PRIVATE EQUITY SOLUTIONS PE Market Impact & Portfolio Update June 4, 2020 Visit us: www.go.dws.com/pe Marketing material. For professional investors only. For Professional Clients (MiFID Directive 2014/65/EU Annex II) only. Not for retail distribution. DWS has prepared the material above based on data provided by third parties. DWS does not guarantee Ïhe accuracy and completeness of this information. Past performance is not indicative of future returns. There is no assurance that investment objectives will be achieved. This presentation is intended only for the exclusive benefit and use of our clients and prospects. This presentation was prepared, in order to illustrate, on a preliminary basis, a specific investment strategy and does not carry any right of publication or disclosure. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of DWS. CONTENTS 01 PE Market – Covid Impact 02 Our Perspective and Market Positioning 03 Executed Transactions 04 Current Opportunity Set 05 Team Biographies 06 Disclosures 01 PE MARKET – COVID IMPACT WHAT’S REALLY HAPPENING IN PE FUNDS? PE has reacted quickly but every fund is facing a different impact 01 02 03 Phase One: Q1 Phase Two: Q2 Phase Three: H2 What’s happening in my ‘Enforced’ stability & Opportunistic add-ons portfolio companies? defensive add-ons and M&A . 24/7 info gathering . Cash injections . Focus on winners . Focus on liquidity (bank . Government support (where . Add-ons and selective lines, fund lines, LP capital possible) and unwinding M&A calls) deals (where possible) . Stabilize other assets . Lender (re)negotiations . Watch and wait . More intense discussions . Triage portfolio . Bid/ask spread with lenders Investors won’t really know what’s happening until Q2 valuations are published (usually September) Source: DWS Private Equity as at May 2020. Team opinion based on a number of informal conversations and discussions with several PE market participants (Feb-May 2020). No assurance can be given that any forecast, target or opinion will materialize. / 4 WINNERS AND LOSERS Underlying sector exposure will be a key determinant in private equity portfolio performance Q1’20 REPORTED NAV ADJUSTMENTS (buyout)1 Avoid Watch Focus Casinos Facility-Based Care Health & Wellness Products 10% 0% Oil & Gas Logistics Consumer Staples -10% -11% Leisure Facilities Telecoms Sustainable Investments -20% Travel & Entertainment Repair & Maintenance Cloud & Digital Infrastructure -30% Brick & Mortar Retail Manufacturing E-Commerce AVERAGE Sector expertise and cycle tested management teams have become more critical than ever 1. Credit Suisse PFG (May 2020) based on reported Q1 valuations across strategies in PE. Source: DWS Private Equity as at May 2020. Past performance is not a reliable indicator of future returns. No assurance can be given that any forecast, target or opinion will materialize. / 5 EMERGING THEME IN THE COVID ERA DWS expects bid/ask pricing gaps to remain throughout 2020 and into next year To bridge the gap on pricing, buyers are increasingly negotiating downside protection and greater alignment with sellers through various mechanisms such as the inclusion of structured equity, larger management rollovers, and performance based earn-outs ILLUSTRATIVE PRE-COVID CAPITAL STRUCTURE ILLUSTRATIVE POST-COVID CAPITAL STRUCTURE 2.5x Senior Debt 3.0x Senior Debt 2.5x 3.0x Second Lien / Mezzanine 1.5x 2.5x Earn-Out 0.5x 4.0x Second Lien / Mezzanine 4.5x Structured Equity 1.0x Rollover Equity 0.5x 5.5x Roll-Over Equity 0.5x 5.5x 6.0x 6.0x Common Equity 4.0x Common Equity 4.0x 10.0x 10.0x Source: DWS Private Equity as at May 2020. No assurance can be given that any forecast, target or opinion will materialize. For illustrative purposes only. Not intended to represent any investment. / 6 COVID IMPACT: EXIT ENVIRONMENT Likely to extend hold periods and demand more net capital from LPs KEY POINTS GLOBAL BUYOUT EXITS 2,356 2,437 . Following the GFC, buyout exit volume decline in subsequent 2,406 1,200 2,500 two years leading to longer hold periods for existing portfolio 2,202 2,302 1,937 companies 1,000 1,920 1,742 2,000 . Impact of this crisis still early, but previously unimaginable halt 1,619 800 1,398 to trading has made underwriting new investments, corporate 1,299 1,500 1,125 600 521 acquisitions, or IPOs extremely difficult 455 864 403 400 399 1,000 CountExit 682 366 357 515 . Focus on stabilizing companies and preventing potential 400 323 308 316 255 bankruptcies will also require an increase in Private Equity Value Exit ($bn) 212 136 500 capital calls to LPs, putting further pressure on returns. 200 114 116 . Current environment provides plenty of opportunities for 0 0 structured financing or other sources of alternative capital 2007 2008 2009 2010 2013 2014 2015 2018 2019 2006 2011 2012 2016 2017 Exit Value ($bn) # Of Exits 2020 YTD 2020 ANNUAL BUYOUT CONTRIBUTIONS VS DISTRIBUTIONS ($BN) 400 320 341 321 330 308 300 209 198 218 163 199 200 187 147 141 137 97 66 77 100 66 95 35 54 17 68 11 (18) (37) 0 (50) (83) (100) (103) (120) (151) (145) (143) (163) (121) (200) (172) (180) (189) (205) (178) (253) (300) (254) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sep-19 Capital Contributions Capital Distributions Net Capital Distributed Sources: DWS CIO View (May 2020), Evercore Market Update Report (April 2020) & Preqin (2020). Past performance is not a reliable indicator of future returns. No assurance can be given that any forecast, target or opinion will materialize. / 7 VALUE PROPOSITION TO SPONSORS PES can be an attractive alternative for GPs to invest more in existing assets Capital Source PES Alternative Greater flexibility over use of funds Debt Market Equity can expand borrowing base Debt PES Market Trusted, unthreatening counterparty Faster negotiations with greater Competitor GPs transparency of information Competitor More aligned governance GPs True third-party valuation and LP Co-Invest structure GP-Led LPs may co-invest alongside PES LPs Secondary Much lower complexity Independent Valuation / Speed of Executionof / Speed Valuation Independent No change to original fund structure GP-Led Secondary and terms Flexibility Faster execution / certain execution Source: DWS Private Equity as at May 2020. The information herein reflects our current views only, is subject to change, are not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein. For illustrative purposes only. / 8 PE CONTROL SPONSOR CAPITAL SOLUTIONS Covid has materially impacted traditional capital solutions Debt Market Private Equity Solutions Senior Debt retrenching Partial exits more realistic/attractive Subordinated Debt at better terms Sponsors see attractive add-ons (for lender) and larger deals Re-equitisation of balance sheets of Execution of Limited Partners GP-Led Secondary Focused on existing commitments Valuation challenges Valuation / Speed Speed /Valuation Adjusting to Covid-19 constraints on Traditional buyers in a “wait and see” mode as deal policies and protocols they wait for the market to clear and reset Denominator effect Independent Independent Flexibility Less attractive / available More attractive / available Net Neutral Source: DWS Private Equity as at May 2020. The information herein reflects our current views only, is subject to change, are not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein. / 9 ACCESS TO ATTRACTIVE PRIVATE MARKET ASSETS Seeking to mitigate risk by investing in seasoned, performing assets Exit $ Value Additional value GP creation entry point PES entry point Time Capital for Growth Minority Capital Continuation Capital • Add-ons • Partial exit and DPI to LPs • Enable sponsor to pursue greater • Organic growth initiatives • Buyout other shareholders returns from their key assets • Vertical integration • Consolidate sponsor control • Taking advantage of identified • Product investment catalysts for further growth Bespoke structures seeking to mitigate risk and ensure alignment: Liquidation Preferences, Exit Veto, Put Options, Sponsor & Management Investments, etc. Source: DWS Private Equity as at January 2020. No assurance can be given that any forecast or target will be achieved; for illustrative purposes only. The information herein reflects our current views only, is subject to change, and is not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein. There is no assurance that investment objectives can be achieved. Please refer to Risk Factors in the offering document for important information. / 10 02 OUR PERSPECTIVE AND MARKET POSITIONING OUR APPROACH TO RISK MITIGATION Various levers seek to enhance the risk / return profile of our transactions ENTRY POINT & HOLD PERIOD1 OUR PHILOSOPHY Continuing to back performing assets CMR/CIC Entering later into the hold period at an attractive entry point EMERGE/PGI More aligned due diligence and information flow NUTRA UPSTREAM Where possible, seeking to create additional protection via a bespoke structure G&S TRANSACTION STRUCTURE – NUTRACEUTICAL2 CEGAL 30% 20% PES Protected from Loss ESH for decline in EV up to 32% PES has Full Upside 10% Participation 0% 0 2 4 6 8 10+ -10% -20% Hold period PES Entry -30% Valuation (years from original GP entry) -40% -50% EnterpriseEnterprise Value Value GP original PES entry Estimated exit -60% entry point point Nutra EV PES Return Source : DWS Private Equity and Control Sponsors. DWS has prepared, where applicable, the material in this section based on data provided third parties. DWS does not 1. By transaction or representative company within a transaction as a proxy. Exit timing is indicative only guarantee the accuracy and completeness of this information. There is no assurance that investment objectives will be and should not be relied upon as a firm exit date for any investment.