International capital markets strongly under pressure in the 2008 stock exchange year. The worldwide financial crisis – triggered by the distortions in the real estate and mortgage business in the USA – was exacerbated in the course of the year 2008 and threatened the stability of the worldwide banking system. The loss of trust on the part of investors was such that it impacted all international stock markets, and stock exchanges sustained massive value losses. Shareholders not only got rid of their financial stocks but also of shares in all industries right across the board. This development was additionally exacerbated by finance houses that massively placed securities on the capital market in order to compensate for their liquidity bottlenecks that resulted from the crisis.
The Dow Jones Industrial Index, one of the major international key indices, collapsed by 35 (previous year: plus 6.5) per cent closing at 8,668 points. In Europe, the EuroSTOXX declined in the year under review by 44 per cent to 2,451 points. The DAX, the German key index, lost 40 (previous year: plus 22) per cent in the course of the year plummeting to 4,810 points. The technology index, TecDAX, even dropped by as much as 50 (previous year: plus 30) per cent to 483 points. Even sustainable stocks could not resist the pull of the financial crisis. The Dow Jones Sustainability Index lost 45 (previous year: plus 9) per cent, and the Natural Share Index (NAI) dropped by 43 (previous year: plus 26) per cent to only 3,387 points. In Germany, the ÖkoDAX plummeted by 62 (previous year: plus 25) per cent to 267 points.
The negative stock exchange mood also determined the performance of the solar stocks, which was reflected in a high volatility. The significant stock price losses until October 2008 were further exacerbated by the uncertainties of the industry concerning the unsolved political funding situation in Germany, Spain, and the USA. When legislation was introduced with new funding conditions the situation relaxed slightly towards the end of the third quarter of the year. As a result of growing concern about the negative development of the real economy and fears of a possible “credit crunch” in the financing of future solar projects as well as the bleak growth forecasts for some of the solar companies, stock prices declined again in the fourth quarter. Future economic environment Consequently, the Photon Photovoltaic Stock Index (PPVX) lost some 68 (previous year: plus 150) per cent over the course of the year under review and slipped to 2,095 points. The World Solar Energy Index (SOLEX) showed similar development, also dropping by 68 (previous year: plus 111) per cent to 566 points.
Capital market turbulences significantly weakened stock prices. The SOLARWORLD stock was also massively under the influence of the general downward trend on the international stock exchanges. In early 2008 the security suffered the first stock price losses caused by the poor annual results of the financial sector as well as the arising economic fears in the USA with appropriate stock price corrections.
In spite of strong quarterly operating figures – which initially supported the stock until September – the stock depreciated significantly over the course of the year. Massive pressure on the stock was created by concern about the continuity of the legal framework conditions in the important solar markets of Spain and the USA at the end of September. At the same time the financial crisis deteriorated. Reports about insolvency proceedings of important banks as well as forecasts of a possible recession in the USA and in Europe again triggered massive stock price corrections. The solar stocks that are known to be volatile reacted with particularly high stock price losses – as did the SOLARWORLD stock. Our good figures in the third quarter of the year have meanwhile given the stock price an intensive boost. Pressure in the opposite direction then came in the fourth quarter from the reported capital bottlenecks suffered by competitors. Despite of our comfortable liquidity situation we were unable to avoid the general feeling of insecurity. Liquidity analysis
Development of the SOLARWORLD stock in comparison
Source: Deutsche Börse, 2009
The SOLARWORLD stock listed in the Prime Standard of the Frankfurt Stock Exchange (TecDAX) traded at a closing price of € 15.10, which was minus 64 (previous year: plus 74) per cent below the year’s opening quotation of € 41.90. However, the stock was still trading four per cent above the average depreciation of the international solar indices, PPVX and SOLEX.
SOLARWORLD continues to be one of the leading companies in the TecDAX. Measured by market capitalization of all technology stocks, we occupied a good third place at the end of 2008 (end of 2007: second place). In the trading volume ranking, our stock continued to be in second place. During the twelve months of the year under review the trading volume in free float amounted to € 10.6 billion (previous year: € 11.4bn). The average daily trading volume in terms of number of shares amounted to 1.6 (previous year: 1.3) million shares. Market capitalization as at 30 December 2008 was € 1.7 billion (previous year: € 4.6bn).
Investors increasingly go for sustainable investment criteria. The public and the financial markets are increasingly becoming aware of ecological and social issues such as climate change or the globalization of production and the associated risks. A study by the auditing and tax consultancy firm of Ernst & Young on the perspectives concerning sustainability strategies of companies and the appropriate investment products (Social Responsible Investments – SRI) shows that the importance of social and ecological criteria in capital investment decisions is increasing. Institutional investors, in particular, pay increasing attention to the sustainability performance of the companies in which they invest. Sustainability is viewed more and more as a necessary reaction to future challenges.
SOLARWORLD stock rated as ecological investment. One of the leading rating agencies worldwide in the sustainable investment segment, oekom research, gives SOLARWORLD an overall rating of A- thus rating us as PRIME in the accepted rating methodology. This means that the shares of SOLARWORLD are qualified as an investment from an ecological and a social point of view – supplementary to the evaluation under ROI aspects and subject to individual exclusion criteria of the financial service providers in question. Among the clients of oekom research are financial service providers who have invested a total volume of currently more than € 90 billion on the basis of the sustainability research. www.oekom-research.com
Sustainability indices much in demand. At the major international financial centers the number of sustainable index families went up to 34 (previous year: 32) in the year 2008. These sustainability indices summarize the stock price development of the relevant publicly quoted companies in the areas of climate change, environmental technology, social commitment, and renewable energies. The creation of new indices even in a tempestuous stock exchange year like 2008 shows the sound interest of the capital market in the development of sustainable securities.
SOLARWORLD AG listed in major indices. The SOLARWORLD stock in addition to quotation on the TecDAX is listed in several sustainability indices.
Index quotations of the SOLARWORLD Stock
Carbon Disclosure Project – transparency in climate protection strategies as an investment criterion. The Carbon Disclosure Project (CDP) analyzes the effects of global climate change on companies as well as their individual emissions and climate protection strategies. Today the CDP is the world’s largest joint initiative of the financial industry and maintains the world’s largest freely available emission register on company-related greenhouse gas emissions. It serves sustainability-oriented investors as an information base in their investment decisions. In the year under review, 3,000 (previous year: 2,400) companies worldwide were asked to disclose the appropriate data. Participation is voluntary. The response rate of the companies interviewed in Germany amounted to 55 (previous year: 52) per cent.
The number of institutional investors who signed the CDP increased in 2008 (CDP 6) to 385 (previous year: 315) companies. The investment capital represented in CDP 6 went up by 39 per cent to 57 (previous year: 41) trillion US dollars.
SOLARWORLD has been a CDP member since its introduction. SOLARWORLD has participated in this project since introduction of the CDP in Germany in the year 2005 (CDP 4) thus meeting the wish of international investors for the disclosure of greenhouse gas emissions. Quality and environmental management
Sustainability factors influence stock performance. Statistical computations of the Center for Corporate Responsibility and Sustainability at the University of Zurich (CCRS) in cooperation with the Swiss Federal Institute of Technology (ETH Zurich), and the Center for European Economic Research (ZEW), Mannheim, prove that there is a clear correlation between the sustainability of companies and their financial performance. Initially, individual economic analyses were performed on some 460 European and US companies that had already been assessed under sustainability criteria by the Sarasin Bank. These criteria include social and ecological risks such as higher energy prices or tougher environmental legislation that may potentially have a negative impact on business results. The analysis shows a significantly positive influence on the average monthly stock return in the years from 2003 through to 2006 from the company rating resulting from the sustainability factors. The study comes to the following conclusion: Investments in companies that act in an environmentally friendly and socially responsible manner open up greater profit opportunities to investors than shares in non-sustainable companies. As examples, Sarasin mentions companies from the renewable energies sector. According to the estimates of the Swiss bank the interaction between sustainability and financial performance can be expected to continue to develop positively due to the increased attention given to risks of all kinds in the current financial crisis.
SOLARWORLD stock among top securities in sustainability funds. According to “Finance & Ethics Research” sustainable share funds returned a performance of minus 43 per cent in the year 2008 (previous year: plus 7.5 per cent) due to the financial market crisis. In spite of this negative development they were still two per centage points ahead of the total funds market. However, the market for sustainable retail funds did not escape the negative stock market mood unscathed. In the year 2008 the sustainable fund assets in the countries of Germany, Switzerland, and Austria dropped from € 30 billion to € 19 billion. SOLARWORLD AG ended the full year of 2008 as the third best individual security in sustainable share funds. On the Internet platform www.sustainable-investment.org, which offers an overview of all sustainability funds licensed in the German language region, including their Top Ten investments, SOLARWORLD was listed as a Top Ten investment by more than 40 funds in 2008. This means: Shares of SOLARWORLD AG were the preferred choice of fund managers for sustainability funds.
Shareholder structure of SOLARWORLD AG as at 31 December 2008. The capital stock of the company is divided into 111,720,000 no par value bearer shares with an imputed nominal value of € 1. Notifications concerning the amount of voting shares pursuant to paragraph 21 Sec. 1, Sentence 1 WpHG by the shareholders to the company as well as to the Federal Office of Financial Services Supervision (Bundesanstalt für Finanzdienstleistungsaufsicht = BaFin) were given in the year under review and were reported on the company’s Homepage.
Shareholder Structure as at 31 December 2008
Share buy-back not exercised. On 8 October 2008 the Management Board of SOLARWORLD AG decided to make use of the authorization granted by the AGM on 21 May 2008 to acquire treasury stock of up to 10 per cent of the capital stock of the company pursuant to paragraph 71 Sec. 1, No. 8 AktG. No such acquisition took place in the year under review. The authorization to acquire treasury stock is limited in time to the end of business on 21 November 2009.
Annual General Meeting 2008: dividend resolution, re-election of the Supervisory Board, profit and loss transfer agreements. At the AGM of SOLARWORLD AG on 21 May 2008 in Bonn in the presence of about 1,000 shareholders, 51.57 per cent of the voting stock was represented. For fiscal year 2007 the distribution of a dividend was approved for the eighth year in succession. The profit share (14 cents per share) increased by 40 per cent per share over the previous year. The rate of dividend distribution was equivalent to 63 per cent of the balance sheet profit in the individual financial statement of the stock corporation as at 31 December 2007.
In addition, the Supervisory Board was re-elected until the end of the AGM that will decide on the discharge from duties for the fiscal year ending on 31 December 2012. By way of individual elections, the relevant resolutions were carried with clearly more than 99 per cent in each case.
Furthermore, the resolution on the approval of the profit and loss transfer agreements between SOLARWORLD AG and the Freiberg subsidiaries backdated to 1 January 2008 was carried with a large majority of the votes cast. Principles and objectives of financial management
Future dividend and distribution. The Management Board and the Supervisory Board of SOLARWORLD AG will propose to the AGM convened for 20 May 2009 a dividend of 15 cents (previous year: 14 cents) per share for fiscal year 2008 on the basis of the good results generated in the year under review. The upcoming AGM will decide on the appropriation of the balance sheet profit from the individual financial statement of the stock corporation for fiscal 2008 with a distribution sum of € 16.76 million for the 111.72 million individual share certificates entitled to a dividend.
Dividend and distribution
2) Adjusted for issue of bonus shares 2005 (1:1), 2006 (1:3) and 2007 (1:1)
The information pursuant to paragraph 315 Sec. 4, No. 1 and No. 3 HGB (composition of the subscribed capital and participation in capital) can be obtained from the previous paragraphs.
The provisions concerning the appointment and dismissal of management board members and amendments to the Articles of Association (paragraph 315 Sec. 4, No. 6 HGB) result from the Stock Corporation Act.
Regarding the powers of the Management Board (paragraph 315 Sec. 4, No. 7 HGB) reference is made to the Stock Corporation Act and the comments on Equity Capital contained in the Notes.
As per the due date there were financial liabilities amounting to € 527 million (converted) for which creditors can demand early repayment in the event of a change of control (paragraph 315 Sec. 4, No. 8 HGB). A change of control shall be deemed to occur if and when one party (with the exception of Frank H. Asbeck, members of his family or companies controlled by any of the aforementioned parties), directly or indirectly holds more than 50 per cent of the voting rights for the shares issued or acquires the possibility to nominate or to elect the majority of the Supervisory Board members or to cause such a nomination or election to take place.
Regarding paragraph 315 Sec. 4, No. 2, 4, 5 and 9, no information is required.
High standards implemented in Investor Relations. In the year under review SOLARWORLD further intensified the dialogue with international investors in Europe and the USA. All in all, we presented our company at 30 (previous year: 25) Road Shows, Equity Forums and Investors’ Conferences such as the 23rd European Photovoltaic Solar Energy Conference and Exhibition in Valencia, Spain, or the Solar Power International in San Diego, USA. In addition to the business press conference and the analysts conference to present our balance sheet in March 2008, we conducted international telephone conferences on the publication dates of our quarterly reports.
Our high demands concerning the quality and transparency of our capital market communications are defined primarily in terms of the information needs of our shareholders and also of our stakeholders. On the basis of permanent demand analyses, market observations and an intensive dialogue with our shareholders, in 2008 we succeeded in enhancing quality and transparency, taking into consideration our disclosure duties at the same time. The increased capital market demands such as the recently defined performance indicators of the German Association for Financial Analysis and Asset Management (DVFA) have been included in our reporting this year. Key performance indicators of DVFA Criteria
We also took account of the societal interest in our business activities: With the publication of our first sustainability report for the fiscal year 2007 we used the reporting framework of the Global Reporting Initiative (GRI), which we then had audited by the BDO audit company (Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft). Even with a short preparation time, we achieved the reporting level of A+.
Our reporting in the area of Investor Relations was again paid tribute to in the year under review. In the evaluation of Manager Magazin, which analyzed some 200 annual reports of German and European stock corporations according to criteria such as content, design and language, we managed to jump into second place (previous year: 3) of the TecDAX.
Media presence substantially increased. In 2008 we were again able to increase the scope of our media reporting by way of intensive press and public relations work. By means of our Corporate News we made comprehensive information available to the public. In fiscal year 2008 the TV, print, and online media carried a total of 12,852 (previous year: 7,796) messages about SOLARWORLD. This is to say that the number of editorial contributions published about us more than doubled and we benefited additionally from the significantly increased media equivalence value. This value determines the value for money that the editorial contributions published give you when converted into the advertising value of a commercial advertisement. In the year under review this value went up by a factor of about six to € 91.4 million (previous year: about € 14.6m).
Media Equivalence Value // Comparison 2008 and 2007
Source: Excerpt from media observation/only German editorial entries were counted
| 2008 | 2007 | Change in % | |
| Editorial entries (per year) – Print, Online, TV | 12,852 | 7,796 | + 64.85 |
| Average number of publications per day (365 days) | 35.21 | 21.36 | + 64.85 |
| Media Equivalence Value (in €) | 91.38 | 14.56 | + 527.61 |
In the year under review we succeeded in expanding our business internationally. With the start of production in the USA and in South Korea, we created a sound starting position for further growth. In the USA, in particular, the energy market is heading for a crucial turn-around through appropriate economic measures to promote renewable energies. Our European sales markets were characterized in 2008 by a high level of dynamic development. In the second and third quarters, in particular, there were demand peaks that we could make positive use of. We therefore also exceeded our earnings and sales forecast from the previous year – as we had already announced in the 2008 First Half Report. Internal targets achieved and targets set for 2008/2009+