PartnersMeriel KOREA A Dawning Ship Finance Exporter The 2 nd Annual Marine Money London Ship Finance Forum At The Dorchester, Park Lane Thursday, 20 January 2011 MARINE M O N E Y

Meriel Partners Index I.Current State of Global Ship Finance Industry 4 II.Korea’s Position in the Maritime Industry 6 III.The Landscape of Ship Finance in Korea 11 IV.Institutional Investors in Korea 21 V.Closing Remarks 26 Contact 30 2

Meriel Partners Disclaimer Any and all information and opinions contained herein are as of the date of this material and the Firm does not undertake any obligation to update them. All market prices, data and other information are not warranted as to the completeness or accuracy and are subject to change without notice. Past performance is not indicative of future results, and the Firm is not providing investment advice through this material. This material does not take into account individual client circumstances, objectives or needs. In reaching a determination as to the appropriateness of any proposed transaction or strategy, readers should undertake a thorough independent review of the legal, regulatory, credit, accounting and economic consequences of such transaction in relation to their particular circumstances and make their own independent decisions. 3

Meriel Partners 4 I. Current State of Global Ship Finance Industry

Meriel Partners Since the 2008 financial crisis, the shipping industry has been undergoing the shortage of capital Source: Deallogic, Clarksons Demand and Supply of Shipping Loan [US$ billion] Current State of Global Ship Finance Industry 5 Liquidity Shortage !!!! US$ billion

Meriel Partners 6 II. Korea’s Position in the Maritime Industry

Meriel Partners Rank #16; US$832.5 billion Korea’s GDP Ranking 7 Korea ranked the 16 th largest country in terms of GDP with US$832.5 billion in 2009 Source: IMF US$ billion

Meriel Partners Source: Clarkson (Dec 2010) Current orderbook at Korean shipyards is 45.3 million CGT On a value basis, Korea is the world’s largest at approximately US$143 billion (36.5% of global orderbook), followed by China with US$123 billion Orderbook by Country Value of Orderbook by Country 2010 [US$ billion] The 2 nd Largest Shipbuilding Nation 8 million CGT Combined figure of China, Korea and Japan represents 85% of the World’s total orderbook

Meriel Partners Source: Review of Maritime Transport 2010, UNCTAD As of Dec. 2009, Korean shipowners owned 1,235 Vessels totaling 54.1 million DWT Korea has 181 shipowners registered with the Korean Shipowner’s Association as of Jan 2011 Korea’s Shipowning Position in the World The 6 th Largest Shipowning Nation 9 million DWT

Meriel Partners ~ Korea is the 3 rd largest importer of iron ore and thermal & coking coal, and estimated to import in total 54.6 million tons of iron ore and million tons of coal in 2010 Seaborne Iron Ore Import 2010 (E) Source: Clarksons Seaborne Coal Import 2010 (E) million tonnes The 3 rd Largest Importer of Major Bulk Cargo

Meriel Partners 11 III. The Landscape of Ship Finance in Korea

Meriel Partners Japanese Trading House Japanese Trading House Commercial Banks Asia Financial Crisis SIC Act Enactment Restructuring Sold 112 ships Leasing Co’s Korea Trading Co. Government Support Government Support History of Ship Finance in Korea : Pre - SIC 12 Pre - SIC Shipping Market Collapse Post - SIC

Meriel Partners In order to support an ailing domestic maritime industry, the Korean government designed a tax incentivized funding structure and legislated the SIC Act (Shipping Investment Company Act) in September 2002 The objective of SIC Act is to “establish the groundwork for the development of the maritime industry and ultimately contribute to the development of the national economy.” The Act provides certain tax savings on the investment to Retail Investors. In addition, it allows those Funds raised by the licensed SIC Fund Managers to be listed in Korea Stock Exchange for further liquidity The SIC Act 13

Meriel Partners Retail Investors Institutional Investors Up to the amount of US$270,000: tax free 2004~2008 Up to the amount of US$270,000: 5% tax 2009~2010 Up to the amount of US$90,000: 5% tax 2011~2013 ? ? Jan 2014 No Tax Incentive to Institutional Investors SIC Act Tax Incentive 14

Meriel Partners Asia Financial Crisis SIC Act Enactment Shipping Market Collapse SICs Restructuring Sold 112 ships Institutional Investors Institutional Investors Japanese Trading House Commercial Banks Leasing Co’s Korea Trading Co. Government Support Leasing Commercial Banks Commercial Banks Government Support Government Support History of Ship Finance in Korea : Post - SIC 15 Post - SIC Pre – SIC

Meriel Partners Source : SIC Fund Managers, Meriel US$ million For the first 5 years since the enactment of SIC Act between 2004 and 2008, average of US$175 million was raised in local market for shipping transactions However, the amount had tripled in 2009 to US$517 million and increased over 5 times in 2010 to US$900 million Ship Funds Placed In Korea Since

Meriel Partners Placement Method & Tranche Due to decreasing tax benefit allowed by the SIC Act, the more transactions are being placed through private placements, i.e. directly with end-investors rather than through SIC Managers In addition, investors began to participate more in equity or mezzanine tranche with upside sharing Investor Participation by Tranche Source : SIC Fund Managers Report, Meriel Private Placement 17 Equity Mezzanine Junior Senior

Meriel Partners (E) Taiwan (Bulker) US (Bulker) Venezuela (Barge) China (Bulker) US (Bulker) Swiss (Container) Greece (Szmx T) Singapore (Bulker) Indonesia (Chem T) Singapore (DSV) Transactions For Foreign Owners US (Bulker) Arranged by Meriel Partners PublicPrivate

Meriel Partners Source : FISIS (Financial Statistics Information System) The main factor affecting pricing of Korean ship funds is the local bond yields Historical Yield of Korea Ship Funds 19 %

Meriel Partners Active Ship Finance Players in Korea 2002 Commercial Banks Trading Houses Institutional Investors SIC Act 20 No longer are shipping investments coming only from KDB or KAMCO Funds; Korean Pension Funds, Insurance Companies as well as Savings Banks are approaching investments within the shipping sector as real investment opportunities

Meriel Partners 21 V. Institutional Investors in Korea

Meriel Partners Combined asset of major institutional investors in Korea is approx US$756 billion as of March Pension Funds manage US$295 billion and 42 Insurance Companies manage assets totaling US$390 billion World’s Institutional Investors Major Institutional Investors In Korea OECD Total US$69.4 trillion Source: KOFIA(Korea Financial Investment Association), Mar Overview of Institutional Investors In Korea 22 US$ billion

Meriel Partners The following illustrates the historical portfolio composition of three major Pension Funds in Korea, which represent more than 90% of the total Pension Funds in asset size More than 80% of portfolio is invested in Bonds US$ billion Alternative Investments Bonds Stocks Others Source : National Pension Service, The Korea Teachers Pension, Government Employees Pension Service Pension Funds 23

Meriel Partners The following represents the portfolio composition of all life and non-life insurance companies in Korea over the past 6 years Majority of the portfolio is invested in debt and equity securities as well as loans Alternative Investments Securities Loans Others Source : FISIS (Financial statistics Information system) US$ billion Insurance Companies 24

Meriel Partners Alternative investments of both Pension Funds and Insurance companies have increased substantially over the past years 29.7% Substantial Increase in Alternative Investments Source : FISIS (Financial Statistics Information System), Marine Money Asia 25 US$ billion

Meriel Partners 26 VI. Closing Remarks

Meriel Partners 27 Korea, A Dawning Ship Finance Exporter Success Story Competitors made money in shipping and boss pushes Diversification Korean Institutional investors are strategically increasing alternative investments where shipping is classified Counter-Cyclical Investment Opportunity People remember those who bought a landmark building in Seoul during Asian financial crisis and made huge profit Familiarity Over the past years, investors have accumulated knowledge and experience in shipping Less Competition Local real estate market, the main areas for alternative investment area to Investors, hasn’t recovered

Meriel Partners Is Ready To Provide Capital Nationality of Shipowner (Borrower) Any credible shipowner worldwide Type of AssetsAny type AgeLess than 15 year old Investment Size Per DealUS$25 ~ US$250 million Tranche (Yield) Senior to Equity (7% ~ 12%+) LTVUp to 100% Investment Period5~ 20 years 28

Meriel Partners The Right Partner What you need is 29

Meriel Partners #1602, Boutique MONACO , Seocho-dong, Seocho-gu Seoul, South Korea Tel: +82 (0) Fax: +82 (0) Contact 30