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Value-driven strategy and management system

The strategy of the comdirect group is aimed at utilising the opportunities in the direct banking market, in both the B2C and B2B segments, on a value, growth and yield-oriented basis, but with a manageable level of risk at all times. We invest a significant portion of our income in establishing and extending customer relationships through the systematic expansion of our range of products and services, as well as intensive marketing. We control the level of these growth expenses on a flexible basis. We are guided here by the assessment of the respective market opportunities on the one hand, and our demanding targets for return on equity and risk-bearing capability on the other. The aim is to always maintain a balance between long-term increase in value and short-term return in every reporting period.

By pursuing this strategy, the comdirect group aims to expand its market leadership in online securities business for modern investors in Germany and gain market shares in the banking segment. We intend to increase the number of customers to 3 million and assets under custody to €50bn by the end of 2013.

To reach these targets, we have tailored our products and services to address the needs of the different market segments and types of investor. Initiatives to improve our range of products and services are flanked by targeted marketing campaigns. We use these to convey performance advantages to the various target groups and also to enhance the already high level of awareness of the comdirect and ebase brands.

We are expanding the spectrum of securities, order functions and our analysis and information tools for active traders to enable them to implement their trading strategies without restriction; current examples here are the start of CFD trading (see B2C business line ) and introduction of limit trading in LiveTrading.

In addition to a comprehensive choice of products and favourable terms and conditions, fund investors and securities savers especially want support when making investment decisions. Our quality-checked investment proposals can be implemented at considerably reduced front-end loads.

With regard to financial investments and payment transactions, customers set great store by competitive interest rates on call money, fixed-term deposit and time deposit accounts, a current account that is convenient, secure and fee-free, favourable financing solutions and personal service. For this customer group, we offer a broad range of investment accounts as well as fee-free cash withdrawals in Germany and abroad, and we are continually improving the security and convenience of online transactions. In addition to the comprehensive and readily comprehensible information offering on our website, our expert Customer Services staff are available around the clock every day. Moreover, our customers can use our multi-award-winning building finance advice service. To sum up, we aim to encourage even more customers to make the switch from branch banks to our direct bank model, as well as to break down any reservations that may still exist. B2B-type banking products are also very important for our institutional partners as a complement to securities investments when it comes to attracting customers and retaining them long term.

Strategic milestones in the B2C business line

In the B2C business line we have pooled the key strategic measures in the “complus” programme that covers a five year period (to the end of 2013). As part of “complus”, comdirect bank has significantly expanded its attractive range of products and services for securities traders and savers as well as banking customers. Of particular note in the reporting year are the ETF buy campaign encompassing 150 very popular index funds from fund companies ComStage, ETFlab and UBS that has been running since March and the more attractive terms and conditions for Tagesgeld PLUS. In addition to further expanding the ETF offering (see B2C business line ), the focus in 2012 will be on making the current account even easier to use.

Direct and individual contact with specific customer groups, especially active traders, was a focal point in 2011. The most significant measures were the launch of integrated trading with CFDs on more than 1,200 underlying assets and the development of the convenient order functions for OTC trading (LiveTrading) as part of our “Germany’s performance broker” umbrella campaign. Since November 2011, customers have been able to contact our Customer Services team directly on a local telephone number; useful video clips also help customers execute their online transactions. In 2012, our contact with customers is set to be even faster and more direct, including through greater use of social media platforms.

We further developed our modern and effective banking platform in financial year 2011. Visible results for our customers include in particular the new CFD trading platform, as well as the fundamental revision of our website in the fourth quarter. Despite extraordinarily active trading on some trading days, as in the previous year we achieved a very high level of system availability of 99.9% thanks to our continually modernised IT infrastructure.

We further improved our independent and transparent advisory models. The launch of our innovative online live advice service, where customers can follow each step of the advisory process online, made our Baufinanzierung PLUS building finance advice even more transparent and more popular. In the space of a year, we increased the number of financing partners from around 150 to over 250. We also further developed our Anlageberatung PLUS investment advice as well as Vorsorgeberatung PLUS provisioning advice. Priority in 2012 will be to continue to expand Baufinanzierung PLUS.

Strategic milestones in the B2B business line

In the B2B business line, ebase has set itself the overriding objective of supporting the business models of its cooperation partners with a comprehensive spectrum of tailored and B2B-type banking products and services. This centres on expanding custody account services and supplementing them with B2B-type banking solutions, as well as partner-specific configurations and white labelling variants of the product offering. This allows partners to integrate and offer all key services for their end customers from one source. This is aimed at attracting new partners, end customers and assets in the respective target segments, and at retaining existing mandates long term. Through growth in the volume of customer assets managed by its partners, ebase intends to position itself as Germany’s leading integrated brokerage and banking platform for institutional partners (B2B direct bank).

ebase is already well positioned in the insurance companies and banks target segment. After the custody account solution for collective premium reserve accounts was supplemented in the reporting year by a solution for individual premium reserve accounts, which means that even more fund unit-linked insurance contracts can now be supported by custody account solutions from ebase. Already introduced in 2010 as an attractive follow-on product for the reinvestment of funds paid out on the maturity of life insurance policies, the account solution was further developed as a white label variant (see B2B business line). For this reason, ebase can provide insurance companies with accounts that have the company’s own look and feel. Furthermore, the partner insurance companies are now able to offer their own interest rate sponsoring for these accounts (see B2B business line). As a result of changes in investor behaviour, the interlinking of custody account and account solutions is also meeting with great interest on the part of investment companies.

For the target groups comprising independent financial advisers (IFA) and asset managers, ebase has extended its product spectrum for ETFs and savings plans. In conjunction with the settlement account and an account with external payment functions that will be available by mid-2012, IFAs can access all of the major services for the comprehensive support of their end customers – regardless of their main bank.

In all target segments, ebase supports its partners in the sales process. ebase is expanding the services for its investment custody accounts in order to meet the increased service requirements of its partners that arise from changes in the regulatory framework conditions amongst other things.

In addition, ebase is looking at new target groups beyond the existing market segments. The main focus here centres especially on big companies with large customer bases that are looking for solutions to make customer relationships profitable and to retain customers. Working together with ebase, they can offer their customers banking services and integrate these with their core business to provide added value for end customers.

Financial and risk strategy

The strategic financing measures of the comdirect group are described in the chapter Financial situation and assets of the comdirect group, while our risk strategies are explained in the risk report.

Management

Intangible assets of the comdirect group

The value-driven management of the comdirect group is based on its fields of competence and intangible assets. In addition to the assets reported in the balance sheet, these intangible assets determine the value of the company and as such form the basis for successful business development and earnings performance.

The most important intangible asset is the quality of our customer relationships. By targeting customers through marketing campaigns, our website, Customer Services and investment, building finance and provisioning advisers, we intend to intensify these relationships and increase both customer satisfaction (see Customer satisfaction and performance comparisons ) and customer activity. In addition, our institutional partners are serviced by key account managers.

The high level of awareness of the comdirect and ebase brands and the values associated with the brands are a key competitive factor in existing and new customer business. We therefore strive to continually improve these brand values. Details of the comdirect group’s presence in the capital market and its activities in Investor Relations in the reporting year are given in the chapter The share.

Operating excellence in our largely automated yet individualised contact approach tailored to the different customer groups is a strength that impacts positively on the value of the company. This refers to the acquisition of new customers and the ongoing servicing of customers as well as the efficient execution of campaigns. This presupposes a high level of customer-related knowledge, professional and flexible Customer Services and a high-performing IT system.

The management quality, service expertise, process intelligence and innovative power of the bank essentially depend on the expertise of its employees. We enhance our employees’ skills as part of our personnel development and management training measures. We promote expertise and create framework parameters for the positive development of teams, are involved in training and continued professional development and offer performance- related and success-oriented compensation (see Personnel report).

Internal management system

To systematically further develop our core competences and intangible assets for the benefit of our shareholders and stakeholders and thus to increase the value of the company and achieve a permanently attractive return on equity, we manage the entire bank on a holistic basis, taking account of all opportunities and material risks. In this regard, we focus our attention not only on the development of financial performance indicators, but also on non-financial performance indicators, which have an impact on the earnings situation and company value of the bank.

The monthly overall bank management reporting shows whether the bank’s financial and operating performance indicators are within the target range or whether unexpected variances have occurred. Selected performance indicators are monitored and managed at shorter intervals.

The financial situation for both the comdirect group and the business lines is illustrated by the return on equity before tax and the cost/income ratio amongst others. Additional important financial performance indicators are the net interest and net commission income as well as earnings per customer.

With regard to the non-financial performance indicators, we distinguish between customer, market and product-related indicators, as well as efficiency, risk and process-related indicators. We also use certain performance indicators that make it possible to measure the sustainable development of the comdirect group. These sustainable development key performance indicators (SD-KPI) are tailored to the business model of the B2C and B2B direct bank and as such are only comparable with the key indicators of a traditional commercial or investment bank to a limited extent. Selected indicators are used in external reporting.

Customer and market-related indicators, such as trades or the number of different deposit accounts, are largely operating, company-specific leading indicators that have a delayed impact on our financial ratios, and in the event of deviations from forecasts enable us to implement countermeasures early on, for example by adjusting terms and conditions.

Sustainable development of the comdirect group

Corporate responsibility decisively guides our day-to-day actions in the comdirect group. This responsibility goes far beyond our operating activities, encompassing community and social aspects as well.

Supporting investors

Providing investors with comprehensive and readily comprehensible information to support them in their investment decisions is very important to us. In brokerage, we offer our customers an extensive range of information and analysis tools. Our customisable information platforms for the respective securities class are of note here. For example, there is a separate Informer for ETFs. We make a large share of these tools available to non-customers as well.

All users of our website can find information on our new CFD trading on the cfd.comdirect.de portal. This provides detailed information on how CFDs work and explains the risks, opportunities and methods available to limit risk.

On average in 2011, our model portfolio and information pages recorded over 100.1 million page impressions a month, which is around 51% of all of the page impressions for our website.

With the aim of providing securities investors with tips on how to adequately diversify their portfolios, we provide fundamentally suitable investment proposals for specific investor types that have been quality-checked by independent organisations. Here we apply particularly strict selection criteria to our fund offering. The Fonds- Diamanten not only have to score well in the performance-based rating but also in the Morningstar qualitative rating if applicable. The qualitative rating measures the quality of the fund management and investment process, amongst other factors, and prefers providers that view their unitholders as partners and put the long-term prospects of success ahead of short-term profits.

To promote the long-term asset accumulation by private households that is important for the economy, we offer particularly attractive terms and conditions as well as financial incentives to encourage customers to invest in securities savings plans. One such example is financial security for the younger generation via our JuniorDepot junior custody account.

Environmentally friendly banking operations

As part of our “green comdirect” programme, we continually identify potential energy savings in order to reduce our carbon footprint on a sustainable basis. We already reduce our CO2 emissions in the previous year by switching to a green electricity supplier. We are able to make energy savings in IT in particular, as well as in lighting, paper consumption and employee travel. Accordingly, we intend to further reduce our CO2 emissions by the end of 2012 using, amongst other things, energy-saving servers and workstation PCs, which automatically switch to power saving mode at night for example, as well as LED lighting. A better link between our offices in Quickborn and the local public transport network is also being piloted at the moment. Other project proposals will be reviewed this year and will be gradually implemented if practical in ecological and economical terms. We aim to achieve additional CO2 savings from 2013.

Selected financial performance indicators

Performance indicator Definition Business line B2C Business line B2B
    2011 2010 2011 2010
Return on equity before tax Pre-tax profit/average equity excluding revaluation reserve (in %) 20.7 15.8 29.5 31.3
Cost/income ratio Administrative expenses/(net interest income before provisions + net commission income + result from financial investments + other operating income + result from hedge accounting + trading result) (in %) 66.2 70.7 80.2 80.5
Net interest income per customer Net interest income after provisions/ number of customers on average for the year (in €) 93 68 1 0
Net commission income per customer Net commission income/number of customers on average for the year (in €) 89 87 41 43
Profit per customer Pre-tax profit/number of customers on average for the year (in €) 62 48 9 8

Social commitment

Our social commitment centres on the Numeracy Foundation (“Stiftung Rechnen”), which was founded and initiated by comdirect bank. Established in 2009, the Foundation aims to promote numeracy in Germany under the motto “Making numbers fun”. As a central point of contact, the Foundation networks promoters of mathematics and number skills from the worlds of science, business, politics and society and initiates activities that draw attention to numeracy and help give it a positive image.

Since 2011, the Foundation has been supporting the “Come to MINT” initiative which encourages young women to enter the “MINT” professions (mathematics, IT, natural sciences and technology).

Staff from comdirect bank are involved in the “Mathe4Life” (Maths4Life) corporate volunteering project and go to schools in and around Hamburg as mathematics speakers to help create a better understanding of the importance of maths in professional life. In 2011, the project started at the Scout24 Group in Munich as well.

The “Mathe-Meister” (maths champions) initiative supported by the Nummeracy Foundation has been providing maths software for master craftsmen apprentices since 2011. The new software is intended to help identify and close gaps in numeracy skills at an early stage.

Furthermore, the Numeracy Foundation was involved in the international “Mathematik ohne Grenzen” (maths without borders) competition, supported the “Mathe.Forscher” (maths researchers) programme and carried out the nationwide “Mathe macht das Tor” (score a goal with maths) competition for schools that was so popular it will be repeated in 2012.

comdirect bank views itself as a partner of the Numeracy Foundation. Accordingly, not only did comdirect bank – together with Börse Stuttgart AG – provide the basic assets for the Foundation, but it also supports expansion of the Foundation’s activities by having executive comdirect employees on the Management Board and Board of Trustees. comdirect also operates the office for the Foundation.