information regarding hotel development will be regularly featured in the quarterly newsletter and distributed to members.  Hotel brochures will be printed to introduce planned facilities plus entertainment and tourist amenities, and be distributed among travel agencies and target companies.

D -Villa Marketing Strategy.  10-20 each 150 to 200 sq.mtrs. (1500 to 2000 SF) 2-3 bedroom villas will be built at the GGGC site. Potential customers will be corporations in the Kyiv area who are at present interested in having resort facilities for their staff in a golf resort environment.  If the Moscow Country Club is to be an indicator of the success of such a strategy, then this type of leisure corporate residences will be immediately filled up.  Anticipated rental of these villas will be $75,000 per year.  In Moscow similar villas rent for $125,000 to $150,000 per year.

GGGC golf course is being built on 76 hectares of land along the riverbanks of the Kozinka and Irzhavets rivers, which are tributaries to the great Dnieper (Dnipro) river, and on 4 hectares of adjacent land presently known as the “Baza”.  The facilities on the GGGC land will include the golf course, driving range and a putting green, and a pitch and put course (or an additional 9 hole course).  On the “Baza” land there will be a clubhouse, hotel, pro-shop, health club, sauna, massage and therapy facilities, an area for tennis courts, retail spaces, café, bar, and a restaurant.

A summary of the facilities is as follows:

Location	Facility	Present Status
GGGC Land	Golf Course	In approval stages
GGGC Land	Driving Ran	In approval stages
GGGC Land	Putting Green	In approval stages
GGGC Land	Pitch & Putt	In approval stages
"BAZA"	Club House	Existing – needs renovation
"BAZA"	Locker Room	Existing area – Needs construction work and equipment
"BAZA"	50 Room Hotel	Existing - needs re-planning and and/or renovation (can be made into 20-25 townhouse or condominium units)
"BAZA"	Restaurant	Existing - needs major renovation, equipment and furnishings
"BAZA"	Bar	Existing - needs renovation, equipment/furnishings
"BAZA"	Snack Bar	Existing area - Needs reconstruction
"BAZA"	Health Club	Existing - needs reconstruction
"BAZA"	Sauna	Existing - needs reconstruction
"BAZA"	Pro Shop	Existing area - Needs construction work plus equipment and products
"BAZA"	Shops	Existing area - Needs construction work plus equipment and products
"BAZA"	Tennis Courts	Existing area - Needs construction work
"BAZA"	Beach Area	Existing
"BAZA"	Club/Discotheque	Existing Building - needs reconstruction plus equipment

 

The total cost of the project is based on 2 various valuations plus a combination of share ownership and loan options. 

Various options are available for investment in the project.  These include Credit only, Investment Only, and a combination of Credit  and Investment.  Finances required for these options range from $1.5  to $7.2 million. 

Note:  Financial tables deleted from web version of business plan.  For information on financial figures and financial structure of project, please contact:  Walter Prochorenko  at:  prowalt@yahoo.com

Investments will be utilized during the first three years of Project implementation for the reconstruction of the club house infrastructure, hotel, villas, amenities, and course irrigation, etc in accordance with the schedule of the construction works and costs budgeted for the Project.

The investment will yield a 20-28% annual interest rate, with interest payments beginning in Year 1, paid monthly.  The repayment of principle will commence at the end of Year 1, with additional repayments at the end of Year 5.

a. Political and Economic.  Investing in Ukraine involves certain considerations not usually associated with investing in the more developed markets of the United States, Japan, Canada or Western Europe.  These considerations include:  (i) political and economic factors such as risk of expropriation, nationalization and general social, political and economic instability; and (ii) the possible difficulty of enforcing legal rights in Ukraine.

The Government of Ukraine is currently implementing reforms directed at political and economic liberalization, including efforts to decentralize the decision-making process in Ukraine, to move towards a market-oriented economy and to foster a multi-party political system.  There can be no assurance that these reforms, including those permitting full repatriation of profits, will continue or, if continued, will achieve the goals set by the Government of Ukraine.  Neither can there be any assurance of the pace at which the proposed reforms will take place.  In addition, there is uncertainty whether current political trends in Eastern Europe, including the FSU, will continue to create favorable circumstances for Ukraine to liberalize its political and economic environment.

The current situation in relation to taxation in Ukraine is under review.  It is anticipated that a new Ukrainian tax code will be introduced in 2001, which may alter the current situation in relation to the taxation of companies and of dividends.

b. Repatriation of Profits.  Under Ukrainian law, in general foreign investors are guaranteed the right to repatriate profits earned from Ukrainian investments.  However, to the extent that profits are earned in local currency (hryvnia). this right may be limited or effectively negated by the availability in Ukraine of foreign exchange and by access to the inter-bank foreign exchange auction market.

Alternatively, we have set up a mechanism for the repatriation of profits through the payment of membership and other fees to foreign banks.  This is a perfectly legal method but will require the assistance of foreign banks to make this work properly.  We already have an arrangement with a major European bank for doing this and all indications are that this will not only work well but will even reduce risk and taxes.

c. Currency Risk.  A portion of the Company’s revenue and income will be earned in local currency.  Accordingly, the US dollar equivalent of the assets and revenues of the Company’s investment would be adversely affected by reductions in the value of the hryvnia relative to the dollar.  Conversely, they would be positively affected by increases in the value of the hryvnia relative to the dollar.

d.  Enforceability of Contracts.  The legal system in Ukraine is in a nascent stage and subject to continuous change and development.  There are concerns regarding difficulties or inability to enforce contracts in Ukraine.  The position in Ukraine in relation to the ownership of property, in general, and land, in particular, remain uncertain.

e. Land.  With the adoption of new land laws by the Ukrainian Government at the end of 2001, the ownership of major plots of land has become a reality.  Former investor fear that leased land would somehow be expropriated is becoming less and less of a factor.  There are still restrictions on ownership of agricultural lands (until the year 2005; however, since the land leased by GGGC does not fall into this category, this is not a significant risk factor.  GGGC now has an option to purchase the land, however this process will require some time and will require the project to be at least substantially under way in order for this option to be exercised. The benefit of the new situation is that GGGC will have the right to purchase the land at a very reasonable price.  Market prices will not play a role in these transactions.

As an investment project, GGGC offers a number of significant advantages:

A-    Demand:  The large and growing expatriate community in Kyiv currently has no access to golf in Ukraine.  The present lack of recreational and athletic facilities, combined with the increasing popularity of golf both as a leisure and business pastime, will create a ready demand for a golf resort at Koncha Zaspa.

B-    Location:  The physical setting and features of the Koncha Zaspa location are uniquely advantageous for a golf resort and residential community.  The island location of the golf courses, a distinction shared by few other courses in the world, enhances the game’s natural appeal.  Furthermore, visual proximity to the Dnipro River will increase the aesthetic value of the hotel resort and residential villas.

C-    Management:  The GGGC resort will be owned and managed by individuals with considerable experience in planning, building and operating projects of this type.  In addition to committing their own capital, the partners already have obtained most of the necessary permits to begin work immediately. 

Although all investments and projects of this type have an inherent risk, the fact that GGGC will be the FIRST golf club and resort in Ukraine, reduces the risk factor very substantially.  There are certain issues such as repatriation of capital, management, importation of equipment, etc that will need to be addressed on a regular basis, particularly since the laws of Ukraine change regularly, but past experience has shown that all such problems and issues can be resolved satisfactorily if experienced overall management is in place. In addition, even though every country is “unique” in its own right, most countries work on a certain set of principles and rules.  These are still being established in Ukraine since Ukraine was economically very rarely fully independent.  Therefore many rules found in other countries either do not apply or require creative thinking and management to overcome. Generally, however, and taking all aspects into consideration, one can safely assume that the project is almost guaranteed to be substantially successful.