Report on the Financial Situation of Migros Group
Balance Sheet

Mortgage and other customer receivables and customer deposits and liabilities of the Financial Services sector have had a considerable effect on the balance sheet of Migros Group. Compared to 31 December 2009, the balance sheet total rose by CHF 1.6 billion to CHF 52.4 billion as a result of a renewed increase in customer deposits in the financial services business. Customer deposits as per 31 December 2010 amounted to approx. 46.4 per cent of the balance sheet total (31 December 2009: 45.4 per cent).

Balance sheet of the Retail and Industry sector

The balance sheet Total assets for the Retail and Industry sector increased by 2.1 per cent to CHF 19'973 million over the previous year-on-year. Increases in the balance sheet total assets and changes in the balance sheet structure from the previous year were mainly due to operating businesses and financing activities.

Surplus liquid funds available by the end of 2009 were used to reduce acquisition financing in the year under review. Maturing receivables due from commercial banks were not renewed due to the currently low interest rates, but assigned to the liquid funds. The carrying amount of tangible assets increased by CHF 363.9 million on the previous year as a result of extensive investment activities by Migros Group. During the last financial year, Migros Group invested CHF 1'458.7 million (previous year CHF 1'402.7 million) mainly in renewing its branch network and plants in Switzerland. The Cooperatives were able to commence operations not only at 13 new sales locations and 9 replacement buildings, but also at 5 major redevelopments/expansions of sales locations. One example: after two years of construction, Länderpark Stans was completed on 30 September 2010. With 52 new shops, Länderpark Stans is one of the most beautiful shopping centres in the whole of Switzerland. The country's biggest solar power plant was also installed on the shopping centre's roof with 3’150 solar panels.

The carrying amount of intangible assets amounted to CHF 1'167.8 million as at 31 December 2010 is therefore slightly up on the previous year (CHF 1'094.4 million). The increase in intangible assets is mainly due to the company acquisitions made in the Travel segment. Goodwill (intangible assets with unlimited period of use) is CHF 725.3 million (previous year CHF 633.4 million). An important item in this figure is the goodwill acquired in 2007 with the acquisition of Denner.

Migros recognises actuarial gains and losses on defined benefit pension schemes as affecting net income by using the "corridor approach". This approach means that the actuarial losses, which mainly arose during the financial crisis, if at all, are recorded only as expenditure pro rata and with a delay. Actuarial losses of CHF 229.8 million (previous year CHF 220.5 million) are still capitalised in Other assets in the financial period (see also explanation in Section H and Notes 10 and 38).

The quoted debt securities of Migros Group were awarded an A/outlook stable by Standard & Poor’s. The balance sheet structure of the Retail and Industry sector continues to remain healthy. The net finance debts of CHF 1.0 billion (previous year CHF 1.6 billion) are set against a balance sheet total of CHF 20.0 billion and have decreased by CHF 610.6 million from the previous year. Based on the current EBITDA, these debts can be paid off within half a year. With an increase in equity of CHF 777.5 million, the proportion of shareholder equity in the total capital increased to 62.1 per cent. The principle of matched maturities, whereby shareholder equity and long-term loan capital cover non-current assets, has been maintained.

Balance sheet of the Financial Services sector

During the reporting year Mortgages and other customer receivables rose by 4.7 per cent from the previous year to CHF 28.9 billion.

Interest servicing by mortgage customers remains very good. Interest outstanding (without past due and problem receivables) amount to only 0.4 per cent of total interest income from mortgages.

In order to ensure refinancing of loans to customers at any time, also under changed market conditions, Migros Bank holds significant cash reserves in the form of securities. Securities shown under the balance sheet item Other financial assets amount to CHF 2.1 billion and mainly consist of debt securities and widely diversified investment funds. During the reporting year, these cash reserves were reduced by a total of CHF 46 million.

This marked credit growth was mainly financed with new customer deposits. Customer deposits and liabilities increased by CHF 1.1 billion or 4.8 per cent. Customer deposits totalled CHF 24.8 billion, corresponding to 85.9 per cent of customer lending at the end of 2010. Migros Bank consequently continues to benefit from a comfortable refinancing structure.

Due to the positive result for the year, the bank once again managed to significantly strengthen its equity base. As of 31 December 2010, the bank's capital amounted to CHF 2'607 million, significantly above the coverage required under Swiss banking law.