2011 Annual Report - OTCIQ.com

Glossary of Financial Terms
Actuarial gains and losses
The actuarial calculation of provisions for pensions is based
on projections of a number of variables, such as projected
future salaries and pensions. An actuarial gain or loss is
recorded when the actual numbers turn out to be different
from the projections.
ADR
Abbreviation for American depositary receipt. These are depositary
certificates issued by U.S. banks and traded on U.S. stock
exchanges in place of a foreign stock. ADRs make it easier for
foreign companies to gain access to U.S. investors.
Beta factor
Indicator of a stock’s relative risk. A beta coefficient of more
than one indicates that a stock has a higher risk than the
overall market; a beta coefficient of less than one indicates
that it has a lower risk.
Bond
Debt instrument that gives the holder the right to repayment
of the bond’s face value plus an interest payment. Bonds are
issued by public entities, credit institutions, and companies
and are sold through banks. They are a form of medium- and
long-term debt financing.
Capital employed
Represents the interest-bearing capital tied up in the E.ON
Group. It is equal to a segment’s operating assets less the
amount of non-interest-bearing available capital. Other shareholdings
are included at their acquisition cost, not their fair
value.
Capital stock
The aggregate face value of all shares of stock issued by a company;
entered as a liability in the company’s balance sheet.
Cash flow statement
Calculation and presentation of the cash a company has
generated or consumed during a reporting period as a result
of its operating, investing, and financing activities.
Cash provided by operating activities
Cash provided by, or used for, operating activities of continuing
operations.
CEO Letter
E.ON Stock
Combined Group Management Report
Consolidated Financial Statements
Corporate Governance Report
Supervisory Board and Board of Management
Tables and Explanations
Commercial paper (“CP”)
Unsecured, short-term debt instruments issued by commercial
firms and financial institutions. CPs are usually quoted on a
discounted basis, with repayment at par value.
Consolidation
Accounting approach in which a parent company and its
affiliates are presented as if they formed a single legal entity.
All intracompany income and expenses, intracompany accounts
payable and receivable, and other intracompany transactions
are offset against each other. Share investments in affiliates
are offset against their capital stock, as are all intracompany
credits and debts, since such rights and obligations do not
exist within a single legal entity. The adding together and consolidation
of the remaining items in the annual financial
statements yields the consolidated balance sheets and the
consolidated statements of income.
Contractual trust arrangement (“CTA”)
Model for financing pension obligations under which company
assets are converted to assets of a pension plan administered
by an independent trust that is legally separate from the
company.
Cost of capital
Weighted average of the costs of debt and equity financing
(weighted average cost of capital: “WACC”). The cost of equity
is the return expected by an investor in a given stock. The
cost of debt is based on the cost of corporate debt and bonds.
The interest on corporate debt is tax deductible (referred to
as the tax shield on corporate debt).
Credit default swap (“CDS”)
A credit derivative used to hedge the default risk on loans,
bonds, and other debt instruments.
Debt factor
Ratio between economic net debt and EBITDA. Serves as a
metric for managing E.ON’s capital structure.
Debt issuance program
Contractual framework and standard documentation for the
issuance of bonds.
Discontinued operations
Businesses or parts of a business that are planned for divestment
or have already been divested. They are subject to special
disclosure rules.
205