Every day counts - Deutsche Beteiligungs AG

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10 Disclosure of fair value Valuation rules at www.deutsche-beteiligung.de Our complete valuation rules are accessible through our on-line information service. There has been a change in capital markets’ assessment of our stock in recent years. We are currently in the midst of a transition phase: since the beginning of the 2002/2003 financial year, we have been reporting the intrinsic value (fair value) of our shares on a semi-annual basis, disclosing the unrealized value movement that results from a current valuation of the portfolio in comparison to the book value. This is common practice in comparable Anglo-Saxon private equity companies. We are thus responding to a capital market demand which applies the intrinsic value of stock, determined by internationally acknowledged accounting principles as a measure of performance. In determining the unrealized appreciation – or valuation reserves – we apply the rules laid down by the International Financial Reporting Standards (IFRS). The basis for this is the current market value (fair value) of the portfolio. The valuation reserves represent the net current value of our investments, which may be higher, or possibly also lower, than the amounts carried in the balance sheet in conformity with the German Commercial Code. Fair value based on IFRS rules The value of our investments is determined semi-annually in conformity with guidelines that are based on IFRS rules and approved by our auditors. We apply different methods to determine the fair value – depending on the type of investment: • Quoted enterprises are generally valued at their stock market price at the valuation date; in certain instances, the price may be reduced by a discount. • If a purchase offer has been submitted for an investment, the valuation will be based on that offer. • Valuations may also be based on recent comparable transactions in the market. • If none of the above procedures is applicable, valuations may be determined by the multiples method based on income data and peer-group comparisons – meaning that price/earnings ratios of comparable enterprises are used for the valuation. • Investments consisting of several different companies are subject to a “sum-of-theparts” valuation – the valuation is derived by adding the individual sums for the components of an investment. • Silent participations are valued at acquisition cost (or, if applicable, their lower market value); the same applies to loans granted by Deutsche Beteiligungs AG to its portfolio companies, and to new investments in the first year after acquisition. The fair value of one share of Deutsche Beteiligungs AG is derived by dividing the valuation reserves by the number of shares and adding that to the equity per share. The value of our fund management business (see pages 23 and 64) as well as Deutsche Beteiligung’s long-standing excellent market position are not reflected in the fair value. Data based on key figures of investee companies is one constituent in determining the fair value. Another determinant is the situation on capital markets. Approximately onefifth of the fair value of our investment portfolio is directly linked to the share price trend for the companies in question. A decline in prices will lead to a decline in the valuation reserves, even without our holdings necessarily experiencing a deterioration in their earnings position – frequently a decisive factor in profitably exiting an investment.
Weak dollar curtails valuation reserves in portfolio In the reporting year, the fair value of our shares declined slightly to 12.48 euros (November 1, 2002: 12.95 euros). The book value of the equity per share rose from 11.08 euros to 11.34 euros, whereas the unrealized appreciation decreased from 1.86 euros to 1.16 euros per share. Thus, at the end of the past financial year, the shares of Deutsche Beteiligungs AG were traded approximately at their intrinsic – or fair – value. At the beginning of the 2002/2003 financial year, the portfolio of Deutsche Beteiligungs AG contained unrealized appreciation of 26.1 million euros. At October 31, 2003, it had dropped to 9.8 million euros, a decline of 16.3 million euros. This change was caused by a number of different, partly netted, effects. Changes in valuation reserves T€ 30,000 25,000 20,000 15,000 10,000 5,000 0 Valuation reserves at Nov. 1, 2002 Change due to realizations (sales) Reduction due to exchange rate changes Increase due to changes in stock market prices (netted) Reduction due to changes in earnings/multiples (netted) Exchange rate changes had the greatest negative impact on the unrealized appreciation: the weakness of the US dollar against the euro resulted in a loss of 11.8 million euros. The value of our US holdings and fund investments as well as several other fund investments carried in US dollars diminished by this amount solely for reasons of the dollar’s devaluation, independent of the earnings position of these enterprises. At the beginning of the 2002/2003 financial year, one dollar equaled 1.01 euros; at the end of the financial year at October 31, 2003, one dollar was valued at 86 euro cents, a decline of 15.3 percent. One fourth of our portfolio, valued according to IFRS rules, is linked to exchange rate gyrations of the US dollar. A further devaluation of the US currency by 0.05 euros per dollar would, for instance, reduce the fair value of our portfolio by another 3.5 million euros; a revaluation would have the opposite effect. These gyrations would result in a deterioration/improvement in the fair value of 25 euro cents per share. Some 11.3 million euros of the valuation reserves were realized by the sale of investments. In exiting these investments, the price last carried on the accounts was the minimum we achieved in all cases. Deutsche Beteiligungs AG · Annual Report 2002/2003 Valuation reserves Positive effects Negative effects Other changes Valuation reserves at Oct. 31, 2003 US $/Euro in € 1.00 0.95 0.90 0.85 0.80 Nov. 02 Jan. 03 Shares Mar. 03 May 03 July 03 Sept. 03 Nov. 03 11
Page 1 and 2: Annual Report 2002/2003 Every day c
Page 3 and 4: Deutsche Beteiligungs AG · Annual
Page 7 and 8: Wilken Freiherr von Hodenberg born
Page 9 and 10: Changes to the Board of Management
Page 11 and 12: November 1, 2002 to December 31, 20
Page 13: Shares of Deutsche Beteiligungs AG:
Page 17 and 18: Pro-active investor relations Deuts
Page 19 and 20: Prospects for our shares Capital ma
Page 21 and 22: For instance, the special accountin
Page 23 and 24: DEUTSCHE BETEILIGUNGS AG - MARKET P
Page 25 and 26: This performance is founded on six
Page 27 and 28: We build on an established network
Page 29 and 30: Platform for growth - Opportunities
Page 31 and 32: OUR PORTFOLIO - GOOD CROSS SECTION
Page 33 and 34: Volume November 1, 2002 € 313.1 m
Page 37 and 38: MANAGEMENT BUYOUTS - PARTNERSHIPS F
Page 45 and 46: Hochtemperatur Engineering GmbH Mai
Page 47 and 48: EXPANSION FINANCING - REACHING FOR
Page 49 and 50: Bauer AG Schrobenhausen Deutsche Be
Page 51 and 52: Hucke AG Lübbecke (through Bowa Be
Page 53 and 54: Otto Sauer Achsenfabrik Keilberg Be
Page 55 and 56: INTERNATIONAL BUYOUT FUNDS - BALANC
Page 57 and 58: Accessing opportunities in eastern
Page 59 and 60: Unternehmens Invest AG Vienna Deuts
Page 61 and 62: PORTFOLIO - BALANCED ACROSS INDUSTR
Page 63 and 64: Industrial profile of portfolio bal
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MANAGEMENT’S REPORT I. Market dev
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Investments during the year under r
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IV. 5. Appropriation of the distrib
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Our support for the development of
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IX. Events subsequent to the closin
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Liabilities and shareholders’ equ
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Deutsche Beteiligungs AG · Annual
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D. Accounting policies Deutsche Bet
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AUDITORS’ REPORT We have audited
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The financial statements of Deutsch
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Statutory offices Comparable office
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Statutory offices Comparable office
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MBO Multiples method Official Marke
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FIVE-YEAR FINANCIAL SUMMARY in mill
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