The Future of the KG-MarketDavid Landgrebe

Hamburg, 13th June 2015

2

Agenda

1 • HCI who we are

2 • Size of the German Capital Market

3• Facts about German investment

culture

4• Potential for new Business in

Germany

5• New Financial Regulation under MIFD

and AIFM (New World)

6 • Basic features of future KG funds

7 • Summary

3

Funds

HCI Capital AG – Who we are

Number of Employees

Raised Equity

Investors

Foundation in 1985

Investment Volume

110,290

15.4 bn EUR total8.4 bn EUR today

6.1 bn EUR total3.4 bn EUR today

130

30 years

526 total246 today

4

Size of the German Capital Market

Total Fund Volume of the Germans 1,6 trillion EUR (or 1.600 billion)

5

Mutual funds volume against the KG Market

Currently the closed-end fund market has 200 billion EUR Assets under Management

This is just a fraction (12,5%) from the Mutual Fund Market

Shipping has 45 billion or 23% of all assets under management within the closed-end funds.

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Facts about German investment culture

1997

162951

879

739

344

Financial Assets in billion EUR

Currency and deposits

Debt securities

Equity and investment fund shares

Life insurance

Pension enti-tlements

Other

Priorities: Cash, Life Insurance , Pension entitlements

Germans love cash and hate risk

Germans held 128 billion in bills and coins at home

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Potential for new Business in Germany

Today more than 1,997 billion EUR are held in cash or cash equivalents

Annual savings rate: 9.4%. of available income / around 165 billion EUR.83 billion EUR of that going into cash accounts

Potential for shipping:

In the past: Ship KG placing = 2.5% of annual savings (but overdone during boom)

Applying same ratio today would mean 4 billion EUR

However, quarter of the ratio more realistic in future

German retail investor market then good for at least 1 billion EUR of shipping equity per year

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New Financial Regulation under MIFD and AIFM

Legal framework- New Investments only in line with AIFM and Capital Investment Act (KAGB)

Product design- Higher equity ratios- Transparent Factsheet with all costs, i.e. one-off costs, carrying-costs, provisions,

performance fees- Stricter Standards for sales an distribution by MIFD II

Domestic Shipping Management Companies (or rather Asset-Manager)

- Comprehensive reporting standards towards several official “check points”

- Domestic Management Companies (Kapitalverwaltungsgesellschaft KVG) - Depositary (Verwahrstelle)- Federal Financial Supervisory Authority (BaFin) - German Central Bank (Bundesbank)

New World

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Basic features of future KG funds

Product design:

- Minimum equity volume of 100 Mio. EUR / Minimum 3 ships/assets per KG/AIF

- Debt-to-Equity: 50% maximum

- Investment ratio: 95 %

- Combination of long-term charter and spot employment

- in Blind pool-funds with strict investment rules

Preconditions for market revival

- End to insolvencies / Clearing-out of distressed tonnage

- 24-36 months time to forget and recover for private retail investors

- 18 months of uninterrupted stable charter markets and positive results of leading global container lines

Layout and Preconditions

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Summary:

• KG equity placing stalled, but potential for comeback

• Huge cash reserves among German retail investors

• Mindset (“something tangible!”) works in favour of ship as an asset class

• As an investment base Shipping can/should at least offer 4-5% returns, more than fixed-income products

• New regulation (AIFM, MIFID II) allows a fresh start in this sector

• New ship KGs/AIF with higher equity ratio, multiple ships and mixed employment concepts

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KG 2.0

We look towards the future and remain hopeful for the resurrection of the German KG Market

The beer is only 5 meters away – Cheers ☺

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