DIRECT CONTAINER INVESTMENT

Transcription

1 DIRECT CONTAINER INVESTMENT

2 Carsten Jans Managing Director The Company Based in Hamburg, MAGELLAN Maritime Services was founded on August 14, 1995, in what was to become the Maritime Group. After more than thirty-five years of experience in working for shipping companies and agents as well as NVOCC in Hamburg and Bremen, shipping clerk and founder Carsten Jans original intention was to cut the costs of empty container transports in the maritime shipping industry. We used an innovative system to initiate a customised service of a type that is still unique worldwide. Increased market demand prompted us to found a new branch at almost the same time, MAGELLAN Maritime Services (HK) Ltd, based in Hong Kong. MAGELLAN Maritime Services (HK) Ltd played a major role in our Group s success from 1995 to The enormous expansion of China and our business focus in the Shanghai region led to our decision to relocate the Hong Kong branch to Shanghai in April After establishing our own branch in New York in 1998, which we moved to Chicago in March 2000, MAGELLAN Maritime Services gained a solid base in three of the world s most important trading hubs. We then opened our Swiss branch on entering the global sea container financing and leasing business. August 2003 saw MAGELLAN Container Management Services GmbH founded in Zug, its head office later moving to Basle in May Services Our activities specifically cover trading, financing and leasing sea containers across the world in addition to reducing empty container transport costs. The experience and capability shared amongst our staff ensure ideal service and expertise in container management; this is our recipe for success. We aim to play a major contributing role in shaping the global container market with our innovative ideas.

3 When American freight forwarder Malcolm McLean took his tanker-turned-freighter Ideal X with fifty-eight containers aboard from Newark, NJ, to Houston, TX, on April 26, 1956, no one would have thought that the voyage would mark the start of a new age in shipping. Containers and globalisation The Paris-based ISO International Standardisation Organisation s new standard dimensions passed at the Hamburg Chamber of Commerce in October 1964 ushered in the containerisation of global freight that has remained to the present day. We currently have around 21 million container units moving across oceans and continents, a prime factor in one of the greatest revolutions the world has ever seen globalisation. Certification MAGELLAN containers are certified to ISO and satisfy the standards set by CSC TIR UIC TCT (The International Convention for Safe Containers) (The Customs Convention on the International Transport of Goods) (The International Union of Railways) (Transportation Cargo Containers and Unit Loads Quarantine Aspects and Procedures by Commonwealth of Australia Department of Health) Our owner and product group (alpha prefix) codes are registered at the International Office for Containers (BIC Bureau International des Containers, Paris). Safety All our containers have been type-tested and certified by classification associations such as Germanischer Lloyd and Bureau Veritas, and comply with the internationally recognised ACEP (Approved Continuous Examination Programme), a programme for ongoing container inspections to replace the fixed inspection intervals (first inspection after constructing the container after sixty months, inspections every thirty months afterwards) as originally specified in the CSC Convention. MAGELLAN has been granted the corresponding approval from Hamburg s Health and Safety Department (Amt für Arbeitsschutz). In addition, we have commissioned experts to supervise container production. Quality We attach great importance to top quality in our newly constructed containers; we mostly use corrosionresistant steel in construction, steel technically termed COR-TEN or SPA-H (superior atmospheric corrosion-resistant steel) with a specialised chemical composition ensuring high-quality, lasting and durable material. Environment Environmental protection played a significant role in our choice of maritime coatings from major names in the coating industry with almost only acrylic coatings used in our interior and exterior container finishes, products free of tetrachloromethane or xylene as chlorinated or aromatic solvents. The interior coatings are food-grade with FDA (Food and Drug Administration, U.S.A.) approval. The wooden floors in our new containers are impregnated against insect infestation using environmentally friendly agents, and comply with Australian Quarantine and Inspection Service (AQIS) provisions.

4 Twenty-foot Equivalent Unit Construction of a 20 container: Approval by GL Door header The TEU or twenty-foot equivalent unit has become standard in sea container dimensions; TEU refers to standard containers of 20 or 6.05m in length, 8 or 2.43m in width, and 8 6 or 2.59m in height. However, the TEU term is not only used for 20 containers but also for specifying container capacity in ships and port facilities. Shipping containers are mainly made of steel, especially COR-TEN steel. (COR-TEN is a registered trademark of United States Steel Corporation. Steel with a specialised chemical composition ensuring a high-quality, lasting and durable material) Door gasket Corner fittings Owner and product group code Top side rails Serial number Side wall Check digit Size and type codes Material decal (COR-TEN) Operational characteristics Door leaf Hinge Bottom side rails Door rod Forklift pockets Door lock Door bar guide Door rod bracket CSC plate Corner post Door handle and locking bracket Door cam and cam bracket Door sill Manufacturing a 20 container involves a total of 100 kg in coatings, thinners and bitumen, about 230 kg in hardwood, and about 1,850 kg in steel. Two TEU or one FEU (forty-foot equivalent unit) will usually fit onto a semi-trailer. Together with the third, higher, standard containers referred to as 40 High Cubes, standard containers make up almost 90% of the world s container inventory in circulation. A High Cube container has a height of 9 6 or 2.89m. The foot is one of the oldest units of length, along with the finger, hand, span, cubit, and yard. These units were probably in common use even before the invention of writing. The current imperial foot is equivalent to cm (12 inches, imp. inches), or a shoe size of almost 48½ metric.

5 Special containers Containers at 45 or 48 length as well as smaller containers with lengths of 8 or 10 are referred to as special containers. Containers with lockable doors at either end (double-door containers), sidemounted doors (side-door containers) and open tops are also available. The European logistics industry uses specific pallet-wide containers for handling EURO pallets efficiently. Special containers also include custom products for shipping certain types of freight major examples include refrigerated containers, tank containers, and bulk containers. The Cost Equivalent Unit, or CEU, aims at drawing a commercial comparison between these various containers the term does not refer to the actual container size, but represents a financial unit. TEU, FEU, and 40 High Cube containers have CEU values of 1, 1.6, and 1.7, respectively. Our modern fleet includes standard and special containers available in all standard sizes almost worldwide. The containers we usually lease to maritime shipping companies include 20 Standard 40 Standard 40 High Cube 20 Reefer 40 Palletwide 40 Open Top

6 General characteristics of the container market Container and container ship markets Steel price trends Investing in containers is a completely different ball game from investing in container ships, although both involve logistics and shipping and one depends on the other. In simple terms, a vessel is a method of shipment and a container is a form of packaging. Shipping companies purchase, run, and, at some point, sell their vessels Container prices Containers are more like packaging equipment with a running expense rather than capital value as in vessels, so the market is primarily oriented to demand from companies. Container purchase and leasing rates are mainly based on their users or lessees seasonal demand, so prices have not undergone the boom seen on the ship market in recent years. Another important factor influencing container production cost is the raw material used steel. Container service life A new container will see around ten to fifteen years of service life, but there are still units aged twenty to twenty-five years still on lease and in circulation. The container s condition plays a pivotal role in its use any container that meets the standards will be used; depreciation is in a long-term plan, viewing containers only as necessary equipment, so some peculiarities have developed in the container market compared to the ship market; construction prices and charter rates for container ships have little in common with construction costs and leasing rates for containers. The world saw 1.5 billion tonnes of crude steel produced in 2011 mainly due to developments on the Chinese market, which commands a share of about 46% of total world production. The price of shipping containers fluctuates due to volatile steel prices and Dollar rates; In mid-2008, prices per ton of COR-TEN steel were quoted at $1,000, and at $500 in early 2009, then to fluctuate between $700 and $900 in 2011 (Source: World Steel Association). moderate in the usage phase. Decommissioned containers are then often reused for storage and eventually permanently scrapped, maybe after thirty or forty years. World Steel Prices $/metric tonne Hot Rolled Steel Coil Jan Feb Mar Apr May Jun Jul Aug Sep Okt Nov Dec Jan Feb Mar Apr May Source: MEPS steel prices

7 Required number of containers per vessel As a rule of thumb, each liner carrier would need double the amount of containers as it has slots on a new vessel into the company s logistical planning. That would mean around twenty thousand standard 20 containers (TEU) at a factor of two for a vessel with capacity for ten thousand TEU slots for standard containers in line operation. As the chart below shows, the number of containers available per slot has levelled off at about two in recent years after reaching a factor of 2.5 to 3 in the 1990s. Number of containers available worldwide per container slot (On the world s existing vessels in the years 2000 to 2015) Source: Drewry Maritime Research, Container Census 2012, Annual Report 2011, S. 62, F = Forecast Financing containers Shipping companies buy or hire additional containers, while container lessors finance their containers from banks or on the capital market, including private and institutional investors and container funds. Ownership structure in the world s container fleet in ,0% 5,0% 43,0% Lessors Owners Others Container owners and lessors Shipping companies mainly invest in their vessels; some of the containers needed for new vessels are purchased outright, but some are hired to protect the liner carrier s liquidity. The container leasing market is becoming increasingly important for liner carriers due to the large amounts of container tonnage ordered. Besides shipping companies and other business enterprises, container leasing companies own around 43% of all containers used worldwide compared to 38% in 2009, and the tendency is still rising. Around 90% of the 52% of containers owned by the carriers are owned by the Top 25 liner carriers (source: Drewry Maritime Research, 2012 Container Census, 2011 Annual Report, p. 25, and WorldCargo News). Source: Drewry Maritime Research, Container Census 2012

8 Features of the container market today The Top 25 liner carriers Order books are full with the liner carriers; the vessels will be delivered in coming years and must be financed from the lines operated. As the table of Top 25 lines shows, 87% of the world s container slots can be found on container ships belonging to the Top 25. In addition, 85% of the newly ordered tonnage goes to the Top 25 liner carriers. The fleet of approximately 5,980 container ships currently afloat with nearly 16.4 million TEU should expand further by about 18%. However, new orders from the Top 25 lines inevitably require around 6 million more containers, taking the factor of two and the number of container slots on new vessels into account. Full order books with top liner carriers! Top carriers will need more containers in the long term! MAGELLAN only leases to the Top 25 liner carriers! Source: Alphaliner Top100, Operated fleets as per 2 June 2012 from: additional calculations World container fleet as of June 2012 Total Owned Chartered Orderbook Pl. Linien-Carrier TEU Ships TEU Ships TEU Ships % Chart TEU Ships % exist. 1 APM-Maersk % % 2 Mediterranean Shg Co % % 3 CMA CGM Group % % 4 COSCO Container L % % 5 Evergreen Line % % 6 Hapag-Lloyd % % 7 APL % % 8 CSCL % % 9 Hanjin Shipping % % 10 MOL % % 11 NYK Line % % 12 OOCL % % 13 Hamburg Süd Group % % 14 Yang Ming % % 15 K Line % % 16 Hyundai M.M % % 17 Zim % % 18 PIL (Pacific Int. Line) % % 19 UASC % 20 CSAV Group % % 21 Wan Hai Lines % % 22 HDS Lines % 23 TS Lines % 24 X-Press Feeders Group % % 25 SITC % % Total Top ,4% ,1% Total All (weltweit) Anteil Top 25 87% 61% ,4%

9 Global container inventory The global container fleet will grow from 31 million TEU in early 2012 to 42 million TEU in Growth rates are relatively easy to predict if only due to the increasing number of vessels in service; half of the additional 11 million TEU are already accounted for in the new ship orders already known (see previous page). Container fleet development over the past thirty years The crisis in 2009 caused a worldwide decrease in container inventory, with production almost completely halted; new containers did not even cover demand from replacing decommissioned containers. More container ships were delivered in 2009, so there were more container ships and fewer containers in 2010 as reflected in sustained price levels on the container market, which remained well over the ten-year average into the years 2011 and Source: Drewry Maritime Research, Container Leasing Industry 2012, p. 41, and Containerisation International, Container Leasing Market 2010, p. 38, Table 39, F = Forecast Production capacity and production volumes per year in thousands Source: Drewry Maritime Research, Container Leasing Industry 2012, p. 39, F = Forecast MAGELLAN orders directly from container factories in China!

10 The container leasing market The proportion of long-term lease containers has been increasing over shortterm or master lease containers for years. Container leasing rates in master leasing arrangements subsided during the crisis; liner carriers no longer used short-term lease containers, increasing off-hire inventory at container lessors. Long-term leasing arrangements were sustained for the most part. The table shows that short-term master leasing arrangements decreased sharply in the 2001 and 2009 crises, substantially increasing off-hire inventory with a heavy negative impact on earnings for some container lessors. Development in container leasing rates in the total container leasing fleet In addition, liner carriers have increasingly been entering long-term leasing arrangements for years in order to protect their liquidity, once again with new vessels playing a major role. The share of leased containers is increasing across the world. Source: Containerisation International, Container Leasing Market 2010, p. 28, table 25, and Drewry Maritime Research, Container Leasing Industry 2012, p. 29 In times of crisis, lessees for master leasing arrangements dwindle in numbers while liquidity amongst liner carriers causes a TREND TOWARDS LONG-TERM LEASING. Shortterm leasing rates are more sensitive than long-term arrangements! MAGELLAN does not work with any single container lessor, and MAGELLAN only provides longterm arrangements.

11 Container types Ninety-five percent of the total container inventory is in maritime service (source: Drewry Maritime Research, Container Census 2012). The options for leasing sea containers are therefore many times greater when not limited to regional markets, which often lack efficient checks and balances. This situation also applies to international niche markets not dealing with standard containers. The container backlog at the end of 2011 amounted to around 31 million TEU 30% for 20 Standard containers and all of 45.7% for 40 High Cube containers. Both container types evidently represent by far the largest market segments, strongly suggesting oversize growth rates up to 2015 as the inventory of 40 Standard containers remains consistent. The inventory in 20 Standard and 40 High Cube containers is expected to increase by 36.9% and as much as 54.7%, respectively, by (Source: Drewry Maritime Research, Container Census 2012, Annual Report 2011, pp. 21 and 79, and Containerisation International, Container Leasing Market 2010) Demand for both types of container mainly applies to arrangements lasting years due to new vessels, and the containers will enter a reasonably predictable global market in five years time. MAGELLAN vermietet nur Seecontainer! MAGELLAN vermietet 20-Fuß u. 40-Fuß Standard sowie 40-Fuß High Cube-Container!

12 Current market assessment Global container handling has been expanding for years with double-digit percentages in some cases. The steady growth in container traffic is mainly a result of the ever-increasing trade volume from increasing globalisation, with increasing numbers and sizes that is, slot capacities in vessels. The Täglicher Hafenbericht (THB) AKTUELLE MARKTEINSCHÄTZUNG, or Daily Harbour Report CURRENT MARKET APPRAISAL, reported on July 20, 2011, that Maersk alone had ordered ten vessels at a capacity of 18,000 TEU each. In March 2012, the Institut für Seeverkehrswirtschaft und Logistik (Maritime Management and Logistics Institute, ISL) reported expectations for a substantial increase in international goods trading, as increasing container handling rates are a reliable indicator for world trade (THB, March 23, 2012). The freight rate increases forecasted by liner carriers also proved accurate during 2012 (DVZ No. 18 of May 4, 2012), an indication that increasing numbers of liner carriers are leaving the cutthroat competition for market share. On May 31, 2012, Alphaliner specialist analysts claimed a decrease in order volume for container ships at capacities decreasing from almost 7 million TEU (6.98) in 2008 to just over 3 million TEU (3.67) in May 2012; a total of around 6 million TEU in containers would still be required for this 3 million slot capacity. A liner carrier still needs around two containers per slot and will order the containers as required, but not before (FAZ, May 4, 2012). The enormous investment in vessels has contributed to liner carriers no longer necessarily equipping their vessels with their own containers. Shipping companies once invested their record profits from previous years in ships and increasingly in containers, especially in the years 2005 to 2007 with only 35% of all brand-new containers delivered to leasing companies; however, there has been a reverse in this trend. Currently, leasing companies own about 43% (2009: 38%), shipping companies about 52% (2009: 58%) of all the world s containers, a trend set to continue. Even in 2009, the ISL stated that it could be assumed that the share of leasing companies on the maritime shipping market could rise again with liner carriers facing times when the small amount of capital available is also needed elsewhere, and looking more closely into the container leasing option. Containers remain a scarce commodity. Shipping companies are in the process of stocking up again, but the manufacturers have little interest in jacking up production capacity beyond current demand. (DVZ, May 26, 2011: Container werden wieder knapp [Containers in short supply again])

13 An increase in the container fleet from 27 million TEU then to 42 million TEU by the year 2015 was expected even in early 2010 (see graph: Container fleet development). The latest figures of around 31 million TEU in January 2012 rising to 42 million TEU by 2015 show that forecasts on the future of the container leasing market have hardly changed. The container market is relatively predictable due to order books at shipyards and the expected increase in world trade. MAGELLAN will remain true to its investment criteria: Only long-term contracts! No container lessors contracted one-stop shop! Orders directly from container factories in China! Investment only in Standard sea containers (20, 40, and 40 High Cube)! Leasing to Top 25 liner carriers only!

14 MAGELLAN MARITIME SERVICES GMBH Since its establishment in 1995, MAGELLAN Maritime Services GmbH has leased sea containers to international companies including liner carriers, freight forwarders and logistics companies, and other business enterprises on its own behalf and on behalf of others. To date, MAGELLAN has leased out a total of 175,000 TEU (twenty-foot equivalent units), which have been settled for the most part. We currently have 65,000 TEU at an average age of two years leased out in long-term arrangements. Since 2005, we at MAGELLAN Maritime Services GmbH have provided private placement investments or direct investments in containers for private and institutional investors. Refer to our image brochure for more details on MAGEL- LAN Maritime Services GmbH; we will be pleased to provide you with a copy on request, or you can download the brochure from Our company presentation film and a video on direct container investment are available here under Media and Container Investment. One feature of MAGELLAN Maritime Services GmbH is that we combine investment opportunity with container management and leasing. In our role in providing investment opportunities, we at MAGELLAN Maritime Services do not commission any third parties for container management, so we also act as lessors towards lessees such as liner carriers. This saves costs as you will see in our attractive direct investment opportunities.

15 LP funds and direct investment Comparison between LP funds and direct investment systems: Magellan trading balance: Serial no. Year Offer no. Container type PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft Standard 100% PP ft High Cube 100% PP ft High Cube 100% PP ft Open Top 100% PP ft Standard 100% DI ft High Cube 100% DI ft High Cube 100% DI ft High Cube 100% DI ft High Cube 100% DI ft High Cube 100% DI ft High Cube 100% Payables settlement rate Serial no. Year Offer no. Container type Payables settlement rate DI ft High Cube 100% DI ft Reefer 100% DI ft Standard 100% DI ft Standard 100% DI ft Standard 100% DI ft High Cube 100% DI ft High Cube 100% DI ft High Cube 100% DI ft Standard 100% DI ft Standard Settlements since Apr DI ft Standard Settlements since Apr DI ft High Cube Settlements since Apr DI ft Standard Settlements as of July DI ft Standard Settlements as of July DI ft Standard Settlements as of Oct DI ft Standard Settlements as of Oct Note: Serial nos , and 12 have been settled according to contract, including repurchase.

16 Legal conditions A variety of investment concepts decide the legal basis for investment in containers. The situation and role of the parties to the contract, and especially the investor, always play a vital part. The legal status of an investment company as usually stated in the investment prospectus determines the legal conditions in container investments such as closed funds. The ownership, property, usage and participation rights arise from the legal concept in the fund. An investor should pay especially close attention to the contract since the investor will be joining other investors in the whole investment. A direct investor is an exclusive purchaser of an exactly specified container quantity and type, regardless of the interests of other investors. Investors avoid leasing or selling containers themselves by leaving management to management companies with specialist knowledge in the industry. While providing direct container investment, MAGELLAN Maritime Services GmbH manages and administers an investor s containers. MAGELLAN Maritime Services GmbH does not commission any third parties for container management, and acts as the lessor towards any lessee such as a liner carrier. The investor thus concludes contracts directly with the immediate trading partner concerned. The main contracts are: Sales agreement The investor concludes a contract with the seller Magellan Maritime Services GmbH and acquires a certain number of containers. This contract stipulates container type and purchase price per unit, any additional costs, and the resulting total price as an exact figure. The sales contract is based on an investment offer that includes the sales price along with the forecast return in lease payments, forecast resale revenue, container type, and general situation. In addition, the purchase agreement includes payment terms and conditions for commissioning a trustee to review resources usage. After the seller and investor have both signed the sales contract and after the sales price has been paid, the investor receives a title deed confirming ownership of the containers with corresponding container ID numbers while establishing the investor s owner status; the transfer of title deed replaces the transfer of any actual container. If a trustee has been commissioned, the trustee will only transfer the sales price paid to the seller, in this case Magellan Maritime Services GmbH, once the seller has documented that it has sent the title deeds to the investor. Management agreement In a management contract, the investor the container purchaser requests a container manager Magellan Maritime Services GmbH to manage and lease out containers on behalf of the investor from the beginning of any leasing arrangement. The management agreement is based on an investment offer that specifies the leasing period and rate as well as the terms of payment to the investor. The container manager is authorised to conclude any contracts involved in the investment at its sole discretion on behalf of the investor, including sub-authorisation. The container manager collects the lease payments from the lessee on behalf of the investor, and forwards the payment to the investor according to the terms of payment in the management agreement. Administrative responsibilities also include ensuring container maintenance, replacement purchases as necessary, and sufficient insurance against container damage and loss according to international standards. Once the agreed lease period has expired, the container manager has to return the container in perfect condition to a prearranged depot usually outside the country in accordance with internationally accepted rules. If containers have to be replaced with other equivalent containers to ensure a successful sale, the container manager will take on the ownership of the original containers.

17 Repurchase offer Direct investment usually involves either repurchase offers or contracts with repurchase agreements. The various options may have an impact on tax conditions in a container investment. The investor is not bound to a repurchase agreement concluded with the container manager, Magellan Maritime Services GmbH. The agreement regulates settlement procedures in the event that the investor accepts the offer, especially payment arrangements. A repurchase offer only sets the payment terms on acceptance of an offer, but does not constitute a repurchase guarantee. Magellan will submit an offer to buy back the container to the investor before the expiration of the lease and management agreement for a price based on the repurchase price forecast. The content of these contracts is only generally outlined here; the investor should carefully review each contract original before signing.

18 Risks General notes This offer covers a business investment that involves risk to the investor. Any investor will be taking a medium-to-long-term commitment without any accurately foreseeable outcome, with total loss of capital investment as a possibility in a correspondingly negative development. We assume no liability for failure to reach any financial, tax-related, or other targets. Additional, unforeseen risks and events that can change the financial result of investment to the substantial financial detriment of the investor may occur in addition to the risks described below. All of these risks may occur on their own, in combination, or to a particularly heavy degree. Loss of lease payment The investor commissions MAGELLAN Maritime Services GmbH (hereinafter referred to as MAGELLAN) to lease containers out for a fixed term. MAGELLAN will manage and lease containers directly to liner carriers for a period largely matching the agreement period. The risk remains that MAGELLAN may not be able to honour lease payments either in part or in full, or on time, which may be to the financial detriment of the investor if MAGELLAN is not responsible for the loss of lease payment. A container might not be leased again or may be leased for a significantly lower lease payment after the end of a lease agreement period with a liner carrier. As a result, MAGELLAN may itself experience financial difficulty preventing it from fulfilling its own leasing obligations in full, in part or on time. Failure in repurchase agreement/sale of investment MAGELLAN will submit a repurchase offer on contract conclusion or, at the latest, thirty days before the expiry of a set period. In a case of insolvency, MAGELLAN would not be able to honour this repurchase agreement. In this case, or even on the investor s own request, the investor itself may sell or lease the containers. Container value depends on several factors such as current new price, sale location, type, condition, and design specification. The investor has a contractual entitlement to have containers returned in the same type and number originally purchased, but not the actual original containers. In addition, the containers will be used in international maritime traffic and left available at depots outside Europe according to schedule at the end of the agreement period, so it could be difficult for a private individual to sell containers if required. Containers are generally bought and sold in US-Dollars, so exchange rate risks will arise. Loss, destruction, damage Containers are mobile objects that may be lost during use, destroyed, or damaged beyond ordinary wear and tear. These risks are routinely insured by liner carriers. If the insurance does not cover damage or loss in full or in part, or no adequate insurance cover exists, the investor may undergo financial loss unless the liner carrier can pay for the damage or loss. Trading options Sale or transfer of containers purchased by the investor to a third party requires the unconditional transfer of all contracts, and must be approved by Magellan. Handling fees of 125, plus VAT, will be charged in a transfer of containers to a third party; both transferor and transferee are jointly liable for paying this fee. Purchase, management, and repurchase agreements have limited trading options; there is no regulated secondary market for agreements of this type. Exchange rate Offers may be made in either Euros or US- Dollars. Foreign exchange risks always arise if funds are converted into other currencies. An example of exchange rate risk would be where an investor converts lease payments and repurchase prices quoted in Dollars into Euros at an unfavourable Dollar-Euro exchange rate. Leveraging Investors leveraging the investment would have to take on the liability associated with leveraging and its settlement, even if that liability cannot be serviced from lease payments and repurchase price. In addition, interest expenses cannot be deducted from Germany s (Abgeltungssteuer) flat-rate withholding tax. We strongly discourage leveraging. Legal risks Incorrect, invalid or incomplete contracts may pose legal risks with potentially significant impact on the financial outcome of an investment. Changes in statute, legal precedent, and administrative practice also pose risks. Individual contracts such as contracts with lessees may be subject to foreign law, which, if applied, may also lead to significantly higher costs. Tax risks The investor undergoes what is basically a miscellaneous transaction subject to VAT. Future decisions from public financial administration, legislative changes, or changes in precedence may substantially affect how an investment is treated with possible impact on yield for the investor. Every investor should seek advice from a tax accountant before signing any contract.

19 Components in a direct investment offer Components in a direct investment offer from MAGELLAN Maritime Services GmbH are as follows: This information brochure The direct investment offer consisting of: Forecasting and overview Sales agreement Management agreement Repurchase offer Revocation instructions and money laundering laws Information on the PostIdent procedure Product data sheet

20 Contact Interested? If you have any questions, please contact us in Hamburg or your personal investment consultant. Details on our products and services are available on the Web. Visit us on our website: MAGELLAN Maritime Services GmbH Domstrasse Hamburg Germany Tel: Fax: MAGELLAN Container Management Services GmbH Birsigstrasse Basle Switzerland Tel: Fax: magellan@magbsl.ch MAGELLAN Maritime Services (USA) Ltd South Cicero Avenue #231 Oak Lawn, IL USA Tel: Fax: bcook@magchi.com MAGELLAN Maritime Services (Shanghai) Ltd. Room 302, Juyang Building No Pudong Avenue Shanghai P.R.China Tel: Fax: richglory@gmail.com All rights reserved. Copying in whole or in part subject to approval of Magellan Maritime Services GmbH, Domstraße 17, Hamburg, Germany.