PHOENIX PHarmaHaN dEl GmbH & CO KG maNNHEIm...December 2010. Nevertheless, healthcare policy had an...

PHOENIX PHarmaHaNdEl GmbH & CO KG maNNHEIm GrOuP maNaGEmENt rEPOrt aNd CONsOlIdatEd fINaNCIal statEmENts31 JaNuary 2011

group

Group management report and consolidated financial statements 2010/2011

Group management report 2 Businessandgeneralenvironment 6 Subsequentevents 6 Netassets,financialpositionandresultsofoperations 11 Risksandopportunities 14 Forecast

Consolidated financial statements 16 Consolidatedincomestatement 17 Consolidatedstatementofcomprehensiveincome 18 Consolidatedstatementoffinancialpositionasof31January2011 20 Consolidatedcashflowstatement 22 Statementofchangesinequity

24 Notestotheconsolidatedfinancialstatements

91 Auditopinion

2 PHOENIXgroupmanagementreportandconsolidatedfinancialstatements2010/2011

Business and general environment

Overview PHOENIX

PHOENIXisaleadingEuropeancompanyinpharmaceuticalstradingandoneofthelargestfamilyfirmsinGermanyandEurope.ThecorebusinessofPHOENIXiswholesaleandretailpharmaceuticals.Inaddition,Groupcompaniesoperateinrelatedbusinessareassuchasservicesforpharmaceuticalsmanufacturers,pharmacyITsystems,andlogistics.

AttheendofthefiscalyearPHOENIXoperated157wholesalebranchesin23countriesinitscorebusiness,aswellas1,562pharmaciesinalargenumberofcountries.ThismakesPHOENIX’scountryportfoliohighlydiversified.TheproportionofconsolidatedrevenuegeneratedbyGermanbusinesshasfallenoverthelastfewyearsduetotheEuropeanexpansionandisnowaround31%.Noneoftheforeignsubsidiariesaccountsformorethan11%ofconsolidatedrevenue.EasternEuropeancountriesaccountforapproximately16%ofrevenue.Thesemarketsgenerallygrowfasterthanthematurepharmaceuticalmarkets.

PHOENIXisthemarketleaderinwholesalepharmaceuticalsintencountries:Germany,Italy,theCzechRepublic,Slovakia,Serbia,Bosnia,Bulgaria,Denmark,FinlandandSweden.PHOENIXoperatestheretailpharmacybusinessmainlyintheUK,Norway,theNetherlands,SwitzerlandandeasternEurope.

Inthefiscalyear2010/2011,thePHOENIXGrouphadanaverageheadcountof23,206full-timeequiva-lents.Thisis55fewerthanintheprioryear(averageintheprioryear:23,261).Commonmanagementprinciplesaswellastrainingprogrammesandmanagementtoolsbasedontheseprinciplesensurethattheworkforceinallcountriesiswell-qualified,motivatedandefficient.

Corporate strategy

ThecorporatestrategyofPHOENIXisgearedtoachievingsustainablevaluesthroughacustomer-orientedcorporateculture,strictcostmanagementandprofit-orientedgrowth.ThedecentralisedorganisationalstructuredoesjusticetotheregionaldifferencesinthevariousEuropeanpharma-ceuticalmarkets.

PartofPHOENIX’sstrategyis,inadditiontoorganicgrowth,toregularlyacquirepharmaciesandwholesalecompaniestoexpanditsmarketposition.PHOENIXalsosystematicallyexpandsitsservicerangeforpharmaceuticalmanufacturers,pharmaciesandothercustomers.

Inwholesalepharmaceuticals,PHOENIXhasestablishedbusinessrelationshipswithpharmacycus-tomers.Manyofthepharmacycustomerstakepartinpartnershipprogrammes.Insomecountries,PHOENIXalsooffersfranchisesystemsforindependentpharmacies.Regularcustomersurveyshelptomaintainastrongcustomerfocusandhighlevelsofcustomersatisfaction.

GrOuP maNaGEmENt rEPOrt

PHOENIXgroupmanagementreportandconsolidatedfinancialstatements2010/2011 3

Inlogistics,PHOENIXcontinuouslyimplementsbestpracticesacrossEurope.Processoptimisationmeasuresthataresuccessfulinonecountryserveasastartingpointforimprovementmeasuresinothercountries.

TheCompanyislargelymanagedusingthefinancialindicatorsoftheincomestatement,thestate-mentoffinancialpositionandthecashflowstatement.ThemainP&LindicatorsareprofitbeforetaxandEBITDA.Asregardsthekeyindicatorsofthestatementoffinancialposition,weprimarilyaimtofurtherreducenetdebtandatthesametimetoimprovetheratioofnetdebttoEBITDA.Networkingcapitalisalsocontinuouslyoptimisedinordertoreducenetdebt.

Development of the market

Theoveralleconomyimprovedasawholein2010comparedwiththeprioryear.RealGDPinGermanygrewby3.6%.Intheeurozonetoo,realGDPincreasedby1.7%in2010.

SlightgrowthwasrecordedontheEuropeanpharmaceuticalmarkets.However,inmanymarkets,growthwasslowedbyhealthcarepolicy.

Inthecurrentfiscalyear,thewholesalepharmaceuticalsmarketinGermany,themostimportantmarketforPHOENIX,recordedrelativelysubstantialgrowthat4.4%intheperiodfromJanuarytoDecember2010.Nevertheless,healthcarepolicyhadaneffect.Asof1August2010,thestatutorydiscountsofpharmaceuticalsmanufacturerstostatutoryhealthinsurancefundswereraisedto16%(previously6%)andapricemoratoriumwassetonrefundablepharmaceuticalsuntil31December2013.Inanotherchange,since1January2011,newpharmaceuticalsarereviewedfortheirbenefitsandthepriceisnegotiatedwiththepharmaceuticalsmanufactureronthisbasis.

TheGermanparliament(“Bundestag”)passedtheAMNOG[“GesetzzurNeuordnungdesArzneimit-telmarktesindergesetzlichenKrankenversicherung”:ActfortheRestructuringofthePharmaceuticalMarketinStatutoryHealthInsurance]on11November2010.Amongotherthings,thelawprovidesasof1January2012forastructuralchangetowholesaleremuneration.Thenewsystemconsistsofafixedmark-upindependentofprice,combinedwithapercentagemark-uponthesalespriceofthepharmaceuticalscompany.Bywayofaninterimsolutionfor2011,aflat-ratewholesalemark-downof0.85%onthemanufacturer’ssalespriceforprescriptionpharmaceuticalstookeffect.PHOENIXaimstousesalesandmarketingmeasurestocompensateforanyresultingburdens.TheAMNOGfurther-moreprovidesforpharmaciestoapplyanincreasedmark-downofEUR2.05(previouslyEUR1.75)perprescriptionpackfrom1January2011.

ElsewhereinwesternEurope,especiallyintheUK,growthinthepharmaceuticalsmarketincreasedcomparedwiththeprioryear,contributingtoourpositivebusinessperformance.Asof1October2010,theNationalHealthServiceonceagainloweredtherefundsforgenericproductsintheUK.Italyfelttheafter-effectsofthepricecutsintroducedforcertainpharmaceuticalsasof1June2010aswellastheadjustedregulationonmarginsforwholesalepharmaceuticalsandpharmacyretail.TheFrenchmarketcontinuedtobeshapedbyintensecompetition,whichadverselyaffectedourbusinessperformance.


ThedevelopmentofmarketsinnorthernEuropewasvariablein2010/2011.WhilethereferencepricesystemintroducedinFinlandintheprioryearresultedinastagnantmarket,andtheDanishmarketdeclinedslightly,NorwayandSwedenbothrecordedmarginalmarketgrowth.Swedensawanin-creaseinthenumberofpharmaciesandanexpansionofpharmacychainsfollowingtheliberalisationofthepharmacymarket.

IneasternEurope,theHungarianpharmaceuticalsmarket,amongothers,showedstronggrowthinpharmaceuticalstrading.ThenewHungarianpharmaciesactenteredintoeffecton1January2011.Itrequirespharmaciststoholdaninvestmentofatleast25%intheirpharmacies’capitalasof1January2014;asof1January2017,pharmacistswillhavetoholdamajorityinterestintheirpharma-cies.InSerbia,wherePHOENIXhashadapresencesince2008,theCompanysubstantiallyexpandeditsmarketpositionagaininthefiscalyear.

Acquisitions, disposals, investments and joint ventures

On16June2010,PHOENIXmadeanagreementwithCelesioAGlimitedtotheNetherlands,underwhichCelesioAGcontributedits100%investmentinLloydsNederlandB.V.with62pharmaciestoourDutchsubsidiaryBrocacefHoldingN.V.andinreturnreceived45%ofthesharesinBrocacefHoldingN.V.Withsome110ofitsownpharmaciesandaround40franchisepartnerpharmacies,themergedcompanyisthesecondlargestproviderintheDutchpharmacymarket,whichplacesitinamuchstrongermarketposition.ThetransactionincreasedtheGroup’sequityduetoaEUR63.8mcapitalincreasebythenon-controllingshareholders.

Inaddition,individualpharmaciesinvariouscountrieswereacquiredinthefiscalyear2010/2011.

TheCompanymadepaymentsofEUR10.7m(prioryear:EUR69.1m)forbusinesscombinationsinthefiscalyear2010/2011.ThebusinesscombinationsresultedinanincreaseingoodwillofEUR50.0m(prioryear:EUR43.5m).

WesoldourSwedishpharmacyretailbusinessasof30April2010asplanned.

Inthecourseoftheportfolioclearingofnon-coreactivities,wedisposedofourinvestmentsof42.5%intheRussianpharmaceuticalstradingcompanyZAORosta.

Furthermore,wesoldourinvestmentof12.5%inAndreae-NorisZahnAG,aGermanpharmaceuticalwholesalertotheAllianceBootsGroupforEUR26pershare.WereceivedEUR34.7mfromthistrans-action.

Inthecourseofrefinancing,PHOENIXsolditsinvestmentsinKLHoldingGmbHtoarelatedpartyforapriceofEUR58.5m.

Eachdisposalgeneratedaprofit.


Financial restructuring and refinancing

ThefinancialrestructuringandrefinancingofthePHOENIXGroupwassuccessfullycompletedinfiscalyear2010/2011.Itcomprisesthefollowingmajorelements:

� ConclusionofasyndicatedloanagreementfororiginallyEUR2.6b.� IssueofabondwithanominalvalueofEUR506.2m.� IndependentfinancingoftheComifarGroupinItalyofuptoEUR750.0m.� SaleoftheinvestmentinKLHoldingGmbH.� Repaymentoftheloangrantedtoarelatedparty,includingaccruedinterest,ofEUR458.5m.� IncreaseinequitybyEUR505.5m.

On2July2010,PHOENIXconcludedasyndicatedloanagreementwith17banksforatotalofEUR2.6b.Thesyndicatedloanagreementexpireson31December2013.Alsoon2July2010,theItalianComifarGroupagreednewlong-termfinancingwithcommitmentsofEUR750.0mandatermthatrunsuntil31December2013withagroupoflenderscomprisingsixItalianbanks.ThisfinancingpackagereplacesthepreviousfinancinginItalyandendstheItalianstandstillagreement.

AftersecuringindependentfinancingfortheComifarGroup,thePHOENIXGroupwasabletoirrevo-cablyterminatetheItalianfacilityofEUR750.0mcontainedinthesyndicatedloanagreementofEUR2.6bon5July2010,reducingthesyndicatedloanagreementtoEUR1.85b.

On13July2010,PHOENIXPIBFinanceB.V.successfullyplacedabondforthefirsttime.Thebond,whichhasanominalvalueofEUR506.2mandatermuntil2014,bearsafixedcouponof9.625%.TheproceedsfromtheissueweredepositedonatrustaccountuntiltheentirerefinancingplanhadbeenimplementedandwasavailablefortheCompanytouseoncethenewcreditfacilityhadbeendrawnforthefirsttime.

ThesaleofthesharesinKLHoldingGmbHwasarrangedbyagreementdated27July2010.Thesharesweretransferredtothebuyereffective3September2010.

On11August2010,allmeasuresforrefinancingPHOENIXweresuccessfullycompleted.Thestandstillagreementwiththelendersandthetrustagreementwereendedaccordingly.Withthefundsfromthenewsyndicatedcreditfacility,thebond,theEUR505.5mcapitalincreaseandthepartialrepay-mentofEUR435.4moftheloangrantedtoarelatedparty,thepreviousliabilitiesgovernedbythestandstillagreementwererepaidinfullandtherelatedagreementsended.Furthermore,thepreviousfinancingofforeignsubsidiariesoftheGroupwasalso,toalargeextent,replacedinthecourseoftherefinancingmeasures.

ApartnerloangrantedattheendofJune2010wasrepaidincludingintereston17August2010.

On23September2010,theremainderoftheloangrantedtoarelatedpartywasrepaidincludinginterest.ThustherelatedpartyhasnowrepaidtheloanamountofEUR458.5mincludingallinteresttoPHOENIX.


Duetothesuccessfulreductionofnetdebt,PHOENIXpermanentlyreducedthelong-termtrancheofthesyndicatedloanbyEUR200.0masof19January2011,bringingthesyndicatedcreditfacilitydowntoEUR1.65b.Withregardtothefinancialcovenantstobecompliedwith,werefertothecommentsintheSection“Risksandopportunities.”

Change in management

Mr.StefanHerfeldwasappointedgeneralmanagerofPHOENIXVerwaltungsGmbHon3September2010.Heisresponsibleforretail.

Dr.MichaelKeppelsteppeddownasgeneralmanagerofPHOENIXVerwaltungsGmbHasplannedandleftthecompanywitheffectasof30September2010.

Mr.OliverWindholzwasappointedtothemanagementofPHOENIXVerwaltungsGmbHwitheffectasof1February2011.Mr.WindholzwillsucceedMr.HenryIberl(executivedirectorsales/marketing).Havinggivenmorethan30yearsofservicetothecompany,Mr.Iberlwilltakehiswell-earnedretire-mentasplannedinJune2011afterhis60thbirthday.

Advisory board set up

Inaccordancewiththeprinciplesofgoodcorporategovernance,anadvisoryboardwasestablishedatPHOENIXPharmahandelGmbH&CoKGasaprofessionalsupervisorybody.InadditiontoMr.LudwigMerckle,theboardincludesDr.BerndScheifele(Chairman),Dr.WolframFreudenberg,RolfGlessingandDr.LorenzNäger.

Subsequent events

Witheffectfrom11February2011,PHOENIXmadeafurtherpartialrepaymentofthelong-termtrancheofthesyndicatedloanofEUR15.0m.ThesyndicatedcreditfacilitynowamountstoEUR1,635.0m,ofwhichEUR625.0mcanbeutilisedonarevolvingbasisuntil31December2013andEUR1,010.0misdrawnuntil31December2013.

Undertheagreementdated9February2011,PHOENIXimprovedthemarginagreedinthesyndicatedcreditfacilityforcurrentlyEUR1,635.0m,concludedon2July2010,bysome0.5%p.a.onaverage,effectiveasof11February2011.

Net assets, financial position and results of operations

Results of operations

AtEUR21,737.8m,revenuewasup2.0%ontheprior-yearlevel.Theeffectofexchangeratesonrevenuegrowthwas1.9%,whileat0.2%,changesintheconsolidatedgroupdidnothaveamaterialeffectonrevenuedevelopment.

PHOENIXPharmahandelGmbH&CoKGrecordedanincreaseinrevenueof2.2%.Here,revenuegrowthisattributabletostrongmarketgrowth.


Thegrossprofitmargin,calculatedasgrossprofitinrelationtorevenue,increasedfrom8.84%to8.95%.Thisisattributabletoasellingstrategyfocusedonmarginsinvariouscountriesaswellastotheincreaseinrevenuefromhigher-marginservicefees.TheDutchLloydspharmacieshavealsocontributedtotheincreaseingrossprofitmargin.

OtherincomefellbyEUR3.0mtoEUR147.0m.Thisismainlyduetolowercommissionincomeanddecreaseinexchangerategains.Thisisoffsetbysignificantlyhighergainsondisposalofassets,par-ticularlyonthedisposalofour42.5%investmentintheRussianpharmaceuticalcompany,ZAORosta.

PersonnelexpensesroseslightlyfromEUR930.8mtoEUR937.9m.AlegalamendmentconcerningthetreatmentofpensionplansinNorwayandtheUKledtoanon-recurringEUR19.2mreductioninpensionobligations,whichreducedpersonnelexpensesinthereportingyear.TheLloydspharmaciesintheNetherlands,whichwereconsolidatedfromDecember,contributedEUR5.8mtotheincreasedpersonnelexpenses.Collectivelybargainedpayrisesalsodroveuppersonnelexpenses.Furtherpro-ductivityimprovementshadadecreasingeffectonpersonnelexpenses.

OtherexpensesrosebyEUR24.3mtoEUR589.1m.Thismainlystemsfromanincreaseinbaddebtallowances.Forinstance,areceivablefromakeyaccountinSlovakiahadtobewrittenoffinfull.Changesintheconditionsofthepharmacymarketinvariousothercountrieshavealsoledtoin-creasedcreditrisk,whichwehaveprovidedforbyrecognisingimpairmentlosses.Inaddition,anincreaseinrentalcosts,partiallyasaresultofthefullconsolidationoftheLloydspharmaciesasofDecember,ledtoanincreaseinotherexpenses.Thiswascounterbalancedbyasignificantreductioninothertaxes,whichcontainedadditionstoaprovisionforVATintheprioryear.OtherexpensescontaincostsofEUR8.6mfromfinancialrestructuring(prioryear:EUR12.2m).

TheresultfromassociatesclimbedbyEUR1.5mtoEUR2.2m.ThiswasmainlyduetotheinclusionintheprioryearofanimpairmentlossonpharmacyinvestmentsintheNetherlandsconsolidatedusingtheequitymethod.

TheresultfromotherinvestmentsfellfromEUR7.4mtoEUR5.9m.Inthereportingyear–asintheprioryear–thisfigureincludesadividendreceivedinrelationtoZAORosta,Russia.

Earningsbeforeinterest,taxes,depreciationandamortisation(EBITDA)rosefromEUR546.4mtoEUR573.0mchieflyduetotheincreaseingrossprofit,whichmorethanoffsetthecost-sideincrease.

TheEBITDAindicatorusedforcomparisonwithournetdebt(adjustedEBITDA)remainedalmostunchangedandisdeterminedasfollows:

EURk FY09/10 FY 10/11

EBITDA 546,354 573,000

Interestfromcustomers 22,057 23,656

Costsoffinancialrestructuring 12,200 8,554

Factoringfees 8,355 4,956

IncreaseintheprovisionforVAT 21,104 0

Adjusted EBITDA 610,070 610,166

ThereturnonsalesbasedonadjustedEBITDAstoodat2.81%after2.86%intheprioryear.


AtEUR89.8m,amortisation,depreciationandimpairmentremainedsubstantiallybelowtheprior-yearlevelofEUR123.6m.Thiswasmainlyduetothefactthattheregularimpairmenttestsinthecurrentfiscalyeardidnotleadtoanyimpairmentcharges(prioryear:EUR31.9m).

Earningsbeforeinterestandtaxes(EBIT)rosedrivenbythepositivedevelopmentofEBITDAandamortisation,depreciationandimpairmentsfromEUR422.7mintheprioryeartoEUR483.2m.ThereturnonsalesbasedonEBITincreasedfrom1.98%to2.22%.

ThefinancialresultchangedfromEUR-181.4mtoEUR-212.1m.InterestincomedecreasedslightlyfromEUR48.6mtoEUR46.3m.InterestcostdecreasedfromEUR208.7mtoEUR200.9m.NetexchangeratelossesinthefinancialresultcametoEUR22.1m(prioryear:exchangerategainsofEUR8.4m).TheywerepartiallyoffsetbyincomefromderivativesofEUR16.0m(prioryear:expenseofEUR9.7m).Inthecurrentfiscalyear,theotherfinancialresultofEUR22.2m(prioryear:EUR-0.3m)containsincomefromthesaleoftheinvestmentsinAndreae-NorisZahnAG,Germany,andKLHold-ingGmbH,Germany.

ProfitbeforetaxroseasaresultofthesignificantimprovementinEBITfromEUR241.3mtoEUR271.1m.

Profitbeforetaxisimpactedbyspecialexpensesaspartoffinancialrestructuringandrefinancing.Profitbeforetaxadjustedfortheseeffectsisdeterminedasfollows:

EURk FY09/10 FY 10/11

Profitbeforetax 241,344 271,050

Costsoffinancialrestructuring 32,098 81,719

Profit before tax (adjusted) 273,442 352,769

Theincreaseinthecostsoffinancialrestructuringcomparedwiththeprioryearismainlyattributabletothecostsincurredinfiscalyear2010/2011fortheprematurerepaymentofthefinancingunderthestandstillagreement.

TaxesonincomecametoEUR125.4m,EUR42.5mupontheprior-yearfigure.TaxesonincomecontainexpensesfromcurrentincometaxesofEUR109.6m(prioryear:EUR89.6m)aswellasadeferredtaxexpenseofEUR15.8m(prioryear:deferredtaxincomeofEUR6.7m).Thetaxraterosefrom34.4%to46.3%,chieflyduetoimpairmentlossesonunusedtaxlossesandinterestcarryforwardsasaresultoftheplannedrestructuringandhighernon-tax-deductibleexpensesundertheinterestlimitationrule.

ProfitfortheperiodcametoEUR145.7m(prioryear:EUR158.4m).AnamountofEUR-0.2m(prioryear:EUR14.3m)thereofwasattributabletonon-controllinginterests.


Net assets

TheGroup’stotalassetsdecreasedby6.2%toEUR7,560.2m.Thecurrencytranslationdifferenceonthetotalassets,whichisdisclosedinthestatementofchangesinequity,amountstoEUR-82.1m(prioryear:EUR-103.3m).

IntangibleassetsrosebyEUR56.0mtoEUR1,540.7m.TheincreaseischieflyduetothepurchaseaccountingoftheLloydspharmaciesacquiredintheNetherlandsasof1December2010,whichresultedingoodwillofEUR38.5mandotherintangibleassetsofEUR1.3m.Asof31January2011,intangibleassetsessentiallycomprisedgoodwill(EUR1,201.9m;prioryear:EUR1,150.3m)andphar-macylicensesintheUK(EUR287.3m;prioryear:EUR283.8m).

Property,plantandequipmentincreasedbyEUR6.8mtoEUR734.6m.Thefirst-timeconsolidationoftheLloydspharmaciesintheNetherlandsincreasedproperty,plantandequipmentbyEUR10.9m.

Non-currentotherfinancialassetsdecreasedfromEUR204.3mintheprioryeartoEUR70.0m.ThisismainlyduetoaEUR110.7mreductioninavailable-for-salefinancialassetstoEUR43.2masaresultofthesaleofthe5.81%investmentinKLHoldingGmbH,Germany,andtheinvestmentof12.5%inAndreae-NorisZahnAG,Germany.

InventoriesrosecomparedtotheprioryearbyEUR50.4mtoEUR1,576.0m.Theincreaseisparticu-larlyattributabletorevenuedevelopmenttowardstheendofthefiscalyear.TheacquisitionoftheLloydspharmaciesresultedinanincreaseininventoriesofEUR9.3m,whilethereclassificationofthePolishoperationstoavailable-for-salefinancialassetsresultedinaEUR26.9mdecrease.

TradereceivablesdecreasedfromEUR2,857.7mintheprioryeartoEUR2,596.2m.Aspartofasellingpolicy,whichfocusedinpartonnetworkingcapital,measuresaimedatshorteningpaymenttermshelpedtofurtherreducetradereceivables.Receivablesdays(measuredastradereceivables/revenuex360)havedecreasedfrom48.3daysintheprioryearto43.0inthefiscalyear.ThereclassificationofthePolishoperationstoavailable-for-salefinancialassetsresultedinaEUR32.8mdecreaseintradereceivables.

ReceivablesamountingtoEUR139.3mhadbeensoldasof31January2010(prioryear:EUR136.2m)underABSandfactoringprogrammesthatarenotaccountedforinthestatementoffinancialposition.UnderABSandfactoringprogrammesthatareaccountedforonlytotheextentofthecontinuinginvolvement,receivablesofEUR338.2mhadbeensoldasof31January2011(prioryear:EUR278.9m).TheGroup’scontinuinginvolvementcametoEUR15.1m(prioryear:EUR7.2m).

Non-currentassetsheldforsalemainlyincludeourPolishoperationsintheWholesalepharmaceuti-cals,Pre-wholesaleandPharmacyretailsegments.TherelatedassetsamounttoEUR79.3m.Further-more,assetsheldforsalecontainfourpharmaciesintheNetherlandswhicharetobesoldduetorequirementsimposedbytheGermanantitrustauthorities,andrealestateandequityinvestmentsnotrequiredforoperations.


Financial position

EquityincreasedfromEUR1,112.5masof31January2010toEUR1,821.8masof31January2011.Theequityratiostoodat24.1%(prioryear:13.8%).ThemainreasonfortheriseistheEUR505.5mcapitalincreaseconductedinthecourseofrefinancinginAugust2010.ProfitfortheperiodofEUR145.7m(prioryear:EUR158.4m)islikewisereflectedintheequityincrease.AspartoftheacquisitionoftheLloydspharmacies,equityincreasedduetoaEUR63.8mcapitalincreasebythenon-controllingshareholders.CurrencytranslationhadaneffectofEUR21.7m(prioryear:EUR33.2m)andthechangeinthereserveforfinancialassetsaccountedforasavailableforsaleofEUR-25.5m(prioryear:EUR31.9m)onthechangeinequity.Asof31January2011,theavailable-for-salereserveamountstoEUR12.3m(prioryear:EUR37.1m)andmainlycontainschangesinthefairvaluesofminorityinvest-mentsinpharmacies.

CashflowfromoperatingactivitieswasclearlypositiveatEUR580.0m(prioryear:EUR923.5m).AfurtherdecreaseofEUR269.9minworkingcapital(prioryear:downEUR614.0m)coupledwiththestabledevelopmentofearningsmadeasubstantialcontributiontothepositivecashflowfromoperatingactivities.Thefurtherimprovementinnetworkingcapitalchieflystemsfromafurtherreductionintradereceivables.CashflowfrominvestingactivitieswaspositiveatEUR502.5m(prioryear:cashoutflowofEUR126.9m).TherepaymentoftheEUR458.5mloangrantedtoarelatedpartyandthecashreceivedofEUR130.2mfromdisposalsoffinancialassets(prioryear:EUR7.7m)morethanoffsetthecashpaidforbusinesscombinationsandinvestmentsinnon-currentassets.

FreecashflowincreasedfromEUR796.5mintheprioryeartoEUR1,082.5m;togetherwiththecapitalincreaseofEUR505.5m(prioryear:EUR0m),itwasusedtoreducethenetfinancialliabilities.

AtEUR575.0m,cashandcashequivalentsinthestatementoffinancialpositionweresubstantiallyabovetheprior-yearlevelofEUR396.7m.Forthechangeincashandcashequivalents,pleaserefertothecashflowstatement.

ProvisionsforpensionsdecreasedbyEUR14.3mtoEUR112.0m,primarilyduetothechangeinregu-lationsconcerningpensionplansinNorwayandtheUK,whichledtoanon-recurringEUR19.2mreductioninpensionobligations.

Non-currentfinancialliabilitiesrosefromEUR238.7mintheprioryeartoEUR1,633.9m.Theincreaseinnon-currentliabilitiesismainlyattributabletotheplacementofalong-termbondwithanominalvolumeofEUR506.2minJuly2010aswellastothelong-termtrancheofthesyndicatedloanwithanoriginalnominalvolumeofEUR1,225.0m,whichwassubsequentlyloweredbyEUR200minJanuary2011owingtothefasterthanexpecteddebtreduction.Non-currentliabilitiesalsocontainsupplementarycontributionsofEUR135m(prioryear:EUR135m).

CurrentfinancialliabilitiesdecreasedfromEUR3,637.8mintheprioryeartoEUR862.9mduetotherefinancingcarriedoutinAugust2010.Currentfinancialliabilitiesincludeamongotheritemsliabili-tiestobanksofEUR289.7m(prioryear:EUR2,774.4m),liabilitiesfromABSandfactoringagreementsofEUR262.6m(prioryear:EUR344.6m)andloansofEUR167.5m(prioryear:EUR167.6m).


Accordingtothecalculationbelow,netdebtfellfromEUR3,678.4mtoEUR2,176.6m.

EURk 31Jan2010 31 Jan 2011

+Financialliabilities(non-current) 238,721 1,633,905

lesssupplementarypartnercontribution -135,032 -135,032

lessderivativefinancialinstruments(non-current) -10,506 -488

+Financialliabilities(current) 3,637,817 862,921

lessderivativefinancialinstruments(current) -17,912 -5,628

lesscashandcashequivalents -396,716 -575,001

lessheld-to-maturityfinancialassets -60 -60

+SoldinthecourseoffactoringandABStransactions 407,971 462,479

lessreceivablesfromfactoring -34,359 -47,390

lessreceivablesfromABSprograms -11,506 -19,118

Net debt 3,678,418 2,176,588

Theobjectiveoffinancialmanagementistocontinuouslyimprovethecapitalstructurebyreducingthegearingratio.Inthelongterm,weaimtofurtherimprovetheequityratioandtoachievearatioofnetdebttoEBITDAofaround3.0.

TradepayablesincreasedbyEUR114.8mcomparedwiththeprioryeartoEUR2,576.7m.Withthesuccessfulconclusionofrefinancing,paymenttermssetbysuppliershavealsoreturnedtonormal.

Overall,thePHOENIXGroupwasabletodefenditspositioninthefiscalyear2010/2011asoneoftheleadingpharmaceuticalstradersinEuropeandreportedastablebusinessperformance.Furthermore,thesuccessfulconclusionofrefinancingalsolaidthefoundationsforcontinuedpositivebusinessdevelopment.

Risks and opportunities

Risks

TheriskmanagementsystemwithinthePHOENIXGroupconsistsoffullydocumentedandcompre-hensiveplanning,approvalandreportingstructuresandanearlywarningsystem.Theinternalauditexaminesthissystemregularlyforadequacy,operabilityandefficiency.Findingsmadebytheinternalauditarereportedtomanagementonaregularbasis.

PHOENIXissubjecttomarketrisks.Asarule,thepharmaceuticalmarketislessaffectedbycycli-calswingsthanotherindustries,butthelossofpurchasingpowerandcost-savingmeasuresingovernmentspendingonhealthcarecanhaveanegativeimpactonthepharmaceuticalmarketandPHOENIX’sbusiness.Forexample,thechangesinremunerationstructuresundertheAMNOGinGermanycouldinfluenceourbusiness.


ThenewHungarianpharmaciesactthatenteredintoeffecton1January2011requirespharmaciststoholdaninvestmentofatleast25%intheirpharmacies’capitalasof1January2014;asof1January2017,pharmacistswillhavetoholdamajorityinterestintheirpharmacies.

Theearningssituationinthewholesalepharmaceuticalsbusinessisalsoheavilyinfluencedbythetermsandconditionsgrantedtocustomersandbysuppliers.Thisiswhythesetermsandconditionsaremonitoredonaconstantbasisonthesalesandpurchasingside.

Intheoperatingbusiness,thequalityandstabilityoftheoperatingprocessesisdecisive.Inmanyareas,therearecontingencyplanstomanageunforeseeninterruptionsofbusiness.ThestandardisationoftheITsystemshelpsensurethestabilityoftheoperatingprocesses.

ThecreditriskatPHOENIX,measuredbasedontotalreceivables,islow.Healthcareinstitutionsgenerallyhaveagoodcreditratingandtherisksaregenerallydiversifiedbythelargenumberofcustomerrelationships.InthecourseofliberalisationofthepharmacymarketsinEurope,however,pharmacychainsandnewsaleschannelsareincreasinglyemerging,creatinganincreasingnumberofmajorcustomerswithahigherlevelofreceivablesoutstanding.Intheeventofdefaultofakeyaccount–asoccurredinSlovakiain2010/2011throughthecombinationofseveraladversefactors–thisposestheriskofcorrespondinglylargehigherbaddebtallowances.Thereceivablesmanage-mentsystemissubjecttoacontinuousimprovementprocess.Thepharmaciesaredividedintoriskclustersaccordingtotheirownershipstructureandeconomicsituationinordertopreventapparentlyindependentpharmaciesforminganunknownclusterriskthroughthesetwofactors.Theriskclustersareconstantlymonitoredand,ifcriticalchangesarise,measuresaretakentolimittherisk.Inordertomonitorinternationalcustomers,thereisaregularexchangebetweenthedebtormanagersofthevariouscountries.Thereisaregularexchangeonriskcustomersateverymanagementmeeting.

PartofPHOENIX’sstrategyistoregularlyacquirepharmaciesandwholesalecompaniestoexpanditsmarketposition.Asaresult,PHOENIXisexposedtolegal,fiscal,financialandoperationalrisksfromacquisitions.Acquisitionprojectsarethereforeanalysedandreviewedbythecentralmergers&acquisitionsdepartmentandalsoapprovedbymanagement.Itmay,however,happenthatthedevelopmentanticipatedatthedateofacquisitiondiffersfromtherealitywhichcan,inturn,leadtoanimpairmentlossbeingrecognisedongoodwillinthecourseofimpairmenttesting.

Basedontheinformationcurrentlyavailable,therearenolegalproceedingswhichcouldhaveamaterialinfluenceontheresultsofoperations,netassetsandfinancialposition.

Inafinancingcontext,PHOENIXisexposedtovariousrisks.

InthecourseoftherefinancingconcludedinAugust2010,certainfinancialcovenantswereagreed,thebreachofwhichpresentsarisktofinancing.Thedevelopmentoftheliabilitiesandthecovenantsismonitoredregularlyasaresult.Inthefiscalyear2010/2011,theagreedcovenantswillbecomfortablycompliedwith.

Derivativesareusedinthecompanytohedgeagainstinterestrateandcurrencyrisks.Theiruseiscloselymonitoredonatimelybasis.Derivativefinancialinstrumentsareusedforhedgingpurposes.Counterpartyrisksareminimisedbythecarefulselectionoftradingpartners.

TheagreementunderlyingourbondcontainsrestrictionsandobligationsforPHOENIXasissuerasarecustomaryinthemarket.Intheeventthatwefailtocomplywiththeserestrictionsandobliga-tions,theamountofthebondplustheinterestaccruedmayfalldue.


Pleasealsorefertothecommentsinthenotes.

Asregardsthetranslationrisk,theexchangeratesofthepoundsterlingandtheNorwegiankroneareofrelevanceforPHOENIX.TransactionrisksarerelevantinsomeeasternEuropeancountrieswheredeliveriesbythepharmaceuticalsmanufacturersaresometimesinvoicedineuroandsome-timesinUSdollar.FortheGroup,however,thesearenotmaterial.

DuetoaninvestmentinthelistedpharmaceuticalcompanyPolskaGrupaFarmaceuticznaSA,Poland,PHOENIXisexposedtosharepricefluctuations.Fluctuationsonthefinancialmarketsmayalsoleadtodeficitsinthepensionfundsandtheinherentriskofanunplannedincreaseinpersonnelexpenses.

Opportunities

Demographictrendsandmedicalprogressarelong-termdriversofgrowthandwillensureacontinu-ingpositivetrendinthepharmaceuticalmarket.ThebroadgeographicdiversificationofPHOENIXreducestheimpactofchangesinhealthcarepolicyinindividualmarketsandprovidesastrongbasisforsuccessfullydevelopingactivitiesfurther.

Thankstoitsbroadgeographicalcoverage,forinstance,PHOENIXcanofferpharmaceuticalsmanu-facturersEurope-widelogisticsservices.

PHOENIXholdsaleadingmarketpositioninwholesalepharmaceuticalsinalmostallcountriesinwhichthecompanyoperates.Indeed,wearethemarketleaderforwholesalepharmaceuticalsinalargenumberofcountries.OurmarketpositionisparticularlystrongineasternEurope.There,nocompetitorhascomparablecountrycoverageormarketposition.

Inwholesalepharmaceuticals,PHOENIXhasestablishedbusinessrelationshipswithpharmacycustomers.Manyofthepharmacycustomerstakepartinpartnershipprogrammes.Insomecountries,PHOENIXalsooffersfranchisesystemsforindependentpharmacies.Theintegrationofthewholesaleandretailpharmaceuticalbusinessoffersopportunities,allowingcostsavingsinpharmaceuticalssaleschannels.

Inlogistics,PHOENIXcontinuouslyimplementsbestpracticesacrossEurope.Processoptimisationmeasuresthataresuccessfulinonecountryserveasastartingpointforimprovementmeasuresinothercountries.

Thenewfinancingstructureestablishedinfiscalyear2010/2011createdthefinancialbasisforthefurthergrowthofPHOENIX.Thisappliesbothfororganicgrowthandforappropriateacquisitions.Withbankfinancing,abond,andacapitalincrease,thenewfinancingstructureismorediversifiedandlongertermthaninthepast.

Overall,PHOENIXoperatesinastablemarketwithsubstantialopportunitiesandiswellpositionedtosuccessfullymakeuseoftheseopportunitiesandtofurtherexpanditsstrongmarketpositioninthefuture.


Forecast

WeexpectthepharmaceuticalmarketsinEuropetorecordslightgrowthinthefiscalyear2011/2012.Nevertheless,themarketdevelopmentwillcontinuetoreflectthecost-cuttingmeasuresintroducedbyhealthcarepolicymakersinvariouscountries.

InGermany,theAMNOGwillresultinanewremunerationstructurefortheGermanwholesalepharmaceuticalbusiness,firstin2011throughtheflat-ratewholesalemark-downof0.85%onthemanufacturer’ssalespricesandin2012throughachangeinthespreadprovisiontowardsacom-binationoffixedmark-upandapercentagecomponent.Weendeavourtousesalesandmarketingmeasurestocompensateforanyresultingburdens.

Weexpectourrevenuegrowthtoslightlyoutpacethemarketinthefiscalyear2011/2012,onthebackofbothorganicandM&Agrowth,andinparticularthetransactionsintheNetherlands,whichwillhaveanimpactoverthefullyear.AtthelevelofadjustedEBITDA,weexpecttoexceedthe2010/2011levelinthefiscalyear2011/2012.

For2011/2012,weplantoinvestmoreinproperty,plantandequipmentthanintheprioryear,especiallyduetotheexpansionofawholesalebranchofficeinnorthernEurope.

ThecurrentincomesituationasofFebruarysofarconfirmsthedevelopmentanticipatedintheplanningfor2011/2012.

Forthefollowingfiscalyear,weanticipaterevenuegrowthofabout3%andafurtherincreaseinearnings.Inadditiontothedevelopmentofmarketgrowthandthegrossprofitmargin,especiallyagainstthebackdropofhealthcarepolicymeasures,acontinuingsourceofuncertaintyforusishowforeigncurrenciesandmarketinterestratesrelevantforuswilldevelop.

Mannheim,31March2011

ReimundPohl StefanHerfeld HenryIberl

Dr.Hans-UlrichKummer Dr.MichaelMajerus OliverWindholz


CONsOlIdatEd fINaNCIal statEmENts

Consolidated income statement for fiscal year 2010/11EURk Note FY09/10 FY 10/11

Revenue 1 21,317,594 21,737,772

Costofpurchasedgoodsandservices -19,433,656 -19,792,954

Gross profit 1,883,938 1,944,818

Otheroperatingincome 2 149,979 147,012

Personnelexpenses 3 -930,848 -937,909

Otheroperatingexpenses 4 -564,808 -589,103

Resultsfromassociates 5 686 2,237

Resultfromotherinvestments 5 7,407 5,945

Earnings before interest, taxes depreciation and amortisation (EBITDA) 546,354 573,000

Amortisationofintangibleassetsanddepreciationofproperty,plantandequipment 6 -123,639 -89,819

Earnings before interest and taxes (EBIT) 422,715 483,181

Interestandsimilarincome 75,338 136,440

Interestandsimilarexpenses -256,419 -370,771

Otherfinancialresult -290 22,200

Financial result 7 -181,371 -212,131

Profit before tax 241,344 271,050

Incometaxes 8 -82,917 -125,368

Profit for the period 158,427 145,682

Thereofattributabletonon-controllinginterests 14,336 -165

Thereof attributable to owners of the parent company 144,091 145,847


Consolidated statement of comprehensive income for fiscal year 2010/11EURk FY09/10 FY 10/11


Gains/lossesfromchangesinthefairvalueofavailable-for-salefinancialassets 31,933 2,293

Reclassificationadjustments 0 -27,741

Currencytranslationdifferences 33,156 21,692

Other comprehensive income, net of taxes 65,089 -3,756

Total comprehensive income 223,516 141,926

Thereofattributabletonon-controllinginterests 16,116 -289

Thereof attributable to owners of the parent company 207,400 142,215


Consolidated statement of financial position as of 31 January 2011EURk Note 31Jan2010 31 Jan 2011

Non-current assets

Intangibleassets 9 1,484,719 1,540,719

Property,plantandequipment 10 727,826 734,628

Investmentsinassociates 11 25,156 23,741

Otherfinancialassets 12 204,314 70,031

Deferredtaxassets 8 54,451 34,680

Othernon-currentassets 0 282

Incometaxreceivables 0 4,052

2,496,466 2,408,133

Current assets

Inventories 13 1,525,542 1,575,963

Tradereceivables 14 2,857,738 2,596,177

Incometaxreceivables 8 9,420 16,071

Otherreceivablesandothercurrentfinancialassets 14 678,332 212,048

Otherassets 15 82,816 71,952

Cashandcashequivalents 16 396,716 575,001

5,550,564 5,047,212

Non-currentassetsclassifiedasheldforsale 23 12,128 104,903

Total equity and liabilities 8,059,158 7,560,248


Consolidated statement of financial position as of 31 January 2011EURk Note 31Jan2010 31 Jan 2011

Equity

Unlimitedandlimitedpartners'capital 17 500,000 1,050,000

Reserves 17 567,428 653,987

Othercomprehensiveincome 17 -66,141 -69,773

Non-controllinginterests 17 111,210 187,536

1,112,497 1,821,750

Non-current liabilities

Financialliabilities 20 238,721 1,633,905

Provisionsforpensionsandsimilarobligations 18 126,288 111,975

Deferredtaxliabilities 8 122,788 125,974

Othernon-currentliabilities 0 435

487,797 1,872,289

Current liabilities

Financialliabilities 20 3,637,817 862,921

Tradepayables 21 2,461,916 2,576,711

Otherprovisions 19 49,055 32,816

Incometaxliabilities 8 61,540 89,973

Otherliabilities 22 248,536 251,554

6,458,864 3,813,975

Liabilitiesdirectlyassociatedwithassetsclassifiedasheldforsale 23 0 52,234

Total equity and liabilities 8,059,158 7,560,248


Consolidated cash flow statement for fiscal year 2010/11 EURk FY09/10 FY 10/11


+/- Write-downs/write-upsoffixedassets 124,813 89,819

-/+ Gain/lossfromthedisposaloffixedassets -15,397 -14,834

+/- Increase/decreaseinnon-currentprovisions 7,868 -20,005

+/- Othernon-cashexpenses/income 15,700 27,012

- Interestincome -48,649 -46,325

+ Interestexpense 208,676 200,876

- Taxincome -13,439 -7,550

+ Taxexpense 96,356 132,918

- Interestpaid -189,632 -159,053

+ Interestreceived 28,286 43,560

Interest paid -161,346 -115,493

- Incometaxespaid -67,057 -91,777

+ Dividendsreceived 3,550 9,827

Net interest and taxes paid and dividends received -224,853 -197,443

RESULT BEFORE CHANGE IN WORKING CAPITAL 309,502 310,150

-/+ Increase/decreaseininventories 37,462 -49,855

-/+ Increase/decreaseintradereceivables 501,432 246,520

-/+ Increase/decreaseinotherreceivablesandotherassets -28,699 -11,506

+/- Increase/decreaseintradepayables 92,425 100,758

+/- Increase/decreaseincurrentprovisions 10,751 -5,722

+/- Increase/decreaseinotherpayablesandotherliabilities* 609 -10,307

Changes in working capital 613,980 269,888

CASH FLOW FROM OPERATING ACTIVITIES 923,482 580,038

*Thereportingitemincrease/decreaseinfinanceleaseliabilitieswasnewlyaddedintheyearunderreview.Prioryearfigureshavebeenadjustedaccordingly.


Consolidated cash flow statement for fiscal year 2010/11 EURk FY09/10 FY 10/11

- Cashpaidforthepurchaseofconsolidatedcompaniesandbusinessunits -73,022 -16,693

+ Cashreceivedfromthepurchaseofconsolidatedcompaniesandbusinessunits 3,899 5,953

Cash paid for the purchase of consolidated companies and business units -69,123 -10,740

+ Cashreceivedfromthesaleofconsolidatedcompaniesandbusinessunits 10,654 11,234

- Cashpaidforthesaleofconsolidatedcompaniesandbusinessunits 0 -65

Cash received from the sale of consolidated companies and business units 10,654 11,169

+ Cashreceivedfromdisposalsofintangibleassets 634 73

+ Cashreceivedfromdisposalsofproperty,plantandequipment 14,894 5,817

+ Cashreceivedfromdisposalsoffinancialassets 7,714 130,241

Cash received from disposals of fixed assets 23,242 136,131

- Cashpaidforinvestmentsinintangibleassets -11,727 -5,636

- Cashpaidforinvestmentsinproperty,plantandequipment -76,791 -88,197

- Cashpaidforinvestmentsinfinancialassets -4,947 -488

Cash paid for investments in fixed assets -93,465 -94,321

+ Cashreceivedfromtheissueofloanstorelatedparties 0 458,495

+ Cashreceivedfromsecuritiesandfinancialassets 1,756 1,731

CASH IN/OUTFLOW FROM INVESTING ACTIVITIES -126,936 502,465

CASH FLOW AVAILABLE FOR FINANCING ACTIVITIES 796,546 1,082,503

+ Capitalincrease 0 505,450

- Paymentstonon-controllinginterests(dividends) -1,639 -2,454

+/- Increase/decreaseinABS/factoringliabilities -502,054 -82,497

+/- Increase/decreaseinloanstopartnersintheparentcompany -1,006 0

+ Cashreceivedfromtheissueofbondsandloans 74,443 1,959,012

- Cashrepaymentsofbondsandloans -393,768 -3,287,221

+/- Increase/decreaseinfinanceleaseliabilities* 9,768 3,672

CASH FLOW FROM FINANCING ACTIVITIES -814,256 -904,038

CHANGE IN CASH AND CASH EQUIVALENTS -17,710 178,465

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 398,728 396,716

Exchangerateeffectoncashandcashequivalents 15,698 3,532

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 396,716 578,713


Statement of changes in equity for fiscal year 2010/11

Statement of changes in equityEURk

Unlimitedandlimitedpartners’capital

Reserves Currencytranslationdifference

IAS39Available-for-salefinancialassets

Equity attributable to partners

Non-controlling interests

Total equity

1 February 2009 500,000 423,822 -135,381 5,931 794,372 98,993 893,365

Profitfortheperiod 144,091 144,091 14,336 158,427

Othercomprehensiveincome 32,120 31,189 63,309 1,780 65,089

Total comprehensive income, net of tax 144,091 32,120 31,189 207,400 16,116 223,516

Capitalincrease/reduction 1,018 1,018

Changesinbasisofconsolidation

IFRIC14pensionliabilityadjustment -679 -679 -679

Dividends -1,849 -1,849

Otherchanges 194 194 -3,068 -2,874

31 January 2010 500,000 567,428 -103,261 37,120 1,001,287 111,210 1,112,497

Profitfortheperiod 145,847 145,847 -165 145,682

Othercomprehensiveincome 21,184 -24,816 -3,632 -124 -3,756

Total comprehensive income, net of tax 145,847 21,184 -24,816 142,215 -289 141,926

Capitalincrease/reduction 550,000 -44,550 505,450 63,841 569,291

Changesinbasisofconsolidation -16,207 -16,207 14,626 -1,581

Dividends -1,871 -1,871

Othertransactionswithowners -1,027 -1,027 -1,027

Otherchanges 2,496 2,496 19 2,515

31 January 2011 1,050,000 653,987 -82,077 12,304 1,634,214 187,536 1,821,750


Statement of changes in equity for fiscal year 2010/11

Statement of changes in equityEURk

Unlimitedandlimitedpartners’capital

Reserves Currencytranslationdifference

IAS39Available-for-salefinancialassets

Equity attributable to partners

Non-controlling interests

Total equity

1 February 2009 500,000 423,822 -135,381 5,931 794,372 98,993 893,365

Profitfortheperiod 144,091 144,091 14,336 158,427

Othercomprehensiveincome 32,120 31,189 63,309 1,780 65,089

Total comprehensive income, net of tax 144,091 32,120 31,189 207,400 16,116 223,516

Capitalincrease/reduction 1,018 1,018

Changesinbasisofconsolidation

IFRIC14pensionliabilityadjustment -679 -679 -679

Dividends -1,849 -1,849

Otherchanges 194 194 -3,068 -2,874

31 January 2010 500,000 567,428 -103,261 37,120 1,001,287 111,210 1,112,497

Profitfortheperiod 145,847 145,847 -165 145,682

Othercomprehensiveincome 21,184 -24,816 -3,632 -124 -3,756

Total comprehensive income, net of tax 145,847 21,184 -24,816 142,215 -289 141,926

Capitalincrease/reduction 550,000 -44,550 505,450 63,841 569,291

Changesinbasisofconsolidation -16,207 -16,207 14,626 -1,581

Dividends -1,871 -1,871

Othertransactionswithowners -1,027 -1,027 -1,027

Otherchanges 2,496 2,496 19 2,515

31 January 2011 1,050,000 653,987 -82,077 12,304 1,634,214 187,536 1,821,750


General

The Company

PHOENIXPharmahandelGmbH&CoKG,Mannheim,Germany(‘PHOENIX’or‘theGroup’)isaEuropeanpharmaceuticalsdistributiongroup.PHOENIXoperateswholesaledistributioncentresin23Europeancountries.Inseveralcountries,PHOENIXalsooperatespharmacychainsofitsown.TheregisteredofficeislocatedinMannheim,Germany.

Basis of presentation

TheconsolidatedfinancialstatementsofPHOENIXhavebeenpreparedinaccordancewithInter-nationalFinancialReportingStandards(IFRSs)asissuedbytheInternationalAccountingStandardsBoard(IASB),London,UnitedKingdom,asapprovedforadoptionintheEuropeanUnionatthereport-ingdateandtheadditionalrequirementsofGermancommerciallawpursuanttoSec.315a(1)HGB(Handelsgesetzbuch:Germancommercialcode).

Theconsolidatedfinancialstatementshavebeenpreparedineuro(EUR)andallvaluesareroundedtothenearestthousand(EURk)exceptwhenotherwiseindicated.

Theconsolidatedfinancialstatementshavebeenpreparedonahistoricalcostbasis.Thisdoesnotapplytoderivativefinancialinstrumentsandavailable-for-salefinancialassetswhicharemeasuredatfairvalue.Thecarryingamountsofrecognisedassetsandliabilitiesthatarehedgeditemsinfairvaluehedgesthatwouldotherwisebecarriedatcostareadjustedtorecordchangesinthefairvaluesattributabletotherisksthatarebeinghedged.

Theincomestatementhasbeenpreparedusingthenatureofexpensemethod.Thestatementoffinancialpositionhasbeencategorisedintocurrentandnon-currentitemsinlinewithIAS1.Forthesakeofclaritycertainitemsinthestatementoffinancialpositionandtheincomestatementaresummarised.Detailsoftheseitemsarepresentedinthenotestothefinancialstatements.

TheconsolidatedfinancialstatementsofPHOENIXasof31January2011andtheyearthenendedwereauthorisedforissueon31March2011bythemanagementofPHOENIXPharmahandelGmbH&CoKG.

NOtEs tO tHE CONsOlIdatEd fINaNCIal statEmENts as Of 31 JaNuary 2011


Basis of consolidation

TheconsolidatedfinancialstatementscomprisethefinancialstatementsofPHOENIXanditssubsidi-ariesasof31January2011andtheyearthenended.

Subsidiariesarefullyconsolidatedfromthedateofacquisition,beingthedateonwhichtheGroupobtainscontrol,andcontinuetobeconsolidateduntilthedatethatsuchcontrolbytheparentceases.

Thefinancialstatementsofmostofthesubsidiariesarepreparedforthesamereportingperiodastheparentcompany,usingconsistentaccountingpolicies.OnlycompaniesbelongingtotheLuxembourgsubgroupandLIBRAAG,Sofia,BulgariaaswellastheSerbian,BosnianandMazedoniansubsidiarieshave31Decemberastheirreportingdate.Ingeneralthereisnomaterialimpactonthefinancialstatements,andincaseofanymaterialeffectthisimpactisconsidered.

Allintra-groupbalances,incomeandexpensesandunrealisedgainsandlossesresultingfromintra-grouptransactionsareeliminatedinfull.

Non-controllinginterestsrepresenttheportionofprofitorlossandnetassetsthatisnotheldbytheGroupTheportionofprofitorlossattributabletonon-controllinginterestswasconsequentlydisclosedseparatelyintheincomestatementfromtheportionattributabletotheownersoftheparentcompany.Theyarereporteddirectlyinequityintheconsolidatedstatementoffinancialposition,separatelyfromtheequityattributabletotheownersoftheparentcompany.Acquisitionsofnon-controllinginterestsandchangesintheinterestsattributabletotheparentcompanythatdonotleadtoalossofcontrolareaccountedforasequitytransactions.

Thefullyconsolidatedgroupcomprises308(31January2010:365)Germanandforeigncompanies.34affiliates(31January2010:38)wereaccountedforusingtheequitymethod,and3entities(31Janu-ary2010:6)wereconsolidatedproportionately.Inaddition,aspecialpurposeentity(31January2010:2)wasincludedintheconsolidatedgroupinaccordancewiththerulingsofSIC12.ThecompletelistofshareholdingsisanintegralcomponentofthenotestotheconsolidatedfinancialstatementsandwillbepublishedintheelectronicversionoftheGermanFederalGazette.

Thetablepresentschangesininterestswithoutlossofcontrolinthefiscalyearunderreview.

in% 31Jan2010 31 Jan 2011

Interest changes without loss of control

BrocacefHoldingNV,Maarssen 100.00 55.00

AmedisHoldingAG 94.39 94.61

FloortargetLtd 100.00 60.00

PHOENIXFarmacijad.d. 99.38 99.70

PHOENIXPharmahandelGmbH&CoKG,Mannheim,exercisedtheexemptionprovisionofSec.264bHGB.


Currency translation

Theconsolidatedfinancialstatementsarepresentedineuros,whichisalsotheparentcompany’sfunctionalcurrency.ThisisthecurrencyoftheprimaryeconomicenvironmentinwhichPHOENIXoperates.

Transactionsinforeigncurrencyaretranslatedtothefunctionalcurrencyattherateprevailingonthetransactiondate.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesareretrans-latedatthefunctionalcurrencyspotrateofexchangeprevailingatthereportingdate.Allexchangedifferencesaretakentotheincomestatement,providedtheyarenotallocabletomonetaryitemsdenominatedinforeigncurrencywhicharepartofanetinvestmentinaforeignoperation,inwhichcasetheexchangedifferencesarerecordedinothercomprehensiveincome.

Theassetsandliabilitiesofforeignoperationsaretranslatedtoeuroattherateofexchangeprevail-ingasofthereportingdateandtheirincomestatementsaretranslatedataveragerates.Theex-changedifferencesarisingonthetranslationarerecordedinothercomprehensiveincomeuntilthesubsidiariesaredisposedof.

Country Currency Closingrate Averagerate

31Jan2010 31 Jan 2011 FY09/10 FY 10/11

Bulgaria BGN 1.9558 1.9558 1.9558 1.9558

BosniaandHerzegovina BAM 1.9558 1.9558 1.9558 1.9558

CzechRepublic CZK 26.2230 24.2230 26.3508 25.1507

Croatia HRK 7.3150 7.4171 7.3347 7.2977

Denmark DKK 7.4443 7.4544 7.4455 7.4480

Estonia EEK 15.6466 15.6466 15.6466 15.6466

UnitedKingdom GBP 0.8666 0.8609 0.8881 0.8550

Hungary HUF 271.1500 273.8500 279.5107 275.9353

Latvia LVL 0.7087 0.7030 0.7061 0.7083

Lithuania LTL 3.4528 3.4528 3.4528 3.4528

Macedonia MKD 61.5760 61.7880 61.7737 61.6200

Norway NOK 8.2120 7.9270 8.6448 7.9757

Poland PLN 4.0463 3.9362 4.3155 3.9803

Serbia RSD 98.4533 104.6485 94.5194 104.1478

Sweden SEK 10.2388 8.8670 10.5769 9.4359

Switzerland CHF 1.4662 1.2891 1.5088 1.3646


Application of new accounting standards

Inthefiscalyear2010/11,PHOENIXappliedthefollowingrevisedstandardsandinterpretationsthataremandatoryforthefiscalyear2010/11forthefirsttime.

TheamendmenttoIFRS2“GroupandTreasuryShareTransactions”waspublishedinJune2009.ThisamendmentclarifiesthescopeofIFRS2specifyingthatanentityreceivinggoodsorservicesinashare-basedpaymentarrangementmustaccountforthosegoodsorservicesregardlessofwhichentityinthegroupsettlesthetransactionandregardlessofwhetherthetransactionissettledincashorshares.Thefirst-timeapplicationoftheamendmenthadnoimpactonthenetassets,finan-cialpositionandresultsofoperationsoftheGroup.

ThemajorchangesfromtherevisionofIFRS3“BusinessCombinations”concernthedeterminationofthepurchaseprice,themeasurementofnon-controllinginterests,theaccountingforstepacquisi-tionsandthetreatmentofconditionalelementsofpurchasepriceandacquisitioncosts.

Undertheamendment,non-controllinginterestscaneitherbemeasuredatfairvalue(fullgoodwillmethod)orprorataatfairvalueofthenetassetsidentified.Inthecaseofstepacquisitions,thepre-viouslyheldequityinterestisremeasuredatfairvaluethroughprofitorlossonthedateoftransferofcontrol.Anyadjustmenttoconditionalelementsofthepurchaseprice,whicharerecognisedasaliabilityonthedateofpurchase,isalsotoberecognisedthroughprofitorloss.Acquisition-relatedcostsareexpensedasincurred.First-timeadoptionofIFRS3(2008)resultedintransactioncoststotallingEUR1.2mbeingexpensed.

ThemajorchangestoIAS27“ConsolidatedandSeparateFinancialStatements”relatetoaccountingforchangesinshareholdingsandnon-controllinginterests.Changesinshareholdingswhichdonotleadtoalossofcontrolarerecognisedasanequitytransactionbetweenpartners.However,iftrans-actionsleadtoalossofcontrol,theresultinggainorlossistoberecognisedthroughprofitorloss.Lossesshouldevenbeallocatedtonon-controllinginterestsifthismeansthatthenon-controllinginterestshaveanegativebalance.First-timeadoptionofIAS27(2008)resultedinthetransferofEUR22.0mfromreservestonon-controllinginterestsandEUR1.6mbeingoffsetagainstreserves.

Otherwise,thefollowingstandardsandinterpretationsweremandatoryintheyearunderreviewbuthadnomaterialimpactonthepresentationoftheconsolidatedfinancialstatements:

� IFRS1:First-timeAdoptionofIFRS(revised)� IFRS1:AdditionalExemptionsforFirst-timeAdopters� IFRS1/IFRS5:ImprovementstoInternationalFinancialReportingStandards(2008)� IFRS2:GroupCash-settledShare-basedPaymentTransactions� IAS32:ClassificationofRightsIssues� IAS39/IFRS7:ReclassificationofFinancialAssets–EffectiveDateandTransition� IAS39:EligibleHedgedItems–AmendmenttoIAS39� IFRIC12:ServiceConcessionArrangements� IFRIC15:AgreementsfortheConstructionofRealEstate� IFRIC16:HedgesofaNetInvestmentinaForeignOperation� IFRIC17:DistributionsofNon-cashAssetstoOwners� IFRIC18:TransfersofAssetsfromCustomers� ImprovementstoInternationalFinancialReportingStandards2009–minorimprovementstoa

numberofstandards(IFRS2,IFRS5,IAS1,IAS7,IAS17,IAS18,IAS36,IAS38,IAS39,IFRIC9,IFRIC16)andconsequentialamendments


Standards, interpretations and amendments issued, but not yet adoptedTheIASBandIFRIChaveadoptedthestandardsandinterpretationslistedbelow,whoseapplicationisnotyetmandatoryfortheFY2010/2011orhavenotyetbeenendorsedbytheEuropeanCommissioninsomecasesasofthereportingdate.Wearecurrentlyexamininghowtheymightaffectthecon-solidatedfinancialstatementsofPHOENIX.

Standard/Interpretation Mandatoryasofthe

fiscalyear

EndorsedbytheEU

IFRS1 LimitedExemptionfromComparativeIFRS7–DisclosuresforFirst-timeAdopters

2011/12 Yes

IFRS1 HyperinflationandFixedTransitionDate 2012/13 No

IFRS7 DisclosuresonTransfersofFinancialInstruments 2012/13 No

IFRS9 FinancialInstruments:ClassificationandMeasurement 2013/14 No

IAS12 DeferredTaxes–RealisingtheCarryingAmountofanAsset 2012/13 No

IAS24 RelatedParties 2011/12 Yes

ImprovementstoInternationalFinancialReportingStandards2010

2011/12 No

IFRIC14 PrepaymentsofaMinimumFundingRequirement 2011/12 Yes

IFRIC19 ExtinguishingFinancialLiabilitieswithEquityInstruments 2011/12 Yes


Summary of significant accounting policies

Business combinations and goodwill

Businesscombinationsareaccountedforusingtheacquisitionmethod.Thecostofthebusinesscombinationcorrespondstothefairvalueoftheassetsgiven,theequityinstrumentsissuedandtheliabilitiesincurredandassumedasofthedateofexchange.Italsoincludesthefairvalueofanyrecognisedassetorliabilityresultingfromacontingentconsiderationarrangement.Costsrelatedtothebusinesscombinationareexpensedasincurred.Oninitialrecognitionofanacquisition,allidentifiableassets,liabilitiesandcontingentliabilitiesaremeasuredatfairvalueonacquisitiondate.Foreachbusinesscombination,theGroupdecidesonacase-by-casebasiswhetherthenon-controllinginterestsintheacquireearemeasuredatfairvalueortheproportionateshareintherecognisedamountsoftheacquiree’snetidentifiableassets.

Anydifferencebetween(i)theaggregateofcostofthebusinesscombination,anynon-controllinginterestintheacquireeandtheacquisition-datefairvalueofanypreviouslyheldequityinterests;and(ii)theGroup’sshareinthenetidentifiableassetsacquiredisrecognisedundergoodwill.Followinginitialrecognition,goodwillisvaluedatcostlesscumulativeimpairmentchargesandnotamortised.Goodwillissubjectedtoanimpairmenttestatleastonceannuallyatthereportingdateorwheneverthereisanyindicationofimpairment.

Ifthecostofacquisitionislessthanthefairvalueofthenetassetsofthesubsidiaryacquiredasoftheacquisitiondate,thedifferenceisrecogniseddirectlyintheincomestatement.

Intangible assets

Intangibleassetsacquiredseparatelyaremeasuredoninitialrecognitionatacquisitioncostplusanyincidentalcostsofacquisitionandlessanytradediscountsorrebates.Thecostofintangibleassetsacquiredinabusinesscombinationistheirfairvalueasofthedateofacquisition.Internallygeneratedintangibleassetsarestatedatcost.

Followinginitialrecognition,intangibleassetsarecarriedathistoricalcostlessanyaccumulatedamortisationandanyaccumulatedimpairmentlosses.Forthepurposesofamortisation,theusefullivesofintangibleassetsareassessedaseitherfiniteorindefinite.

Intangibleassetswithfinitelivesareamortisedonastraight-linebasisovertheusefuleconomiclifeandassessedforimpairmentwheneverthereisanindicationthattheintangibleassetmaybeimpaired.Theamortisationperiodandtheamortisationmethodforanintangibleassetwithafiniteusefullifeisreviewedatleastateachfiscalyearend.

Intangibleassetswithindefiniteusefullivesarenotamortised,butaretestedforimpairmentannuallyeitherindividuallyoratthecashgeneratingunitlevel.Theusefullifeofanintangibleassetwithanindefinitelifeisreviewedannuallytodeterminewhetherindefinitelifeassessmentcontinuestobesupportable.Ifnot,thechangeinusefullifefromindefinitetofiniteismadeonaprospectivebasis.


Licenseswithindefiniteusefullivesaregrantedwithunlimitedprotectionforthesaleofdrugsandotherpharmaceuticalproductsintherelatedterritoryunderpubliclaw.Allotherlicensesaregrantedforperiodsrangingbetweenthreeand30yearsdependingonthespecificlicense.

Theusefullivesofthemaintypesofintangibleassetsareasfollows:

Pharmacylicenses indefiniteor3to30years Software 3to5years

Property, plant and equipment

Property,plantandequipmentarecarriedathistoricalcostlessaccumulateddepreciationandanyaccumulatedimpairmentlosses.Maintenanceandrepaircostsareexpensedasincurred.Borrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofaqualifyingassetarecapitalised.Aqualifyingassetisanassetthatnecessarilytakesasubstantialperiodoftimetogetreadyforitsintendeduseorsale.

Withtheexceptionofland,property,plantandequipmentisdepreciatedovertheexpectedusefullife.Itemsofproperty,plantandequipmentaredepreciatedprorataintheyearofacquisition.Theresidualvalues,usefullivesandthedepreciationmethodarereviewedatleastattheendofeachreportingperiod.

Ondisposalofanitemofproperty,plantandequipmentorwhennofutureeconomicbenefitsareexpectedfromitsuseordisposal,thecarryingamountoftheitemisderecognised.

Theusefullivesthemaintypesoftangibleassetsareasfollows:

Buildings 25to50years Technicalequipmentandmachines 5to14years Otherequipment,fixturesandfittings 3to13years

Investments in associates

AnassociateisanentityinwhichtheGrouphassignificantinfluenceandthatisneitherasubsidiarynoraninterestinajointventure.Investmentsinassociatesarereportedusingtheequitymethodandinitiallymeasuredatcost.Goodwillrelatingtotheassociatesisincludedinthecarryingamountoftheinvestmentandisnotamortisedortestedforimpairmentseparately.

TheincomestatementreflectstheGroup’sshareoftheassociates’profitorlossfortheperiod.Wheretherehasbeenachangerecogniseddirectlyintheequityoftheassociates,theGrouprecognisesitsshareofanychangesanddisclosesthis,whenapplicable,inthestatementofchangesinequity.AnyunrealisedgainsandlossesresultingfromtransactionsbetweentheGroupandtheassociatesareeliminatedtotheextentoftheinterestintheassociates.

Wherenecessary,adjustmentsaremadetobringtheaccountingpoliciesinlinewiththoseoftheGroup.


Afterapplicationoftheequitymethod,theGroupdetermineswhetheritisnecessarytorecogniseanadditionalimpairmentlossontheGroup’sinvestmentinitsassociates.TheGroupdeterminesateachreportingdatewhetherthereisanyobjectiveevidencethattheinvestmentintheassoci-ateisimpaired.IfthisisthecasetheGroupcalculatestheamountofimpairmentasthedifferencebetweentherecoverableamountoftheinvestmentintheassociateanditscarryingamountsandrecognisesthedifferenceintheincomestatement.

Non-current assets held for sale

Non-currentassetsorgroupsofassetsandliabilitiesareclassifiedasheldforsaleiftheircarryingamountislikelytobeprincipallyrealisedfromasaleandnotfromtheircontinueduse.Theyaremeasuredattheloweroftheircarryingamountorfairvaluelesscosttosell.

Impairment of non-financial assets

TheGroupassessesateachreportingdatewhetherthereisanindicationthatanassetmaybeimpaired.Ifanyindicationexists,orwhenannualimpairmenttestingforanassetisrequired(e.g.,forintangibleassetswithanindefiniteusefullife),theGroupestimatestheasset’srecoverableamount.Anasset’srecoverableamountisthehigherofanasset’sfairvaluelesscoststosellanditsvalueinuse.Therecoverableamountisdeterminedforanindividualasset,unlesstheassetdoesnotgeneratecashinflowsthatarelargelyindependentofthosefromotherassetsorgroupsofassets.Asthecashflowsnecessarycanoftennotbeobtainedforindividualitems,assetsbeingusedtogetherandbeinglargelyindependentfromotherassetsorgroupsofassetsaregroupedtoacash-generatingunit.Wherethecarryingamountofanassetorcash-generatingunitexceedsitsrecoverableamount,theassetisconsideredimpairedandiswrittendowntoitsrecoverableamount.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Indeterminingfairvaluelesscoststosell,anappropriatevaluationmodelisused.Thesecalculationsarecorroboratedbypubliclyavailablemarketinformationtotheextentavailableorotheravailablefairvalueindicators.Impairmentlossesarerecognisedintheincomestatement.

Forassetsexcludinggoodwill,anassessmentismadeateachreportingdateastowhetherthereisanyindicationthatpreviouslyrecognisedimpairmentlossesmaynolongerexistormayhavedecreased.Ifsuchindicationexists,theGroupestimatestheasset’sorcash-generatingunit’srecoverableamount.Apreviouslyrecognisedimpairmentlossisreversedonlyiftherehasbeenachangeintheassumptionsusedtodeterminetheasset’srecoverableamountsincethelastimpairmentlosswasrecognised.Suchreversalisrecognisedintheincomestatement.

Thefollowingcriteriaarealsoappliedinassessingimpairmentofspecificassets:


GoodwillGoodwillistestedforimpairmentannually(asof31January)andwhencircumstancesindicatethatthecarryingamountmaybeimpaired.

Impairmentisdeterminedforgoodwillbyassessingtherecoverableamountofeachcash-gener-atingunit(orgroupofcash-generatingunits)towhichthegoodwillrelates.Wheretherecoverableamountofthecash-generatingunitislessthantheircarryingamountanimpairmentlossisrecog-nised.Anyimpairmentlossrecognisedongoodwillisnotreversedinasubsequentperiod.

Cash-generatingunitsaredefinedonacountrylevelandgoodwillhasbeenallocatedaccordingly.Therecoverableamountforallcash-generatingunitsisdeterminedonthebasisofadiscountedcashflowmodel(weightedaveragecostofcapitalapproach)bydiscountingfreecashflowsusinganap-propriatediscountrate.Thefreecashflowsarebasedonfinancialbudgets(businessplans)approvedbyseniormanagementcoveringafour-yeardetailplanningperiod.

Intangible assets with an indefinite useful lifeIntangibleassetswithindefiniteusefullivesaretestedforimpairmentannuallyasof31Januaryeitherindividuallyoratthecashgeneratingunitlevel,asappropriateandwhencircumstancesindicatethatthecarryingvaluemaybeimpaired.andwhencircumstancesindicatethatthecarryingvaluemaybeimpaired.

Financial assets and financial liabilities (financial instruments)

Measurement and recognition of financial assets and financial liabilitiesAfinancial instrumentisanycontractthatgivesrisetoafinancialassetofoneentityandafinancialliabilityorequityinstrumentofanotherentity.FinancialinstrumentsarerecognisedwhenPHOENIXbecomesapartytothecontractualprovisionsoftheinstrument.

Purchasesorsalesoffinancialassetsthatrequiredeliveryofassetswithinatimeframeestablishedbyregulationorconventioninthemarketplace(regularwaypurchases)arerecognisedonthesettlementdate.Financialassetsandfinancialliabilitiesareoffsetandthenetamountreportedintheconsolidatedstatementoffinancialpositionifthereisacurrentlyenforceablelegalrighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasis,ortorealisetheassetsandsettletheliabilitiessimultaneously.

Financial assetsandfinancial liabilitiesarerecognisedinitiallyatfairvalueplus,inthecaseofinstrumentsnotatfairvaluethroughprofitorloss,directlyattributabletransactioncosts.Thefairvalueoffinancialinstrumentsthatareactivelytradedinorganisedfinancialmarketsisdeterminedbyreferencetolistedmarketbidpricesatthecloseofbusinessattheendofthereportingperiod.Forfinancialinstrumentswherethereisnoactivemarket,fairvalueisdeterminedusingvaluationtech-niques.Suchtechniquesmayincludeusingrecentarm’slengthmarkettransactions;referencetothecurrentfairvalueofanotherinstrumentthatissubstantiallythesame;discountedcashflowanalysisorothervaluationmodels.

Atinitialrecognitionfinancial assetsareclassifiedasloansandreceivables,held-to-maturityinvest-ments,available-for-salefinancialassets,financialassetsatfairvaluethroughprofitorlossorasderivativesdesignatedashedginginstrumentsinaneffectivehedge.Thesubsequentmeasurementandrecognitionoffinancialassetsdependsontheirclassification.


Other financial assetsclassifiedasavailable-for-salefinancialassetsinaccordancewithIAS39aremeasuredatfairvaluewithunrealisedgainsorlossesrecognisedinothercomprehensiveincome.Financialinvestmentsforwhichnoquotedmarketpriceisavailable,andwhosefairvaluecannotbereliablymeasured,arecarriedatcost.Whentheinvestmentisderecognised,thecumulativegainorlossrecordedinequityisrecognisedintheincomestatement.Iftheassetisdeterminedtobeimpaired,thecumulativelossrecordedinequityisrecognisedintheincomestatement.Non-deriv-ativeotherfinancialassetswithfixedordeterminablepaymentsandfixedmaturitiesareclassifiedasheld-to-maturityinvestmentswhentheGrouphasthepositiveintentionandabilitytoholdittomaturity.

Trade receivablesarecategorisedasloansandreceivablesandaremeasuredatamortisedcost.Alldiscerniblespecificrisksandimpairmentlossesareaccountedforthroughtheuseofanallowanceaccount.Reversalsarecarriedoutifthereasonsfortheimpairmentnolongerapply.Defaultleadstotheimmediatederecognitionofthereceivables.

Other receivablesandloansarecategorisedasloansandreceivablesandaremeasuredatamortisedcost.Amortisedcostiscomputedusingtheeffectiveinterestmethodlessanyallowanceforimpair-mentandprincipalrepaymentorreduction.Gainsandlossesarerecognisedwhentheloansarederecognisedorimpaired,aswellasthroughtheamortisationprocessduetotheeffectiveinterestmethod.Alldiscerniblespecificrisksandimpairmentlossesrelatedtocustomerloansareaccountedforthroughtheuseofanallowanceaccount.

Atinitialrecognitionfinancial liabilitiesareclassifiedasfinancialliabilitiesatamortisedcost,asfinancialliabilitiesatfairvaluethroughprofitorlossorasderivativesdesignatedashedginginstru-mentsinaneffectivehedge.

Financial liabilitiesandtrade payablesarecarriedatamortisedcostusingtheeffectiveinterestmethod,ifappropriate.Gainsandlossesarerecognisedwhentheliabilitiesarederecognisedaswellasthroughtheamortisationprocessduetotheeffectiveinterestmethod.ThegainorlossonthehedgediteminafairvaluehedgeunderIAS39attributabletothehedgedriskleadstoanadjust-mentofthecarryingamountofthehedgeditem.

TheGrouphasnotdesignatedanynon-derivativefinancialassetsorfinancialliabilitiesatfairvaluethroughprofitorloss.

Financial guarantee contractsissuedbytheGrouparethosecontractsthatrequireapaymenttobemadetoreimbursetheholderforalossitincursbecausethespecifieddebtorfailstomakeapaymentwhendueinaccordancewiththetermsofadebtinstrument.Financialguaranteecontractsarerecognisedinitiallyasaliabilityatfairvalue,adjustedfortransactioncoststhataredirectlyattributabletotheissuanceoftheguarantee.Subsequently,theliabilityismeasuredatthehigherofthebestestimateoftheexpenditurerequiredtosettlethepresentobligationatthereportingdateandtheamountrecognisedlesscumulativeamortisation.

TheGrouphasnotissuedanyfinancialguaranteesforaconsideration.Theprobabilityofdefaultofthefinancialguaranteeisconsideredlow.


Impairment of financial assetsTheGroupassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetoragroupofassetsisimpaired.Financialassetsthatarenotmeasuredatfairvaluethroughprofitorlossaredeemedtobeimpairedifthereisobjectiveevidenceofimpairment(e.g.,debtorsareexperiencingsignificantfinancialdifficulty,defaultordelinquencyininterestorprincipalpayments,theprobabilitythattheywillenterbankruptcyorotherfinancialreorganisationandwhereobserv-abledataindicatethatthereisameasurabledecreaseintheestimatedfuturecashflows,suchaschangesinarrearsoreconomicconditionsthatcorrelatewithdefaults).PHOENIXassessesindividu-allywhetherobjectiveevidenceofimpairmentexistsforfinancialassets.Furthermoreassetsareincludedinagroupoffinancialassetswithsimilarcreditriskcharacteristicsandareassessedcollec-tivelyforimpairment.Anyimpairmentlossisrecognisedintheprofitorloss.

Impairmentlossesoffinancialassetsmeasuredatamortisedcostarecausedbythepresentvalueofestimatedfuturecashflowsbeinglowerthanthecarryingamount.Thepresentvalueoftheesti-matedfuturecashflowsisdiscountedatthefinancialasset’soriginaleffectiveinterestrate.Incaseofavariableinterestrate,thediscountrateformeasuringanyimpairmentlossisthecurrenteffec-tiveinterestrate.

Impairmentlossesofavailable-for-salefinancialassetsaremeasuredasthedifferencebetweentheacquisitioncostandthecurrentfairvalue,lessanyimpairmentlosspreviouslyrecognisedintheincomestatement.Anyimpairmentlossisremovedfromequityandrecognisedintheincomestate-ment.If,inasubsequentperiod,thefairvalueincreasesandtheincreasecanbeobjectivelyrelatedtoaneventoccurringaftertheimpairmentlosswasrecognisedintheincomestatement,theimpair-mentlossisreversedthroughtheincomestatement.Inthecaseofequityinvestmentsclassifiedasavailable-for-sale,objectiveevidencewouldincludeasignificantorprolongeddeclineinthefairvalueoftheinvestmentbelowitscost.Impairmentlossesonequityinstrumentsarenotreversedthroughtheincomestatement,butarerecognisedinothercomprehensiveincome.

Derecognition of financial instrumentsAfinancialassetisderecognisedwhentherightstoreceivecashflowsfromtheassethaveexpired.InadditionafinancialassetisderecognisedwhentheGrouphastransferreditsrightstoreceivecashflowsfromtheassetorhasassumedanobligationtopaythereceivedcashflowsinfullwith-outmaterialdelaytoathirdpartyundera‘pass-through’arrangement:AdditionallytheGrouphastransferredsubstantiallyalltherisksandrewardsoftheasset,orhasneithertransferrednorretainedsubstantiallyalltherisksandrewardsoftheasset,buthastransferredcontroloftheasset.

Afinancialliabilityisderecognisedwhentheobligationundertheliabilityisdischargedorcancelledorexpires.


PHOENIXsellssignificantvolumesofreceivablesthroughsecuritisationprogramsorfactoringtrans-actions.WhenthereceivablessolddonotmeetIAS39derecognitionrequirementsthereceivablesarerecognisedintheconsolidatedfinancialstatementseventhoughtheyhavebeenlegallysold.Acorrespondingfinancialliabilityisrecordedintheconsolidatedstatementoffinancialposition.Gainsandlossesrelatedtothesaleofsuchassetsarenotrecogniseduntiltheassetsareremovedfromtheconsolidatedstatementoffinancialposition.WithincertainsecuritisationprogramsPHOENIXhasneithertransferrednorretainedsubstantiallyalltherisksandrewardsoftheassetnortrans-ferredcontroloftheasset.ThesetransactionsarerecognisedtotheextentoftheGroup’scontinuinginvolvement.

Derivative financial instruments and hedge accountingTheGroupusesderivativefinancialinstrumentssuchasforwardexchangecontracts,interestrateswapsandcrosscurrencyswapstohedgeitsforeigncurrencyrisksandinterestraterisks.Derivativesareinitiallyrecognisedatfairvalueonthedateonwhichaderivativecontractisenteredintoandaresubsequentlyremeasuredatfairvalue.Derivativesarecarriedasfinancialassetswhenthefairvalueispositiveandasfinancialliabilitieswhenthefairvalueisnegative.

Anygainsorlossesarisingfromchangesinfairvalueonderivativesduringtheperiodthatdonotqualifyforhedgeaccountingandtheineffectiveportionofaneffectivehedgearetakendirectlytotheincomestatement.

Inthecaseofderivativeswithquotedmarketprices,fairvalueisthepositiveornegativefairvalue,ifnecessaryafteranyreductionforcounterpartyrisk.Ifnoquotedmarketpricesareavailable,fairvalueisestimatedonthebasisoftheconditionsobtainedattheendofthereportingperiod,suchasinter-estratesorexchangerates,andusingrecognisedvaluationtechniques,suchasdiscountedcashflowmodelsoroptionpricingmodels.

PHOENIXdoesnotusehedgeaccountingatpresent.

Inventories

Inventoriesareinitiallyrecognisedatcostbasedonthefirstinfirstoutmethod.Costsincurredinbringingeachproducttoitspresentlocationandconditionareincludedincostatinitialrecognition.

Ateachreportingdate,inventoriesaremeasuredatthelowerofcostornetrealisablevalue.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lessestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.


Cash and cash equivalents

Cashandcashequivalentsinthestatementoffinancialpositioncomprisecashatbanksandonhandandshort-termdeposits.

Equity

ThecomponentsofequityarerecognisedinaccordancewithIAS32(rev.2008).Financialinstrumentshavetobeclassifiedoninitialrecognitionasafinancialliability,financialassetoranequityinstru-mentinaccordancewiththesubstanceofthecontractualarrangementsandthedefinitionsofIAS32(2008).Asof31January2011thecapitalcontributionsoftheunlimitedandlimitedpartnersofthePHOENIXPharmahandelGesellschaftmitbeschränkterHaftung&CoKG(puttableinstruments)wereclassifiedasequityasallcriteriaofIAS32(2008)weresatisfied.Thecriteriaforputtableinstru-mentsthatshouldbeclassifiedasanequityinstrumentare:

a) Theinstrumententitlestheholdertoaproratashareoftheentity’snetassetsintheeventoftheentity’sliquidation.

b) Theinstrumentisintheclassofinstrumentsthatissubordinatetoallotherclassesofinstruments.

c) Allfinancialinstrumentsintheclassofinstrumentsthatissubordinatetoallotherclassesofinstrumentshaveidenticalfeatures.

d) Apartfromthecontractualobligationfortheissuertorepurchaseorredeemtheinstrumentforcashoranotherfinancialasset,theinstrumentdoesnotincludeanycontractualobliga-tiontodelivercashoranotherfinancialassetstoanotherentity,ortoexchangefinancialassetsorfinancialliabilitieswithanotherentityunderconditionsthatarepotentiallyunfa-vourabletotheentity,anditisnotacontractthatwillormaybesettledintheentity’sownequityinstrumentsassetoutinthedefinitionsforfinancialliabilitiesinaccordancewithIAS32.

e) Thetotalexpectedcashflowsattributabletotheinstrumentoverthelifeoftheinstrumentarebasedsubstantiallyontheprofitorloss,thechangeintherecognisednetassetsorthechangeinthefairvalueoftherecognisedandunrecognisednetassetsoftheentityoverthelifeoftheinstrument(excludinganyeffectsoftheinstruments).

ThesupplementarycontributionsmadebyPHOENIX’spartnersasof31January2008areclassifiedasfinancialliabilitiesinaccordancewithIAS32(2008).Thesupplementarycontributionsarealsoputtableinstruments,butdonothaveallfeaturesrequiredbyIAS32(2008).


Treasury shares

Ownequityinstrumentswhicharerepurchased(treasuryshares)arerecognisedatcostanddeductedfromequity.Nogainorlossisrecognisedintheincomestatementonthepurchase,saleorcancel-lationoftheGroup’sownequityinstruments.Anydifferencebetweenthecarryingamountandtheconsiderationisrecognisedinretainedearnings.

Pensions and other post-employment benefits

Liabilitiesfordefinedbenefitplansaremeasuredusingtheprojectedunitcreditmethodinaccord-ancewithIAS19,takingintoaccountnotonlythepensionobligationsandvestedpensionrightsknownatthereportingdate,butalsoexpectedfuturesalaryincreases.Theinterestrateusedtodeterminethepresentvalueoftheobligationswassetonthebasisofhigh-qualityfixedinterest-bearingsecurities/corporatebondswithadurationcorrespondingtothepensionplansintherel-evantcountry.Actuarialgainsandlossesarerecognisedasincomeorexpensewhenthenetcumula-tiveunrecognisedactuarialgainsandlossesforeachindividualplanattheendofthepriorreportingperiodexceed10%ofthehigherofthedefinedbenefitobligationandthefairvalueofplanassetsatthatdate.Thesegainsorlossesarerecognisedovertheexpectedaverageremainingworkinglivesoftheemployeesparticipatingintheplans.Thereturnonplanassetsisclassifiedasinterestincome.

Thepastservicecostsarerecognisedasanexpenseonastraight-linebasisovertheaverageperioduntilthebenefitsbecomevested.Ifthebenefitshavealreadyvested,followingtheintroductionof,orchangesto,apensionplan,pastservicecostsarerecognisedimmediately.

Provisions

Aprovisionisrecognisedwhenthereisapresent(legalorconstructive)obligationtowardsathirdpartyonthebasisofapasteventwhereitismorelikelythannotthattherewillbeanoutflowofresourcestosettletheobligationandtheobligationcanbereliablyestimated.Provisionsarestatedattheamountneededtosettletheobligationandarenotnettedagainstpositivecontributionstoearnings.Iftheeffectofthetimevalueofmoneyismaterial,provisionsarediscountedusingacur-rentpre-taxratethatreflects,whereappropriate,therisksspecifictotheliability.Wherediscountingisused,theincreaseintheprovisionduetothepassageoftimeisrecognisedasafinancecost.

Current and deferred taxes

Thetaxexpenseoftheperiodcomprisescurrentanddeferredtaxes.Taxesarerecognisedinthein-comestatement,unlesstheyrelatetoitemsrecogniseddirectlyinequityorinothercomprehensiveincomeinwhichcasethetaxesarealsorecognisedinequityorinothercomprehensiveincome.

Current income taxesCurrentincometaxassetsandliabilitiesforthecurrentandpriorperiodsaremeasuredattheamountexpectedtoberecoveredfromorpaidtothetaxationauthorities.


Deferred income taxesDeferredtaxesarerecognisedforalltemporarydifferencesbetweenthetaxbaseoftheassets/liabilitiesandtheircarryingamountspursuanttotheIFRSfinancialstatements(liabilitymethod).If,however,deferredtaxarisesfromtheinitialrecognitionofanassetorliabilityaspartofatrans-actionotherthanabusinesscombination,whichasofthedateofthetransactionhasnoeffectonneithertheaccountingnorthetaxableprofitorloss,adeferredtaxitemisnotrecognisedneitheronthedateofinitialrecognitionnorsubsequently.Deferredtaxesaremeasuredusingthetaxratesandtaxprovisionsenactedorsubstantivelyenactedbythereportingdateandthatareexpectedtoapplytotheperiodwhentheassetisrealisedortheliabilityissettled.

Deferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferencecanbeutilised.

Deferredtaxliabilitiesfortaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiariesandassociatesarerecognised,unlessthetimingofthereversalofthetemporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.Deferredtaxassetsanddeferredtaxliabilitiesareoffset,ifalegallyenforceablerightexiststosetoffcurrenttaxassetsagainstcurrentincometaxliabilitiesandthedeferredtaxesareleviedbythesametaxationauthorityandeitherrelatetothesametaxableentityordifferenttaxableentitieswhichintendtosettleonanetbasis.

Leases

Group as a lesseeFinanceleases,whichtransfertotheGroupsubstantiallyalltherisksandbenefitsincidentaltoownershipoftheleaseditem,arecapitalisedatthecommencementoftheleaseatthefairvalueoftheleasedpropertyor,iflower,atthepresentvalueoftheminimumleasepayments.Leasepaymentsareapportionedbetweenfinancechargesandreductionoftheleaseliabilitysoastoachieveacon-stantrateofinterestontheremainingbalanceoftheliability.Financechargesarerecognisedintheincomestatement.

Leasedassetsaredepreciatedovertheusefullifeoftheasset.However,ifthereisnoreasonablecertaintythattheGroupwillobtainownershipbytheendoftheleaseterm,theassetisdepreciatedovertheshorteroftheestimatedusefullifeoftheassetandtheleaseterm.

Operatingleasepaymentsarerecognisedasanexpenseinthestatementofincomeonastraight-linebasisovertheleaseterm.

Group as a lessorLeaseswheretheGroupdoesnottransfersubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.Initialdirectcostsincurredinnegotiatingandconcludinganoperatingleaseareaddedtothecarryingamountoftheleasedassetandrecognisedovertheleasetermonthesamebasisastheleaseincome.


Revenue recognition

PHOENIXmainlyoriginatesrevenuefromthesaleofpharmaceuticalandrelatedgoodsand–toalesserextent–fromtherenderingofservices.

IncaseswherePHOENIXactsasprincipal,i.e.,hastheexposuretothesignificantrisksandrewardsassociatedwiththesaleofgoods,(gross)revenuefromthesaleofpharmaceuticalandrelatedgoodsisrecorded.IndicatorsforthiscasearecontractsituationsinwhichtheGroupisprimaryobligortowardsthecustomer,carriesthesignificantrisksandrewardsconnectedtoinventory,haslatitudeoverproductpricingandcarriesthecreditriskofthesalestransaction.

IncaseswheretheGroupactsasanagent(net)revenuefortherenderingofservicesisrecorded.Theseactivitiestypicallyrelatetodistribution,stockholdingandprovidinglogisticsinformationser-vicestotheprincipal.ThissituationoccurswhenPHOENIXdoesnotsubstantiallycarrytherisksortheownershipofthegoods.Goodsarethenstockedonacommissionbasis.

PharmaceuticalandrelatedgoodsrevenueisrecognisedatthetimewhenPHOENIXhastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods,whenitisprobablethattheeconomicbenefitswillflowtotheGroupandtherevenuecanbereliablymeasured.Revenueismeasuredatthefairvalueoftheconsiderationreceived,excludingdiscounts,rebates,andsalestaxesorduty.

Revenuefromservicesisrecogniseduponperformanceoftherelatedservices.


Significant accounting estimates and assumptions

Thepreparationoftheconsolidatedfinancialstatementsrequiresmanagementtomakejudgments,estimatesandassumptions.Estimatesaremadeprimarilyforthemeasurementofassets,liabilitiesandcontingentliabilitiesacquiredthroughbusinesscombinations,impairmenttestsaccordingtoIAS36,measurementofprovisionsforpensions,otherprovisionsaswellasincometaxes,particularlyrelatedtodeferredtaxassetsonlosscarryforwards.However,uncertaintyabouttheseassumptionsandestimatescouldresultinoutcomesthatrequireamaterialadjustmenttothecarryingamountoftheassetorliabilityaffectedinfutureperiods.

Thekeyassumptionsandestimatesconcerningthefutureandotherkeysourcesofestimationuncertaintyatthereportingdate,thathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfiscalyeararediscussedbelow.

Impairment of non-financial assetsTheGroup’simpairmenttestforgoodwillisprincipallybasedonvalueinusecalculationsthatuseadiscountedcashflowmodel(weightedaveragecostofcapitalapproach).ThecashflowsarederivedfromthebudgetforthenextfouryearsanddonotincluderestructuringactivitiesthattheGroupisnotyetcommittedtoorsignificantfutureinvestmentsthatwillenhancetheassetbaseofthecash-generatingunitbeingtested.

Therecoverableamountismostsensitivetotheperpetualcapitalexpendituresandthediscountratesusedforthediscountedcashflowmodelaswellastheexpectedfuturecashinflowsandthegrowthrateusedforextrapolationpurposes.

IntangibleassetswithindefiniteusefullivesarebasedonfairvaluelesscoststosellcalculationsthatusearelieffromroyaltyapproachoranEBITDAmultiple.

FurtherdetailsonimpairmentaredisclosedinNote9.

Deferred tax assetsDeferredtaxassetsarerecognisedforallunusedtaxlossestotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthelossescanbeutilised.Significantmanagementjudgmentisrequiredtodeterminetheamountofdeferredtaxassetsthatcanberecognised,baseduponthelikelytimingandtheleveloffuturetaxableprofitstogetherwithfuturetaxplanningstrategies.

FurtherdetailsondeferredtaxesaredisclosedinNote8.

Bad debt allowance for trade receivables and other assetsRecordingabaddebtallowanceorrecognisingawrite-offforreceivablesandotherassetsistoalargeextentbasedonjudgment,takingintoaccounttheabilityofthedebtortopayoutstandingbalances.

FurtherdetailsonbaddebtallowancesaredisclosedinNote14.


Pension benefitsThecostofdefinedbenefitpensionplansaswellasthepresentvalueofthepensionobligationisdeterminedusingactuarialvaluations.Theactuarialvaluationinvolvesmakingassumptionsaboutdiscountrates,expectedratesofreturnofassets,futuresalaryincreases,mortalityratesandfuturepensionincreases.Allassumptionsarereviewedateachreportingdate.Indeterminingtheappro-priatediscountratemanagementconsiderstheinterestratesofhigh-qualityfixedinterest-bearingsecuritieswithadurationcorrespondingtothepensionplansintherelatedcountry.Themortalityrateisbasedonpubliclyavailablemortalitytablesforthespecificcountry.

Futuresalaryincreasesandpensionincreasesarebasedonexpectedfutureinflationratesforthespecificcountry.

FurtherdetailsabouttheassumptionsusedaregiveninNote18.

Fair value of financial instrumentsWherethefairvalueoffinancialassetsandfinancialliabilitiesrecordedinthestatementoffinancialpositioncannotbederivedfromactivemarkets,theyaredeterminedusingvaluationtechniquesincludingthediscountedcashflowmodel.Theinputstothesemodelsaretakenfromobservablemarketswherepossible,butwherethisisnotfeasible,adegreeofjudgmentisrequiredinestablish-ingfairvalues.Thejudgmentsincludeconsiderationsofinputssuchasliquidityrisk,creditriskandvolatility.Changesinassumptionsaboutthesefactorscouldaffectthereportedfairvalueoffinancialinstruments.

Revenue recognitionFollowingIAS18,thegrossversusnetsalespresentationofdistributionagreementswithpharma-ceuticalsuppliersdependsonwhethertheGroupactsasaprincipaloranagent.Thisjudgementrequiresamongothersanestimationoftherisksandrewardsrelatedtoinventoriesandtradere-ceivablesincurredbyPHOENIXinthecontextofthesedistributionagreements.

FurtherdetailsonrevenuearedisclosedinNote1.

Business combinationsThebusinesscombinationscarriedoutinFY2010/11andFY2009/10areexplainedbelow.PurchaseaccountingisperformedinaccordancewiththepurchasemethodpursuanttoIFRS3“BusinessCombinations”.

InFY2010/11,theaggregatedcontributednetprofitoftheacquisitionstotheGroup’sprofitfortheyearamountedtoEUR577k(FY2009/10:EUR517k).Assumingtheacquisitiondateforallbusinesscombinationshadbeenthebeginningoftheperiod,theaggregatedrevenueswouldhaveamountedtoEUR203,626k(inFY2009/10:EUR51,477k).Assumingtheacquisitiondateforallbusinesscom-binationshadbeenthebeginningoftheperiod,theaggregatedprofitfortheperiodwouldhaveamountedtoEUR2,752k(FY2009/10:EUR6,090k).


Acquisitions in FY 2010/11. Amounts recognised as of the acquisition date

EURk Lloyds Other Total

Cashandcashequivalents 0 13,162 13,162

Equityinstruments 63,840 0 63,840

Total acquisition costs 63,840 13,162 77,002

Intangibleassets 1,269 2,374 3,643

Property,plantandequipment 10,879 3,256 14,135

Finacialassets 491 35 526

Inventories 9,314 1,678 10,992

Currentreceivables 16,554 2,217 18,771

Otherassets 1,171 1,922 3,093

Cashandbankbalances 4,948 1,328 6,276

Total assets 44,626 12,810 57,436

Non-currentprovisions 65 13 78

Non-currentliabilities 0 1,887 1,887

Deferredtaxliabilities 106 641 747

Currentprovisions 2,099 326 2,425

Currentliabilities 16,978 8,340 25,318

Equity and liabilities 19,248 11,207 30,455

Netassets 25,378 1,603 26,981

Non-controllinginterests 0 2 2

Acquired assets, net 25,378 1,601 26,979

Goodwill 38,462 11,561 50,023


Cash outflow due to acquisition

EURk Lloyds Other Total

Cashandcashequivalentsacquiredwithsubsidiary 4,948 1,005 5,953

Cashoutflow 0 -10,741 -10,741

Actual cash outflow 4,948 -9,736 -4,788

Lloyds Nederland B.V.On1December2010,BrocacefHoldingN.V.acquired100%ofthevotingsharesinLloydsNederlandB.V.,whichhaspharmaciesintheNetherlands.ItisexpectedthatPHOENIXwilldecisivelystrengthenitsmarketpositionthroughtheacquisition.

ThefairvalueoftheissuedequityinterestwasdeterminedusinganEBITmultiple.

Thegoodwillmainlyresultsfromtheacquiredpharmacies’locationadvantages.EUR8,959koftherecognisedgoodwillisexpectedtobetaxdeductible.

ThegoodwillfromthisbusinesscombinationwasallocatedtotheNetherlandscash-generatingunit.

ThefairvalueofcurrentreceivablescontainstradereceivableswithafairvalueofEUR16,208k.ThegrossamountofthetradereceivablespastdueamountstoEUR16,504k,ofwhichEUR296kisexpectedtobeuncollectible.

Basedontheavailableinformation,themeasurementofindividualareasofassetsandliabilitiescouldnotbefinalisedasofthereportingdate.

Other acquisitionsInFY2010/11theGroupacquiredfurtherpharmaceuticalcompaniesinbusinesscombinationsthatareindividuallyimmaterial.

Thegoodwillarisingonthoseacquisitionswasallocatedtothecash-generatingunitsHungary(EUR2,752k),Switzerland(EUR915k),UnitedKingdom(EUR759k),Estonia(EUR328k),theCzechRepublic(EUR2,910k),theNetherlands(EUR1,279k),Slovakia(EUR2,076k)andNorway(EUR542k)andismanagedinthelocalfunctionalcurrencies(HUF,CHF,GBP,EUR,CZKandNOK).

EUR1,688koftherecognisedgoodwillfromotherbusinesscombinationsisexpectedtobetaxdeductible.

Non-controllinginterestsarerecognisedattheshareoftheidentifiablenetassetsintheacquirees.


Acquisitions in FY 2009/10. Carrying amounts before the business combination

EURk PlusPharmacieSA

PharmanovaBeld.o.o.

EvropaLekd.o.o.

PharmaciesNorway

Otheracquisitions

Total

Intangibleassets 204 114 164 0 59 541

Property,plantandequipment 67 305 1,691 331 535 2,929

Financialassets 16,428 8,171 2,272 0 0 26,871

Deferredtaxassets 0 0 0 317 0 317

Inventories 2,474 3,360 1,394 585 935 8,748

Current-termreceivables 0 0 0 0 1,049 1,049

Otherassets 2,336 1,295 926 1,586 0 6,143

Cashandbankbalances 1,256 225 16 -33 339 1,803

Assets 22,765 13,470 6,463 2,786 2,917 48,401

Non-currentprovisions 0 172 2,205 0 0 2,377

Non-currentliabilities 0 2,805 0 2,914 0 5,719

Currentprovisions 200 0 0 1,135 0 1,335

Currentliabilities 15,375 7,089 3,294 0 1,814 27,572

Liabilities 15,575 10,066 5,499 4,049 1,814 37,003

Net assets 7,190 3,404 964 -1,263 1,103 11,398


Fair value recognition on acquisition


PharmanovaBeld.o.o.

EvropaLekd.o.o.

PharmaciesNorway

Otheracquisitions

Total

Purchaseprice 10,880 7,871 2,879 4,246 7,005 32,881

Incidentalcosts 0 84 0 0 102 186

Total acquisition costs 10,880 7,955 2,879 4,246 7,107 33,067

Intangibleassets 3,164 114 85 0 1,284 4,647

Property,plantandequipment 67 305 1,691 331 535 2,929

Financialassets 16,428 7,401 1,683 0 0 25,512

Deferredtaxassets 0 0 0 317 0 317

Inventories 2,474 3,372 1,325 585 1,023 8,779

Currentreceivables 0 0 0 0 1,060 1,060

Otherassets 2,336 1,360 810 1,586 0 6,092

Cashandbankbalances 1,256 225 16 -33 339 1,803

Assets 25,725 12,777 5,610 2,786 4,241 51,139

Non-currentprovisions 0 184 2,636 0 0 2,820

Non-currentliabilities 0 2,805 0 2,914 0 5,719

Deferredtaxliabilities 355 0 0 0 0 355

Currentprovisions 200 0 0 1,135 0 1,335

Currentliabilities 15,375 7,089 3,294 0 2,340 28,098

Liabilities 15,930 10,078 5,930 4,049 2,340 38,327

Netassets 9,795 2,699 -320 -1,263 1,901 12,812

Non-controllinginterests -4,173 0 0 0 -48 -4,221

Net assets acquired 5,622 2,699 -320 -1,263 1,853 8,591

Goodwill 5,258 5,256 3,199 5,509 5,206 24,428


Plus Pharmacie SA, Ivry sur Seine, FranceOn3February2009,PHOENIXPharmaSASacquiredanadditional16%ofthevotingsharesofPlusPharmacieSA.Until31January2008thiscompanywasconsolidatedatequitywith35%.Sincethisacquisitionwasachievedinstages,everystagewasregardedseparatelyunderIFRS3(2004).

Withinthisacquisition,PHOENIXacquiredtrademarksandacustomerbase.BothintangibleassetswerecalculatedwithfairvalueofEUR1,900kandEUR1,060krespectivelyandwereseparateshownfromgoodwill.

Thegoodwillcomprisesthevalueofexpectedsynergiesarisingfromacquisition.

Thegoodwillarisingonthisacquisitionwasallocatedtothecash-generatingunitFranceandismanagedinthelocalfunctionalcurrency(EUR5,258k).

Asof31July2009PHOENIXPharmaSASacquiredanadditional10.56%ofthesharesofPlusPharma-cieSA.ThegoodwillarisingonthisacquisitionamountstoEUR2,120kwasallocatedtothecash-generatingunitFrance.

Pharmanova Bel d.o.o. (now: PHOENIX Veleprodaja Lijekova d.o.o.)On4May2009,PHOENIXPIBAustriaBeteiligungsGmbHacquired100%ofthevotingsharesofthepharmaceuticalwholesalerPharmanovaBeld.o.oBijeljina,BosniaandHerzegovina.


Thegoodwillarisingonthisacquisitionwasallocatedtothecash-generatingunitBosniaandHerzegovinaandismanagedinthelocalfunctionalcurrency(BAM).

Evropa Lek d.o.o.On1February2009,PHOENIXPharmad.o.oacquired100%ofthevotingsharesofthepharmaceuticalwholesalerEvropaLekd.o.oBelgrade,Serbia.

Thegoodwillcomprisesthevalueofexpectedsynergiesarisingfromacquisition.Thegoodwillarisingonthisacquisitionwasallocatedtothecash-generatingunitSerbiaandisman-agedinthelocalfunctionalcurrency(RSD).

Cash flow on acquisition


PharmanovaBeld.o.o.

EvropaLekd.o.o.

ApothekenNorwegen

Otherbusinesscombinations

Total

Netcashacquiredwiththesubsidiary 1,256 225 16 0 339 1,836

Cashpaid -10,880 -7,955 -2,879 -4,246 -6,884 -32,844

Net cash outflow -9,624 -7,730 -2,863 -4,246 -6,545 -31,008


Pharmacies in NorwayOn6March2009,Apotek1NorgeASacquired100%ofthevotingsharesofpharmacieslocatedinBergen,Norway.


Allofthegoodwillarisingontheseacquisitionswasallocatedtothecash-generatingunitNorwayandismanagedinthelocalfunctionalcurrency(NOK).

Other acquisitionsInFY2009/10theGroupacquiredfurtherpharmaceuticalcompaniesinbusinesscombinationsthatareindividuallyimmaterial.

Thegoodwillarisingonthoseacquisitionswasallocatedtothecash-generatingunitsHungary(EUR1,122k),Switzerland(EUR1,293k),UnitedKingdom(EUR484k),Latvia(EUR971k),Estonia(EUR501k)andPoland(EUR835k)andismanagedinthelocalfunctionalcurrencies(HUF,CHF,GBP,LVL,EEKandPLN).


notes to the income statement

1 Revenue

TheGroup’srevenuemainlyconsistsofthesaleofpharmaceuticalandrelatedgoods(EUR21,567,775kinFY2010/11andEUR21,169,453kinFY2009/10).Thesmallerportionofrevenueisattributabletodistributionfeesandconsignmentwarehousefees,thesaleofpharmacyITsystems,transportationsystemsandotherservices.

2 Other operating income

EURk FY09/10 FY 10/11

Exchangerategains 8,429 2,702

Netprofitfromthedisposaloffixedassets 8,683 21,242

Incomefromthereleaseofprovisionsandaccruals 5,788 7,391

Commissionincome 37,013 29,856

Rentalincome 8,222 6,430

Incomefromthereversalofbaddebtallowancesandpaymentsreceivedforreceivablesandotherassets 16,097 10,532

Marketingandotherservices 28,002 31,736

Allocationoffreightcosts 2,374 2,214

Other 35,371 34,909

Other operating income 149,979 147,012

ThenetgainsfromthedisposaloffixedassetscontainEUR15,150k(prioryear:EUR0k)fromthedis-posalofsharesinanentity.

Theothersitemcontainsanumberofindividalitems,suchasforinstanceenergycostmarkupsandcross-chargedtransportationfees.

3 Personnel expenses

EURk FY09/10 FY 10/11

Wagesandsalaries 701,092 727,401

Socialsecuritycontributions 124,910 127,344

Pension,retirementbenefitandsimilarexpenses 42,026 17,848

Otherpersonnelcosts 62,820 65,316

930,848 937,909


Theaverageheadcountmeasuredinfull-timeequivalents(FTEs)decreasedby55toatotalof23,206.Otherpersonnelexpensesmainlyincludetrainingexpensesandcostsfortemporarypersonnel.

Theaverageheadcount(FTEs)breaksdownasfollowsbycountry:

31Jan2010 31 Jan 2011

Austria 166 165

Bulgaria 604 596

Croatia 294 288

CzechRepublic 1,452 1,395

Denmark 550 537

Estonia 348 350

Finland 382 410

France 1,123 1,057

Germany 3,475 3,447

Hungary 1,676 1,752

Italy 1,862 1,783

Latvia 382 361

Lithuania 524 492

Macedonia 47 55

Netherlands 1,082 1,097

Norway 2,204 2,209

Poland 609 570

Russia 1 1

Serbia 375 442

Slovakia 447 454

Sweden 568 528

Switzerland 708 700

UnitedKingdom 4,301 4,396

Bosnia-Herzegovina 81 121

23,261 23,206

Theaverageheadcountofentitiesthatwereconsolidatedproportionatelywas6(prioryear:19).

Thelineitem“Basicwagesandsalaries”includesanamountofEUR4,021k(prioryear:EUR6,354k)forseverancepaymentsandsimilarcosts.

Owingtothelegislativeamendmentswhichaffectsthecalculationofpensionobligations,pensionobligationsdecreasedbyEUR19,228kthroughprofitorlossin2010/11(prioryear:EUR0k).


4 Other operating expensesEURk FY09/10 FY 10/11

Transportationcosts 100,349 105,074

Leasingandrentalcosts 95,926 102,259

Exchangeratelosses 2,426 2,977

Expensesfrombaddebtallowances 31,307 65,361

Otherbuildingandequipmentcosts 51,451 51,142

Marketingandadvertisingexpenses 55,142 55,410

CommunicationandITexpenses 36,307 39,813

Legalandconsultingcosts 47,281 45,113

Repairandmaintenancecosts 28,501 29,535

Netlossonthedisposalofassets 2,865 3,447

Othertaxes 31,529 9,858

Officesupplies 10,389 10,282

Insurancecosts 6,873 6,779

ABS/factoringandsimilarfees 8,355 4,956

Other 56,107 57,097

Other operating expenses 564,808 589,103

ThedevelopmentofbaddebtallowancesispresentedinNote14.Infiscal2010/11,theauditorsoftheGroupreceivedauditfeesofEUR770k(prioryear:EUR1,390k),otherattestationfeesofEUR1,261k(prioryear:EUR11k),taxadvisoryfeesofEUR46k(prioryear:EUR143k)andEUR1,533k(prioryear:EUR5,935k)forotherservices.

OtherexpensescontaincostsrelatedtothefinancialrestructuringofthePHOENIXGroupofEUR8,554k(prioryear:EUR12,200k).

5 Result from associates and other investments

Theresultfromassociatesmainlyincludestheprofitfromseveralassociates,chieflynon-controllinginterestsinpharmacies.

TheresultfromotherinvestmentsmainlyrepresentstheincomereceivedfromZAORosta,Russia.


6 Depreciation of property, plant and equipment and amortisation of intangible assets

EURk FY09/10 FY 10/11

Depreciationofproperty,plantandequipmentandamortisationofintangibleassets 90,161 89,398

Impairmentofpharmacylicenses 1,590 421

Impairmentofgoodwill 31,888 0

123,639 89,819

Thedepreciation,amortisationandimpairmentchargeinfiscal2010/11containsareversalofEUR1,900k(prioryear:EUR0k)ofimpairmentpreviouslychargedonintangibleassetsinFrance.

7 Financial result

EURk FY09/10 FY 10/11

Interest and similar income

Interestincome 48,649 46,325

Exchangerategains 21,459 64,159

Otherfinancialincome 4,619 3,230

Otherfinancialincomederivatives 611 22,726

75,338 136,440

Interest and similar expenses

Interestexpenses -208,676 -200,876

Exchangeratelosses -13,084 -86,231

Otherfinancialexpenses -24,367 -76,905

Otherfinancialexpensesderivatives -10,292 -6,759

-256,419 -370,771

Other financial results -290 22,200

Financial result -181,371 -212,131

InterestincomeincludeinterestincomefromcustomersintheamountofEUR23,656k(prioryear:EUR22,057k)andinterestfromarelated-partyloanamountingtoEUR14,367k(prioryear:EUR20,653k).


Interestexpensescontaintheinterestportionincludedintheadditionstopensionprovisionsafterdeductingtheexpectedreturnonplanassets.InFY2010/2011,interestexpensesforpensionslesstheexpectedreturnonplanassetsamountedtoEUR2,363k(prioryear:EUR1,526k).Interestincomeandexpensesrelatetofinancialassetsandliabilitiesthatarenotcarriedatfairvaluethroughprofitorloss,withtheexceptionoftheaforementionedinterestexpenses,anadditionalEUR606kforotherprovisions(prioryear:EUR0k)andinterestincomefromthereleaseofaprovisionofEUR1,877kforVAT(prioryear:EUR0k).

Otherfinancialexpensescontainnon-recurringeffectsofEUR16,846k(prioryear:EUR0k)incon-nectionwithrefinancing.ThisitemalsocontainsexpensesofEUR56,319k(prioryear:EUR19,933k)associatedwiththefinancingcoveredunderthestandstillagreement.Ofthisamount,EUR13,031kpertainedtotheprematureterminationofthisfinancing.

TheotherfinancialresultcomprisesgainsfromthedisposaloffinancialassetsofEUR27,741kclassifiedasavailableforsale(prioryear:EUR0k).

8 Income taxes

Themajorcomponentsoftaxexpensearesummarisedinthefollowingtable:

EURk FY09/10 FY 10/11

Currenttaxes 89,605 109,588

Deferredtax -6,688 15,780

82,917 125,368

ThecurrentincometaxesincluderefundsforpriorperiodsofEUR5,623k(prioryear:EUR5,245k)andexpensesofEUR8,320k(prioryear:EUR2,028k).

Byusingpreviouslyunusedtaxlosses,thecurrentincometaxeswerereducedbyEUR2,934k(prioryear:EUR0k).

Infiscal2010/11,adeferredtaxexpenseofEUR3,452kwasrecognisedinothercomprehensiveincome(prioryear:EUR0k).Thisamountresultsfromchangesinthefairvalueoffinancialassetsclassifiedasavailableforsalewhicharerecognisedinothercomprehensiveincome.

Thedeferredtaxesatyearendwerecalculatedusingthetaxratesapplicablefortherespectiveentitiesintheirrespectivecountries.

Inthecurrentfiscalyear,thetaxrateapplicableinHungarydecreasedfrom19%to10%.


AreconciliationoftheexpectedincometaxexpensetoactualincometaxexpenseusingtheaveragetaxrateoftheGroupispresentedinthetablebelow:

FY09/10 FY 10/11

EURk % EURk %

Profit before tax 241,344 100.0 271,050 100.0

Expected income tax expense 67,576 28.0 75,894 28.0

Impactofchangestotaxratesondeferredtaxes -456 -0.2 -1,946 -0.7

Taxeffectofnon-deductibleexpensesandtax-exemptincome 12,993 5.4 1,756 0.6

Effectoftaxesrelatingtoprioryearsrecognisedinthefiscalyear -9,111 -3.8 11,303 4.2

Effectofdifferingnationaltaxrates -1,895 -0.8 3,650 1.3

Effectofimpairments/adjustmentstocarryingamounts 16,216 6.7 33,366 12.3

Othereffects -2,407 -1.0 1,345 0.5

Income taxes 82,916 34.4 125,368 46.3

Thedeferredtaxassets,andthedeferredtaxliabilitiesaresummarisedinthefollowingtable:

EURk FY09/10 FY 10/11

deferredtaxassets

deferredtaxliabilities

deferred tax assets

deferred tax liabilities

Intangibleassets 5,905 75,440 5,498 76,292

Property,plantandequipment 8,781 46,640 8,279 49,583

Financialassetsandotherassets* 12,875 37,705 20,864 29,342

Inventories 6,653 3,989 6,088 3,898

Assetsclassifiedasheldforsale 0 0 0 3,168

Provisions* 26,008 1,929 19,862 815

Liabilities 31,084 6,752 24,299 15,158

Deferred taxes on timing differences* 91,306 172,455 84,890 178,256

Deferredtaxesonunusedtaxlosses 12,812 0 2,072 0

Netting* -49,667 -49,667 -52,282 -52,282

Total deferred taxes 54,451 122,788 34,680 125,974

*ThepresentationofnettinginFY09/10wasadjustedtoimprovecomparabilityofthefigures.


Deferredtaxassetsarerecognisedonunusedtaxlossesattheamountatwhichtheassociatedtaxbenefitsarelikelytoberealisedthroughfuturetaxableprofit.TheGroupdidnotrecognisedeferredtaxassetsonunusedtaxlossesandfutureinterestbenefitsofEUR346,165k(prioryear:EUR261,255k).Theunusedtaxlossesandinterestcarryforwardswillbeforfeitedasfollows:

EURk FY09/10 FY 10/11

Within1year 64 1,380

After1year,butwithin2years 1,201 48

After2years,butwithin3years 0 2,988



After5years 49,461 53,487

Unusedtaxlossesthatarenotforfeited 210,629 286,015

261,355 346,165

NodeferredtaxliabilitieswererecognisedonrevenuereservesofsubsidiariesamountingtoEUR2,084,746k(prioryear;EUR998,541k)becausetheseearningsareintendedtobeindefinitelyreinvestedinthoseoperations.


notes to the statement of financial position

9 Intangible assets

EURk Rightsandlicenses

Goodwill Advancepayments

Cost 1 February 2009 376,900 1,163,978 725

Currencytranslation 12,190 8,620 -7

Changesintheconsolidatedgroup 1,280 0 0

Additions 7,568 43,517 863

Disposals -9,820 -206 -6

Reclassificationsnon-currentassetsheldforsale 750 0 -499

31 January 2010 388,868 1,215,909 1,076

Currencytranslation 2,910 5,406 -8

Changesintheconsolidatedgroup -130 0 827

Additions 6,538 53,351 1,397

Disposals -1,435 -625 -3

Reclassificationsdisposalgroup -1,487 -13,647 0

Reclassifications 1,533 0 -1,845

31 January 2011 396,797 1,260,394 1,444

Accumulated amortisation 1 February 2009 52,842 33,573 21

Currencytranslation 2,182 168 -1

Additions 10,038 31,888 0

Disposals -9,636 0 0

Reclassifications 59 0 0

31 January 2010 55,485 65,629 20

Currencytranslation 826 0 2

Changesintheconsolidatedgroup -497 0 0

Additions 8,743 0 4

Reversalsofimpairmentlosses -1,900 0 0

Disposals -1,845 0 0

Reclassificationsdisposalgroup -1,390 -7,174 0

Reclassifications 13 0 0

31 January 2011 59,435 58,455 26

Net carrying amount 31 January 2010 333,383 1,150,280 1,056

31 January 2011 337,362 1,201,939 1,418


Theitem“Rightsandlicenses”mainlycontainspharmacylicensesandbrandnameswithindefiniteusefullivesintheUKtotallingEUR289,158k(31January2010:EUR285,669k).Theusefullifeforsuchlicenseshasbeenassessedasindefiniteduetothefactthatsuchlicensesaregrantedforanunlim-itedtimeperiod.

Goodwill

Goodwill carrying amounts

EURk 31Jan2010 31 Jan 2011

Country Currency

Hungary HUF 78,482 82,411

Netherlands EUR 81,155 121,878

Switzerland CHF 107,748 112,021

Italy EUR 72,173 72,173

France EUR 70,602 70,438

UnitedKingdom GBP 282,637 286,726

Sweden SEK 40,639 40,639

Denmark DKK 44,797 44,797

Norway NOK 176,113 177,109

Other 195,934 193,747

Total 1,150,280 1,201,939

Impairment testing of goodwill and intangible assets with indefinite livesTheannualimpairmenttestpursuanttoIFRS36.10wasconductedin31January2011.

Theassetstobetestedcomprisegoodwillallocatedtotherespectivecash-generatingunitsaswellastrademarksandlicensesintheUK.Thetrademark‘Numark’wasacquiredin2005andispartofNumarkLtd.,UK.ThelicensesarepartofLRowland&Co.(Retail)Ltd.,Cheshire,UK,andresultfromtherighttooperateanoutletforprescriptionsalesincertainlocationsintheUK.

Impairment of goodwillImpairmentisdeterminedforgoodwillbyassessingtherecoverableamountofeachcash-generatingunit(orgroupofcash-generatingunits)towhichthegoodwillrelates.

Thecalculationsoftherecoverableamountsforthecash-generatingunitsaremostsensitivetothefollowingassumptions:

TerminalEBITDAandterminalvaluegrowthrate Perpetualcapitalexpenditure Discountrates

Thekeyassumptionsusedtodeterminetherecoverableamountforthedifferentcash-generatingunitsarefurtherexplainedinthesignificantaccountingpoliciesregardingimpairmentofnon-financialassets.


Terminal EBITDA and terminal value growth rateTheterminalEBITDAisobtainedbyincreasingtheEBITDAofthelastplanningperiodwithaterminalgrowthrateof1%.

Perpetual capital expenditurePerpetualcapitalexpenditure(cashflowfrominvestingactivities)iscomputedbasedonaratioofcapitalexpendituretorevenue(onaverage0.4%).Thisratioisderivedfromaveragehistoricaldatatakingintoaccountthespecificbusinessmodelsofthecash-generatingunit.

Discount ratesDiscountratesreflectthecurrentmarketassessmentoftherisksspecifictoeachcash-generatingunit.Thediscountratesarederivedonthebasisofthecapitalassetpricingmodel.

Thecapitalassetpricingmodelisusedtodetermineatheoreticallyappropriaterequiredrateofreturnofanassettoconsidertheasset’snon-diversifiablemarketrisk.Toderivethecostofequitythesumofrisk-freerateandacompany-specificriskpremiumiscalculated.Thecompany-specificriskpremiumisdeterminedbytheproductoftheexpectedmarketriskpremium(31January2011:5%;31January2010:5%)andabetafactor,whichmeasurestheasset’ssensitivitytomarketrisk.

Thepeergroupcomprisesofthefollowing(comparable)companies: CelesioAG UnitedDrugplc Andreae-NorisZahnAG

Thediscountratesaregenerallyadjustedtoreflectthemarketassessmentofcountry-specificrisksforwhichfutureestimatesofcashflowshavenotbeenadjusted.

Thefollowingtableshowsthepre-taxdiscountrates(weightedaveragecostofcapitalbeforetax)formaterialcash-generatingunits:

% 31Jan2010 31 Jan 2011

Discount rate (WACC before tax)

UnitedKingdom 9.79 7.24

Netherlands 9.63 7.22

France 9.39 7.06

Switzerland 9.78 7.27

Italy 10.33 7.72

Hungary 11.69 9.09

Denmark 9.79 7.22

Sweden 9.86 7.30

Norway 9.74 7.22

Other 9.70 - 15.97 7.22 - 11.57


Theimpairmenttestsresultinrecognitionofanimpairmentlossforthefollowingcash-generatingunit:

EURk 31Jan2010 31 Jan 2011

Impairment of goodwill

Netherlands 19,559 0

Bulgaria 5,155 0

Poland 7,174 0

Total 31,888 0

Therewerenoimpairmentlossesasof31January2011.

Anyimpairmentlossesareallocatedtoreducethecarryingamountsofgoodwillallocatedtotherespectivecash-generatingunit.Thereductionsincarryingamountsaretreatedasimpairmentlossesandarerecognisedinthelineitem“Depreciationofproperty,plantandequipmentandamor-tisationofintangibleassets”intheincomestatement.

Sensitivity analysisAdecreaseofthegrowthrateby0.5%wouldleadtofurtherimpairmentsinasingle-digitmillionEURamount.ThiswouldaffecttheCroatiacash-generatingunit.

Anincreaseoftheregularinvestmentamountby0.1%wouldleadtofurtherimpairmentsinasingle-digitmillionEURamount.ThiswouldaffecttheCroatiacash-generatingunit.

Anincreaseinthediscountrateby1%wouldleadtoimpairmentsinatwo-digitmillionEURamount(lessthanEUR40m).Thiswouldaffectthecash-generatingunitsItaly,CroatiaandLithuania.

Impairment of intangible assets with indefinite useful livesThetrademarks‘Numark’and‘Nucare’weretestedforimpairmentasof31January2010and2011.Thefairvalueofthetrademarksisdeterminedbasedonarelieffromroyaltyapproachusingtherecentbusinessplansasofthetestingdateandanappropriateroyaltyrate.Coststosellhavebeendeduct-edinordertoderivethefairvaluelesscoststosell.Itwasnotnecessarytorecogniseanyimpairmentlossesonthetrademarksasof31January2010and2011.

ThepharmacylicensesofLRowland&Co.(Retail)Ltd.,UK,weretestedforimpairmentasof31January2010and2011.Thefairvalueofthelicensesisdeterminedbasedonthedirectlyattributableoperat-ingprofitwithprescriptiondrugsandanEBITDAmultipleof10(prioryear:10)aswellasagrowthrateof2.5%(prioryear:2.5%).TheimpairmenttestsresultedintherecognitionofanimpairmentlossonthelicensesintheUK:EURk 31Jan2010 31 Jan 2011

Impairment of licenses

Pharmacylicenses,UnitedKingdom 1,590 421


EURk Landandbuildings

Technicalequipmentand

machinery

Otherequipmentfurnitureand

fixtures

Advancepaymentsand

constructioninprogress

Cost 1 February 2009 676,351 172,680 392,441 12,431

Currencytranslation 13,384 1,956 12,144 278

Changesintheconsolidatedgroup 63 512 789 1,527

Additions 28,676 11,824 41,523 12,770

Disposals -13,304 -2,260 -29,178 -4,197

Reclassificationsfromnon-currentassetsheldforsale -9,810 -19 -672 0

Reclassifications 3,719 3,796 984 -8,750

31 January 2010 699,079 188,489 418,031 14,059


Changesintheconsolidatedgroup 9,472 477 -1,602 -34

Additions 14,826 6,185 47,156 18,259

Disposals -6,521 -1,551 -20,133 -1,641

Reclassificationsfromnon-currentassetsheldforsale -9,243 -2,395 -2,201 0

Reclassifications 6,757 5,990 3,222 -15,659

31 January 2011 729,128 198,889 456,532 15,414

Accumulated depreciation 1 February 2009 169,303 115,933 247,599 94


Additions 27,602 13,486 40,625 0

Disposals -4,172 -2,668 -26,086 -104

Reclassificationsfromnon-currentassetsheldforsale -3,486 -5 -617 0

Reclassifications -368 4,267 -3,958 0

31 January 2010 193,385 132,480 265,967 0


ChangesinthecompositionoftheGroup 0 -41 -311 0

Additions 26,717 10,148 45,780 0

Impairmentlosses 345 0 0 0

Disposals -1,178 -1,273 -15,723 0

Reclassificationsfromnon-currentassetsheldforsale -2,662 -1,805 -1,884 0

Reclassifications 129 3,444 -3,586 0

31 January 2011 222,640 144,365 298,330 0

Net carrying amount 31 January 2010 505,694 56,009 152,064 14,059

31 January 2011 506,488 54,524 158,202 15,414

10 Property, plant and equipment


Itemsofproperty,plantandequipmentwithacarryingamountofEUR28,473k(prioryear:EUR170,251k)havebeenpledgedascollateralforliabilities.ThecollateralmainlyresultsfromchargesonlandandbuildingsinGermany(EUR24,056k).

Thecarryingamountsofproperty,plantandequipmentgenerallyapproximatetheirfairvaluesatthereportingdate.

Therearecontractualcommitmentstoacquireproperty,plantandequipmentofEUR1,262k(31January2010:EUR3,339k).

Net carrying amounts for finance leasesTheassetsheldunderfinanceleaseagreementsareasfollows:EURk 31Jan2010 31 Jan 2011

Landandlandrightsandbuildingsincludingbuildingsonthird-partyland 27,118 25,989

Technicalequipmentandmachinery 4,136 2,770

Carrying amount 31,254 28,759

AssetsheldunderfinanceleaseagreementsprimarilyrepresentbuildingsheldinItalyandFrance.

Thereconciliationofthefutureminimumleasepaymentsandtheirpresentvalueisdisclosedinthefollowingtable:

EURk 31Jan2010 31 Jan 2011

Minimumleasepayments

duewithinoneyear 3,812 12,414

dueafteroneyearbutnotmorethanfiveyears 11,768 4,610

dueinmorethanfiveyears 7,082 4,417

Interest -4,844 -613

Present value of minimum lease payments 17,818 20,828


Operating leasesPHOENIXholdsnumerousassetsunderoperatingleaseagreements.Suchagreementsprimarilyrelatetorealestate,technicalequipmentandcompanycars.Thefutureminimumleasepaymentsundernon-cancellableoperatingleasesaresummarisedbyduedatecategory: EURk 31Jan2010 31 Jan 2011




dueinmorethanfiveyears 116,946 97,358

Total minimum lease payments 335,297 362,993

TheincomefromsubletpropertiesamountstoEUR2,639k(prioryear:EUR1,831k).

EURk 31Jan2010 31 Jan 2011

Leaseexpense

Minimumleasepayments 66,888 85,995

Contingentrents 7,534 166

Subleasepaymentsreceived 664 868

Total lease expense 75,086 87,029

Leases where the Group acts as lessorPHOENIXactsaslessorinseveralcountriesofoperation.ThemostsignificantarrangementsinwhichtheGroupactsaslessorareheldbytheGermansubsidiaryTransmedTransportGmbH.Thisentityactsaslessorfortransportationvehicles.MinimumleasepaymentsallocabletoTransmedTransportGmbHamounttoEUR8,636kasof31January2011(31January2010:EUR8,384k).Furtherlessorarrange-mentsexistinFinland,theCzechRepublic,theUK,theNetherlands,andattheLuxembourgsubgroup.Theleaseagreementsexclusivelyrepresentoperatingleases.Thefutureminimumleasepaymentsareasfollows:

EURk 31Jan2010 31 Jan 2011




dueinmorethanfiveyears 702 2,068

Total minimum lease payments 13,363 17,176


11 Investments in associates

ThePHOENIXGroupholdsinvestmentsin39associates.Significantinvestmentsinassociatesareasfollows:

31Jan2010 31 Jan 2011

PHOENIXshare

%

Netcarryingamount

EURk

PHOENIx share

%

Net carrying amount

EURk

Pharmosa.s.,CzechRepublic 28 5,759 28 6,151

EdamenVolendam,Netherlands 49 3,837 49 3,837

Schermer,Netherlands 49 1,035 49 1,104

Elderveld,Netherlands 40 1,413 40 1,601

DeWitteKnoop,Netherlands 40 1,353 40 1,734

Buttercups,UK 49 1,214 49 1,299

Other 10,545 8,015

25,156 23,741

Mostoftheassociatesareaccountedforusingtheequitymethod.TheshareofthenetprofitofallassociatesattributabletotheGroupamountstoEUR1,506k(inFY2009/10:EUR1,506k).ThecarryingamountofallassociatestotalsEUR23,741k(inFY2009/10:EUR25,156k),thereofEUR23,538kresultingfromassociatesaccountedforusingtheequitymethod(FY2009/10:EUR24,956k).Intotal,associ-atesgeneratedrevenueofEUR600,575k(FY2009/10:EUR588,275k)andnetprofitofEUR4,887k(FY2009/10:EUR4,384k).ThecompaniesaccountedforusingtheequitymethodcontributedrevenueofEUR574,119k(FY2009/10:EUR568,282k)andnetprofitofEUR4,666k(FY2009/10:EUR4,177k).TotalassetsoftheassociatesamountedtoEUR256,841k(FY2009/10:EUR238,077k)andtotalliabilitiestoEUR191,677k(FY2009/10:EUR183,101k).AssetsofEUR244,447k(FY2009/10:EUR234,184k)andtotalliabilitiesofEUR172,104k(FY2009/10:EUR165,176k)areallocabletothecompaniesaccountedforusingtheequitymethod.

MostassociateshavedifferentfiscalyearsfromPHOENIX,typicallythecalendaryear.

TheunrecognisedshareoflossesofassociatesamountedtoEUR5kforthereportingperiod(FY2009/10:EUR336k);whiletheaccumulatedlossessincetheacquisitionsoftheassociatescametoEUR3,282k(FY2009/10:EUR3,282k).


12 Other financial assets

Thefollowingtablepresentsthecompositionofnon-currentotherfinancialassets:

EURk 31Jan2010 31 Jan 2011

Available-for-salefinancialassets 153,852 43,156

Loanstoandreceivablesfromassociates 13,071 11,361

Otherloans 35,360 14,160

Othernon-currentfinancialassets 2,031 1,354

204,314 70,031

Intheprioryear,financialassetsavailableforsalemainlycompriseda12.5%investmentinAndreae-NorisZahnAG,a5.81%investmentinKLHoldingGmbHanda4.33%investmentinanotherentity.Thefirsttwoentitiesweresoldinthecourseofthefiscalyear,whilethelatterwasclassifiedasnon-currentassetsheldforsale.

13 Inventories

EURk 31Jan2010 31 Jan 2011

Rawmaterialsandsupplies 11,766 7,616

Finishedgoodsandmerchandise 1,495,771 1,550,767

Paymentsonaccount 18,005 17,580

1,525,542 1,575,963

DuringthefiscalyearinventorieswerewrittendownbyEUR10,384k(FY2009/10:EUR8,426k).Im-pairmentlossesofEUR7,577k(FY2009/10:EUR3,605k)werereversedduringtheperiod,mainlyduetotheunexpectedsaleofwritten-downinventories.InventorywithacarryingamountofEUR77,839k(31January2010:EUR80,743k)wasvaluedatnetrealisablevalueasofthereportingdate.InventorieswithacarryingamountofEUR0k(31January2010:EUR500,277k)havebeenpledgedascollateralforfinancialliabilities.


14 Trade receivables and other current financial assets

EURk 31Jan2010 31 Jan 2011

Tradereceivables 2,857,738 2,596,177

Other receivables and other financial assets Held-to-maturityfinancialassets 60 60

Loanstoandreceivablesfromassociates 467,945 21,227


Derivativefinancialinstruments 587 6,720

Othercurrentfinancialassets 147,154 135,118

678,332 212,048

Asof31January2011,tradereceivablesincludereceivablessoldinthecourseoffactoringandABStransactionswhichdonotmeetthecriteriaforderecognitionsetforthinIAS39.EUR283,961kofthesereceivablesarerecognisedattheiroriginalcarryingamount(prioryear:EUR381,692k);theassociatedfinancialliabilityamountstoEUR246,575k(prioryear:EUR336,456k)andisrecordedassecuritisedloans(seeNote20).Thetotalamountofreceivablessold,whichmeetthecriteriaforderecognitioninIAS39andthusarenotshownonthestatementoffinancialposition,amountstoEUR139,346k(prioryear:EUR136,236k).ThetotalcarryingamountoftradereceivablesrecognisedtotheextentofthecontinuinginvolvementamountstoEUR338,227kwithacontinuinginvolvementofEUR15,094k(prioryear:EUR278,936kwithacontinuinginvolvementofEUR7,201k).Thecorre-spondingfinancialliabilityamountstoEUR15,984k(prioryear:EUR8,129k)andisalsorecordedassecuritisedloans(seeNote20).RetainedsecurityofEUR66,508k(prioryear:EUR45,865)undersecu-ritisationandfactoringtransactionsaresubjecttothesamerisksasunsoldreceivables,i.e.,defaultriskandriskoflatepayment.

Intheprioryear,loanstoassociatesorrelatedpartiescontainedaloantoarelatedpartyincludingaccruedinterestofEUR444,128k.TheloanincludinginterestwasrepaidtoPHOENIXinfiscal2010/11.

Othercurrentfinancialassetsincludereceivablesfrombonuses,socialsecuritypaymentsandothercurrentreceivables.

TradereceivablesandotherassetswithacarryingamountofEUR25,000k(prioryear:EUR797,521)havebeenpledgedascollateralforliabilities.


Thevaluationallowancesontradereceivablesandcustomerloans,whichareincludedinotherloans,havedevelopedasfollows:

EURk Trade receivables Other loans

Allowancesasof1February2009 62,325 6,164

Additions 27,866 1,570

Utilisation -6,663 -718

Reversal -14,722 -1,642

Currencyandotherchanges 944 -102

Allowances as of 31 January 2010 69,750 5,272

Allowancesasof1February2010 69,750 5,272

Additions 59,533 3,148

Utilisation -8,777 -1,231

Reversal -7,909 -815

Currencyandotherchanges 712 1,354

Allowances as of 31 January 2011 113,309 7,728

Theincreaseinallowancesismainlyattributabletothefactthatareceivablefromakeyaccounthadtobewrittenoffinfullinthefiscalyear2010/11.Inaddition,debtorrisksincreasedowingtochangesinconditionsprevailinginthepharmacymarket.Asof31January2011and31January2010,theageinganalysisoftradereceivablesandcustomerloansthatarepastduebutnotimpairedisasfollows:

EURk Thereof

Total carrying amount

Neitherpastduenorimpaired

Impaired Pastduebutnotimpaired

<30days

31-60days

61-90days

91-150days

151-240days

241-330days

>330days

31 Jan 2010

Tradereceivables 2,857,738 2,540,911 96,585 137,720 38,755 9,537 10,543 9,471 5,429 8,786

Otherloans 62,586 50,768 11,702 72 14 10 20 0 0 0

31 Jan 2011

Tradereceivables 2,631,323 2,242,965 195,573 115,325 26,041 9,154 12,053 11,969 6,867 11,376

Otherloans 63,359 49,647 13,658 51 3 0 0 0 0 0


Asofthereportingdate,therewerenoindicationsthatthedebtorsofthereceivablesshownas“pastduebutnotimpaired”wouldnotmeettheirpaymentobligations.Fromthetradereceivablespastdue>330daysthemainpartrelatestoCroatiawherelongtermsofpaymentarecustomary.Tradereceivablesdisclosedinthelineitemnon-currentassetsheldforsaleinthestatementoffinancialpositionareincludedintheageinganalysispresented.InsomecasesPHOENIXholdspromissorynotes,pledgedassetsofpharmacies,mortgages,landandbuildings,inventories,cashandcashequivalentsandotherpersonalguaranteesascollateralfortradereceivablesaswellasforotherloans.

15 Other assets

EURk 31Jan2010 31 Jan 2011

Prepayments 31,602 37,073

Taxclaims-VATandothertaxes 6,698 7,771

Sundryassets 44,516 27,108

Other assets 82,816 71,952

Theotherassetschieflycompriseprepayments.

16 Cash and cash equivalents

EURk 31Jan2010 31 Jan 2011

Bankbalances 293,768 562,541

Cashonhand 18,648 9,009

Cashequivalents 84,300 3,451

396,716 575,001

Themovementincashandcashequivalentsispresentedintheaccompanyingcashflowstatement.


17 Equity

Unlimited and limited partners’ capitalOn11August2010,thelimitedpartnersincreasedtheircapitalintheparentcompanybycontributionincashofEUR550,000ktoEUR1,050,000k.ApartialsumofEUR44,500kwascontributedbyfullyconsolidatedentitiesandoffsetagainstreserves.Theunlimitedpartners’capitalisstillEUR0k.

ReservesThereservesamounttoEUR653,987kasof31January2011(prioryear:EUR567,428k).

Treasury sharesIntheFY2006/07PHOENIXInternationalBeteiligungsGmbHacquiredthecompaniesOttoStumpfGmbH,Berlin,Germany,andOttoStumpfGmbH,Gotha,Germany.Thesecompaniestogetherhold8.1%ofthelimitedpartners’capitalofPHOENIXPharmahandelGmbH&CoKG.Theacquisitioncostofthetreasuryshares(EUR298,737k;prioryear:EUR298,737k)isoffsetagainstreserves.

Other comprehensive incomeOthercomprehensiveincomeincludescurrencytranslationdifferencesamountingtoEUR-82,077k(prioryear:EUR-103,261k)andchangesrelatingtothemeasurementofavailable-for-salefinancialassets(IAS39).Thechangesthathavebeenrecogniseddirectlyinequityarealsopre-sentedinthestatementofchangesintotalequity.

Non-controlling interestsThenetprofit/lossfortheperiodattributabletonon-controllinginterestscametoEUR-165k(prioryear:EUR14,336k).Inaddition,non-controllinginterestsincreasedasaresultoftheLloydsNederlandB.V.acquisition.

Capital managementTheobjectiveofcapitalmanagementatPHOENIXistoprovideasoundfinancialprofileandsecurebusinessoperations.

OwingtoPHOENIX’sbusinessmodel,capitalexpendituresarerelativelylow.Thefocusisontheirimpactontheconsolidatedstatementoffinancialpositionandtheconsolidatedincomestatement.

Thecapitalstructureismonitoredbasedontheequityratioandnetdebt.EBITDAandearningsbeforetaxesarealsoimportantKPIsforcorporatemanagementpurposes.

EURk 31Jan2010 31 Jan 2011

Equity 1,112,497 1,821,750

Totalassets 8,059,158 7,560,248

Equity ratio 13.8% 24.1%


EURk 31Jan2010 31 Jan 2011

+Financialliabilities(non-current) 238,721 1,633,905

lesssupplementarypartnercontribution -135,032 -135,032

lessderivativefinancialinstruments(non-current) -10,506 -488

+Financialliabilities(current) 3,637,817 862,921

lessderivativefinancialinstruments(current) -17,912 -5,628

lesscashandcashequivalents -396,716 -575,001

lessheld-to-maturityfinancialassets -60 -60

+SoldinthecourseoffactoringandABStransactions 407,971 462,479

lessreceivablesfromfactoring -34,359 -47,390

l0essreceivablesfromABSprograms -11,506 -19,118

Net debt 3,678,418 2,176,588

Theobjectiveoffinancialmanagementistocontinuouslyimprovethecapitalstructurebyreducingthegearingratio.Inthelongterm,weaimtofurtherstrengthentheequityratioandachievearatioofnetdebttoEBITDAofaround3.0.

UndertheloanagreementsinGermanyandItalyitwasundertakentocomplywithvariousfinancialcovenants,allofwhichwerecomfortablycompliedwithintheyearunderreview.Theseinclude,forinstance,theratioofnetdebttoEBITDAortheinterestcover.Failuretocomplywiththefinancialcovenantsposesafinancingrisktotheextentthatthelenderscoulddemandtheimmediaterepay-mentoftheloans.

TheagreementunderlyingourcorporatebondcontainsrestrictionsandobligationsforPHOENIXasissuerasarecustomaryinthemarket.Failuretocomplywiththeserestrictionsandobligationscouldresultintheamountofthebondplustheinterestaccruedfallingdue.

Compliancewiththeagreedcovenantsisstrictlymonitoredaspartofcorporateplanningandre-portedtothelendersonaquarterlybasis.


18 Pension provisions and similar obligations

Fornumerousemployees,theGroupestablishesprovisionforretirementbenefitseitherdirectlyorindirectlythroughcontributionstopensionfunds.Variousretirementbenefitsystemsareinplace,dependingonthelegal,economicandtaxframeworkineachcountry.Thesearegenerallybasedonemployees’yearsofserviceandsalarylevels.AtPHOENIX,thecompanypensionschemesincludebothdefinedcontributionplansanddefinedbenefitplans.Indefinedcontributionplans,theGrouppayscontributionstoexternalfunds.Afterpayingthecontributions,theGrouphasnofurtherbenefitobligations.Thesumofallpensionexpensesinconnectionwithdefinedcontributionplansamount-edtoEUR41,160k(prioryear:EUR44,197k).ThisamountincludesthecontributionstheGroupmadetostatutorypensioninsurancefundswhichfallunderthedefinitionofdefinedcontributionplans.Indefinedbenefitplans,theGroup’sobligationistoprovidetheagreedbenefitstocurrentandformeremployees.Thebenefitobligationsunderdefinedbenefitplansarefinancedbyprovisionsorbyfunds.

Theexpensesforretirementbenefitsrecognisedintheincomestatementcanbesummarisedasfollows:

EURk FY09/10 FY 10/11

Pension cost recognised through profit or loss

Currentservicecost -22,425 -23,651

Interestcost -21,617 -24,786

Expectedreturnonplanassets 20,091 22,423

Actuarialgainsandlossesrecognisedinthereportingperiod -2,814 -769

Pastservicecost 0 19,228

EffectofthelimitpursuanttoIAS19.58b) -3,081 -3,092

Other 491 700

-29,355 -9,947

Actualreturnonplanassets 33,707 28,508

OfthetotalexpenditureofEUR9,947k(prioryear:EUR29,355k),EUR7,584k(prioryear:EUR27,829k)isshowninpersonnelexpensesandEUR2,363k(prioryear:EUR1,526k)ininterestexpenses.Theseinterestexpensesalsocontaintheexpectedreturnonplanassets.


Thefollowingtableshowsthefinancingstatusoftheplansandthecalculationofthenetdefinedbenefitliability:

EURk 31Jan2010 31 Jan 2011

Calculation of net defined benefit liability

Presentvalueoffundedobligations -505,155 -541,392

Planassetsatfairvalue 385,231 429,437

Defined benefit obligations in excess of plan assets -119,924 -111,955

Presentvalueofnon-fundedobligations -41,651 -61,206

Pastservicecost 701 652

Unrecognisedactuarialgainsandlosses 47,451 78,459

Unrecognisedasset(limitpursuanttoIAS19.58b)) -13,622 -17,643

Exchangedifferences 1,097 0

Net defined benefit liability -125,948 -111,693

Thenetliabilitycanbebrokendownintothedefinedbenefitliabilityandthedefinedbenefitassetasfollows:

EURk 31Jan2010 31 Jan 2011

Definedbenefitassetpresentedonstatementoffinancialposition 340 282

Definedbenefitliabilitypresentedonstatementoffinancialposition -126,288 -111,975

Net defined benefit liability -125,948 -111,693

Thedevelopmentofthedefinedbenefitobligationisasfollows:

EURk 31Jan2010 31 Jan 2011

Defined benefit obligation as of 1 February 493,603 546,806

Currentservicecost 22,425 23,651

Interestcost 21,617 24,786

Employeecontributions 3,868 3,047

Actuarialgainsandlosses 4,409 33,341

Benefitspaid -25,363 -24,434

Pastservicecost 863 -19,228

Businesscombinations 2,820 0

Plancurtailmentsandsettlements -523 -1,778

Other -971 -2,726

Exchangedifferences 24,057 19,133

Defined benefit obligation as of 31 January 546,806 602,598


Changesinthefairvalueofplanassetsareasfollows:

EURk 31Jan2010 31 Jan 2011

Fair value of plan assets as of 1 February 334,407 385,231

Expectedreturnonplanassets 20,091 22,423

Actuarialgainsandlosses 13,616 6,085

Employercontributions 17,146 21,398

Employeecontributions 4,608 2,774

Benefitspaid -19,136 -21,372

Exchangedifferences 14,787 11,951

Other -288 947

Fair value of plan assets as of 31 January 385,231 429,437

Thefunds’assetsoriginateprimarilyfromNorway(49.0%;year:48.2%),theNetherlands(35.2%;prioryear:36.6%),Switzerland(10.0%;prioryear:9.3%)andtheUK(5.5%;prioryear:5.5%).

TheGroupexpectstocontributeEUR25,856ktoitsdefinedbenefitpensionplansinFY2011/12.

Theassetsinthefundscanbedividedintothefollowingcategoriesonapercentagebasis:

% 31Jan2010 31 Jan 2011

Equityinstruments 24.8 25.0

Debtinstruments 63.1 58.2

Property 1.8 5.2

Other 10.3 11.6

100.0 100.0

Theoverallexpectedrateofreturnonassetsisdeterminedusingauniformmethodbasedonlong-termactualhistoricalyields,theportfoliostructureandthefutureyieldsexpectedinthelongterm.


TheprincipalassumptionsusedindeterminingpensionobligationsfortheGroup’splansareshownbelow:

% FY09/10 FY 10/11

Discount rate

NOK 4.5 4.0

GBP 5.6 5.6

EUR

thereofGermany 5.5 5.1

thereofNetherlands 5.0 5.2

thereofFinland 5.0 4.1

thereofItaly 4.5 4.5

thereofFrance 4.0 - 4.8 4.5

thereofAustria 4.0 5.0

SEK 3.5 3.8

CHF 3.3 2.5

Expected return on plan assets

NOK 6.0 5.4

GBP 7.0 7.0

EUR

thereoftheNetherlands 5.7 5.7

thereofFinland 4.0 4.5

thereofFrance 4.0 0.0

CHF 4.0 3.25

Futuresalaryincreases 2.7 2.7

Futurepensionincreases 1.1 1.9

Thedevelopmentofthepensionobligationsandthefunds’assetsforpriorperiodsisasfollows:

EURk FY07/08 FY08/09 FY09/10 FY 10/11

Definedbenefitobligation -480,939 -493,603 -546,806 -602,598

Planassets 369,782 334,407 385,231 429,437

(Deficit)/surplus -111,157 -159,196 -161,575 -173,161

Experienceadjustmentsonplanliabilities 1,425 174 298 4,996

Experienceadjustmentsonplanassets -4,062 -30,695 3 6,987


19 Other provisions

EURk Restructuring Personnel Other Total

1 February 2009 388 16,656 7,150 24,194

Changesintheconsolidatedgroup 0 0 769 769

Currencytranslation 1 23 52 76

Addition 3,637 3,695 24,925 32,257

Utilisation -389 -2,821 -1,154 -4,364

Reversal 0 -2,861 -1,016 -3,877

31 January 2010 3,637 14,692 30,726 49,055

Changesintheconsolidatedgroup 0 0 -15 -15

Currencytranslation 0 121 26 147

Addition 0 4,079 3,627 7,706

Utilisation 0 -2,869 -15,480 -18,349

Reversal -194 -483 -5,528 -6,205

Interestrate 0 477 0 477

31 January 2011 3,443 16,017 13,356 32,816

TherestructuringprovisionrelatestothereorganisationattheFrenchsubgroup.Outflowsareexpectedforthenextfiscalyear.

Personnel-relatedotherprovisionsmainlyrepresentlongserviceandseveranceprovisions.Theexpectedoutflowiswithinthenextyear(s)anddependsonoccurrenceoftheevent.Reimburse-mentsarenotexpected.

OtherprovisionsmainlyincludeaprovisionforvalueaddedtaxesofEUR7,852k(prioryear:EUR26,104k)andlitigationprovisionsofEUR3,802k(prioryear:EUR1,314k).Theoutflowoflitigationprovisionsisexpectedwithinthenextyeardependingontheoccurrenceofeventsortheendofcourtproceedings.Reimbursementsarenotexpected.


20 Financial liabilities

Atthereportingdatefinancialliabilitiesweresplitbetweennon-currentandcurrentliabilitiesasfollows:

EURk 31Jan2010 31 Jan 2011

Financial liabilities (non-current)Liabilitiestobanks 74,773 1,007,917

Bonds 0 487,793

Loans 1,115 623

Supplementarypartnercontribution 135,032 135,032

Otherfinancialliabilities 27,801 2,540

238,721 1,633,905

EURk 31Jan2010 31 Jan 2011

Financial liabilities (current) Liabilitiestobanks 2,774,430 289,729

Bonds 177,089 0

Loans 167,551 167,464

Liabilitiestoassociatesandrelatedparties 41,560 46,010

Liabilitiesandprovisionsforcustomerrebatesandbonuses 29,348 28,505

ABSandfactoringliabilities 344,585 262,559

Otherfinancialliabilities 103,254 68,654

3,637,817 862,921

On13July2010,PHOENIXPIBFinanceB.V.issuedabondwithanominalvolumeofEUR506.15mandanominalinterestrateof9.625%.Thebondhasatermoffouryears.

Onceallprerequisiteshadbeenmet,themeasurestorefinancePHOENIXweresuccessfullyimple-mentedinfullby11August2010.Thestandstillagreementwiththeformerlendersandthetrustagreementwereendedaccordingly.

Inthecourseofrefinancing,PHOENIXconcludedasyndicatedloanagreementwithatermof3.5years.Thelong-termtrancheofthisloanagreementwithanominalvolumeofEUR1,225mispresentedundernon-currentliabilitiestobanks.Attheendoffiscal2010/11,apartialamountofEUR200mwasrepaidprematurely.Inaddition,PHOENIXhasaccesstoashort-termcreditlineofEUR625m,whichhadnotbeendrawnasof31January2011.TheComifarGroupinItalyalsoconcludedarefinancingarrangementforatotalvolumeofEUR750minJuly2010,ofwhichEUR308.4mhadbeendrawnasof31January2011.Thisisreportedundercurrentliabilitiestobanks.


Sharesinsignificantgroupentitieshavebeenpledgedascollateral.

Thecurrentliabilitiestobanksandshort-termbondsexistingasof31January2010andsubjecttothestandstillagreementwererepaidaspartoftherefinancingmeasuresinAugust2010.

ThedecreaseinABS/factoringliabilitiesismainlyaffectedbymoreABS/factoringprogrammesbeingclassifiedasoff-balance-sheettransactionscomparedtoprioryear.Liabilitiesfromfactoringtrans-actionsdeclinedfromEUR91,115ktoEUR85,240kandliabilitiesfromasset-backed-securitiestrans-actionstoEUR177,319k(prioryear:EUR253,470k).PleasealsorefertoNote14.

Otherfinancialliabilities(non-current)includethefinanceleaseliabilityofEUR1,325k(prioryear:EUR7,245k).Alsolong-termderivativefinancialinstrumentsamountingtoEUR488k(prioryear:EUR10,506k)areincluded.

Otherfinancialliabilities(current)mainlyincludetheshort-termfinancialleaseliabilitiesamountingtoEUR19,503k(prioryear:EUR17,083k)andshort-termderivativefinancialinstrumentsamountingtoEUR5,628k(prioryear:EUR17,912k).

21 Trade payables

Tradepayablesarenon-interestbearingandarenormallysettledonusualbusinessterms.

22 Other liabilities

EURk 31Jan2010 31 Jan 2011

VATandothertaxliabilities 53,983 65,627

Wagesandsalaries 57,200 62,552

Personnel-relatedprovisions 44,797 46,686

Liabilitiesrelatingtosocialsecurity/similarcharges 15,326 15,927

Paymentsonaccountreceived 4,065 4,853

Otherliabilities 73,165 55,909

Other liabilities 248,536 251,554

Otherliabilitiesmainlyincludeoutstandinginvoicesforrentalcostsandenergy.


23 Non-current assets held for sale

Non-currentassetsofEUR104,903k(prioryear:EUR12,128k)andliabilitiesofEUR52,234k(prioryear:EUR0k)areclassifiedasheldforsale.TheystemfromcompaniesinPoland,Germany,Croatia,Nether-lands,France,theCzechRepublicandSlovakia.

TheincreasemainlyresultsfromtheclassificationofassetsandliabilitiesofPHOENIXPharmaPolskaasheldforsaleinconnectionwithadecisionmadebymanagementinNovember2010tosellPHOENIXPharmaPolska.Thesaleisexpectedtobeconcludedinthecourseoffiscal2011/12.

Themajorclassesofassetsandliabilitiesclassifiedasheldforsaleasof31January2011areasfollows:

EURk

Non-currentassets 33,645

Currentassets 71,258

Non-currentliabilities 59

Currentliabilities 52,175

ExchangedifferencesofEUR-1,944karerecordeddirectlyinequity;theserelatetoassetsclassifiedasheldforsale.

Theaccumulatednetprofitresultingfromthechangeinfairvaluerelatingtoinvestmentsclassifiedasheldforsaleandrecognisedinothercomprehensiveincomeasof31January2011cametoEUR4,603k.

other notes

Commitments

CommitmentsamounttoEUR474,170k(31January2010:EUR473,142k)andgenerallyconcernrentandleaseagreements.Theamountsaredueasfollows:

EURk 31Jan2010 31 Jan 2011

Within1year 137,875 161,915

1-5years 196,412 194,566

Morethan5years 138,855 116,156

473,142 472,637


Contingent liabilities

EURk 31Jan2010 31 Jan 2011

Guarantees 134,416 115,805

Obligationsinrespectofbillsofexchange 2,173 0

Liabilitiesfromwarrantyagreements 150 0

136,739 115,805

Guaranteesarepotentialfutureobligationstothirdparties,theexistenceofwhichdependsontheoccurrenceofatleastoneuncertainfutureeventoutsidethecontrolofthePHOENIXGroup.TheguaranteesmainlyrelatetoretailcustomersandsuppliersandwereprimarilyissuedbysubsidiariesofthesubgroupsintheUKandAustria.Theguaranteesincludeobligationsforwhichtheprobabilityofoutflowisremote.

Additional disclosure on financial instruments

Theitemsinthestatementoffinancialpositionforfinancialinstrumentsareassignedtoclassesandcategories.Thecarryingamountsforeachcategoryandclassandthefairvaluesforeachclassarepre-sentedinthefollowingtableforFY2010/11:

EURk CategoryinaccordancewithIAS39

Fiscal year 2010/11 Loansandreceivables

Available-for-sale

financialassets

Held-to-maturityfinancial

assets

Financialassetsheldfortrading

Outsidethescope

ofIFRS7

Carryingamount

Fair value

AssetsBondsandothersecurities(held-to-maturity) 0 0 60 0 0 60 60

Available-for-salefinancialassets 0 43,156 0 0 0 43,156 43,156

Tradereceivables 2,596,177 0 0 0 0 2,596,177 2,596,177

Loanstoandreceivablesfromassociates 32,588 0 0 0 0 32,588 32,588

Otherloans 62,423 0 0 0 660 63,083 62,953

Derivativefinancialassetswithouthedgeaccounting 0 0 0 6,720 0 6,720 6,720

Otherfinancialassets 136,182 245 0 0 45 136,472 136,472

Cashandcashequivalents 575,001 0 0 0 0 575,001 575,001

Non-currentassetsheldforsale 40,661 7,806 0 0 56,436 104,903 104,903


ThecarryingamountsforeachcategoryandclassandthefairvaluesforeachclassarepresentedinthefollowingtableforFY2009/10:

Duetotheshort-termmaturitiesofcashandcashequivalents,tradereceivablesandothercurrentfinancialassetstheircarryingamountsgenerallyapproximatethefairvaluesatthereportingdate.

Thefairvalueofloanstoandreceivablesfromassociatesorrelatedcompanies,otherloansandreceivablesfromassociatesorrelatedcompanies,held-to-maturityfinancialassetsandothernon-currentfinancialassetsdueaftermorethanoneyearcorrespondtothenetpresentvalueofthepaymentsrelatedtotheassetsbasedonthecurrentinterestrateparametersandcurves.

Thefairvaluesofavailable-for-salefinancialassetsarederivedfromquotedmarketpricesinactivemarkets,ifavailable.Ifquotedmarketpricesinanactivemarketdonotexist,thefairvalueisdeter-minedusingvaluationmodelswhicharebasedongenerallyacceptedvaluationprinciples.Thelinealsoincludesinvestmentsinequitysecuritiesforwhichnolistedpriceonanactivemarketexistsandwhosefairvaluescannotbereliablydetermined.Theseassetsaremeasuredatcost.

Derivativefinancialinstruments,bothheld-for-tradingandhedginginstrumentsaremeasuredatfairvalue.Thefairvalueoffinancialinstrumentsthatareactivelytradedinorganisedfinancialmarketsisdeterminedbyreferencetoquotedmarketprices.Forfinancialinstrumentswherethereisnoactivemarket,fairvalueisdeterminedusingvaluationtechniques.Fortheseitems,thefairvaluesalwayscorrespondtothecarryingamount.


Fiscal year 2009/10 Loansandreceivables

Available-for-sale

financialassets

Held-to-maturityfinancial

assets

Financialassetsheldfortrading

Outsidethescope

ofIFRS7

Carryingamount

Fair value

AssetsBondsandothersecuritiesheld-to-maturity 0 0 60 0 0 60 60

Available-for-salefinancialassets 0 153,852 0 0 0 153,852 153,852

Tradereceivables 2,857,738 0 0 0 0 2,857,738 2,857,738

Loanstoandreceivablesfromassociatesorrelatedparties 481,016 0 0 0 0 481,016 481,016

Otherloans 97,946 0 0 0 0 97,946 98,064

Derivativefinancialassetswithouthedgeaccounting 0 0 0 587 0 587 587

Otherfinancialassets 147,903 1,282 0 0 0 149,185 149,185

Cashandcashequivalents 396,716 0 0 0 0 396,716 396,716


ThecarryingamountsforeachcategoryandclassoffinancialliabilitiesandthefairvaluesforeachclassarepresentedinthefollowingtableforFY2010/11:


Fiscal year 2010/11 Otherfinancialliabilities

Financialliabilitiesheld-for-

trading

Fairvalueoption

Nocategoryaccordingto

IAS39.9

Outsidethescope

ofIFRS7

Carryingamount

Fair value

Financial liabilities Liabilitiestobanks 1,297,646 0 0 0 0 1,297,646 1,341,225

Bonds 487,793 0 0 0 0 487,793 560,088

Loans 168,087 0 0 0 0 168,087 168,087

Tradepayables 2,576,711 0 0 0 0 2,576,711 2,576,711

Liabilitiestoassociatesandrelatedparties 46,010 0 0 0 0 46,010 46,010

Supplementarycontributions 135,032 0 0 0 0 135,032 135,032

Liabilitiesandprovisionsforcustomerrebatesandbonuses 28,505 0 0 0 0 28,505 28,505

ABSandfactoringliabilities 262,559 0 0 0 0 262,559 262,559

Otherfinancialliabilities 44,249 0 0 20,829 0 65,078 65,078

Derivativefinancialliabilitieswithouthedgeaccounting 0 6,116 0 0 0 6,116 6,116

Liabilitiesdirectlyassociatedwithassetsclassifiedasheldforsale 45,806 0 0 0 6,428 52,234 52,234


ThecarryingamountsforeachcategoryandclassoffinancialliabilitiesandthefairvaluesforeachclassarepresentedinthefollowingtableforFY2009/10:

Duetotheshort-termmaturitiesoftradepayablesandothercurrentfinancialliabilitiestheircarryingamountsgenerallyapproximatethefairvaluesatthereportingdate.

Fair value hierarchy of financial instruments PHOENIXappliesthefollowingfairvaluehierarchytodefineandpresentitsfinancialinstrumentsmeasuredatfairvalue:

Level1:Quoted(unadjusted)pricesinactivemarketsforidenticalassetsorliabilities.

Level2:Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(i.e.,asprices)orindirectly(i.e.,derivedfromprices).

Level3:Valuationtechniquesinwhichalltherelevantinputsarenotbasedinobservablemarketdata.


Fiscal year 2009/10 Otherfinancialliabilities

Financialliabilitiesheld-for-

trading

Fairvalueoption

Nocategoryaccordingto

IAS39.9

Outsidethescopeof

IFRS7

Carryingamount

Fair value

Financial liabilities Liabilitiestobanks 2.849.203 0 0 0 0 2.849.203 2.849.203

Bonds 177.089 0 0 0 0 177.089 177.089

Loans 168.666 0 0 0 0 168.666 168.666

Tradepayables 2.461.916 0 0 0 0 2.461.916 2.461.916

Liabilitiestoassociatesandrelatedparties 41.560 0 0 0 0 41.560 41.560

Supplementarycontributions 135.032 0 0 0 0 135.032 135.032

Liabilitiesandprovisionsforcustomerrebatesandbonuses 29.348 0 0 0 0 29.348 29.348

ABSandfactoringliabilities 344.585 0 0 0 0 344.585 344.585

Otherfinancialliabilities 78.309 0 0 24.328 0 102.637 102.637

Derivativefinancialliabilitieswithouthedgeaccounting 0 28.418 0 0 0 28.418 28.418


EURk Financialinstrumentsmeasuredatfairvalue

Fiscal year 2010/11 Level1 Level2 Level3 Total

Available-for-salefinancialassets 211 0 30,965 31,176

Derivativefinancialassetswithouthedgeaccounting 0 6,720 0 6,720

Derivativefinancialliabilitieswithouthedgeaccounting 0 6,116 0 6,116

Non-currentassetsclassifiedasheldforsale 7,806 0 0 7,806

EURk Financialinstrumentsmeasuredatfairvalue

Fiscal year 2009/10 Level1 Level2 Level3 Total

Available-for-salefinancialassets 44,035 0 80,555 124,590

Derivativefinancialassetswithouthedgeaccounting 0 587 0 587

Derivativefinancialliabilitieswithouthedgeaccounting 0 28,418 0 28,418

Thefairvalueforavailable-for-saleassetsmeasuredatcostofEUR11,980k(prioryear:EUR29,262k)hasnotbeendisclosedbecausethefairvaluecannotbemeasuredreliably.Thereasonisthatthenecessarymarketparameterscannotbeevaluatedreliablyandnoactivemarketexists.

Thefollowingtableshowsthereconciliationofthefairvaluebasedonlevel3.

EURk Fiscal year 2010/11

Available-for-salefinancialassets

1 February 2009 65,325

Totaloftheaccumulatedgainsandlossespreviouslycarriedinothercomprehensiveincome 15,230

31 January 2010 80,555

Totaloftheaccumulatedgainsandlossespreviouslycarriedinothercomprehensiveincome 8,473

Acquisition 405

Saleofshares -58,468

thereofrecognisedintheincomestatement 17,062

31 January 2011 30,965


Net gains or losses on each category of financial instruments

EURk FY09/10 FY 10/11

Loansandreceivables -13,238 -67,867

Available-for-salefinancialassets 35,771 55,467

thereofrecogniseddirectlyinequity 31,933 5,745

thereofrecognisedinincome 3,838 49,722

Financialliabilitiesatamortisedcost 14,949 -24,584

Financialassetsheldfortrading -13,881 17,447

23,601 -19,537

Thepresentationofnetgainsorlossesdoesnotincludeinterestincomeandexpensesontherespectivefinancialinstruments.

Netgainsofavailable-for-salefinancialassetsaremainlyattributabletothechangesinthefairvalueoftheinvestmentsinKLHoldingGmbHandAndreae-NorisZahnAG.EUR27,741kwasreclassifiedfromequitytotheotherfinancialresultinthefiscalyear(prioryear:EUR0k).

Interestfromfinancialinstrumentsisrecognisedininterestincomeandexpenses.Foreignexchangeeffectsandfairvaluechangesofderivativesarerecognisedinotherfinancialresultfromderivatives.Impairmentlossesoftheperiod:

EURk FY09/10 FY 10/11

Tradereceivables 26,584 61,524

Loanstoandreceivablesfromassociates 245 41


Otherfinancialassets 490 62

30,129 70,795

Thefollowingtablecontainsnominalandmarketvaluesofthederivativefinancialinstruments:

EURk 31Jan2010 31 Jan 2011

Nominalamount

Marketvalue

Nominalamount

Marketvalue

Assets Derivativesheldfortrading

Foreigncurrencycontracts 180,206 587 410,864 6,721

Interestrateswaps 17,051 0 0 0

Liabilities Derivativesheldfortrading

Foreigncurrencycontracts 247,570 1,387 472,848 5,628

Interestrateswaps 255,316 27,032 2,477 488


Intheprioryear,currencyandinterestrateriskswerehedged,includingthroughaUSDprivateplace-mentusingcross-currencyswaps.Infiscal2010/11,boththeUSDprivateplacementandthecross-currencyswapwererepaidearlyaspartoftherefinancingprogramme.

Financial risk management and derivative financial instruments

Objectives and principles of the financial risk management

Duetoitsmultinationalbusinessactivities,PHOENIXisexposedtofinancialrisks.Inparticularthisincludesmarketrisk(changesinforeignexchangerates,interestrates)andcreditrisk.Inaddition,liquidityrisksmayariseduetotheoperatingbusiness,duetothefinancialrisksnamedaboveandbecauseofunexpectedfluctuationsinthefinancialmarkets.

TheserisksaremonitoredbytheriskmanagementsystemwithinthePHOENIXGroupwhichconsistsoffullydocumentedandcomprehensiveplanning,approvalandreportingstructuresandanearlywarningsystem.Grouptreasuryisresponsibleforimplementingthebindinginternalguidelinesandrequirements,approvedbythemanagementboardspecifyinghowfinancialrisksaretobecontrolled,andforongoingriskmanagement.Thegrouptreasuryinformsthemanagementboardonanon-goingbasisaboutthecurrentriskexposureandthemarketdevelopmentontheglobalfinancialmarkets.Theinternalauditexaminesthissystemregularlyforadequacy,operabilityandefficiency.Findingsoftheseexaminationsarereportedtothemanagementoftheparentcompany.

DerivativesareusedbyPHOENIXinspecificcasestohedgeagainstinterestrateandcurrencyrisks.Onlyselectedbankswithhighcreditratingsareacceptedcounterpartiesforourderivativecontracts.Theiruseandvaluationiscloselymonitoredonatimelybasis.Althoughthederivativesarecontractedforhedgingpurposes,theyareclassifiedasheld-for-tradingunderIAS39.

Onlyasmallnumberofpersonsisauthorisedtotradewithderivatives.Thetrading,backofficeandreportingfunctionsareseparateandindependentfromeachother.Thiscontrolisemployedstrictlyaccordingtobindinginternalguidelinesthatutiliseatwo-personprinciple.Theconclusionordis-posalofderivativesisonlyallowedinaccordancewiththeinternaltreasuryguidelinesofPHOENIX.Undertherefinancingprogramme,PHOENIXhasundertakentocomplywithcovenants.Thesewerecompliedwithinthefiscalyear2010/11.

Market risk

Currency riskCurrencyriskarisesthroughfluctuationsoftheexchangerateofforeigncurrenciesandtheirimpactontheitemsofthestatementoffinancialpositionwhicharenotdenominatedinthefunctionalcurrency.ThecurrencyrisksforPHOENIXoriginateprimarilyfrominternalrefinancingactivitiesandinvestmentsinforeignentities.Asthegroupcompanieslargelysettletheiroperatingbusinessintheirrespectivefunctionalcurrency,theoperative(transactional)currencyrisksaresmall.


Currencyrisksariseinthecourseofintragroupfinancingwheneverloansareextendedtogroupentitiesincurrenciesotherthantheeuro.Thesecurrencyrisksarehedgedbyconcludingforwardexchangecontractswithbanks.

Inthecalculationofthecurrencyexposureforthesensitivityanalysisthoseitemsofthestatementoffinancialpositionwereconsideredwhicharenotinthefunctionalcurrencyoftherespectivereportingcompany.ThoseitemsofthestatementoffinancialpositionhavebeenaccumulatedforthewholeGroup.Alsotheinternalloanswhicharenotinthefunctionalcurrencyofthereportingunithavebeenconsideredandtheamountsaggregated.Afterthat,thecurrencyeffectsfora10%increase(decrease)oftheEURagainsttherespectivecurrencyhavebeenmeasured.Inthenextstep,themarketvaluechangesofderivativefinancialinstruments(currencyswaptransactionsandforwards),whichwereenteredtohedgetheseexposures,werecalculatedundertheassumptionofa10%increase(decrease)ofthespotexchangeratesasoftheclosingdate.

Finally,thehypotheticaleffectonprofitofthesensitivityanalysiswascalculatedbynettingtheeffectsoftheassumed10%increase(decrease)inthevalueoftheEURagainstallothercurrenciesper31January2011forboththeunderlyingandderivativefinancialinstruments.Thematerialresultsofthesensitivityanalysisareasfollows:

IftheSEKdepreciates(appreciates)by10%againsttheEURothercomprehensiveincomewouldbeEUR12,265klower(higher).Thiseffectresultedfromaninternallyissuedhybridloan.

IftheGBPdepreciates(appreciates)by10%againsttheEURprofitbeforetaxeswouldbeEUR55k(prioryear:EUR3,522k)higher(lower).Thisisprimarilyduetointernalloansasdescribedabove.

IftheEURdepreciates(appreciates)by10%againsttheRSDprofitbeforetaxeswouldbeEUR5,323k(prioryear:EUR2,581k)higher(lower).Thisisprimarilyduetotradepayablesandinternalloansreceivedfromfinancingentities.

IftheEURdepreciates(appreciates)by10%againsttheHRKprofitbeforetaxeswouldbeEUR4,555k(prioryear:EUR4,142k)higher(lower).Thisisprimarilyduetotradepayables.

Interest rate riskInterestraterisksexistasaresultofpotentialchangesinthemarketinterestrateandmayleadtoachangeinfairvalueinthecaseoffixedinterest-bearingfinancialinstrumentsandtofluctuationsininterestpaymentsinthecaseofvariableinterest-bearingfinancialinstruments.PHOENIXgenerallydoesnothedgethevariableinterest-bearingfinancialinstruments.

HavingcompletedtherefinancingprogrammePHOENIXnolongerhadtheitemsithadhedgedinthepast;therelatedinterestrateswapswereterminated.Theinterestoptionforwhichaninterestratecapwasagreedtohedgeagainstinterestraterisks,particularlytheriskofincreasingreferenceinterestrates,expiredinthefiscalyear.Thereisonlyacross-currencyswapinplace,whichservestohedgeaninternalloan.Asofthereportingdate,thenominalvolumeamountstoEUR2,477k;itdecreasesproportionatelyastheloanisrepaid.


Forfinancialinstrumentswithfixedinterestthataremeasuredatamortisedcost,changesinmarketinterestrateshavenoimpactontheearningsandequity.Withregardtovariableinterest-bearingfinancialinstruments,changesinmarketriskratesimpacttheearningsandarethusconsideredinthesensitivityanalysis.

Theinterestsensitivityanalysispresentedbelowshowsthehypotheticaleffectswhichachangeinthemarketinterestrateatthereportingdatewouldhavehadonthepre-taxresult.Itassumesthattheexposureatthereportingdateisrepresentativeoftheyearasawhole.

Thefixed-interestperiodunderPHOENIX’sfinancialdebtisprimarilyofashort-termnature.There-fore,apositive(negative)parallelshiftoftheEURmarketinterestratecurveby100basispointsasofthereportingdatewouldleadtoanegative(positive)impactofEUR12,245k(prioryear:EUR23,107k)ontheprofitbeforetax.

Apositive(negative)parallelshiftof100basispointsfortheEURinterestratecurves,assumingotherinterestratecurvesandexchangeratesremainconstant,wouldnothaveanymaterialeffectsontheinterestderivativesandforeignexchangederivativesintheportfolioasofthereportingdate.

Thesemeasurementeffectswouldhavehadadirecteffectonprofitbeforetaxinthecorrespondingamount.

Other price risksAsof31January2011,aninvestmentinpublicallylistedentitywasdisclosedasheldforsale.A10%increase(decrease)inthesharepriceofthisentitywouldhaveledtoaEUR781kincrease(decrease)inothercomprehensiveincome.Intheprioryear,a10%increase(decrease)inthesharepricewouldhaveraised(reduced)othercomprehensiveincomebyEUR586k.

Credit risk

FromtheGroup’sperspective,creditriskdescribestheriskthatapartytoafinancialinstrumentwillfailtomeetitscontractualobligationsandthuscauseafinanciallossfortheGroup.Creditriskcomprisesboththedirectdefaultriskandtheriskthatthecreditworthinessofthecounterpartywilldeteriorate,aswellastheconcentrationofrisks.TheGroupisexposedtocreditriskfromitsoperat-ingactivities,fromcertainfinancialtransactionsandfromthegrantingoffinancialguaranteesforbankloansforpharmacycustomers,mainlyinAustriaandtheUK.

Themaximumexposureoffinancialassetstocreditriskisequaltothecarryingamountofeachclassoffinancialassets.


Thelevelofcreditriskfromoperatingactivitiesismonitoredandkeptincheckbyanaccountsre-ceivablemanagementsystem.Duetothestructureofourcustomers,theriskofdefaultisassessedtoberatherlowintheGroup.Thisisbecauseourcustomers,thepharmacies,generallyhaveagoodcreditrating.Despitesomebiggercustomers,ourcustomerbasisiswidelydiversifiedwithsmallamountsofreceivablesallocabletoeachindividual.InthecourseofliberalisationofthepharmacymarketsinEurope,however,pharmacychainsandnewsaleschannelsareincreasinglyemerging,creatingalargenumberofmajorcustomerswithahigherlevelofreceivablesoutstanding.Inaddi-tion,theGroupholdsinsomecasespromissorynotesfromcustomers,pledgedassetsofpharmacies,mortgagesandotherpersonalguaranteesascollateralforloanstopharmacies.

AsPHOENIXonlyentersintoderivativeswithbankswithahighrating,thereisnoriskofpossibledefaultsofanyderivativeswithapositivemarketvalue.Also,asPHOENIXspreadsthederivativecontractsoverawiderangeofbanks,thereisnoconcentrationofrisksofdefaultwithasinglebank.Additionally,PHOENIXmonitorsverycloselythefinancialnewsandmarketsandhasthereforeanearlywarningsystemofpossibledifficultiesofabank.

Liquidity risks

Liquidityriskdescribestheriskthatacompanycannotfulfilitsfinancialobligationswhentheybecomedue.TomonitortheGroup’sliquidity,PHOENIXhasimplementedadailyrollingliquidityplanningsystem.Additionally,thereareregulartelephoneconferencestodiscussspecialliquidityissuesanddevelopments.SubsidiariesareintegratedintheGroup’scentralfinancingsystem.

Thefollowingtableshowsthecontractuallyagreedundiscountedinterestpaymentsandrepaymentsofnon-derivativefinancialliabilitiesandderivativefinancialassetsandliabilitiesasof31January2011.

Thetablepresentedincludesfinancialliabilitiesundertheliabilitiesitemofthestatementoffinancialpositioninconjunctionwithassetsheldforsale.

EURk Cashflows2011/12

Cashflows2012/13

Cashflows2013/14-2015/16

Cashflows2016/17-2020/21

Cashflows>2021/22

Liabilitiestobanks 386,427 53,766 1,103,022 565 56

Bonds 48,717 48,717 579,226 0 0

Loans 172,697 0 0 0 0

Tradepayables 2,622,109 0 0 0 0

Liabilitiestoassociatesandrelatedparties/supplementarycontribution 47,965 8,102 151,237 0 0

Liabilitiesandprovisionsforcustomerrebatesandbonuses 28,505 0 0 0 0

ABSandfactoringliabilities 265,718 0 0 0 0

Otherfinancialliabilities 51,718 0 0 0 0

Financeleaseliabilities 11,582 1,947 3,384 4,637 0

Financialguaranteecontracts 106,297 0 0 0 0

Derivativefinancialinstrumentswithouthedgeaccounting 5,628 488 0 0 0


Thecontractuallyagreedundiscountedpaymentsat31January2010arepresentedinthefollowingtable:

Forliquidityanalysistheitems“payablestoassociatesorrelatedcompanies”,“liabilityandprovisionsforcustomerrebatesorbonuses”and“ABS/factoringliabilities”wereincludedin“otherliabilities”intheprioryear.Inaddition,the“supplementarycontribution”itemisincludedinthe“loans”item.

Liabilitieswithearlyterminationrightshavebeenclassifiedaccordingtofirstcalldate.Forfloatingrateinterestpayments,thecurrentfloatinginterestrateistakenasabasis.Paymentsinforeigncurrencyaretranslatedusingtheexchangerateatyearend.

Notes to the statement of cash flows

CashandcashequivalentsamountedtoEUR578,713kattheendofthereportingperiod(prioryear:EUR396,716k)andcomprisedcashofEUR571,550k(prioryear:EUR312,416k)aswellascashequivalentsofEUR3,451k(prioryear:EUR84,300k).RestrictedcashattheendoftheperiodamountstoEUR36,138k(prioryear:EUR34,888k)andcorrespondstosecuritydepositsforrevolvingcreditlines(e.g.,ABSandfactoring).Inaddition,bankbalancesofEUR150,109k(prioryear:EUR0k)werepledgedascollateralunderthesyndicatedfacilitiesagreement.CashandcashequivalentsofEUR4,682k(prioryear:EUR158,428k)attheendoftheperiodarerestrictedtoownershipoftheforeignsubsidiaries,sincelocalcovenantsorotheragreementsdonotallowthesubgroupstotransferthoseamountsdirectlyorindirectlyviaothersubsidiariestotheparentcompany.

Inaddition,cashandcashequivalentsofEUR130,422kheldbyaforeignsubsidiaryattheendoftheprioryearweresubjecttoageneralrestriction.

Asofyear-end2010/11,apartialamountofEUR3,712k(prioryear:EUR0k)ofthecashandcashequiv-alentswasallocatedtoadisposalgroupanddisclosedundernon-currentassetsheldforsale.PaymentsmadeforacquisitionsofconsolidatedcompaniesandbusinessunitsofEUR16,693k(prioryear:EUR73,022k)correspondwiththepaymentsofthepurchasepricelessanycashandcashequiv-alentsacquiredofEUR5,953k(prioryear:EUR3,899k).CashreceivedfromthesaleofconsolidatedcompaniesandbusinessunitscorrespondstothegainsonsalereceivedofEUR11,234k(prioryear:EUR10,654k)lesscashandcashequivalentsdisposedofEUR65k(prioryear:EUR0k).

EURk Cashflows2010/11

Cashflows2011/12

Cashflows2012/13-2014/15

Cashflows2015/16-2019/20

Cashflows>2020/21

Liabilitiestobanks 2,849,642 28,855 28,391 17,429 673

Bonds 198,558 0 0 0 0

Loans 187,994 8,403 159,498 0 0

Tradepayables 2,473,609 0 0 0 0

Otherliabilities 524,830 16,200 243 465 517

Derivativefinancialinstrumentswithouthedgeaccounting 16,991 11,616 4,649 174 0


Related party disclosures

General

PursuanttoIAS24,personsorentitieswhichhavecontrolovertheGrouphavetobedisclosed.MembersoftheMercklefamilyandentitiescontrolledbythemareconsideredasrelatedparties.

Financing transactions

WithintheGroup’sfundsmanagement,inFY2008/09anunsecuredloanintheamountofEUR415,000kwasgrantedtoarelatedparty.Thisloanexpireson31January2011andoriginallyaccruedinterestatthe3-monthEURIBORplusa1.00%mark-up.TheinterestratewasadjustedtotheinterestrateoftheGermanrestructuringloan.Infiscal2010/11,theloanandinterestaccrueduptothatpointwererepaidinfulltoPHOENIXinconnectionwiththerefinancingprogramme(carryingamountasof31January2010:EUR444,128k).Theresultinginterestincomeinthefiscalyear2010/11amountedtoEUR14,367k(prioryear:EUR20,563k).

Byagreementdated27June2010,apartnergrantedashort-termloanofEUR96,613k.Theloanwassubjecttointerestatthe1-monthEURIBORplusa4.5%mark-upandcouldbeterminatedatanytime,butnotbeforesuccessfulrefinancing.TheloanincludinginterestofEUR570kwasrepaidon17August2010.

LoanreceivablesofEUR16,472k(prioryear:EUR17,664k)areduefromassociatesasof31January2011inconnectionwithfinancingtransactions.Theresultinginterestincomeinthefiscalyear2010/11amountedtoEUR786k(prioryear:EUR773k).

Inaddition,individualloanswereextendedtoanotherrelatedparty.Inthiscontext,theGrouphadopenitemsofEUR357kintotalasof31January2011(prioryear:EUR487k).TwosmallerloansofEUR80kwererepaidinfiscal2010/11.

TheGroupalsohadaninterestofEUR205kintheprofitsofarelatedpartyinfiscal2010/11.Theprofithadnotyetbeenpaidoutasof31January2011.

FinancialliabilitiesofEUR18kwereduetotheunlimitedpartnerasof31January2011(prioryear:EUR12k).PHOENIXhasliabilitiesduetotheformerunlimitedpartneramountingtoEUR1,044k(prioryear:EUR1,029k).

FromanotherrelatedpartytheGroupreceivedloansinanamountofEUR5,942kasof31January2011(prioryear:EUR9,210k).

Inconnectionwiththebondissued,relatedpartiessubscribedbondcertificateswithanominalvolumeofEUR49,000k(prioryear:EUR0k).


Purchases and sales of investments

ThesharesinKLHoldingGmbHweresoldtoarelatedpartyon3September2010atapriceofEUR58,468k.ThisresultedinagainondisposalofEUR17,062k.

On28January2011,PHOENIXacquiredfromarelatedparty100%ofthesharesinanentitythathadpreviouslybeenconsolidatedasaspecialpurposeentity.

Goods purchases and sales Aspartoftheirordinarybusinesstransactions,theGrouppurchasesgoodsfromcertainpharmaceuti-calcompaniescontrolledbyrelatedparties.ThesepurchasesamountedofEUR181,731k(prioryear:EUR465,123k)duringthefiscalyear2010/11.Inthecourseofthesetransactions,theGrouphadout-standingliabilitiesbalancesofEUR10,610kasof31January2011(prioryear:EUR49,290k).Amajorpharmaceuticalscompanyceasedtobearelatedpartyby10August2010.

Infiscal2010/11,PHOENIXsoldpharmaceuticalsamountingtoEUR95,995ktorelatedparties(prioryear:EUR22,587k).ThisresultedinoutstandingreceivablesofEUR21,851kasof31January2011(prioryear:EUR3,553k),whichwereimpairedbyEUR3,012k(prioryear:EUR0k).

Forthemostpart,theoutstandingbalancesarenotsecurednorhaveguaranteesbeenissuedonthem.Thereceivablesweresettledbypaymentorbynettingthemagainstaccountspayable.

Leases

TheGrouphasrentedsaleswarehousespace(distributioncentres)inGermanyfromvariouslimitedpartners.Inthefiscalyear2010/11thefixedleasesamountedtoEUR10,469k(prioryear:EUR10,680k)andtheinvestment-relatedleasescametoEUR1,937k(prioryear:EUR1,937k).OutstandingbalancefromthesetransactionscametoEUR14,835kasof31January2011(prioryear:EUR14,458k).

Inaddition,theGroupleaseswarehousespacefromotherrelatedparties.TheannualleasepaymentsamountedtoEUR1,112kinfiscal2010/2011(prioryear:EUR938k).

Inthefiscalyear2010/2011,officeandwarehousespacewasleasedinViennaunderaleaseagreementwitharelatedparty.AsofAugust2010,itnolongerqualifiedasarelatedparty.TheleasepaymentsincurreduptothatpointcametoEUR327k(prioryear:EUR562k).Inanothercase,theGroupenteredaslessorintoaleaseagreementwitharelatedpartyintheNetherlands.Theincomefromthisleaseagreementinthefiscalyear2010/11amountedtoEUR126k(prioryear:EUR740k).Theleaseendedon31March2010.Asintheprioryear,thecorrespondingpropertyisclassifiedasheldforsale.

Other services

TheGroupperformsadministrativeservicesforlimitedpartners(IT,accountingorconsultingservices),forwhichtheGroupreceivedcompensationofEUR491kinthefiscalyear2010/11(prioryear:EUR500k).Theoutstandingreceivablesinthefiscalyear2010/11amountedtoEUR54k(prioryear:EUR56k).


TheGrouprenderedservicesofEUR645ktootherrelatedpartiesinthefiscalyear2010/11.ThisresultedinoutstandingreceivablesofEUR12kasof31January2011.

Infiscal2010/11,theGrouppurchasedotherservicesfromotherrelatedpartiesamountingtoEUR596k.Asof31January2011,therewerestilloutstandingliabilitiesofEUR54k.

Other

InAugust2010thepartnersinPHOENIXPharmahandelGmbH&Co.KGincreasedtheirlimitedpartnercontributionsbyatotalofEUR550,000k;anamountofEUR44,500kthereofisattributabletotreasuryshares.GroupequityincreasedbyEUR505,500kasaresult.

Terms and conditions

Unlesstermsandconditionsofrelatedpartytransactionshavebeencommentedonspecificallyabove,theyweremadeonanarm’slengthbasis.Outstandingbalancesatyearendareunsecuredandsettlementoccursincash.

Remuneration of the members of management board

ThetotalexpenseforremunerationofthemanagementboardinthereportingperiodwasEUR6,167k(prioryear:EUR7,784k)andisclassifiedasshort-termemployeebenefits.

ThecurrentservicecostinconnectionwithpensionawardsgrantedtomembersofthemanagementboardinthereportingperiodwasEUR249k(prioryear:EUR221k).

FormermembersofthemanagementboardreceivedremunerationofEUR1,066kinthefiscalyearunderreview(prioryear:EUR976k).PensionprovisionofEUR6,106khavebeenrecognised.

Remuneration of the advisory board

TheadvisoryboardremunerationamountedtoEUR100kinthefiscalyearunderreview(prioryear:EUR0k).

Mannheim,31March2011

ThemanagementboardoftheunlimitedpartnerPHOENIXVerwaltungsGmbH


WehaveauditedtheconsolidatedfinancialstatementspreparedbyPHOENIXPharmahandelGmbH&CoKG,Mannheim,comprisingtheincomestatement,thestatementofcomprehensiveincome,thestatementoffinancialposition,thecashflowstatement,theconsolidatedstatementofchangesinequityandthenotestotheconsolidatedfinancialstatements,togetherwiththegroupmanagementreportforthefiscalyearfrom1February2010to31January2011.ThepreparationoftheconsolidatedfinancialstatementsandthegroupmanagementreportinaccordancewithIFRSsasadoptedbytheEUandtheadditionalrequirementsofGermancommerciallawpursuanttoSec.315a(1)HGB[“Handelsgesetzbuch”:GermanCommercialCode]istheresponsibilityoftheCompany’smanage-ment.Ourresponsibilityistoexpressanopinionontheconsolidatedfinancialstatementsandonthegroupmanagementreportbasedonouraudit.

WeconductedourauditoftheconsolidatedfinancialstatementsinaccordancewithSec.317HGB[“Handelsgesetzbuch”:GermanCommercialCode]andGermangenerallyacceptedstandardsfortheauditoffinancialstatementspromulgatedbytheInstitutderWirtschaftsprüfer[InstituteofPublicAuditorsinGermany](IDW).Thosestandardsrequirethatweplanandperformtheauditsuchthatmisstatementsmateriallyaffectingthepresentationofthenetassets,financialpositionandresultsofoperationsintheconsolidatedfinancialstatementsinaccordancewiththeapplicablefinancialreportingframeworkandinthegroupmanagementreportaredetectedwithreasonableassurance.KnowledgeofthebusinessactivitiesandtheeconomicandlegalenvironmentoftheGroupandexpectationsastopossiblemisstatementsaretakenintoaccountinthedeterminationofauditprocedures.Theeffectivenessoftheaccounting-relatedinternalcontrolsystemandtheevidencesupportingthedisclosuresintheconsolidatedfinancialstatementsandthegroupmanagementreportareexaminedprimarilyonatestbasiswithintheframeworkoftheaudit.Theauditincludesassessingtheannualfinancialstatementsofthoseentitiesincludedinconsolidation,thedetermi-nationofentitiestobeincludedinconsolidation,theaccountingandconsolidationprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatementsandthegroupmanagementreport.Webelievethatourauditprovidesareasonablebasisforouropinion.Ouraudithasnotledtoanyreservations.

Inouropinion,basedonthefindingsofouraudit,theconsolidatedfinancialstatementscomplywithIFRSsasadoptedbytheEUandtheadditionalrequirementsofGermancommerciallawpursuanttoSec.315a(1)HGBandgiveatrueandfairviewofthenetassets,financialpositionandresultsofoperationsoftheGroupinaccordancewiththeserequirements.ThegroupmanagementreportisconsistentwiththeconsolidatedfinancialstatementsandasawholeprovidesasuitableviewoftheGroup’spositionandsuitablypresentstheopportunitiesandrisksoffuturedevelopment.

Stuttgart,31March2011

Ernst&YoungGmbHWirtschaftsprüfungsgesellschaft

Dr.Schmidt RometschWirtschaftsprüfer Wirtschaftsprüferin[GermanPublicAuditor] [GermanPublicAuditor]

audIt OPINION

PHOENIXPharmahandelGmbH&CoKGPfingstweidstraße10-1268199Mannheim,Germanywww.phoenixgroup.eu

group

http://www.phoenixgroup.eu

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