Annual Report 2013/2014. Geschäftsbericht 2013/

Transcription

1 Annual Report 2013/2014 Geschäftsbericht 2013/2014

2 Facts and Figures Profile 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 stocks, bonds, certificates and warrants. Additional business areas include serving as a stock and bond specialist on the Frankfurt stock exchange, Integrated Orderflow Management (IOM), Fixed Income, Designated Sponsoring, Institutional Customer Support, Research, Equity/Debt Capital Markets and investment management for the Steubing German Mittelstand Fund I (SGMF). As of 30 June 2014 the group employed a staff of 64 members. Steubing AG is a member of the Federal Associa - tion of Securities Companies on the German Stock Markets (bwf), the Securities Trading Companies Compensation Fund (EdW), the Frankfurt Institute for Risk Management and Regulation (FIRM), and a supporting member of Frankfurt Main Finance e.v., an initiative designed to strengthen Frankfurt as a financial centre. Result for financial year 2013/2014 (in k) 2012/ /2014 Gross profit before cost of trading 19,913 19,944 Gross profit after cost of trading 17,410 17,483 Result from ordinary activities 1, Net income

3 Preface Dear Shareholders and Business Partners, In the past financial year we have realigned certain aspects of our strategy, and alongside our traditional broker age business in the primary market, we have proceeded to develop our Debt Capital Markets activities as a second area of emphasis. In this business area, we support SMEs in the structuring and placement of bonds. After approximately one year, the initial results in this segment are positive: On behalf of HELMA Eigenheimbau AG ( 25 million plus 10 million top-up), Alfmeier Präzision AG ( 30 million), PORR AG ( 50 million) Vedes AG ( 32 million in total), HanseYachts AG ( 18 million in total) and NZWL Neue Zahnradwerk Leipzig GmbH ( 25 million), we have successfully placed bonds amounting to some 200 million. We also feel it important to emphasise that after carrying out due diligence we have (for the time being) declined to place an almost equal volume simply be - cause the companies concerned still had some ground to make up in terms of financing structure or covenants, or indeed lacked the maturity to enter the capital market. This clearly underscores the caution with which we approach the selection and structuring of new issues. The fact that bonds issued with our support have in some cases been heavily oversubscribed, and the development in prices since they began to be traded, together show that we are pursuing the correct strategy, and that despite the sometimes justified negative press reports in recent months, the market still retains its appetite. We shall therefore continue on our chosen path in the new financial year. The traditional securities trading business has for some years been undergoing radical change. The reasons are many and various - high frequency trading, competition between exchanges, increasing regulation are all familiar topics. Nevertheless Steubing AG continues to qualify as an innovative service provider and system partner to major institutions. Take for example the field of Integrated Orderflow Management (IOM), in which Steubing AG offers integrated support for the entire order process from placement through to innovative clearing and settlement solutions. In recent months IOM-supported trading volumes have steadily increased. Strategies require committed staff to implement them. And in order to retain high-achieving staff, it is essential for our company to offer an appropriate ratio of fixed and variable remuneration. Since January 2014, under the terms of the German Banking Act, the variable component may not exceed 100% of fixed compensation. However with the consent of the Annual General Meeting, the ratio may be increased to 200%. At the forthcoming AGM in December 2014, Steubing AG intends to put forward such a proposal in order to ensure that the company is not placed at any competitive disadvantage, but also to avoid personnel downsizing in times of weak turnover. It has long been the policy of Steubing AG to allow customers, employees and shareholders each to enjoy an appropriate share in the company s success. Our proposal this year to pay a dividend to our shareholders in the amount of 50 cent per share is very much in this tradition. It must be borne in mind that our net income of 600,000 would have been higher, were we not compelled by regulatory requirements to allocate the sum of 839,000 to a separate item heading for the General Banking Risk Fund. Since this fund is similar in character to equity capital, we consider it reasonable in return to defray the cost to some extent out of capital reserves. The underlying bases for a successful financial year in 2014/2015 are in no way put at risk, given that our equity ratio on the qualifying date of 30 June 2014 still stood at a comfortable 87.2%. In conclusion we would like to thank our employees for their endeavours in the past financial year. Day in, day out, in 2014/2015 the team at Steubing AG will once again deploy its skills and stamina in support of the company s success. Yours sincerely, The Management Board Alexander Caspary Kai Jordan 29

4 Balance Sheet as of 30 June 2014 ASSETS EUR Fiscal Year EUR Prior Year EUR k 01. Cash reserve a) Cash on hand 20, , Receivables from banks a) Payable on demand 33,480, ,068, b) Other receivables 3,303, ,784, ,301, Receivables from customers 293, , thereof: Financial services institutions EUR 0.00 (EUR ) 04. Shares and other variable-yield securities 1,030, ,050, Trading assets 3,101, ,615, Equity investments 171, , thereof: in financial services institutions EUR 0.00 (EUR 5,000.00) 07. Intangible assets a) Purchase franchises, industrial and similar rights and assets and licenses in such rights and assets 107, , Property and equipment 395, , Other assets 1,913, ,101, Prepaid expenses 225, , Excess of covering assets over pension and similar obligations 150, , Total assets 44,192, ,593,

5 Balance Sheet as of 30 June 2014 LIABILITIES AND EqUITY EUR Fiscal Year EUR Prior Year EUR k 01. Liabilities to banks a) Payable on demand 1,583, , Trading liabilities 1,062, , Other liabilities 1,585, ,872, Provisions a) Tax provisions 614, , b) Other provisions 773, ,387, , Fund for general banking risks 3,384, ,546, thereof allocation pursuant to Sec. 340e (4) HGB 837, Equity a) Subscribed capital 11,350, ,350, b) Capital reserves 20,989, ,217, c) Net retained profit 2,850, ,189, ,700, thereof profit carryforward EUR ,00 (prior year: EUR ,00) Total liabilities and equity 44,192, ,593,

6 Income Statement for the Period of 01 July 2013 to 30 June 2014 EUR Fiscal Year EUR Prior Year EUR 01. Interest income from a) Lending and money market business 14,334,390 25, Interest Expenses 9, , , , Current income from a) Shares and other variable-yield securities 70, , b) Equity investments 3, , , , Commission income 13,554, ,171, thereof: a) Brokerage income EUR 1,690, (prior year EUR 1,816,026.10) 05. Commission expenses 4,817, ,631, thereof: 8,737, ,539, a) Brokerage expenses EUR 2,517, (prior year EUR 2,578,722.89) 06. Income from trading book positions 14,492, ,132, thereof: a) Securities EUR 12,563, (prior year EUR 13,673,204.16) b) Price differences from name-to-follow transactions: EUR 1,928, (prior year EUR 458,891.55) 07. Expenses from trading book positions 6,113, ,773,992,71 thereof: a) Securities EUR 4,550, (prior year EUR 3,554,768.78) b) Options EUR 0.00 (EUR 50,001.00) c) Price differences from name-to-follow transactions EUR 1,563, (EUR 169,222.93) 08. Other operating income 308, , thereof: income from foreign currency translation: EUR 9, (EUR 0.00) 09. General and administrative expenses a) Personnel expenses aa) Wages and salaries 6,475, ,490, ab) Social security, pension and other benefit costs 871, , thereof: for old-age pensions EUR 236, (EUR 179,179.65) Total personnel expenses 7,347, ,256, b) other administrative expenses 7,403, ,991, ,751, ,248, Amortization, depreciation and write-downs of intangible assets and property and equipment 172, , Other operating expenses 107, , thereof: expenses from foreign currency translation: EUR 3, (EUR 0.00) amount carried over 2,464, ,903,

7 Income Statement for the Period of 01 July 2013 to 30 June 2014 EUR Fiscal Year EUR Prior Year EUR amount carried over 2,464, ,903, Write-downs and allowances on receivables and certain securities as well as allocations to provisions for possible loan losses , Write-downs of and allowances on equity investments, shares in affiliates and securities classified as fixed assets 9, , Allocations to the fund for general banking risks Sec. 340e HGB 837, ,035, Result from ordinary activities 1,617, ,836, Income taxes 1,019, ,071, Net income 597, , Profit carryforward from the prior year 25,000 25, Appropriation of the capital reserves 2,227, ,910, Net retained profit 2,850, ,700,

8 Notes of Wolfgang Steubing AG Wertpapierdienstleister, Frankfurt am Main, for the fiscal year from 1 July 2013 to 30 June 2014 I. General Information on the Financial Statements and the Accounting and Valuation Policies The reporting period is the fiscal year from 1 July 2013 to 30 June Securities trading banks must comply with the supplementary regulations for certain types of businesses in accordance with Sec. 340 et seq. HGB [ Handelsgesetzbuch : German Commercial Code]. These financial statements were prepared in accordance with these regulations, in particular Sec. 340 (4) and Sec. 340a HGB. Reference is made to the RechKredV [ Verordnung über die Rechnungslegung von Kreditinstituten : German Bank Accounting Directive] dated 11 December 1998 regarding the forms mentioned in Sec. 340a (2) Sentence 2 HGB. The regulations of Sec. 252 et seq. HGB were applied in determining the carrying values of assets and liabilities. Following these regulations, items were valued at acquisition or production cost unless a lower value had to be stated in accordance with commercial law. Cash reserves, receivables from banks and customers and other assets are stated at nominal value. No bad debt allowances were necessary. Shares and other variable-yield securities held for investment purposes were valued in accordance with Sec. 253 (1) HGB. Financial instruments held for trading were stated at fair value less a risk discount in accordance with Sec. 340e (3) HGB. The special item Fund for general banking risks was set up pursuant to Sec. 340e (4) HGB. Equity investments were carried according to the modified lower of cost or market principle, being stated at either acquisition cost or, in case of permanent impairment, at the lower market value on the balance sheet date. Depreciation of fixed assets subject to wear and tear was charged over their useful lives. Details of depreciation can be found in the enclosed statement of changes in fixed assets. Low-value assets acquired in 2013/2014 with a value of up to were written off immediately. The Institution used the option under Sec. 6 (2a) EStG [ Einkommensteuergesetz : German Income Tax Act] and recognized a collective item for movable assets costing between and 1, that are subject to wear and tear. This item will be depreciated on a straight-line basis over a period of five years. Prepaid expenses contain expenditure before the balance sheet date that relates to the next reporting period. Liabilities are stated at the settlement value. Provisions for uncertain liabilities were set up at the settlement value according to prudent business judgment. Pension commitments were valued on the basis of Prof. Klaus Heubeck s 2005 G mortality tables. There are no provisions with a residual term of more than one year that would be discounted pursuant to Sec. 253 (2) HGB. Assets and liabilities denominated in a foreign currency are disclosed using the reference rates of the European Central Bank on the balance sheet date. They are valued in accordance with Sec. 340h HGB. The regulations in Sec. 340f and Sec. 340g HGB were not applied. In accordance with Sec. 340e (4) HGB, the legally prescribed share of 10% of net income from trading book positions was allocated to the reserve pursuant to Sec. 340g HGB. 34

9 Notes II. Notes to the Balance Sheet 1. Receivables from banks The receivables include accrued interest as of 30 June They are due in less than three months. Time deposits of 3,562k have been pledged as collateral for the rental, exchange and other guarantees issued by banks To secure the claims under the clearing and settlement agreements, the Institution granted CACEIS Bank Deutschland GmbH a contractual right of lien on its trading and custody accounts maintained by this bank. 24,061k was kept on these accounts as of the balance sheet date. 2. Shareholdings in accordance with Sec. 285 No. 11 HGB Consultores Corporate Finance AG, with registered office in Haibach: Share of capital held 20.75% Capital stock 60, Book value 18, Result as of 31 December , SDB Steubing Derivates Brokerage GmbH, with registered office in Bad Homburg v.d.h.: Share of capital held 49.90% Capital stock 150, Book value 152, Result as of 30 June , Statement of changes in fixed assets The statement of changes in fixed assets as of 30 June 2014 was prepared in accordance with Sec. 268 (2) HGB and Sec. 34 (3) RechKredV. The statement of changes in fixed assets is attached as an exhibit. 4. Breakdown of listed and unlisted securities in Balance sheet item Listed Unlisted Debt securities and other fixed-income securities Shares and other variable-yield securities ,030, Trading assets 3,101, Trading liabilities 1,062, Equity investments , Shares in affiliates All but 152, of the securities held can be traded on a stock exchange. The securities included in trading assets exclusively comprise debt securities and other fixed-income securities and shares and other variable-yield securities. The risk discount of 196, was recognized as the difference between unrealized gains and losses from all of the positions reported as financial instruments in the trading book in accordance with IDW AcP BFA 2 section Valuation of negotiable securities at the lower of cost or market One position under shares and other variable-yield securities was recognized at the lower net realizable value, while the rest of this item was valued according to the modified lower of cost or market principle. The entire item Trading book was valued at fair value less a risk discount in accordance with Sec. 340e (3) HGB. 35

10 Notes 6. Investment fund pursuant to Sec. 285 No. 26 HGB (over 10%) The trading book includes the following investmend fund: Name Steubing German Mittelstand Fund Home country Luxembourg Investment objective Bond fund Share value 929, Difference compared with book value 0,00 Dividends Reinvested Restrictions on daily redemption None 7. Property and equipment Office equipment, furniture and fixtures are valued at 395, Treasury shares On 10 December 2009, the shareholder meeting, pursuant to Sec. 71 (1) No. 7 AktG [ Aktiengesetz : German Stock Corporation Act], authorized the Institution, following the commencement of trade in the Institution s shares on a German stock exchange, to buy and sell treasury shares for trading purposes at prices that are not 10% higher or lower than the share s average closing price as quoted by the electronic trading system of the Frankfurt Stock Exchange (Xetra closing price) or a successor system on the three previous trading days. The shares acquired for this purpose may not exceed 5% of Steubing AG s capital stock at the end of any calendar day. The authorization was issued for a period of five years, beginning on the day the resolution was passed. This authorization was not used during the fiscal year. Furthermore, the shareholder meeting authorized the Institution (in accordance with Sec. 71 (1) No. 8 AktG) to buy and sell treasury shares at market conditions for other purposes. At market conditions means that once trade in the Institution s shares has commenced on a German stock ex change, the purchase or sale prices on the three previous trading days may not be more than 10% above or below the share s average closing price on XETRA. At market conditions before the commencement of trade means that the shares may be bought or sold at prices in line with a valuation system developed by a recognized audit firm, and that these prices do not exceed or fall below such values by more than 10%. The shares acquired for this purpose may not exceed 10% of the Institution s capital stock at the end of any day. The aim is to put the Institution in a position to acquire, when appropriate, businesses or investments by making a payment in kind (shares in the Institution) rather than by paying cash. For this reason, the shareholders statutory right to subscribe was excluded. No shares were purchased or sold in the reporting period. 9. Other assets Other assets comprise: EUR k Corporate income tax refund 1,106 Trade tax refund 802 Receivables from other investees and investors 3 Other receivables 2 Total 1, Excess of covering assets over pension and similar obligations The pension provision was offset against the employer s pension liability insurance as follows: EUR k Pension provision under the BilMoG (settlement value) 673 Employer s pension liability insurance (fair value) 823 Balance after offsetting

11 Notes The calculation was based on the 2005 mortality tables of Prof. Heubeck using the projected unit credit method (PUCM) and an interest rate of 4.99%. Pension and salary increases are not taken into account as the pension commitment is for a fixed amount. 11. Statement of changes in provisions A statement of changes in provisions is enclosed as an exhibit. 12. Other liabilities Other liabilities are as follows: EUR k Bonus liabilities FY 2013/2014 1,265 Liabilities to suppliers 189 VAT 128 Other 3 Total 1, Capital Stock The Institution s capital stock is held solely in the form of bearer shares. It is divided into 5,675,000 no-par shares. The capital stock of 11,350, is fully paid in. 14. Shares per class At the balance sheet date, the Company s capital stock was divided into 5,675,000 no-par bearer shares. 15. Allocations to and appropriation of reserves in EUR k 01 July 2013 Allocations Appropriation 30 June 2014 Capital reserves 23, ,227 20,990 Revenue reserves Legal reserve Reserve for treasury shares Total 23, ,227 20, Schedule of times to maturity in accordance with Sec. 340d HGB in conjunction with Sec. 9 RechKredV in k The time to maturity breaks down as follows: Total Up to three Three months One to five More than months to one year years five years Other receivables from banks 3,304 3, Debt securities and other fixed-income securities Receivables from customers Foreign currency The total amount of receivables from banks denominated in foreign currency is 55,903.36; foreign currency liabilities to banks amount to 515, The carrying values are calculated using the mean spot exchange rate on the balance sheet date. 37

12 Notes The total amount of receivables from customers denominated in foreign currency is 55,736.59; other foreign currency liabilities amount to The carrying values are calculated using the mean spot exchange rate on the balance sheet date. 18. Proposal for the appropriation of profit Proposal by the Management Board to the Supervisory Board for the appropriation of net retained profit in accordance with Sec. 170 (2) AktG: The management board proposes that the Company s net retained profit of 2,850, be appropriated as follows, subject to the resolution of the shareholder meeting: Distribution to the shareholders ( 0.50 per share) 2,837, Less dividends on treasury shares 0.00 Allocation to the revenue reserves in accordance with Sec. 58 (3) Sentence 1 AktG 0.00 Profit carryforward to new account 12, Net retained profit as of 30 June ,850, Derivatives The Institution had no derivatives as of the balance sheet date. 20. Contingent Liabilities There are no contingent liabilities pursuant to Sec. 251 HGB. III. Notes to the Income Statement 1. Amortization, depreciation and write-downs Amortization, depreciation and write-downs are disclosed in the statement of changes in fixed assets attached as an exhibit. 2. Other significant items Other operating income and Other operating expenses do not contain any significant items. 3. Breakdown of income taxes All income taxes are attributable to ordinary business activities. 4. Deferred taxes Taking into account all differences between the statutory balance sheet and the tax accounts and the comparison of the resulting deferred tax assets and deferred tax liabilities, the Institution has net deferred tax assets. The tax rate used for the valuation was 31.1%. The Institution did not make use of the option under Sec. 274 (1) HGB to recognize net deferred tax assets. 5. Auditor s fees The total auditor s fees charged for the fiscal year break down as follows: a) Audit services k 100 b) Audit-related services (Sec. 46 WpHG) thereof for the prior year: EUR 5k k 25 c) Other services k 1 38

13 Notes IV. Other Notes 1. Management Board The following individuals are members of the Institution s management board: Alexander Caspary, information technology graduate, Frankfurt am Main Kai Jordan, banker, Neu Isenburg Mr. Kai Jordan is a general manager of SDB Steubing Derivatives Brokerage GmbH. In addition, Mr. Jordan is a member of the management board of the bwf [ Bundesverband der Wertpapierfirmen e. V. : Federal Association of Securities Trading Firms] and a member of the supervisory board of Consultores Corporate Finance AG. The total remuneration of management in the reporting period amounted to 778k. The total remuneration of the former members of management amounted to 148k in the fiscal year. The pension provisions recognized for former members of management stood at 673k as of 30 June Supervisory Board The following individuals are members of the supervisory board: Wolfgang Steubing, banker, Frankfurt am Main (Chairman) Frank Wiebols, former attorney/notary, Frankfurt am Main (Deputy Chairman) Ernst J. Neumeier, tax advisor/legal counsel, Maintal Christoph Bokelmann, Managing Partner of Christoph Bokelmann GmbH, Frankfurt/Main Achim Vandreike, former mayor, Frankfurt am Main Dietmar Schmid, Chairman of the Supervisory Board of BHF Bank AG, Frankfurt/Main Total remuneration for fiscal year 2012/2013 paid in the reporting year was 149, Off-balance sheet obligations Pursuant to Sec. 251 HGB: As of balance sheet date, there were no liabilities as defined by Sec. 251 HGB that had not been accounted for in the balance sheet. Other off-balance sheet obligations: As of 30 June 2014, there were obligations from rental agreements for office space and garages, as well as from leases. As of the balance sheet date, the total obligation was 584, The contracts have an average term of 16 months. 4. Average Number of Employees 64 persons were employed on average in fiscal year 2013/ Equity investments requiring disclosure There are no equity investments requiring disclosure as defined under Sec. 160 (1) No. 8 AktG. Frankfurt am Main, Germany, September 2014 Management Board of Wolfgang Steubing AG: Alexander Caspary Kai Jordan 39

14 Statement of Changes in Fixed Assets as of 30 June 2014 (Gross) Acquisition and Additions Reclassifications Accumulated Amortization, Book value Book value production costs Disposals amortization, depreciation and depreciation and write-downs write-downs Write-ups from 01 July July June 2014 to 30 June June June 2013 EUR EUR EUR EUR EUR EUR EUR Software 182, , Vehicles 117, , , Office equipment, fixtures and fittings 1,149, , , , , Office equipment, fixtures and fittings 4, , formerly Hamburg IT equipment 800, , , , , , , IT equipment formerly Hamburg 7.819,13 7, Standard software 478, , , , , , Leasehold improvements 1,057, ,032, , , Low-value assets 23, , , , , Low-value assets collective item 60, , , , ,484,00 25, , Equity investments 176, ,57 176, Profit-sharing securities 1,855, , ,030, ,050, ,914, , ,150, , ,704, , ,

15 Statement of Changes in Provisions in Fiscal Year 2013/ July 2013 Utilization Reversal Allocation 30 June 2014 EUR EUR EUR EUR EUR 1. Pensions provisions Tax provisions Trade tax 280, , , Corporate income tax 261, , , , , , Other provisions Bookkeeping expenses 62, , , , EDW allocation 1, , , , Other expenses, London branch Vacation entitlements 31, , , , Other 544, , , , , Audit and financial statement costs 203, , , , , , , , , , ,383, , , , ,387,

16 Management Report of Wolfgang Steubing AG Wertpapierdienstleister, Frankfurt am Main, for the fiscal year from 1 July 2013 to 30 June 2014 I. General The Institution was established as Wolfgang Steubing GmbH in Its name was changed to Wolfgang Steubing AG Wertpapierdienstleister (hereinafter Steubing AG) by notarized deed dated 28 January This change of legal form became effective upon entry in the commercial register on 25 May 1999 under HRB no The Institu tion has qualified as a securities trading bank since January 2000 and has a dependent branch office in Frankfurt am Main, Börsenplatz 4, which is not registered in the commercial register. The Institution s core business is trading in and electronic order routing for listed equities, bonds, certificates and warrants. Steubing AG acts as a broker on all German stock exchanges, enables orders to be executed on XETRA and has direct online access to approximately 50 international trading venues. The Institution has many years experience in trading foreign shares. Its other business areas are: Acting as a specialist for shares and bonds on the Frankfurt Stock Exchange, including ensuring that around 950 domestic and foreign equities are liquid and readily tradable on the XETRA platform. Integrated order flow management (IOM) featuring integrated management of the entire order process from order placement all the way through to innovative clearing and settlement solutions. Designated sponsoring, for which Steubing AG has consistently received the highest ranking (AA) to date. Bondinvest as an off-exchange bond trading platform ( on which over 3,000 corporate, bank, government and sovereign bonds are constantly listed and offered for trading. Institutional customer business comprising a wide range of services for institutional investors, international banks and trading desks, from organizing roadshows through to placing new issues. Research including macroeconomic analyses, corporate and industry reports from the steel, electronics, mechanical engineering, industrial and automotive sectors as well as daily morning news. Equity capital markets, where Steubing AG independently and expertly helps small and medium-sized companies prepare and implement IPOs and capital increases. Debt capital markets, providing end-to-end process support for issuing SME bonds, from assessing capital market maturity through coordinating the documentation and approaching investors to placement and the start of trading in the bonds. Investment management services for Steubing German Mittelstand Fund I (SGMF). Steubing AG is a member of the bwf [ Bundesverband der Wertpapierfirmen e.v. : Federal Association of Securities Trading Firms], the EdW [ Entschädigungseinrichtung der Wertpapierhandelsunternehmen : Compensatory Fund of Securities Trading Companies], the FIRM [ Frankfurter Institut für Risikomanagement und Regulierung : Frankfurt Institute for Risk Management and Regulation] and is a sponsoring member of Frankfurt Main Finance e.v., an initiative to strengthen Frankfurt as a financial center. 42

17 Management Report II. Business Performance Steubing AG closed the fiscal year with net income of 597, The result reflects the ongoing difficult conditions in the traditional securities trading and brokerage business as well as increased costs for trading systems, administration and regulation. The result includes the legally prescribed allocation to the fund for general banking risks of 837, The fiscal year provided further evidence of the discrepancy between index performance and turnover. Although the DAX index of leading German shares cracked the magical 10,000-point mark for the first time on 9 June 2014 and all indices were recorded substantial gains (including MDAX up 22.68%, TecDAX up 38.14%), trading turnover remained at prior levels. This was the case with XETRA (up 4.7% to 2.19b) as well as floor trading at the Frankfurt Stock Exchange (down 2.17% to 214.7b). The two platforms are suffering from the global trends, with more and more securities trading activities taking place in dark pools, internal systems of major institutions and on alternative platforms. Despite this tense situation that has prevailed for several years, Steubing AG s securities trading segments also have good news to report. Integrated order flow management continues to record growth in the transaction volumes managed for affiliated institutions. Specialist trading was able to buck the trend, increasing turn over in the managed order books by around 30%. In addition, Steubing AG slightly increased the number of designated sponsor mandates. In derivatives trading, the costs of Steubing Derivatives Brokerage GmbH were re - duced further. The new strategy initiated last year in the capital markets business was also successful. In its debt capital markets (DCM) segment, Steubing supports companies in structuring and placing bonds. Even though the SME bonds segment is subject sometimes justifiably to public criticism, our Institution was able to place a volume totaling EUR 200m since September Four further issues were made in the second half of the fiscal year: Neue ZWL Zahnradwerk Leipzig GmbH ( 25m), HELMA Eigenheimbau AG ( 10m, tap issue), HanseYachts AG ( 13m) and VEDES AG ( 20m). This underlines that the market is receptive to carefully selected and structured issues, as is confirmed by the in some cases high level of oversubscription of the transactions as well as by the good price performance of the bonds. The majority of the bonds in each transaction went to institutional investors. We do not view the SME bond as a rival product to the traditional bank loan, but as an addition to the financing mix of equity and debt. This also applies to some of the issuers that we serve. In the future, the interlinking of equity capital markets (ECM) and DCM will continue to gain in importance. This trend is confirmed by transactions such as those of HELMA Eigenheimbau AG, which, along with the tap bond issue, carried out a capital increase ( 6.8m) with our help. We will continue to focus in particular on careful selection and structuring of issues, as the environment in this market will likely remain turbulent for the time being due to problems with older issues. Steubing German Mittelstand Fund I (SGMF I) was unable to fully escape this turbulence, but its price was able to recover from its low in March We want to continue making our contribution to developing and professionalizing the market through our activities. III. Economic Situation Financial position The financial position of Steubing AG was excellent and in order at all times. As of the balance sheet date, the Institution had cash and cash equivalents of EUR 36,804k with equity at EUR 35,189k and the fund for general banking risks at EUR 3,385k. This makes Steubing AG one of the financially strongest securities trading banks in Germany. 43

18 Management Report Results of operations Gross profit after trading costs increased by 0.44% from EUR 17,410k to EUR 17,486k. Net commission income increased by 33.6%, while interest and investment income was 43% lower than in the prior year due to current in - ter est rate levels. Net income from trading book positions was down by 19% in the fiscal year. Other operating in - come fell by 27%. As general and administrative expenses were only 4% higher than the prior year, the result from ordinary activities was merely around 12% lower year on year. The net income for the year decreased from 765k to 598k. Net assets Assets and liabilities were valued in accordance with the relevant legal provisions. Nearly all assets can be liquidated at short notice. As of 30 June 2014, the Institution reported capital stock of 11,350k and capital reserves of 20,990k. Equity, in - cluding net retained profit and the fund for general banking risks, thus came to 38,574k in total as of 30 June This translates into an equity ratio of 87.2% as of the balance sheet date. Based on the net retained profit of 2,850k, the management and supervisory boards plan to propose to the shareholder meeting in Frankfurt in December 2014 a dividend of 0.50 for fiscal year 2013/2014 (prior year: 1.00). IV. Employees Personnel expenses increased from 7,256k in the prior year to 7,347k in fiscal year 2013/2014 (up 1%). The number of employees including the management board and three temporary staff members increased from 63 to 64 in the reporting year. As of 30 June 2014, 25 persons were employed in trading and broking, and 9 in sales and sales trading; there were 11 back office employees and 5 IT staff members. Three employees worked in research and three worked in investor/public relations/financial portfolio management. There were a total of five employees in the internal audit and capital markets segments. Training was offered and provided to all employees. V. Risks As a securities trading bank and specialist, Steubing AG is subject to external supervision by BaFin [ Bundesanstalt für Finanzdienstleistungsaufsicht : Federal Financial Supervisory Authority] and Deutsche Bundesbank. The Institution has set up various control mechanisms in order to manage and control limit compliance and the risk structure of its positions at all times. To meet its organizational duties, the Institution has set up an internal audit function to monitor the various areas and appointed an anti-money laundering officer. Counterparty credit risk Counterparty credit risks can arise from own positions held as well as from receivables from customers or counterparties. Since Steubing AG settles transactions quickly, the notional counterparty credit risk in the trading book in accordance with the SolvV [ Solvabilitätsverordnung : German Solvency Ordinance]/CRR is regularly less than 3% of capital. The counterparty credit risk in the banking book is limited by the fact that only positions with good fu - ture growth prospects are entered into. Moreover, management continually monitors the positions and their devel - opment. 44

19 Management Report Market risk Market risk in trading can arise as price risks in proprietary trades or own positions from name-to-follow transactions. These risks are monitored by the risk management team during trading hours and kept to a minimum. The notional market risk in accordance with the SolvV/CRR in the trading book at the close of daily trading therefore averaged only 3% to 4% of capital. Liquidity risk Liquidity risks are continually monitored by risk control and taken into account in calculating capital requirements. 60% to 80% of Steubing AG s assets regularly comprise receivables from other banks which themselves have ratings ranging from good to very good. The receivables are payable on demand. Liabilities due within one year, on the other hand, only amount to 12% of total liabilities and equity. The liquidity ratio in accordance with the LiqV [ Liquiditätsverordnung : German Liquidity Ordinance] is on average around 10, i.e., the sum total of cash and cash equivalents is on average 10 times greater than the payment obligations. As long as these ratios are maintained, the liquidity risk is mathematically insignificant. Risk management The Institution uses modern IT technology to monitor positions. Limits are set for each trader. Positions are monitored several times a day and are reduced immediately if the limits are exceeded. General market risks, which exist at all times even in highly volatile markets, are minimized and mitigated by means of the specified limits and fast execution times. The aggregate risk is limited by continuous controls by the management board. Where banking book positions have been taken, the corresponding securities are subject to continual evaluation in the form of an analysis of the quarterly reports and general information on the respective companies. Contingency planning Several backups are made of all data, and in some cases data are also stored externally. Alternative equipment is available for use at all times in the event of a disruption to the computer systems. Operational risk Given the Institution s good human and technical resources, provision has been made for internal operational risks. The main external risks are failures of stock exchange systems, which have occasionally occurred in the past. The Institution also avoids risks as far as possible by having a diversified customer base. Derivative financial instruments No transactions involving options and futures were executed in the reporting period. VI. Anticipated Development of the Company After a very good first quarter, growth weakened in Germany. This applies in particular to the construction sector, which had benefited from the mild winter weather in the first quarter. The eurozone will play a key role in the rest of the year. In the first four months of this year, the value of exports to the eurozone increased by 3.9% to 157.8b, which corresponds to a share of 42.3% in total exports. This clearly shows that even a small recovery in the eurozone is sufficient to immediately boost demand for German goods. After the outbreak of the financial crisis, the share of exports to the eurozone decreased steadily. Previously, this weakness was more than compensated by exports to the BRIC countries (Brazil, Russia, India and China) and to NAFTA (North American Free Trade Agreement). In the first four months of this year, exports to the BRIC countries 45

20 Management Report fell by 1.5% to 40b due to Russia: in the same period, the value of exports to the Russian Federation declined by 14% to 10.3b. A further decline has to be factored in. We expect further declines as a result of additional, tighter sanctions against Russia due to the escalation of the crisis in the Ukraine, the worst occurrence to date being the shooting down of a passenger plane. These will probably not be offset by the positive development of exports to China. However, we expect the shortfalls of revenue from the BRIC countries will be compensated by higher exports to NAFTA. This is due in particular to the US, which buys around 85% of the goods shipped to NAFTA. As a result of the prolonged and harsh winter conditions at the beginning of this year, growth in German exports to this region was muted in the first few months. This situation has now changed. In May, the growth rate amounted to an impressive 10.5% year on year. The figure reached EUR 7.5b, virtually on a par with the value of exports to Russia in the first four months. Growth in the US is set to accelerate further. Unemployment has fallen to 6.1%, while the number of people in employment has exceeded the level that prevailed before the financial crisis. Inflation is once again 1.8% (Person - al Consumption Expenditure Price Index). A further increase cannot be ruled out. This year, the geographically balanced structure of German exports will therefore once again mean that the weak - nesses of individual buying countries will be more than offset by the strengths of other buying countries. Overall, we expect an increase in Germany s real gross national product of 2.3% in the current year. However, this forecast may be jeopardized by an escalation of the crisis in the Ukraine. For the most part, the stock markets have already factored in the improved growth prospects, which have also driven up profit expectations for German companies. Based on the profit estimates for this year (source: Bloomberg), the German stock index has almost reached its fair value. Investors will therefore increasingly look ahead to next year. The management boards of German companies have not yet taken it upon themselves to issue an outlook for Hopefully they will do so when they announce their profits for the second quarter. From an economic perspective, the coming year is likely to be even better than the current year, so higher stock quotations can be expected. The trend on the bond markets will be different. The good or even better than expected economic development in the US will force the Federal Reserve (Fed) to adjust its monetary policy earlier than expected. In October, the Fed s program of purchasing government bonds and mortgage-backed bonds will end. The Fed is then expected to raise basic interest rates six months later. We expect such an increase as early as this year. The Fed has continually ad - justed the targets intended to trigger a change in its monetary policy. Its initial guidance was that interest rates would be raised once unemployment falls below 6.5% or the cost of living exceeds 2%. Later, when unemployment was approaching the 6.5% mark, the Fed replaced the or with an and. With the cost of living now approaching the 2% threshold, the Fed is saying provided that inflation expectations continue to be well anchored at 2.5%. The air is slowly getting thinner for the Fed. It has to send out a signal in order to retain the confidence of market participants. This can only entail an interest rate change in order to begin adjusting monetary policy to reflect the advanced growth. This will lead to lower prices on the US bond markets with the result that long-term interest rates will continue to normalize. In Europe, short-term interest rates will remain low. Unemployment is still much too high and thus inflation is too low. However, higher long-term interest rates in the US will also lead to a gradual normalization of yields in Europe. The expansion of the institutional customer service and bond trading business segments was the focus of the first few months of the new fiscal year. Steubing AG added three new employees to the research segment. From now on, the Institution will have up to 50 companies on the coverage list in the old economy segment focusing on the steel and electronics sectors. New products such as Steubing View are designed to increase added value for institutional customers. It is also planned to expand the in house credit research function. Last but not least, Steubing AG has organized another investor conference in Zurich in cooperation with Deutsche Börse AG and youmex AG. Companies such as ThyssenKrupp AG, Aixtron SE and PORR AG with interesting stocks and bonds will give presentations at the conference on 7 October. In the bond trading segment, Steubing AG has intensified its marketing efforts concerning the off-exchange Bondinvest trading platform. Five order flow providers are now connected to Bondinvest, and Steubing AG is in the nego- 46

21 Management Report tiation process with additional institutions. The product range has been extended to over 3,000 bonds, which are traded via a quote request procedure. The internet platform will be relaunched in the next few months in order to make Bondinvest even more attractive for the order flow providers end customers. The debt capital markets segment also began the new fiscal year with an operating success. A successful tap issue of the Gebr. Sanders GmbH & Co. KG bond was made in a private placement. Further mandates are in the preparation stage. In the regulatory arena, Steubing AG successfully implemented the requirements set out by the Capital Requirements Directive (CRD) related to Basel III. The next topic on the agenda will pertain to the reform of the EU Markets in Financial Instruments Directive (MiFID). The EU s objectives include harmonizing the financial markets, expanding transparency requirements and improving investor protection. The creation of new regulatory guidelines in connection with trading in dark pools and algorithmic and high frequency trading could very well give rise to opportunities for Steubing AG. The ESMA consultation phase ended on 1 August. The EU member states have been instructed to implement MiFID II by 3 July The EdW [ Entschädigungseinrichtung der Wertpapierhandelsunternehmen : Compensatory Fund of Securities Trading Companies] will also impose new regulations with effect from 22 July This will entail a modification of contribution regulations and have an impact in particular on future special contribution levies. This is the EdW s response to the strategy pursued by a number of members of keeping the special contributions for general banking risks as low as possible through a voluntary increase in the fund. Steubing AG, which traditionally has a conservative strategy, was unaffected by this. For the current levy, a request was made to set the next special contribution at the minimum amount. VII. Significant Events (after 30 June 2014) No events of significance for the Company occurred after the balance sheet date. 47

22 Audit Opinion We have audited the annual financial statements, comprising the balance sheet, the income statement and the notes to the financial statements, together with the bookkeeping system, and the management report of Wolfgang Steubing AG Wertpapierdienstleister, Frankfurt am Main, for the fiscal year from 1 July 2013 to 30 June The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with German commercial law are the responsibility of the Institution s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the management report based on our audit. We conducted our audit of the annual financial statements in accordance with Sec. 317 HGB [ Handelsgesetzbuch : German Commercial Code] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards re quire that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with [German] principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Institution and expectations as to possible mis - statements are taken into account in the determination of audit procedures. The effectiveness of the accountingrelated internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Institution in accordance with [German] principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the Institution s position and suitably presents the opportunities and risks of future development. Eschborn/Frankfurt am Main, 24 September 2014 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Müller-Tronnier German Public Auditor Arlt German Public Auditor 48

23 Report of the Supervisory Board In the past financial year 2013/2014 the Supervisory Board has performed the duties incumbent upon it under the law and in accordance with the articles of association and has regularly, promptly and continuously advised and supervised the management of Steubing AG. The economic situation of the company, its development prospects and investment projects, the market situation, regulatory requirements and all other business matters of material importance have been analysed in detail with the Management Board and internally within the Supervisory Board, in meetings and individual discussions. In addition to numerous discussions between the Supervisory Board Chairman and the Management Board, four ordinary meetings of the Supervisory Board and one Annual General Meeting were held with the following emphases: The focus of the meeting in August 2013 was on the new Debt Capital Markets business area, as well as the decision by Deutsche Börse AG to cease XETRA bond trading. At its meeting in October 2013 the Board adopted the annual financial statements for financial year 2012/2013 and prepared the agenda for the Annual General Meeting which took place in Frankfurt am Main on 12 December In February 2014 the Board discussed the situation of the Steubing German Mittelstand Fund I as well as vari - ous tax issues. Topics at the meeting in Mai 2014 included personnel strategy and the new contribution regulations for the securities trading companies compensation fund (EdW). In a separate meeting the internal audit report for the previous financial year (including risk analysis, accounting and reporting systems and the compensation system) was discussed with the auditor. The Supervisory Board noted the information presented with approval. The annual financial statements of Wolfgang Steubing AG Wertpapierdienstleister including the Management Report and the bookkeeping and reporting systems were audited by the auditors Messrs Ernst & Young GmbH of Eschborn, who on 24 September 2014 awarded a unqualified audit certificate. The auditors clarified the annual financial statements and the audit report with the Supervisory Board at a separate meeting. The Supervisory Board declared upon completion of its examination that it had no objections and approved the annual financial statements and management report prepared by the Management Board. No further resolutions were adopted by the Management and Supervisory Boards. In accordance with Section 172 Sentence 1 of the German Stock Corporation Act (AktG) the annual financial statements were thereby adopted. The Supervisory Board fully endorses the proposal by the Management Board for the appropriation of profit. The Supervisory Board would like to thank the Management Board and all employees of Wolfgang Steubing AG Wertpapierdienstleister for their successful efforts in the past financial year. Frankfurt am Main, 20 October 2014 The Supervisory Board Wolfgang Steubing (Chairman on the Supervisory Board) 49

24 Proposal of the Management Board for Allocation of Profits Pursuant to Sec 170 (2) of the Stock Corporation Act ( AktG ), the Management Board proposes that, subject to the resolution on the allocation of profits by the general shareholders meeting, the profits for the fiscal year 2013/2014 totaling 2,850, be allocated as follows: a) Dividend distribution to the shareholders, Sec. Code ,675,000 shares at ,837, b) Allocation to revenue reserves in accordance with Sec. 58 (3) sentence 1 AktG 0.00 c) Profit carryforward to new account 12, Net retained profit as of 30 June ,850, Frankfurt am Main, Germany, 14 October 2014 The Management Board Alexander Caspary Kai Jordan 50

25 The Company Management Board Alexander Caspary Kai Jordan Frankfurt am Main Frankfurt am Main Supervisory Board Wolfgang Steubing Frank Wiebols Christoph Bokelmann Ernst Neumeier Dietmar Schmid Achim Vandreike Frankfurt am Main (Chairman) Frankfurt am Main (Deputy Chairman) Frankfurt am Main Maintal Bad Homburg Frankfurt am Main Financial Year 01 July to 30 June Contact Goethestrasse Frankfurt am Main Telephone +49.(0) Fax +49.(0) Auditors Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Mergenthalerallee Eschborn 51

26 Steubing AG Goethestraße Frankfurt am Main Telefon Fax info@steubing.com