PHOENIX PIB Dutch Finance B.V.
Annual Report for the year 2018/19 PHOENIX PIB Dutch Finance B.V.
Contents
Directors’ report 1
Financial statement 2018/19 6
Balance sheet as at 31 January 2019 7
Statement of income for the year 2018/19 8
Cash flow statement for the year 2018/19 9
Notes to the 2018/19 financial statements 10
Other information 27
i PHOENIX PIB Dutch Finance B.V.
Directors’ report The Board of Directors of PHOENIX PIB Dutch Finance B.V. (the “Company”) is pleased to present you its financial statements for the financial year ended 31 January 2019. All amounts in the directors’ report are stated in EUR 1,000, unless indicated otherwise. General information on the legal entity PHOENIX PIB Dutch Finance B.V., with its statutory seat and its office in Maarssen, the Netherlands, serves as a financing company for the affiliated company PHOENIX PIB Finance B.V. and was founded on 17 April 2013. PHOENIX PIB Dutch Finance B.V. is a fully-owned subsidiary of PHOENIX PIB Dutch Holding B.V., Maarssen, the Netherlands and is ultimately owned by PHOENIX Pharma SE, Mannheim, Germany (“PHOENIX”). The Company is part of a fiscal unity for corporate income tax purposes together with the principal of the fiscal unity, PHOENIX PIB Dutch Holding B.V. and PHOENIX PIB Finance B.V., a fully-owned subsidiary of PHOENIX PIB Dutch Holding B.V. The Company recognizes its current tax result in the financial statements. The company has signed an advanced pricing agreement with the Dutch tax authorities. The current tax position is settled by bank via PHOENIX PIB Dutch Holding B.V. Financial position as at balance sheet date and the statement of income during the financial year Due to the fact that the Company serves as financing company for the PHOENIX group companies, the Company’s income relates to interest income from related parties. As the net financial result of the Company for the year 2018/19 was a profit of EUR 1,396 (2017/18: EUR 1,581) and the Company incurred EUR 107 (2017/18: EUR 101) general and administrative expenses this resulted in an operating profit before taxation for the year 2018/19 of EUR 1,289 (2017/18: EUR 1,480). The company had a positive cash flow of EUR 17 (2017/18: EUR 68 negative) mainly as a result of positive interest inflows. The Company’s solvency decreased slightly to a level of 1.1% (2017/18: 1.2%), mainly as a result of a higher dividend payment in comparison to the net result. Since the Company forms a fiscal unity together with PHOENIX PIB Dutch Holding B.V. and PHOENIX PIB Finance B.V., the company applies the principle that the deferred tax assets / liabilities are accounted for at the parent entity of the fiscal unity (PHOENIX PIB Dutch Holding B.V.) when applicable, therefore no deferred tax assets or liabilities are accounted in the financial statements of the Company. The tax liability as recorded in the financial statements of the Company is an intercompany liability to the head of the fiscal unity. Corporate Governance The Board of Directors, which is responsible for the corporate governance structure of the Company, believes that the principles and best practice provisions of the Dutch Corporate Governance Code that are applicable, are interpreted by the Board of Directors and implemented.
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Corporate Social Responsibility To ensure the effectiveness of the PHOENIX's commitment to Corporate Social Responsibility, the Company contributes to the economy in an ethical manner. This economic responsibility has two main aspects: long-term financing for PHOENIX and business ethics. The Company influences its relationships with both external (long-term financing) financers and PHOENIX. Business ethics for the Company mainly contain the compliance with fiscal requirements in cooperation with the tax authorities and ethical standards. The Law ‘Wet Bestuur en Toezicht’ requires large-sized legal entities to have a balanced composition of their Board of Directors in terms of gender, with at least 30% of the seats occupied by women and at least 30% by men. The current composition of the Board of Directors deviates from the above-mentioned percentages, since the board exists of 2 male directors. In order to achieve a balance between male and female members in the future, as soon as a vacancy occurs, and the suitability of the candidates is equal, a female candidate is preferred. Finance As per 31 January 2019 the Company’s assets were for 98% (31 January 2018: 97%) financed by long-term financing with two issued bonds. These bonds, with each a nominal value of EUR 300,000, have been issued during fiscal year 2014/15 (30 July 2014) and during fiscal year of 2013/14 (27 May 2013) respectively. Both bonds are listed on the EURO MTF, a non-regulated market operated by the Luxembourg Stock Exchange, and represent notes issued and guaranteed, jointly and severally by PHOENIX Pharmahandel GmbH & Co KG and certain of its subsidiaries. On 6 November 2017 the direct parent company of the Company, PHOENIX PIB Dutch Holding B.V., purchased bonds with a nominal value of EUR 100,000 and still owns these bonds per the date of these financial statements. Going Concern Although the working capital for the year 2018/19 is negative, the Company has a positive result and shareholder’s equity. Based on these figures and on the refinancing measures taken and implemented by the PHOENIX Group we believe that the going concern assumption is valid. PHOENIX Pharmahandel GmbH & Co KG, as (intermediate) beneficial owner of the Company, is in compliance with debt covenants of its Syndicated Multicurrency Term Loan and Revolving Credit Facilities Agreement and will act as a guarantor for external debts (including the bonds) when necessary, together with PHOENIX International GmbH and PHOENIX PIB Finance B.V. Also for upcoming years we expect positive results and cash flows, with the result that the Company’s management has prepared the PHOENIX PIB Dutch Finance B.V. financial statements on a going concern basis. Personnel The Company had two part-time directors during the fiscal year 2018/19 (2017/18: two). Furthermore the Company had two part-time employees (2017/18: two). No significant change is expected for the year 2019/20. Risk management The risk management policies and procedures are key to ensure proper management of the Company. The Company is a small entity with 2 directors and 2 employees, who all know and
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understand that risk management is an important process. The risk management system is embedded in the organization from the level of the directors to the operations and finance department (soft controls). All employees contribute to identifying risks and the associated control measures. The Company analyses and controls its risks. To this end it divides them into categories which are mentioned below. The control measures are subsequently defined for each identified risk. Where possible, a qualitative description is included of the expected effectiveness of the measures taken. The Company has put measures in place for the majority of the risks and uncertainties identified.
Operating activities In the conduct of its operating activities the Company enters into several financial instruments, such as loan facilities and bonds. Due to the use of these instruments, the Company is among others exposed to interest rate risk. Interest rate risks exist as a result of potential changes in the market interest rate and may lead to fluctuations in interest payments of variable interest-bearing financial instruments. The Company assesses the interest rate risk as low since the interest on loan facilities to related parties as well as the interest rate on bonds are fixed. The loan facilities to related parties bear an interest which is calculated by reference of the refinancing possibilities of the Company including a margin for administration and equity at risk in line with the advanced pricing agreement with Dutch tax authorities. As the amounts of the loan facilities and bonds are almost
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equal in amount and the interest rates correlate with each other, the interest rate risk is assessed to be low. a) Strategy The Company’s main activities consists of (re-) financing of related parties. Management is therefore on regular basis in close contact with the PHOENIX’ board to anticipate on any changes in financing structure. Based on the long term financing contracts and management actions, strategic risks are estimated as a low risk. b) Financial position In the conduct of its normal activities the Company enters into several financial instruments such as payables, cash balances with banks and bonds issued. Due to the use of these instruments, the Company is exposed to credit risk and liquidity risk. As per 31 January 2019 the Company’s assets were for 98% (31 January 2018: 97%) financed by long-term financing, with two issued bonds for which PHOENIX Pharmahandel GmbH & Co KG, PHOENIX International GmbH and PHOENIX PIB Finance BV are guarantors. This position is covered by two issued loans with similar due dates as the bonds, resulting in a reduced risk on the financial position of the Company. Credit risk represents the risk of default on a receivable that may arise from a counterparty failing to meet the required payments as agreed up on. Per 31 January 2019 the Company’s receivables represents amounts due from related parties, mainly from the affiliated company PHOENIX PIB Finance BV. Per 31 January 2019 PHOENIX PIB Finance BV had a solvency of 45% (31 January 2018: 45%). PHOENIX PIB Finance BV issues loans to affiliated companies within PHOENIX, for which PHOENIX Pharmahandel GmbH & Co KG acts as guarantor for the loans issued. PHOENIX PIB Finance BV also has the ability to make use of a SFA loan facility of EUR 1.25 billion. The credit risk of PHOENIX PIB Finance BV is therewith expected to be low. Liquidity risk is the risk that the Company cannot meet her obligations pursuant to settle in cash or other financial assets and financial obligations. The basic principles of the liquidity risk management includes that there are sufficient facilities maintained as needed to meet the current and future financial liabilities, in normal and difficult circumstances, and without unacceptable losses. The majority of the short-term liabilities however relates to the accruals for interest expenses, which are guaranteed by several PHOENIX companies. c) Laws, rules and regulations All decisions are made by the Board of Directors and all decisions are made in line with the code of conduct which both directors signed. Not meeting the tax regulation is the main risk in the field of laws, rules and regulations. The Company therefore has on a regular basis contact with the Dutch tax authorities and acts in line with an advanced pricing agreement with Dutch tax authorities.
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Outlook The Company’s management expects for the year 2019/20 no significant changes in activities, therefore it is expected that the net income for the year 2019/20 will be in line with the net income of 2018/19. Subsequent events There have been no significant subsequent events between 1 February 2019 and the date of issuance of these financial statements. Maarssen, 18 April 2019 Board of Directors:
Mr. J.P. Eeken
Mr. N. van Esschoten
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Financial statement 2018/19
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Balance sheet as at 31 January 2019 (before appropriation of net income)
Note 31 January 2019 31 January 2018 EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Fixed assets Financial fixed assets 3 606,311 602,394
Total fixed assets 606,311 602,394
Current assets Other receivables and prepaid expenses 4 9,726 12,721
9,726 12,721 Cash and cash equivalents 5 26 9
Total current assets 9,752 12,730
Total assets 616,063 615,124
Note 31 January 2019 31 January 2018 EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Shareholder’s equity 6 Share capital 250 250 Share premium 4,500 4,500 Retained earnings 1,001 1,391 Result for the year 967 1,110
6,718 7,251
Long term liabilities 7 597,076 595,554
Short term liabilities 8 12,269 12,319
Total shareholder’s equity and liabilities 616,063 615,124
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Statement of income for the year 2018/19
Note 2018/19 2017/18 EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Interest - and other financial income 12 23,168 23,299 Interest - and other financial expenses 12 (21,772) (21,718) General and administrative expenses 13 (107) (101)
Operating income/(loss) before provision for income taxes 1,289 1,480
Income tax benefit/ (expense) 15 (322) (370)
Net income/(loss) 967 1,110
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Cash flow statement for the year 2018/19
2018/19 2017/18
note EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Net income/(loss) 967 1,110
Operating results from financial (income)/losses (1,396) (1,581) Income tax 322 370
Change in net working capital (1) (7)
Interest received 3/6/8 20,375 20,290 Interest paid 12 (20,250) (20,250) Tax paid 8 (370) (360)
(245) (320)
Cash flow from Operating activities (353) (428)
Loan repayments 6/8 1,870 2,360
Cash flow from Investing activities 1,870 2.360
Dividend payment 6 (1,500) (2,000)
Cash flow from Financing activities (1,500) (2,000)
Change in Cash and cash equivalents 17 (68)
Cash and cash equivalents at 1 February 9 77
Cash and cash equivalents at 31 January 26 9
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Notes to the 2018/19 financial statements
1 General a) Activities PHOENIX PIB Dutch Finance B.V. (the “Company”) with its statutory seat and its office in Maarssen, the Netherlands, serves as a financing company for the affiliated company PHOENIX PIB Finance BV. PHOENIX PIB Dutch Finance B.V. is a wholly-owned subsidiary of PHOENIX PIB Dutch Holding B.V., Maarssen, the Netherlands, which is ultimately owned by PHOENIX Pharma SE, Mannheim, Germany. The financial figures of the Company are included in the consolidated annual accounts of PHOENIX Pharma SE, Mannheim, Germany. b) Basis of preparation The accompanying financial statements have been prepared under the historical cost convention in accordance with generally accepted accounting principles in the Netherlands and comply with the financial requirements included in Part 9 of Book 2 of the Netherlands Civil Code. All amounts in the financial statement are stated in EUR 1,000, unless indicated otherwise. c) Going concern Although the working capital for the year 2018/19 is negative the Company has a positive result and shareholder’s equity. Based on these figures and on the refinancing measures taken and implemented by the PHOENIX Group we believe that the going concern assumption is valid. PHOENIX Pharmahandel GmbH & Co KG, as (intermediate) beneficial owner of the Company, is in compliance with debt covenants of its Syndicated Multicurrency Term Loan and Revolving Credit Facilities Agreement and will act as a guarantor for external debts (including the bonds) when necessary, together with PHOENIX International GmbH and PHOENIX PIB Finance BV. Also for upcoming years we expect positive results and cash flows, with the result that the Company’s management has prepared the PHOENIX PIB Dutch Finance B.V. financial statements on a going concern basis.
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2 Principles for the valuation of assets, liabilities and determination of the result a) General An asset is included in the balance sheet when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be reliably measured. A liability is included in the balance sheet when it is expected to result in an outflow from the entity of resources embodying economic benefits and the amount of the obligation can be measured with sufficient reliability. Income is recognised in the profit and loss account when an increase in future economic potential related to an increase in an asset or a decrease of a liability has arisen and of which the size can be measured reliably. Expenses are recognised when a decrease in the economic potential related to a decrease in an asset or an increase of a liability has arisen, of which the size can be measured with sufficient reliability. If a transaction results in a transfer of future economic benefits and/or when all risks relating to assets or liabilities transfer to a third party, the asset or liability is no longer included in the balance sheet. Assets and liabilities are not included in the balance sheet if economic benefits are not probable or cannot be measured with sufficient reliability. The income and expenses are accounted for in the period to which they relate. The preparation of the financial statements requires management to form opinions and to make estimates and assumptions that influence the application of principles and the reported values of assets and liabilities and of income and expense. The actual results may differ from these estimates. The estimates and the underlying assumptions are periodically assessed. Revisions of estimates are recognised in the period in which the estimate is revised and in future periods for which the revision has consequences. The accounting principles of the Company are summarised below. These accounting principles have been applied consistently throughout the year and the preceding year. The financial statements are presented in euros, the Company’s functional currency. All financial information in euros has been rounded to the nearest thousand.
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b) Foreign currencies Transactions denominated in foreign currency are converted into the functional currency of the Company at the exchange rate applying on the transaction date. Monetary assets and liabilities denominated in foreign currency are converted at the balance sheet date into the functional currency at the exchange rate applying on that date. Non-monetary assets and liabilities in foreign currency that are stated at historical cost are translated into euros at the applicable exchange rates applying on the transaction date. Foreign currency gains and losses are recorded to the statement of income as income / expense. c) Related-party transactions For the purpose of these accounts, parties are considered to be related to the Company, if: (a) A person or a close member of that person's family is related to a reporting entity if that person: (i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following conditions applies: (i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). d) Financial instruments Financial instruments include loan facilities and other receivables, cash items, loans and other financing commitments, and trade and other payables. Financial instruments initially recognized at fair value. After initial recognition, financial instruments are valued in the manner described below.
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Financial fixed assets and other receivables and prepaid expenses Financial fixed assets and other current receivables are carried at amortised cost on the basis of the effective interest method, less impairment losses if applicable. e) Impairment of financial assets Financial assets are tested for impairment in case of changes or circumstances arise that lead to an indication that the carrying amount of the asset will not be recovered. The recoverability of assets in use is determined by comparing the carrying amount of an asset with the estimated present value of the future net cash flows which the asset is expected to generate, discounted at the effective rate of the financial instrument determined on the initial recognition of the instrument. If the carrying amount of an asset exceeds the estimated present value of the future cash flows, impairment charge is recorded which is the difference between the carrying amount and the recoverable amount. f) Other receivables and prepaid expenses The accounting policies applied for the valuation of other receivables and prepaid expenses are described under the heading ‘Financial instruments’. g) Cash and cash equivalents Cash and cash equivalents are carried at face value. h) Long term liabilities Long term liabilities are recognised initially at fair value, net of transaction costs incurred. Long term liabilities are subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. i) Recognition of income Interest income: Interest income is recognized pro rata in the profit and loss account. The effective interest rate for the asset concerned is taken into account, provided the income can be measured and the income is probable to be received. Interest expense: Interest expense is allocated to successive financial reporting periods in proportion to the outstanding principal. Premiums and discounts are treated as annual interest charges so that the effective interest rate, together with the interest payable on the bonds, is recognized in the profit and loss account, with the amortized (net) cost of the liabilities being recognized in the balance sheet. Period interest charges and similar charges are recognized in the year in which they fall due.
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j) Income tax Corporate income tax comprises the current corporate income tax payable and deductible for the reporting period. Corporate income tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax comprises the expected tax payable or receivable on the taxable profit or loss for the financial year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to the tax payable in respect of previous years. The Company is part of a fiscal unity for corporate income tax purposes together with the principal of the fiscal unity, PHOENIX PIB Dutch Holding B.V. and PHOENIX PIB Finance B.V., a wholly-owned subsidiary of PHOENIX PIB Dutch Holding B.V. The Company has agreed with the Dutch tax authorities an advanced pricing agreement on the minimum taxable amount related to the Company’s financing activities. Since the Company forms a fiscal unity together with PHOENIX PIB Dutch Holding B.V., all deferred tax assets and/or liabilities are accounted for at PHOENIX PIB Dutch Holding B.V. level when applicable. Therefore there are no deferred tax assets or liabilities accounted in the financial statements of the Company. Tax assets and/or liabilities will be settled with tax authorities by PHOENIX PIB Dutch Holding B.V. and the current account with PHOENIX PIB Dutch Holding B.V. is settled by way of payment. k) Cash flow statement The cash flow statement has been prepared using the indirect method. l) Determination of fair value A number of accounting policies and disclosures in the Company’s financial statements require the determination of the fair value for financial assets and liabilities. For measurement and disclosure purposes, fair value is determined on the basis of the following methods. Where applicable, detailed information concerning the principles for determining fair value are included in the section that specifically relates to the relevant asset or liability.
Financial assets The fair value of investments held to maturity is determined for the benefit of the disclosures. The fair value is estimated at the present value of the future cash flows. The future cash flows are based on fixed interest receipts and repayments of loans issued, discounted at the discount rate per end of the fiscal book year. To determine the present value of the future cash flows a refinancing rate is determined, which consist of the yield to maturity (YTM) of the underlying bond that the company used to acquire the funding. A margin for group financing is added to the YTM that reflects the difference between the payable coupon rate and the receivable interest rate on the issued loan.
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Other receivables and prepaid expenses The fair value of other receivables and prepaid expenses is only determined for the benefit of the disclosures. The fair value is estimated at the present value of future cash flows.
Non-derivative financial commitments The fair value of non-derivative financial commitments is only determined for disclosure purposes and is calculated on the basis of the net present value of future repayments and interest payments discounted at the refinancing rate at the reporting date. The fair value of non- derivative financial commitments traded on active markets as at the balance sheet date is determined by reference to quoted market prices, without deduction of transaction costs. m) Use of estimates The preparation of the financial statements requires management to form opinions and to make estimates and assumptions that influence the application of principles and the reported values of assets and liabilities and of income and expense. Actual results may differ materially from these estimates. The estimates and the underlying assumptions are constantly assessed. Revisions of estimates are recognised in the period in which the estimate is revised and in future periods for which the revision has consequences. Management identified the fair value determination of the loan facilities to related parties as a higher risk estimate.
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3 Financial fixed assets Loan facilities to related parties
EUR 1,000
Balance as per 31 January 2017 614,403 Settlement with interest receivable (non-cash, note 4) (9,646) Loan repayments from related parties (22,653) Loan facilities drawn by related parties 20,290
Balance as per 31 January 2018 602,394 Settlement with interest receivable (non-cash, note 4) 5,788 Loan repayments from related parties (22,246) Loan facilities drawn by related parties 20,375
Balance as per 31 January 2019 606,311
Loan facilities to related parties The loan facilities to related parties as per 31 January 2019 of EUR 606,311 are fully issued to the affiliated PHOENIX PIB Finance BV and concern loan facilities which are limited until 27 May 2020 (EUR 305,942 with a maximum facility of EUR 311,000) and 30 July 2021 (EUR 300,369 with a maximum facility of EUR 315,000) respectively. PHOENIX PIB Finance BV is allowed to increase the issued loans with a minimum of EUR 10 up to the maximum loan facility. The loans bear an interest which is determined by reference of the refinancing possibilities of the Company plus a margin for administration and equity at risk, which is in line with the advanced pricing agreement with the Dutch tax authorities. As per end of the fiscal year the calculated interest rates were 3,57% (EUR 305,942) and 4.00% (EUR 300,369) respectively. Per 31 January 2019 PHOENIX PIB Finance BV had a solvency of 45% (31 January 2018: 45%). PHOENIX PIB Finance BV issues loans to affiliated companies within PHOENIX, for which PHOENIX Pharmahandel GmbH & Co KG acts as guarantor for the loans issued. PHOENIX PIB Finance BV also has the ability to make use of a SFA loan facility of EUR 1.25 billion. The credit risk of PHOENIX PIB Finance BV is therewith expected to be low.
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4 Other receivables and prepaid expenses The other receivables and prepaid expenses as presented under current assets mature within one year. Other receivables and prepaid expenses consist of:
Balance as per 31 January 2019 2018 EUR 1,000 EUR 1,000
Opening balance receivables from related parties 12,721 66 Interest receivable during the year (note 12) 23,168 23,299 Interest received during the year (20,375) (20,290) Interest receivable added to loan facilities (note 3) (5,788) 9,646
9,726 12,721
Receivables from related parties consists of intercompany receivables for interest charges (EUR 9,726) on the loan facilities and are presented under current assets as they mature within one year. Decrease is caused by adjusted timing of interest settlements.
5 Cash and cash equivalents Cash and cash equivalents amount to EUR 26 (31 January 2018: EUR 9). No restriction on the usage of cash exists.
6 Shareholder’s equity The movements in shareholder’s equity have been as follows:
Issued and Share Retained Result for the Total paid-in capital premium earnings year
EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Balance as per 31 January 2017 250 4,500 2,311 1,080 8,141 Appropriation of net income 2016/17 - - 1,080 (1,080) - Dividend payment - - (2,000) - (2,000) Net income for the year 2017/18 - - - 1,110 1,110
Balance as per 31 January 2018 250 4,500 1,391 1,110 7,251
Appropriation of net income 2017/18 - - 1,110 (1,110) - Dividend payment - - (1,500) - (1,500) Net income for the year 2018/19 - - - 967 967
Balance as per 31 January 2019 250 4,500 1,001 967 6,718
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The authorised share capital consists of 250,000 common shares of which 250,000 shares are issued and outstanding at 31 January 2019 (31 January 2018: 250,000 common shares of which 250,000 shares are issued and outstanding). The shares have a nominal value of 1 EURO each. On 26 November 2018 the Company paid out EUR 1,500 dividend to its (immediate) parent PHOENIX PIB Dutch Holding B.V.
7 Long term liabilities
note Balance as per 31 January 2017 594,116 Amortized costs (30) Amortization costs bonds 12 1,468
Balance as per 31 January 2018 595,554 Amortization costs bonds 12 1,522
Balance as per 31 January 2019 597,076
As per 31 January 2019 the long term liabilities consists of two issued bonds each with a nominal value of EUR 300,000. These bonds have been issued during the fiscal year of 2013/14 (27 May 2013) and during the fiscal year of 2014/15 (30 July 2014) and are listed on the EURO MTF, a non-regulated market operated by the Luxembourg Stock Exchange. The bonds represent notes issued and guaranteed, jointly and severally by PHOENIX Pharmahandel GmbH & Co KG and certain of its subsidiaries. The bonds bear an interest of 3.125% (effective interest rate: 3.444%) with a due date on 27 May 2020 and 3.625% (effective interest rate: 3.859%) with a due date on 30 July 2021 respectively. On 6 November 2017 the direct parent of the Company, PHOENIX PIB Dutch Holding B.V., purchased bonds with a nominal value of EUR 100,000 and still owns these bonds per the date of these financial statements.
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8 Short term liabilities Liabilities with a remaining maturity of one year are presented under short-term liabilities. Short-term liabilities consist of:
Balance as per 31 January 2019 2018 EUR 1,000 EUR 1,000
Interest payable 11,908 11,907 Payables to related parties 322 370 Other liabilities 39 42
12,269 12,319
Interest payable relates to accrued interest in relation to the bonds as mentioned in note 7. The payables to related parties relate to the (corporate) tax payable to the principal of the fiscal unity, PHOENIX PIB Dutch Holding B.V.
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9 Risk Section The risk management policies and procedures are key to ensure proper management of the Company. The Company is a small entity with 2 directors and 2 employees, who all know and understand that risk management is an important process. The risk management system is embedded in the organization from the level of the directors to the operations and finance department (soft controls). All employees contribute to identifying risks and the associated control measures. The Company analyses and controls its risks by dividing them into categories which are mentioned below. The control measures are subsequently defined for each identified risk. Where possible, a qualitative description is included of the expected effectiveness of the measures taken. The Company has put measures in place for the majority of the risks and uncertainties identified.
a) Operating activities In the conduct of its operating activities the Company enters into several financial instruments such as loan facilities and bonds. Due to the use of these instruments, the Company is among others exposed to interest rate risk. Interest rate risks exist as a result of potential changes in the market interest rate and may lead to fluctuations in interest payments of variable interest-bearing financial instruments.
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The Company estimates the interest rate risk as low as the interest on loan facilities to related parties as well as the interest rate on bonds are fixed. The interest rate on loan facilities to related parties bear an interest which is calculated by reference of the refinancing possibilities of the Company including a margin for administration and equity at risk in line with the advanced pricing agreement with Dutch tax authorities. As the amounts of the loan facilities and bonds are almost equal in amount and the interest rates correlate with each other, the interest rate risk is assessed as low. b) Strategy The Company’s main activities consists of (re-) financing of related parties. Management is therefore on regular basis in close contact with the PHOENIX’ board to anticipate on any changes in financing structure. Based on the long term financing contracts and management actions, strategic risks are estimated as a low risk. c) Financial position In the conduct of its normal activities the Company enters into several financial instruments such as payables, cash balances with banks and bonds issued. Due to the use of these instruments, the Company is exposed to credit risk and liquidity risk. As per 31 January 2019 the Company’s assets were for 97% (31 January 2018: 97%) financed by long-term financing with two issued bonds for which PHOENIX Pharmahandel GmbH & Co KG, PHOENIX International GmbH and PHOENIX PIB Finance BV are guarantors. This position is covered by two issued loans with similar due dates as the bonds, resulting in a reduced risks on the financial position of the Company. Credit risk represents the risk of default on a receivable that may arise from a counterparty failing to meet the required payments as agreed up on. Per 31 January 2019 the Company’s receivables represents amounts due from related parties, mainly from the affiliated company PHOENIX PIB Finance BV. Per 31 January 2019 PHOENIX PIB Finance BV had a solvency of 45% (31 January 2018: 45%). PHOENIX PIB Finance BV issues loans to affiliated companies within PHOENIX, for which PHOENIX Pharmahandel GmbH & Co KG acts as guarantor for the loans issued. PHOENIX PIB Finance BV also has the ability to make use of a SFA loan facility of EUR 1.25 billion. The credit risk of PHOENIX PIB Finance BV is therewith expected to be low. Liquidity risk is the risk that the Company cannot meet her obligations pursuant to settle in cash or other financial assets and financial obligations. The basic principles of the liquidity risk management includes that there are sufficient facilities maintained as needed to meet the current and future financial liabilities, in normal and difficult circumstances, and without unacceptable losses. The majority of the short-term liabilities however relates to the accruals for interest expenses, which are guaranteed by several PHOENIX companies. d) Laws, rules and regulations All decisions are made by the Board of Directors and all decisions are made in line with the code of conduct which both directors signed. Not meeting the tax regulation is the main risk in the field of laws, rules and regulations. The Company therefore has on a regular basis contact with the Dutch tax authorities and acts in line with an advanced pricing agreement with Dutch tax authorities.
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10 Fair value The fair value of the other financial instruments stated on the balance sheet can be specified as follows:
Balance as per 31 January: Fair value Carrying Fair value Carrying amount amount 2019 2019 2018 2018 EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Financial fixed assets Loan facilities to related parties 633,856 606,311 646,668 602,394
633,856 606,311 646,668 602,394
Other receivables and prepaid expenses Receivables from related parties 9,726 9,726 12,721 12,721
9,726 9,726 12,721 12,721
Long term liabilities Bonds issued 626,898 597,076 643,815 595,554
626,898 597,076 643,815 595,554
Short term liabilities Interest payable 11,908 11,908 11,907 11,907 Payables to related parties 322 322 370 370 Other liabilities 39 39 42 42
12,269 12,269 12,319 12,319
The Company has changed the determination of the discount rate for discounting future cashflows of the loan facilities to related parties from using a market interest rate to a refinancing rate. The impact on the comparative figures is not material, however for consistency reason the comparative figure is adjusted. Both the loan facilities to related parties as well as the bonds show fair values which are higher than the carrying amount. The higher values are mainly the effect of the interest percentages which are above the market level.
22 PHOENIX PIB Dutch Finance B.V.
11 Off-balance sheet commitments Commitments The Company is part of a fiscal unity for corporate income tax purposes together with PHOENIX PIB Dutch Holding B.V. and PHOENIX PIB Finance B.V. As such the Company is jointly and severally liable for the corporate income tax payable by all companies belonging to the fiscal unity. The Company issued loan facilities to related parties with a total value of EUR 626,000, of which EUR 606,311 (note 3) have actual been issued. If loans are drawn up to their maximum this would result in an increase in issued loans by EUR 19,689. No other off-balance sheet commitments are outstanding as per 31 January 2019.
12 Interest - and other financial income and expense The detail of interest - and other financial income is as follows:
2018/19 2017/18 EUR 1,000 EUR 1,000
Interest income - related parties 23,168 23,299
23,168 23,299
Interest income from related parties concerns interest on loan facilities to related parties as reported under note 3. The detail of interest - and other financial expense is as follows:
2018/19 2017/18 EUR 1,000 EUR 1,000
Interest expense 20,250 20,250 Amortization costs bonds 1,522 1,468
21,772 21,718
Interest expense concerns interest payable on the issued bonds as reported under note 7. Bonds are subsequently stated at amortised cost, the difference between the proceeds (net of transaction costs) and the redemption value is recognised as amortization costs bonds. These amortization costs result in a difference between the nominal interest rate and the effective interest rate.
23 PHOENIX PIB Dutch Finance B.V.
13 General and administrative expenses The detail of other operating expenses is as follows:
2018/19 2017/18 EUR 1,000 EUR 1,000
Remuneration 53 53 Professional fees 49 39 Other expenses 5 9
107 101
The remuneration expenses relates to the two part-time directors, two part-time employees and charges by PHOENIX Pharmahandel GmbH & Co KG. Professional fees relates to audit fees, legal- and tax consultants.
14 Transactions with related parties Transactions with related parties occur when a relationship exists between the Company, its participating interests and their directors and key management personnel. All transactions are based at arms’ length. There are no other transactions with related parties other than disclosed in these financial statements. There have been no transactions outside the normal course of business.
15 Income taxes The Company is part of a fiscal unity for corporate income tax purposes together with PHOENIX PIB Dutch Holding B.V. as the principal of such fiscal unity and with PHOENIX PIB Finance B.V. Since the Company forms a fiscal unity together with PHOENIX PIB Dutch Holding B.V. and PHOENIX PIB Finance B.V., the company applies the principle that the deferred tax assets / liabilities are accounted for at the parent entity of the fiscal unity when applicable, therefore no deferred tax assets or liabilities are accounted in the financial statements of the Company.
24 PHOENIX PIB Dutch Finance B.V.
The statutory corporate tax rate in the Netherlands was 25% (2017/18: 25%). The effective tax rate over 2018/19 also was 25% (2017/18: 25%):
2018/19 2017/18 EUR 1,000 EUR 1,000 Operating income/(loss) before provision for income taxes 1,289 1,480
Income tax benefit/ (expense) (322) (370)
Effective tax rate 25% 25%
16 Auditor’s fees With reference to Section 2:382a (1) and (2) of the Dutch Civil Code, the following fees for the financial year of 2018/19 have been charged by Ernst & Young Accountants LLP to the Company:
2018/19
EY Audit Other EY Total EY network EUR 1.000 EUR 1.000 EUR 1.000
Audit of the financial statements 38 - 38 Other audits - - - Tax advise - - - Other non-audit services - - -
38 - 38
2017/18
EY Audit Other EY Total EY network EUR 1.000 EUR 1.000 EUR 1.000
Audit of the financial statements 38 - 38 Other audits - - - Tax advise - - - Other non-audit services - - -
38 - 38
25 PHOENIX PIB Dutch Finance B.V.
17 Remuneration board of directors Remuneration of the board directors took place in the form of salary. The total remuneration for 2018/19 was EUR 38 (2017/18: EUR 38) including social charges, fully related to short term remuneration.
18 Articles of Association provisions governing profit appropriation Awaiting the decision by the shareholders, the net profit of the year is separately included in the shareholder's equity as result of the year.
19 Subsequent events There have been no significant subsequent events between 1 February 2019 and the date of issuance of these financial statements.
Maarssen, 18 April 2019 Board of Directors:
Mr. J.P. Eeken
Mr. N. van Esschoten
26 PHOENIX PIB Dutch Finance B.V.
Other information Appropriation of income The Articles of incorporation provide that the net income for the year is subject to the disposition decided upon at the Annual General Meeting of Shareholders.
Independent auditor’s report The independent auditor’s report is set forth on the following page.
27 EY Building a better working world
Independent auditor’s report To: the shareholders and board of directors of PHOENIXPIB Dutch Finance B.V. Report on the audit of the financial statements 2018/19 included in the annual report Our opinion We have audited the financial statements for the year ended 31 January 2019 of PHOENIXPIB Dutch Finance B.V., based in Maarssen.
In our opinion the accompanying financial statements give a true and fair view of the financial position of PHOENIXPIB Dutch Finance B.V.as at 31 January 2019, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The financial statements comprise: The balance sheet as at 31 January 2019 The statement of income for the year 2018/19 The notes comprising a summary of the accounting policies and other explanatory information
Basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of PHOENIX P18 Dutch Finance B.V.in accordance with the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Materiality Materiality €3,000,000 (2017/18: €3,000,000)
Benchmark applied 0.5% of total assets (2017/18: 0.5% of total assets)
Explanation The company serves as a financing company for the affiliated company PHOENIXPIBFinance B.V.Based on our professional judgment we believe total assets is a suitable basis, as this is an important and stable measure of the company’s performance. Nochanges have been made to the materiality level as compared to prior year. FY Page 2 Buildinga better workingworld
We have also taken misstatements into account and/or possible misstatements that in our opinion are material tot the users of the financial statements for qualitative reasons.
We agreed with the board of directors that misstatements in excess of €150,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Our key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the board of directors. The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Our key audit matters are consistent with prior year.
Our audit approach Key observations
Valuation of loan facilities to related parties (Notes 3 and 10 in the financial statements)
The loan facilities to related patties Our audit procedures include an Management has updated the teptesent over 98%of the balance sheet assessment of the recoverability valuation and the fair value total. The loan facilities to related of the loan facilities to related disclosure of the loan facilities parties are initiallyrecognized at fair parties, including an assessment for FY2018/19. Weagree with value and subsequently measured at of the financial viabilityof the management’s assessment. amortized cost. Furthermore, the fair counterparty. Based on our procedures value of the loans is disclosed in the performed on the valuation of financial statements. As there is no Furthermore, with respect to the the loan facilities and the fair observable market price for the loan fair value disclosure of the loan value disclosure, we have not facilities, the tair value is estimated at facilities we have involved identified uncorrected errors the present value of the future cash internal EYspecialists to assess that require adjustment of the flows using a discount rate. the valuation calculation and key financial statements including assumptions. disclosures related to the loan Giventhe magnitude of the account, the facilities. potential impact of an impairment on the income statement and the estimation aspects in the fair value disclosure, we have considered the valuation and presentation and disclosure of the loan facilities to related parties as significant to our audit. Disclosureson the loan facilities to related parties (including the fair value) are included in notes 3 and 10 of the financial statements. ______
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I’ Our audit approach Key observations _ f Valuation of the bonds (Notes 7 and 10 in the financial statements)
The bonds are initiallyrecognized at fair Our audit procedures include an Management has updated the value and subsequently measured at assessment of the accounting for calculation of the valuation of amortized cost. Giventhe magnitude of the bonds in accordance with the the bonds and the fair value the account we have considered the contractual terms. Furthermore, disclosure. Weagree with valuation of the bonds (including the fair we have recalculated the managements assessment. value disclosure) as significant to our amortized cost value based on audit. the effective interest method. We Based on our procedures have audited the disclosure note performed we have not Disclosures on the valuation (including by recalculating the fair value of identified errors that requite the fair value) of bonds are included in the bonds based on independent adjustment of the financial notes 7 and 10 of the financial market information. statements including disclosures statements. related to the bonds.
Report on other information included in the annual report In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of: The directors’ report Other information as requited by Part 9 of Book 2 of the Dutch Civil Code
Based on the following procedures performed, we conclude that the other information: Is consistent with the financial statements and does not contain material misstatements Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
The board of directors is responsible for the preparation of the other information, including the directors’ report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements Engagement We were engaged by the board of directors as auditor of PHOENIXPIB Dutch Finance B.V.as of the audit for the year ending 31 January 2014 and have operated as statutory auditor ever since that financial year. Page 4
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Description of responsibilities for the financial statements Responsibilities of the board of directors for the financial statements The board of directors is responsible for the preparation and fair presentation of the financial statements in accordance with Part 9 of Book 2 of the Dutch CivilCode. Furthermore, the board of directors is responsible for such internal control as the board of directors determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the board of directors is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the board of directors should prepare the financial statements using the going concern basis of accounting unless the board of directors either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The board of directors should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others: Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors E’V Page 5 Building a better working world
Concluding on the appropriateness of the board of directors’ use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern, If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern Evaluating the overall presentation, structure and content of the financial statements, including the disclosures Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit.
We provide the board of directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the board of directors, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Eindhoven, 18 April 2019
Ernst & Young Accountants LLP
Signed by A. (Anke) B.E. Laan