The Company Management Board. Facts and Figures. Earnings. Pre-Tax Earnings and Surplus 2005/ / / /2006. Dr.

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2 The Company Management Board Wolfgang Steubing Alexander Caspary Dr. Jochen Grossmann Kai Jordan Wolf-Dietrich Martin Supervisory Board Frank Wiebols Ernst Neumeier Christoph Bokelmann Frankfurt am Main Frankfurt am Main Haibach Frankfurt am Main Karben Frankfurt am Main (Chairman) Maintal (Deputy Chairman) Frankfurt am Main Facts and Figures Earnings EUR k Pre-Tax Earnings and Surplus EUR k Pre-Tax Earnings Surplus / , /2006 9,347 4, / , /2007 5,980 4,584 28

3 Introduction Dear Shareholders, dear Business Partners, on 27 June, 2007, we celebrated the 20th company anniversary with numerous guests from the financial world, politics and the press at the Frankfurter Hof. The event was crowned by a speech on the consequences of the globalisation by our guest speaker Mikhail Gorbachev. Steubing AG closed the financial year 2006/2007 with a profit in a continuously highly volatile market. The development of the single branches was varied. As in the past, the subsidiaries in the domestic market developed excellently, whereas the London branch produced a negative result. After due consideration of different strategic options, the Management Board of Steubing AG therefore decided to close the London branch in February The expenses related to this decision had a strong negative impact on the company s pre-tax results, which amounted to 5,980k for the financial year 2006/2007 compared to 9,347k in the previous year. Due to the decreased tax duties Steubing AG s earnings after tax of 4,584k range only slightly below the previous mark of 4,772k. The taxes were calculated taking into account the activation of deferred tax on retained earnings as well as the application of case-law of the European Court of Justice concerning the realization of losses of foreign subsidiaries in the EU following the freedom of establishment and free movement of capital. In addition to the closure of the London branch we have given up our lead broking activities at the Börse München in May 2007 as this was no longer a sufficiently profitable business area. Thanks to our strategy as a diversified and international stock broker we could not only stabilise our position, but were able to achieve positive progress on the market. We will continue this result-oriented strategy in the future. We will expand our offer of international trading possibilities and diversify our business even further. An important element will be the development of our investment banking business. Equally important is the expansion and improvement of our capacities for placement with institutional investors as well as our capabilities in securities research. In terms of research, we focus in particular on small- and middle-sized companies. As a systems and service partner for our clients we are especially committed to a continuous, sustainable stake holder approach and will thus push the expansion and diversification of our business with great care and consideration. We are confident to thus create the right business environment to continue sharing our business success with our shareholders in the required and best way. The Management and Supervisory Boards of Steubing AG plan to propose an increase of the dividend from 0.75 to 0.90 gross per share to the annual shareholder meeting, which will be held on February 08, 2008 in Frankfurt/Main. In the light of the 20th anniversary of Steubing AG we want to give an optimistic outlook to the future with this dividend proposal. We would like to thank all our staff for their contribution and our shareholders and business partners, but in particular our clients, for their continuous trust The Management Board 29

4 Balance Sheet as of June 30, 2007 ASSETS EUR EUR EUR Prior Year EUR k 1. Cash reserve a) Cash on hand 22, b) Balances at central banks thereof: at Deutsche Bundesbank EUR c) Postal giro balances , Public-sector debt instruments an bills of exchange eligible for refinancing with central banks a) Treasury bills and treasury discount notes as well as similar public-sector debt instruments thereof: eligible for refinancing with Deutsche Bundesbank EUR b) Bills of exchange thereof: eligible for refinancing with Deutsche Bundesbank EUR Due from banks a) Payable on demand 38,150, ,173 b) Other amounts due 17,438, ,589, , Due from customers 6,450, thereof: secured by mortgages EUR Municipal loans EUR thereof: from fiancial services institutions 5. Debt securities and other fixed-interest securities a) Money market securities aa) Issued by public bodies thereof: eligible as collateral with Deutsche Bundesbank EUR ab) From other issuers thereof: eligible as collateral with Deutsche Bundesbank EUR b) Bonds and debt securities ba) Issued by public bodies thereof: eligible as collateral with Deutsche Bundesbank EUR bb) From other issuers thereof: eligible as collateral with Deutsche Bundesbank EUR c) Own debt securities Nominal value EUR Shares and other variable-interest securities 1,254, , Equity investments 5, thereof: in banks EUR thereof: in financial services institutions EUR Shares in affiliated companies 55, thereof: in banks EUR thereof: in financial services institutions EUR Trust assets thereof: trust loans EUR Equalization claims on public bodies including amounts exchanged for debt securities Intangible assets 264, Property and equipment 520, , Unpaid contributions to subscribed capital thereof: called in EUR Treasury shares 3,250, ,250 Nominal value/ accounting par value EUR Other assets 2,893, , Prepaid expenses 531, Capital deficit Total assets 70,836, ,362 30

5 Balance Sheet as of June 30, 2007 Equity and Liabilities EUR EUR EUR Prior Year EUR k 1. Liabilities to banks a) Payable on demand 1, ,968 b) With an agreed term or period of notice , Liabilities to customers a) Savings deposits aa) With a statutory period of notice of three months ab) With an agreed period of notice of more than three months b) Other liabilities ba) Payable on demand thereof: to financial services institutions EUR bb) With an agreed term or period of notice thereof: to financial services institutions EUR Securitized liabilities a) Dept securities issued b) Other securitized liabilities thereof: money market securities EUR own acceptances and promissory notes outstanding EUR Trust liabilities thereof: trust loans EUR Other liabilities 10,616, , Deferred income Accruals a) Accruals for pensions and similar obligations 560, b) Tax accruals 1,071, ,868 c) Other accruals 1,503, ,135, , Special item with an equity portion Subordinated liabilities Participation certificate capital thereof: due within two years EUR Fund for general banking risks Contribution paid to effect an approved capital increase Equity a) Subscribed capital 5,675, ,675 b) Capital reserve 41,629, ,629 c) Revenue reserves ca) Legal reserve cb) Reserve for treasury shares 3,250, ,250 cc) Reserves required by articles of incorporation and bylaws cd) Other revenue reserves 1,191, ,441, , d) Retained earnings 5,336, ,082, ,822 thereof profit carryforward: EUR 752, (prior year EUR 50,000.00) Total equity and liabilites 70,836, ,362 Prior year EUR k 1. Contingent liabilities a) Acceptances and endorsements b) Guarantees c) Assets pledged as collateral security for third-party obligations Other obligations a) Commitments arising out of sale and repurchase transactions b) Placement and underwriting commitments c) Irrevocable loan commitments EUR EUR 31

6 Income Statement for the Period of July 1, 2006 to June 30, 2007 EUR EUR EUR Prior year EUR k 1. Interest income from a) Lending and money market transactions 1,632, b) Fixed-interest securities and government inscribed debt ,632, Interest expenses 12, ,619, Current income from a) Shares and other variable-interest securities 894, b) Equity Investments c) Shares in affiliated companies , Income from profit pooling and profit and loss transfer agreements Commission income 16,491, , Commission expenses 8,933, , Net income or net expense from financial transactions a) Income from financial transactions 34,341, ,093 thereof: aa) Securities EUR 25,641, (prior year EUR 34,639,765.32) ab) Futures EUR (prior year EUR ) ac) Options EUR (prior year EUR ) ad) Price differences from name-to- EUR 8,700, follow transactions (prior year EUR 9,454,066.77) 7. b) Expenses from financial transactions 16,279, ,061, ,893 thereof: ba) Securities EUR 15,836, (prior year EUR 20,270,070.27) bb) Futures EUR5.239, (prior year EUR ,525.77) bc) Options EUR (prior year EUR ) bd) Price differences from name-to-eur 203, follow transactions (prior year EUR 253,725.24) 8. Other operating income 507, Income from the release of the special item with an equity portion General and administrative expenses a) Personnel expenses aa) Wages and salaries 11,218, ,852 ab) Social security, pension and other benefit costs 858, ,076, thereof: for old-age pensions EUR , (prior year EUR.07228,009.55) 10. b) Other administrative expenses 8,958, ,035, , Write-downs and adjustments to intangible assets and property and equipment 961, Other operating expenses 664, amount carried over 5,980, ,328 32

7 Income Statement for the Period of July 1, 2006 to June 30, 2007 EUR EUR EUR Prior year EUR k amount carried over 5,980, , Write-downs and allowances on amounts due and certain securities and allocation to provisions for possible loan losses Income from write-ups on amounts due and certain securities and from the reversal of provisions for possible loan losses Write-downs and adjustments to equity investments, shares in affliated companies and securities treated as fixed assets Income from write-ups on equity investments, shares in affiliated companies and securities treated as fixed assets Expenses from loss absorption Allocations to the special item with an equity portion Result from ordinary activities 5,980, , Extraordinary income Extraordinary expenses Extraordinary result Income taxes 1,396, , Other taxes not carried under item ,396, Income from loss absorption Profits transferred under profit pooling and profit and loss transfer agreements Net income / loss for the year 4,584, , Profit carryforward from prior year 752, Withdrawals from the capital reserves Withdrawals from revenue reserves a) From the legal reserve b) From the reserve for treasury shares c) From reserves required by the articles of incoporation and bylaws d) From other revenue reserves , Withdrawals from participation certificate capital Allocations to the revenue reserves a) To the legal reserve b) To the reserve for treasury shares ,250 c) To reserves required by the articles of incoporation and bylaws d) To other revenue reserves Replenishment of participation certificate capital Advance distributions Retained earnings 5,336, ,822 33

8 Notes to the Financial Statements as of June 30, 2007 of Wolfgang Steubing AG I. General Information on the Financial Statements and on the Accounting and Valuation Methods The period under review is the fiscal year from July 1, 2006 to June 30, Securities trading banks, like 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 have been prepared in accordance with these regulations, in particular Sec. 340 (40) and Sec. 340a HGB. Reference is made to the German Bank Accounting Directive [ Verordnung über die Rechnungslegung von Kreditinstituten : RechKredV] dated December 11, 1998 regarding the forms mentioned in Sec. 340a (2) Sentence 2 HGB. The regulations of Sec. 252 et seq. HGB have been applied in determining the carrying values of assets and liabilities. Following these regulations, items were valued at either acquisition cost or production cost unless a lower value had to be stated in accordance with commercial and/or tax law. Cash reserves, amounts due from banks and customers and other assets are stated at nominal value. No valuation adjustments were necessary. Shares and other variable-interest securities held for investment purposes have been valued in accordance with Sec. 253 (2) HGB. Securities held for trading have been valued according to the strict lower of cost or market principle pursuant to Sec. 253 (3) HGB. Equity investments and shares in affiliated companies have been carried according to the modified lower of cost or market principle, being stated at either cost or, in case of permanent impairment, at the lower market value on the balance sheet date. Depreciation on fixed assets subject to wear and tear has been charged over their useful lives on a declining-balance or on a straight-line basis. Details of depreciation can be found in the enclosed statement of changes in fixed assets. The fully amortized start-up and business expansion expenses were recognized as intangible assets in the fiscal year. The prior-year disclosure was also adjusted to facilitate comparison. Low-value assets acquired in 2006/2007 were written off immediately in accordance with Sec. 6 (2) of the German Income Tax Act ( Einkommensteuergesetz : EStG); this amounted to 11, Prepaid expenses contains expenditure before the balance sheet date that relates to the next reporting period. Liabilities are stated at the amount repayable. Accruals for uncertain liabilities are set up in the amount likely to be required according to prudent business judgment. Pension commitments have been valued on the basis of Prof. Klaus Heubeck s 2005 G mortality tables. Assets and liabilities denominated in a foreign currency are disclosed using the reference rates of the European central bank on the balance sheet date. The valuation corresponds to the provisions of Sec. 340 h (2) HGB. The regulations in Sec. 340 f and Sec. 340 g HGB were not applied. 34

9 Notes II. Notes to the Balance Sheet 1. Due From Banks The amounts due include prorated interest as of June 30, They are due in less than three months. Time deposits of 3,718k are pledged as collateral for the rental and exchange guarantees issued by banks. To protect the claims under the clearing and settlement agreements, the Company granted HVB a contractual right of lien on the trading and custody accounts maintained by this bank. 34,180k was kept on these accounts as of the balance sheet date. 2. Due From Customers The amounts due from customers relate to the cash capital increase of a customer which was supported by Wolfgang Steubing AG. It was settled at the beginning of July Equity Investments Sec. 285 No. 11 HGB Mars Siebenundreissigste Vermögensverwaltungs AG, with registered office in Frankfurt am Main, Germany: Share of capital held % Share capital 50, Book value 55, Result as of December 31, Statement of Changes in Fixed Assets The statement of changes in fixed assets as of June 30, 2007 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. 5. Breakdown of Listed and Unlisted Securities Balance sheet item Listed Unlisted Shares and other variable-interest securities 249, ,005, Equity investments 5, Shares in affiliated companies 55, All but 5, of the securities qualify for trading on a stock exchange. 6. Valuation of Negotiable Securities at the Lower of Cost or Market The entire item shares and other variable-interest securities was valued according to the strict lower of cost or market principle. 7. Property and Equipment Fixtures, fittings and office equipment are valued at a total of 520,

10 Notes 8. Treasury Shares On December 14, 2006, the shareholder meeting, pursuant to Sec. 71 (1) Nr. 7 AktG [ Aktiengesetz : German Stock Corporation Act], authorized the Company, following the commencement of trade in the Company s own shares on a German stock exchange, to buy and sell treasury shares for the purpose of trading at prices that do not exceed or fall below 10% of the closing price of the share as quoted by the electronic trading system of the Frankfurt Stock Exchange (Xetra closing price) or a successor system on three prior trading days. The portfolio of the shares acquired for this purpose may not exceed 5% of Steubing AG s share capital at the end of any calendar day. The authorization was issued for a period of 18 months, beginning on the day the resolution was passed. This authorization was not used during the fiscal year. Furthermore, on January 27, 2005, the shareholder meeting authorized the Company in accordance with 71 Sec. 1 (8) AktG to buy and sell treasury shares at market conditions for other purposes. At market conditions means that following the commencement of trade in the Company s own shares on a German stock exchange, the purchase or sale prices on the three previous trading days may not be more than 10% above or below the average XETRA closing price of the share. 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 auditing firm, and that these do not exceed or fall below such prices by more than 10%. The portfolio of the shares acquired for this purpose may not exceed 10% of the Company s share capital at the end of any day. This is intended to put the Company in a position to acquire, when appropriate, businesses or investments by making a payment in kind of company shares rather than by making a cash payment of a purchase price. For this reason, the shareholders right to subscribe was excluded. No shares were bought or sold in accordance with Sec. 71 (1) No. 8 AktG in the period under review. Again, a total of 250,000 shares pursuant to Sec. 71 (1) No. 2 AktG are disclosed at a total price of 3,250, These shares account for 4.4%, or 250,000.00, of the share capital. The necessary reserve for treasury shares in accordance with Sec. 272 (4) HGB, which was set up from revenue reserves, remained unchanged. 9. Other Assets Other assets comprise: EUR k Life reinsurance claims 1,715 Corporate income tax refund 990 Other receivables 188 2, Development of Accruals A schedule showing the development of the accruals is enclosed as an exhibit. 11. Other Liabilities Other liabilities are as follows: EUR k Securities lending obligation 6,450 Securities buy-in obligation 29 Bonus liabilities 2,903 Received deposits 186 Prepayment received 16 Liabilities to suppliers 998 VAT 35 10,617 The securities lending obligation refers to a customer s cash capital increase at the beginning of July 2007 for which a counterclaim in the same amount existed. 36

11 Notes 12. Share Capital The Company s share capital is held solely in the form of bearer shares. It is divided into 5,675,000 no-par shares. The share capital of 5,675, is fully paid up. 13. Shares per Class At the balance sheet date, the Company s share capital was divided into 5,675,000 no-par bearer shares. 14. Allocations to and Withdrawals from Reserves in EUR k July 1, 2006 Allocations Withdrawals June 30, 2007 Capital reserve 41, ,629 Revenue reserves 1, ,192 Legal reserve Reserve for treasury shares 3, ,250 46, , Schedule of Times to Maturity Sec. 340 d HGB in Conjunction with Sec. 9 RechKredV The residual terms break down as follows: Total Up to three Three months One to five Over five months to one year years years EUR k EUR k EUR k EUR k Other amounts due from banks 17,438 17, Amounts due from customers 6,450 6, Foreign Currencies The total amount due from banks denominated in foreign currency is 338,625.50; liabilities to banks in foreign currencies amount to 1, The carrying values are calculated at the exchange rate on the balance sheet date. Other assets denominated in foreign currencies amount to 24, Other liabilities denominated in foreign currencies total 98, The carrying values are calculated at the historical exchange rate. Where commercial or tax law requires the lower carrying value to be stated, items are translated at the exchange rate of the balance sheet date. 17. Proposal for the Appropriation of Profits Proposal by the Management Board to the Supervisory Board for the appropriation of retained earnings in accordance with Sec. 170 (2) AktG: The Management Board proposes that the Company s retained earnings of 5,336, be appropriated as follows, subject to the resolution of the shareholders meeting: Distribution to the shareholders ( 0.90 per share) 5,107, less dividends on treasury shares 225, Allocation to revenue reserves in accordance with Sec. 58 (3) Sentence 1 AktG 0.00 Profit carried forward to new account 454, Retained earnings as of June 30, ,336,

12 Notes 18. Derivatives The Company had no derivatives as of the balance sheet date. 19. Contingent Liabilities There are no contingent liabilities pursuant to Sec. 251 HGB. III. Notes to the Income Statement 1. Breakdown by Geographical Market Frankfurt, Germany EUR k London, UK EUR k Interest result 1, Commission result 7,377 0 Result from financial transactions 17,058 1, Amortizations and Depreciation Amortization and depreciation are disclosed in the statement of changes in fixed assets attached as an exhibit. No impairment losses were charged. 3. Other Significant Items Item no. 8 "other operating income" does not contain any significant items. Item no. 12 "other operating expenses" contains disposals of property and equipment following the closure of the London branch of 466k. 4. Breakdown of Income Taxes All taxes on income are attributable to ordinary business activities. IV. Other Disclosures 1. Management Board The following individuals are members of the Company s Management Board: Wolfgang Steubing, bank officer, Frankfurt am Main, Germany Alexander Caspary, information technology graduate, Frankfurt am Main, Germany Wolf-Dietrich Martin, bank officer, Karben, Germany Kai Jordan, bank officer, Frankfurt am Main, Germany Dr. Jochen Grossmann, economics graduate, Haibach, Germany Mr. Wolf-Dietrich Martin has been a member of the supervisory board of Mars 37. Vermögensverwaltung AG since July 2002, a member of the supervisory board of Tosca-Fund Ltd and Tosca Long since March 2003 and a member of the stock exchange board of the Frankfurt Stock Exchange since March Mr. Wolfgang Steubing has been a member of the supervisory board of Fondsgesellschaft WMG Ltd. since March

13 Notes Mr. Kai Jordan has been a general manager of WST-Broker GmbH since January 2003 and is a member of the Management Board of the Federal Association of Securities Trading Firms at the German Stock Markets [ Bundesverband der Wertpapierfirmen an den deutschen Börsen e.v. ]. The total remuneration of the Management Board in the fiscal year amounted to 2,013k. 2. Supervisory Board The following individuals are members of the Supervisory Board: Frank Wiebols, attorney/notary, Frankfurt am Main, Germany (chairman) Ernst J. Neumeier, tax advisor and legal advisor, Frankfurt am Main, Germany (deputy chairman) Christoph Bokelmann, bank officer, Frankfurt am Main, Germany The following individual was elected as a substitute member: Carsten Link, attorney, Frankfurt am Main, Germany Officially appointed from March to April 2007: Dieter Wagner-Kissel, attorney and notary, Frankfurt am Main, Germany Total remuneration paid in the fiscal year was 59, 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 June 30, 2007, there were obligations from rental agreements for garages and office space, as well as from leasing agreements. As of the balance sheet date, the total obligation was 1,272, The average term of the contracts is 22 months. 4. Average Number of Employees 70 persons were employed on average in fiscal year 2006/ 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 2007 The Management Board of Wolfgang Steubing AG: Wolfgang Steubing Alexander Caspary Dr. Jochen Grossmann Kai Jordan Wolf-Dietrich Martin 39

14 Statement of Changes in Fixed Assets as of June 30, 2007 (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 July 1, 2006 July 1, 2006 June 30, 2007 to June 30, 2007 June 30, 2007 June 30, 2006 Euro Euro Euro Euro Euro Euro Euro Start-up and expansion expenses, London 596, , , , , Software 559, , , , , Software London 2, , , Standard software 690, , , , , , , Standard software London 19, , , , Vehicles 200, , , , , , , Office equipment, fixtures and fittings 1,372, , ,077, , , , , Office equipment, fixtures and fittings, Hamburg 35, , , , , Office equipment, fixtures and fittings, London 735, , , , IT equipment 563, , , , , , , IT equipment, Hamburg 10, , , , , , IT equipment, London 588, , , , Leasehold improvements 1,005, , , , , , Low-value assets up to EUR , , , , , Low-value assets up to EUR 410, Hamburg 5, , Low-value assets up to EUR 410, London Shares in affiliated companies 55, , , Equity investments 5, , , Profit-sharing securities 1,005, ,005, ,005, ,506, , ,791, , ,850, ,225, ,573,

15 Development of Accruals in Fiscal Year 2006/2007 Wolfgang Steubing AG in EUR As of As of July 1, 2006 Utilization Reversal Allocation June 30, Pension accruals 460, , , Tax accruals Trade tax 1,007, , , , Corporate income tax 860, , , , ,868, , , , ,071, Other accruals Bafin allocation , , , Bookkeeping expenses 50, , , , EDW contribution 700, , , Other expenses, London Branch 606, , , , , Vacation entitlements 118, , , , Other 350, , , , , Audit and financial statement costs 146, , , , , ,037, ,069, , , ,503, ,366, ,576, , , ,135,

16 Management Report on the Financial Statements as of June 30, 2007 in Accordance with Sec. 264 (1) HGB of Wolfgang Steubing AG 1. General Information The Company was established as Wolfgang Steubing GmbH in Its name was changed to Wolfgang Steubing AG Wertpapierdienstleister (hereinafter referred to as Steubing AG ) by notarized deed dated January 28, This change of legal form became effective upon entry in the commercial register on May 25, 1999 under HRB The Company has qualified as a securities trading bank since January In the broker ratings issued by Deutsche Börse AG, Steubing AG achieved a top rating from the very beginning. The Company s core business is the broking of German and foreign securities. This includes trading as a broker (or name-to-follow broker) on the major German stock exchanges, executing orders on XETRA, order book management, international trading, sales trading and proprietary trading. The Company also engages in portfolio management and underwriting business to a limited extent. At the moment, these operations do not have a significant effect on earnings. In its brokerage operations, the Company acts as a broker between market participants admitted to the exchanges in Hamburg, Hanover, Berlin, Düsseldorf, Frankfurt am Main, Munich and Stuttgart, and those on the over-the-counter ( OTC ) market. The Company s brokerage transactions can involve all shares traded on these exchanges, e.g. DAX shares, MDAX shares, second-tier shares, foreign shares, as well as options and OTC securities. As part of its order book management activities, the Company determines prices for the shares allocated to its order book in the General Standard, Prime Standard and OTC segments. Since August 5, 2004, the Company has been authorized to trade in securities, with the exception of warrants, using the electronic trading system Xetra on the Vienna Stock Exchange. Membership of Euronext was acquired in February The Company has dependent branch offices in Frankfurt am Main, Börsenplatz 7-11, and, since July 2005, in Hamburg, Ballindamm 38, which are not entered in the commercial register. In Hamburg, the Company mainly carries out sales and sales trading for institutional customers. 2. Business Performance Steubing AG has continued to perform well in a demanding and highly volatile market. We have been successfully pursuing our strategy as a diversified and international securities services provider in today s stock markets which are dominated by algorithmic and quantitative trading models. Following a decision by the Frankfurt administrative court on March 5, 2007, the order books for the Prime and General Standards were redistributed. In order to meet the demands of the judgment, the stock exchange board of the Frankfurt Stock Exchange amended the criteria for order book distribution. The order books were redistributed as of March 26, Under the new system, each of the 21 applicants (there were only ten order book managers prior to redistribution), share order book groups with a total of two percent of the annual order book turnover. This allocation was independent of the order book manager s performance. Based on their individual relative performance, the existing order book managers were allocated further order books. Thanks to its excellent performance, Steubing AG was again put in charge of all of the order books in the Renewable Energies industry group and in the Retail Internet", Publishing & Printing and Household Appliances & Houseware groups. Although the number of order books managed dropped from 71 to 39, the effect on market share was relatively small due to the allocated industry groups. In addition, the Company keeps order books for some 917 international stocks in the OTC market on the Frankfurt Stock Exchange. 42

17 Management Report In connection with the renegotiation of the contract concerning specialist activities on the Munich Stock Exchange, the Management Board decided to cease remote order book management in Munich. The order books were returned to the management of the Munich Stock Exchange for redistribution effective May 25, Since the introduction of designated sponsoring by Deutsche Börse AG in October 1998, Steubing AG has been active in the electronic trading system XETRA as a relationship officer for small or mid-size caps. In a rating which Deutsche Börse AG has issued since October 1999, the Company has continuously attained the best rating AA. Three new companies were won as customers in the fiscal year. The Company is still aiming to extend trading in international stocks. Driven by the growing demand from institutional customers, the range of trading opportunities on offer has been substantially enlarged, particularly in emerging markets, such as Bulgaria, Romania, Slovenia, Estonia, Latvia, Lithuania, Israel and South Korea. Following a careful examination of various strategic options, the London branch was closed at the end of June 2007 due to the unsatisfactory earnings situation. Its license to trade in the United Kingdom was returned to the Financial Services Authority (FSA, London) on May 21, The resulting expenses once again had a significant impact on the income statement. We transferred the London branch s membership of the London Stock Exchange to Steubing AG, Frankfurt. 3. Economic Background Financial Position Fiscal year 2006/2007 was characterized by the upwards trend on the stock markets and the rise in oil prices and interest rates. The DAX has risen by up to 40% since July 2006, increasing steadily to 8,131 points in the reporting period. On June 30, 2007, the DAX stood at 8,007 points. Steady increases in both sales and income were generated in this market environment in the fiscal year. The financial position of Steubing AG was excellent and in order at all times. As of the balance sheet date, the Company had cash and cash equivalents of 55,589k, with equity of 57,083k. This makes Steubing AG one of the financially strongest financial services institutions/securities trading banks in Germany. Results of Operations Despite slightly lower commission income, the commission result increased by 5% in the fiscal year due to a significant reduction in commission expenses. Higher income was generated from interest and investment income. By contrast, the result from financial transactions decreased by 22% in the fiscal year. As a result, gross profit (after trading costs) was 12% lower than in the prior year. The general administrative expenses decreased by 5% compared with the prior year, other operating expenses incurred by the closure of the London branch, however, had a negative impact on the results. The result from ordinary activities dropped by a total of 36%, which was primarily attributable to the loss of the London branch. In Germany, the result was only 8.7% lower than in the prior year. The net income of 4,584k is only 3.9% lower than in the prior year due to the lower tax expense. Taxes were calculated taking into account the recognition of the claim for payment of the corporate income tax credit from old profit carryforwards and based on the European Court of Justice s ruling on accounting for losses of foreign EU subsidiaries, taking into account the freedom to establish branches and move capital. 43

18 Management Report Net Assets Assets and liabilities have been valued in accordance with the relevant legal provisions. The lower of cost or market principle as defined by the German commercial law was observed. Nearly all the assets can be liquidated at short notice. As of June 30, 2007, the Company states share capital of 5,675,000.00, a capital reserve of 41,629k and other revenue reserves of 1,192k. Equity, including retained earnings, totaled 57,083k as of June 30, This translates into an equity ratio of 80.6% as of the balance sheet date. Based on the net income, the Management Board and Supervisory Board are planning to propose to the shareholder meeting in Frankfurt in February 2008 the distribution of a dividend of 0.90 (prior year: 0.75) for fiscal year 2006/2007 in line with its shareholder-friendly policy. 4. Employees In fiscal year 2006/2007, personnel expenses amounted to 12,077k (incl. London) in comparison with 11,628k in the prior year. As the London branch was closed, the number of employees (including directors) decreased to 66 in the fiscal year. As of June 30, 2007, 38 persons were employed in trading and broking in Frankfurt, three in Hamburg; there were ten administrative and back office employees and four IT staff members. Four employees worked in research and investor relations, one person worked in internal audit and one in equity capital markets (all in Frankfurt). Training was offered and provided to all employees. 5. Risks As a securities trading bank and order book manager, Steubing AG is subject to external supervision by the Federal Financial Supervisory Authority [ Bundesanstalt für Finanzdienstleistungsaufsicht : BaFin] and Deutsche Bundesbank. The Company has set up various control mechanisms in order to manage and control the limit compliance and risk structure of its portfolio positions at all times. To meet its organizational duties, the Company has set up an internal audit function to monitor the various areas and appointed a money laundering officer. Credit Risk Credit risks can arise from own positions held as well as from amounts due from customers or counterparties. Since Steubing AG settles transactions in the short term, the notional counterparty default risks of the trading book are regularly less than 1% of own funds. The credit risk of the banking book is limited by the fact that only positions with a good ranking are accepted. Moreover, management continually monitors the positions and their development. 44

19 Management Report Market Risk Market risk in trading can arise as price risks in proprietary trading or own positions from name-to-follow transactions. These risks are monitored by risk management during trading hours and kept to a minimum. The notional market risk positions from the trading book at the close of trading therefore averaged only 3% to 8% of own funds. Liquidity Risk Liquidity risks are continually monitored by risk control in accordance with Principle II and taken into account in the capital charge. 65% to 85% of Steubing AG s assets regularly comprise amounts due from banks, which themselves have good to very good ratings. Liabilities due within one year, on the other hand, only amount to 15% of total equity and liabilities. The liquidity ratio in accordance with Principle II is regularly greater than 5, i.e. the sum total of cash and cash equivalents is regularly at least five times greater than the payment obligations. As long as these ratios are maintained, the liquidity risk is mathematically insignificant. Risk Management The Company makes use of state-of-the-art 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 kept to a minimum with these limits and with fast execution times. The level of aggregate risk is limited by the implementation of 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 corporate information. 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. However, the only failures experienced in the past have been short-term failures of stock exchange systems. Operational Risk Given the Company s good staffing and technical facilities, provision has been made for internal operational risks. The main external risks involve failures of stock exchange systems, which have occasionally occurred in the past. The Company also avoids risks as far as possible by having a diversified client base. Derivative Financial Instruments No warrants were traded in the period under review. At times, the Company concluded futures contracts to hedge its equity positions. 45

20 Management Report 6. Anticipated Development of the Company The economic fundamentals have continued their upward trend, with strong foreign demand leading to noticeable growth in capital expenditure accompanied by a lasting recovery in the labor market in Germany. Very few people are now expecting unemployment to rise, pointing to growing consumer demand which, in traditional economic cycles, has driven the second part of the upswing. The mortgage crisis in the US could put a damper on the global economy, however its extent and duration are hard to predict at this stage. What is more, the central banks have been taking concerted action to mitigate the crisis. If the financial markets are fairly quick to recover, we could be seeing growth rates of more than two percent in Germany for several years to come. This would lead to double-digit profit growth for German companies. In fiscal year 2007/2008, the financial markets in Europe and their participants will be dealing with the effects that the implementation of MiFID (Markets in Financial Instruments Directive) as of November 1, 2007 will have on business processes, trading structures, stock markets, and price models. In this connection, Deutsche Börse is planning to introduce a new price model for floor trading, the effects of which cannot yet be predicted. Steubing AG is currently implementing the formal requirements under the MiFID and will be keeping a close eye on the development of the exchange and OTC market models. We already offer retail banks attractive terms for the execution of their customers securities orders as a best executor in Xetra Best. The trading team for foreign equities was enlarged to continue the expansion and growth of these activities. Three order book managers once again raised objections to the already mentioned redistribution of the order books for the Prime and General Standards of the Frankfurt Stock Exchange on March 26, It remains to be seen whether this will lead to a court review of the official notices after an amendment to the Stock Exchange Act concerning the criteria for order book distribution takes effect on November 1, Steubing AG will further diversify its business model through the structuring and expansion of complementary business divisions. This includes the establishment of underwriting business, the improvement of its placement strength with institutional investors, and the expansion of equities research capacity. The focus will be on small and medium-sized companies which are of interest for institutional customers. In addition, Deutsche Börse AG named us as a Deutsche Börse Listing Partner in November As a securities trading bank, Steubing AG is a member of the Compensatory Fund of Securities Trading Companies (EdW). The EdW compensates private investors by a specified amount if they incur damages as a result of the insolvency of a member of the fund. Following the insolvency of Phoenix Kapitaldienst GmbH in March 2005, BaFin found that there was a case for compensation. Consequently, the EdW and its members potentially face compensation payments of several times the EdW s assets, which may necessitate special allocations. The companies affected are currently working intensively towards finding a mutually acceptable solution. At present, neither probability nor the amount of a potential special allocation to EdW members can be determined. Steubing AG made appropriate provision for the risk in its 2005/2006 financial statements. It is also difficult to assess whether a potential special allocation would withstand a legal review. Market players have already filed an action questioning the lawfulness of the contribution levied by the EdW before the Federal Constitutional Court. Steubing AG will continue its successful strategy of continuously expanding existing business areas in Germany. Expansion of the client base in Germany and abroad and marketing development the international trading platform will continue to play an important role in this strategy. 46

21 Management Report 7. Significant Events (after June 30, 2007) No events of significance for the Company occurred after the balance sheet date. 8. Other Trading on stock exchanges in Germany and abroad is, to a large extent, shaped by the use of the latest information technology and electronic networks. This trend will also require significant investments in the maintenance, update, and expansion of systems in the future. In order to continue to generate increases in trading volumes, the required investments may still exceed the current level. Steubing AG will continue to expand its range of services for institutional clients. The Company will focus on optimizing trading systems and order routing technology and further extend high-performance settlement structures for internationally operating investors. It will also extend the opportunities for direct market access to important equity markets for investors. Steubing AG has proved to be successful in the difficult market phase over the last few years. Its sound capital base and its highly qualified staff are laying strong foundations for consolidating and expanding its market position further. The objective for the current fiscal year is to attain a positive overall result, to drive forward the expansion of complementary business fields in the core area of equity trading and sales and to strengthen the long-term earnings power of Steubing AG, while carefully considering all market risks and rewards. Consolidation efforts on the European stock exchanges confirm our long-term business strategy of internationalization. Thus Steubing AG is well positioned for changes in the stock exchanges. The business prospects of the Company continue to be good. The fiscal year demonstrated that the Company can achieve above-average results even in volatile markets. The Company will not be unaffected by a decline in the capital markets. However, we will carefully monitor and analyze current trends in order to minimize any potential risks. 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, Germany, for the fiscal year from July 1, 2006 to June 30, 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 Company 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 [in Deutschland] (IDW). Those standards require 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 Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related 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 Company 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 Company s position and suitably presents the opportunities and risks relating to future development. Eschborn/Frankfurt am Main, Germany, September 28, 2007 Ernst & Young AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft Müller-Tronnier Wirtschaftsprüfer (German Public Auditor) Heist Wirtschaftsprüfer (German Public Auditor) 48