Annual Report
2013/2014
DRIVING
EXPANSION.
ENSURING
CONTINUITY.
MAKING STRONG
COMPANIES STRONGER.

Glossary

Beta factor (ß)

Measure of the systemic risk of a security in comparison with the market as a whole. A beta of less than one means that the security is exposed to less risk than the total market. The opposite is the case for a beta of greater than one.

Bid-ask spread

Difference between the bid and offering price of a share

Buy-and-build

Concept by which a new company is built, often in a fragmented market: an existing business serves as the platform and is complemented by add-on acquisitions to form a significantly larger entity.

Carried interest

Profit-share entitlement to a fund management company or its managers linked to the performance of managed private equity funds. After fund investors have received a minimum return on their invested capital, fund managers can achieve a superior profit share.

Cash flow

Indicator used to determine a company‘s financial position and frequently also its earnings position: the flows of funds within a period resulting from the difference between the inflow and outflow of cash.

closing

End of subscription period for a (private equity) fund.

Co-Investment fund

A third-party fund managed by Deutsche Beteiligungs AG that co-invests alongside Deutsche Beteiligungs AG or, if appropriate, other financial investors. Investors commit a certain amount of capital which is successively drawn down as soon as fitting investment opportunities arise. Following the sale of the fund’s investments, the proceeds are paid to the investors. A co-investment fund in Germany is generally organised as a limited partnership (“Kommanditgesellschaft”).

Corporate broker

A concept, initially unique to Great Britain but increasingly also found in Germany, aimed at supporting a company in the capital market through a bank. A corporate broker assists in managing relationships to current and potential shareholders. He advises companies on identifying potential new institutional investors and provides feedback from investors to the company.

Corporate governance

Standards for the management and supervision of companies defining the spheres of accountability for supervisory boards, management boards, shareholders and other stakeholders.

CTA

Abbreviation for 'contractual trust arrangement' a model for the funding of a company's pension obligations, by which certain assets (plan assets) are transferred to a trustee (trust). In the IFRSbased financial statements, this results in a balance sheet contraction, in that plan assets are offset against pension provisions. This enhances international comparability of financial statements.

D&O insurance

Directors and Officers Liability Insurance; an insurance that companies take out for members of their corporate bodies and other executives for coverage of financial liability claims.

Dax

German stock market index; benchmark for the development of the capital market

Deal flow

Sum of investment opportunities offered to an investment company. Deutsche Beteiligungs AG endeavours to have early knowledge of investment opportunities; it uses its closely-knit network to that end.

Deferred taxes

Asset or liability items used to offset temporary differences against the taxable profit (tax loss). Deferred tax expense/income represents a corrective factor in relation to the tax base for the period. The primary objective is to present income tax expenses in appropriate proportion to the posted earnings before taxes. A major aspect for DBAG is the discrepancy between the time the value growth occurs and the realisation of that gain upon an investment’s disposal.

Designated sponsor

Consultant to a securities issuer. Designated sponsors ensure a minimum amount of liquidity of a certain security traded on the stock exchange by inputting immediately marketable buy or sell offers with a low spread into the trading system for that security, consecutively or upon request.

Discounted cash-flow method

Procedure used to measure the enterprise value, determined by the sum of discounted cash flows expected in the future. Discounting is performed using an interest rate for a long-term risk-free investment plus a risk premium.

Dow Jones STOXXPrivate Equity 20 Index

European private equity index. Tracks the performance of the 20 largest listed private equity companies in western Europe; the shares of Deutsche Beteiligungs AG are a constituent of the index.

Due Diligence

Diligent, systematic and detailed collection, investigation and analysis of data preceding a commitment to invest. The purpose is to determine the strengths and weaknesses of a target company as well as the risks involved. It goes far beyond the examination of financial statements, and regularly comprises e.g. legal aspects, tax issues, market positioning, and management quality. Depending on the situation, environmental and patent issues may also be addressed.

EBIT

Abbreviation for earnings before interest and taxes. An absolute indicator, determined on the basis of net income before taxes, net interest and extraordinary earnings. This indicator reveals a company’s operative profitability, independent of its individual equity structure.

EBITDA

Abbreviation for earnings before interest, taxes, depreciation and amortisation. An indicator of a company’s operating profitability, independently of its equity structure and capital expenditures.

EBT

Abbreviation for earnings before taxes.

Equity

The residual interest in the assets of a company after deducting all its liabilities.

Equity story

A compendium on a public company in respect of its future rewards and risk profile, highlighting its strategy, profitability, corporate philosophy and culture. This information helps potential investors to assess the company on their own.

Exit

The sale of an investment from a financial investor’s portfolio. Principally, there are three exit routes: trade sale (sale to another company), initial public offering (stock market listing) or secondary buyout (sale to another financial investor). Deutsche Beteiligungs AG considers all three variants in realising its investments.

Expansion financing

Investment in a company in which only a minority of the voting rights are obtainable; both early-stage and established companies may seek expansion capital to finance their next phase of growth. Expansion capital is frequently also sought to improve a company’s capital structure. Expansion capital investments are mostly terminated by a repurchase of interests or a later IPO.

Expansion financing investment

Minority investment in an enterprise, generally with the objective of preparing for a public offering.

Fair disclosure

Efforts to communicate the corporate information required to assess a certain security to all market participants simultaneously.

Fair Value

The current amount for which an investment could be exchanged between knowledgeable, willing and independent parties.

Family office

Organisation that provides investment management services for large private assets; these include the spread over different asset classes and the selection of suitable investments. Forms of family offices may be family-owned entities in which the family’s (or several families’) assets are bundled as well as firms or departments of banks that provide financial services for this group of clients.

Free float

The sum of all shares of a company not held in firm hands, or, in other words, the marketable portion of a company’s stock. Funds of FundsInvestment funds that invest in other funds.

Fundraising

The soliciting of equity commitments to a private equity fund.

General Standard

Segment governed by the statutory minimum requirements of the Official or Regulated Unofficial Market.

Growth financing investment

Minority investment in an enterprise, generally with the objective of preparing for a public offering.

IFRS

International Financial Reporting Standards; accounting standards that have been obligatory for quoted companies in the European Union since 2005. A major difference compared with the German accounting standards is the valuation of financial assets by their fair value at the respective balance sheet date. This value may exceed their historical acquisition cost.

Institutional investors

Organisations such as investment companies, investment funds, insurance companies, pension funds, investment banks and foundations. They mostly have comprehensive knowledge of investment vehicles and risk exposure and are in a position to invest substantial assets or make investment commitments with a long-term horizon.

Investor Relations

Activities directed toward promoting relationships between a company and its existing or potential investors.

Lead-Investor

In a syndicate of investment companies generally the investor holding the largest share, who takes charge of organizing the financing and coordinating the transaction. In a fund investment, the investor holding the largest interest.

Lock-up period

Period of time during which existing shareholders commit not to sell shares from their holdings following an IPO. This is aimed at protecting new shareholders from downslides in stock prices caused by the sale of large blocks of shares after a new issue.

LPX

An index family; the individual indices are composed of the stocks of listed private equity companies. DBAG shares are constituents of the LPX50, the LPX Direct and LPX Europe. The LPX50 consists of the 50 largest quoted private equity companies worldwide, measured by their market capitalisation; the LPX Direct is focused exclusively on firms that directly invest in companies (thus excluding investments in funds); the LPX Europe is composed solely of European private equity firms.

LPX50

Global private equity performance index. Part of an index family; the LPX 50 consists of the 50 largest quoted private equity companies worldwide, measured by their market capitalisation. The shares of Deutsche Beteiligungs AG are one of two German stocks in the LPX 50 and have a weighting of 0.68 percent.

M&A market

Mergers & Acquisitions; market for negotiating businesses or shares of businesses to buyers and sellers.

Market capitalisation

Total market value of all of a company’s outstanding shares, calculated by multiplying the number of issued shares by their current market price.

MBO

Management buyout; the takeover of a company by its management with the support of one or more financial investors who finance the transaction.

Mid-market segment

The market for investment transactions is divided into three segments: transactions with a value of less than 50 million euros are considered “small”; next comes the mid-market segment with transactions valued from 50 to 300 million euros; transactions with a value of more than 300 million euros form the upper market segment.

Multiples method

Method used to value enterprises; determined by multiplying a relevant indicator (e.g. EBIT) by a multiple derived from current market prices. This multiple is calculated on the basis of the quotient derived from a peer group of companies and their respective earnings indicators.

Net asset value (NAV)

Market value of all tangible and intangible assets of a company less its liabilities. This value corresponds to the equity in accordance with the IFRS. The net asset value per share (or equity per share) is a key indicator used in assessing the value of a quoted private equity company.

Official Market

(Amtlicher Markt) Primary tier of the German Stock Exchange that sets high standards for admittance.

Operation Blanche

Purchase of new shares without the employment of own capital; a shareholder sells exactly as many subscription rights in a regular capital increase as would be required to exercise the remaining pre-emptive rights and pay the issue price using the proceeds from the sale of the rights. After an Operation Blanche, the absolute amount of the shareholder’s investment in the shares of the respective company remains unchanged; his relative share of the capital stock, however, will decrease.

Parallel fund

Also: co-investment fund. A third-party fund that co-invests (usually by a fixed percentage) alongside another investor; at Deutsche Beteiligungs AG: the funds managed by Deutsche Beteiligungs AG

Peer Group

A group of companies similar in terms of industrial sector, structure, products, and sales, used for comparison purposes.

Portfolio

Here: all the holdings of an equity investment company.

Prime Standard

Segment on the German Stock Exchange with high standards of transparency. Admission to the Prime Standard is a prerequisite for inclusion in one of the stock indices, such as the S-Dax.

Private equity

Private capital; capital provided to non-quoted companies for the mid to long-term.

Public-to-Private

Delisting of a formerly quoted company; also referred to as taking private.

Regulated Market

Entry segment for newcomers to the stock exchange with less stringent admission conditions.

Return on equity

Indicator used in assessing the business performance of a company; the profit delivered to the owners is expressed as a percentage of the equity available at the beginning of a financial year.

Return on equity (NAV) per share

Key target and performance indicator of Deutsche Beteiligungs AG (is equal to return on NAV per share). The closing NAV per share at the end of the financial year is set against the opening NAV per share at the beginning of the financial year, less dividends paid in the course of that year.

Road show

Presentation of the company to institutional investors.

S-Dax performance index

Selection index of the German Stock Exchange for smaller companies from classical sectors of the economy. Comes after the stocks indexed in the M-Dax and consists of 50 stocks admitted to the Prime Standard of the Official Market or Regulated Unofficial Market.

Secondary buyout

A kind of second management buyout: the financial investor and MBO managers sell to a new generation of managers and to a new private equity investor.

Silent Partnership

A silent partnership usually having a fixed term, fixed interest rate and defined performance- related components; not subject to public disclosure.

SME (in Germany: “Mittelstand“)

Small and Midsize Enterprises. There is no generally valid definition of what is considered an SME. Possible distinguishing factors could be, for example, a company&8217;s annual revenues, the number of employees or the ownership structure. Deutsche Beteiligungs AG defines Germany’s “Mittelstand“ as companies generating annual revenues of between 50 and 500 million euros, regardless of their ownership structure or the number of employees. There are more than 5,000 such companies in Germany.

Spin-off

The splitting off of a division or subsidiary from a company/large corporation and the creation of an independent company.

Stock options

Rights granted for the purchase of a company’s stock at a fixed price (or a price determined on the basis of a certain scheme). Deutsche Beteiligungs AG had installed a stock option programme in 2001; the final stock options were exercised in financial year 2008/2009.

STOXX Private Equity 20 Index

European private equity index. Tracks the performance of the 20 largest listed private equity firms in western Europe; DBAG shares are a constituent of the index.

Track record

A record of performance by a company or an entrepreneur or manager.

Trade Sale

The sale of an investment to a company that wants to complement its product portfolio, expand its market presence or achieve other strategic goals.

Transaction value

Value of the debt-free enterprise.

Turn around

The restructuring of a business to achieve profitability again. In some cases, the business will start off anew with a new management and/or a revised product range.

UBGG

German Special Investment Company Act (Gesetz über Unternehmensbeteiligungsgesellschaften ? UBGG); in 1986, Deutsche Beteiligungs AG was the first firm to be recognised as a special investment company. Among other things, this law exempts companies ? subject to certain conditions ? from municipal trade tax.

Valuation reserves

The difference between the book value in conformity with the German Commercial Code (acquisition cost or lower) and the current market value.

Venture capital

Risk capital; mostly private capital provided to start-ups or emerging businesses.

Write-downs

A reduction in the value of assets; must be disclosed in the profit and loss account.

Xetra

Electronic market trading system.