Fagron N.V. — Annual Report 2011

Jul 30, 2013

Publication

Arseus NV

Waregem

Konzernabschluss zum Geschäftsjahr vom 01.01.2011 bis zum 31.12.2011

Declaration

We declare that, to the best of our knowledge, the consolidated financial statements for the year ended 31 December 2011, prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, and the legal and regulatory requirements applicable in Belgium, reflect a true and fair view of the equity, the financial situation and the results of the Company and the companies that are included in the consolidation scope, and that the annual report provides a true and fair view of the development and the results of the Company and of the position of the Company and the companies included in the consolidation scope, and provides a description of the main risks and uncertainties they are faced with.

In the name and on behalf of the Board of Directors

29 March 2012

Ger van Jeveren, CEO

Jan Peeters, CFO

FINANCIAL ANNUAL REPORT 2011

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated income statement

Consolidated statement of realised and unrealised gains and losses

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

Report of the Board of Directors on the consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.	General information
2.	Financial reporting principles
3.	Risk Management
4.	Critical accounting estimates and judgments
5.	Segment information
6.	Turnover
7.	Other operating income
8.	Employee benefit expenses
9.	Depreciation and amortisation
10.	Other operating expenses
11.	Financial result
12.	Income tax expenses
13.	Earnings per share
14.	Intangible fixed assets
15.	Property, plant and equipment
16.	Financial assets and other non-current assets
17.	Taxes, remuneration and social security
18.	Inventories
19.	Trade receivables, other receivables and cash and cash equivalents
20.	Equity
21.	Provisions
22.	Pension obligations
23.	Financial debts and financial instruments
24.	Other current payables
25.	Contingencies
26.	Related parties
27.	Business combinations
28.	Information on the Statutory Auditor, his remuneration and related services
29.	Significant events after balance-sheet date
30.	Additional notes
31.	List of the consolidated companies

STATUTORY AUDITOR'S REPORT

STATUTORY FINANCIAL STATEMENTS

Condensed stand-alone income statement Arseus NV

Condensed stand-alone balance sheet Arseus NV

Appropriation of profits Arseus NV

ALPHABETICAL TERMINOLOGY LIST

Consolidated financial statements

Consolidated income statement

(x 1,000 euros)	Note	2011	2010
Operating income		493,582	425,262
Turnover	6	492,330	424,056
Other operating income	7	1,252	1,206
Operating expenses		(447,325)	(389,246)
Trade goods		(250,269)	(222,210)
Services and other goods		(75,865)	(63,208)
Employee benefit expenses	8	(101,163)	(89,606)
Depreciation and amortisation	9	(14,531)	(12,672)
Other operating expenses	10	(5,498)	(1,549)
Operating profit		46,257	36,017
Financial income	11	1,269	477
Financial expenses	11	(10,448)	(6,437)
Profit before income tax		37,078	30,056
Income tax expenses	12	(8,938)	(7,578)
Profit after income tax		28,140	22,479
Attributableto
Equity holders of the company (net profit)		28,147	22,357
Non-controlling interest		(7)	122
Profit for the period		28,140	22,479
Profit for the period per share (in euros)	13	0,94	0,75
Diluted profit per share (in euros)	13	0,92	0,75
Recurring net profit per share (in euros)	13	1,05	0,98
Diluted recurring net profit per share (in euros)	13	1,03	0,97

Consolidated statement of realised and unrealised gains and losses

(x 1,000 euros)	2011	2010
Profit after income tax for the financial year	28,140	22,479
Unrealised gains and losses
Exchange rate differences	(4,738)	2,952
Total realised and unrealised gains and losses of the period	23,402	25,431
Attributable to the equity holders of the company	23,478	25,193
Minority interests	(76)	238

Consolidated balance sheet

(x 1,000 euros)	Note	2011	2010
Noncurrent assets		446,376	355,810
Intangible assets	14	367,069	284,498
Property, plant and equipment	15	57,150	48,862
Financial assets	16	819	818
Deferred tax assets	17	20.368	20,785
Other non current assets	16	969	846
Current assets		233,856	217,782
Inventories	18	76.643	66,059
Trade receivables	19	75.956	86,303
Other current assets	19	11.407	14,234
Cash and cash equivalents	19	69,850	51,186
Total assets		680,282	573,592
Equity	20	220,452	208,122
Shareholder's equity (parent)		225,676	216,654
Treasury shares		(9,004)	(10,816)
Non-controlling interest		3,780	2,284
Noncurrent liabilities		12,735	225,747
Provisions	21	1,051	975
Pension obligations	22	3.884	3,276
Deferred tax liabilities	17	1.932	4,363
Borrowings	23	4,350	214,960
Financial instruments	23	1.517	2,172
Current liabilities		447,045	139,723
Borrowings	23	254,057	2,315
Financial instruments	23	1,935	2,758
Trade payables		94,194	80,845
Taxes, remuneration and social security	17	37,338	27,000
Other current payables	24	59,521	26,806
Total equity and liabilities		680,232	573,592

Consolidated statement of changes in equity

(x 1,000 euros)	Note	Share capital & share premium	Other reserves	Treasury shares	Retained earnings	Total	Non-controlling interest	Total equity
Balance at 31 December 2009		317,302	(195,876)	(7,881)	80,761	194,306	0,046	196,353
Currency translation adjustments			2,836			2,836	116	2,952
Profit for the period					22,357	22,357	122	22,479
Total recognised income for the period		317,302	(193,040)	(7,881)	103,118	219,499	2,284	221,783
Purchase of treasury shares				(2,935)		(2,935)		(2,935)
Dividends relating to 2009 result					(10,80)	(10,880)		(10,880)
Share-based payments			154			154		154
Purchase non-controlling interests
Balance at 31 December 2010		317,302	(192,887)	(10,816)	92,238	205,838	2,284	208,122
Currency translation adjustments			(4,669)			(4,669)	(69)	(4,738)
Profit for the period					28,147	28,147	(7)	28,140
Total recognised income for the period		317,302	(197,555)	(10,816)	120,385	229,317	2,207	231,524
Capital increase	20	224				224		224
Purchase of treasury shares	20			1,812		1,812.		1,812
Dividends relating to 2010 result	20				(13,154)	(13,154)		(13,154)
Share-based payments	20		45			45		45
Purchase non-controlling interests	20		(1,575)			(1,575)	1,575
Balance at 31 December 2011		317,527	(199,085)	(9,004)	107,030	016,670	3,783	220,452

Consolidated cash flow statement

(x 1,000 euros)	2011	2010
Operating activities
Profit before income taxes	37,078	30,056
Taxes paid	(8,281)	(7,803)
Adjustments for financial items	9,179	5,960
Total adjustments for non-cash items	14,985	11,642
Total changes in working capital	19,185	2,269
Total cash flow from operating activities	72,147	42,126
Investment activities
Capital expenditures	(17,330)	(19,159)
Investments in existing shareholdings (subsequent payments) and in new holdings	(45,023)	(53,486)
Total cash flow from investing activities	(62,353)	(72,645)
Financing activities
Capital increase	224
Purchase of treasury shares		(3,152)
Dividends paid	(13,176)	(10,812)
New borrowings	62,241	69,443
Reimbursement of borrowings	(28,407)	(1,979)
Interest received (paid)	(10,416)	(6,385)
Total cash flow from financing activities	10,467	47,116
Total net cash flow for the period	20,260	16,596
Cash and cash equivalents-start of the period	51,186	34,284
Gains or losses on exchange on liquid assets	(1,596)	306
Cash and cash equivalents- end of the period	69,850	51,186
Change in cash and cash equivalents	20,260	16,596

The item "adjustment for financial items" relates to interest paid and received and to other financial expenses and income not being cash flows such as revaluation of the financial instruments. The "total adjustments for non-cash items" particularly relates to depreciation, amortisation and changes in provisions. The item "total changes in working capital" concerns changes in the inventories, trade debtors and creditors, other receivables and debts, and all other balance sheet elements that form part of the working capital. Aforementioned changes are adjusted as appropriate for non-cash flows as presented above and conversion differences and changes in the consolidation scope.

Report of the Board of Directors on the consolidated financial statements

1.1. Consolidated income statement

The operating income increased by 16.1% from 425.262 million euros in 2010 to 493.582 million euros in 2011.

The net turnover represents 99.7% of the operating income and increased by 16.1%, from 424.056 million euros in 2010 to 492.330 million euros in 2011. Organic growth amounted to 2.0% (2.7% at stable exchange rates) during 2011. The acquisitions in 2010, combined with the acquisitions in 2011 of Brazilian company Pharma Nostra and a Dutch compounding pharmacy within the Fagron division and Belgian company CMS within the Corilus division form the main components of external growth in 2011.

The turnover developed in a different pattern for each division. In 2011, Fagron realised a growth in turnover by 35.5% (37.4% at stable exchange rates) and an organic growth rate of 6.3% (7.8% at stable exchange rates). The continued strong results confirm the success of Fagron's strategy, focusing on worldwide revitalisation of pharmaceutical compounding. As part of the strategy, Fagron continually introduces new products and concepts on the market in order to fulfill the growing worldwide demand for tailor-made medication. Fagron founded Fagron Academy in zoo. Fagron Academy's objective is to inform prescribers and pharmacists regarding the use and importance of pharmaceutical compounding for their patients. It also offers training courses to pharmacists to further enhance their skills in pharmaceutical compounding of tailor-made medicaton. Fagron Academy will be introduced worldwide during 2012.

In 2011, more vital steps were taken in terms of strategy to accelerate Fagron's worldwide market leadership within the fast-growing niche market of pharmaceutical compounding. After the acquisition of Pharma Nostra in Brazil, the acquisition of a specialist compounding pharmacy in the Netherlands, starting up a greenfield in Argentina, entering into a partnership in Serbia and taking over Polish company Pharma Cosmetic, Fagron now operates in 24 countries in Europe and in North and South America.

Arseus Dental realised a turnover growth of 1.1% in 2011 and an organic growth of -1.4%. Arseus Dental's technology-driven activities (Swiss company Hader and French company Julie Owandy) achieved good organic growth in 2011. The increase in Julie Owandy was driven by the introduction of the I-Max Touch 3D (digital 3-dimensional dental imaging equipment) and by further reinforcement of market leadership in France of Julie, software for dentists. In 2011, Hader successfully developed and marketed orthopaedic and dental concepts.

The activities of Arseus Dental targeting dental laboratories also showed healthy growth within 2011. In early 2011, Ceka-Preciline®s product range of attachments was further extended and the in-house quality brand Selexion® was introduced in Europe. Selexion® includes an extensive range of products used on a daily basis by dental laboratories. Under the name Novux®, Arseus Dental introduced a unique CAD/CAM concept for dental laboratories during 2011. Ceka-Preciline®, Selexion® and Novux® are Arseus Dental's own brands.

Arseus Dental's distribution activities focusing on dental practices had a difficult year. During the course of 2011, better operational structures were implemented, the product range was optimised and a number of management changes were implemented. Furthermore, a number of procedures were started in the context of further improvement of service, quality and customer focus. These initiatives resulted in an increase in the gross margin as well as a healthy turnover growth in the fourth quarter. We expect this trend to continue into 2012.

Arseus Medical's turnover decreased by 0.7% in zoo. The organic growth was -4.9%. The negative organic turnover growth was due mainly to the phasing out of a number of non-strategic distributions in the second half of zoo. In line with the strategy, new medical solutions and concepts were successfully introduced during 2011.

Corilus realised a 10.5% turnover growth in 2011. Organic growth amounted to 1.3%. Organic turnover growth was depressed slightly due to a temporary shortage of technical staff, which resulted in carrying out fewer installations than scheduled for 2011. Belgian company CMS, supplying software to residential care centres in Belgium, was acquired in early 2011 and was subsequently successfully integrated.

In 2011, four Belgian pharmacy chains signed agreements to install Greenock Pharmacy, the innovative pharmacy software, in their Belgian pharmacies. This is a clear confirmation of Greenock's quality. During 2011, 140 Belgian pharmacies were migrated to Greenock.

The gross margin (the difference between turnover on the one hand and trade goods, raw and auxiliary materials on the other) in 2011 amounts to 242.061 million euros. This represents 49.2% of the turnover. The gross margin in 2010 was 47.6%.

The total operating expenses, defined as services and various goods, employee benefit expenses and other operating expenses minus other operating income, amounts to 181.274 million euros, increasing by 28.117 million euros compared to 2010. The cost coverage, defined as operating expenses versus gross margin, improved from 75.9% in 2010 to 74.9% in 2011.

Depreciation and amortisation increased by 14.7% from 12.672 million euros in 2010 to 14.531 million euros in 2011.

The operating profit amounts to 46.257 million euros, representing 9.4% of turnover, an improvement of 10.240 million euros compared to 2010. In 2010 the operating result was 36.017 million euros, representing 8.5% of the turnover.

The financial result amounts to -9.179 million euros against -5.960 million euros in 2010. This increase is due to increasing net financial debt, while interest rates have increased on average. The financial derivatives were subject to a positive revaluation of 1.478 million euros in 2011. This positive revaluation relates to the increase in the market value of the interest rate hedges that do not qualify for hedge accounting in accordance with IAS 39. Excluding the revaluation of the financial derivatives, the financial result amounts to -10.657 million euros.

This brings profit before income tax to 37.078 million euros, an increase of 7.022 million euros compared to 2010.

The taxes amount to 8.938 million euros. The effective tax burden, as a percentage of the profit before income taxes, has decreased to 24.1% in 2011 compared with 25.2% in 2010.

Profit for the period amounts to 28.140 million euros, an increase of 25.2% in comparison to 2010. The non-controlling interest amounts to -0.007 million euros and concerns Fagron A/S (formerly Tamda) in the Czech Republic and Unit Dose Pack BV in the Netherlands. As a result, the share of Arseus comes to 28,147 million euros.

1.2. Consolidated balance sheet

The consolidated balance sheet total increased by 28.6% from 573.592 million euros in 2010 to 680.232 million euros in 2011.

Assets

Total noncurrent assets amount to 446.376 million euros. This amount is 90.566 million euros higher than in 2010.

The intangible assets increased by 82.571 million euros to a total of 367.069 million euros. This increase is due mainly to recognising goodwill as a result of the acquisitions of Pharma Nostra in Brazil, CMS in Belgium and a Dutch compounding pharmacy, and to Corilus' and Arseus Dental Dental Technologies R&D activities.

Property, plant and equipment increased by 8.288 million euros to a total of 57.250 million euros. This increase is due mainly to acquiring assets in acquisitions and the new head office and distribution centre of Fagron Netherlands, which were delivered in December 2011.

The net operational capital expenditures amount to 27.330 million euros, which is 3.5% of the 2011 turnover. The net operational capital expenditures included investments in R&D, automation and the aforementioned investment in a new head office and distribution centre for Fagron Netherlands.

Financial assets amount to 0.819 million euros.

Deferred tax assets represent a value of 20.368 million euros. They are mainly related to tax losses carried forward which are likely to be appropriated in the future.

The other non current assets amount to 0.969 million euros and are mainly security deposits.

Total current assets amount to 233.856 million euros in 2011 compared to 217.782 million euros in 2010, an increase by 16.074 million euros. The key changes were the increase in inventories by 10.584 million euros (16.0%), the decrease in trade receivables by 10.347 million euros (12.0%), and the increase in cash and cash equivalents by 28.664 million euros (36.5%). The decrease in trade receivables is due to stricter management of outstanding invoices and factoring.

Equity and liabilities

Total equity amounts to 220.452 million euros. This represents an increase of 12.330 million euros in comparison to 2010.

Total liabilities increased from 365.470 million euros in 2010 to 459.780 million euros in 2011. This represents an increase of 94.31o million euros.

Provisions increased by 0.076 million euros to 1.051 million euros.

Pension obligations in 2011 amount to 3.884 million euros, a decrease of 18.6% in comparison to 2010.

Deferred tax liabilities relate among other things to temporary differences between reporting and fiscal accounting at the local entities. These amounted to 1.932 million euros in 2011 against 4.363 million euros in 2010.

Non current interest-bearing financial liabilities (long-term borrowings) amount to 4.350 million euros in 2011, a decrease of 210.61o million euros against 2010. Current interest-bearing financial liabilities (short-term borrowings) amount to 254.057 million euros in 2011, an increase of 251.742 million euros against 2010. These movements are mainly attributable to the expiration of the company's credit facilities on the closing date of August 2012, i.e. within 12 months.

As at 31 December 2011, net financial debt (total current and non current interest-bearing financial liabilities plus other long-term liabilities less cash and cash equivalents) amounts to 188.557 million euros, versus 166.089 million euros at the closing date of 2010. At year-end 2011, the net financial debt/annualised recurring EBITDA ratio was 2.48, fully in compliance with the covenant under the credit facility, which sets a maximum ratio of 3.25.

Trade payables are 13.349 million euros, or 16.5%, higher than in 2010, amounting to 94,294 million euros in 2011.

Taxes, remuneration and social security amount to 37.338 million euros, an increase of 10.338 million euros in comparison to 2010.

Other current payables amount to 59.521 million euros versus 26.806 million euros in 2010. This increase is due to the increase of subsequent payments for acquisitions.

1.3. Consolidated cash flow statement

The consolidated cash flow statement takes as its starting point the profit before income taxes of 37.078 million euros, as reported in the consolidated income statement.

From this amount are deducted the outgoing cash flows before taxes, being 8.281 million euros. This amount includes all income taxes effectively paid during 2011. Then the elements from operating activities not having a cash flow effect or not directly related to operating activities are reintroduced. This represents a total of 24.164 million euros. A significant portion relates to paid interest (10.416 million euros) recognised as cash flows from financing activities (see below) minus the positive revaluation of financial derivatives (1.478 million euros). In this context, depreciations and amortisations on tangible and intangible assets and changes in provisions and deferred taxes are significant non-cash elements as well. The next step is to set off the changes in working capital in the cash flow statement (positive effect of 19.185 million euros). The total cash flow from operating activities amounts to 72.147 million euros, an increase of 71.3% in comparison to 42,126 million euros in 2010.

Total cash flows from investment activities produced an outflow of 62.353 million euros relating to capital expenditures in the amount of 17.330 million euros and payments for existing shareholdings (subsequent payments) and in new holdings in the amount of 45.023 million euros.

The total of cash flows from financing activities represents an inflow of 10,467 million euros. Arseus increased its share capital by 0.224 million euros in 2011 and paid out 13.276 million euros in dividends. Payment of interest on loans and other financial elements such as financial discounts produced an outflow of 10.416 million euros, the new borrowings producing an inflow of 62.241 million euros. This is offset by repayment of borrowings in the amount of 28,407 million euros.

Total cash and cash equivalents increased by 20.260 million euros: from 51.186 million euros at the start of the reporting period to 69.85o million euros at the end of the reporting period. This difference is due to losses on exchange on liquid assets.

Notes to the consolidated financial statements

1. General information

Arseus NV (the 'Company) and its subsidiaries (together, the 'Group') constitute a multinational group of companies that supplies products, services and concepts to professionals and institutions in the healthcare sector in Europe, the United States, Brazil and Argentina. The company is subdivided into four divisions and operates in the markets for pharmaceutical compounding for pharmacies, dental products, medical and surgical products, and medical ICT solutions. The Company is a public limited liability company, incorporated and domiciled in Belgium, with its registered office at Textielstraat 24, 8790 Waregem. The company registration number is BE 0890 535 026. The operational activities of the Arseus Group are driven by the Dutch company Arseus BV. The head office of Arseus BV is located in Rotterdam.

The shares of Arseus are listed on the regulated markets of NYSE Euronext Brussels and NYSE Euronext Amsterdam.

The Board of Directors approved the publication of these consolidated financial statements on 29 March 2012.

2. Financial reporting principles

The principal accounting policies applied in preparing these consolidated financial statements are detailed below. These policies have been consistently applied by all consolidated entities, including subsidiaries, to all years presented, unless stated otherwise.

IFRS developments

The consolidated financial statements of Arseus have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The consolidated financial statements have been prepared on the basis of the historical cost convention, with the exception of financial assets and liabilities (including derivative instruments), which are stated at fair value.

a) New and revised standards and interpretations of existing standards applied by the Group in 2011.

The following new standards, revised standards and interpretations first apply to the reporting period of the Group starting from 1 January 2011:

•	IAS 24 (revised): 'Related party disclosures', effective as of 1 January 2011. The revised standard updates the definition of 'Related Party and amends certain requirements relating to disclosure obligations of state-controlled enties.
•	"Improvements to the IFRS standards" (2010) resulting in changes to IAS 1, IAS 27, IAS 34, IFRS 1, IFRS 3, IFRS 7 and IFRIC 13. The improvements are applicable to financial years starting on or after 1 January 2011.

The application of the standards above did not have any worth mentioning impact on the Group's financial result or balance sheet position.

The following new standards, revised standards and interpretations first apply to the reporting period of the group starting from 1 January 2011, but are not relevant for the Group:

•	Amendments to the IAS 32 standard Glassification of rights issues' requiring the rights issued within the scope of application of the amendments to be classified as equity. The amendments are applicable to financial years starting on or after 1 February 2010.
•	Amendments to the IFRS I standard, providing a limited exemption for comparative IFRS 7 information for first-time adopters, effective date 1 July 2010.
•	IFRIC 19 `Extinguishing financial liabilities with equity instruments', effective date 1 July 2010.
•	IFRIC 19 clarifies the administrative processing of transactions in which a debtor and a creditor revise the conditions of a financial commitment resulting in the debtor paying back the amount due in full or in part by means of issuing equity instruments to the creditor.
•	Amendments to the interpretation IFRIC 14 `Prepayments of a minimum funding requirement', effective dater January 2011. The changes remove the unintended implications of IFRIC 14 relevant to processing of prepayments in the event of a minimum required funding ratio.

b) The following new standards, amendments to standards and interpretations were published by IASB but have not yet become mandatory for the financial year starting on 1 January 2011 and have not yet been approved by the EU:

•	Amendments to the IFRS 1 standard `First-time adoption of International Financial Reporting Standards' concerning severe hyperinflation and withdrawing the fixed application date for first adopters. The improvements are applicable to financial years starting on or after 1 July 2011.
•	Amendments to the IFRS 7 standard 'Financial instruments disclosures', requiring an improvement in disclosure on transferred financial assets. These amendments are applicable on financial years starting on or after 1 July 2011.
•	Amendments to the IAS 1 standard `Presentation of financial statements', effective date 1 July 2012. The amendments pertain to the notes to items presented in the unrealised gains and losses in the statement of realised and unrealised gains and losses.
•	Amendments to the IAS 12 standard 'Income taxes', effective date 1 January 2012. The amendments provide a practical method for valuation of deferred tax assets and liabilities for property investments recognised in accordance with the fair-value model.
•	IFRS 9 `Financial instruments', effective date January 2013. This standard pertains to classification and valuation of financial assets and liabilities and suspension of recognising financial assets and liabilities in the balance sheet.
•	IFRS 10 Consolidated financial statements', effective date 1 January 2013. The new standard builds on the existing principles by identifying the concept of control as the key factor in the decision to recognise an entity in the consolidated financial statements.
•	IFRS 11 'Jointe arrangements', effective dater January 2013. The new standard focuses more on rights and obligations than on legal form. The proportional consolidation method is no longer acceptable.
•	IFRS 12 'Disclosure of interests in other entities', effective dater January 2013. This new standard contains requirements for the disclosure of all forms of interests in other entities.
•	IFRS 13 'Fair value measurement', effective date January 2013. The new standard explains how the fair value is to be measured for the purpose of financial reporting.
•	IAS 19 (revised) Employee benefits', effective as of January 2013. The revised standard results in significant amendments to the method of recognising and valuation of the pension cost of defined-benefit pension rights and severance pay, and to disclosure of all employee benefits.
•	IAS 27 (revised) Separate financial statements', effective as of 1 January 2013. The revised standard contains the remaining requirements relevant to separate financial statements after inclusion of the requirements regarding control in the new IFRS so standard.
•	IAS 28 (revised) 'Investments in associates and joint ventures', effective as of 1 January 2013. Due to the publication of IFRS 11, the revised standard requires joint ventures and associates to be processed in accordance with the Changes in Equity method.

Consolidation criteria

Subsidiaries are entities where Arseus can control some financial and operational policies and in which it generally has a shareholding in excess of 50% of voting rights. Subsidiaries are fully consolidated as from the date that control is transferred to Arseus. They are deconsolidated as from the date that control by Arseus ceases. An acquisition is recognised using the purchase method. The cost price of an acquisition is defined as the fair value of the assets given, the shares issued and the liabilities assumed on the date of the exchange. Identifiable assets acquired and liabilities and contingencies assumed in a business combination are initially set at their fair value on acquisition date. For each business combination, the acquiring party values any minority interest in the party acquired at fair value or at the proportional share in the identifiable net assets of the party acquired. The acquiring costs incurred are recognised as expenses. The remainder of the total of the transferred fees and the amount recognised as any minority interests is taken from the net balance of the acquired identifiable assets, and the acquired liabilities form goodwill to be recognised as an asset. Regarding the acquisition of Dutch company Unit Dose Pack BV in zoo, the full goodwill method was applied.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated while being regarded as impairment indicator of exceptional loss of value. Where required, financial reporting principles of subsidiaries have been amended to ensure consistency with the financial reporting principles adopted by Arseus.

Foreign currency translation

Items included in the financial statements of all entities of Arseus are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in euros, the functional and presentation currency of Arseus. To consolidate Arseus and each of its subsidiaries, the respective financial statements are converted as follows:

•	Assets and liabilities at the year-end rate;
•	Income statements at the average rate for the year;
•	Components of the equity at historical exchange rate.

Exchange rate differences arising from the conversion of the net investment in foreign subsidiaries at year-end exchange rate are recognised as shareholders' equity elements at 'cumulative conversion differences'.

Transactions in foreign currencies

Transactions in foreign currencies are translated to the functional currency using the exchange rates on the transaction date. Profits and losses from exchange rate differences resulting from settling these transactions and from the conversion of monetary assets and liabilities into foreign currencies at exchange rates valid at year end, are recognised in the income statement.

Property, plant and equipment

Property, plant and equipment are valued at the acquisition value or the production costs plus allocated costs where appropriate. Depreciation is calculated pro rata temporis on the basis of the useful life of the asset, in accordance with the following depreciation parameters:

Buildings	25 to 60 years
Building fixtures and fittings	5 to 25 years
Computer equipment	2.5 to 5 years
Office equipment	2.5 to 5 years
Furniture and vehicles	2.5 to 5 years
Other tangible fixed assets	2 to 4 years

Virtually all assets are depreciated on a straight-line basis. Any residual value taken into account when calculating the depreciations is reviewed annually. Assets acquired under finance leasing arrangements are depreciated over their economic life, which may exceed the lease term if it is reasonably certain that ownership will be obtained at the end of the lease term.

Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the share of Arseus in the net identifiable assets of the acquired subsidiary on acquisition date. Goodwill on acquisitions of subsidiaries is recognised under intangible assets. Goodwill is tested for impairment at least once a year, but also when there is a triggering event. Goodwill is recognised at cost price less accumulated impairment losses. Impairment losses on goodwill are never reversed. Gains and losses on the disposal of an entity include the book value in goodwill relating to the entity sold.

Brands, licences, patents and other

Intangible assets are capitalised at cost, provided this cost is not higher than the economic value and the cost price is not higher than the recoverable value. No intangible assets with an unlimited useful life were identified. The costs of brands with a definite useful life are capitalised and generally amortised on a straight-line basis over a period of 20 years.

Research and development

Research costs related to the prospect of gaining new scientific or technological knowledge and understanding are recognised as costs as at the moment they are incurred.

Development costs are defined as costs incurred for the design of new or substantially improved products and for the processes preceding commercial production or use. They are capitalised if, among other things, the following criteria are met:

•	there is a market for selling the product;
•	the economic benefits for Arseus will increase when selling the asset developed;
•	the expenditure attributable to intangible assets can be measured reliably.

Development costs are amortised using the straight-line method over the period of their expected benefit, currently not exceeding five years. Amortisation starts as from the moment that these assets are ready for use.

In-house development

Unique products developed in-house, including software controlled by Arseus, that are expected to generate future economic benefits, are capitalised at the cost directly related to their production. These products are depreciated on their economic life, which is currently estimated at 2.5 to 7 years.

Software

Acquired software is capitalised at cost price and then valued at cost price less accumulated depreciations and exceptional losses of value. The software is depreciated over its useful life, which is currently estimated at 2.5 to 7 years.

Impairment of nonfinancial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and in-use value. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities, unless Arseus has an unconditional right to defer settlement of the liability for at least 12 months after balance sheet date.

Financial assets

Arseus classifies its financial assets into the following categories: loans and receivables, and financial assets available for sale. Management determines its investment classifications at initial recognition, evaluating them at each reporting date. The Group does not have any financial assets in the category held until maturity nor any financial assets designated as fair value for which any changes in value have to be included in the income statement.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments, which are not quoted in an active market and that are not intended for trading. They are included in current assets, except for those maturing more than 12 months after balance sheet date. Loans and receivables are carried at amortised cost using the effective interest method.

Financial assets available for sale

Financial assets available for sale are assets regarding which the management does not have any intention of disposal within 12 months of balance sheet date or does not have the intention or possibility to hold these until maturity. Financial assets available for sale are initially valued at fair value except where such fair value cannot be reliably determined, in which case they are valued at cost. Unrealised gains and losses arising from changes in the fair value are recognised in unrealised results. If the relevant assets are sold or impaired, the accrued fair value adjustments are recognised in the income statement.

Any events or change in circumstances indicating a decrease in the recoverable amount are monitored closely. Impairment losses are recognised in the income statement as and when required.

Lease contracts - Operating leases

Lease contracts in which a significant portion of the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments under operating leases are made on a straight-line basis over the life of the operating lease.

Lease contracts - Finance leases

Lease contracts regarding property, plant and equipment whereby Arseus retains virtually all risks and benefits of ownership are classified as finance leases.

Finance leases are capitalised at the inception of the lease contract at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between liability and financing charges, so as to achieve a constant amount on the outstanding financing balance.

The corresponding rental obligations, net of financing charges, are recognised at non current (payable after 1 year) and current (payable within the year) borrowings. The interest component of the financing charges is recognised in the income statement over the lease period, so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period.

The property, plant and equipment assets acquired under finance leases are depreciated over the useful life of the asset, which may exceed the lease term if it is reasonably certain that ownership will be obtained at the end of the lease term.

Inventories

Raw materials, auxiliary materials, and trade goods are valued at the acquisition value using the FIFO method or using the net realisable value (NRV) at balance sheet date, whichever is lower. Work in progress and finished products are valued at production cost. In addition to purchasing costs of raw materials and auxiliary materials, production costs include production costs and production overhead costs directly attributable to the individual product or the individual product group.

Trade receivables

Trade receivables are initially valued at fair value. A provision for impairment loss relating to trade receivables is created when there is objective evidence that Arseus will not be able to collect all amounts due. Significant financial difficulties of the debtor, the probability of the debtor becoming insolvent or undergoing financial restructuring, and non or overdue payments are regarded as indicators for recognising an impairment loss for the trade receivable in question.

If trade receivables are transferred to a third party (i.e. factoring), the trade receivables are taken off the balance sheet provided that the conditions as stated in IAS 39 paragraphs 15-37 and IAS 32 paragraphs 42-43 are fulfilled.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, and are valued at acquisition at fair value and recognised at cost. Adjustments to the carrying amounts are made when at balance sheet date realisation value is lower than the book value.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are recognised in the equity as a deduction, net of taxes, from the proceeds.

If a company of Arseus purchases share capital of Arseus (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the shareholders of Arseus until the shares are cancelled, reissued or disposed of. If such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and related income tax effects, is included in equity attributable to the equity holders of Arseus.

Provisions

Provisions for restructuring costs, legal claims, risk of losses or costs potentially arising from personal securities or collateral constituted as guarantees for creditors or commitments to third parties, from obligations to buy or sell non-current assets, from the fulfilment of completed or received orders, technical guarantees associated with turnover or services already completed by Arseus, unresolved disputes, fines and penalties related to taxes, or compensation for dismissal are recognised when: Arseus has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions for restructuring costs comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Provisions are recognised based on management's best estimate of the expenditure required to settle the present obligation at balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.

Derivative financial instruments

Arseus utilises derivative financial instruments to limit risks relating to unfavourable fluctuations in interest rates. No derivatives are employed for trade purposes.

Derivative financial instruments are initially valued at cost. After initial valuation, these instruments are stated in the balance sheet at fair value

As the derivatives contracts of Arseus do not fulfil the criteria set in IAS 39 to be regarded as hedging instruments, changes in fair value of derivatives are recognised in the income statement.

Employee benefit expense

Pension obligations

The companies of Arseus operate various pension schemes. The pension schemes are funded through payments to insurance companies, determined by periodic actuarial calculations. Arseus has both defined benefit and defined contribution plans. The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the future defined benefit obligations less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service pension costs. The defined benefit obligation is calculated periodically by independent actuaries using the projected-unitcredit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses arising from empirical adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are spread in the income statement over the employees' expected average remaining employment periods. For defined contribution plans, Arseus pays contributions to insurance companies. Once the contributions have been paid, Arseus ceases to have any liabilities. Contributions to defined contribution plans are recognised as costs in the income statement at the moment they are made.

Share-based payments

Arseus operates an equity-settled, warrant-based compensation plan. The total amount to be recognised as costs over the vesting period is determined by reference to the fair value of the warrants granted, excluding the impact of any non-market vesting conditions (for example, profitability and turnover growth targets). Non-market vesting conditions are included in the assumptions about the number of warrants expected to become exercisable. At each balance sheet date, Arseus revises its estimates of the number of warrants expected to become exercisable. Arseus recognises any impact of the revision of original estimates in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the warrants are exercised.

Income taxes

Income taxes as recognised in the income statement include current income tax and deferred taxes. Current income taxes include the expected tax liabilities on the taxable income of Arseus for the financial year, based on the applicable tax rates at balance sheet date, and any adjustments of previous years. Deferred taxes are recognised using the balance sheet liability method and are calculated on the basis of the temporary differences between the carrying amount and the tax base. This method is applied to all temporary differences arising from investments in subsidiaries and associates, except for differences whereby the timing of reversing the temporary difference is controlled by Arseus and whereby the temporary difference is not likely to be reversed in the near future. The calculation is based on the tax rates as enacted or substantially enacted at balance sheet date and expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Under this calculation method, Arseus is also required to account for deferred taxes relating to any difference between the fair value of the net acquired assets and their fiscal book value resulting from any acquisitions. Deferred tax assets are recognised in so far as the tax losses carried forward are likely to be utilised in the foreseeable future. Deferred income tax receivables are fully written down when it ceases to be likely that the corresponding tax benefit will be realised.

Revenue recognition

Turnover of goods are recognised at the moment that delivery of the products has been made to the customer, that the customer has accepted the products, and that the related receivables are likely to be collectable. Turnover of services are recognised in the accounting period in which the services have been provided. The turnover of software suites from stock are recognised as revenue at the time of delivery. The revenues relating to software service contracts are recognised over the term of the contract.

Segment reporting

An operating segment is a group of assets and activities engaged in providing products or services that are the basis of the internal reporting to Arseus' Executive Committee.

Dividend distribution

Dividend distribution to the shareholders of Arseus is recognised as a liability in the financial statements of Arseus in the period in which the dividends are approved by the shareholders of Arseus.

3. Risk Management

Risk management is extremely important to Arseus in order to secure the long-term business objectives and the value creation of the company. The policy of Arseus is to focus on identifying all major risks, on developing plans to prevent and manage these risks, and on putting in place measures to contain the consequences should such risks effectively occur. Still, Arseus cannot conclusively guarantee that said risks will not occur or that there will be no consequences when they occur.

Investing in the shares of Arseus therefore entails specific risks that potential investors should take into consideration, including but not limited to the following risks, which are listed in no particular order:

Strategic risk related to market and growth

The strategic risk related to market and growth is that Arseus may face unfavourable market situations or competition that develops to Arseus' disadvantage. Another possibility is bad strategic decisions taken by the Company. Such as: technological advances enabling the development of competitive alternative products, the possibility that success of a new product fails to materialise, ineffective configuration of the pipeline, scarcity of pharmaceutical raw materials, a drop in demand in the markets where Arseus is active as a result of new regulations and/or legislation, amended policy of healthcare insurers, events affecting the purchasing patterns of key customers, or a disturbed balance between demand and supply in the markets where Arseus is active.

Arseus intends to achieve sustainable growth by consolidating its leading position in selected segments of professional healthcare by means of organic growth and to further expand this via an active buy-and-build strategy. The active acquisition policy also enables Arseus to achieve synergy benefits and improve efficiency. This is accompanied by the risk that acquired entities may not meet expectations. Arseus limits this risk as much as possible by a continuous process of international market research and by subjecting possible acquisition candidates to rigorous due diligence. After acquisition, Arseus integrates the acquired entity as quickly and as thoroughly as possible, both in strategic and organizational policies.

Risks related to regulations

The professional healthcare sector is subject to close regulatory control at both national and international level. Though Arseus has in place strictly defined operating procedures and policies to ensure compliance with the rules imposed by national and international authorities, the chance remains that risks related to applicable legislation or the regulatory framework, should they materialise, might prove to have an adverse effect on Arseus.

Adequate and reliable financial reporting is essential for both the internal management reports and the external reporting. Group-wide reporting guidelines have been drawn up within Arseus to this end, based on IFRS and internal information needs.

All entities periodically prepare business plans, budgets and interim forecasts at predetermined moments. Discussions with the management of the entities take place periodically on the general course of affairs, including the realisation and feasibility of the forecasts issued and strategic decisions.

With regard to fiscal regulation, Arseus makes use of the possibilities offered by the fiscal legislation and regulation without taking any unnecessary risks in doing so. Arseus has the support of external fiscal advisers in this regard.

Inventory risks

As a distributor and producer, Arseus maintains inventories of (elements of) its product portfolio. Maintaining inventories however entails the risk of full or partial non-marketability of products and the risk of price drops. The policy Arseus has initiated to optimise the supply chain and to reduce operational working capital is expected to lead to a decrease in inventory levels.

Product liability risk

The product portfolio of the four divisions of Arseus comes with potential product liability risks. In its efforts to protect itself against these risks, Arseus has in place high standards of quality in terms of products and processes and continuously endeavours to assure that all business units comply with both internal and external regulations. Product liability issues, however, cannot be entirely precluded. Arseus has effected a product liability insurance within reasonable constraints.

Cyclical and seasonal nature of operating activities

Decisions to purchase investment goods (involving a large capital outlay) tend to some degree to be linked to the overall economic climate. The introduction of government healthcare refunding measures also has a potential impact on the timing of the customer's purchase decisions. Dental equipment in particular proves to be subject to seasonal effects.

ICT related risk

To limit potential ICT related risks, Arseus uses the most recent hardware and software solutions with a proven track record. Though Arseus has taken rigorous precautions to assure the security and reliability of its IT systems, incidents may occur involving backup recovery, viruses and international network links with potential implications for the operating activities of Arseus.

Financial risks

In addition to aforementioned strategic and operational risks, Arseus is also subject to various financial risks. Arseus has at its disposal ample credit facilities to sustain its day-to-day operations. The most important credit facility of 300 million euros has a term until 30 August 2012. At the end of 2011, the net financial debt/annualised recurring EBITDA ratio was 2.48 and therefore more than satisfied the condition of a debt ratio of maximum 3.25 as of 31 December 2055 as agreed in the credit agreement.

Arseus manages the cash and financing flows and the risks arising from these by means of a group-wide treasury policy. In order to optimise the financial position and keep the related interest charges to a minimum, the cash flows of the companies are centralised in a single cash pool as much as possible.

Credit risk

Credit risk involves the risk that a debtor or other counterparty is unable to satisfy its payment obligations to Arseus, resulting in a loss for Arseus. Operating an active credit policy, Arseus has in place strict procedures to manage and limit credit risks. No individual customers make up a substantial part of either turnover or outstanding receivables. Arseus has an active policy to reduce operational working capital; from this perspective the group aims to reduce the accounts receivable balance.

Interest risk

Arseus regularly assesses the mix of financial debts with fixed and variable interest rates. At this time, financing is largely based on a syndicated loan in euros with a variable interest rate of 1 to 6 months. A higher Euribor rate by so base points would have adversely affected the variable interest charges in the amount of some 183 (thousand) euros after taxes. A 7o million euros financing risk due to the variable interest rate is hedged by financial derivatives.

Exchange rate risk

The exchange rate risk is the risk on results due to fluctuations in the exchange rates. Arseus reports its financial results in euros and is, because of the international distribution of its activities, subject to the potential impact of currencies on its profits. Exchange rate risk is the result on the one hand of several entities of Arseus operating in a functional currency other than euros and on the other hand of the circumstance that purchasing and retail prices of Arseus have foreign currencies as reference. The risk involved in entities of Arseus operating in a functional currency other than the euro concerns entities operating in Czech crowns, Swiss francs, British pounds, Danish crowns, Polish zloty, US dollars and Brazilian real. In 2011, these entities collectively represent just over 18% of the consolidated turnover and over 29% of the operating result of Arseus. Currency risk due to translation of assets and liabilities of foreign subsidiaries into euros is not hedged.

Some of the Group's revenue is realised in currencies other than the euro, such as in Brazil and the United States. The hypothetical supplementary effect of the euro strengthening (weakening) by 10% against the Brazilian real would affect the income statement by 0.599 million euros (0.732 million euros), whereas the impact on equity would amount to 6.190 million euros (7.565 million euros). In the event of the euro strengthening (weakening) by 10% against the US dollar, the impact on the income statement would amount to 0.123 million euros (0.150 million euros). The impact on equity would amount to 0.481 million euros (0.588 million euros). The company also incurs indirect currency risk as a large part of its purchases in Brazil are actually transactions in US dollars. This means that the Group's products will become relatively more expensive to the consumer in Brazil each time the US dollar rises against the Brazilian real. The risk is difficult to quantify, as such price increases are directly charged to the consumer in full or in part.

Fair value risk

Arseus utilises financial derivatives to hedge its interest risks. Arseus hedged a 70 million euros financing risk due to the variable interest rate. In accordance with IFRS, all financial derivatives are recognised either as assets or as liabilities. In accordance with IAS 39, financial derivatives are recognised at fair value. Changes in fair value are recognised by Arseus directly in the income statement because these are financial derivatives that do not qualify as cash flow hedging instrument. At the end of 205s, the cumulative revaluation of financial derivatives amounted to -3.452 million euros whereby this is treated as a non-cash item.

4. Critical accounting estimates and judgments

Estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are deemed reasonable given the circumstances.

Critical assessments and judgments

Arseus makes assessments and assumptions concerning the future. The resulting estimates will, by definition, rarely match the related actual results. Those estimates and assumptions that entail a significant risk of causing the need for a material adjustment of the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimated impairment loss of goodwill and intangible assets

Arseus performs annual goodwill impairment tests in accordance with the IFRS specified in note 2 on page 94. The recoverable amount of cash flow generating units is determined on the basis of value-in-use calculations. These calculations require the application of estimates. The book value of goodwill as at 31 December 2011 was 333.432 million euros (2010: 251.944 million euros).

Pension obligations

The present value of the pension obligations is derived from a number of actuarially determined factors based on assumptions. The assumptions applied to determine net costs (income) for pensions include expected long-term rate of return of the relevant pension plan assets and the discount rate. Any changes in these assumptions will impact the book value of pension obligations. The gross defined benefit obligation is calculated periodically by independent actuaries. The book value of pension obligations as at 31 December 2011 was 3.884 million euros (2010: 3.276 million euros).

Provisions for disputes

As stated, provisions are valued at present value of the best estimate by management of the expenditure required to settle the existing obligation at balance sheet date. Provisions for disputes require significant professional judgment in terms of the ultimate outcome of administrative law rulings or court judgments. Estimates are always based on all available information at the moment the financial statements are prepared. However, the need for significant adjustments cannot be absolutely precluded if ruling or judgment proves not as expected. Hypotheses and assessments are continuously evaluated on the basis of empirical facts and other factors including projected development of future events regarded as reasonable given the circumstances.

5. Segment information

All activities of Arseus relate to products and services in professional healthcare and are divided into four main operational segments: Fagron, Arseus Dental, Arseus Medical, and Corilus. In accordance with IFRS 8, the operational segments were determined on the basis of the components that the Executive Committee applies to assess the performance of the operational activities and on which the decisions are based.

Arseus is organised on the basis of four main operational segments:

1. Fagron provides products and services for pharmaceutical compounding. Fagron develops and markets its own pharmaceutical formulas, sells and distributes instruments and pharmaceutical raw materials for pharmaceutical compounding, sells and distributes compounded and cosmetic products under its own brand name, Fagron, to pharmacists, provides third-party pharmaceutical compounding services to pharmacists and hospitals, and provides specialty pharmaceutical raw materials to the pharmaceutical, nutraceutical, veterinary and cosmetic industries.

2. Arseus Dental provides specialist products and services to dentists, labs and other dental professionals. Furthermore, Arseus Dental produces and assembles a complete in-house range of imaging equipment for dentists, such as x-ray units, panoramic units, intra-oral digital sensors and cameras. In Switzerland, Arseus Dental (as OEM supplier) manufactures precision components for the dental and orthopaedic industry.

3. Arseus Medical provides innovative products, services and solutions for doctors, hospitals, nursing homes and homecare nurses. The focus lies on personal care, mobility, organisation, hygiene & sterilisation and diagnostics.

4. Corilus provides total ICT solutions for a wide range of medical and paramedical professions, such as pharmacists, dentists, GPs, ophthalmologists, and veterinarians.

The segment results for the reporting period ending 31 December 2022 are as follows:

2011 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Total turnover	242.981	163,39	52,082	34,443		492,903
Intersegment turnover	(43)	(174)	(232)	(124)		(573)
Turnover	242,938	163,224	51,850	34,318		492,330
Operating result per segment	46,353	(624)	4,595	5.989	(10.056)	46,257
Financial result						(9,179)
Profit before income tax						37,078
Income tax expenses						(8,938)
Profit for the period						28,140

The segment results for the reporting period ending 32 December 2010 are as follows:

2010 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Total turnover	179,376	161,567	52,414	31,191		424,548
Intersegment turnover	(37)	(110)	(211)	(134)		(492)
Turnover	179,339	161.457	52,203	31,057		424,056
Operating result per segment	34,429	293	4,025	5,310	(8,041)	36,017
Financial result						(5,960)
Profit before income tax						30,056
Income tax expenses						(7,578)
Profit for the period						22,479

Other segmented items recognised in the income statement are as follows:

2011 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Depreciation and amortisation	2,458	3,620	1,042	4,086	3,344	14,550
Write-down on inventories	(862)	286	138			(439)
Write-down on receivables	(125)	673	(49)	(80)		419

2010 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Depreciation and amortisation	1,949	3,298	902	3,495	2,809	12,453
Write-down on inventories	(332)	(355)	79	(10)		(617)
Write-down on receivables	22	788	(95)	113	7	836

As at 31 December 2011 the assets and liabilities, and the capital expenditure (investments) for the reporting period ending on this date, are as follows:

2011 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Assets	301,798	194,690	56,455	56,707	70,583	680,232
Liabilities	115,196	56,722	16,572	11,974	259,316	459,780
Capital expenditure	4,359	2,023	1,080	5,152	4,717	17,330

As at 31 December 2010 the assets and liabilities, and the capital expenditure (investments) for the reporting period ending on this date, are as follows:

2010 (x 1,000 euros)	Fagron	Arseus Dental	Arseus Medical	Corilus	Unallocated	Total
Assets	197,800	180,743	63,375	47,498	84,176	573,592
Liabilities	62,122	57,484	21,635	8.644	215,585	365,470
Capital expenditure	1,345	1,976	1,047	4,072	10,719	19,159

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and cash from operations. They exclude deferred tax assets related to the IFRS revaluation of the investments.

Segment liabilities comprise operational liabilities but exclude such elements as corporate borrowings.

Turnover of Arseus in 2011 and 2010 by geographical segments is as follows:

(x 1,000 euros)	2011	2010
The Netherlands	132,076	127,779
Belgium	128,818	126,493
France	72,750	65,083
Brazil	57,351	5,473
Germany	46,408	47,484
Italy	14.523	14,835
Switzerland	10,545	9,779
United States	9,661	7,148
Spain	9,476	9,227
Czech Republic	6,230	5,669
United Kingdom	2,374	2,040
Denmark	2,092	3,003
Poland	27	43
Total	492,330	424,056

Arseus has a broad customer base in which no one customer accounts for more than 10% of turnover.

Concerning the geographical segments Belgium and the Netherlands, Arseus applies the following allocation for fixed assets in 2011 and 2010:

(x 1,000 euros)	2011	2010
Belgium	129,026	120,157
The Netherlands	95,619	75,470
Other	221,731	160,183
Total	446,376	355,810

6. Turnover

(X 1,000 euros)	2011	2010
Sale of goods	467,230	402,384
Rendering services	25,040	21,071
Turnover	492,330	424,056

7. Other operating income

(x 1,000 euros)	2011	2010
Gain on disposal of fixed assets	81	419
Other operating income	1,1/1	787
Total other operating income	1,252	1,206

8. Employee benefit expenses

(X 1,000 euros)	2011	2010
Wages and salaries	69,435	60,570
Social security costs	18,724	15,755
Pension costs - defined benefit plans	502	928
Pension costs - defined contribution plans	1,360	1,441
Other post-employment benefit contributions	1,327	4,607
Other employment costs	9,815	6,305
Total employee benefit expenses	101,163	89,606

Full-time equivalents (rounded at one unit)	2011	2010
Belgium	553	522
Brazil	429	178
The Netherlands	417	395
France	275	243
Germany	193	192
Switzerland	101	102
Czech Republic	91	82
Italy	55	59
United States	50	48
Spain	41	42
United Kingdom	11	12
Denmark	9	10
Poland	2	3
Argentina	1
Total	2,229	1,887

At 31 December 2011, Arseus' workforce (fully consolidated companies) comprised 2,333 persons or 2,228.5 full-time equivalents. Of these full-time equivalents, 1,115.2 are attributable to Fagron, 646.o to Arseus Dental, 166.6 to Arseus Medical, 253.9 to Corilus and 46.8 to Arseus Corporate.

9. Depreciation and amortisation

(X 1,000 euros)	2011	2010
Depreciation and amortisation	14,550	12,453
Write-down on inventories	(439)	(617)
Write-down on receivables	419	836
Depreciation and amortisation	14,531	12,672

10. Other operating expenses

(X 1,000 euros)	2011	2010
Increase (decrease) in provisions for current liabilities	(68)	(181)
Increase (decrease) in provisions for pension liabilities	495	(213)
Taxes and levies (excl. income tax)	1,586	1,316
Other operating expenses	3,484	627
Total other operating expenses	5,498	1,549

The item 'Other operating expenses' mainly pertains to acquiring costs and deficits on the realisation of trade receivables.

Non-recurring costs are not recognised as 'Other operating expenses' but are presented in their originating cost category. The total non-recurring costs included in the EBIT amount to 5.890 million euros. These costs mainly include acquiring costs, integration costs and reorganisation costs within Arseus Dental. In addition, the revaluation of the financial derivatives constitutes a non-recurring result of 1.478 million euros in the financial result. The total non-recurring costs after income taxes are calculated by multiplying the sum of the non-recurring costs by the weighted average effective income tax rate and come to 3.349 million euros.

11. Financial result

(x 1,000 euros)	2011	2010
Financial income	1,269	477
Revaluation of financial derivatives	1,478	382
Financial expenses	(2,958)	(1,845)
Interest expenses	(8,010)	(4,959)
Currency exchange differences	(958)	(14)
Financial result	(9.179)	(5,960)

The positive revaluation of financial derivatives relates to the change in the market value of the interest rate hedges that are not a cash flow and do not qualify for hedge accounting in accordance with IAS 39. To value the hedging instruments, the mixed instruments were split into their components and valued on the basis of valuation models, discounted cash flows, and Black & Scholes, as appropriate. The parameters used for these models are those valid as at year-end.

The financial result, excluding the revaluation of the financial derivatives, amounts to -10.657 million euros, an increase of 68% compared to 2010. This increase is due to an increase in the net financial debt and an average increase in interest rates.

The item interest hedging concerns 70 million euros of the total financing.

12. Income tax expenses

(x 1,000 euros)	2011	2010
Current tax expenses	7,922	8,911
Deferred tax	1,016	(1,333)
Income tax expenses	8,938	7,578
Weighted average current tax rate	24,1%	25.2%
Profit before income tax	37,078	30,056
Tax calculated at weighted average statutory tax rate	11,358	9,233
Income not subject to taxes	(3,572)	(4,366)
Expenses not deductible for tax purposes	841	456
Tax on profit previous years	(72)	2,320
Other	382	(64)
Income tax expenses	8,938	7,578

In early 2011, Corilus negotiated a settlement of disputes with the tax authority pertaining to the tax years 2003 through 2007 for a total sum of 2.320 million euros. In 2010, this amount was included in the line 'Tax on profit previous years'.

13. Earnings per share

(x 1,000 euros)	2011	2010
Basic earnings per share
Profit attributable to equity holders of the Company	28,147	22,357
Weighted average number of ordinary shares (x 1,000)	30,082	29,995
Basic earnings per share (in euros)	0,94	0,75
Diluted earnings per share
Profit attributable to equity holders of the Company	28,147	22,357
Weighted average number of ordinary shares (x 1,000)	30,082	29,995
Effect of warrants	363	102
Weighted average number of ordinary shares (diluted; x 1,000)	30,446	30,097
Diluted earnings per share (in euros)	0,92	0,75
Earnings per share before non-recurring items
Profit attributable to equity holders of the Company	28,147	22,357
Non-recurring items (after tax)*)	3,349	6,954
Profit before non-recurring items attributable to equity holders of the Company	31,496	29,311
Weighted average number of ordinary shares (x 1,000)	30,082	29,995
Basic earnings per share before non-recurring items (in euros)	1,05	0,98
Effect of warrants	363	102
Weighted average number of ordinary shares (diluted; x 1,000)	30,446	30,097
Diluted earnings per share (in euros)	1,03	0,97

*) See Note 10 for definition and calculation of the non-recurring items (after tax).

14. Intangible assets

(x 1,000 euros)	Goodwill	Development	Concessions & patents	Brands	Software	Other	Total
Net book value as at 1 January 2010	199,825	14,619	1,357	3,974	9,605	74	229,455
Investments		6,707	240	77	2,604		9,629
Acquisitions	51,776			342			52,118
Disposals					(41)		(41)
Amortisation		(3,503)	(396)	(362)	(3.069)	(4)	(7,334)
Other movements		53	(4)		85		135
Exchange differences	343	179			15		538
Net book value as at 31 December 2010	251,944	18,056	1,197	4,032	9,199	70	284,498
Gross carrying amount	251,944	35,841	5,489	5,030	20,964	148	319,416
Accumulated amortisation		(17,785)	(4,292)	(998)	(11,765)	(78)	(34,918)
Net book value	251,944	18,056	1,197	4,032	9,199	70	284,498
Net book value as at 1 January 2011	251,944	18,056	1,197	4,032	9,199	70	284,498
Investments		8,126	92	6	1,244		9,447
Acquisitions	85.563	77	9	1	82		85,732
Disposals					(17)		(17)
Amortisation		(5,388)	(185)	(405)	(2,634)		(8,612)
Other movements		2,591	16	75	(2,575)	(70)	37
Exchange differences	(4.075)	43			16		(4,016)
Net book value as at 31 December 2011	333,432	23,505	1,128	3,708	5,296		367,069
Gross carrying amount	333,432	48,117	5,216	5,178	17,789	22	409,754
Accumulated amortisation		(24,612)	(4,088)	(1,469)	(12,493)	(22)	42,685)
Net book value	333,432	23,505	1,128	3,708	5,296		367,069

The category 'Development' consists mainly of unique software developed in-house in full control of Arseus.

Goodwill

Goodwill is tested at least annually for impairment and consistently when a trigger event occurs. Goodwill is recognised at cost price less accumulated impairment losses.

Goodwill impairment test

Goodwill is allocated to the cash flow generating units of Arseus, i.e. the four divisions of Arseus: Fagron, Arseus Dental, Arseus Medical and Corilus.

The goodwill allocation per division (in million euros) was as follows:

	2011	2010
Fagron	179.21	113.86
Arseus Dental	82.22	76.18
Arseus Medical	38,98	38.26
Corilus	33.02	23.64
Total	333.43	151.94

The recoverable amount of a cash flow generating unit is determined on the basis of value-in-use calculations. These calculations use cash flow projections with a five-year forecast horizon based on detailed financial budgets approved by management for the first year. The year-one budget figures are extrapolated for years two through five, taking into account an i nternal growth rate and a budgeted gross margin. In addition to these rates, the model uses assumptions such as the rate of perpetual growth and a pre-tax discount rate. Below are specified the key assumptions for the value-in-use calculations. Management determined gross margin and growth rates based on past performance and its market development expectations.

	Organic 5-year Growth 2011(%)		Perpetual Growth Rate (%)		Gross Margin (%)		Discount Rate (%)
2011	2010	2011	2010	2011	2010	2011	2010
---	---	---	---	---	---	---	---	---
Fagron	5	5	2.5	2.5	51.42	51.48	9.42	12.81
Arseus Dental	4	4	2.0	2.0	41.10	39.68	8.13	8,74
Arseus Medical	3	3	2.5	2.5	45.32	43.12	7.47	8.54
Corilus	3	3	1.5	1.5	79.32	75.88	8.39	8.88

The above assumptions were subjected to a sensitivity analysis confirming that for 2011 no impairment of goodwill was required.

The value per cash flow generating unit as per aforementioned value-in-use calculations is compared with the net book values of the non-current assets of the relevant cash flow generating unit. For all cash flow generating units, value-in-use exceeds net book value.

15. Property, plant and equipment

(x 1,000 euros)	Land and buildings	Plant machinery and equipment	Furniture and vehicles	Leasing and other similar rights	Other tangible assets	Assets under construction	Total
Net book value as at 1 January 2010	13,994	5,807	3,609	2,703	11,181	1,338	38,631
Investments	8,099	2,021	709		1,859	194	12,882
Acquisitions	1,572	1,162	116	7	226		3,083
Disposals	(348)	(9)	(100)		(1,515)		1,972)
Amortisation	(365)	(1,595)	1,354)	(430)	(1,373)		(5,118)
Other movements	1,059	223	30		8	(1,388)
Exchange differences	588	356	10	458		10	1,422
Net book value as at 31 December 2010	24,599	7,965	3,019	2,738	10,387	155	48,862
Gross carrying amount	27,000	20,012	15,198	4,594	16,204	155	83,164
Accumulated amortisation	(2,401)	(12,047)	(12,179)	(1,856)	(5,817)		(34,302
Net book value	24,599	7,965	3,019	2,738	10,387	155	48,862
Net book value as at 1 January 2011	24,599	7,965	3,019	2,738	10,387	155	48,862
Investments	3,278	2,089	1,684	430	2.117	230	9,829
Acquisitions	4,059	497	1,968	61	22		6,606
Disposals	(92)		(73)	(8)	(992)		(1,165)
Amortisation	(675)	(1,849)	(1,391)	(512)	(1.510)		(5,938)
Other movements	26	(49)	131	(20)	(421)	(151)	(483)
Exchange differences	(414)	(104)	(110)	74		(7)	(560)
Net book value as at 31 December 2011	30,781	8,549	5,228	2,762	9,603	228	57,150
Gross carrying amount	34,468	23,487	18,751	5,190	16.613	228	98,736
Accumulated amortisation	(3,686)	14,938)	13,523)	(2,428)	(7,010)		(41,586)
Net book value	30,781	8,549	5,228	2,762	9,603	228	57,150

The Group's liability regarding financial leasing is guaranteed as the lessor holds the legal property title of the leased assets.

16. Financial assets and other non current assets

(x 1,000 euros)	Financial assets	Other noncurrent assets	Total
Balance at 1 January 2010	1,228	1,014	2,241
Investments	27	48	75
Transfers and disposals	7	1	8
Reimbursements	(409)	(218)	(627)
Other movements	(34)	2	(32)
Balance at 31 December 2010	818	846	1,665
Balance at 1 January 2011	818	846	1,665
Investments		200	200
Transfers and disposals		42	42
Reimbursements		(119)	(119)
Other movements	1		1
Balance at 31 December 2011	819	969	1,788

The assets available for sale mainly consist of a minority interest participation of 0.790 million euros.

This asset is stated at cost due to not having any reliable information on its fair value.

An analysis of the assets mentioned above showed that none of these need to undergo an extraordinary impairment in 2011

Other fixed assets concern receivables with different due dates. The fair value approximates the book value.

17. Taxes, remuneration and social security

a) Taxes, remuneration and social security

(x 1,000 euros)	2011	2010
Current income tax liabilities	4,197	3,823
Other current tax and VAT payables	19,196	10,830
Remuneration and social security payables	13,945	12,346
Taxes, remuneration and social security	37,338	27,000

b) Deferred tax assets

(x 1,000 euros)	Differences in depreciation rates	Employee benefits	Provisions	Tax losses	Other	Total
Balance at 31 December 2009	60	619	594	17,235	697	19,205
Result	130	184	(429)	330	1,085	1,320
Change in the scope of consolidation			261			261
Balance at 31 December 2010	210	803	426	17,565	1,78 z	20,785
Result	(16)	156	(48)	2,052	(3,552)	(1,408)
Change in the scope of consolidation			1,114		(124)	990
Balance at 31 December 2011	194	958	1,493	19,617	(1,895)	20,368

The category 'Other' mainly concerns netting with deferred tax liabilities.

An impairment test is performed on tax losses twice per year. If it becomes clear that the Company will not be able to use these losses within a reasonable time, these are derecognised. This calculation is based on result projections with a seven-year forecast horizon, based on detailed financial budgets approved by the management for the first year and an extrapolation of these figures for the second through seventh year. The 2011 analysis results showed that no impairment is required for the relevant assets.

The amount of non-recognised tax losses is not significant. A major part of the deferred tax assets relating to the category 'Tax losses' is recognised in companies that incurred a loss during the current or previous financial year.

c) Deferred tax liabilities

(x 1,000 euros)	Differences in depreciation rates	Other	Total
Balance at 31 December 2009	2,708	1,524	4,232
Result	322	(299)	23
Change in the scope of consolidation	108		108
Balance at 31 December 2010	3,138	1,225	4,363
Result	241	(2,672)	(2,431)
Change in the scope of consolidation Balance at 31 December 2011	3,379	(1,447)	1,932

The category 'Other' mainly concerns netting with deferred tax assets.

No deferred tax assets on translation differences are recognised in the 'Unrealised gains and losses'.

As there is no practical plan for up streaming dividends, no deferred tax liabilities are recognised in this respect.

18. Inventories

(X 1,000 euros)	2011	2010
Raw materials	12,088	13,714
Auxiliary materials	2	3
Work in progress	3,540	2,438
Finished goods	7,588	8,630
Trade goods	53,424	41,276
Inventories	76,643	66,059

19. Trade receivables, other receivables and cash and cash equivalents

a) Trade receivables and other receivables

(x 1,000 euros)	2011	2010
Trade receivables	79,230	88,520
Provision for impairment of receivables	(3,274)	(2,218)
Total trade receivables	75,956	86,303
Other receivables	11,407	14,234

There is no concentration of credit risk with respect to trade receivables as the majority of Arseus' customers are internationally dispersed. There were no indications at the end of the reporting period that debtors of trade receivables not yet due would not fulfil their payment obligations. Provisions were made for known exposures. The item 'Other receivables' mainly concerns taxes to be refunded over the reporting period and value added tax.

(x 1,000 euros)	Carrying amount	Of which not past due at year-end	Less than 30 days	Between 31 and 150 days	Ofwhich due atyear-end
Between 91 and 150 days	More than 150 days
---	---	---	---	---	---	---
Trade receivables at
31 December 2011	75,956	51,802	12,561	6,143	1,565	3,785
Trade receivables at
31 December 2010	86,303	58,683	14,490	7,537	1,807	3,786

Arseus applies a strict credit policy towards its customers, ensuring that the Company controls and minimises credit risk. The Group has a stable customer base. The majority of its customers are not part of a listed company. No individual customers make up a substantial part of either turnover or outstanding receivables.

b) Cash and cash equivalents

(x 1,000. euros)	2011	2010
Investments with a maturity of less than three months	3,059	1,605
Cash at bank and in hand	66,790	49,581
Cash and cash equivalents	69,850	51,186

The majority of cash and cash equivalents consist of money in bank accounts and cash. The cash and cash equivalents are centralised as much as possible in a cash pool, deposited in accounts with banks that mostly have an A rating. A11 new bank accounts we open are with banks awarded at least an A or A- rating.

Trade receivables and other receivables, cash and cash equivalents are generally within a close range of maturities. Therefore, the carrying amount approximates the fair value.

20. Equity

Authorised capital

By resolution adopted by the Extraordinary General Meeting of 7 September 2007, the Board of Directors was granted the power to increase the capital in one or more instalments by a maximum amount of 319,810:475 euros by means and on terms to be decided by the Board of Directors, such within a period of five years as from publication date of said resolution in the Annexes of the Belgian Bulletin of Acts, Orders and Decrees.

As at 31 December 2011, the Board of Directors is still authorised to increase the capital by a maximum amount of 319,810,475 euros.

If the capital is increased within the limits of the authorised capital then the Board of Directors will be competent to request payment of a share premium. If the Board of Directors adopts this decision then this share premium will be deposited into a blocked account the balance of which can only be reduced or transferred in whole on the basis of a resolution adopted by a General Meeting of Shareholders in accordance with the clauses governing an amendment of the articles of association.

This power of the Board of Directors will apply to capital increases that are subscribed to in cash or in kind, or that result from capitalisation of reserves with or without the issue of new Shares. The Board of Directors is permitted to issue convertible bonds or warrants within the limits of the authorised capital.

The Extraordinary General Meeting on 14 May 2012 respectively 5 June 2012, will make a decision on renewal of the Board of Director's proxy to increase the authorised share capital, such within the limits of the existing proxy as set out in Article 5bis of the articles of association, in one or more rounds by a maximum amount of 320,023,050.35 euros, such within a period of five years from the date of announcing such a decision in the Annexes of the Belgian Bulletin of Acts, Orders and Decrees. This proxy to increase the capital may be exercised only subject to the approval of at least three fourths (3/4) of the directors present or lawfully represented.

Statement of changes in the capital and in the number of shares

The movements in this balance sheet item are presented in the statement of changes in equity. During 2011, no treasury shares were purchased. The decrease of treasury shares is due to (subsequent) payments on participations. As at 31 December 2011, Arseus NV owned a total of 1,097,585 treasury shares. In accordance with IFRS, these shares are deducted from equity and do not affect the income statement. In the context of the Warrant Plan of the Offer and Warrant Plans 1 and 2, 21,767 new shares were issues during 2011 at an amount of 224:379 euros, 11,804 euros of which was recognised as an issue premium. The total number of shares outstanding as at 31 December 2011 amounted to 31,216,888.

During 2011, a majority interest share was acquired in Dutch company Unit Dose Pack BV. A liability was taken to the Group's equity concerning acquisition of the minority interest.

Warrant Plan of the Offer

As proposed by the Board of Directors, the Extraordinary General Meeting of Shareholders of 7 September 2007 approved the 'Warrant Plan of the Offer'. This plan concerned the creation of no more than 6,550,699 warrants, each entitling the holder to subscribe to one share, to be offered to existing shareholders of Omega Pharma NV who acquired Arseus NV shares. At the adoption of the realised capital increase on 9 October 2007, the exact number of warrants issued proved to be 3,650,575. These warrants were exercisable from 17 to 28 January 2011 at an exercise price of 14.50 euros (140% of 10.25 euros, which was the price set at the moment of the IPO).

On 16 February 2011, 1,018 new shares were issued as a result of the exercise of warrants under the Warrant Plan of the Offer. These newly issued shares are entitled to dividend from the 2011 financial year onward. Consequently, these 1,018 newly issued shares were listed on a separate line on NYSE Euronext until 10 May 2011. After this issue, the number of voting securities of Arseus amounted to 31,196,139. The total number of voting rights (denominator) amounted to 31,196,139. The authorised share capital amounted to 319,820,911.43 euros.

On 16 June 2011, 20,749 new shares were issued as a result of exercising warrants under the Warrant Plans and 2, both approved by the Board of Directors on 6 September 2007. The number of voting securities of Arseus currently amounts to 31,216,888. The total number of voting rights (denominator) currently amounts to 31,216,888. The authorised share capital currently amounts to 320,023.050.35 euros.

Share-based payments

On 6 September 2007, the Board of Directors approved two warrant plans for the benefit of the employees, directors and consultants of the Company and/or subsidiaries (Warrant Plan r and Warrant Plan 2).

The warrants granted under Warrant Plan r (for employees) have a lifetime of 8 years as of the date on which they are granted.

For employees (Warrant Plan r) the warrants are exercisable in annual instalments of 25%, in May of the fourth, fifth, sixth and seventh calendar year after the calendar year in which the Warrants are offered.

Pursuant to a decision taken by the Board of Directors dated 11 May 2009, held in the presence of the notary Mr Dirk Van Haesebrouck, the period during which the warrants granted to beneficiaries prior to 31 August 2008 in the context of Warrant Plan r are exercisable, was extended by 5 years to 17 December 2020, in accordance with the Amendment Act (Herstelwet).

The warrants granted under Warrant Plan 2 (for directors and consultants) have a lifetime of 5 years as of the date on which they are granted.

For directors and consultants (Warrant Plan 2) the warrants are exercisable, pursuant to a decision of the relevant body, after granting of the warrants, (i) in annual instalments of 50% in May of the third and fourth calendar years after the calendar year in which the warrants are offered, or (ii) in annual instalments of 25% in May of any calendar year after the calendar year in which the warrants are offered. These alternatives depend on the holder's contribution paid for the warrants. This is 7.5% for (i) or 15% for (ii).

Pursuant to a decision of the Board of Directors dated 13 July 2009 it was decided, subject to the resolutive condition of any decision to the contrary taken by the General Meeting, to extend the period for exercising the rights granted to beneficiaries prior to 31 August 2008 under Warrant Plan 2 by five years to 17 December 2017, on the understanding that beneficiaries exercising their rights following the expiry of the initial period (exercising of rights after 17 December 2012) will solely be entitled to acquire existing, instead of new, shares in the Company. This extension was presented by the Board of Directors at the annual meeting on 10 May 2010. The General Meeting ratified this proposal.

The condition for vesting warrants is for employees that they still have an employment contract with the Company and for directors and consultants that their relationship with the Company has not been terminated.

The cost of the warrants is determined at the warrant's fair value on grant date and is spread over the vesting period of the warrants. The cost is recognised at the item 'Other employee benefit expenses' at an amount of 45 (thousand) euros for financial year 2011.

The movements in the number of outstanding warrants under the Warrant Plan of the Offer were as follows:

2011	Average exercise price (in euros)	Warrants
As at,. January	14,50	3,680,575
Allocated
Lapsed		3,679,557
Exercised	14,50	1,018
As as 31 December 11	-	-

Movements in the number of outstanding warrants under Warrant Plans 1 and 2 and their related weighted average exercise prices are as follows:

2011	Average exercise price (in euros)	Warrants
As at 1 January	10.11	1,224,000
Lapsed	10.25	21,375
Lapsed	8.68	500
Lapsed	8.14	20,000
Lapsed	7.77	750
Exercised	9.74	20,749
As at 31 December	10.14	1,160,626

During 2011, 20,749 warrants were exercised under Warrant Plans 1 and 2.

The related weighted average exercise price per share at year-end amounted to 10.14 euros in 2011.

As of 31 March 2012, the total number of warrants not yet exercised, which could prompt the issue of the same number of shares of the Company, amounted to 1,16o,626. Their average exercise price amounts to 10.14 euros.

Outstanding warrants at year-end have the following expiry dates and exercise prices:

Expiry date	Exercise price	Warrants
2011 - May	6.29	10,000
2012 - May	10.25	1,032,863
2012 - May	8.14	17,375
2013 - Ma	10.25	40,132
2013 - May	8.14	2,375
2013 - May	7.77	3,125
2013 - May	8.11	125
2014 - May	10.25	40,132
2014 - May	8.14	2,375
2014 - May	/.//	3,125
2014 - May	8.11	125
2,15 - May	8.14	2,375
2,15 - May	/.//	3,125
2,15 - May	8.11	125
2016 - May	7.77	3,125
2016 - May	8.11	125
Total	10.1437	1,160,626

Fair value

The fair value of the warrants granted under Warrant Plan r and Warrant Plan 2 was determined using the `Black & Scholes' valuation model. The main inputs into the model were the share price at grant date, the abovementioned exercise price, the standard deviation of expected share price returns, the option life specified above, and the annual risk-free interest rate.

Stock option plan

On 7 December 2009, the Board of Directors approved the Arseus NV Stock Option Plan (Stock Option Plan) for employees, directors, and consultants of the Company and/or subsidiaries, which approval was subsequently ratified by the Special Shareholders' Meeting of 27 January 2010.

The options granted under the Stock Option Plan are granted free of charge and, in line with the plan, have a term of 6 years from the date of offer. Options not exercised at the end of the six-year term, on r6 January 2016 therefore, are void by operation of law.

In accordance with the provisions of Section 43, § 4,1 of the Act of 26 March 1999 concerning the Belgian Action Plan for Employment 1998 (Stock Options Act), the Exercise Price shall be determined on the basis of the share's average closing price during the thirty days preceding the date of the offer of the Options, and was therefore calculated at 8.5214 euros per option. The Options shall be exercisable during the third, fourth, fifth and sixth calendar year following the calendar year in which the Options were offered, each time for 25%.

The Exercise of the Options at the Exercise Price shall take place unconditionally and may only take place in the month of April of each calendar year and may take place for the first time in April 2012 in the proportions specified below.

Exercise of maximum	Time
25 % of the Options granted	April 2012
50 % of theOptions granted	April 2013
75 %of the Options granted	April 2014
100 % of the Options granted	April 2015

2011	Average exercise price in euros	Stock options
Per 1 January	8.52	987,500
Granted
Forfeited
Void and unexercisable
Exercised
Per 31 December	8.52	987,500

On 27 October 2011, the Company's Board of Directors approved the 2011 Stock Option Plan for consultants and employees of Arseus NV and/or its subsidiaries, such under the suspensive condition of approval by the General Meeting. The 2011 Stock Option Plan will be presented to the Annual General Meeting of 14 May 2012 for approval, and will be available for inspection on the corporate website (www.arseus.com) under the header 'Investor Relations'.

The procedure of Article 523 of the Belgian Companies Code was not applied during 2011, also not for the Board of Directors' approval of the 2011 Stock Option Plan on 27 October 2011, such due to the fact that the beneficiaries were not yet known at the moment the plan was approved.

Dividend

A dividend of 13,154 (thousand) euros was paid in 2011. This equates to a gross dividend of 0.44 euros per share. At the Annual General Meeting of 14 May 2012, a gross dividend for 2011 will be proposed amounting to 0.50 euros per share, which equates to a total dividend of 15,06o (thousand) euros. This dividend due is not recognised in these financial statements.

A further Note on equity is included in the section Corporate Governance Statement on page 58 of this annual report.

21. Provisions

(x 1,000 euros)	Taxes	Disputes	Warranty obligations	Other	Total
Balance at 1 January 2010	48	183	511	115	857
Additions
Through business combinations		139	41	160	341
Other		114	89	140	342
Amounts used		(313)	(172)	(39)	(523)
Transfers			(22)	(20)	(42)
Balance at,. January 2011	48	123	448	357	975
Additions
Through business combinations			144		144
Other		(13)	51	10	47
Amounts used		(9)	(37)	(69)	(115)
Balance at 31 December 2011	48	100	606	297	1,051

22. Pension obligations

The amounts recognised in the balance sheet are established as follows:

(x 1,000 euros)	2011	2010	2009	2008	2007
Present value of funded obligations	12,474	13,004	12,390	10,386	9,712
Fair value of plan assets	(9,838)	(9,441)	(8,735)	(7,755)	(7,737)
Present value of unfunded obligations	2,636	3,623	3,655	2,631	105
Unrecognised actuarial losses (gains)	1,248	(347)	(290)	413	401
Liability in the balance sheet	3,884	3,276	3,365	3,044	2.376

All defined benefit plans are final salary pension plans. The amounts pertaining to post-employment medical plans are included in the liability but are not significant. There are no informal constructive obligations.

In the Netherlands, Arseus has two defined benefit plans at Fagron Services BV and Spruyt hillen BV. The principal actuarial assumptions applied were as follows:

•	The weighted average discount rate was 5.10% for 2011 and 5.20% for 2010;
•	The weighted expected return on plan assets amounted to 4.06% during 2011 and 3.82% during 2010;
•	The weighted expected general salary increase amounted to 2.50% during 2011 and 2.50% during 2010.

The assets comprise qualifying insurance policies and are not part of the in-house financial instruments of Arseus.

The amounts recognised in the income statement are as follows:

(X 1,000 euros)	2011	2010
Current service cost	728	473
Interestcost on obligation	637	582
Return on plan assets	(368)	(340)
Net actuarial gains (losses) recognised during the year
	997	715
of which included in the other operating expenses	495	(203)
of which included in the employee benefit expenses	502	928

Movements in net liability:

(x 1,000 euros)	2011	2010
Net liability in the balance sheet at 1 January	3,276	3,365
Expense	997	715
Pensions paid directly from pension reserve
Contributions (benefits -effective pension obligation payments)	(390)	(804)
Net liability in the balance sheet at 31 December	3,884	3,276

23. Financial debts and financial instruments

(x 1,000 euros)	2011	2010
Non-current
Financial lease liabilities	767	1,264
Bank borrowings	3,583	213,697
Other borrowings
	4,350	214,960
Current
Financial lease liabilities	534	683
Bank borrowings	253,516	850
Other borrowings	7	782
	254,057	2,315
Total	258,407	217,275

Non-current borrowings by term (x 1,000 euros)	2011 Financial leases	2011 Bank borrowings	2010 Financial leases	2010 Bank borrowings
More than 1 year but less than 5 years	767	2,128	1,264	211,891
More than 5 years		1,454		1,805
Total non-current borrowings	767	3,583	1,264	213,697

a. Bank borrowings

The book value of the bank borrowings is expressed in euros. The effective interest rate at balance sheet date on 32 December 2011 was 2.776%.

Arseus' principal financing sources are two credit facilities of 300 million euros in total, with a duration to 30 August 2012. As at the closing date of 2011, an amount of 246 million euros had been withdrawn. This amount is presented as a current bank loan. This concerns a loan with a variable interest rate of 1 to 6 months. The interest risk relating to 70 million euros of this loan was hedged with financial derivatives. The valuation of this instrument is in accordance with a Level 2 method. This implies that the valuation is based on inputs other than the listed prices in active markets such as included in Level 2. The fair values of all derivatives held for hedging purposes are based on valuation methods. These methods maximise the use of detectable market data where available and minimise the impact of the Company's estimates and projections. To value the hedging instruments, the mixed instruments were specified to component level and valued on the basis of valuation models, discounted cash flows, and Black & Scholes respectively as appropriate. The parameters used for these models are those applicable as at year-end and are therefore classified as Level 2.

The fair value of these financial derivatives at year-end 2011 was 3.452 million euros, 1.517 million euros of which was presented as long-term liability and 1.935 million euros as short-term liability. The full movement in fair value in 2011 was added to the result. Arseus has no other financial derivatives.

As do the borrowing companies, Arseus NV and Arseus Capital NV, the following companies serve as guarantors for the bank loan concluded by Arseus:

Company

• ACA Pharma NV	• Corilus SA
• Alphadent NV	• Duo-Med NV
• Arseus NV	• Dutch BioFarmaceutics BV
• Arseus Capital NV	• Fagron BV
• Arseus Dental Nederland BV	• Arseus Dental Solutions NV
• Arseus Lab BV	• Spruyt hillen BV

b. Financial leases

Property, plant and equipment include the following amounts where Arseus is a lessee under a financial lease.

(x 1,000 euros)	2011	2010
Cost-capitalised financial leases	5,190	4,594
Accumulated depreciation	(2,428)	(1,856)
Net amount of assets in leasing	2,762	2,738

The Group's liability regarding financial leasing is guaranteed as the lessor holds the legal property title of the leased assets.

The net amount of the financial leases concerns the following investments:

(x 1,000 euros)	2011	2010
Machinery and installations	2,733	2,738
Furniture and vehicles	29
Net amount of assets in leasing	2,762	2,738

Financial lease liabilities-minimum lease payments:

(x 1,000 euros)	2011	2010
Within, 1 year	568	731
More than, 1 year but less than 5 years	896	1,499
Total	1,464	2,230
Future financing charges on financial leases	163	284
Present value of financial lease liabilities	1,301	1,947

c. Operating leases

Operating lease liabilities - minimum lease payments:

(x 1,000 euros)	2011	2010
Within, 1 year	6,752	5,749
More than, 1 year but less than 5 years	12,642	10,818
More than 5 years	4,200	4,932
Total	23,594	21,499

The fair values of the bank borrowings and financial leasing liabilities are calculated based on the present value of the future payments associated with the debt.

24. Other current payables

(x 1,000 euros)	2011	2010
Prepayments	1,069	2,097
Other payables	55,253	21,857
Accrued expenses	3,198	2,852
Other current payables	59,521	26,806

An amount of 50.090 million euros of the 'Other payables' pertains to amounts to be paid concerning existing participations (subsequent payments).

Trade payables and other commitments generally have due dates that are close to each other. The reported values approximate the fair values.

25. Contingencies

At the date of this annual financial report, Arseus was not involved in any material disputes. The term Material' in this context is defined as a financial risk exceeding 0.750 million euros.

Arseus is involved in a number of claims, disputes and legal proceedings within the normal conduct of its business. Management believes that these claims, disputes and legal proceedings will not, on aggregate, have a materially adverse impact on Arseus' financial position.

The prospectus and the 2007, 2008, 2009 and 2010 annual reports report that Fagron Iberica, one of Arseus NV's subsidiaries, had a dispute regarding a claim of 12.953 million euros from Abbott GmbH & Co. KG. The court of first instance No.37 of Barcelona ruled in favour of Fagron Iberica on 11 March 2005, but Abbott GmbH & Co KG filed an appeal. In 2008, the court again ruled that Fagron Iberica is not required to pay any compensation, in response to which Abbott GmbH & Co.KG appealed again. On 31 May 2011, the court's final ruling was in favour of Arseus once more and the case has been closed.

26. Related parties

The overall remuneration package for members of the Executive Committee and the CEO individually, as well as the non-executive directors, for the financial years 2010 and 2011 was as follows.

(x 1,000 euros)	Fixed remuneration component'	Variable remuneration component	Other remuneration components'
2010 financial year
Gervan Jeveren, CEO	424	291	16
Executive Committee, including the CEO	1.850	591	37
Non-executive members of the Board of Directors	185
2011 financial year
Ger van Jeveren, CEO	437	300	24
Executive Committee, including the CEO	1.607	657	48
Non-exec utive members of the Board of Directors	185

The variable remuneration component for the 2011 fiscal year is the bonus effectively paid out in 2012.

The Nomination and Remuneration Committee prepares proposals annually for the remuneration policy and/or other benefits for members of the Executive Committee and the CEO.

1. Costs incurred by Arseus, i.e. the gross amount including any social security contributions.

2. Includes costs regarding pensions, insurances and the cash value of the other benefits in kind.

In 2007, members of the Board of Directors who do not serve on the Executive Committee obtained 110,000 warrants. The resignation of two members in 2009 brings the total number of warrants outstanding in this context to 90,000. In the course of 2007, Mr Van Jeveren obtained 500,000 warrants, while the other members of the Executive Committee obtained 300,000 warrants. The members of the Executive Committee, in the composition in effect on 31 December 2011, together hold 810,000 warrants. In the course of 2010, Mr Van Jeveren obtained 500,000 stock options, while the other members of the Executive Committee together hold 390,000 stock options.

The CEO rents out buildings to a group company for an amount of 244,000 euros. This lease arrangement was concluded before the Company was acquired by Omega Pharma, the legal predecessor to Arseus, and was supported by independent valuation reports upon its commencement. This lease was reported to Arseus' Board of Directors when Arseus was established. The agreements are expiring.

27. Business combinations

Arseus completed a number of acquisitions in the financial year 2011. Full control was acquired of all group companies, with the exception of Unit Dose Pack BV, where Arseus obtained a majority interest of 51%. As the acquired activities were immediately-in their entirety or to a significant degree - integrated in existing entities of Arseus, their respective contributions to the profit of Arseus have not been reported separately.

Regarding US company Fagron Inc. (formerly Gallipot Inc.) acquired in 2010, the final fair value of the assets and liabilities acquired was established, representing an increase in goodwill of 0.118 million euros. This goodwill was allocated to the operating company segment Fagron. The fair value of the acquired assets and liabilities is further explained in the following box.

Fair value of the acquired assets and liabilities of Fagron Inc.

(x 1,000 euros)
Property, plant and equipment	148
Deferred tax assets	346
Inventories	1,215
Trade receivables	779
Other receivables	79
Cash	125
Total assets	2,693
Trade payables	619
Other current debts	768
Net acquired assets	1,306
Goodwill	10,490
Total acquisition amount	11,796

During 2010, Brazilian company Fagron do Brasil Farmacêutica Ltda (formerly Deg Importacao De Produtos Quimicos Ltda) was acquired. In November 2011, the final fair value of the assets and liabilities acquired was established, representing an increase in goodwill of 0.938 million euros. This goodwill was allocated to the operating company segment Fagron. The fair value of the acquired assets and liabilities is further explained in the following box.

Fair value of the acquired assets and liabilities of Fagron do Brasil Farmaceutica Ltda

(x 1,000 euros)
Intangible assets	74
Property, plant and equipment	2,458
Deferred tax assets	204
Inventories	3,943
Trade receivables	4,550
Other receivables	87
Cash	-822
Total assets	10,494
Financial debts	102
Trade payables	3,564
Other current debts	1,902
Net acquired assets	4,926
Goodwill	32,411
Total acquisition amount	37,338

Fair value of the acquired assets and liabilities of Pharma Nostra Comercial Ltda

(x 1,000 euros)
Intangible assets	4
Property, plant and equipment	5,121
Other non-current assets	50
Deferred tax assets	1,233
Inventories	5,717
Trade receivables	5,268
Other receivables	103
Cash	2,104
Total assets	19,600
Financial debts	5,856
Trade payables	5,159
Other current debts	9,287
Net acquired assets	-702
Goodwill	52,175
Total acquisition amount	51,472

Furthermore, Fagron acquired a Dutch compounding pharmacy in 2011. Corilus acquired Belgian company CMS. CMS supplies software to residential care homes in Belgium. In addition to the above acquisitions, some smaller companies and activities were acquired, the total acquisition price of which amounted to 32.262 million euros. The total net assets acquired for allocation of the acquisition price regarding these smaller companies and activities amounted to 0.494 million euros. Regarding the acquired trade receivables of 1.620 million euros, a bad debt provision was created amounting to 0.075 million euros. The provisional fair value of the acquired assets and liabilities of these smaller companies was determined as detailed below.

Fair value of the acquired assets and liabilities - other companies

(x 1,000 euros)
Intangible assets	90
Property, plant and equipment	1,586
Other assets	39
Deferred tax assets	353
Inventories	868
Trade receivables	5,545
Other receivables	192
Cash	2,170
Total assets	6,842
Provisions	207
Deferred tax liabilities	0
Financial debts	1,396
Trade payables	2,601
Other current debts	2,145
Net acquired assets	494
Goodwill	31,768
Total acquisition amount	32,262

The final determination of the fair value of the assets and liabilities regarding previous minor acquisitions resulted in an adjustment of 0.565 million euros. Furthermore, the total goodwill decreased by 4.075 million due to exchange rate differences, which were mainly due to fluctuations in the Brazilian real. The fair value of a number of acquired assets and liabilities was determined on a provisional basis. The fair value as stated is provisional because the integration process of the acquired entities and their activities is still on going.

At year-end, the Group had an amount of approximately 11.2 million euros in contingencies. These fees payable to former shareholders were determined on the basis of business plans at the time of acquisition. Any differences between the liabilities as stated and the actual payment are not material for 2011.

The total represents an increase in the goodwill of 81.488 million euros, of which 65.345 million euros was allocated to the Fagron operating segment, 6.041 million euros to Arseus Dental, 0.721 million euros to Arseus Medical and 9.381 million euros to Corilus. To a large extent, the goodwill relates to future profit potential due to operational benefits to be gained, including synergy and scale benefits and efficiency improvements, as well as commercial benefits in the form of access to new markets and realising market leadership in both new and existing markets.

In December 2011, Arseus signed an agreement for the acquisition of Pharma Cosmetic in Poland, established in Krakow. This company is a leading supplier of pharmaceutical raw materials for pharmaceutical compounding in Poland. In 2011, Pharma Cosmetic achieved a turnover of approximately 7.5 million euros and it will be consolidated as from January 2012.

28. Information on the Statutory Auditor, his remuneration and related services

The Company's Statutory Auditor is PricewaterhouseCoopers Bedrijfsrevisoren BCVBA, represented by Peter Opsomer.

(X 1,000 euro)	2011	2010
Audit fee for the Group audit
Arseus Group	419	355
Audit fee for PricewaterhouseCoopers Bedrijfsrevisoren	200	179
Audit fee for parties related to PricewaterhouseCoopers Bedrijfsrevisoren	235	176
Additional services rendered by the Auditor to the Group
Other engagements linked to the Auditor's mandate	38	37
Additional services rendered by parties related to the Auditor to the Group
Taxadvisory services	73	39
Other services	180	8

The item 'Other services', i.e. services other than strictly financial auditing work, relates mainly to due diligence work.

29. Significant events after balance sheet date

In December 2011, Arseus signed an agreement for the acquisition of Pharma Cosmetic in Poland. This company will be included in Arseus' consolidated financial statements as from January 2012.

30. Additional notes

1 Off-balance sheet rights and liabilities - collateral:

•	Hader SA provided a mortgage registration in the amount of 0.002 million euros in the context of its financing,
•	Arseus BV issued a guarantee in the amount of 1.3 million euros in the context of the new construction of the head office of Fagron Nederland.

2 Arseus NV signed a liability statement on behalf of a number of Dutch subsidiaries. These are:

•	Arseus BV
•	Arseus Dental BV
•	Arseus Dental Nederland BV
•	Arseus Lab BV
•	Arseus Medical BV
•	Corilus BV
•	DSD BV
•	Dutch Bio Farmaceutics BV
•	Fagron Brazil Holding BV
•	Fagron BV
•	Fagron Group BV
•	Fagron Services BV
•	Novux Lab BV
•	Pharma Assist BV
•	Spruyt hillen BV
•	Steunpunt Apotheek Mierlo-Hout BV
•	Timm Health Care BV
•	Twipe BV

31. List of the consolidated companies

Abacus BVBA	Landvan Rodelaan 7,9820 Schelderode (Belgium)	100%
ABC Dental and Pharmaceutical Consultancy NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
ACAPharma NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
AD Dentaire SAS	Rue faubourg de bethune 90, 59001 Lille (France)	100%
Alpa Sprl	Avenue de Coteaux 82, 4030 Liege (Belgium)	100%
Alphadent NV	Textielstraat 24,8790 Waregem (Belgium)	100%
APPEGSA	Rue de la Sambre 6, 6032 Charles 'Belgium)	100%
Arseus Belgie NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus BV	Kralingseweg 207-211, 3062 CE Rotterdam (Netherlands)	100%
Arseus Capital NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus Dental BV	Kralingseweg 207-211, 3062 CE} Rotterdam (Netherlands)	100%
Arseus Dental Nederland BV	Cartografenweg 18, 5141 M T Waalwijk (Netherlands)	100%
Arseus Dental Solutions Est SARL	Bouc le de la Bergerie 5, 57070 SI Julien Les Metz (France)	100%
Arseus Dental Solutions IDF SAS	AvenueAlphand 2, 75116 Paris ,France)	100%
Arseus Dental Solutions Nord SA	Rue faubourg de béthune 90, 59000 Lille (France)	100%
Arseus Dental Solutions NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus Dental Solutions Ouest SAS	LeBordage,35510 Cesson Sevigne (France)	100%
Arseus Dental Solutions Rhone-Alpes SARL	Boulevard Edmond Michelet 13, 69008 Lyon (France)	100%
Arseus Dental Solutions SAS	Boulevard Ornano 30/34,93200 Saint-Denis (France)	100%
Arseus Devroebvba	Dragonderdreef 5, 8570 Vichte (Belgium)	100%
Arseus Hospital NV	Boomsesteenweg 524, 2610 Wilrijk (Belgium)	100%
Arseus Lab BV	Leeuweriklaan 2, 3704 GR Zeist (Netherlands)	100%
Arseus Lab NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus Lab SAS	27 rue des Frères Lumière, 68000 Colmar (France)	100%
Arseus Medical BV	Gelderlandhaven 4, 3433 PG Nieuwegein (Netherlands)	100%
Arseus Medical NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus Tec NV	Textielstraat 24, 8790 Waregem (Belgium)	100%
Arseus Tec SAS	Boulevard Ornano 32,93200 Saint-Denis (France)	100%
Bruco Hospital NV	Dragonderdreef 5, 8570 Vichte (Belgium)	100%
C MIS BVBA	Mastboomstraat 4, 2640 Aartselaar (Belgium)	700%
C MS Frankrijk S.	Boulevard Malesherbes 19, 75008 Paris (France)	100%
CMS NV	Mastboomstraat 4, 2640 Aartselaar (Belgium)	100%
Corilus BV	Randhoeve 221, 3995 GA Houten (Netherlands)	100%
Corilus Info Sante) SA	Rue Gabriel Peri 30, 92700 Colombes (France)	100%
Corilus SA	Rue Camille Hubert 23, 5032 Gembloux (Belgium)	100%
Dorge Medic SA	Chausse de Nivelles 351, 5020 Temploux (Belgium)	100%
D SD BV	Markerkant 1303I, 1314 AL Almere (Netherlands)	100%
Duo-Med NV	Berkenlaan 53, Londerzeel (Belgium)	100%
Dutch BioFarmaceutics BV	Steenovenweg 15, 5701 AJ Helmond (Netherlands)	100%
Eurotec Dental GmbH	Forumstrasse 12, 4468 Neuss (Germany)	100%
Eurotec Dental SAS	BoulevardOrnano 30/34,93200 Saint-Denis (France)	100%
Fagron au.	Holicka 1098/31 M, 77200 Olomouc (Czech Republic)	73.1%
Fagron Brasil Empreendimentos
E Participaeoes Ltda	Rua Jurupari,803 -Jardim Oriental, 04348-070 Sao Paulo (Brazil)	100%
Fagron Brazil Holding BV	Kralingseweg 267-211, 3062 CE Rotterdam (Netherlands)	100%
Fagron BV	Venkelbaan 101, 2908 KE Capelle aan den Ilssel (Netherlands)	100%
Fagron do Brasil Farmaceutica	Rua Jurupari, 803-Jardim Oriental, 04348-070 Sao Paulo (Brazil)	100%
Fagron GmbH &Co KG	Von-Bronsart-Straße 12, 22885 Barsbüttel (Germany)	100%
Fagron Group BV	Kralingseweg 207-211, 3062 CE Rotterdam (Netherlands)	100%
Fagron Holding USALLe	Orangestreet 1209, New Castle County (United States of America)	100%
Fagron Iberica SAU	Carrerde Josep Tapiolas 15, 8226 Terrassa (Spain)	100%
Fagron Inc.	2400 Pilot Knobroad, 55120 St. Paul (United States of America)	100%
Fagron Italia SrL	Via Del Fonditore 4/4, 40138 Bologna (Italy)	100%
Fagron Nordic A/S	Kigkurrent 8 M 2. Sal, 2300 Copenhagen (Denmark)	100%
Fagron NV	Textielstraat 20, 8790 Waregem (Belgium)	100%
Fagron Poland SP. Z.o.o	Albatrosów 1 , Cracow (Poland)	100%
Fagron SAS	Rue Gabriel Peri 30,92700 Colombes (France)	100%
Fagron Services BV	Molenwerf 13,1911 DB Uitgeest (Netherlands)	100%
Fagron Services BVBA	Industrieweg 2, 2850 Boom (Belgium)	100%
Fagron Sarl	Intendente Neyer 924,Beccar,Partido de San Isidro. Provincia de Bs.As (Argentina)	100%
Fagron UK Ltd	Pink Ribbon Lane I First Floor,NE1 DWNewcastle upon Tyne (United Kingdom)	100%
Faynel Jost SARL	Boulevard Edmond Michelet 13, 69008 Lyon (France)	100%
GJD NV	Ieperstraat 30, 8930 Menen (Belgium)	100%
GSM DentaireSarl	Rue du Point du Jour 77, 92100 Boulougne Bilancourt (France)	100%
Hader SA	Rue Jardiniere 153, 2300 La Chaux-de-Fonds (Switzerland)	100%
Imagelevel NV	Nieuwkerkenstraat 29,9100 Nieuwkerken-Waas (Belgium)	100%
JPG Pharma NV	Ondernemersstraat 4, 2500 Lier (Belgium)	100%
Liengme SA	Boulevard Eplatures 39, 2300 La Chaux-de-Fonds (Switzerland)	100%
Médical Universal SAS	1 Rue Galilée, 69800 Saint Priest (France)	100%
Multident GmbH	Pelikanplatz 25, 30177 Hannover (Germany)	100%
Nolte GmbH	Schürfweg 29.49477 Ibbenbüren (Germany)	100%
Novux Lab BV	Leeuweriklaan 3, 3705 GR Zeist (Netherlands)	100%
Owandy Benelux Spr	Chaussée Bara 68,1420 Braine L'Alleud (Belgium)	100%
Owandy Iberia SLU	Centrobbc Barajas c/jerez de los cabalieros 2,28042 Madrid (Spain)	100%
Owandy Inc	192 Lexington Avenue Suite 1101, 10016 NY New York (United States of America)	100%
Owandy Radiologie Italia Srl	Via del Guado 57, 20033 Ml Desio (Italy)	100%
Owandy SAS	Allee kegler 4/5, 77420 Champs sur Marne (France)	100%
Pharma Assist BV	Dieselstraat, 7903 AR Hoogeveen (Netherlands)	100%
Pharma Nostra C omercial Ltda	Rua Aquidaba,1144,20720-299 Rio de Janeiro (Brazil)	100%
Pharmaflore SA	Rue Botrieux 7, 7864 Lessines (Deux-Acren)(Belgium)	100%
Rocam SA	Rue Jardiniére 153,2300 La Chaux-de-Fonds (Switzerland)	100%
Sosoeme NV	Samelstraat 33, 9170 Sint Gillis Waas (Belgium)	100%
Spruythillen BV	Tinbergenlaan 1, 3401 MT IJsselstein (Netherlands)	100%
SteunpuntApotheek Mierlo-Hout BV	Steenovenweg 15,5701 AJ Helmond (Netherlands)	100%
Timm Health Care BV	Tinbergenlaan 1, 3401 MT IJsselstein (Netherlands)	100%
Twipe BV	Kralingseweg 207-211, 3062 GE Rotterdam (Netherlands)	100%
Unit Dose Pack BV	Eijkenakker 12, 5571 SL Bergeijk (Netherlands)	51%
Van Beek Medical BV	Zeilmakersstraat 31, 8601 WTSneek (Netherlands)	100%
Van Hopplynus Ophtalm SA	Rijksweg 10,2880 Bornem (Belgium)	100%
Zenith Pharmaceuticals Cyprus Ltd	Doma Building Arch Makarios IIIAvenue 2.27, 3105 Limassol (Cyprus)	100%

STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS' MEETING ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY ARSEUS NV AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2011

As required by law and the company's articles of association, we report to you in the context of our appointment as the company's statutory auditor. This report includes our opinion on the consolidated financial statements as well as the required additional disclosure.

Unqualified opinion on the consolidated accounts

We have audited the consolidated accounts of Arseus NV and its subsidiaries (the "Group") as of and for the year ended p December 2011, prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated accounts comprise the consolidated income statement, the consolidated statement of realised and unrealised gains and losses, the consolidated balance sheet, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet total was EUR (000) 680,232 and the consolidated balance sheet shows a profit for the financial year, group share, of EUR (000) 28,147.

The company's Board of Directors is responsible for the preparation of the consolidated accounts. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated accounts that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting principles; and making accounting estimates that are reasonable in the circumstances.

Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in accordance with the legal, requirements applicable in Belgium and with Belgian auditing standards. As issured by the Institut des Reviseurs d'Entreprises/Instituut der Bedrijfsrevisoren. Those auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts are free of material misstatement.

In accordance with the auditing standards referred to above, we have carried out procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts. The selection of these procedures is a matter for our judgement, as is the assessment of the risk that the consolidated accounts contain material misstatements, whether due to fraud or error. In making those risk assessments, we have considered the Group's internal control relating to the preparation and fair presentation of the consolidated accounts, in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

PwC Bedrijfsrevisoren cube, burgerlijkevermootschap met handelsvorm - PwC Reviseurs d'Entreprises scrl, société civile a forme commerciale- Financial Assurance Services

Maatschappelijke zetel/Siège social: Woluwe Garden, Wohnvedal l8, B-9000 Sint-Stevens-Woluzve Vestigingseertheid/Unite d'etablissement: Wilsonplein 5 G, B-9000 Gent

T: -32 (0) 9 268 82 11, F: +32 (0) 9 268 82 99, WWW.pwc.com

BTW/TVA BE 0429.501.944/RPR Brussel -RPM Bruxelles/ING BE 43 3101 3811 9501- BIC BBRUBEBB/RBS BE89 7205 4043 3185 - BIC ABNABEBR

We have also evaluated the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management as well as the presentation of the consolidated accounts taken as a whole. Finally, we have obtained from the Board of Directors and Group officials the explanation and information necessary for our audit.

We believe that the audit evidence we have obtained provides a reasonable basis for our opinion

In our opinion, the consolidated accounts give a true and fair view of the Group's net worth and financial position as of 31 December 2011 and of its results and cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Additional disclosure

The company's Board of Directors is responsible for the preparation and content of the management report on the consolidated accounts.

Our responsibility is to include in our report the following additional disclosure, which does not have any effect on our opinion on the consolidated accounts:

•

The management report on the consolidated accounts deals with the information required by the law and is consistent with the consolidated accounts. However, we are not in a position to express an opinion on the description of the principal risks and uncertainties facing the Companies included in the consolidation, the state of their affairs, their forecast development, or the significant impact of certain events on their future development. Nevertheless, we can confirm that the information provided is not in obvious contradiction with the information we have acquired in the context of our appointment.

Ghent,12. April 2012

**The Statutory Auditor

PricewaterhouseCoopers Bedrijfsrevisoren bcvba

Represented by**

Peter Opsomer BV BA, Represented by, Bedriffsrevisor

Statutory financial statements

Condensed stand-alone income statement Arseus NV

(x 1,000 euros)	2011	2010
Operating income	2,490	2.793
Turnover Other operating income	2,490	2,793
Operating charges	2,977	3.411
Goods for resale, raw materials and consumables
Services and other goods	2,781	3,266
Remuneration, social security and pensions	166	94
Depreciation and amortisation	29	29
Other operating charges	1	22
Operating result	-487	-618
Financial result	14.926	17.795
Profit from ordinary activities before taxes	14.439	17.177
Exceptional result
Profit for the financial year before taxes	14.439	17.177
Result taxes
Net profit for the financial year	14.439	17.177

Condensed stand-alone balance sheet Arseus NV

(x 1,000 euros)	2011	2010
Fixed assets	400,115	400,143
Formation expense
Intangible assets	29	57
Proper ty, plant and equipment
Financial assets -	400,086	400.086
Current assets	94,909	114,131
Debtors due after one year	69.569	69.569
Inventories and orders in execution
Debtors due within one year	3.621	8.570
Investments	9.801	11.613
Cash at bank and in hand	11.855	24.334
Deferred charges and accrued income	63	45
Total assets	495,024	514,274
Capital and reserves	333,130	333,526
Capital	320.023	319.810
Share premiums	12
Legal reserves	3.156	2,434
Unavailable reserves	9.207	10.816
Available reserves	732	278
Profit carried forward		188
Creditors	161,894	180,748
Creditors due after one year		166,000
Creditors due within one year	161.630	14,564
Accrued charges and deferred income	264	184
Total liabilities	495,024	514,274

Appropriation of profits Arseus NV

(x 1,000 euros)	2011	2010
Profit to be appropriated	14,627	17,177
Profit for the year to be appropriated	14.439	17,177
Profit carried forward from the previous financial year	188
Transfers from capital and reserves	1,358
To the reserves	1.358
Transfers to capital and reserves	925	3,835
To statutory reserves	722	859
To other reserves	203	2.976
Result tobe carried forward		188
Profit to be carried forward		188
Profit tobe distributed as dividends	15,060	13,154
Dividend	15.060	13,154

Accounting policies

The accounting policies used for the stand-alone statutory financial statements of Arseus NV are in accordance with the KB of 31.01.2001 implementing the Belgian Companies Code.

Statutory financial statements of Arseus NV

As required by article105, Belgian Companies Code, this annual report contains a condensed version of the statutory financial statements of Arseus NV. The annual report and the Statutory Auditor's report will be filed and will be available for inspection at the Company's registered seat.

The Statutory Auditor expressed his unqualified opinion on the statutory financial statements of Arseus NV over financial year 2011

Alphabetical terminology list

In addition to the terms as defined in IFRS, this annual report also includes other terms. These 'alternative performance indicators' are defined below. The IFRS terminology is in italics.

Operating cash flow:	EBITDA, 'Earnings Before Interests, Taxes, Depreciations and Amortisations', Result of operating activities plus depreciations and amortisations.
Operating result:	Result of operating activities, EBIT ('Earnings Before Interests and Taxes')
Gross margin:	Net turnover less acquired trade goods, raw materials and auxiliary materials and adjusted for change in inventories and WIP, as a percentage of net turnover
EBIT:	'Earnings Before Interests and Taxes', Result of operating activities
EBITDA:	'Earnings Before Interests, Taxes, Depreciations and Amortisations', Result of operating activities plus depreciations and amortisations, operating cash flow
EBT:	'Earnings Before Taxes', Profit before taxes, Result of operating activities after net financing costs
Financial result:	Net financing costs, result of financing income and financing costs
Gearing ratio:	Net financial debt as percentage of total Equity
Net capex:	Net capital expenditure, Capital expenditure (investments) and produced assets less turnover of investment goods and investment goods taken out of service
Net financial debt:	The sum of current and non-current interest-bearing borrowings plus derivative financial instruments and less cash and cash equivalents
Net turnover:	Revenue
Non-recurring items:	One-off charges not related to ordinary operations
Net result:	Profit (loss) of the reporting period, consolidated result
REBIT:	'Recurring Earnings Before Interests and Taxes', Result of operating activities adjusted for all non-recurring items
REBITDA:	'Recurring Earnings Before Interests, Taxes, Depreciations and Amortisations', Result of operating activities plus depreciations and amortisations and adjusted for all non-recurring items
Recurring net result:	Profit (loss) of the reporting period, adjusted for non-recurring items
Recurring net operating cash flow:	Profit (loss) of the reporting period plus depreciations and amortisations and adjusted for all non-recurring items
Recurring operating cash flow:	Profit (loss) from operating activities plus depreciations and amortisations and adjusted for all non-recurring items
Working capital:	Inventories plus Trade receivables less Trade payables