Financial Glossary

ADJUSTED EARNINGS PER SHARE
Earnings per share represent the annual net surplus after minority interests divided by the number of shares. Adjusted earnings per share are based on the adjusted net surplus after minority interests. This key earnings figure is stated net of the earnings and tax impact of the measurement of financial derivatives as of the balance sheet date under IAS 39 and one-off write-downs on non-current assets. The number of shares corresponds to the weighted average number of our shares in circulation during the period under report.

ADJUSTED EBIT
The abbreviation EBIT stands for Earnings Before Interest and Taxes. For internal management purposes we use adjusted EBIT, i.e. EBIT excluding the impact on earnings of the measurement of financial derivatives at fair value as of the balance sheet date under IAS 39 and excluding one-off and special items (e.g. one-off write-downs on non-current assets).

ADJUSTED EQUITY RATIO
The equity ratio presents equity as a proportion of total assets. For internal management purposes, we adjust both sides of our balance sheet to eliminate the cumulative measurement items for financial derivatives measured under IAS 39. We adjust equity to exclude the relevant net balance of the positive fair values on the asset side and the negative fair values on the liabilities side.

BETA FACTOR
The beta factor (ß) portrays the relative risk harboured by an individual share compared with an index. A beta factor higher than one means that the share involves greater risk than its comparative market. The reverse is the case for a beta factor lower than one.

CAPITAL EMPLOYED
This is the capital used by a company on which external providers of capital are entitled to a return.

CASH FLOW
The cash flow presents all inflows and outflows of cash and cash equivalents in a given period.

D&O INSURANCE
Directors and officers insurance is a financial loss liability insurance policy concluded by a company to protect its directors and officers against costs arising as a result of legal disputes.

DIVIDEND
Profit-based payment to shareholders.

DIVIDEND YIELD
Key figure portraying the dividend distribution made by a stock corporation as a percentage of its share price.

FREE CASH FLOW
The free cash flow portrays the extent to which a company is able to cover its investments from its cash flow from operating activities, i.e. net of investments in intangible assets, property, plant and equipment and investment property.

IMPAIRMENT TEST
An impairment test is a test performed on intangible assets (goodwill, patents, licences etc.) and financial assets (values of shareholdings) to ascertain their ongoing value.

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
International accounting regulations issued by the International Accounting Standards Board (IASB). Based on a Regulation adopted by the European Union (EU), parent companies oriented towards the capital market in the EU have been obliged since 1 January 2005, and at the latest since 1 January 2007, to apply IFRS when preparing their consolidated financial statements. These regulations aim to achieve an international harmonisation of accounting requirements and thus to enhance the comparability of consolidated financial statements.

MARKET CAPITALISATION
This key figure is calculated by multiplying the number of shares issued by their share price.

MARKET RISK PREMIUM
Represents the additional return which the market as a whole or a specific share must offer over and above the risk-free interest rate to reward the additional risk assumed by the investor.

PRICE / CASH FLOW (P/CF) RATIO
The price / cash flow ratio is calculated by dividing the share price by the cash flow per share. This ratio thus presents the multiple by which the cash flow per share is valued on the stock market.

PRICE / EARNINGS (P/E) RATIO
Also known as the P / E ratio. This key figure places the earnings of a company in relation to its current stock market valuation. An important key figure in assessing the earnings power of a company compared with one or several other companies.

RISK-FREE INTEREST RATE
The return which an investor can expect on a risk-free investment, such as a government bond.

ROCE
Abbreviation for Return on Capital Employed. This key figure shows how effectively and profitably a company uses its capital. The ROCE presents operating earnings before interest, taxes on income and goodwill amortisation (EBITA) as a proportion of capital employed.

SUSTAINABILITY
Sustainability means using natural resources in such a way that future generations will also be able to meet their needs. From a company perspective, sustainable business activity involves taking due account of economic, ecological and social aspects. This is also referred to as corporate social responsibility (CSR).

SWAPS (COMMODITY SWAPS)
A commodity swap is an agreement governing the exchange of a series of fixed commodity price payments (fixed amount) and variable commodity price payments (market price). This only involves an exchange of cash (settlement amount).

TAX RATE
The tax rate corresponds to actual tax expenses as a proportion of earnings before taxes.

TAX SHIELD
The tax shield designates the value of the tax benefit contributed by borrowing interest, debts or losses carried forward to the value of a company. As companies are permitted in most tax jurisdictions to deploy debts or losses to reduce their tax burdens, these items raise the value of a company for potential buyers, as they can be offset against profits at the acquirer. When a company is correspondingly indebted or carries forward old losses in its balance sheet, its market value is higher by precisely this amount of tax benefit than that of a comparable company that is not indebted.

VALUE SPREAD
Principal key figure used in our value-based company management. It is calculated by subtracting the weighted average cost of capital (WACC) from the return on capital employed (ROCE).

WACC
Abbreviation for Weighted Average Cost of Capital. This key figure represents the long-term minimum economic return generated on operations based on the ratio of debt capital and equity. Equity costs are calculated at the risk-free interest rate, a risk premium for market risk and the beta factor. Debt capital costs are calculated using the risk-free interest rate plus a premium for default risk. This key figure may be calculated both before taxes and after taxes. As a pre-tax figure, it represents the minimum economic ROCE.

XETRA
Abbreviation for Exchange Electronic Trading. This is the electronic stock market trading system for shares and options at Deutsche Börse AG. It is characterised by automatic order handling, an open order book, i.e. transparent to all market participants, and equal access for all market participants irrespective of their location. Due to its high speed and low cost of executing orders, it has largely replaced floor trading on German stock exchanges.