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METRO AG Annual report Made to trade Cosmin Comsa

Company outline
Retail Company in Dusseldorf, Germany. Specialized in Warehouses/Hypermarkets /Electronics/Department stores Divisions: Metro Cash and Carry, Real, Media Markt, Saturn, Galeria Kaufhof and Praktiker Traded on Frankfurt Stock Exchange as MEO Key people: Olaf Koch(CEO); Mark Frese (CFO) Revenue (2011):66.702 Bn euro Profit: 641 Mln euros Assets: 33.98 Bn / Total equity: 6.437 Bn euro

Balance Sheet Metro AG - Assets Note 18 : The acquisition of the

Redcoon group by Media-Saturn resulted in goodwill of 83 million. In 2011, the measurement of stock tender rights resulted in a goodwill decrease of 52 million at MediaSaturn (previous year: increase of 26 million). In accordance with IFRS 3 in conjunction with IAS 36, goodwill is tested for impairment once a year. Note 19. The other intangible assets have a finite useful life and are therefore amortized as scheduled. Non-scheduled write-downs concern internally generated software, at 1 million. The fair value of the investment properties is determined by means of internationally recognized measurement methods, in particular the comparative value method and the discounted cash flow method. Financial assets are recognized at amortized cost. In December 2010, METRO GROUP decided to sell its consumer electronics stores in France to the French investor High Tech Multicanal. From the time of the approval of the sales transaction all assets and liabilities of the French consumer electronics stores were treated as disposal groups in accordance with IFRS 5 and recognised in the balance sheet items assets held for sale and liabilities related to assets held for sale, respectively.

Balance Sheet Liabilities& Equity

Equity: In terms of amount and composition, i.e. the ratio of ordinary to preference shares, subscribed capital has not changed compared with 31 December 2010. Provisions for pension commitments of employer defined benefit plans. Plan assets serve strictly pension obligations of the company, as under IAS 19. The actuarial calculations are based on country-specific mortality tables. Adjusted for currency effects, trade Liabilities are slightly higher than a year earlier. Key items in other liabilities are commitments from stock tender rights totaling 315 million (previous year: 389 million), liabilities towards customers of 310 million (previous year: 297 million), liabilities from real estate totaling 86 million (previous year: 80 million) and liabilities to third-party shareholders of 78 million.

Statement of comprehensive income

Metro Ag, disclosed the statement of comprehensive income in two stages: 1.Income statement 2.Statement of comprehensive income(IAS1) Net profit is attributed to the Group in itself and to the rest of the noncontrolling interests. METRO AG defines earnings per share as earnings per ordinary share. In 2010, holders of preference shares of METRO AG were entitled to a dividend of 1.485 that was 0.135 higher than that paid to holders of ordinary shares. The company also presents tax effects as OCI, but registers no deferred taxes.

Statement of Cash Flows

As IAS 7 states, the Cash Flow statement is divided in the 3 main activities (operating, investing, financing) Reconciliation of non cashgenerating items (provisions, write-backs) Corporate acquisitions are discounted from operating cash flows Gains from sale of assets are also recorded in this section Profit distribution (dividends) is recorded under investing activities in two separate categories : METRO AG shareholders and other shareholders The item cash and cash equivalents includes cash and cash on hand as well as cash in transit and bank deposits with a remaining term of up to three months.

Notes to the financial statements

Note 11. Net profit for the period attributable to non-controlling interests Of net profit for the period attributable to non-controlling interests, profit shares accounted for 211 million (previous year: 178 million) and loss shares for 101 million (previous year: 92 million). This mainly concerns profit/loss shares of noncontrolling interests in the Media-Saturn sales division. Under this note Metro discloses that they dont have a majority stake in the Saturn stores and that is why they report their earnings as from uncontroling interests. 24. Deferred tax assets/deferred tax liabilities In accordance with IAS 12, deferred taxes relating to differences between the carrying amount of a subsidiarys pro rata assets and liabilities in the balance sheet and the investment book value for this subsidiary in the parent companys tax statement must be created (so-called outside basis differences) if the tax benefit is likely to be realized in future. In this statement Metro Discloses the accounting method used in the case of deferred taxes, stating that to be realized they have to be settled with the differences from carrying amount and value of the liability.

Other Notes to the Financial Statements

Note 8: Other financial results. The other financial income and expenses from financial instruments are assigned to measurement categories on the basis of the underlying transactions pursuant to IAS 39. Besides income and expenses from the measurement of financial instruments according to IAS 39, this also includes the measurement of foreign currency positions according to IAS 21. In this note, Metro presents more on their profit position from financial instruments and how currency translations affect these instruments. Note 18: Goodwill: In accordance with IFRS 3 in conjunction with IAS 36, goodwill is tested for impairment once a year. This is carried out at the level of a group of cash-generating units. In the case of goodwill, this group is the organizational unit sales division per country. In the impairment test, the cumulative book value of the group of cash-generating units is compared with the recoverable amount. Metro, further presents the way they disclose goodwill, with annual impairment tests on Groups of assets, such as CGUs. These are geographical operating areas, being considered for country.

Other notes to financial statements

Note 42. Management of financial risks.

Interest rate risks are caused by changes in interest rate levels. Interest rate swaps and interest limitation agreements are used to cap these risks. Interest rate derivatives that are not part of a qualified hedging transaction under IAS 39 are recognized at fair value in other financial result and, through resulting interest flows, in interest income. Further, Metro elaborates on the treatment of interest rate risk and how interest rate derivatives such as swaps and limitation agreements are recognized.

Currency risk The currency derivatives are used primarily for pound sterling, Danish Krone, Japanese Yen, Polish Zoty, Romanian leu, Russian rouble, Swiss franc, Czech koruna, Turkish lira, Hungarian forint as well as US dollar. Hedging transactions that, according to IAS 39, are not part of a hedge are recognized at their fair value. Value changes are recognized directly in income. Even if no formal hedging relationship was created, these are hedging transactions that are closely connected to the underlying business and whose impact on earnings will be netted by the underlying transaction (natural hedge). In this note Metro Group elaborates on currency hedging and how these hedging instruments are accounted for.

Note 42 continued: Management of liquidity risk Financial instruments utilized include money and capital market products (time deposits, call money, commercial papers, promissory note loans and bonds/EMTNs sold as part of ongoing issue programmes) as well as bilateral and syndicated loans. Cash pooling is also used because it allows the surplus liquidity of individual Group companies to be used to fund other Group companies internally. This note explains how the company protects itself from liquidity risk, a very important precaution in the retail and wholesale business. They are using regular trading assets as under IAS 32 and IAS 39, recognized at fair value on the income statement.