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Container Boxes – Introduction Bert van Leeuwen – Head of Aviation & Intermodal Research DVB Bank

Tokyo, November 2018

DisclaimerThis presentation was prepared by DVB Bank SE (“DVB”) exclusively for the benefit and internal use of the addressee mentioned on the cover page. Neither this presentation nor any of its contentsmay be used by any other party or for any other purpose without the prior written consent of DVB. The oral commentary from DVB accompanying this presentation is an integral part of the presentationand the presentation is not complete without such commentary.

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No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a completestatement or summary of the securities, markets or developments referred to in the presentation. Any opinions expressed in this presentation are subject to change without notice and DVB is not underany obligation to update or keep current the information contained herein or communicate any updates to the addressee mentioned on the cover page. In particular, the information in this presentationreflects prevailing conditions and our views as of this date, all of which are subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, theaccuracy and completeness of information available to us from public sources.

Furthermore, neither DVB nor any of its affiliates, directors, employees or agents accept any liability for any loss or damage arising out of the use of all or any part of this presentation.

In the UK, DVB is regulated in the conduct of its investment business by the Financial Conduct Authority. In the United States of America, DVB acts through DVB Capital Markets LLC, which is a brokerdealer registered with the U.S. Securities and Exchange Commission and admitted by the Financial Industry Regulatory Authority to conduct securities business in the U.S.

Forward looking statements:Statements made in this presentation, other than statements of historical fact, are forward-looking statements that involve risks and uncertainties. These statements relate to future aircraft deliveries,growths of the air transportation market and the aircraft leasing market. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “anticipate”,“intend”, “plan”, “believe”, “estimate”, “potential”, “continue”, “outlook”, “could”, “target”, “project”, “seek”, “may”, “assume”, the negative of these terms or other comparable terminology. Actual results,and actual events that occur, may differ materially from those projected in any forward-looking statement as a result of certain risks and uncertainties.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation and are based on information currently and reasonably known to us.Except as required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Objectives and Topics• Main data sources : Harrison Consulting; Drewry Maritime Research, ContainerisationInternational, Cargo Facts, World Cargo News, RWI/ISL, WTO.

• After a few weaker years (de-globalization) international merchandise recovered.Current international trade tensions could put pressure on the recovery.

• Container trade remains a (maturing) growth business.

• Container boxes are an attractive asset category for financiers and investors. The boxmarket has shown more stability compared to the container vessel market.

• Historically, supply/demand imbalances in the box market generally were short lived asaging container generations (> 12-15 years) required replacement capacity.

• Financing container lessors has proven to be relatively low risk business. Experiencewith major liner defaults is relatively favorable. Direct exposure on smaller “local” linersseems to carry the highest risk.

• Dry cargo 20’ and 40’HC are the most liquid boxes but value per unit is low (repo costper unit high % of value). 40’HC reefers also fairly liquid, higher $ value, moretechnology risks.

• Box prices and residual values fluctuate with steel price. Depending on the state of themarket when entering into a deal, the residual value risk seems manageable.

Relative Importance of Maritime Container Cargo

Container

Container

General Cargo

General Cargo

Dry Bulk

Dry Bulk

Oil Tanker

Oil Tanker

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cargo Value

Fleet Dwt

Container Share of Merchandise Trade

• Container lines deploy a fleet of approximately 5,200 fully-cellular container ships withan aggregate capacity in excess of 20 million TEU on-board slots, transporting 1.5billion tons of containerised cargo with an estimated value of US$4 trillion per year.

• Container trade generates approximately 700 million TEU of container moves throughthe world’s container ports and revenues of US$150 billion for the container shippinglines annually

Source : Harrison consulting

Regulation and Identification

Containers have to meet requirements of the IMO’s (=UN) International Convention for Safe containers

CSC establishes criteria for testing, inspection, approval, maintenance and control of containers

CSC approval to be confirmed by “CSC Safety Approval” data plate

Containers are certified individually inspected by a classification society (B.Veritas, Germ.Lloyd, ABS)

Other requirements include TIR Customs Convention, Custom Convention on containers etc.

Identification governed by ISO 6346

Bureau International des Containers et du Transport Intermodal assigns unique owners code (e.g. DVBU)

DVBU 001 234 3(owner code) (serial number) (check digit)

Manufacturing Serial number also in corner casting

Tracking & Tracing

Tracking and tracing of containers is essential (using BIC code) :• for liners / shippers: where is the unit / cargo• for liners : is it loaded (billing of demurrage) or empty (available)• for lessors / financiers : less relevant in case of creditworthy lessee

Container moves are read and transmitted electronically by (terminal / depot) cameras using OCR.

In less developed areas, data are manually keyed into a computer, connected to a central tracking system or send by email/fax from a local database.

Increasingly high value containers / cargo data are transmitted by GPS systems of RFID (Radio Frequency Identification)

According to the World Shipping Council < 0,003% of the container fleet is lost at sea every year (600-700 containers). Major accidents can change this (tsunami etc.)

Containers Types

“TEU” Twenty foot Equivalent Unit : measure to enable adding up of fleet capacity, e.g. one 45’ container is 2.25 TEU. Only takes into account length.

“CEU” (Cost Equivalent Unit) / Asset TEU / Financial TEU : measures the value of a container as multiple of the value of a standard 20’ dry box ($ 2.250) , e.g. one 20’ Tank ($ 13.500) is 6 CEU. CEU factor will change over time

Three Main Container Categories :

ISO Maritime Containers : 8ft wide / 8ft 6in or 9ft 6in high / 20, 40, 45ft long. All surface transport modes.

Regional / North American Domestic Containers : 8ft 6in wide / 9ft 6in high / 48, 53 ft long. Mainly truck/train.

Regional / European Swapbodies and Non-Cellular Pallet Wide Containers : 2.5 m wide / 8ft 9in, 9ft high / 6 – 14 m. long. Mainly truck/train/shortsea/barge.

Maintenance & Repair

Maintenance & Repair takes place at selected depots

Target is to minimize M & R cost

Container “in use” should meet CSC criteria. ACEP = Approved Coninuous Examination Programme (after 5 year every 30 months) should ensure compliance with Convention for Safe Containers.

Moment containers go “on lease” or “off lease”. Inspect to establish “normal wear & tear” (for account of lessor) or “damage” (for account of lessee, insurance)

Important to minimize negotiations about damage, Standard M&R criteria:• IICL 6 = Internat. Institute of Container Lessors = lessor friendly = stringent à to optimize condition of container,

discourage return and/or maximize repair compansation (or “RND” income !)

• UCIRC = Unified Container Inspection and Repair Criteria. Proposed by the Container Owners Association and liner-friendly. Now used for “in service repairs”

• CIC = Common Interchange Criteria = compromise accepted by a few large lessors (competitive advantage initially) and COA

Is there now a set of truly universally accepted criteria ?

Comparison of GDP, Trade and Container Fleet

Growth of the container box fleetclosely correlates to containertrade growth. Box replacementcycle is predictable based ontechnical/economic life and lackof major changes in containertechnology (except refrigeratedcontainers).

Growth in the container box fleet closelyfollows the growth of container trade.Oversupply of container boxes unlikelyto last for a prolonged period. Increasein container vessel capacity hasexceeded growth in demand for manyyears already, even taking impact of“slow steaming” into account.

Relation Container Fleet and Container Slots

Source : Drewry Maritime Research

OCEAN-BORNE CONTAINER FLEET, VESSEL-SLOT FLEET AND CONTAINER/SLOT OPERATING RATIO

Container Throughput Stagnant in Recent Months

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

Jan-

07M

ay-0

7Se

p-07

Jan-

08M

ay-0

8Se

p-08

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11M

ay-1

1Se

p-11

Jan-

12M

ay-1

2Se

p-12

Jan-

13M

ay-1

3Se

p-13

Jan-

14M

ay-1

4Se

p-14

Jan-

15M

ay-1

5Se

p-15

Jan-

16M

ay-1

6Se

p-16

Jan-

17M

ay-1

7Se

p-17

Jan-

18M

ay-1

8

RWI/ISL - Container Throughput Index (2010=100)Computations of RWI and ISL based on Data from 88 ports; August 2018: flash estimate

original seasonally and working day adjusted

?

Global Box Fleet Categories – Relevant for Liquidity


-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

11,551,857

51,305

4,426,176

21,447,358

515,925 35,985 36,974 739,986

434,502 220,039

WORLD CONTAINER FLEET (in TEU) BY OPERATING CATEGORY AND SIZE by end 2017

Maritime (8 ft wide) Am. Domestic (8 ft 6 in wide) Regional (2.5 m wide)

Global Maritime Box Fleet

0 2 000 000 4 000 000 6 000 000 8 000 000

10 000 000 12 000 000 14 000 000 16 000 000 18 000 000 20 000 000

10 625 000

3 920 000

18 720 000

477 000 20 000 158 500 79 500 247 000 56 000 216 000 297 500151 500 44 500

2 583 000 433 000

WORLD MARITIME CONTAINER FLEET (in TEU) BY DETAILED TYPE

end 2017

Standard Dry Dry Special Reefer TankSource : Drewry Maritime Research

“Specials” : Prices Other Container Types

1.0

1.6 1.71.4

2.3 2.4

3.5

5.5

6.7

6.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

20ftStandardDry-Cargo

40ftStandardDry-Cargo

40ft High-Cube Dry-

Cargo

20ft Open-Top

40ft Open-Top

20ftCollapsibleFlat Rack

40ftCollapsibleFlat Rack

20ftStandard

Reefer

40ft High-Cube Reefer

20ft TankContainer

Current Newbuilt Prices

Price Mid 2017

CEU Multiple

Source : Harrison and Drewry Maritime Research

Container Production (All Types)


0

1000

2000

3000

4000

5000

6000

2014 2015 2016 2017 2017Capacity

CONTAINER PRODUCTION BY MANUFACTURER2014-17 (’000 TEU)

CIMC Singamas CXIC MCI Hyundai Dong Fang Other China Other

CAPACITYUTILISATION

CA. 67%

Maritime Container Production


0

50,000

100,000

150,000

200,000

250,000

300,000

MONTHLY DRY CARGO AND REEFER CONTAINER PRODUCTION

20' 40' 40H 45H 53H RF20' RF40H RF45H RF53H

Container Price Dynamics

Source : Harrison

$2,158

$3,669$3,027

$5,182

$12,000

$14,500

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Jan-

00Ju

n-00

Nov

-00

Apr-

01Se

p-01

Feb-

02Ju

l-02

Dec-

02M

ay-0

3O

ct-0

3M

ar-0

4Au

g-04

Jan-

05Ju

n-05

Nov

-05

Apr-

06Se

p-06

Feb-

07Ju

l-07

Dec-

07M

ay-0

8O

ct-0

8M

ar-0

9Au

g-09

Jan-

10Ju

n-10

Nov

-10

Apr-

11Se

p-11

Feb-

12Ju

l-12

Dec-

12M

ay-1

3O

ct-1

3M

ar-1

4Au

g-14

Jan-

15Ju

n-15

Nov

-15

Apr-

16Se

p-16

Feb-

17Ju

l-17

Dec-

17M

ay-1

8

Container Newbuilt Prices

20ft Standard Dry-Cargo 40ft High-Cube Dry-Cargo20ft Open-Top 20ft Collapsible Flat Rack20ft Standard Reefer 40ft High-Cube Reefer

REEFERS

DRIES

Container Price Dynamics

Source : Harrison

$2,950

$1,250

$2,158

$1,136

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Mar

-00

Aug-

00Ja

n-01

Jun-

01No

v-01

Apr-0

2Se

p-02

Feb-

03Ju

l-03

Dec-

03M

ay-0

4O

ct-0

4M

ar-0

5Au

g-05

Jan-

06Ju

n-06

Nov-

06Ap

r-07

Sep-

07Fe

b-08

Jul-0

8De

c-08

May

-09

Oct

-09

Mar

-10

Aug-

10Ja

n-11

Jun-

11No

v-11

Apr-1

2Se

p-12

Feb-

13Ju

l-13

Dec-

13M

ay-1

4O

ct-1

4M

ar-1

5Au

g-15

Jan-

16Ju

n-16

Nov-

16Ap

r-17

Sep-

17Fe

b-18

Jul-1

8

CORRELATION CONTAINERS AND STEEL PRICES

20ft Standard Dry-Freight China Hot-Rolled Coil Steel Price (USD per tonne)

Asia Carbon Steel (all products) (USD per tonne) World Scrap Steel (USD per tonne)

Container Price Dynamics – Used Dry Box Market

Source : Harrison

2178

1297

60%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

500

1000

1500

2000

2500

3000

350020 FT DRY CARGO VALUES AND RESALE PRICES

New price Asia

Resale Price Europe (LH Axis)

Europe Resale Price as Percentage of New Price (RH Axis)

Europe Resale Price as Percentage of OEC (RH Axis)

Container Price Dynamics - Used Reefer Market

Source : Harrison

15500

4477

29%

24%

0%

5%

10%

15%

20%

25%

30%

0

5000

10000

15000

20000

2500040 FT HC REEFER VALUES AND RESALE PRICES

New price Asia

Resale Price Europe (LH Axis)

Europe Resale Price as Percentage of New Price (RH Axis)

Europe Resale Price as Percentage of OEC (RH Axis)

Hi-Lo Chart Used Box Prices (12-15 year old units)

100% 100%108%

39%

28%

78%83%

115%

82%

68%

52%

43% 45%

20% 18%

44%

58%

85%

58%

43%

27%20% 22%

13% 13%

26%19%

40%

28%

16%

0%

20%

40%

60%

80%

100%

120%

140%

20ftStandard

Dry

40 ftStandard

Dry

40 ft HCDry

20 ftReefer

40 ft HCReefer

Tank 20 ft OpenTop

40' Opentop

20' FlatRack

40' FlatRack

12-15 Yr Old Used Containers Prices as % of original equipment prices

Highest

Average 2000-2017

Lowest

Source : Harrison

Hi-Lo Chart Used Box Prices (12-15 year old units)

71% 71%76%

47%

30%

74%

58%

88%

48%

41%

52%

42% 43%

24% 22%

53%

46%

68%

38%

30%34%

24% 26%

16% 17%

36%

24%

36%

17% 16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20ftStandard

Dry

40 ftStandard

Dry

40 ft HCDry

20 ftReefer

40 ft HCReefer

Tank 20 ft OpenTop

40' Opentop

20' FlatRack

40' FlatRack

12-15 Yr Old Used Containers Prices as % of contemp. new replacement prices

HighestAverage 2000-2017Lowest

Source : Harrison

Hi-Lo Risk Years ?

Source : Harrison

1950

2250

0

500

1000

1500

2000

2500

3000

3500

Jan-

07M

ay-0

7Se

p-07

Jan-

08M

ay-0

8Se

p-08

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11M

ay-1

1Se

p-11

Jan-

12M

ay-1

2Se

p-12

Jan-

13M

ay-1

3Se

p-13

Jan-

14M

ay-1

4Se

p-14

Jan-

15M

ay-1

5Se

p-15

Jan-

16M

ay-1

6Se

p-16

Jan-

17M

ay-1

7Se

p-17

20' Dry Container Prices - 10 year history

HI

LO

Top 10 Lessor’s Fleet Share Increasing


WORLD CONTAINER FLEET BY OWNER CATEGORY 2012-2017 (M TEU)

Lessor’s Share


CONTAINER FLEET OWNED OR MANAGED BY LEASING COMPANIES, 2012-2017 (M TEU)

Lease Rates


5898

420510

0

200

400

600

800

1000

1200

1400

1600

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2003

.Q4

2004

.Q2

2004

.Q4

2005

.Q2

2005

.Q4

2006

.Q2

2006

.Q4

2007

.Q2

2007

.Q4

2008

.Q2

2008

.Q4

2009

.Q2

2009

.Q4

2010

.Q2

2010

.Q4

2011

.Q2

2011

.Q4

2012

.Q2

2012

.Q4

2013

.Q2

2013

.Q4

2014

.Q2

2014

.Q4

2015

.Q2

2015

.Q4

2016

.Q2

2016

.Q4

2017

.Q2

2017

.Q4

2018

.Q2

Per Diem Lease Rates (LTL)

20' 40'

40'HC 20'RF

40'HC RF

REEFERS

DRIES

Dry Cargo Container Leasing


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1993

1995

1997

1999

2001

2003

2003

.Q4

2004

.Q2

2004

.Q4

2005

.Q2

2005

.Q4

2006

.Q2

2006

.Q4

2007

.Q2

2007

.Q4

2008

.Q2

2008

.Q4

2009

.Q2

2009

.Q4

2010

.Q2

2010

.Q4

2011

.Q2

2011

.Q4

2012

.Q2

2012

.Q4

2013

.Q2

2013

.Q4

2014

.Q2

2014

.Q4

2015

.Q2

2015

.Q4

2016

.Q2

2016

.Q4

2017

.Q2

2017

.Q4

2018

.Q2

20ft Dry Cargo, Lease Rates and Initial Cash-on-Cash Returns

Purchase Price (LH Axis)

Per Diem x 365 (LH Axis)

ICoCR in % (RH Axis)

< Purchase Price (New)

Initial Cash-on-Cash Return >

< Per Diem x 365 (LH Axis)

Reefer Leasing


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

19

93

19

95

19

97

19

99

20

01

20

03

20

03

.Q4

20

04

.Q2

20

04

.Q4

20

05

.Q2

200

5.Q

4

20

06

.Q2

20

06

.Q4

20

07

.Q2

20

07

.Q4

20

08

.Q2

20

08

.Q4

20

09

.Q2

20

09

.Q4

20

10

.Q2

20

10

.Q4

20

11

.Q2

20

11

.Q4

20

12

.Q2

20

12

.Q4

20

13

.Q2

20

13

.Q4

20

14

.Q2

201

4.Q

4

20

15

.Q2

20

15

.Q4

20

16

.Q2

20

16

.Q4

20

17

.Q2

20

17

.Q4

20

18

.Q2

40ft HC Reefer, Lease Rates and Initial Cash-on-Cash Returns

Purchase Price (LH Axis)

Per Diem x 365 (LH Axis)

ICoCR in % (RH Axis)

< Purchase Price (New)

Initial Cash-on-Cash Return >

< Per Diem x 365 (LH Axis)

ICIR = Initial Cash Investment Return

ICIR (or simple “cash on cash”) is a simplified benchmark to calculate how attractive it is invest in containers

ICIR calculates the per diem for the initial lease contract (x 365) as a percentage of the investment in the new container

ICIR has decreased over the past decades because of :

• Growing competitiveness of the leasing business

• Shift from Master Lease to Long Term Lease (less risk, high utilisation)

• Lower operating cost

• Economies of scale in container management systems

• Pressure from lessees, shipping lines on per diems

• Optimized finance structures with lowest possible interest cost

• Introduction of investor classes that only require “modest” equity returns

• Ancillary income : RND, penalties, profit on used equipment sales etc.

Below a certain minimum ICIR (depending on their WACC), Lessors will not invest in new containers

Initial Cash-on-Cash Ratio’s Downward Trend Coming to an End ?


9.73%9.67%

11.79%11.46%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2003

.Q4

2004

.Q2

2004

.Q4

2005

.Q2

2005

.Q4

2006

.Q2

2006

.Q4

2007

.Q2

2007

.Q4

2008

.Q2

2008

.Q4

2009

.Q2

2009

.Q4

2010

.Q2

2010

.Q4

2011

.Q2

2011

.Q4

2012

.Q2

2012

.Q4

2013

.Q2

2013

.Q4

2014

.Q2

2014

.Q4

2015

.Q2

2015

.Q4

2016

.Q2

2016

.Q4

2017

.Q2

2017

.Q4

2018

.Q2

Initial Cash-on-Cash Returns

20' 40'

40'HC 20' RF

40'HC RF

REEFERS

DRIES

Conclusions

Containers form a relatively simple - but robust - asset class, compared to other transportation assets, such as trains, planes and ships

Still there is more complexity to it, especially on the “crossroads of money and metal”

For investors / lessors / financiers it is an attractive asset class, provided one is comfortable with the tracking / tracing mechanisms

The risk of technical obsolescence is very limited, except maybe for reefer-containers, due to stringent environmental regulations

Container manufacturers can quickly adapt to changing market conditions, enabling the industry to reduce surplus container capacity almost instantaneously, thereby preventing the shipping “bust-boom”-cycle

The container business is continuously looking for efficiency gains, via equipment specs., operational / interchange rules, management systems but also optimized finance structures (lower interest rates and capital cost)

Financing of container fleets / lessors has proven to be fairly low risk business but financing boxes for (2nd

tier) shipping lines may represent a higher risk (post default recovery)

Container Boxes –Introduction - Marine Money DVB.pdfContainer moves are read and transmitted...

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