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Morgan Stanley Infrastructure Partners

Morgan Stanley Infrastructure Partners. Worldwide Port Update. 15 September 2010. IU10-03161I-T09/10. Morgan Stanley Infrastructure Partners. Table of Contents. Section 1. 2010 Performance & Developments. Section 2. Volumes & Rates. Section 3. Montreal Trade Routes. Section 4.

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Morgan Stanley Infrastructure Partners

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  1. Morgan Stanley Infrastructure Partners Worldwide Port Update 15 September 2010 IU10-03161I-T09/10

  2. Morgan Stanley Infrastructure Partners Table of Contents Section 1 2010 Performance & Developments Section 2 Volumes & Rates Section 3 Montreal Trade Routes Section 4 Panama Canal Expansion Section 5 2010 Port Industry Banking Transactions 2

  3. Morgan Stanley Infrastructure Partners Section 1 2010 Performance & Developments 3

  4. Morgan Stanley Infrastructure Partners 2010 PERFORMANCE & DEVELOPMENTS 2010 Performance at Various Ports • Americas Overview • Panama Canal traffic and tonnage declined during the quarter ending June 30. Total canal transits declined 2.8% from the same quarter last year. Transits of supers – larger ships that require greater time and navigation skills to transit the canal – decreased 3.1% • Container volume at the Port of Vancouver, B.C. increased 12% in the first six months of 2010 as demand for consumer goods rebounds from last year’s recession • Europe Overview • Port of Rotterdam saw an 8% increase in throughput of roll on/off vessels in the first six months of 2010 compared with the same period last year; 14.8% year-on-year recovery in cargo throughput for first-half 2010 • Port of Antwerp reported container volumes were up nearly 20% for the first six months of 2010, to 4.2 million TEUs Source Journal of Commerce 4

  5. Morgan Stanley Infrastructure Partners 2010 PERFORMANCE & DEVELOPMENTS 2010 Performance at Various Ports • Asia Overview • Container traffic at major ports in India for the April-July period increased 14% over the same period last year. Indian Ports Association estimates total volume for the first four months of fiscal 2010-11 at 2.5 million TEUs • Container traffic through Chinese ports hit an all-time monthly high of 12.44 million TEUs in May 2010, up 21.9% from May 2009, as the nation’s foreign trade surged by nearly 50% from a year ago • Hong-Kong based Hutchinson Port Holdings, EBIT rose 35% as container throughput increased 17% to 35.3 million TEUs in the first-half 2010 • International Container Terminal Services, Inc. net income increases 83% for the first six months of 2010. The Company handled a consolidated volume of 2.0 million TEUs in the first-half 2010, 26% higher than the same period in 2009 Source Journal of Commerce; Portworld; Capital IQ 5

  6. Morgan Stanley Infrastructure Partners 2010 PERFORMANCE & DEVELOPMENTS Current Developments in 2010 • Carriers were exposed when rates collapsed last year, losing billions in the process, and shippers were similarly exposed this year when rates turned upward • Emergence the Container Freight Swap Agreement (CFSA) • Based on the Shanghai Shipping Exchange index developed by ship broker Clarksons and marketed by Morgan Stanley • Cash-settled agreement between two parties which allows hedging against price movements in Asian containerized export markets • Lock-in future costs (price in US$ per container for a given number of containers on an agreed route during a specified period) and crystallize future margins up to 23 months ahead • During August 2010, Compañía Sud Americana de Vapores (CSAV), the largest Chilean shipping company in Latin America and the world’s eighth-largest container fleet, became the first shipper to make a container-derivative trade with Morgan Stanley Source Economist; Journal of Commerce; ifw-net.com; Freight Investor Services website 6

  7. Cascadia Northeast NorthernCalifornia SouthernCalifornia Southeast NG Opportunities Existing Flows Florida National Gateway Projects Gulf Coast NW Ohio Intermodal Transfer Hub Morgan Stanley Infrastructure Partners 2010 PERFORMANCE & DEVELOPMENTS CSX National Gateway Corridor Project • CSX plans a major set of construction projects across the Midwest and along the Atlantic seaboard allowing for stacking boxes two high across its entire system • Digging out major remaining obstacles • Raising numerous line clearances across four states • 185-acre Ohio hub under construction expected to save up to two days on cross-country moves from West Coast ports • Cost for the National Gateway corridor estimated at $850 million, including $175 million for its 185-acre hub Ohio hub Montreal Midwest Source Journal of Commerce 7

  8. Morgan Stanley Infrastructure Partners Section 2 Volumes & Rates 8

  9. Jan–Jun 2010 vs. Jan–Jun 2009 (Measured in TEUs) % Morgan Stanley Infrastructure Partners VOLUMES & RATES Atlantic Coast Volumes YTD 2010 vs. YTD 2009 YTD North American East Coast Port Volumes Increase/Decrease Source Port Websites; Press Releases; Norbridge research • Notes • GPA and VPA are through July as data was available • PA NY/NJ is loaded only 9

  10. Jan–July 2010 vs. Jan–July 2009(Measured in TEUs) % Morgan Stanley Infrastructure Partners VOLUMES & RATES Pacific Coast Volumes YTD 2010 vs. YTD 2009 YTD North American West Coast Port Volumes Increase/Decrease Source Port Websites; Press Releases; Norbridge research • Notes • POLB, Oakland, and Tacoma are loads only • Seattle is international only 10

  11. Rate Percentage Change Rate Per 40-foot Box Morgan Stanley Infrastructure Partners VOLUMES & RATES Drewry Container Rate Benchmark August 2009 to August 2010 • The rate benchmark is based on Drewry Shipping Consultants' research and derived from NVOCCs shipping Hong Kong to Los Angeles. The rate is in dollars and based on a full 40-foot containerload, excluding terminal-handling charges in Hong Kong • While the 16 Aug 2010 average spot rate dipped 3.1% sequentially, it was up 110.5% year-over-year and up 113.2% from the beginning of the year. The 2 Aug 2010 average spot rate was a record high, surpassing all previous rates since the index began at year-end 2005 Source Journal of Commerce 11

  12. Morgan Stanley Infrastructure Partners VOLUMES & RATES Rate Increases at Various Port Rates Effective October 2010 • Orient Overseas Container Line Limited (OOCL) to raise rates on services in both directions on the trans-Atlantic and on services from the Middle East, South and Southeast Asia to Australia • Between Europe and the U.S., Canada and Mexico, rates will be $320 per TEU and $400 per FEU • Increase rates by $300 per TEU shipped from Southeast Asia (Singapore, Malaysia, Thailand, Indonesia, Vietnam, Cambodia, Philippines, Indian Subcontinent and Middle East) to Australia • Port of NY/NJ to raise some handling fees by 2 percent and impose new charges for early delivery of export containers and for improperly documented hazardous-materials exports at its five marine terminals • Additional charge of $125 per load for export cargo delivered to terminals ahead of schedule • Documentation fee of $50 per cargo unit for additional services required for hazmat exports that arrive with improper documentation Source Journal of Commerce 12

  13. Morgan Stanley Infrastructure Partners VOLUMES & RATES Rate Increases at Various Port Rates Effective October 2010 • Nippon Yusen Kaisha (NYK) to increase freight rates on containers moving in both directions on its trans-Atlantic services • Applies to all cargo under NYK Line independent tariffs and service contracts; $150 per TEU and $300 per FEU • Maersk Line to increase rates on all container cargoes shipped across the North Atlantic • Extra $250 for a 20-foot dry container, $350 more for a 40-foot box and an additional $500 for a 40-foot reefer container for cargo moving in both directions between the U.S. and northern Europe • Rates will rise by $250 per TEU and $350 per FEU and reefer boxes moving to and from Canada and North Europe • Cargo moving from the U.S. and Canada to the Mediterranean will rise by $200 per container • Cargo moving westbound from the Mediterranean to the U.S. and Canada will rise by $200 per container Source Journal of Commerce 13

  14. Morgan Stanley Infrastructure Partners Section 3 Montreal Trade Routes 14

  15. Montreal Container Traffic by Trade Region: 2004 and 2009 Morgan Stanley Infrastructure Partners MONTREAL TRADE ROUTES Montreal Gateway’s Trade Lanes North Europe and the Mediterranean • North Europe and the Mediterranean are Montreal Gateway’s largest trade lanes Total TEUs: 1.2M Total TEUs: 1.2M 15 Source POM Reported Data. Norbridge Analysis

  16. 2004 2008 2009 Morgan Stanley Infrastructure Partners MONTREAL TRADE ROUTES Montreal Gateway’s Trade Lanes North Europe-North Atlantic Container Traffic • Montreal Gateway maintained its share on the Northern Europe-North Atlantic trade between 2004 and 2008, but lost share during the global economic downturn in 2009 Total TEUs: 2.8MM Total TEUs: 2.7MM Total TEUs: 2.1MM 16 Source POM and Halifax Reported Data; PIERS; Norbridge Analysis

  17. 2004 2008 2009 Morgan Stanley Infrastructure Partners MONTREAL TRADE ROUTES Montreal Gateway’s Trade Lanes Mediterranean-North Atlantic Container Traffic • Montreal Gateway gained share on the Mediterranean-North Atlantic trade between 2004 and 2008–2009 Total TEUs: 1.2MM Total TEUs: 1.1MM Total TEUs: 0.9MM 17 Source POM and Halifax Reported Data; PIERS; Norbridge Analysis

  18. North Atlantic Container Traffic by Trade Region: 2004 and 2009 Morgan Stanley Infrastructure Partners MONTREAL TRADE ROUTES China - North Atlantic’s Largest Trading Partner Total TEUs: 8.9M Total TEUs: 8.8M • Notes • Excludes Halifax as data not provided Source POM Reported Data; PIERS; Norbridge Analysis 18

  19. Morgan Stanley Infrastructure Partners Section 4 Panama Canal Expansion 19

  20. Morgan Stanley Infrastructure Partners PANAMA CANAL EXPANSION Panama Canal Expansion • More than doubling the annual capacity of the Panama Canal primarily through a doubling/tripling of the maximum vessel size • The expansion project is currently ahead of its Q4-2014 schedule • Adding two sets of locks to handle vessels of up to 12,500 TEUs and with drafts of up to 50’ • High-value time-sensitive goods expected to continue to West Coast ports • Navigating cargo through the Panama Canal and up the East Coast will take more time • Non-time sensitive commodities and goods will likely choose the retrofitted Panama route Source Norbridge Analysis 20

  21. Morgan Stanley Infrastructure Partners PANAMA CANAL EXPANSION Big Ship Realities: 10,000 TEU Ship • U.S. Atlantic Coast ports anticipate significant diversion of Asia-North American cargo in very large (8,000–10,000 TEU vessels) from U.S. Pacific Coast ports to U.S. Atlantic Coast ports in a 2015–2017 timeframe. • Assumption is 5,000–7,000 TEU ships will cascade into other Atlantic Basin trades • Big ships require high utilization rates in order to deliver their scale economy advantages • Generate 900,000-950,000 TEUs of round-trip capacity per year on a weekly service • Five weekly strings generate an annual capacity equivalent to the entire 2009 throughput for the Port of New York • New York’s total 2009 traffic was handled by 20+ container lines operating on 10+ trade lanes • Requires 2+ days to discharge and reload 50% of its capacity assuming 24x 7 operations, four cranes and 30 moves per hour • Requires a minimum 3,000–3,500 ground slots 21 Source Norbridge Analysis

  22. Morgan Stanley Infrastructure Partners Section 5 2010 Port Industry Banking Transactions 22

  23. M&A Private Placements Equity Offerings Debt Offerings Bankruptcies and Restructurings Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS 2010 Banking Transactions in the Port Industry Source Capital IQ; Press Releases 23

  24. Committed Future Portfolio Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS DP World Portfolio–Operating Terminals and Developments Terminals New Development Source Dubai World website 24

  25. Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS 2010 M&A Transactions Source Capital IQ; Press Releases 25

  26. Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS 2010 M&A Transactions Source Capital IQ; Press Releases 26

  27. Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS 2010 Private Placement Transactions Source Capital IQ; Press Releases 27

  28. Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS 2010 Debt Offering Transactions Source Capital IQ; Press Releases 28

  29. Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS Other 2010 Transactions Source Capital IQ; Press Releases 29

  30. L:\MSIP\Asset Management\Presentations\Journal of Commerce Presentation\Watt Presentation v1.ppt\A2XP\01 SEP 2010\7:35 PM\30 Morgan Stanley Infrastructure Partners 2010 PORT INDUSTRY BANKING TRANSACTIONS DP World - Developments • Dubai World seeking to renegotiate $14.4 billion of loans and may sell ports firm DP World in a bid to raise as much as $19.4 billion to repay creditors; has also considered selling off assets over a period of eight years of pay off creditors • DP world handled 23.7 million TEUs across its portfolio of 50 operating terminals in the first-half 2010, an increase of 16% against the same period last year. The Company also announced EBITDA was up 8% to $580 million for the six month ended June 30, 2010 • Dubai World postponed a plan to list some of its shares on the London Stock Exchange. DP World turned to the option of listing shares in London after talks to sell a stake to regional private-equity company Abraaj Capital collapsed • In February 2010, DP World announced it was considering floating parts of its Australian assets in an initial public offering valued at $884 million. DP World planned on calling the newly listed entity DP Australia. Source Dubai World website; Portworld; Reuters, Journal of Commerce; Capital IQ 30

  31. Morgan Stanley Infrastructure Partners Disclosures • The information in this presentation (the “Presentation”) is highly confidential and is being provided solely for informational and educational purposes. It is to be used exclusively at the 5th Annual Canada Maritime Conference on September 15, 2010. This Presentation may not be reproduced or distributed to any other persons. The information herein does not contend to address the financial objectives, situation or specific needs of any individual recipient. In addition, this Presentation is not an offer, or a solicitation of an offer, to buy or sell any security or instrument or to participate in any trading strategy. • Any views expressed are those of the presenter as of the date of the presentation and are subject to change at any time due to changes in market or economic conditions. The views expressed does not reflect the opinions of all portfolio managers at MSIM or the views of the firm as a whole, and may not be reflected in the strategies and products that the Firm offers. • Charts and graphs provided herein are for illustrative purposes only. Past performance is not indicative of future results. • Information regarding expected market returns and market outlook is based on the research, analysis, and opinions of the presenter. These conclusions are speculative in nature, may not come to pass, and are not intended to predict the future of any specific Morgan Stanley investment. No representation or warranty can be given with respect to the accuracy or completeness of the information. • All investments involve risks, including the possible loss of principal. 31

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