1. 4 October 2003 Recent developments in Investment Banking – Business Models and Differentiation 12. Bankenforum Dr. Hanns-Alexander Klemm

2. 1 1.Introduction to Cazenove 2.What do Investment Banks do? 3.The Investment Banking market 4.Different business models in Investment Banking 5.Recent challenges Contents

3. 2 Section 1 Introduction to Cazenove

4. 3 London Frankfurt Paris Milan Hong Kong Beijing Singapore Johannesburg New York Cazenove is a relationship based advisory firm, combining high quality impartial advice with strong distribution Corporate FinanceEquity Capital Markets Distribution & execution Investment Banking Independent since 1823 Fund Management Research Equities Institutional & Retail Charities Private Clients Manages assets of close to €10 billion Specialist investment management services and independent advice Private Equity / alternative investments Market intelligence Over 110 analysts Sector based approach for large caps Global distribution capability with c.100 sales people Country based approach for mid caps Execution services internationally Initial Public Offerings Financial advisory M&A advisory Equity offerings Debt advisory 1 – Introduction to Cazenove

5. 4 History and Background The origins of Cazenove can be traced to the early Huguenot financiers who left France in the late seventeenth century. In 1819 Phillip Cazenove joined the business of his brother-in-law John Menet: in 1823 they became partners, and the modern firm of Cazenove was established 1823 In the mid-1930s the business reached its position as one of the City of London’s pre- eminent stockbroking partnerships 1930 s In the 1980s Cazenove played an important part in most of the British Government’s privatisation issues and, as the only major independent firm in the London securities industry, successfully built its business both domestically and internationally 1980 s The firm changed from a partnership to corporate status in April 2001, raising finance from some of the leading institutional investors in the UK. Nevertheless, the firm remains substantially owned by its employees. Set up Frankfurt and Beijing offices 2001 1 – Introduction to Cazenove Growing internationalisation. Development of pan-European equities, research and distribution. Build-up of advisory capabilities, including Mergers & Acquisitions. 1990’s

6. 5 A leading financial adviser in German M&A Source: Merger rmarket German M&A activity 1 st half year 2003 Advised Gerling NCM in the €655 million sale to Swiss Re and Deutsche Bank. Advised Securicor in the disposal of its 50% stake in Securicor Omega Express to Deutsche Post for €247 million Advised De La Rue in the €22 million disposal of its 6.28% stake in Koenig & Bauer AG to an investor group Advised Agiv Real Estate in its disposal of the internet businesses myLoc and Taxxus Internet Solutions to GlidePath Advised Abbot Group in its £134 million acquisition of Deutag from Preussag / TUI Advised Procter & Gamble in its € 6.7 billion takeover of Wella AG. 1 – Introduction to Cazenove Selected transactions 2001 - 2003

7. 6 At a glance…international capital markets transactions in 2002 Hong Kong BOC Hong Kong (Holdings), IPO Chen Hson, Secondary Placing China Oilfield Services, IPO CNOOC, Guaranteed Notes Comba, IPO Fong’s Industries Company, Secondary Placing Fountain Set, Placing Harbin Brewery, IPO Kowloon Development Co, Placing Lee & Man Paper Manufacturing, IPO Lerado Group, Placing Lianhua Supermarket, IPO Linmark Group, IPO Moulin, Placing Shanghai Real Estate, Placing Sinotrans, Placing Standard Chartered, IPO Techtronic Industries, Follow-On Offering Victory City International, Placing France Autoroutes du Sud de la France, IPO Wanadoo, Placing Norway Aktiv Kapital, Placing Singapore Lindeteves Jacoberg, Warrants Noble Group, Placing Japan Daido Life, IPO Arrk Corp, Primary Offering D&M Holdings, Bought Deal Sweden Intrum Justitia, IPO D Carnegie, Placing Taiwan Fubon Financial Holding, Convertible Bond Issue Malaysia PLUS Expressways, IPO Maxis Communications, IPO Spain Enagas, IPO Italy ASM Brescia, IPO Hera, IPO China China Telecom, IPO USA Chicago Mercantile Exchange Holdings, IPO Regal Entertainment Group, IPO Travelers Property Casualty, IPO Alcon Laboratories, IPO Accenture, Global Offering, Secondary Offering The Thomson Corporation, Follow-On Offering Peabody Energy Corporation, Follow-On Offering UT Starcom, Secondary Offering UK & Ireland IPO Burberry Engelfield Intertek Group John Wood Group Mouchel William Hill Wolfson Microelectonics Xstrata Global Offering Allied Domecq BPB Centrica HBOS Serco Group Placing Amphenol Bookham Technology Christian Salvesen Govett Strategic Trust Independent Investment Trust Premier Farnell Stanley Leisure TNS Vernalis Rights Issue Royal & Sun Alliance Bonds Daily Mail & General Trust GUS Land Securities Yorkshire Water Eurobond Issue BG Group John Lewis EMI Group Allied Domecq BOC Group FirstGroup Convertible Bond Issue Anglo American BAA Cable & Wireless Dimension Data Friends Provident International Power lastminute.com Callable Notes Barclays Bank Egg HSBC Secured Bonds London Merchant Securities Tier One Notes Bank of Ireland Bought Deal Intertek Perpetual Capital Subordinated Securities Prudential plc 1 – Introduction to Cazenove

8. 7 Raising new capital for European companies A recent survey by IFR ranked Cazenove 1 st as bookrunner in 2002 for all primary equity activity in the UK and 4 th in Europe (as well as the Middle East and Africa) Cazenove recently received the prestigious EuroWeek 2002 Awards for ‘Best Global Accelerated Issue’ and ‘Best European Accelerated Issue’ for our performance in the HBOS £1.3bn Global Offering 1 – Introduction to Cazenove

9. 8 Long term player in Europe With the exception of Germany where the capital markets opened up much later to foreign banks, Cazenove has been active in Europe for up to 20 years, starting in each country with the deals shown opposite G e rmany 1996 with Deutsche Telekom I Finland 1984 with Nokia Sweden 1982 with SCA Italy 1985 with STET (precursor of Telecom Italia) Denmark 1984 with Radiometer Portugal 1988 with Corticeira Amorim Norway 1988 with Rieber & Son Switzerland 1983 with Société Générale de Surveillance France 1982 with Bongrain Holland 1984 with Wessanen Belgium 1985 with Société Générale de Belgique Spain 1982 with Banco Hispano Americano 1 – Introduction to Cazenove

10. 9 Key European transactions - examples March 2002 (France) Initial Public Offering €2,633m Co-Manager June 2002 (Spain) Initial Public Offering €917m Co-Manager November 2000 (UK/Netherlands) Global Offering £711m & €961m Joint Bookrunner June 2000 (Germany) Global Offering €13,300m Co-Manager 1 – Introduction to Cazenove March 2002 Initial Public Offering £1bn Joint Bookrunner Current Initial Public Offering tba Co-Lead Manager

11. 10 Equity research Over 100 analysts worldwide Integrated Pan-European approach to Eurotop 300 research out of London – nearly 90% by value under coverage Establishing global teams in key sectors Experienced lead analysts with an average of over eight years coverage of a sector and over eleven years relevant industry experience Country approach to researching small and midcap stocks through specialist teams 1 – Introduction to Cazenove

12. 11 Global institutional equity sales 15 Asia Pacific (ex Japan), 6 US and 6 South African sales people based in London, New York, Johannesburg and Asia Pacific 63 sales people selling UK and Continental European Equities in London and New York Over 2,000 global roadshows Asia (ex Japan), 456 Austria, 2 Belgium, 6 Denmark, 120 Finland, 130 France, 409 Germany, 184 Iberia, 91 Iceland, 1 Ireland, 61 Italy, 141 Netherlands, 138 Norway, 170 Sweden, 243 Switzerland, 5 US, 253 1 – Introduction to Cazenove

13. 12 Section 2 What do Investment Banks do?

14. 13 Basic functions In the secondary market for existing securities, they assist buyers and sellers by acting as a broker or dealer Derivatives –Lending –Balance sheet transactions –Principal investments 2 – What do Investment Banks do? Investment Banks mainly perform three functions: Primary market In the primary market they float new securities for cash Mergers & Acquisitions Debt Advisory Equity advisory Valuations Secondary market Advisory

15. 14 Information and product flow Research Sales Trading Capital Markets Corporate Finance Ideas Feedback Product M&A Derivatives 2 – What do Investment Banks do? Chinese Wall Other

16. 15 Product needs over a company´s life cycle IPO Private Placement Private Client ConvertibleSecondary M&A Debt Investment banking approach Commercial banking approach 2 – What do Investment Banks do?

17. 16 Revenue mix 2 – What do Investment Banks do?

18. 17 The Investment Banking market Section 3

19. 18 Cyclicality of the industry 3 – The Investment Banking market Industry revenue percentage change, year over year banksProfitability of securities firms versus commercial

20. 19 Industry growth rates Growth rates (Revenues) 3 – The Investment Banking market

21. 20 Mergers & Acquisitions Global announced & completed M&A 3 – The Investment Banking market Global M&A volume down by 65% (1997 – 2002) European M&A volume down by 52% (1997 – 2002)

22. 21 German M&A down by 50% Source: Thomson Financial Deal value (US$m) German inbound M&A transactions by valueGerman outbound M&A transactions by value Deal value (US$m) 3 – The Investment Banking market

23. 22 Global Underwriting Debt underwriting activityEquity underwriting activity 3 – The Investment Banking market Source: Thomson Financial Data -28% -31% +98% +31%

24. 23 Fund flows US mutual fund flows 1985 - 2001 3 – The Investment Banking market

25. 24 Section 4 Different business models in Investment Banking

26. 25 Segmentation SEARCH SLIDE Global „bulge bracket“ banks CSFB Deutsche Bank Goldman Sachs JP Morgan Lehman Brothers Merrill Lynch Morgan Stanley UBS Warburg International Independent banks Cazenove Lazard Rothschild Other Commerzbank, Dresdner KW Cooperative/Landesbanks Sal Oppenheim HSBC 4 – Different business models in Investment Banking

27. 26 Significant differences (examples) Large integrated firms Independent and other firms l Balance sheet l Lending l Proprietary trading l Derivatives l Broad product offering l Limited balance sheet l Limited or no proprietary trading l Limited or no lending / derivatives l Focused products / services 4 – Different business models in Investment Banking l Independent advisory l Impartiality / limited or no conflict l Long-term client focus l Entrpreneurship l Broad infrastructure l Capacity utilisation l Cross selling / product sales l Specialisation / Divisionalisation l Opportunity cost

28. 27 Competitive dynamics in Germany – generic view 024861012 Franchise DG Coba DKW LB DB LAZ CAZ Roth USBW SSSB CSFB ML GS MS Independents Followers Leaders DB 4 – Different business models in Investment Banking Market share

29. 28 Investment banks vs. MSCI World 2001 to date 4 – Different business models in Investment Banking Source: Datastream Quoted investment banks performed in line with the MSCI global index

30. 29 Results considerably better than a year ago Q2 2003 vs. Q2 2002 Note: Average calculated on a revenue weighted basis; operating revenue for investment banking and institutional sales and trading; extraordinary charge-offs excluded; Morgan Stanley´s profit margin skewed by compensation payments accrued for following quarters Q2 2003  : 31.0% Q2 2002  : 26.9%  +18.8%  +4.2% 4 – Different business models in Investment Banking

31. 30 Revenues / employee (2002) Revenues, no. of employees Revenues by employee 4 – Different business models in Investment Banking

32. 31 Section 5 Recent challenges

33. 32 Challenges / Issues 5 – Recent challenges l Cyclicality l Low activity l Desintermediation l Fee levels / margins l „Spitzer“ / research l Sarbanes Oxley l Basle II Market Regulatory l Cost structures l Management l Staff turnover l Reputation l Capacities Internal / Institutional An industry in change