2 The 2009/2010 financial year at a glance Equity markets presented a mixed picture in Steubing AG's 2009/2010 financial year: marked share price gains in the first six months (July 1 - December 31, 2009) resulted in sharp growth rates for the most important indices (DAX +24%, MDAX +30.5%, TecDAX +30.4%). Stock markets then took a breather, despite the liquidity on hand. This was due to various reasons: the debt crisis in Greece and other European states, US economic data that fell short of expectations, and governments' plans for new financial market regulations. As a consequence, both the TecDAX (-10.2%) and the Stoxx50 (-13.2%) retreated over the January 1 to June 30, 2010 period, while the DAX stagnated below the 6,000 points level. Although turnover on German stock markets in the second half of Steubing AG's financial half-year rose compared with the first six months (+23.9% to 2.08 trillion), it nevertheless remained at a modest level in overall terms: around 3.75 trillion was turned over on all German stock markets in the 2009/2010 business year. Compared with previous years, this represents a 17.9% decline compared with 2008/2009, and a decline of 44.3% compared with 2007/2008. These figures clearly reflect the continued extremely pronounced caution on the part of investors. Since Steubing AG's business model is generally oriented to the providing of services, and less towards entering into market risks, our result exhibits a relatively strong correlation with equity market turnover. In addition, both the strategic further development of existing business areas, and the creation of new business areas, are connected with investments in technology and staff, some of which entail long payback periods. The preliminary figures for the 2009/2010 financial year are as follows: gross profit fell by 19.2%, from k 28,107 to k 22,720. Although we reduced our costs by more than 5%, despite the growth strategy that we are pursuing, this com- Financial year 2009/2010 at a glance (in k) 2007/ / /2010 Gross profit before cost of trading 34,810 28,107 22,720 Gross profit after cost of trading 28,138 23,910 18,587 Earnings before taxes 7,088 6,095 1,864 Preliminary net profit 4,652 4,072 1,167
3 pensated for the gross profit decline to only a minor extent, and we report a preliminary, unaudited pre-tax result of k 1,864, which is 69.4% below the previous year's result. Our preliminary, unaudited net profit for the year amounts to k 1,167 (previous year: k 4,072). This result contains, firstly, the formation of the provision in the mid-six-digit range for the announced special contribution levy raised by the Securities Trading Companies Compensation Fund (EdW) for the Phoenix compensation case, and, secondly, it reflects the current, historically low interest-rate level. In order to make a realistic comparison of our operating performance, the 2009/2010 and 2008/2009 annual financial statements must be corrected to reflect the special effects, and must also take into account the interest income that has not accrued to us in the past financial year due to the low interest-rate level. On this basis, our pre-tax result is 39.9% below the previous year's adjusted figure. The Management and Supervisory boards are planning to propose a dividend of 0.30 (previous year: 0.90) to the Shareholders' Annual General Meeting that will be held in Frankfurt in December Development of various stock indices (in the period from 1 July 2009 to 30 June 2010) in TEUR % 10 0 DAX MDAX -10 TecDAX Stoxx 50 Banks CDAX -20 Total development in financial year 2009/2010 2nd half-year of financial year 2009/2010 * 1 Source: Deutsche Börse AG and Bloomberg
4 Steubing AG's divisional trends Steubing AG's core business activity remains securities trading. Despite difficult market conditions, the staff in this segment of our house has again proved its quality, which is reflected in our good positioning in the upper range of the Deutsche Börse's broker rankings, or in the AA rating for our activities as a Designated Sponsor. The MiFID (EU Markets in Financial Instruments Directive) has precipitated considerable structural changes in classic equities trading, such as even more significant growth in algorithmic trading, and intensive competition between traditional stock markets and alternative trading platforms that was unknown in the past. These processes of change are unfolding at a hitherto unknown speed. We are unable to decouple ourselves from this trend, and for this reason have further broadened the range of services that we offer over the last 12 months: firstly, we have established a small trading unit for products traded on the European EUREX derivatives exchange, and, secondly, we have intensified our fixed income trading activities (please also refer to our abridged report of December 31, 2009). The most recent activity in this area is the Bondinvest platform Development of Stock Exchange Volume (Period: Steubing AG s financial years since 2007/2008) in trillion / / /2010 Turnover on all German Stock Exchanges XETRA -Turnover 1 Source: Deutsche Börse AG and Bloomberg
5 (www.bondinvest.eu). This platform, which Steubing AG has created, provides an interface between private client banks and issuers, and currently offers around 800 bonds for trading in the retail area. The Lead Broking area retained its very good position in the 2009/2010 financial year, despite the complete switch of our stock records in the Regulated Market as part of the routine redistribution in autumn We still manage a total of around 1,000 German and foreign securities in our lead broking business. We continue to play an active role in the debate about the future of floor trading, and we are convinced that we will successfully realise the migration to XETRA that is planned for 2011, not least thanks to our high-performing technical infrastructure. Our market share on the Scoach derivatives exchange, where we currently manage six issuers as a specialist, remains constant at around 12%. Investors' reticence to invest has had an impact on the new share issues business. Statistics regularly produced by Ernst & Young 1 and PricewaterhouseCoopers 2 show that global IPO activity continues to rise (1,033 IPOs globally with a volume of US$ 200 billion in the 2008/2009 business year, compared with 376 IPOs and US$ 27.4 billion in the previous year). This growth is nevertheless particularly driven by the Asian region. New issues activity in Europe and Germany remains weak, by contrast. For instance, European IPO trends in the first half of 2010, which initially appear positive, mainly reflect a few large issues, such as that of the Polish insurance company PZU, and the Essar Energy utility. Companies from the small and mid-cap segment on which Steubing AG focuses are still extremely reserved in their activity. Although five companies ventured a flotation on the Prime Standard of the Frankfurt Stock Exchange in Q1/2010, downbeat news nevertheless subsequently gained the upper hand on the German market. IPOs such as that of the GSW housing group or of the CMI property development company were cancelled. The successful stock market debut of Ströer AG on the Regulated Market, and of two smaller issues in the Entry Standard, at the start of the third quarter provide specific basis for hope, however. Our ECM/Corporate Advisory business, which we have set up in parallel to the strengthening of the Sales and Research areas, and which we have intermeshed, nevertheless suffered from the new issues lull. As a selling agent in the banking syndicate for the successful capital increase of 1 Source: Ernst & Young IPO Update 2 Source: PricewaterhouseCoopers IPO Watch Europe
6 JenOptik AG in March of this year, or as the lead manager for the cash capital increase for ItN Nanovation AG in April 2010, our house has nevertheless successfully proved its expertise and placing power, also in concert with major competitors. Our investors conference this year was again a complete success, as last year, as was the case with our Steel Round Table, which we held for the first time in April. A total of 13 companies held presentations for our institutional customers (including DAX company ThyssenKrupp, MDAX companies Aurubis, BayWa, ElringKlinger, Fuchs Petrolub, Klöckner & Co and Salzgitter, and TecDAX index members Singulus Technologies and Software AG). In parallel to our sales activities, such as holding our investors conferences and corporate road shows, we are also constantly expanding the portfolio of stocks that our analysts cover, which meanwhile comprises around 25 companies. We have recently commenced coverage of Software AG, Fuchs Petrolub, ElringKlinger, Singulus Technologies, SKW Stahl Metallurgie and SAF Holland. We continue to focus on the steel, mechanical engineering, automotive and renewable energies sectors. By contrast with the start of our financial year, Steubing Derivatives Brokerage GmbH, a joint venture between Steubing AG and IDC AG, which is based in Bad Homburg, suffered from the stagnating volumes on the German certificates market over the remaining course of the year. These were almost unchanged between October 2009 ( 102 billion) and May 2010 ( billion). Due to this sideways trend, from which SDB GmbH also failed to decouple itself, we adjusted SDB's cost structures to the new situation in order to maintain profitability. Macroeconomic outlook The German economy recovered significantly in the first half of After the first quarter was still negatively affected by the winter months' climate, the second quarter presented a positive picture. Along with catch-up effects in the construction sector, this particularly reflected strong industrial growth. New orders, production and sales were up by more than 5% compared with the first quarter. This was due to very good export demand trends, particularly strong demand from non-eu states. Although production and sales continue to lag new orders, since high demand was
7 initially satisfied by destocking, the dynamic production growth that is meanwhile evident suggests that stocks have now largely been cleared. Seasonally-adjusted capacity utilisation was still at only 70.5% at the end of the first quarter of last year. This figure recovered to 82.9% at the end of the second quarter of this year 1, by contrast, and is only 1.1 percentage points below the long-run average ( ). This trend can only be described as extremely positive from a German perspective. This is because investments in new production plants are made from a capacity utilisation of 83%, which in turn are followed by employment expansion, and, with it, stronger domestic demand. Precisely this trend got underway in the third quarter of this year. Investors are nevertheless clearly questioning the durability of this upturn. There is no other way to explain capital markets trends. Equity markets responded with restraint to good figures, or ignored them. Fixed income markets, by contrast, fear continued weak growth, or even a double-dip recession. The trend in the USA is the reason for the scepticism, where the labour market is benefiting to only a very slight extent from industrial recovery. US industry comprises only 11% of GDP value-creation. The services sector dominates, by contrast. Employment planning remains negative in this area, however 2. This is also the reason why the slight real estate market recovery that was meanwhile observable has slid into reverse. New home sales marked a new historic low in May of this year. Due to this development, most investors anticipate a renewed recession in the USA, from which the rest of the world would also suffer, but particularly export-spoiled nations such as Germany and Japan. This view nevertheless fails to take into account more recent trends. China has now assumed the role of the locomotive of global economic growth. Germany currently exports around 4.5 billion of goods to China every month. This represents somewhat more than 80% of the goods volumes shipped to the USA. Germany is one of the few industrial states that has maintained a trade surplus (albeit small) with China for several months. The dynamics of this process suggest that China could replace the USA as Germany's most important trade partner outside the EU 27 over the course of this year. As a consequence, the well-proven rule of thumb When the USA catches a cold, Germany suffers a heavy flu no longer applies. 1 Source: ifo Institute for Economic Research 2 Source: Institute for Supply Management
8 Germany produces precisely those goods and industrial services that are most heavily in demand in the world's growth regions. In addition, the Chinese central government is conducting a targeted stimulation of domestic demand, and particularly consumption, in order to free itself from its high export dependency. This, in turn, benefits German companies that have operated production locations in China for many years, and develop and produce goods for the domestic market jointly with Chinese partners. These companies are now reaping the benefits of this strategy. Entrepreneurs from other countries, by contrast, have always regarded China only as an extended workbench for goods that were ultimately intended for re-export. Their sole aim was to exploit the low costs of labour as a production factor. The capital markets are not yet ready to reflect these global economic shifts in their investment policy. It will nevertheless occur, although such fundamental adjustments require a certain length of time. The relative strength of German equities within a global context, however, already sends a signal about such a change in perspective on the part of investors. For this reason, we take a fundamentally positive attitude to equity markets, particularly, however, to the German equity market, where the China story can best be played. Germany's exports to China (Period: three-month average since 1995) in billion in % 0.0 I 95 I 96 I 97 I 98 I 99 I 00 I 01 I 02 I 03 I 04 I 05 I 06 I 07 I 08 I 09 I 10 I 0.0 Germany's exports to China in billion (left scale) Germany's exports to China as a % of exports to the USA (right scale) 1 Source: Eurostat, Ruland Research GmbH
9 Steubing AG's 2010/2011 financial year We continue to anticipate an ambitious environment in the equity business area for the new financial year. Volumes will not return to markets until most participants have formed a clear opinion about future global economic trends. It could take quite a long time until this occurs, however. In addition, increasing regulation could present ever-new challenges, particularly to institutions that are oriented towards medium-sized companies. Since the coming into force of the MiFID, competition for order flow is no longer occurring simply among traditional participants in the classic brokerage business, but a constantly growing number of German and international trading locations are meanwhile also entering the fray. This is not only resulting in a compression of trading costs, but also, on the other hand, in an erosion of profit margins. Along with stringent cost management, it is more essential than ever in order to achieve satisfactory results in such a difficult environment that is characterised by fundamental shifts to offer services that provide our customers with genuine added value. A high degree of clearing and settlement expertise, and regulatory know-how, will gain greatly in significance in this context. In line with these aims, we have further developed our international order routing product range, and designed the Integrated Order Flow Management (IOM) service for the international retail business. A key characteristic of the IOM is the integrated management on a one-stop shop basis of the entire order process all the way through to clearing and settlement. The individual concept of cost-optimised cross-border settlement processes is an important additional competitive factor in this area. Having already acquired several smaller customers for the IOM, we have recently signed agreements for the management of the entire foreign retail business of a major bank. Operations are expected to commence before the end of We are currently in the process of joining the Tradegate Exchange in order to further boost the attractiveness of the network of trading locations that Steubing AG already serves. The Berlin-based trading platform that was founded in 2001 as an off-bourse MTF (Multilateral Trading Facility) has enjoyed the status of a securities exchange since December Deutsche Börse AG holds 75% plus one share in Tradegate Exchange, which is particularly aimed at private investors, and currently occupies second position after Frankfurt
10 among regional and floor stock markets. As a consequence, Steubing AG can continue to offer order flow management for all German stock markets. In October/November 2010, we are expecting a decision concerning the further development of our activity as an XETRA specialist for bond trading. This project, which was launched on December 1, 2009, was temporarily halted by an interim order on the part of two companies that were unsuccessful when the specialist mandates were distributed. The Frankfurt Higher Regional Court will hold consultations concerning the expedited proceedings in early October. The Regional Court will then hold a meeting concerning the main action proceedings. Despite the difficult environment, our sales team's activities report gratifying progress. In the current financial year, we will place a particular emphasis on the marketing of our research services with the aim of further expanding our contacts to institutional clients both in Germany and abroad. In doing so, we will continue to focus on the area of small & mid caps, as well as special topics. The market environment is also brightening for the Equity Capital Markets/ Corporate Advisory area. This area is currently working on specific mandates that might be realised over coming months given favourable market circumstances, and subject to positive due diligence results. The long-running Phoenix/EdW story will continue to accompany us. Since the EdW is planning to levy a special payment, a hearing of the member companies is currently being held. With the special payment, the EdW aims to repay the first instalment of the loan granted by the federal government as part of the Phoenix compensation case. This loan has a total volume of 128 million. Steubing AG has issued a corresponding opinion as part of the hearing. We have formed a provision for the instance of the special payment in line with the prudence concept. The year 2011 is also expected to mark a watershed for floor trading on the Frankfurt Stock Exchange. Were all lead brokers to agree to this early migration, and were the Frankfurt Stock Exchange Council to pass a corresponding resolution at its September 29, 2010 meeting, the discontinuation of floor trading planned for 2012 would be brought forward by one year, and floor trading would be replaced from March 28, 2011 by electronic trading on the continuous auction trading model with specialists on an XETRA infrastructure. In view of its activities as a specialist on the Scoach derivatives exchange, Steubing AG is already outstandingly prepared for such a move.
11 The Company Steubing AG is an independent securities trading bank headquartered in Frankfurt am Main, Germany. The company was first founded in 1987 as Wolfgang Steubing GmbH Börsenmakler, a limited liability company, and became a public limited company in January The Company s business activities are founded upon trading and electronic order routing in listed shares, bonds, certificates and warrants. Other principal areas of activity include the Lead Broking, Structured Products, Derivatives, Designated Sponsoring, Sales, Research and Equity Capital Markets/Corporate Advisory business areas. In addition SDB Steubing Derivatives Brokerage GmbH, founded in 2007 in cooperation with IDC AG, also offers independent competence in the field of structured products. At the end of the financial year 2009/2010 the Group employed some 70 staff. Steubing AG is a member of the Federal Association of Securities Companies on the German Stock Markets (bwf e.v.), the securities trading companies compensation fund EdW, and Frankfurt Main Finance e.v., an initiative to strengthen Frankfurt as a financial centre. Steubing AG Services Steubing AG offers services in the following business areas: Trading and Electronic order-routing in listed stocks and bonds, certificates and warrants: In this field Steubing AG acts as an agent/own-account broker on all of the German stock exchanges, facilitates the execution of orders in XETRA trading and also has direct online access to around 50 international markets. The Company has many years of experience in trading in international stocks. In the sales volume rankings published by Deutsche Börse AG for the various market segments, Steubing AG is regularly listed as a top performer. Lead Broking: As a lead broker, Steubing AG offers issuers and investors the opportunity to trade on the Frankfurt Stock Exchange. Deutsche Börse AG has appointed us to set the price of around 1,000 German and international securities. Structured Products: Since December 2008, Steubing AG has provided a service as an intermediary trading specialist at Scoach, the European market for certificates and warrants. The issuers we support are profiting from the high quality and speed of execution.
12 Designated Sponsoring: Since Deutsche Börse AG introduced Designated Sponsoring in October 1998, Steubing AG has managed the securities issued by some attractive companies in XETRA electronic trading. Ever since taking up this activity, Steubing AG as Designated Sponsor has earned an optimum AA ranking in quoting its clients shares. With BB Biotech AG we currently support one company. Derivatives: Steubing AG offers a comprehensive service in the fields of execution and volatility brokerage for all products traded on the Eurex exchange. Sales: Steubing AG focuses on institutional investors, international banks and trading desks. As a well-known block trading partner, the Company is noted for its successful placements and regularly holds roadshows. Research: Our analysts, each of whom has at least ten years professional experience to call on, maintain intensive contacts with the corporate world. In turn this enables them to offer both up-to-the-minute macroeconomic analyses as well as company- and industry-specific reports focusing on the steel, mechanical engineering, automotive and renewable energy sectors. A daily Morning News service complements our research portfolio. Equity Capital Markets/Corporate Advisory: In this area we offer competent independent support for small and medium-size enterprises on issues relating to equity, such as for example how to prepare for and undertake initial public offerings and increase capital, and on the implementation of smaller M&A transactions. We also advise companies that are already listed on their positioning in the capital market. In November 2006, Deutsche Börse appointed Steubing AG as a Listing Partner. We have been active as an issuing expert in M:access since 2008.
13 Contacts Management Board Money Laundering Officer Dr. Jochen Grossmann Alexander Caspary Kai Jordan Marion Steubing Compliance COO Hanns-Adrian Braun +49.(0) Bernd Gegenheimer +49.(0) Investor Relations / Juergen Mai Public Relations +49.(0) Janina Wiebols +49.(0) Domestic Trading Foreign Trading Commission Trading Research Sales-Trading Sales Derivatives Sales Andreas Keune (Proxy) +49.(0) Klaus Best +49.(0) Klaus-Peter Steinert +49.(0) Kai Jordan +49.(0) Wolfgang Schroth +49.(0) Ralf Meinerzag +49.(0) Alexander Deuss +49.(0) Heinz Stork +49.(0)
14 Contacts Lead Broking Foreign Domestic Joachim Große +49.(0) Anthony Disser +49.(0) Structured Products Bernd Gegenheimer +49.(0) Equity Capital Markets Corporate Advisory Dr. Jochen Grossmann +49.(0) Michael Schatzschneider +49.(0) Revision General Management Middle Office Human Resources IT Carsten Bokelmann +49.(0) Dietmar Amberg +49.(0) Hanns-Adrian Braun +49.(0) Melanie Heinz +49.(0) Waleri Schwert +49.(0)
15 Wolfgang Steubing AG Wertpapierdienstleister Financial Year 01 July to 30 June Office Goethestrasse Frankfurt am Main Telephone +49.(0) Fax +49.(0) Auditors Supervisory Board Ernst & Young GmbH Auditing Company Mergenthalerallee Eschborn Wolfgang Steubing (Chairman) Frank Wiebols (Deputy Chairman) Christoph Bokelmann Ernst Neumeier Dietmar Schmid Achim Vandreike DEUTSCHE BÖRSE LISTING PARTNER