Fourth City of London Biennial Meeting

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• Fourth City of London Biennial Meeting
• GERMAN KG FINANCING
• 6th 7th December 2005 a
  well proven ship finance alternative
• - overview and future challenges -
• Christian von Oldershausen

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• The German Closed End Fund Market
• Investments of Closed End Funds in Germany - 2004
• KG Shipping Funds Market overview
• Why financing through KG Shipping Funds?
• KG Shipping Fund Structure
• Task allocation between the different parties
• Outlook Challenges for the future

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The German Closed End Fund Market
15,0
12,8
12,9
11,1
10,6
10,4
9,0
Bn.
5,9
estimated
Source Loipfinger
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Investments of Closed End Funds in Germany - 2004
Source Dobert
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• KG Shipping Funds - Market overview

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Source Die Scope Jahresstudie 2004/2005
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• KG Shipping Fund Market Overview (continued)

Source Die Scope Jahresstudie 2004/2005
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• Why financing through KG Shipping Funds?

• Proved to be one of the most successful means of
  financing ship acquisitions
• Remarkably survived market troughs of 1999 and
  2001
• German shipping banks account for 60 of global
  ship finance
• Provides secure off balance sheet assets for
  shipowners / charterers
• Not the cheapest source of financing, but not
  expensive either
• Transfer of many of the financial risks of
  operating a vessel to private investors
• For the private investor the fund provides a long
  term investment with returns on a nearly tax free
  basis due to the German tonnage tax regime

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KG Shipping Fund Structure
Bank Ship Mortgage
Issuing House
100
Charterer Liner/Tramp Operator
TRUST GmbH
Private Investors Investors Equity
Charter Rate structure
Equity About 30
Senior Debt About 70
German Shipmanagement Company
SHIP Vessel owned by individual single purpose
company MS Vessel GmbH Co KG registered in
Germany
Shipbuilder/Seller Purchase price
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Task allocation between the different parties

• Trust company
• Equity administration and investors support
• Ongoing controlling of the ship management results

• Investor
• Direct or indirect participation in the KG
• Bears the risk of the commercial success of the
  venture

• Investor
• Direct or indirect participation in the KG
• Bears the risk of the commercial success of the
  venture

• Issuing house
• Structuring the financial and legal frameworks
• Issuing and marketing

• Issuing house
• Structuring the financial and legal frameworks
• Issuing and marketing

• Ship manager
• Technical and commercial management (crewing,
  insurance, purchasing, etc.)
• Commercial management (chartering, performance
  monitoring)

• Charterer
• Commercial employment
• Operations

• Bank
• Senior Debt
• Construction finance

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• Outlook Challenges for the future

• High newbuilding and second hand prices
• Scarcity of long-term charters
• Uncertain shipping markets outlook
• Exposure to political changes (tonnage tax)
• Rise of interest rates
• Alternative investment opportunities for private
  investors
• Ship Finance alternatives such as IPO or Islamic
  banking
• Portfolio diversification
• Product diversification of KG houses - KG houses
  becoming international
•  

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mbH Bleichenbrücke 10 D-20354
Hamburg www.hci.de hci_at_hci.de