1. Foreign Investment in the United States WISTA Annual Conference October 16, 2008 New Orleans, LA

2. Introduction Moderator: Eileen P. Brown, Partner, Thompson Coburn LLPModerator: Eileen P. Brown, Partner, Thompson Coburn LLP Panelists:Panelists: –Marilyn L. Muench, former Deputy Assistant General Counsel for International Affairs, U.S. Department of the Treasury –Peter S. Shaerf, Managing Director, AMA Capital Partners Contributor:Contributor: –Patricia J. Williams, Director, U.S. Coast Guard National Vessel Documentation Center (NVDC)

3. Goal To outline various U.S. laws and regulations that may impact decisions on making foreign investment in the U.S. maritime industry so that you may spot and address issues as you consider transactionsTo outline various U.S. laws and regulations that may impact decisions on making foreign investment in the U.S. maritime industry so that you may spot and address issues as you consider transactions

4. U.S. Citizen Control U.S. government interest in ensuring U.S. citizen control of certain assets (i.e., vessels, aircraft)U.S. government interest in ensuring U.S. citizen control of certain assets (i.e., vessels, aircraft) Overview of U.S. citizen requirements applicable to vessels – coastwise and registry tradeOverview of U.S. citizen requirements applicable to vessels – coastwise and registry trade

5. U.S. Governmental Review and Certain Restrictions on Transactions Committee on Foreign Investment in the United States (CFIUS) multi-agency governmental review of acquisition of U.S. assets by foreign entities.Committee on Foreign Investment in the United States (CFIUS) multi-agency governmental review of acquisition of U.S. assets by foreign entities. Office of Foreign Assets Control (OFAC) administers economic and trade sanctions based on U.S. national security, foreign policy or economic concerns.Office of Foreign Assets Control (OFAC) administers economic and trade sanctions based on U.S. national security, foreign policy or economic concerns.

6. Discussion Impact of high profile cases, such as Dubai Ports World.Impact of high profile cases, such as Dubai Ports World. Will the current financial crisis and the need to attract capital to the U.S. change the analytical framework and enforcement decisions associated with issues relating to citizenship and foreign control?Will the current financial crisis and the need to attract capital to the U.S. change the analytical framework and enforcement decisions associated with issues relating to citizenship and foreign control?

7. Homeland Security NATIONAL VESSEL DOCUMENTATION CENTER WISTA USA ANNUAL CONFERENCE OCTOBER 15-17, 2008 NEW ORLEANS, LA United States Coast Guard

8. NVDC The NVDC is a sub-unit of the Department of Homeland Security and the United States Coast Guard. Its mission is to facilitate maritime commerce and the availability of financing while protecting the economic privileges of United States citizens through the enforcement of regulations, and to provide a register of vessels available in time of war or emergency to defend and protect the United States of America. THE NATIONAL VESSEL DOCUMENTATION CENTER 792 T J JACKSON DRIVE FALLING WATERS WV 25419

9. What is Vessel Documentation? U.S. vessel registration is demonstrated by the issuance of a Certificate of Documentation (COD). A COD is required for the operation of a vessel in certain trades and such documentation provides evidence of nationality for international purposes. Who is Eligible to Document a Vessel in the U.S.? Natural Persons Certain Corporations Certain Partnerships (Associations, Etc.) Certain Limited Liability Companies Government (Federal, State, Local) Entities

10. Why Document a Vessel? Required for vessels engaged in certain trades if measuring at least five net tons Entitles vessels to preferred mortgage financing Provides for unhindered commerce between states Provides conclusive evidence of nationality for vessels in foreign waters

11. What types of endorsements are available? COASTWISE – Includes the transportation of passengers or merchandise between points embraced within the coastwise laws of the U.S. Generally, coastwise trade is trade between a point in the U.S. and another point in the U.S. (including Hawaii, Alaska, Puerto Rico and other Territories). REGISTRY – Includes trade between a point in the U.S. and a foreign point or transportation between foreign points (foreign trade). FISHERIES – Includes the processing, storing, transporting, planting, cultivating, catching, taking, or harvesting of fish, shellfish, marine animals, pearls, shells, or marine vegetation in the navigable waters of the U. S. or in the exclusive economic zone. RECREATIONAL – Permits operation for pleasure only.

12. Coastwise Trade/Jones Act Trade U.S. citizen control test applied to any owner of a vessel entitled to participate in the coastwise trade. Stock in vessel owning entity must be at least 75% owned by U.S. citizens.

13. What is Lease Financing or Coastwise Under Charter? Statutory change to eliminate technical impediments to financing “Jones Act” vessels Not intended to undermine U.S. Control provisions for “Jones Act” vessels Permits documentation by a foreign- controlled owner when chartered to an eligible citizen (charterer is the owner pro hac vice)

14. Coastwise Citizenship Requirements for Corporate Owners Organized in the U.S. U.S. CEO, Chairman Restrictions on aliens – no more than a minority of the number of directors to constitute a quorum At least 75% equity invested in U.S. citizens Organized in the U.S. U.S. CEO, Chairman Restrictions on aliens – no more than a minority of the number of directors to constitute a quorum 100% of the stock may be foreign owned. Traditional U.S. Citizen (considered a Section 2 Citizen) Documentation Citizen (requirements for Foreign Trade or Lease Financing)

15. Citizenship Documentation Required for Coastwise Endorsements Traditional Coastwise CG-1258 (Application) No additional requirements Lease Finance Coastwise CG-1258 (Application) Affidavit from owner Citizenship Statement of charterer (must qualify as Section 2 citizen) charter (must be for at least 3 years) any subcharters Charterer must be owner pro hac vice

16. Financing Documented Vessels Recently (Pub. L. 110-181), the Coast Guard was authorized to request reports from mortgagees to ensure compliance with 46 USC § 12139 & 46 CFR 67.31 (Foreign Control Provisions) In general, there are no citizenship requirements applicable to mortgagees of U.S. documented vessels, except: The American Fisheries Act, Pub. L. 105-277, places stringent citizenship requirements on mortgagees of fishing vessels 100 Feet or greater in length (46 USC § 31322)

17. Permissible Foreign Investment Dependent on Form of Investment and Trade Endorsement Sought TRADE ENDORSEMENTCITIZENSHIP REQ’MTSMORTGAGEE LIMITS RECREATIONALBASIC U.S.UNRESTRICTED REGISTRYBASIC U.S.UNRESTRICTED COASTWISEU.S. & 75% U.S.UNRESTRICTED EQUITY COASTWISE/LEASEBASIC U.S.,UNRESTRICTED FINANCEUNRESTRICTED EQUITY, OTHER REQUIREMENTS FISHERY <100 FTU.S. & 75% EQUITYUNRESTRICTED FISHERY >100 FTU.S. & 75% EQUITYMUST BE ELIGIBLE TO IN THE AGGREGATEDOCUMENT FISHING VESSEL (OTHERS AS APPROVED BY MARAD) *BASIC U.S. OWNERSHIP REQUIREMENTS FOR CORPORATIONS ARE: ORGANIZED IN U.S., U.S. CEO, U.S. CHAIRMAN, AND RESTRICTIONS ON ALIENS FOR QUORUM PURPOSES

18. U.S. Government Review of Foreign Investment in the U.S.

19. Committee on Foreign Investment in the United States (CFIUS) CFIUS - a multi-agency U.S. government entity that evaluates the national security implications of mergers and acquisitions that could result in foreign control of U.S. businesses CFIUS - a multi-agency U.S. government entity that evaluates the national security implications of mergers and acquisitions that could result in foreign control of U.S. businesses

20. Committee on Foreign Investment in the United States (CFIUS) Principal member agencies include: Principal member agencies include: Department of the Treasury (Chair) Department of the Treasury (Chair) Department of Commerce Department of Commerce Department of Defense Department of Defense Department of Energy Department of Energy Department of Homeland Security Department of Homeland Security Department of Justice Department of Justice Department of State Department of State

21. Committee on Foreign Investment in the United States (CFIUS) CFIUS can decide to refer cases to the President and can recommend unfavorable action, including divestment or blocking of a transaction. Only the President can decide to divest or block a transaction. CFIUS can decide to refer cases to the President and can recommend unfavorable action, including divestment or blocking of a transaction. Only the President can decide to divest or block a transaction.

22. Key Concepts for CFIUS Process Notification of mergers and acquisitions to CFIUS is voluntary, but CFIUS can request parties to a transaction to submit a notice if they do not do so on their own. Notification of mergers and acquisitions to CFIUS is voluntary, but CFIUS can request parties to a transaction to submit a notice if they do not do so on their own. CFIUS focuses on the national security implications of an eligible transaction. Although “national security” is not defined, CFIUS has interpreted it broadly and it includes within its ambit “critical infrastructure”. CFIUS focuses on the national security implications of an eligible transaction. Although “national security” is not defined, CFIUS has interpreted it broadly and it includes within its ambit “critical infrastructure”. A transaction is subject to CFIUS jurisdiction only if it involves foreign control. A transaction is subject to CFIUS jurisdiction only if it involves foreign control. Transactions that are not notified to CFIUS for review at the time the transaction is being completed remain indefinitely subject to future review and to possible unfavorable action. Transactions that are not notified to CFIUS for review at the time the transaction is being completed remain indefinitely subject to future review and to possible unfavorable action.

23. Office of Foreign Assets Control (OFAC) OFAC, located within the Department of the Treasury, is the primary enforcer of economic (non-military) sanctions imposed by the U.S. OFAC, located within the Department of the Treasury, is the primary enforcer of economic (non-military) sanctions imposed by the U.S. OFAC sanctions can be imposed: OFAC sanctions can be imposed: against entire countries (e.g., Cuba) or more limited regions of countries (e.g., Sudan) against entire countries (e.g., Cuba) or more limited regions of countries (e.g., Sudan) against particular categories of companies or individuals, such as those found to be engaged in terrorism or drug trafficking against particular categories of companies or individuals, such as those found to be engaged in terrorism or drug trafficking

24. Office of Foreign Assets Control (OFAC) OFAC sanctions usually are enforced by restricting actions that can be taken by U.S. firms and individuals with respect to the sanctioned entities. OFAC sanctions usually are enforced by restricting actions that can be taken by U.S. firms and individuals with respect to the sanctioned entities. Restricted activities often include the “facilitation” of transactions with such sanctioned entities. Restricted activities often include the “facilitation” of transactions with such sanctioned entities. OFAC regularly publishes and updates information relating to its sanctions programs, including the identities of sanctioned entities. OFAC regularly publishes and updates information relating to its sanctions programs, including the identities of sanctioned entities.

25. Peter S. Shaerf Managing Director AMA Capital Partners AMA Capital Partners October 16 th 2008 October 16 th 2008 Foreign Investment in Shipping or : ¿Dónde están los euros? or : ¿Dónde están los euros? or : Πού είναι τα ευρώ or : Ou sont les euros?

26. The number of publicly listed maritime companies in the U.S. has exploded

27. Global Market Capitalization

28. Global Volume Traded

29. Have We Scared them away?

31. Why it can work..  Barriers to entry  Lack of liquidity !!  Lack of understanding of sectors  Long term stability of market

32. But why it doesn’t work..  Regulatory intervention  Union affiliation  Cost differentials  Comparable global opportunities  Lack of Liquidity  Minority positions

34. Hypothetical Scenarios for Discussion

35. Hypothetical #1 European shipowner/operator to acquire:European shipowner/operator to acquire: –U.S. registered vessels –U.S. shipping company –an interest in a U.S. shipping company

36. Hypothetical #2 Sovereign wealth fund to acquire:Sovereign wealth fund to acquire: –controlling interest in a U.S. shipyard

37. Hypothetical #3 Asian shipowner with international businesses (including Cuba) acquires:Asian shipowner with international businesses (including Cuba) acquires: –U.S. company (not necessarily marine- related)

38. Questions?