1. Head of Debt Capital Markets Frankfurt
Market Briefing
“Stocks & Bonds”
16th May 2002
Walter Henniges
Managing Director
Deutsche Bank
Head of Debt Capital Markets Frankfurt 1

2. The Market for Bonds Chapter 1

3. The Eurobond Issuance Volume
2001: €uro 609 Mrd.
1999: €uro 481 Mrd.
2000: €uro 485 Mrd.
1997: €uro 301 Mrd.
1998: €uro 340 Mrd.
During the past 5 years the market has gained more liquidity and sophistication on both the issuer’s and investor’s side.
The corportae bond segment has grown most impressively. In 1997 corporate bonds accounted for 5% while the share in 2001 grew to 34% of total issuance.
Source: Bondware
13 May 2002

4. Volume and Currencies
Within the last twelve years, the €uro gained the top position for bond issues in the Euromarket, with replacing the former EMU currencies and more than doubling the USD in
Source: Bondware
14 May 2002

5. Sector development
Source: DB IndexQuant
13 May 2002

6. Issuing into the Eurobond markets
2000
2001
2002 ytd
All Eurobond issuance
Eurobond issuance was up 15% in 2001 compared to 2000
The Euro continues to gain market share in the Eurobond market with the Euro gaining six percentage points market share in 2001 compared to 2000
The Euro sector is continuing to expand in terms of its ability to absorb record volumes of issuance and its capacity for a broader range of credits
In 2001, the market experienced a record of defaults as a result of poor credit quality and a week economy
In 2002, market conditions are influenced by “Enronitis”, Argentinia and last year’s dismal performance in almost every industry sector.
Source: Bondware
13 May 2002

7. The Market for Euros - by Issuer Nationality
1996
2001
Source: Dealogic Bondware
*until 31 March 2002

8. The Market for Euros - by European Issuer Nationality
1996
2001

9. The Market for Euros - by S&P Rating
1996
2001

10. Who are the Issuers?
1996
2001
In 1996:
mainly banks, agencies and sovereigns
biggest issuers: EIB, KfW, EBRD, Abbey National, Wells Fargo, Argentinia
only a few corporate issuer, as VW, GMAC, GECC, Toyota
biggest single issue:
United Kingdom: 2 bn USD (equals 1,7 bn €uro)
In 2001:
biggest portion still banks/finance
increasing share of corporate issues, partly to refinance M&A activities
multi-billion issues from the telecom/ utility sector; France Telecom, British Telecom, Deutsche Telekom, Portugal Telecom, Sogerim, AT&T, DCX, RWE, Fiat, Unilever, Enel, Siemens, etc.
biggest single issue:
Deutsche Telekom: 4,5 bn €uro

11. Investors approach Eurobond Investors How investors value new issuers
Examination and approval of the credit, based on:
Industry Risk
Public Rating
Internal Credit Committee Judgement
Establishing relative value based on:
Similarly rated issues
Secondary trading levels of comparable issuers
“Liquidity” value of the issue
Technical Factors:
Maturity, duration and coupon target
Current portfolio and redemption
views on the underlying benchmark market and outlook for the yield curve

12. Debt Capital Instruments Chapter 2

13. Finance Instruments (overview)
Balance Sheet
Fixed assets
Shareholder Equity
Equity:
Ordinary increase of shareholders’ funds
Revaluation or increase of assets
Divestment:
Sale of unused assets
Equity linked:
Convertible Bond
Exchangeable Bond
Other forms of Hybrid Capital
Liabilities
Outside capital:
Public Bond
Private Placement
Commercial Paper
Syndicated Loans
Bilateral Loans
Current assets
Current Assets:
Liquid assets
Asset Securitisation

14. Products: the key debt instruments (issuer’s perspective)
Private Placement/
EMTNs
Bilateral and
syndicated Loan /
SSD
Instrument
Commercial Paper
Syndicated Bond
Documentation- platform
Commercial Paper Program
„Stand Alone“ Documentation
Debt Issuance Program
Rating / Rating Advisory / Credit Research
„Credit Story“
Name Recognition
The core product is the public syndicated bond. Bond structures range from a plain vanilla Eurobond to hybrid capital.
From the above there is a clear cross selling potential for various OTC-derivative products.

15. The role of the bank Origination Issuer Syndicate Bank Derivatives
Rating Advisory
Origination
Issuer
Syndicate
Bank
Derivatives
Trading
Investor
Sales

16. Environment Chapter 3

17. Current Trends in the Fixed Income Markets
The BASEL II Capital Adequacy Framework will link the capital requirements of a bank to the individual risk of its outstanding loans. Therefore, banks will lift interest margins on international capital markets standards.
This will have a deep impact on smaller companies, as bigger companies have already established their market profile with international investors.
Credit
AAA to A+ to A BBB+ to BB -
Below Unrated
Assessment
AA BB -
Risk Weights r i
20% % % % %
in %
Deutschland
Loans
Germany
Bonds
USA

18. ECB’s and Fed’s Rate changes
While the ECB lowered its interest rates five times since January 2001, the Federal Funds Rates dropped for eleven times since then.
Yield Curve - Euro Swap Annual
Source: Bloomberg
13 May 2002

19. League Tables Chapter 4

20. League Tables in 1998 / 1999
1998
1999
European Banks are highlighted

21. League Tables in 2001 / 2000:
2000
2001
European Banks are highlighted

22. Investor type distribution * Geographical distribution *
European Investment Bank (Aaa/AAA) Global EUR 5 billion 4% EARN due January 2007
Investor type distribution *
Issue Details
Announcement date: 5 November 2001
Launch date: November 2001
Maturity date: January 2007
Reoffer Spread: bps over Bund 6% due January 2007
Joint Lead Managers: BNP Paribas, Deutsche Bank, Morgan Stanley
Syndicate Group: 6 Senior Co-leads and 10 Co-leads
Deal Highlights
This issue represented a ground-breaking step for the EIB as is was
EIB's first Global issued off its Euro Area Reference Note (EARN) programme
EIB’s first fully book built issue
EIB’s first issue to utilise the pot syndication method
EIB's largest issue ever and the first EIB Euro issue to be immediately traded on EuroMTS.
The transaction was carefully prepared and pre-marketed over a two-week period involving investor meetings, conference calls and sales force presentations across Asia, US and Europe.
The issue was positioned as the new, current coupon, 5 year surrogate sovereign benchmark filling a gap in AAA supply that had lain open since July.
Price guidance was announced soon after the 50 bp rate cut by the ECB on Thursday November 8th at a range of low 20s over the Bund 6% January By the end of book building on November 14th the book was oversubscribed with orders totalling nearly EUR 10 billion. The issue was priced the following day at the tight end of the range at +20bps. Once freed to trade, the bid spread tightened in to bps.
The syndicate structure consisted of a 100% pot between the joint leads, with a retention for the co-leads as well as access to a co-lead only ”flexi-pot" of EUR 500 million. This second pot was managed by the EIB alone with additional bonds allocated according to the performance of each bank.
Over 300 accounts submitted orders for the paper, with order sizes ranging from less than EUR 1mn to over EUR 500mn. The average allocation for each investor was approximately EUR 25mn.
Geographical distribution *
* Lead managers’ allocations only