The Company's principal treasury operations are coordinated by its corporate treasury function. All treasury operations are conducted within a framework of policies and procedures approved annually by the Board. As a matter of policy, the Company does not undertake speculative transactions that would increase its currency or interest rate exposure.

The Company is exposed to interest rate risk on restricted cash, cash and cash equivalents and on foreign exchange contracts on which interest is at floating rates. This exposure is primarily to US dollar, Pounds sterling and Euro interest rates. As the Company maintains all of its cash, liquid investments and foreign exchange contracts on a short term basis for liquidity purposes, this risk is not actively managed. In the year to December 31, 2011 the average interest rate received on cash and liquid investments was less than 1% per annum. The largest proportion of these cash and liquid investments was in US dollar money market and liquidity funds.

The Company incurs interest at a fixed rate of 2.75% on $1,100 million in principal amount convertible bonds due 2014.

No derivative instruments were entered into during the year to December 31, 2011 to manage interest rate exposure. The Company continues to review its interest rate risk and the policies in place to manage the risk.

Financial instruments that potentially expose Shire to concentrations of credit risk consist primarily of short-term cash investments, trade accounts receivable (from product sales and from third parties from which the Company receives royalties) and derivative contracts. Cash is invested in short-term money market instruments, including money market and liquidity funds and bank term deposits. The money market and liquidity funds in which Shire invests are all triple A rated by both Standard and Poor's and by Moody's credit rating agencies.

The Company is exposed to the credit risk of the counterparties with which it enters into derivative instruments. The Company limits this exposure through a system of internal credit limits which require counterparties to have a long term credit rating of A- / A3 or better from the major rating agencies. The internal credit limits are approved by the Board and exposure against these limits is monitored by the corporate treasury function. The counterparties to these derivatives contracts are major international financial institutions.

The Company's revenues from product sales in the US are mainly governed by agreements with major pharmaceutical wholesalers and relationships with other pharmaceutical distributors and retail pharmacy chains. For the year to December 31, 2011 there were three customers in the US that accounted for 49% of the Company's product sales. However, such customers typically have significant cash resources and as such the risk from concentration of credit is considered acceptable. The Company has taken positive steps to manage any credit risk associated with these transactions and operates clearly defined credit evaluation procedures. However, an inability of one or more of these wholesalers to honor their debts to the Company could have an adverse effect on our financial condition and results of operations.

A substantial portion of the Company's accounts receivable in countries outside of the United States is derived from product sales to government-owned or government-supported healthcare providers. The Company's recovery of these accounts receivable is therefore dependent upon the financial stability and creditworthiness of the relevant governments. In 2011 the creditworthiness and general economic condition of a number of Eurozone countries (including Greece, Ireland, Italy, Portugal and Spain, the “Relevant Countries”) has continued to deteriorate. As a result, in some of these countries the Company is experiencing delays in the remittance of receivables due from government-owned or government-supported healthcare providers.

The Company's aggregate accounts receivable, net of the allowance for doubtful accounts, in total and from government-owned or government-supported healthcare providers in the Relevant Countries are as follows:


	December 31, 2011	December 31, 2010
	$’M	$’M

Total accounts receivable, net in the Relevant Countries	184	144

Total Accounts receivable, net in the Relevant Countries as a percentage of total outstanding accounts receivable, net	22%	21%

Accounts receivable, net due from government-owned or government-supported healthcare providers for the Relevant Countries	170	126

Accounts receivable due from government-owned or government-supported healthcare providers in the Relevant Countries of $170 million (2010: $126 million) are split by country as follows: Greece $4 million (2010: $8 million); Ireland $1 million (2010: $1 million); Italy $81 million (2010: $60 million); Portugal $14 million (2010: $5 million) and Spain $70 million (2010: $52 million).

In 2011 the Company received $193 million in settlement of accounts receivable in the Relevant Countries - $11 million was from Greece (including $2.1 million in the form of Greek Government Bonds (“GGBs”)); $18 million from Ireland; $94 million from Italy; $5 million from Portugal and $65 million from Spain.

To date the Company has not incurred significant losses on the accounts receivable in the Relevant Countries, and continues to consider that such accounts receivable are recoverable.

Other than the GGBs (principal amount $2.1 million, carrying value $0.7 million as at December 31, 2011) and accounts receivable from government-owned or government-supported healthcare providers outlined above, the Company does not hold any other government debt from the Relevant Countries. Additionally the Company does not consider it is currently exposed to significant sovereign credit risk outside of the Relevant Countries.

The Company continues to evaluate all its accounts receivable for potential collection risks and has made provision for amounts where collection is considered to be doubtful. If the financial condition of the Relevant Countries or other Eurozone countries suffer significant deterioration, such that their ability to make payments becomes uncertain, or if one or more Eurozone member countries withdraws from the Euro, additional allowances for doubtful accounts may be required, and losses may be incurred, in future periods. Any such loss could have an adverse effect on the Company's financial condition and results of operations.

The Company trades in numerous countries and as a consequence has transactional and translational foreign exchange exposures.

Transactional exposure arises where transactions occur in currencies different to the functional currency of the relevant subsidiary. The main trading currencies of the Company are the US dollar, Pounds Sterling, Swiss Franc and the Euro. It is the Company's policy that these exposures are minimized to the extent practicable by denominating transactions in the subsidiary's functional currency.

Where significant exposures remain, the Company uses foreign exchange contracts (being spot, forward and swap contracts) to manage the exposure for balance sheet assets and liabilities that are denominated in currencies different to the functional currency of the relevant subsidiary. These assets and liabilities relate predominantly to intercompany financing, accruals for royalty receipts and specific external receivables. The foreign exchange contracts have not been designated as hedging instruments. Cash flows from derivative instruments are presented within net cash provided by operating activities in the consolidated cash flow statement, unless the derivative instruments are economically hedging specific investing or financing activities.

Translational foreign exchange exposure arises on the translation into US dollars of the financial statements of non-US dollar functional subsidiaries.

At December 31, 2011 the Company had 20 swap and forward foreign exchange contracts outstanding to manage currency risk. The swaps and forward contracts mature within 90 days. The Company did not have credit risk related contingent features or collateral linked to the derivatives. At December 31, 2011 the fair value of these contracts was a net asset of $3.0 million. Further details are included below:

		Fair value	Fair value
		December 31,	December 31,
		2011	2010
		$’M	$’M
		_____________	_____________
Assets	Prepaid expenses and other current assets	3.4	3.7
Liabilities	Other current liabilities	0.4	2.7
		_____________	_____________

Net gains (both realized and unrealized) arising on foreign exchange contracts have been classified in the consolidated statements of income as follows:

	Location of net gain recognized in income	Amount of net gain recognized in income
	__________________________________	____________	____________
Year to		December 31,	December 31,
		2011	2010
		$’M	$’M
		_____________	_____________
Foreign exchange contracts	Other income, net	21.3	24.8
		_____________	_____________

These net foreign exchange gains are offset within Other income, net by net foreign exchange gains/(losses) arising on the balance sheet items that these contracts were put in place to manage.