2008 was a difficult year in the stock market – especially due to the sub-prime crisis in the US and its far-reaching repercussions, which exerted a growing impact on global financial markets as the year progressed. In the autumn of 2008, the deteriorating liquidity and solvency problems of various financial institutions prompted all major industrial countries to adopt packages designed to mitigate the crisis of confidence in the financial markets. Nevertheless, the global financial crisis was accompanied by a slowdown in economic activity. The key industrial countries experienced – in some cases substantial – downward trends. This picture was reflected in the global stock markets.

The German Share Index (DAX) started into 2008 with its high of 7,949 points and closed at 4,810 points at the end of the year, down 39.5%. The Mid-Caps DAX (MDAX), where the TUI share has been listed since September 2008, recorded a decline of 42.3% in the course of the year. In September and October 2008 in particular, stock markets and with them the German indices, came under significant pressure. This was due to a number of troubled financial institutions, notably investment bank Lehman Brothers, which had to file for insolvency in September.

Development of TUI share price in 2008

Fluctuating share prices
The TUI share started into the year at a price of €18,48. In the early months, the smouldering financial crisis, the weakening US economy and strong rises in oil prices caused uncertainty in the capital market. As a result, both the MDAX and the TUI share price fell significantly in January. Over the spring, the share price rose again in line with general market development and the announcement of plans to sell Hapag-Lloyd container shipping. In April 2008 it reached its annual high of €18.78. In the second half of the year, the now global economic pessimism and the negative stock market sentiment caused expectations for the consumer goods industry and world trade to dwindle – a trend which the TUI share could not escape. The sale of Hapag-Lloyd Containerlinie, which took shape in September, was successfully concluded in October when the agreement was signed with the Hamburg consortium. This was immediately followed by a slight recovery of the share price during that period. At the end of the year, the TUI share was quoted at €8.05, down around 56.5% on its opening price.

Quotations, indices and trading

The TUI share is officially traded on all German trading floors and in the Xetra electronic system. No other company with similar operations in tourism and shipping is listed in the German stock market. Several European competitors in the tourism sector such as Thomas Cook, Kuoni and Club Méditerranée are traded on stock markets in the UK, Switzerland and France. In the shipping sector, listed international competitors include Maersk in Denmark, Evergreen Line in Taiwan, COSCO in China and NYK Lines in Japan.

TUI Travel PLC share
TUI Travel PLC shares have been listed on the London Stock Exchange for listed securities since 3 September 2007. On 24 December 2007, the company was admitted to the FTSE 100, the key share index at the London Stock Exchange.

TUI share in the MDAX and Prime Standard
The TUI share has been included in the German share index MDAX since September 2008 and had a weighting of 2.58% at the end of the year. The TUI share was shifted from DAX30 to MDAX as it was no longer one of the 40 largest securities in Germany according to a key criterion for affiliation, i.e. market capitalisation of the free float. The free float had declined from around 80% to just under 55% in the course of the year, mainly due to the acquisition of larger share packages by two major shareholders. Market capitalisation of the free float had fallen substantially as a result. In terms of the second criterion for affiliation to the DAX30, share trading volume, the TUI share still ranked among the top 35 stock corporations.

TUI is listed in the Prime Standard of the Frankfurt Stock Exchange and thus meets the high international transparency standards of this segment, over and above legal requirements.

The TUI share is included in several industry indices in the German stock market and at European level. These include the European sub-indices Dow Jones Travel & Leisure Titans 30 and Dow Jones Euro Stoxx Travel & Leisure. Its year-end weightings in these sub-indices were 0.81% and 4.25%, respectively.

Among the sustainability indices, the TUI share is listed in FTSE4Good, ASPI Eurozone (Advanced Sustainable Performance Indices), ESI (Ethibel Pioneer Index), Dow Jones Sustainability Index World and ECPI Ethical Index €uro. TUI AG also participated in the Carbon Disclosure Project (CDP) and was awarded ‘prime’ invest­ment status by oekom Research AG in 2008. In the German stock market, it is included, amongst others, in the calculation of the DAX sub-sector Transportation Services.

For both institutional and private investors, recommendations by financial analysts are a key decision-making factor. In 2008, 25 banks regularly published studies on TUI AG. At year-end, 32% of analysts recommended buying the TUI AG share, with 36% recommending ‘hold’ and 32% recommending ‘sell’.

Capital stock and number of shares

Employee shares
In December 2008, TUI AG’s capital stock rose by a further €508,045.18 due to the issuance of 198,730 employee shares. At the balance sheet date, it therefore totalled €642,807,158.61, consisting of 251,444,305 no-par value shares certificated by global certificates. The proportionate share capital attributable to each individual share was approx. €2.56. Apart from subscribed capital, both authorised and conditional capital was available, as outlined in greater detail in the notes on the consolidated financial statements.

Convertible bonds
The 2003/2008 convertible bond was repaid at maturity on 1 December 2008. In 2008 no bonds were converted from the 2007/2012 convertible bond. At the balance sheet date, investors therefore held conversion rights for a total of 25,072,254 TUI shares from the bond.

Resolutions of the 2008 Annual General Meeting

The 49th ordinary Annual General Meeting was held in Hanover on 7 May 2008. Approx. 3,000 shareholders and shareholder representatives, representing 71.7% of the voting capital, participated in the AGM. Besides formal ratification of the acts of the Executive and Supervisory Boards and a resolution on the appropriation of profits from the 2007 financial year, the agenda also included renewal of the conditional and authorised capital and a share buyback programme in accordance with section 71 sub-section 1 no 8 of the German Stock Corporation Act. In financial year 2008, the authorisation to purchase our own shares was not used.

A further item on the agenda was the motion for a vote of no confidence in the CEO, placed on the agenda at the request of a shareholder. At the request of Geveran Trading Co. Ltd the dismissal of individual Supervisory Board members and the subsequent election of new Supervisory Board members for the remaining term of office of the dismissed Supervisory Board members were placed on the agenda. This motion and the above-mentioned motion for a vote of no confidence did not meet with sufficient approval and were therefore rejected.

Shareholder structure

At the end of 2008, around 55% of TUI shares were free floating. Around 15% of these were held by private shareholders, around 40% by institutional investors and around 45% by strategic investors. According to an analysis of the share register, these were mainly investors from Germany and other EU countries.

Dividend and yields

TUI AG’s net loss for the year totalled €1,529m. Taking account of the retained profil brought forward of €25m an amount of €1,504m was withdrawn from the capital reserves to balance the net result for the year. In the light of the earnings situation in 2008, which was mainly impacted by restructuring expenses, a proposal to carry the profit available for distribution forward on new account and correspondingly suspend the dividend payment for the 2008 financial year will be submitted to the Annual General Meeting.

Rating

TUI’s financial strength is subject to regular ratings by the international agencies Standard & Poor’s and Moody’s. At the end of 2008, their ratings were as follows:

The respective ratings and further details about the bonds traded in the capital market are provided in the chapter Financial position.

Refinancing

In January 2008, TUI AG issued an equity-linked financing with shares in TUI Travel PLC as underlying. The financing scheme has a volume of €450m and will mature in 2013. To this end, TUI AG has concluded corresponding contracts with Deutsche Bank and Nero Finance Limited, an independent Jersey-based third-party company which is not part of the TUI Group.

In the framework of the financing scheme, TUI sold 10.7% of its shares in TUI Travel PLC to Deutsche Bank which transferred this share block to Nero Finance. Nero Finance issued an exchangeable bond with cash settlement option in TUI Travel PLC shares. The bond carries an interest coupon of 4.50% per annum. If the holders of the exchangeable bond do not exercise their exchange privilege, TUI will be obliged to buy the shares in TUI Travel PLC back upon expiry of the five-year term. In contrast, if the exchange privilege is exercised, TUI is entitled to buy the TUI Travel PLC shares back via a cash settlement option.

Regardless of the temporary sale of the share block, TUI is entitled to instruct the purchaser of the TUI Travel PLC shares to exercise the voting rights associated with these shares in line with the instructions given by TUI AG under a corresponding voting instructions agreement. Accordingly, there will not be any changes with regard to the management of TUI Travel PLC by TUI AG. As a result, TUI Travel PLC will continue to be fully consolidated in TUI’s consolidated financial statements.

Investor Relations

Open dialogue and transparent communication with shareholders, institutional investors, analysts and lenders have a top priority. Discussions with these stakeholder groups centred on Group strategy and business trends in the various sectors, enabling market participants to make a realistic assessment of TUI’s future development.

Regular elements of the IR programme are the annual analysts’ meeting, which is also webcast, and the conference calls offered on publication of the interim reports and on other significant topics such as the sale of Hapag-Lloyd. We also stay in close touch with TUI’s investors and analysts through road shows, conferences and several hundred one-on-one meetings.

Many of these encounters are attended personally by top management to answer questions raised by the capital market. TUI IR also invests in every contact with private investors. The Group was presented to many private investors on occasions such as the Hanover Stock Market Day (Börsentag Hannover) and events organised by shareholder associations. Another important platform for exchange with share­holders is the IR stall at our Annual General Meeting.

As in 2007, shareholders had the opportunity to use an internet tool on the Investor Relations website to register for the Annual General Meeting, order a guest card or instruct one of the proxies provided by the Company. This service was again well received, with approx. 25% of shareholders ordering their admission tickets by means of the new web-based tool.