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Deutsche Beteiligungs AG – Opportunity to invest

Deutsche Beteiligungs AG – Opportunity to invest. German Mid Cap Conference Frankfurt am Main, November 26, 2003. Overview. MBO. Intern. activities. Fund management. Fiscal year 2002/03. Summary. Annex. Contents. Overview Investment strategy in German speaking countries

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Deutsche Beteiligungs AG – Opportunity to invest

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  1. Deutsche Beteiligungs AG – Opportunity to invest German Mid Cap ConferenceFrankfurt am Main, November 26, 2003

  2. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Contents • Overview • Investment strategy in German speaking countries • Investments abroad • Fund management • Financial year 2002/2003 – Investments and disinvestments • Deutsche Beteiligungs AG – A good investment opportunity • Annex

  3. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Deutsche Beteiligungs AG - Overview • 40 years of private equity experience • More than 300 German mid-market transactions • Remarkable success story • 16.3 % return on equity (p.a., 1992/93 to 2001/02) • Good market position • Capital requirements for further investments • Listed since 1985 • 3 principal investors (45 %) • Free float 49.92 % • Market capitalization ~ €170 mn

  4. 40.5 % 21.7 % 37.8 % Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Business activities • Focus on management buyouts • Direct buyout investments in German-speaking countries • Foreign buyout investments through experienced fund partners • Growth financings (minority investments) in exceptional cases only • Fund management • Fee income for cost coverage • Access to larger transactions through additional financings (“parallel funds”)

  5. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Well-balanced portfolio Status: Acquisition costs, Date: October 31, 2003

  6. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Focus on MBOs –Investment criteria • Mid-market businesses / Group subsidiaries • Old economy industry, industrial service sectors • Turnover up to €750 mn p.a. • Proven management • Leading market position • Profitable, with growth potential • Transaction value €50 – 250 mn

  7. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Case study Casco: How Deutsche Beteiligungs AG builds value • Company • World market leader in the development, manufacture and marketing of impregnated foils and other surface materials for floorings, furniture, and construction industry • Sales (2002) €265 mn928 employees in eight countries • Investment • Management buyout led by Deutsche Beteiligungs AG, jointly with US-Partner • Investment €12.4 mn

  8. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Casco Surfaces GmbH • Build value through • Internal growth potential • Development of new markets (Brazil, South East Asia) • Launch of new, high-margin products • Earnings enhancement by optimizing product mix and improving cost structure in Europe (site optimization) • Exit opportunities • Trade sale to buyer, in whose process chain Casco fits • IPO

  9. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Case Study Sebaldus: How Deutsche Beteiligungs AG built value • Company • Major German media business, four categories: Publishing, Printing, Direct Marketing, Electronic Media • Turnover (1997) €476 mn, 3,700 employees • Outset • Increasing competition, market position attacked • Group of 196 shareholders with different objectives • No capital for growth • Investment • MBO in August 1997 (jointly with other finance investors) • Investment €16.7 mn

  10. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Sebaldus AG • Growth in value through focus on core businesses • Core business Printing: - add-on acquisition - new printing press • Core business Publishing: - acquisition of majority in Austrian publisher Metro - IPO for Computec Media AG • Business field Electronic Media sold • Exit • Printing and Direct Marketing activities sold to Schlott AG in December 1999 • Publishing activities sold to WAZ Group in November 2000 • Invested capital tripled

  11. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Experienced investment team average yrs. of private-equity experience at DBAG 4 Principals > 12 7 Directors > 8 10 Investment Managers > 5 • Management remuneration with strong incentive system • Carried-interest scheme installed in 2001 • Investment team must co-invest to profit from performance of investments

  12. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Three out of four German deals through proprietary channels • Excellent network provides proprietary deal access • Avoids costly auction bids • Greater deal probability

  13. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Deal activity Germany – transaction value € 50 – 250 mn Deutsche Beteiligungs AG… … 2002 involved in the completion of two transactions, … 2003 in the completion of three transactions * Jan. to Oct.

  14. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Growth drivers for mid-market deals • Key growth driver:Spin-offs of non-core activities by large corporations • Other growth drivers: • Regulatory pressure on banks to cut back on lending (Basel II) • Succession issue for family-owned companies  Positive mid-market development

  15. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Portfolio diversification through international investments • Fund partnerships benefit business in German speaking countries • Cross-border deals (Casco Surfaces) • Additionally: Portfolio diversification • Comparable investment criteria • Collaboration with experienced partners • USA: Harvest Partners • Austria: Unternehmens Invest AG (UIAG) • France: Quartus Gestion

  16. Deutsche Beteiligungs AG Fund I & II Fund III Fund IV 2002 1998 Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex New equity financing - Investors confide in the team • Fund IV: €228 mn committed – largest equity-raising program to date • Fee income for cost coverage • Investment ratio Deutsche Beteiligungs AG / DBAG Fund IV 1:2

  17. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Financial year 2002/2003 – Difficult environment • Exit markets remain difficult • Strategic investors (trade sales) restrained • Financial investors a stable pillar • IPOs not possible • No economic growth • Challenge for portfolio companies • But: Attractive investment opportunities • Restructuring of "Deutschland AG" (Corporate Germany) • Capital markets pressuring large conglomerates  Invest anticyclically

  18. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Profitable exits despite market weakness • Edscha AG – Secondary BuyoutInvestment: October 2000Exit: November 2002 – IRR: > 25 % p.a. • Andritz AG – Secondary PlacementInvestment: December 1999Exit (82 %): June 2003 – IRR: invested capital doubled, > 20 % p.a. • Global Power Equipment Group Inc. – Stock ExchangeInvestment: August 2000Exit (> 50 %): July 2003 – IRR: invested capital doubled, > 20 % p.a.  Value growth realized

  19. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Financial year 2002/2003 – Nine-months’ results • Balanced quarterly result • Sales proceeds largely consumed by valuation adjustments • Weak US economy=> Valuation adjustments on three portfolio companies and one fund investment • Other operating income significantly above previous year's level • Management fees • Structuring fees • Appreciation in value • Outlook: Balanced total result • Significant improvement vs. previous year

  20. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Recent investments • Casco Surfaces – Management buyoutInvested in July 2003Chemicals – Investment €12.4 mn • Preh-Werke – Management buyoutInvested in November 2003Automotive supplier – Investment €12.8 mn • BBS – Management buyoutInvested in November 2003Industrial services – Investment €10.0 mn  Strong market position

  21. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Shareholder profile Deutsche Bank AG15 % • S-Dax indexed • Free float enlarged to 49.92 % • Market capitalization of free float ~ €84mn Gerling Group15 % Free Float49.92 % Vermögensverwaltung Wilhelm von Finck15 % Kreissparkasse Biberach5.08 %

  22. DBAG Dax (indexed) S-Dax (indexed) Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Share price euros

  23. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Shares trade at book-value level

  24. Deutsche Beteiligungs AG European stocks Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Private equity outperforms other asset classes 16.3% • Private equity returns over 10-year period: 15 percentBase: 196 European buyout funds, Horizon IRR 1993 to 2002 • Private equity returns higher than other asset classes 14.8% 16.0% 12.0% 7.0% 8.0% 6.0% 4.0% 0.0% Private equity Fixed-interest bearing securities Source: Pan-European Performance Study, EVCA, March 2003

  25. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Deutsche Beteiligungs AG – a good investment opportunity • Deutsche Beteiligungs AG founded in 1965 • Long-established brand name • Track record • Diversification • Experience • av. pre-tax 1 year - 9.3 %ROE p.a. 3 years 7.4 % 5 years 18.2 % 10 years 16.3 % • Broad, balanced portfolio of assets • … in managing economic and market cycles • Ability to realize exits • Benefit of network – access to deal flow • Disciplined investment process

  26. Annex

  27. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Valuation rules ofInternational Accounting Standards • Valuation principles based on IAS rules • Valuation based on • Stock market prices • Purchase offers • Comparable transactions • Multiples method (e.g. peer group comparisons) • ”Sum of the Parts“ assessment

  28. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Shareholders’ equity

  29. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Investments

  30. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Result from investment activity ** Consolidated as of FY 2001/02* Before write-offs and provisions ** First 3 quarters

  31. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Net income/loss * * * * consolidated

  32. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Typical investment structure Target company 10 % 30 % 60 % Deutsche Beteiligungs AG 1 : 2 DBAG Fund IV Management of target company 1 % investment by carry team ofDeutsche Beteiligungs AG

  33. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Ten largest investments represent 61 % of book value Status: July 31, 2003

  34. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Most recent ten exits – DBAG not dependent on IPOs

  35. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Financial calendar 2004

  36. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Creating a new Mittelstand Stock abbreviation: Reuters: DBAG.F Bloomberg: DBA ISIN code: DE0005508105 Stock market trading with official listing in PRIME STANDARD Indices: S-Dax C-Dax-Industrial For more information: www.deutsche-beteiligung.com Deutsche Beteiligungs AG Investor RelationsKleine Wiesenau 1 Thomas Franke60323 Frankfurt am Main Tel.: +49 (69) 9 57 87-3 07Tel.: +49 (69) 9 57 87-01 Fax: +49 (69) 9 57 87-3 91 e-mail: IR@deutsche-beteiligung.de

  37. Overview MBO Intern. activities Fund management Fiscal year 2002/03 Summary Annex Cautionary statement regarding forward-looking statements This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Any statement in this presentation that states our intentions, beliefs, expectations or predictions (and the assumptions underlying them) is a forward-looking statement. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Beteiligungs AG. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our business.

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