At home in Europe

Just over a year ago, the headlines caused a stir in the German business press - not a big one, but a noticeable one nonetheless: "Sal. Oppenheim relocating headquarters to Luxembourg" and "Sal. Oppenheim leaving Germany". Indeed, we have been running our group from Luxembourg since 1 st July 2007. Nobody at the time surmised that by taking this innovative step - Sal. Oppenheim was, after all, the first international group to be supervised by Luxembourg's financial watchdog, CSSF - we might be breaking with tradition and turning our back on Germany as a location. Nor would they have been right if they had. On the contrary, many journalists, banking experts and commentators knew - like ourselves - that the step we were taking was a logical one, as the Luxembourg banking marketplace offers us ideal conditions for the growth and internationalisation strategy we have been forging ahead with for many years.

High professionality and flexibility of the Luxembourg financial centre

Nevertheless, it was a major move for our bank, since a 219-year-long corporate and entrepreneurial history written in and from Germany made us what we are today: the biggest independent private bank group in Europe.

Yet, despite our special bond with Germany, it should be remembered that Sal. Oppenheim has always also been a highly active bank internationally. In its early days, it handled the funding of cross-border trade in commodities. Both Salomon Oppenheim and his sons, Simon and Abraham, were then quick to recognise the signs of the times and operated as financiers in the nascent European industrial revolution. They invested in steam shipping, opened banks in Amsterdam and Paris, funded the construction of railways in Russia and China and raised Belgian and French capital for the mining and steel industries. We kept up this international activity in the following generations as well and have been represented ever since in over 30 locations worldwide through offices, stakeholdings and cooperation agreements.

We have traditionally maintained close ties with Luxembourg too. In 1856, Sal. Oppenheim offered its services to the Luxembourg government, which wanted a bank of its own to finance construction of its railway system and exploitation of its rich iron ore deposits. At its request, Abraham Oppenheim, Gustav Mevissen and Raphael Erlanger founded the first big bank in the Grand Duchy: Banque International à Luxembourg. The ties between Sal. Oppenheim and the Luxembourg bank remained in place for nearly 100 years, until 1944.

The modernity and internationality of this financial centre, which already impressed us back then, were what prompted us last year to establish Sal. Oppenheim jr. & Cie. S.C.A. as a holding and move our headquarters to enable us to take full advantage of growth opportunities abroad in future.

We received a very warm welcome at our new headquarters, and the highly professional support provided by the Luxembourg justice and finance ministries, as well as CSSF, illustrates the importance attached to this sector in Luxembourg. Sal. Oppenheim benefits from the financial centre's high professionality, which is reflected in quick decision-making and constructive dialogue.

Our bank's reputation among our clients has not suffered as a result of our relocating headquarters - quite the contrary. Through the Luxembourg financial marketplace, we are winning clients that we would not have reached from Germany. Both German and international clients seeking maximum discretion appreciate the reliable structures, progressive legislation and the pace at which innovations can be implemented. Last year, we managed to markedly increase the volume of assets under management across all locations in Germany and abroad, from € 138 billion to more than € 150 billion.

Pursuing a dual strategy

We have set ourselves the target of establishing Sal. Oppenheim as one of the largest international private banks within the next ten years. In Europe, we are already playing in the top league along with some other reputed banks. While we currently still earn two-thirds of our income in Germany, our aim is to generate half from our international business in the medium term.

We shall achieve this target through over-proportionate growth in our international business, but without cutting back our operations in Germany, since catering to wealthy private clients in particular is a highly locally-driven business. Long-term client loyalty and maximum client satisfaction can only be achieved through proximity and integrity. We therefore repositioned our branches in Hamburg and Düsseldorf last year, taking on extra staff. Half of our 400 new employees are based in Germany, and we are investing heavily at present in expanding our office locations in Frankfurt and Cologne.

As far as acquisitions and cooperation agreements are concerned, we are, on the other hand, currently looking around solely outside Germany to see what is available on the private banking market that might fit our portfolio. The Luxembourg financial marketplace is making this expansion much easier for us.

At the same time, we do not regard our continuous internationalisation over the years purely as an end in itself. It is our response to the changing banking landscape and the rules that the globalised financial markets are setting, since in an environment shaped by stiff competition standstill is no alternative. A bank focussed entirely on Germany cannot survive in the investment banking sector in the long term. And if we offer our asset management clients - both in Germany and abroad - access to international financial products and wish to follow them into other countries, we have to position ourselves accordingly.

In addition, our expanded presence naturally also allows us to win new clients and partners. The fact that, according to the latest Cap Gemini survey, the number of millionaires in Germany increased by a mere 0.9 % in 2006, whereas the figure worldwide was 6.5 %, gives food for thought. For this reason, we shall be pursuing a dual strategy in the years ahead: expanding our business in Germany, while increasing our international activities at the same time. This is why 2007 was another year of progress, a year of success, development and growth for us - both nationally and internationally.

Our group coped very well with the remarkable business year 2007. Our positioning as an integrated asset management and investment bank has proved to be the right strategy, particularly in these turbulent times. Thanks to our conservative risk policy and successful risk management, the turmoil on the financial markets affected us only peripherally. As a result, we were able to increase our group pre-tax net income to € 333 million (+ 7.8%) and can therefore report the most successful year in the 219-year history of our family-owned bank. In the coming years too, we aim to take advantage of the opportunities available to us through organic growth and pinpointed acquisitions.

Expanding with a sense of proportion

We are not pursuing our expansion strategy solely by thinking about new locations and partners. Our focus is also on our employees' global expertise and on enlarging our product and services portfolio, which is geared to international markets and clients. Such a three-prong strategy is the only way to keep clients and partners satisfied in the long term and to stand out from the crowd in a competitive market.

When Sal. Oppenheim unveiled its relocation plans last year, it was widely speculated in the press that we could now be planning a major coup, i.e. a spectacular acquisition. However, this it at odds with the corporate philosophy which has guided our bank's successful international operations for over 200 years. For the benefit of our clients, we pursue a business policy based on continuous, moderate and, above all, sustained growth - and calculable risks.

Not least because of this long-term approach - thinking in generations - we allow ourselves the luxury of patience. A project or a location is allowed time to develop properly. So, rather than adopting a grand-scale conquest strategy, we prefer to shape our profile abroad by applying entrepreneurial finesse. This enables us to grow in many different ways: by establishing or further developing representative offices or branches of our own, by cooperating with reputable partners, by concluding cooperation agreements or by taking over smaller entities that suit our group. These options all rank equally in importance for us and are used as and how they benefit us and our clients in the long term.

And despite incorporation into the Oppenheim financial group, we make a point of allowing growth that leaves room for country-specific idiosyncrasies and entrepreneurial independence. Unlike many internationally active firms which systematically integrate their foreign activities into the parent company, Sal. Oppenheim's office locations remain free to operate on their own.

Gradually expanding selected markets

Last year we focussed, on the one hand, on achieving further competence gains in German-speaking countries and, on the other hand, on expanding our business activities in, for example, France, the UK, Eastern Europe, the US and China.

We deliberately opt for small, pinpointed steps whose overall end result is, however, a high-performance package for our two lines of business, investment banking and asset management. The fact that we have repeatedly managed in the past few years to recruit experienced specialists and even whole teams of highly skilled experts is a competitive advantage from which, for instance, the expansion of our Vienna, Paris and Zurich office locations is currently benefiting greatly.

We have in the meantime boosted our already relatively strong presence in the highly attractive Swiss market in several ways: Besides our asset management subsidiary Sal. Oppenheim jr. & Cie. (Schweiz) AG, which has been operating successfully in Zurich and Geneva since the 1980s, we strongly expanded our investment banking business in 2005 by establishing Sal. Oppenheim jr. & Cie. Corporate Finance (Schweiz) AG, which made us a leading provider in the investment banking market there.

Last year we also expanded the provision of family office services in Switzerland considerably, creating the Oppenheim Landert Family Office as a joint venture between the two Oppenheim banks in Luxembourg and Switzerland and the also owner-managed Dr. Landert Group, based in Zollikon. This latest partnership means that Switzerland, as a location, is very well-positioned in the long term in both our lines of business, investment banking and asset management.

Our bank is just as strongly represented in Austria. At our subsidiary there, Sal. Oppenheim jr. & Cie (Österreich) AG, we strengthened the investment banking team in particular, alongside the already highly successful asset management team, to boost our presence in derivatives business, merger and acquisition activities and equity transactions in the Austrian marketplace in future. Austria's central geographical position makes it a gateway between East and West. For this reason, Sal. Oppenheim jr. & Cie. (Österreich) AG takes care of business with Eastern Europe and further internationalisation towards the East for the group.

By opening individual representative offices - in Prague in 2005 and in Warsaw recently, with Budapest due to follow shortly - we are slowly beginning to explore the, we believe, highly attractive markets in Eastern Europe. These offices will provide both asset management services to the growing number of wealthy entrepreneurs and private individuals and investment banking facilities on the Polish and Hungarian markets. This policy of small steps allows us to gradually create a full range of options, while keeping the risks within reasonable limits.

In France, too, we have expanded further in our two lines of business: Firstly, we have strengthened our presence in the institutional asset management sector by taking over Financière Atlas S.A. and, secondly, we have had an experienced international investment banking team in place in Paris since mid-2007 to progressively increase our equity sales business.

At the same time, we are also gradually putting out our feelers to Italy: By acquiring a 1.7 % interest in Italian industrial and investment bank Mediobanca, we strengthened our business relations and networks there in 2007 after securing access to the market in the north of Italy the previous year through a stake in the newly established Prader Bank in Bolzano (Bozen). Building on this experience, we are working to open an office of our own in Italy that will focus on corporate finance.

We reinforced our presence in both the UK and the US market last year by means of acquisitions and cooperation agreements - much to the benefit of our clients, who are profiting in particular from the increased product know-how.

Many parts form a whole

In the UK, we bought a minority stake in London-based GLG Partners LP, laying the foundation for a strategic partnership with Europe's largest independent alternative asset manager, which manages $ 2o billion worth of assets. This partnership allows our clients to benefit more strongly than before from the excellent GLG single hedge funds and gives them access to tailored product solutions. In 2006, we had already expanded our alternative investments business by acquiring the Attica Group and buying a stake in Integrated Assets Management (IAM) in London.

Making an investment to underpin a partnership is the course we have steered in the US as well. Last spring, we bolstered our expertise in mergers and acquisitions business on the US market by acquiring a 10 % stake in US investment bank Miller Buckfire and concluding a cooperation agreement. Miller Buckfire provides its US clients with strategic financial advice on complex restructuring and refinancing problems and is also a well-established M&A consultant. In future, we shall be jointly providing advisory services in connection with financial restructuring mandates in Germany, Austria and Switzerland and working together on cross-border M&A consultancy between the US and German-speaking countries.

We have also successfully gained a foothold in the Asian market in several ways. After establishing initial contacts in China some years ago by way of a cooperation agreement with Hong Kong funds provider Lloyd George and a stake in Hua Xia Bank, we set up a subsidiary by the name of Oppenheim Asia Invest in Hong Kong in 2007. Through our presence in the region, we are supporting our clients' expansion into China - for example, via investments such as private equity, hedge funds and real estate in the Asian marketplace.

Our team there focus on sounding out Asian stock market and corporate investments for the asset management sector, making this expertise available to their European colleagues and providing further family office services. In addition, the two IPOs of Chinese companies that we supported on the Frankfurt Stock Exchange's Prime Standard segment allowed us to secure a good starting position from which to give Asian investors access to the European marketplace and at the same time pave the way for European investments in Asia.

Future with tradition

Our bank has been steering a course of continuous international expansion - with a range of products and services taking advantage of worldwide opportunities - for many years, not to mention centuries. But by moving our headquarters to Luxembourg last year, we opened up completely new avenues for our internationalisation. We will be using these systematically in the years ahead.

Yet, despite all these changes, Sal. Oppenheim will remain true to the principles guiding its success: reliability, continuity and a deeply-felt sense of responsibility - for our clients, employees, business partners and for society. This is the key to performing well in the marketplace in the long term.