Report on the Financial Situation of Migros Group
Balance Sheet

The Financial Services sector has had a considerable impact on the balance sheet of Migros Group. Compared to the previous year, the balance sheet total rose by CHF 3.0 billion to CHF 58.2 billion, much of which can be attributed to the increase in mortgage and other customer receivables as well as customer deposits and liabilities. Customer deposits as at 31 December 2012 amounted to 47.8% of the balance sheet total (31 December 2011: 46.9%).

Balance sheet of the Retail and Industry sector

The balance sheet total for the Retail and Industry sector rose by 6.5% on the previous year to CHF 21'567.8 million. The increase in the balance sheet total and the change to the balance sheet structure from the previous year were mainly due to acquisitions and operating business.

The carrying amount of tangible assets increased by CHF 127.7 million on the previous year as a result of extensive investment activities by Migros Group. During the last financial year, the companies in the Retail and Industry sector invested CHF 1'211.5 million (previous year CHF 1'243.3 million) mainly in renewing the branch network and plants in Switzerland. The Cooperatives were able to commence operations at eight new sales locations. The focus of such moves was the improvement of local sourcing by Migros. A new Migros supermarket was one of the developments in a number of other localities and districts, e.g. in Frutigen, Hasle-Rüegsau, Oberriet, Ruswil, Luzern-Allmend, Zurich-Altstetten railway station. The first Alnatura organic supermarket was also opened in Zurich-Höngg. With regard to the specialist markets, the centres in Nyon and Martigny were completely renovated. At the Glatt shopping centre (Wallisellen), the first branch of Melectronics with the new store concept has been opened.

Outside of Switzerland, Gries Deco Group (Depot) invested the equivalent of CHF 60.2 million in the new distribution centre in Niedernberg.

Intangible assets amounted to CHF1'257.6 million as at 31 December 2012 (previous year CHF 1'285.7 million). Goodwill (intangible assets with an unlimited period of use) is CHF 809.7 million (previous year CHF 811.5 million). An important item in this figure is the goodwill acquired in 2007 with the acquisition of Denner.

Migros Group recognises actuarial gains and losses on defined benefit pension schemes in the income statement, using the «corridor approach». This means that the actuarial gains and losses are, if at all, recorded only as expenditure pro rata and with a delay. Other assets are made up of assets from employee benefits from the employer contribution reserves without waiver of utilisation of CHF 422.9 million (previous year CHF 370.0 million) and CHF 566.8 million (previous year CHF 225.6 million) in unrecognised actuarial losses under the corridor approach (see also explanations in Section H and Notes 10 and 38).

The balance sheet structure of the Retail and Industry sector remains very healthy. In 2012, net finance debts were reduced by a further CHF 249.4 million to CHF 706.2 million. Based on the current EBITDA of CHF 1’901.5 million, these debts can be paid off within half a year. Shareholder equity increased by CHF 860.9 million to CHF 13'754.1 million and corresponds to 63.8% (previous year 63.6%) of the balance sheet total. 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 5.6% from the previous year to CHF 32.6 billion.

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 1.1 billion in total and mainly consist of debt securities and widely diversified investment funds. During the reporting year, these cash reserves were reduced by CHF 256.8 million in total as a result of risk considerations, and invested as cash and cash equivalents and receivables due from banks.

This marked credit growth was mainly financed with new customer deposits. Customer deposits and liabilities increased by CHF 2.2 billion or 8.5%. Customer deposits totalled CHF 28.2 billion, corresponding to 86.5% of customer lending at the end of 2012. 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 2012, the bank's equity amounted to CHF 2'881.6 million, significantly above the coverage required under Swiss banking law.

On 13 February 2013, the Federal Council decided to activate the so-called countercyclical capital buffer as provided for under the Capital Adequacy Ordinance. This measure was carried out upon the submission of a proposal by the Swiss National Bank and aims to have a dampening effect on the real estate market. For Migros Bank, this measure means that it will require additional regulatory capital of some CHF 100 million, which will be taken into account in the Bank's multi-year equity capital planning.