Market Briefing “Stocks & Bonds” 16th May 2002 Walter Henniges Managing Director Deutsche Bank

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

2. The Market for BondsChapter 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 1999 - 2001. 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 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 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)

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 InstrumentsChapter 2

13. Finance Instruments (overview) Balance Sheet • Equity: • Ordinary increase of shareholders’ funds • Revaluation or increase of assets Fixed assets Shareholder Equity • 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. 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. Products: the key debt instruments (issuer’s perspective) Bilateral and syndicated Loan / SSD Private Placement/ EMTNs Instrument Commercial Paper Syndicated Bond Commercial Paper Program „Stand Alone“Documentation Documentation-platform Debt Issuance Program Rating / Rating Advisory / Credit Research „Credit Story“ Name Recognition

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

16. EnvironmentChapter 3

17. Credit AAA to A+ to A- BBB+ to BB - Below Unrated Assessment AA- BB - Risk Weights r 20% 50% 100% 150% 100% i in % Deutschland 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. Germany Loans Bonds USA

18. ECB’s and Fed’s Rate changes ECB Fed • 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 TablesChapter 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. 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: 14 November 2001 Maturity date: 15 January 2007 Reoffer Spread: 20bps 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 2007. 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 +19.5 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