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EX-12 - EXHIBIT 12 - Walgreens Boots Alliance, Inc.ex12.htm
EX-21 - EXHIBIT 21 - Walgreens Boots Alliance, Inc.ex21.htm
EX-31.2 - EXHIBIT 31.2 - Walgreens Boots Alliance, Inc.ex31_2.htm
EX-23.1 - EXHIBIT 23.1 - Walgreens Boots Alliance, Inc.ex23_1.htm
EX-10.3 - EXHIBIT 10.3 - Walgreens Boots Alliance, Inc.ex10_3.htm
EX-32.2 - EXHIBIT 32.2 - Walgreens Boots Alliance, Inc.ex32_2.htm
EX-10.5 - EXHIBIT 10.5 - Walgreens Boots Alliance, Inc.ex10_5.htm
EX-10.6 - EXHIBIT 10.6 - Walgreens Boots Alliance, Inc.ex10_6.htm
EX-23.2 - EXHIBIT 23.2 - Walgreens Boots Alliance, Inc.ex23_2.htm
EX-23.3 - EXHIBIT 23.3 - Walgreens Boots Alliance, Inc.ex23_3.htm
EX-10.68 - EXHIBIT 10.68 - Walgreens Boots Alliance, Inc.ex10_68.htm
EX-10.81 - EXHIBIT 10.81 - Walgreens Boots Alliance, Inc.ex10_81.htm
EX-10.57 - EXHIBIT 10.57 - Walgreens Boots Alliance, Inc.ex10_57.htm
EX-10.54 - EXHIBIT 10.54 - Walgreens Boots Alliance, Inc.ex10_54.htm
EX-10.79 - EXHIBIT 10.79 - Walgreens Boots Alliance, Inc.ex10_79.htm
EX-10.16 - EXHIBIT 10.16 - Walgreens Boots Alliance, Inc.ex10_16.htm
EX-10.80 - EXHIBIT 10.80 - Walgreens Boots Alliance, Inc.ex10_80.htm
EX-10.17 - EXHIBIT 10.17 - Walgreens Boots Alliance, Inc.ex10_17.htm
EX-32.1 - EXHIBIT 32.1 - Walgreens Boots Alliance, Inc.ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - Walgreens Boots Alliance, Inc.ex31_1.htm
10-K - WALGREENS BOOTS ALLIANCE INC 10-K 8-31-2015 - Walgreens Boots Alliance, Inc.form10k.htm
EX-99.3 - EXHIBIT 99.3 - Walgreens Boots Alliance, Inc.ex99_3.htm

Exhibit 99.2

Alliance Boots GmbH

Interim condensed consolidated financial statements
 
for the nine month period ended 31 December 2014
 

Alliance Boots GmbH

Group interim condensed consolidated income statement (unaudited)
for the nine month period ended 31 December
 
   
Notes
   
2014
£million
   
2013
£million
 
Revenue
          
17,420
     
17,781
 
Profit from operations before share of post-tax earnings of associates and joint ventures
   
4
     
820
     
988
 
Share of post-tax earnings of associates and joint ventures
           
117
     
45
 
Profit from operations
           
937
     
1,033
 
Finance income
           
42
     
15
 
Finance costs
           
(265
)
   
(306
)
Profit before tax
           
714
     
742
 
Tax
   
6
     
(101
)
   
39
 
Profit for the period
           
613
     
781
 
                         
Attributable to:
                       
Equity shareholders of the Company
           
605
     
755
 
Non-controlling interests
           
8
     
26
 
             
613
     
781
 

Group interim condensed consolidated statement of comprehensive income (unaudited)
for the nine month period ended 31 December
 
   
2014
£million
   
2013
£million
 
Profit for the period
   
613
     
781
 
Other comprehensive income for the period
               
Items that will not be recycled to the income statement:
               
Defined benefit schemes – net remeasurements
   
81
     
(235
)
Tax on items that will not be recycled to the income statement
   
(16
)
   
42
 
     
65
     
(193
)
Items that are or may be recycled to the income statement:
               
Net exchange differences on translation of non-Sterling denominated operations
   
(21
)
   
(167
)
Fair value movements on cash flow hedging instruments including amounts recycled
   
(3
)
   
9
 
Movements on available-for-sale investments including amounts recycled
   
2
     
(1
)
Share of post-tax other comprehensive income of associates and joint ventures
   
-
     
(2
)
Amounts recycled on distribution of associate
   
-
     
(78
)
Tax on items that are or may be recycled to the income statement
   
(7
)
   
(3
)
     
(29
)
   
(242
)
Total comprehensive income for the period
   
649
     
346
 
                 
Attributable to:
               
Equity shareholders of the Company
   
641
     
341
 
Non-controlling interests
   
8
     
5
 
     
649
     
346
 
 
1

Alliance Boots GmbH

Group interim condensed consolidated statement of financial position
 
   
Notes
   
31 December
2014
Unaudited
£million
   
31 March
2014
Audited
£million
 
Assets
           
Non-current assets
           
Goodwill
       
4,950
     
4,625
 
Other intangible assets
   
7
     
5,498
     
5,309
 
Property, plant and equipment
   
7
     
2,023
     
1,907
 
Investments in associates and joint ventures
           
478
     
318
 
Available-for-sale investments
           
66
     
67
 
Trade and other receivables
           
92
     
78
 
Deferred tax assets
           
31
     
16
 
Retirement benefit assets
   
13
     
70
     
-
 
Current tax assets
           
5
     
8
 
Derivative financial instruments
           
1
     
29
 
             
13,214
     
12,357
 
Current assets
                       
Inventories
           
2,326
     
1,892
 
Trade and other receivables
           
2,711
     
2,544
 
Cash and cash equivalents
   
8
     
291
     
501
 
Restricted cash
   
10
     
188
     
156
 
Current tax assets
           
8
     
13
 
Assets classified as held for sale
           
5
     
3
 
Derivative financial instruments
           
57
     
11
 
             
5,586
     
5,120
 
Total assets
           
18,800
     
17,477
 
Liabilities
                       
Current liabilities
                       
Borrowings
   
10
     
(5,644
)
   
(301
)
Trade and other payables
           
(4,862
)
   
(4,236
)
Current tax liabilities
           
(129
)
   
(132
)
Provisions
           
(27
)
   
(9
)
Derivative financial instruments
           
(3
)
   
(3
)
             
(10,665
)
   
(4,681
)
Net current (liabilities)/assets
           
(5,079
)
   
439
 
Non-current liabilities
                       
Borrowings
   
10
     
(86
)
   
(5,444
)
Other payables
           
(193
)
   
(158
)
Deferred tax liabilities
           
(836
)
   
(781
)
Retirement benefit obligations
   
13
     
(115
)
   
(174
)
Provisions
           
(12
)
   
(16
)
Derivative financial instruments
           
(1
)
   
-
 
             
(1,243
)
   
(6,573
)
Net assets
           
6,892
     
6,223
 
                         
Equity
                       
Share capital
           
1,080
     
1,079
 
Share premium
           
2,193
     
2,184
 
Retained earnings
           
3,561
     
2,894
 
Other reserves
           
-
     
29
 
Shareholders’ equity
           
6,834
     
6,186
 
Non-controlling interests
           
58
     
37
 
Total equity
           
6,892
     
6,223
 
 
2

Alliance Boots GmbH
 
Group interim condensed consolidated statement of changes in equity (unaudited)
for the nine month period ended 31 December
 
           
Shareholders’ equity
               
2014
 
Share
capital
£million
   
Share
premium
£million
   
Retained
earnings
£million
   
Other
reserves
£million
   
Total
£million
   
Non-
controlling
interests
£million
   
Total
equity
£million
 
At 1 April 2014
   
1,079
     
2,184
     
2,894
     
29
     
6,186
     
37
     
6,223
 
Profit for the period
   
-
     
-
     
605
     
-
     
605
     
8
     
613
 
Other comprehensive income for the period
                                                       
Defined benefit schemes – net remeasurements
   
-
     
-
     
81
     
-
     
81
     
-
     
81
 
Net exchange differences on translation of non-Sterling denominated operations
   
-
     
-
     
-
     
(21
)
   
(21
)
   
-
     
(21
)
Fair value movements on cash flow hedging instruments including amounts recycled
   
-
     
-
     
-
     
(3
)
   
(3
)
   
-
     
(3
)
Movements on available-for-sale investments including amounts recycled
   
-
     
-
     
-
     
2
     
2
     
-
     
2
 
Tax on other comprehensive income for the period
   
-
     
-
     
(16
)
   
(7
)
   
(23
)
   
-
     
(23
)
     
-
     
-
     
65
     
(29
)
   
36
     
-
     
36
 
Total comprehensive income for the period
   
-
     
-
     
670
     
(29
)
   
641
     
8
     
649
 
Transactions with owners
                                                       
Equity share capital issued
   
1
     
9
     
(3
)
   
-
     
7
     
-
     
7
 
Non-controlling interests in businesses acquired
   
-
     
-
     
-
     
-
     
-
     
20
     
20
 
Dividends paid to non-controlling interests
   
-
     
-
     
-
     
-
     
-
     
(9
)
   
(9
)
Contribution from non-controlling interests
   
-
     
-
     
-
     
-
     
-
     
4
     
4
 
Purchase of non-controlling interests
   
-
     
-
     
-
     
-
     
-
     
(2
)
   
(2
)
     
1
     
9
     
(3
)
   
-
     
7
     
13
     
20
 
At 31 December 2014
   
1,080
     
2,193
     
3,561
     
-
     
6,834
     
58
     
6,892
 
 
 
   
Shareholders’ equity
              
2013
 
Share
capital
£million
   
Share
premium
£million
   
Retained
earnings
£million
   
Other
reserves
£million
   
Total
£million
   
Non-
controlling
interests
£million
   
Total
equity
£million
 
At 1 April 2013
   
1,079
     
2,879
     
1,460
     
82
     
5,500
     
171
     
5,671
 
Profit for the period
   
-
     
-
     
755
     
-
     
755
     
26
     
781
 
Other comprehensive income for the period:
                                                       
Defined benefit schemes – net remeasurements
   
-
     
-
     
(235
)
   
-
     
(235
)
   
-
     
(235
)
Net exchange differences on translation of non-Sterling denominated operations
   
-
     
-
     
-
     
(146
)
   
(146
)
   
(21
)
   
(167
)
Fair value movements on cash flow hedging instruments including amounts recycled
   
-
     
-
     
-
     
9
     
9
     
-
     
9
 
Movements on available-for-sale investments including amounts recycled
   
-
     
-
     
-
     
(1
)
   
(1
)
   
-
     
(1
)
Share of post-tax other comprehensive income of associates and joint ventures
   
-
     
-
     
-
     
(2
)
   
(2
)
   
-
     
(2
)
Amounts recycled on distribution of associate
   
-
     
-
     
-
     
(78
)
   
(78
)
   
-
     
(78
)
Tax on other comprehensive income for the period
   
-
     
-
     
42
     
(3
)
   
39
     
-
     
39
 
     
-
     
-
     
(193
)
   
(221
)
   
(414
)
   
(21
)
   
(435
)
Total comprehensive income for the period
   
-
     
-
     
562
     
(221
)
   
341
     
5
     
346
 
Transactions with owners:
                                                       
Settlement of distribution obligation
   
-
     
(695
)
   
695
     
-
     
-
     
-
     
-
 
Dividends paid to non-controlling interests
   
-
     
-
     
-
     
-
     
-
     
(7
)
   
(7
)
Purchase of non-controlling interests
   
-
     
-
     
(47
)
   
176
     
129
     
(131
)
   
(2
)
     
-
     
(695
)
   
648
     
176
     
129
     
(138
)
   
(9
)
At 31 December 2013
   
1,079
     
2,184
     
2,670
     
37
     
5,970
     
38
     
6,008
 
 
3

Alliance Boots GmbH
 
Group interim condensed consolidated statement of cash flows (unaudited)
for the nine month period ended 31 December
 
     
 Note
 
2014
£million
   
2013
£million
 
Operating activities
           
Profit from operations:
       
937
     
1,033
 
Adjustments to reconcile profit from operations to cash generated from operations:
                   
Share of post-tax earnings of associates and joint ventures
       
(117
)
   
(45
)
Depreciation and amortisation
       
263
     
255
 
Impairment of investments in associates, goodwill and other intangible assets
       
40
     
-
 
Net gains on disposal of property, plant and equipment
       
(2
)
   
-
 
Net gains relating to associates
       
(38
)
   
(109
)
Increase in inventories
       
(344
)
   
(187
)
(Increase)/decrease in receivables
       
(165
)
   
8
 
Increase in payables and provisions
       
476
     
73
 
Movement in retirement benefit assets and obligations
       
(51
)
   
(18
)
Cash generated from operations
       
999
     
1,010
 
Net tax paid
       
(133
)
   
(95
)
Net cash from operating activities
       
866
     
915
 
Investing activities
                   
Acquisitions of businesses (net of cash and cash equivalents, and bank overdrafts)
       
(468
)
   
(1
)
Purchase of property, plant and equipment, and intangible assets
       
(234
)
   
(175
)
Purchase of available-for-sale investments
       
(1
)
   
(15
)
Loan repayments net of amounts advanced
       
-
     
18
 
Investments in associates and joint ventures
       
(57
)
   
-
 
Disposal of other assets and investments
       
17
     
15
 
Dividends received from associates and joint ventures
       
10
     
20
 
Interest received
       
22
     
25
 
Net cash used in investing activities
       
(711
)
   
(113
)
Financing activities
                   
Interest paid
       
(187
)
   
(213
)
Proceeds from borrowings
       
1,215
     
638
 
Repayment and repurchase of borrowings and settlement of derivatives
       
(1,352
)
   
(1,052
)
Fees associated with financing activities
       
(14
)
   
(14
)
Movement in restricted cash
       
(35
)
   
(3
)
Repayment of capital element of finance lease obligations
       
(4
)
   
(4
)
Dividends paid to non-controlling interests
       
(8
)
   
(17
)
Purchase of non-controlling interests
       
(4
)
   
(143
)
Issue of ordinary share capital
       
6
     
-
 
Net cash used in financing activities
       
(383
)
   
(808
)
Net decrease cash and cash equivalents in the period
       
(228
)
   
(6
)
Cash and cash equivalents at 1 April
       
500
     
579
 
Currency translation differences
       
(9
)
   
(17
)
Cash and cash equivalents at 31 December
 
8
   
263
     
556
 
 
4

Alliance Boots GmbH
 
Notes to the interim condensed consolidated financial statements
for the nine month period ended 31 December 2014
 
1.
General information
 
Alliance Boots GmbH (the “Company”) is a private company incorporated in Switzerland.  The interim condensed consolidated financial report of the Company as at, and for the nine month period ended, 31 December 2014 are prepared up to the point of acquisition by Superior Holdings Limited (‘Superior’), previously named Ontario Holdings WBA Limited, a subsidiary of Walgreens Boots Alliance, Inc., on 31 December 2014 and comprises the Company and its subsidiaries and their interests in associates and joint ventures (together referred to as the “Group”).  The address of its registered office is Alliance Boots GmbH, Untermattweg 8, Bern 3027, Switzerland.  The principal activities of the Group were pharmacy-led health and beauty retailing and pharmaceutical wholesaling and distribution in many major international markets.

The interim condensed consolidated financial statements for the nine month period ended 31 December 2014 were approved by the Board and authorised for issue on 27 October 2015.
 
2.
Basis of accounting
 
The interim condensed consolidated financial statements have been prepared in Sterling reflecting the denomination of the currency of the most significant proportion of the trade and cash flows of the Company and its subsidiaries and their interests in associates and joint ventures and have been rounded to the nearest £1 million.  The interim condensed consolidated financial statements have been prepared up to the point of acquisition of the Group by Superior on 31 December 2014, in accordance with IAS 34 ‘Interim Financial Reporting'.  Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at, and for the year ended, 31 March 2014.  This interim condensed consolidated financial report does not include all of the information required for full annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 March 2014, which were prepared in accordance with International Financial Reporting Standards (IFRSs).

Preparing the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing this interim condensed consolidated financial report, significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at, and for the year ended, 31 March 2014.
 
3.
Significant accounting policies
 
The accounting policies applied by the Group in this interim condensed consolidated financial report are the same as those applied by the Group in its consolidated financial statements as at, and for the year ended, 31 March 2014.
 
4.
Profit from operations before share of post-tax earnings of associates and joint ventures
 
2014
 
Before amortisation of
customer relationships
and brands, and
exceptional items
£million
   
Amortisation
of customer
relationships
and brands
£million
   
Exceptional
items
£million
   
Total
£million
 
Revenue
   
17,420
     
-
     
-
     
17,420
 
Cost of sales
   
(13,543
)
   
-
     
-
     
(13,543
)
Gross profit
   
3,877
     
-
     
-
     
3,877
 
Selling, distribution and store costs
   
(2,457
)
   
(80
)
   
(12
)
   
(2,549
)
Administrative costs
   
(330
)
   
-
     
(178
)
   
(508
)
Profit from operations before share of post-tax earnings of associates and joint ventures
   
1,090
     
(80
)
   
(190
)
   
820
 
 
 
2013
 
Before amortisation of
customer relationships
and brands, and
exceptional items
£million
   
Amortisation
of customer
relationships
and brands
£million
   
Exceptional
items
£million
   
Total
£million
 
Revenue
   
17,781
     
-
     
-
     
17,781
 
Cost of sales
   
(14,060
)
   
-
     
-
     
(14,060
)
Gross profit
   
3,721
     
-
     
-
     
3,721
 
Selling, distribution and store costs
   
(1,801
)
   
(76
)
   
-
     
(1,877
)
Administrative costs
   
(931
)
   
-
     
75
     
(856
)
Profit from operations before share of post-tax earnings of associates and joint ventures
   
989
     
(76
)
   
75
     
988
 
 
5

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
5.
Exceptional items
 
   
2014
£million
   
2013
£million
 
Within profit from operations
       
Call options for warrants1
   
(167
)
   
(33
)
Impairment of goodwill and other intangible assets2
   
(35
)
   
-
 
Impairment of investment in associate
   
(5
)
   
(7
)
Gain on acquisition of controlling interests in an associate and a joint venture3
   
38
     
-
 
Gain on disposal and distribution of associates4
   
-
     
116
 
Other5
   
(21
)
   
(1
)
Within profit from operations before share of post-tax earnings of associates and joint ventures
   
(190
)
   
75
 
Within share of post-tax earnings of associates and joint ventures
   
2
     
-
 
     
(188
)
   
75
 
Within finance income
               
Fair value movement of equity purchase commitment6
   
17
     
(3
)
Repurchase and repayment of acquisition borrowings7
   
-
     
(13
)
     
17
     
(16
)
Within finance costs
               
Amortisation of prepaid financing fees
   
(18
)
   
-
 
Reassessment of obligations to non-controlling interests
   
(14
)
   
(46
)
     
(32
)
   
(46
)
Within tax
               
Tax credit on exceptional items
   
13
     
6
 
Exceptional tax (charge)/credit8
   
(3
)
   
114
 
     
10
     
120
 
     
(193
)
   
133
 
 
1 During a prior period, the Company together with Walgreen Co. signed agreements with AmerisourceBergen Corporation (‘AmerisourceBergen’) which included the Group receiving warrants to purchase up to 8% of the equity of AmerisourceBergen at future dates.  Simultaneously, the Group issued a call option to Walgreen Co. for Walgreen Co. to purchase these warrants from the Group, only exercisable if Walgreen Co. exercises its option to acquire the remaining 55% equity stake of the Group that they did not own at that time.
 
2 During the period, the Group recorded impairments of goodwill and other intangible assets resulting from the valuation carried out when Superior acquired the Group on 31 December 2014.  The impairments were calculated using a net present value of future cash flows methodology and a relief from royalty method.
 
3 During the period, the Group acquired the 50% of UniDrug Distribution Group Limited (‘UDG’) and 70% of Soap & Glory Limited (‘Soap & Glory’), respectively, that it did not already own.  The fair value of the respective pre-existing interests were remeasured to fair value giving rise to respective gains.
 
4 In August 2012, the Company entered a Purchase and Option Agreement with its parent company, AB Acquisitions Holdings Limited, and Walgreen Co. for Walgreen Co. to acquire a 45% equity stake in the Group.  As part of this agreement, the Company made a commitment to distribute or otherwise transfer its subsidiary’s investment in Galenica Ltd. and any related dividend distributions or proceeds to the selling shareholders at a future date without any payment.  The Group recognised this commitment as a liability measured at fair value.  On 10 May 2013, the Group distributed its investment in Galenica Ltd. recognising a gain on distribution of £115 million.  The increase in the fair value of the liability for this commitment since the beginning of the period to the date of distribution was £43 million.
 
5 Other related to net gains/(losses) on disposal of non-current assets, acquisition related costs, legal and other advisory costs for the Walgreen Co. and AmerisourceBergen transactions and residual costs in relation to other previously announced exceptional projects.
 
6 During a prior period, the Group entered into a contract to acquire a 12% interest in Nanjing Pharmaceutical Company Limited.  The investment was completed in the period, and the fair value gain in the period on this derivative financial instrument was £17 million.
 
7 During the prior period, the Group repurchased and repaid acquisition borrowings with a net value of £858 million.  Pre-paid financing fees expensed on these repurchases and repayments were £13 million.
 
8 The exceptional credit in the prior period mainly relates to the net reduction in deferred tax assets and liabilities resulting from the three percentage point reduction in the rate of future UK corporation tax enacted during the period.  This comprised a two percentage point reduction applicable from April 2014 and the further one percentage point reduction applicable from April 2015.
 
6

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
6.
Tax
 
Income tax expense is recognised based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period.  The effective tax rate, which is defined as the tax charge/(credit) expressed as a percentage of profit from operations excluding share of post-tax earnings of associates and joint ventures, net of finance income and finance costs for the nine month period ended 31 December 2014 was 16.9% (2013: (5.6)%).  The 22.5% increase in the effective tax rate arises mainly as a result of an exceptional tax credit in the prior period which related to the net reduction in deferred tax assets and liabilities resulting from the three percentage point reduction in the rate of future UK corporation tax enacted in that period.
 
7.
Capital expenditure
 
During the nine month period ended 31 December 2014, the Group purchased intangible assets with a cost of £63 million (2013: £72 million) and property, plant and equipment assets with a cost of £192 million (2013: £132 million).  Property, plant and equipment with a carrying amount of £5 million (2013: £5 million) were disposed in the period.
 
8.
Cash and cash equivalents
 
Bank overdrafts included as a component of cash and cash equivalents as shown in the condensed consolidated statements of cash flows were £28 million (31 December 2013: £36 million).
 
9.
Analysis of movement in net borrowings
 
Set out below is a reconciliation of the net decrease in cash and cash equivalents to the (increase)/decrease in net borrowings:
 
   
2014
£million
   
2013
£million
 
Net decrease in cash and cash equivalents
   
(228
)
   
(6
)
Movement in restricted cash
   
35
     
3
 
Cash and cash equivalents outflow from decrease in debt and debt financing
   
141
     
418
 
Movement in net borrowings resulting from cash flows
   
(52
)
   
415
 
Borrowings acquired with businesses
   
(128
)
   
-
 
Finance leases entered into
   
-
     
(5
)
Amortisation of prepaid financing fees
   
(27
)
   
(15
)
Repurchase and repayment of acquisition borrowings
   
-
     
(13
)
Capitalised finance costs
   
-
     
(4
)
Currency translation differences and fair value adjustments on financial instruments
   
61
     
42
 
Movement in net borrowings in the period
   
(146
)
   
420
 
Net borrowings at 1 April
   
(5,051
)
   
(5,893
)
Net borrowings at 31 December
   
(5,197
)
   
(5,473
)

Cash and cash equivalents outflow from decrease in debt and debt financing comprised repayment and repurchase of borrowings and settlement of derivative financial instruments of £1,352 million (2013: £1,052 million) and repayment of capital element of finance lease obligations of £4 million (2013: £4 million) less proceeds from borrowings of £1,215 million (2013: £638 million).  Proceeds from borrowings include funding provided by the committed revolving credit facility.

Set out below is an analysis of net borrowings at 31 December:
 
   
2014
£million
   
2013
£million
 
Cash and cash equivalents
   
291
     
592
 
Restricted cash
   
188
     
178
 
Borrowings within current liabilities
   
(5,644
)
   
(188
)
Borrowings within non-current liabilities
   
(86
)
   
(6,090
)
Net derivative financial instruments
   
54
     
35
 
Net borrowings at 31 December
   
(5,197
)
   
(5,473
)
 
7

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
10.
Financial assets and liabilities
 
The carrying amounts of financial assets and liabilities were:
 
   
31 December
2014
£million
   
31 March
2014
£million
 
Current borrowings
       
Loans – senior facilities
   
(4,778
)
   
(100
)
Other loans – committed
   
(705
)
   
(162
)
Other loans – uncommitted
   
(129
)
   
(34
)
Bank overdrafts
   
(28
)
   
(1
)
Finance lease liabilities
   
(4
)
   
(4
)
     
(5,644
)
   
(301
)
Non-current borrowings
               
Loans – senior facilities
   
-
     
(5,049
)
Other loans – committed
   
(79
)
   
(386
)
Finance lease liabilities
   
(7
)
   
(9
)
     
(86
)
   
(5,444
)
Total borrowings
   
(5,730
)
   
(5,745
)
Cash and cash equivalents
   
291
     
501
 
Total borrowings net of cash and cash equivalents
   
(5,439
)
   
(5,244
)
Restricted cash
   
188
     
156
 
Derivative financial instruments – currency, interest rate and credit instrument assets
   
58
     
29
 
Derivative financial instruments – currency
   
(4
)
   
(3
)
Derivative financial instruments – equity purchase commitment
   
-
     
11
 
Net borrowings
   
(5,197
)
   
(5,051
)
Available-for-sale investments
   
66
     
67
 
Loan assets
   
4
     
4
 
Trade receivables net of provision for impairment
   
2,268
     
2,179
 
Trade payables
   
(3,841
)
   
(3,401
)
Liability to acquire equity stakes from non-controlling interests
   
(3
)
   
-
 
Future dividend obligations to non-controlling interests
   
(92
)
   
(79
)
Net financial liabilities
   
(6,795
)
   
(6,281
)

The Group’s principal borrowings at the period end were:
 
· Committed facilities – £5,562 million (31 March 2014: £5,697 million) in total:
- Loans – senior facilities current borrowings: in December 2014, the Group issued a voluntary repayment notice to lenders on its variable rate loans and revolving credit facility to repay all principal outstanding amounts in January 2015.  By doing so the Group relinquished its right to repay the facilities at the original maturity dates of July 2017 and July 2018, and became contractually obliged to repay the facilities within 12 months of the reporting date.  The variable rate loans and revolving credit facility were therefore presented in current liabilities.  The variable rate loans, which were denominated in Sterling and Euros, were fully drawn and their aggregate carrying value at 31 December 2014 was £4,267 million (31 March 2014: £5,049 million) including the impact of currency revaluation, and were reported net of unamortised fees incurred in respect of the loans.  The revolving credit facility of £1,092 million (31 March 2014: £677 million) provided access to funding in a range of currencies. £511 million (31 March 2014: £100 million) of this facility was drawn as at 31 December 2014 and classified as current borrowings.
- Other loans: these loans totalling £784 million (31 March 2014: £548 million) represented a mix of fixed and variable rate borrowings denominated in Sterling, Euros, Czech Koruna, Chilean Peso and Turkish Lira with principal maturities concentrated between 2015 and 2029.
 
· Uncommitted facilities – £157 million (31 March 2014: £35 million) in total:
- Bank overdrafts and local bank loans repayable on demand.  These facilities were denominated in Turkish Lira, Russian Rouble, Mexican Peso and Czech Koruna.
 
· Finance leases – £11 million (31 March 2014: £13 million) in total.

Cash and cash equivalents included gross bank overdrafts of £40 million (31 March 2014: £80 million) which were offset under cash pooling arrangements.
 
8
Alliance Boots GmbH
 
Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
10.
Financial assets and liabilities (continued)
 
Carrying value and fair value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

At 31 December 2014, carrying values and fair values of the Group’s financial assets and liabilities held to finance the Group’s operations were:
 
   
31 December 2014
   
31 March 2014
 
   
Carrying
value
£million
   
Fair value
£million
   
Carrying
value
£million
   
Fair value
£million
 
Liabilities held at amortised cost
               
Loans – senior facilities
   
(4,778
)
   
(4,778
)
   
(5,149
)
   
(5,176
)
Other loans – committed
   
(784
)
   
(784
)
   
(548
)
   
(548
)
Other loans – uncommitted
   
(129
)
   
(129
)
   
(34
)
   
(34
)
Bank overdrafts
   
(28
)
   
(28
)
   
(1
)
   
(1
)
Finance lease liabilities
   
(11
)
   
(12
)
   
(13
)
   
(14
)
Liability to acquire equity stakes from non-controlling interests
   
(3
)
   
(3
)
   
-
     
-
 
Future dividend obligations to non-controlling interests
   
(92
)
   
(92
)
   
(79
)
   
(79
)
Trade payables
   
(3,841
)
   
(3,841
)
   
(3,401
)
   
(3,401
)
     
(9,666
)
   
(9,667
)
   
(9,225
)
   
(9,253
)
Liabilities held at fair value
                               
Derivative financial instruments – currency
   
(4
)
   
(4
)
   
(3
)
   
(3
)
                                 
Loans and receivables financial assets
                               
Trade receivables net of provision for impairment
   
2,268
     
2,268
     
2,179
     
2,179
 
Loan assets
   
4
     
4
     
4
     
4
 
     
2,272
     
2,272
     
2,183
     
2,183
 
Financial assets held at fair value
                               
Derivative financial instruments – currency, interest rate and credit instrument assets
   
58
     
58
     
29
     
29
 
Derivative financial instruments – equity purchase commitment
   
-
     
-
     
11
     
11
 
Available-for-sale investments
   
66
     
66
     
67
     
67
 
     
124
     
124
     
107
     
107
 
Cash and cash equivalents
   
291
     
291
     
501
     
501
 
Restricted cash
   
188
     
188
     
156
     
156
 
Net financial liabilities
   
(6,795
)
   
(6,796
)
   
(6,281
)
   
(6,309
)

The fair values of bank overdrafts, other loans and trade receivables approximate to their carrying values due to either their short term nature or being re-priced at variable interest rates.  The carrying value of the variable rate senior facility loans approximated fair values of the instruments due to their maturity dates being in January 2015.  The fair value of these loans has been estimated as level 2 in the fair value hierarchy.
 
9

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
10.
Financial assets and liabilities (continued)
 
The carrying values of financial assets and liabilities held at fair value, as analysed by the levels of the fair value hierarchy, were:
 
31 December 2014
 
Level 1
£million
   
Level 2
£million
   
Level 3
£million
   
Total
£million
 
Financial liabilities
               
Derivative financial instruments – currency
   
-
     
(4
)
   
-
     
(4
)
     
-
     
(4
)
   
-
     
(4
)
Financial assets
                               
Derivative financial instruments – currency, interest rate and credit instrument assets
   
-
     
58
     
-
     
58
 
Available-for-sale investments
   
66
     
-
     
-
     
66
 
     
66
     
58
     
-
     
124
 

31 March 2014
 
Level 1
£million
   
Level 2
£million
   
Level 3
£million
   
Total
£million
 
Financial liabilities:
               
Derivative financial instruments – currency
   
-
     
(3
)
   
-
     
(3
)
     
-
     
(3
)
   
-
     
(3
)
Financial assets:
                               
Derivative financial instruments – interest rate and credit instrument assets
   
-
     
29
     
-
     
29
 
Derivative financial instruments – equity purchase commitment
   
-
     
-
     
11
     
11
 
Available-for-sale investments
   
67
     
-
     
-
     
67
 
     
67
     
29
     
11
     
107
 

The levels of the fair value hierarchy reflect the significance of the valuation inputs used in making fair value measurements and are defined as follows:

Level 1: quoted prices in active markets for the same instrument.
Level 2: quoted prices in active markets for similar assets or liabilities or other valuation techniques for which all significant inputs are based either directly or indirectly on observable market data.
Level 3: determined on inputs that are not based on observable market data.

Derivative financial instruments
The derivative financial instruments that the Group holds were not traded in an active market.  Accordingly, their fair values were determined by using suitable valuation techniques that do not make use of entity-specific estimates or by using movements in observable prices for underlying financial instruments attributable to the hedged risks.  The fair value of interest rate swaps was calculated by discounting the estimated cash flows received and paid based on the applicable observable yield curves.  The fair value of interest rate caps was calculated using an option pricing methodology.  The fair value of forward currency contracts was estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates.  The fair value of credit derivatives was calculated by discounting anticipated cash flows using the applicable observable yield curve plus a margin derived from the current trading value of the underlying security.  The fair value of the equity purchase commitment is calculated based on quoted market prices for equity instruments adjusted for the probability of the acquisition occurring.  All computed fair values for derivative financial instruments include an appropriate adjustment for own and counterparty credit risk as appropriate.

Available-for-sale investments
The fair values of quoted investments were based on current bid prices.

There were no transfers between Level 1 and Level 2 fair value measurements during the period.  Movements in the period for financial instruments measured using Level 3 valuation methods are presented below:
 
    
£million
 
At 1 April 2014
   
11
 
Net gains recognised in the income statement
   
17
 
Transfer from Level 3
   
(29
)
Currency translation differences
   
1
 
At 31 December 2014
   
-
 

   
£million
 
At 1 April 2013
   
-
 
Additions
   
5
 
Net gains recognised in the income statement
   
7
 
Currency translation differences
   
(1
)
At 31 March 2014
   
11
 

On 4 December 2014, the Group completed the acquisition of a 12% stake in Nanjing Pharmaceutical Company Limited, which has been accounted for as an associate to the Group using the equity method.  This resulted in the transfer of £29 million from the Level 3 category.

The fair value increase on financial instruments categorised within Level 3 in the nine month period ended 31 December 2014 of £17 million (year ended 31 March 2014: £7 million), is included within finance income in the income statement.
 
10

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
11.
Acquisitions of businesses
 
During the period, the Group acquired controlling equity stakes in a number of businesses.  The most significant were a 99.4% interest in Farmacias Ahumada S.A. (“FASA”) for consideration of £365 million and a further 50% stake in UDG, previously a joint venture of the Group, for consideration of £66 million.  These acquisitions have been accounted for using the acquisition method and the interim condensed consolidated financial statements include the results of these businesses for the period from the respective acquisition dates.

FASA
On 11 August 2014, the Group acquired 99.4% of the equity of FASA, a listed company based in Latin America.  This acquisition provided the Group with a major presence in the Latin America market and a further step towards reaching a global footprint.

The preliminary fair values of the identifiable assets and liabilities of FASA as at the date of acquisition were:
 
   
Fair value
£million
 
Assets
   
Intangible assets
   
167
 
Property, plant and equipment
   
87
 
Deferred tax assets
   
16
 
Inventories
   
169
 
Trade and other receivables
   
90
 
Cash and cash equivalents
   
20
 
Liabilities
       
Borrowings
   
(128
)
Trade and other payables
   
(277
)
Deferred tax liabilities
   
(40
)
Retirement benefit obligations
   
(7
)
Provisions
   
(10
)
Total identifiable net assets at fair value
   
87
 
Non-controlling interests
   
(20
)
Goodwill arising on acquisition
   
298
 
Purchase consideration
   
365
 
         
Analysis of cash flows on acquisition
       
Cash paid
   
365
 
Cash and cash equivalents acquired
   
(20
)
Net cash outflow
   
345
 

The consolidated income statement for the period includes revenue of £221 million and profit before tax for the period of £nil in respect of the FASA business since the acquisition date.  If the FASA business had been a subsidiary of the Group from the beginning of the period, taking into account their results prior to acquisition, revenue and profit before tax for the combined Group on a pro forma basis would have been £18,165 million and £701 million respectively.

The fair value of the non-controlling interests were determined with reference to the closing share price of FASA and Farmacias Benavides S.A.B de C.V., a subsidiary of FASA, respectively at the date of acquisition.
 
11

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
11.
Acquisitions of businesses (continued)
 
UDG
On 15 August 2014, the Group acquired the remaining 50% of the equity of UDG it did not own for £66 million.  This acquisition provided our UK pharmaceutical customers with a broader and more integrated range of flexible pre-wholesaling and contract logistics solutions.

The preliminary fair values of the identifiable assets and liabilities of UDG as at the date of acquisition were:
 
   
Fair value
£million
 
Assets
   
Other intangible assets
   
41
 
Property, plant and equipment
   
11
 
Trade and other receivables
   
10
 
Cash and cash equivalents
   
13
 
Liabilities
       
Trade and other payables
   
(17
)
Deferred tax liabilities
   
(8
)
Total identifiable net assets at fair value
   
50
 
Goodwill arising on acquisition
   
82
 
Fair value of existing interest
   
(66
)
Purchase consideration
   
66
 
         
Analysis of cash flows on acquisition
       
Cash paid
   
66
 
Cash and cash equivalents acquired
   
(13
)
Net cash outflow
   
53
 

The re-measurement to fair value of the Group’s existing 50% joint venture interest in UDG resulted in a gain of £32 million (fair value of £66 million less £34 million carrying value of equity accounted associate at the acquisition date), which was recognised in the income statement within profit from operations.

The consolidated income statement for the period includes revenue of £24 million and profit before tax for the period of £6 million in respect of the UDG business since the acquisition date.  If the UDG business had been a subsidiary of the Group from the beginning of the period, taking into account their results prior to acquisition, revenue and profit before tax for the combined Group on a pro forma basis would have been £17,466 million and £729 million respectively.

Other acquisitions
The Group acquired other businesses during the period for a total cash consideration of £77 million and non-cash consideration of £5 million.  The fair value of net assets acquired was £48 million, which included cash and cash equivalents of £7 million, with goodwill recognised of £46 million. One of these other acquisitions was in relation to an existing associate and the re-measurement to fair value of the Group’s existing share of the associate resulted in a gain of £6 million (fair value of £12 million less £6 million carrying value of equity accounted associate at the acquisition date), which was recognised in the income statement within profit from operations.

Acquisition related costs
The Group incurred acquisition related costs of £4 million in respect of the acquisitions described above and other acquisition related projects.  These costs have been included within administrative costs in the Group’s income statement and are part of the operating cash flows in the statement of cash flows.
 
12

Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
12.
Commitments
 
Capital expenditure contracted for at the period end and not yet incurred was £109 million (31 March 2014: £39 million) in respect of property, plant and equipment and software.
 
13.
Retirement benefit assets and obligations
 
As at 31 December 2014, the net retirement benefit obligation in respect of defined benefit pension schemes was £45 million (31 March 2014: £174 million), comprising schemes with retirement benefit net assets of £70 million (31 March 2014: £nil) and schemes with retirement benefit net obligations of £115 million (31 March 2014: £174 million).  Net actuarial gains in the period were £81 million (2013: £235 million net actuarial losses) with tax charge attributable of £16 million (2013: £42 million credit) and these are recorded in the Group’s interim condensed statement of other comprehensive income.
 
14.
Related parties
 
The Group’s related party relationships and transactions for the year ended 31 March 2014 were disclosed in the Annual Report for the year ended 31 March 2014.  In the nine month period ended 31 December 2014, the significant related party relationships and transactions for the Group were as follows:

Parent and ultimate controlling party
Throughout the period and as at 31 December 2014, AB Acquisitions Holdings Limited was the ultimate parent company of Alliance Boots GmbH.  Subsequent to 31 December 2014, AB Acquisitions Holdings Limited was renamed Sprint Acquisitions Holdings Limited.

Sprint Acquisitions Holdings Limited is incorporated in Gibraltar and is jointly controlled by Alliance Santé Participations S.A., and three private equity investment vehicles advised by Kohlberg Kravis Roberts & Co. L.P..  S. Pessina and O. Barra, who were Directors of Alliance Boots GmbH throughout the period, are directors of Alliance Santé Participations S.A., which is ultimately owned by a family trust.  Sprint Acquisitions Holdings Limited’s registered office is 57/63 Line Wall Road, Gibraltar.

Transactions with fellow subsidiaries of Sprint Acquisitions Holdings Limited
A summary of the significant transactions with fellow subsidiaries of Sprint Acquisitions Holdings Limited in the period is as follows:

On 4 August 2014, the Group sold its 100% equity interest in Alliance Boots Investments 5 Limited, a company that owned 51% of the equity of OOO Alliance Healthcare Rus (“Alliance Healthcare Russia”), a subsidiary of the Group, to a subsidiary of Sprint Acquisitions Holdings Limited for £3 million.  As part of the transaction, a put and call mechanism was put in place over the 51% equity interest owned by Sprint Acquisitions Holdings Limited in Alliance Boots Investments 1 Limited, the parent of Alliance Healthcare Russia, which resulted in the Group continuing to exercise control over the Alliance Healthcare Russia business.  The Group continued to consolidate the results of Alliance Healthcare Russia and its subsidiaries in the Group’s financial statements because it continued to be exposed to variable returns from its involvement in the Russia business and had the ability to affect those returns through its power over the entity.

On 9 December 2014, the Group exchanged its 49% equity interest in Alliance Healthcare Italia S.p.a, an associate of the Group, for a 49% equity interest in AB Acquisitions UK Holdco 3 Limited (subsequently renamed Sprint Acquisitions UK Holdco 3 Limited), a subsidiary of Sprint Acquisitions Holdings Limited.  The share-for-share exchange reflected the fair value of the Group’s equity interest in the respective entities.  Prior to 31 December 2014, Sprint Acquisitions UK Holdco 3 Limited was subsequently capitalised by its majority shareholder, diluting the Group’s equity interest to 9%.

Transactions with Walgreen Co.
Following Walgreen Co. acquisition of a 45% equity stake in Alliance Boots GmbH in August 2012, Walgreen Co. and its subsidiaries (“Walgreens”) were related parties.  A summary of the significant transactions in the period are as follows:

Transactions with Walgreens (excluding those Walgreens subsidiaries which the Group accounts for as joint ventures) were revenue of £113.4 million (2013: £65.0 million), the reimbursement of administrative costs (including secondments) of £3.9 million (2013: £1.7 million) and administrative costs (including secondments) of £3.1 million (2013: £0.8 million).

Transactions with associates and joint ventures
Trading transactions with associates and joint ventures were:
 
          
  2014
            
  2013
 
   
Associates
£million
   
Joint
ventures
£million
   
Associates
£million
   
Joint
ventures
£million
 
Revenue to
   
16
     
66
     
17
     
49
 
Other income receivable
   
-
     
2
     
-
     
3
 
Purchases from
   
(6
)
   
-
     
(9
)
   
-
 
Other charges from
   
(2
)
   
(3
)
   
-
     
(1
)
 
   
31 December 2014
   
31 March 2014
   
Associates
£million
   
Joint
ventures
£million
   
Associates
£million
   
Joint
ventures
£million
 
Amounts due from
   
2
     
-
     
3
     
16
 
Amounts due to
   
-
     
-
     
(1
)
   
(1
)
 
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Alliance Boots GmbH

Notes to the interim condensed consolidated financial statements (continued)
for the nine month period ended 31 December 2014
 
15.
Events after the period end
 
On 31 December 2014, Walgreens Boots Alliance, Inc. (‘WBA’), a newly incorporated company registered in the US, became the successor of Walgreen Co. as part of a reorganisation programme at Walgreens which resulted in Walgreens becoming a wholly owned subsidiary of WBA.  Furthermore on 31 December 2014, WBA completed the acquisition of the remaining 55% of Alliance Boots GmbH that it did not previously own and the 2.7% non-controlling interest in AB Acquisitions Luxco 1 S.à r.l. (which is a holding company of the principal subsidiaries, associates and joint ventures), in exchange for £3,133 million in cash and 144,333,468 shares of WBA common stock ($11.0 billion based on the 30 December 2014 closing market price of $76.05) pursuant to the Purchase and Option Agreement dated 18 June 2012 as amended. As a result, WBA became the ultimate parent undertaking of the Group.

In January 2015, the Group repaid all principal outstanding amounts on its senior credit facilities and certain of the Group’s other committed loans to lenders which amounted to £5,254 million.
 
In July 2015, the Group acquired Liz Earle Beauty Co. Limited, owner of the Liz Earle skincare brand for £140 million.
 
 
14