Fagron N.V. — Annual Report 2015

Feb 28, 2017

Publication

Fagron NV

Waregem

Konzernabschluss zum Geschäftsjahr vom 01.01.2015 bis zum 31.12.2015

Consolidated financial statements

Statement

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated cash flow statement

Notes to the consolidated financial statement

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, amortization and impairment

10 Other operating expenses

11 Financial result

12 Income tax expenses

13 Discontinued operations

14 Earnings per share

15 Intangible fixed assets

16 Property, plant and equipment

17 Financial assets

18 Income taxes, remuneration and social security

19 Inventories

20 Trade receivables, other receivables, cash and cash equivalents

21 Assets held for sale and related liabilities

22 Equity

23 Provisions

24 Pension obligations

25 Financial debts and financial instruments

26 Trade payables

27 Other current payables

28 Contingencies

29 Related parties

30 Business combinations

31 Discontinued operations

32 Information an the Statutory Auditor, his remuneration and related services

33 Significant events after the balance sheet date

34 Additional notes

35 List of the consolidated companies

Statutory Auditor's Report

Statutory financial statement

Condensed stand-alone income statement Fagron NV

Condensed stand-alone balance sheet Fagron NV

Appropriation of profits Fagron NV

Alphabetical terminology list

Forward-looking statements caution

Consolidated financial statements

The Report of the Board of Directors and the Corporate Governance Statement, as reported before, are an integral part of the consolidated financial statements.

Statement

We declare that, to the best of our knowledge, the consolidated financial statements for the year ended 31 December 2015, 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 narre and an behalf of the Board of Directors,

7 April 2016

Hans Stols, CEO

Jan Peeters, CFO

Consolidated income statement

(x 1,000 euros)	Note		2014
Operating income		481,664	450,409
Turnover		472,996	447,056
Other operating income		8,668	3,353
Operating expenses		632,002	356,073
Trade goods		164,166	158,843
Services and other goods		88,957	76,067
Employee benefits expenses	8	125,385	101,642
Depreciation and amortization	9	23,620	19,025
Impairment	9	225,563
Other operating expenses	10	4,311	496
Operating profit		(150,338)	94,336
Financial income	11	2,013	731
Financial expenses	11	(47,004)	(25,215)
Profit before income tax		(195,329)	69,852
Taxes	12	6,954	26,663
Profit for the year from continuing operations		(202,283)	43,190
Profit (loss) for the year from discontinued operations
(attributable to equity owners of the company)	13	270	(27,033)
Profit (loss) for the year		(202,012)	16,156
Profit (loss) attributable to:
Equity holders of the company (net result)		(202,328)	16,226
Non-controlling interests		315	(70)
Earnings per share from continuing and discontinued operations:
attributable to owners of the parent during the year
Profit (loss) for the year per share (in euros)	14	(6.46)	0.53
From continuing operations	14	(6.47)	1.41
From discontinued operations	14	0.01	(0.88)
Diluted profit for the year per share (in euros)	14	(6.44)	0.52
From continuing operations	14	(6.45)	1.39
From discontinued operations	14	0.01	(0.87)

Consolidated statement of comprehensive income

(x 1,000 euros)	Note	2015	2014
Profit for the year		(202,012)	16,156
Other comprehensive income:
Items that will not be reclassified to profit or loss	24
• Remeasurements of post-employment benefit obligations		791	(1,906)
• Tax relating to items that not will be reclassified		264	(635)
Items that may be subsequently reclassified to profit or loss
• Currency translation differences		(26,335)	5,973
Other comprehensive income for the year net of tax		(25,280)	3,432
Total comprehensive income for the year		(227,292)	19,588
Attributable to:
Equity holders of the company		(227,672)	19,686
Non-controlling interests		380	(98)
Total comprehensive income for the year		(227,292)	19,588
Total comprehensive income for the year attributable to equity holders of the company:
From continuing operations		(220,717)	46,719
From discontinued operations	13	270	(27,033)
Total comprehensive income for the equity holders		(220,447)	19,686

The unrealized exchange rate differences of 26 million euros are mainly due to the weakening of the Brazilian real against the euro.

Consolidated statement of financial position

(x 1,000 euros)	Note	2015	2014
Non-current assets		501,535	662,649
Intangible assets	15	410,601	575,252
Property, plant and equipment	16	71,133	59,969
Financial assets	17	5,859	5,064
Deferred tax assets	18	13,942	22,363
Current assets		187,846	228,114
Inventories	19	67,251	65,181
Trade receivables	20	34,090	36,337
Other receivables	20	11,031	18,043
Cash and cash equivalents	20	75,474	108,552
Assets held for sale	21		82,989
Total assets		689,381	973,752
Equity	22	(64,772)	156,948
Shareholders' equity (parent)		(67,473)	154,630
Non-controlling interests		2,700	2,317
Non-current liabilities		27,064	575,472
Provisions	23	15,987	8,891
Pension obligations	24	5,146	6,053
Deferred tax liabilities	18	1,519	6,162
Borrowings	25	4,411	551,504
Financial instruments	25		2,862
Current liabilities		727,090	220,938
Borrowings	25	594,908	5,710
Trade payables	26	63,043	57,440
Taxes, remuneration and social security	18	25,282	38,668
Other current payables	27	41,859	119,120
Financial instruments	25	1,996
Liabilities directly associated with assets classified as held for sale	21		20,394
Total liabilities		754,154	816,804
Total equity and liabilities		689,381	973,752

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 1 January 2014		318,927	(230,499)	(21,842)	84,966	151,553	3,615	155,168
Profit for the year					16,226	16,226	(70)	16,156
Other comprehensive income for the year			3,460			3,460	(28)	3,432
Total comprehensive income for the year			3,60		16,226	19,686	(98)	19,588
Capital increase		733				733		733
Treasury shares				5,350		5,350		5,350
Result on treasury shares				(3,743)		(3,743)		(3,743)
Dividends					(22,209)	(22,209)		(22,209)
Share-based payments			2,060			2,060		2,060
Change in non-controlling interests			1,198			1,198	(1,198)
Balance at 31 December 2014		319,660	(223,781)	(20,235)	78,983	154,628	2,319	156,948
Profit for the year					(202,328)	(202,328)	315	(202,013)
Other comprehensive income for the year			(25,344)			(25,344)	64	(25,280)
Total comprehensive income for the year			(25,344)		(202,328)	(227,672)	379	(227,293)
Capital increase	22	26,101				26,101		26,101
Treasury shares	22			4,792		4,792		4,792
Result on treasury shares	22			(3,380)		(3,380)		(3,380)
Dividends	22				(31,156)	(31,156)		(31,156)
Share-based payments	22		9,216			9,216		9,216
Change in non-controlling interests	22
Balance at 31 December 2015		345,760	(239,909)	(18,823)	(154,501)	(67,473)	2,700	(64,772)

Consolidated cash flow statement

(x 1,000 euros)	2015	2014
Operating activities
Profit before income tax	(195,329)	46,299
Paid taxes	(19,413)	(11,370)
Adjustments for financial items	44,991	26,730
Total adjustments for non-cash items	241,241	44,267
Total changes in working capital	1,820	(4,229)
Total cash flow from operating activities	73,311	101,696
Investment activities
Capital expenditure	(22,052)	(20,656)
Investments in existing shareholdings (subsequent payments)
and in new holdings	(96,674)	(196,171)
Proceeds from disposal of assets	72,450	23,042
Total cash flow from investment activities	(46,276)	(193,785)
Financing activities
Capital increase	106	733
Sale (purchase) of treasury shares	1,412	1,339
Dividends paid	(31,366)	(22,199)
New borrowings	100,289	355,488
Reimbursement of borrowings	(100,917)	(245,703)
Interest received	2,013	842
Interest paid	(32,998)	(25,510)
Total cash flow from financing activities	(61,460)	64,990
Total net cash flow for the period	(34,426)	(27,099)
Cash and cash equivalents – start of the period	108,552	135,412
Gains or losses on exchange on liquid assets	(1,349)	(238)
Cash and cash equivalents – end of the period	75,474	108,552
Change in cash and cash equivalents	(34,426)	(27,099)
Cash flows from discontinued operations
Cash flow from operating activities		11,172
Cash flow from investment activities		(13,322)
Cash flow from financing activities		3,660
Total net cash flow from discontinued operations		1,510

Corilus was sold on 13 March 2015. No cash flow was generated from this discontinued operation in 2015.

The item 'adjustments for financial items' relates to interest paid and received and to other financial expenses and income not being cash flows, such as the revaluation of the financial instruments. The item 'total adjustments for non-cash flow items' relates in particular to depreciation, amortization, impairment and changes in provisions. The item 'total changes in working capital' concerns changes in the inventories, trade receivables and payables, other receivables and debts, and all other balance sheet elements that are part of the working capital.

The aforementioned changes are adjusted as appropriate for non-cash flow items as presented above, for conversion differences and for changes in the consolidation scope.

Notes to the consolidated financial statements

1 General information

Fagron is a scientific pharmaceutical R&D business focused on optimizing and innovating personalized pharmaceutical care. Fagron provides Fagron Specialty Pharma Services, Fagron Trademarks and Fagron Essentials to pharmacies, clinics and hospitals in 32 countries worldwide.

The Belgian company Fagron NV is located at Textielstraat 24, 8790 Waregem, Belgium. The company's registration number is BE 0890 535 026. The operational activities of Fagron are driven by the Dutch company Fagron BV. The company's head office is located in Rotterdam.

Fagron NV shares are listed on Euronext Brussels and Euronext Amsterdam.

These consolidated financial statements were approved for publication by the Board of Directors on 7 April 2016.

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 of the consolidated entities including subsidiaries for all of the years presented, unless stated otherwise.

The consolidated financial statements of Fagron 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 derivative financial instruments and contingencies which are stated at fair value.

Accounting policies and continuity

The consolidated financial statements for Fagron NV and its subsidiaries have been prepared on the going concern basis, which assumes that the company will continue to be able to meet its liabilities as they fall due in the foreseeable future. Due to the change in the reimbursement system in the USA, the EBITDA of the group has dropped. This change in reimbursement system impacted the results of Fagron North America, specifically Freedom Pharmaceuticals and Bellevue Pharmacy which led to an impairment. The net result for 2015 equals -202 million euros which results in a negative equity at 31 December 2015 of -65 million euros. Notwithstanding the positive operational cash flow and the operational profit on non-recurring items and the impairment loss, the company as of 31 December 2015 was unable to comply with certain covenant tests as recognized in the loan facilities.

The loan facilities that contain cross default clauses, replicating the same covenants, are: the bond loan of 225 million euros, the multi-currency credit facility of 220 million euros and the privately placed loans originally dated 15 April 2014, which included 45.0 million US dollars 4.15% Series A Senior Notes due 15 April 2017, 22.5 million euros 3.55% Series B Senior Notes due 15 April 2017, 15.0 million euros 4.04% Series C Senior Notes due 15 April 2019, 5.0 million euros Floating Rate Series D Senior Notes due 15 April 2019, 20.0 million US dollars 5.07% Series E Senior Notes due 15 April 2019 and 60.0 million US dollars 5.78% Series F Senior Notes due 15 April 2021.

On 30 December 2015, anticipating the covenant testing date for the credit facilities, a waiver was granted by the lenders in respect of the financial covenants of the multi-currency credit facility and the privately placed loans. The waiver postpones until 31 March 2016 the covenant test in respect of the financial covenants with an original due date of 31 December 2015. Therefore the company will not be in default on 31 December 2015, which means no cross default will be triggered in respect of the bond loan. The waiver had been valid until 31 March 2016 and this has been extended until the end of June. If no further extension is provided by the credit providers, the company will break through its financial covenants on 30 June 2016. Whilst agreement on the refinancing has not been reached as yet, and there is no clear consensus regarding solutions, the lenders have confirmed they will remain committed to the process and the Board of Directors believe that an agreement can be reached that is acceptable for Fagron. As a consequence of the aforementioned, the bond loan of 225 million euros, the multi-currency credit facility of 199 million euros and the privately placed loans of 167 million euros were accounted for within the current debts as at the balance sheet of 31 December 2015.

The company has been exploring several options to reduce its net debt position and to comply with its financial covenants. Fagron has since successfully completed negotiations with a cornerstone investor and five individual investors about a private capital increase combined with a public capital increase of a total of 220 million euros, subject to the approval of the Extraordinary General Meeting of Shareholders of Fagron.

The proposed capital increase will be in two tranches. The first tranche of the capital increase will be executed via a private issue by a cornerstone investor (WPEF VI Holdco III BE B.V.) and five individual investors (Alychlo NV, Carmignac, Midlin N.V., Bart Versluys and Hans Stols) amounting to in the region of 131 million euros. The second tranche of the capital increase will be executed via a public capital increase by means of a preferential rights issue for an amount corresponding with the difference between 220 million euros and the amount of the first tranche of the capital increase.

The subscription price for the first tranche will correspond with the average closing price for the company's shares on Euronext Brussels for the 30 calendar days immediately preceding the date of the shareholders' meeting in which the capital increase is approved, unless this average rises to above 5.50 euro per share. If WPEF invests in the first tranche, the subscription price for the public capital increase (second tranche) will correspond with 90% of the subscription price for the first tranche. Should the first tranche of the capital increase be unsuccessful, Fagron has plans to increase the capital by means of a public capital increase for the entire amount, for which the subscription price has yet to be determined.

As the combination and timing of the options referred to above are not entirely under Fagron's control, the directors wish to signal the existence of a material uncertainty which may cast doubt on the company's ability to continue as a going concern. Although no decision has yet been made on the different options outlined above, the directors are confident that one of the options will be executed successfully.

Based on the above options, the directors anticipate that Fagron will have adequate resources at its disposal to continue in operational activities into the foreseeable future. For this reason, the company continues to adopt the going concern basis in preparing the financial information. The financial information contains no adjustments that would have followed were the going concern basis of preparation unsuitable.

IFRS developments

The following new standards, amendments to standards and interpretations have been issued, approved by the EU and are mandatory for the first time for the financial year beginning 1 January 2015.

Mandatory and applied		Impact
IFRIC 21 Levies	IFRIC 21 sets out the accounting for a liability to pay a levy if that liability is within the scope of IAS 37. This IFRIC sets out which event leads to a liability and when a liability needs to be recognized.	Fagron has established that the application of this standard will not have a material impact on the consolidated financial statements.
Annual improvements to IFRS standards (2011-2013 cycle)	These improvements resulted in an amendement of IFRS 1 (when a modified version of a standard is not mandatory but available for early application, an entity that applies IFRS for the first time may choose between the old and the new version of the standard under IFRS 1), IFRS 3 (the standard does not apply when accounting for the establishment of joint agreements as defined in IFRS 11), the exception for portfolios in IFRS 13 and clarifying the relationship between IFRS 3 'Business Combinations' and IAS 40 'Investment Property'.	Fagron has established that the application of this standard will not have a material impact on the consolidated financial statements.

The following new standards, amendments to standards and interpretations have been issued and approved by the EU, but are not mandatory for the first time for the financial year beginning 1 January 2015.

Issued and approved by the EU, but not yet mandatory		Anticipated impact
Amendment to IAS 19 Defined benefit plans Annual report 2016	The amendment clarifies the accounting of employee contributions set out in the formal terms of a defined benefit plan.	Fagron has established that the application of this standard will not have a material impact on the consolidated financial statements.
Annual improvements to IFRS standards (2010-2012 cycle) Annual report 2016	These improvements resulted in minor amendments to the following standards: • IFRS 2 'Conditions governing unconditional commitment' • IFRS 3 'Accounting of conditional remunerations' • IFRS 8 'Aggregation of operational segments' • IFRS 8 'Reconciliation of the recognized segments' assets with the total entity's assets' • IFRS 13 'Short-term receivables and debts' • IAS 7 'Capitalized' interest payments' • IAS 16/38 'Revaluation method- variable (pro rata) review of accumulated depreciation' and • IAS 24 'Key management personnel'	Fagron has established that the application of these minor amendments will not have a material impact on the consolidated financial statements.
Annual improvements to IFRS standards (2012-2014 cycle) Annual report 2016	These improvements resulted in an amendment to IFRS 5, 'Fixed assets held for sale and discontinued operations', IAS 19, 'Employee benefits', IFRS 7, 'Financial instruments: disclosures' and IAS 34, 'Interim financial reporting'.	Fagron has established that the application of these minor amendments will not have a material impact on the consolidated financial statements.
Amendments to IAS 1 Presentation of financial statements Annual report 2016	The amendments to IAS 1 are part of the initiative of the IASB to improve the presentation of financial statements and the disclosures therein.	Fagron will review the effects of these amendments and consider adoption when appropriate.
Amendment to IAS 16 Fixed assets and IAS 38 Intangible fixed assets Annual report 2016	In this amendment, the IASB clarified that a revenue-based method for calculating depreciations is considered unsuitable since revenues that are generated by an activity that comprises the use of an asset will generally reflect factors other than the consumption of economic benefits embodied in the asset. The IASB also clarified that revenues in general are not appropriate when assessing the consumption of the economic benefits of an intangible fixed asset.	Fagron has established that the application of these standards will not have a material impact on the consolidated financial statements.

The following new standards, amendments to standards and interpretations have been issued but not yet approved by the EU, and are not mandatory for the first time for the financial year beginning 1 January 2015.

Issued, not yet approved bythe EU and not yet mandatory		Anticipated impact
IFRS 9 Financial Instruments Annual report 2018	The standard addresses the classification, measurement and derecognition of financial assets and liabilities.	Fagron will review the effects of these amendments and consider adoption when appropriate.
Amendments to IFRS 9 Financial instruments Annual report 2018	The amendment incorporates a new general hedge accounting model which will allow reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. These amendments also have an impact on IAS 39 and introduce new disclosure requirements for hedge accounting (also impacting IFRS 7) regardless of whether hedge accounting is used under IFRS 9 or IAS 39.	Fagron will review the effects these amendments and consider adoption when appropriate.
IFRS 15 Revenues from contracts with customers Annual report 2018	The standard concerns recognizing revenues from contracts with customers. The standard will improve the financial reporting of revenues and deliver a better global comparison of the revenues accounted to in the financial statements.	Fagron has established that the application of this standard will not have a material impact on the consolidated financial statements.
IFRS 16 Leases Annual Report 2019	The standard specifies how leases are to be recognized, measured and disclosed. According to the new standard, the lessee must include all leases on the balance sheet, with the exception of short-term leases (term of 12 months or less) and lease contracts with a low value.	Fagron will determine what impact these changes have and incorporate them if applicable.

Other new standards, amendments of standards and interpretations which were published but are not yet mandatory for this financial year starting 1 January 2015, are not applicable for Fagron.

Consolidation criteria

The consolidated financial statements include the accounts of Fagron and its subsidiaries. Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to Fagron. They are no longer consolidated as from the date Fagron no longer has control.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Changes to the fair value of the contingent consideration that is deemed to be an asset or liability are recognized in accordance with IAS 39 in the income statement. Contingent considerations that are classified as equity are not re-measured, and its subsequent settlement is accounted for within equity.

An acquisition is recognized using the purchase method. The cost price of an acquisition is defined as the fair value of the assets given, shares issued and 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 the acquisition date. For each business combination, Fagron 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 recognized as expenses. The positive difference between the acquisition price and the fair value of the share of Fagron in the net identifiable assets of the acquired subsidiary on the date of acquisition forms a goodwill and is recognized as an asset.

Intercompany transactions, balances and unrealized gains on transactions between companies of the Group are eliminated. Unrealized losses are also eliminated, but are considered to be an indication of an impairment. Where necessary, the accounting basis for amounts reported by subsidiaries have been adjusted in accordance with the accounting policies of Fagron.

Transactions with minority interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with shareholders in their capacity as shareholders. For purchases from minority interests, the difference between the price that was paid and the corresponding share acquired against the carrying amount of the net assets of the subsidiary is recognized in equity. Gains or losses on disposals to minority interests are also recognized in equity.

Foreign currency translation

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

•	Assets and liabilities at the year-end rate;
•	Income statement at the average exchange 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 atyear-end exchange rate are recognized as shareholders' equity elements under 'Cumulative conversion differences'.

Transactions in foreign currencies

Transactions in foreign currencies are translated to the functional currency using the exchange rates that apply 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 in foreign currencies at exchange rates valid at year-end are recognized in the income statement.

Exchange rates of key currencies

	Balance sheet		Income statement
	2015	2014	2015	2014
---	---	---	---	---
US dollar	1.089	1.214	1.109	1.328
Brazilian real	4.312	3.221	3.700	3.122
Polish zloty	4.264	4.273	4.183	4.185
Swiss franc	1.084	1.202	1.068	1.215

Intangible fixed assets (15)

Intangible fixed assets are valued at cost price less accumulated amortization and impairment charges. All Intangible fixed assets are tested for impairment whenever there is an indication that the intangible asset may be impaired.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the share of Fagron in the net identifiable assets of the acquired subsidiary on the acquisition date. Goodwill on acquisitions of subsidiaries is recognized under Intangible fixed assets. Goodwill is tested at least annually for impairment and consistently when a trigger event occurs. Goodwill is recognized 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 of goodwill relating to the entity sold.

Brands, licenses, patents and other

Intangible fixed assets are recognized at cost, provided this cost is not higher than the reported economic value and the cost price is not higher than the recoverable value. No other intangible fixed assets with an unlimited useful life were identified. The costs of brands with a definite useful life are capitalized and generally amortized on a straight-line basis over a period of 5 to 7 years. When a part of the acquisition price of a business combination relates to trade names, brand names, formulas or customer records this will be considered an intangible asset.

Research and development

Research costs related to the prospect of gaining new scientific or technological knowledge and understanding are recognized as costs 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 capitalized if, among other things, the following criteria are met:

•	Technical feasibility of the project;
•	Intention to complete and to use or sell the asset;
•	Ability to use or sell the asset;
•	Probability that the asset will generate future economic benefits;
•	Adequate resources to complete the asset;
•	Ability to measure the cost reliability.

Development costs are amortized using the straight-line method over the period of their expected benefit, currently not exceeding 5 years. Amortization starts as of the moment that these assets are ready for use.

In-house development

Unique products developed in-house, including software controlled by Fagron that are expected to generate future economic benefits are capitalized at the cost directly related to their production. The software is depreciated over its useful life, which is currently estimated at 5 years.

Software

Acquired software is capitalized at cost price and then valued at cost price less accumulated depreciations and exceptional losses of value. The assets are depreciated over the useful life, which is currently estimated at 5 years.

Impairment

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized 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 the sale costs and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units).

Property, plant and equipment (16)

Tangible fixed assets are valued at the acquisition value or production costs plus directly attributable costs if applicable. Depreciation is pro rata calculated based on the useful life of the asset in accordance with the subsequent amortization parameters. The useful life of equipment and machinery is 3 to 20 years and for buildings range from 25 to 33 years. Land is not depreciated.

In general all assets are depreciated on a straight-line, based on the estimated economic life. 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.

Financial assets (17)

Fagron classifies its non-derivative financial assets into the following categories: loans and receivables, and financial assets available for sale. Management determines the investment classifications of its (non-derivative) financial assets at initial recognition, and re-evaluates them at each reporting date. The Group does not have any financial assets in the category held until maturity or any (non-derivative) financial assets designated at 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 that are not quoted in an active market and are not intended to be traded. Loans and receivables are included in current assets, except for those maturing more than 12 months after the balance sheet date. Loans and receivables are measured at amortized costs using the effective interest method.

Financial assets available for sale

Financial assets available for sale are non-derivative financial assets that are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through the income statement. 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. Unrealized gains and losses arising from changes in the fair value are recognized in unrealized results. If the relevant assets are sold or impaired, the accrued adjustments are recognized at fair value in the income statement.

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

Taxes, remuneration and social security (18)

Taxes on profits as recognized in the income statement include current income tax and deferred taxes. Current income taxes include the expected tax liabilities on the taxable income of Fagron for the financial year, based on the applicable tax rates at balance sheet date, and any adjustments from previous years. Income tax due on dividends is recognized when a liability to pay the dividend is recognized.

Deferred taxes are recognized using the balance sheet liability method and are calculated on the basis of the temporary differences between the carrying amounts and the tax basis. 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 Fagron 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 realized or the deferred tax liability is settled. Under this calculation method, Fagron 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 taxes are recognized to the ratio as the tax losses carried forward are likely to be utilized in the foreseeable future. Deferred income tax receivables are fully written off when it ceases to be likely that the corresponding tax benefit will be realized.

Fagron will offset tax assets and tax liabilities if, and only if Fagron has a legally enforceable right to offset the recognized amounts; and either (a) intends to settle on a net basis, or (b) to realize the asset and settle the liability simultaneously.

Inventories (19)

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

Trade receivables (20)

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 Fagron will not be able to collect all amounts. Subsequently trade receivables are valued at amortized costs. 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 recognizing an impairment loss for the trade receivable in question.

If trade receivables are transferred to a third party (through factoring), the trade receivables are taken off the balance sheet provided that (1) there is no longer a right to receive cash flows and (2) Fagron has substantially transferred all risks and rewards. The factoring balance at 31 December 2015 came to 19.8 million euros.

Cash and cash equivalents (20)

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 subsequently recognized at cost. Adjustments to the carrying amounts are made when at balance sheet date realization value is lower than the book value.

Assets held for sale and related liabilities (21)

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction or through continuing use.

To be classified as held for sale, the following criteria of IFRS 5 should be met:

•	Management must be committed to the sale;
•	An active program to locate a buyer is initiated;
•	The assets (or disposal groups) are available for immediate sale, taking into account the usual conditions for sale;
•	The sale is highly probable, within 12 months of classification as held for sale;
•	The asset is being offered for sale at a reasonable price: the price is in line with the fair value;
•	Actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn.

When Fagron is committed to a sale plan that results in Fagron relinquishing control over a subsidiary, providing the criteria described above are met, all of the assets and liabilities of that subsidiary are classified as assets held for sale and liabilities directly associated with assets held for sale regardless of whether Fagron will retain a non-controlling interest after the sale.

Assets classified as held for sale and liabilities directly associated with assets held for sale (or groups of assets for disposal) are measured at the lower of their previous carrying amount and fair value less costs to seil.

Share capital (22)

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

If a company of Fagron purchases share capital of Fagron (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the shareholders of Fagron 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 shareholders of Fagron.

Provisions (23)

Provisions exist 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 Fagron, unresolved disputes, fines and penalties related to taxes, or compensation for dismissal. Fagron recognizes a provision if:

•	A present legal or constructive obligation has arisen as a result of past events (the obligating event);
•	It is more likely than not that an outflow of resources will be necessary to fulfil the obligation; and
•	The amount can be estimated reliably.

Provisions for restructuring costs comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses.

Provisions are recognized 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.

Employee benefit expenses

Share-based payments (22)

Fagron operates an equity-based compensation plan, which is paid in shares. The total amount to be recognized as costs over the vesting period is determined by reference to the fair value of the warrants or options granted, excluding the impact of any non-market unconditional commitments (for example, profitability and turnover growth targets). Non-market unconditional commitments are included in the assumptions about the number of warrants or options expected to become exercisable. At each balance sheet date, Fagron revises its estimates of the number of warrants or options expected to become exercisable. Fagron recognizes 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. The modalities of the existing plans were not changed this year.

Pension obligations (24)

The companies of Fagron operate various pension schemes. The pension schemes are funded through payments to insurance companies, determined by periodic actuarial calculations. Fagron has both defined benefit and defined contribution plans. The liability recognized on the balance sheet in respect of defined benefit plans is the present value of the future defined benefit obligations less the fair value of the plan assets. The defined benefit obligation is calculated periodically by independent actuaries using the 'projected unit credit' 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 experience adjustments and changes in actuarial assumptions are recognized immediately, in the period in which they arise, being added or deducted to or from the equity via the unrealized result.

For defined contribution plans, Fagron pays contributions to insurance companies. Once the contributions have been paid, Fagron ceases to have any liabilities. Contributions to defined contribution plans are recognized as costs in the income statement at the moment they are made.

Borrowings (25)

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities, unless Fagron has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Lease contracts – Operating leases (25)

Lease contracts in which a significant portion of the risks and rewards of ownership are retained bythe 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 – Financial leases (25)

Lease contracts regarding property, plant and equipment whereby Fagron retains virtually all risks and rewards of ownership are classified as financial leases. Financial leases are capitalized 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 costs, so as to achieve a constant amount on the outstanding financing balance.

The corresponding rental obligations, net of financing costs, are recognized as fixed (payable after 1 year) and short-term (payable within the year) borrowings. The interest component of the financing costs is recognized 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 tangible fixed assets acquired under financial 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.

Derivative financial instruments (25)

Fagron utilizes derivative financial instruments to limit risks relating to unfavorable fluctuations in interest rates. No derivatives are employed for trade purposes.

Derivative financial instruments are recognized at fair value on the balance sheet. Fair values are derived from market prices. As the derivative contracts of Fagron do not fulfil the criteria as set in IAS 39 to be regarded as hedging instruments, changes in fair value of derivatives are recognized in the income statement.

Revenue recognition

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

Segment reporting

IFRS 8 defines an operating segment as:

•	a component of an entity that engages in business activities from which it may earn revenues and incur expenses;
•	in whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance; and
•	for which discrete financial information is available.

Fagron determines and presents operating segments on the information that is internally provided to the Executive Committee, the body that was Chief Operating Decision Maker during 2015. 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 Fagron's Executive Committee. As a result of the sale of the Healthcare division in 2014 and Corilus in 2015, Fagron redefined its operating segments as of 1 January 2015.

The financial information of the current Fagron segments that is provided to the Executive Committee is split up in Fagron Specialty Pharma Services, Fagron Trademarks, Fagron Essentials and HL Technology. These are the segments within Fagron as per 2015.

Earnings per Share (14)

Fagron presents basic and diluted Earnings per Share (EPS) for common shares. Basic EPS is calculated by dividing the profit or loss for the period attributable to holders of common shares by the weighted average number of common shares outstanding during the period. Dividend distribution to the shareholders of Fagron is recognized as a liability in the financial statements in the period in which the dividends are approved by the shareholders.

For the purpose of calculating diluted EPS, the profit or loss for the period attributable to holders of common shares adjusted for the effects of all dilutive potential shares should be divided by the sum of the weighted average number of outstanding ordinary shares used in the basic EPS calculation and the weighted average number of shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

3 Risk management

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 Fagron to this end, based on IFRS and internal information needs.

Risk management is an important core responsibility of Fagron in order to secure the long-term business objectives and the value creation of the company. The policy of Fagron 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, Fagron cannot conclusively guarantee that such risks will not occur or that there will be no consequences when they occur.

All entities periodically prepare business plans, budgets and interim forecasts at predetermined moments. Discussions with management of the entities take place periodically on the general course of affairs, including the realization and feasibility of the forecasts issued and strategic decisions. With regard to fiscal regulation, Fagron makes use of the possibilities offered by the fiscal legislation and regulation without taking any unnecessary risks in doing so. Fagron has the support of external fiscal advisers in this regard.

In addition to strategic and operational risks, Fagron is also subject to various financial risks. To sustain its day-to-day operations, Fagron has the following credit facilities at its disposal.

Bonds

On 2 July 2012, Fagron NV issued bonds for an amount of 225 million euros. The nominal value of the bonds is 1,000 euros. The bonds are listed on Euronext Brussels under ISIN code BE0002180462 on 2 July 2012. The issue price of the bonds was 101.875%. The bonds have a maturity of five years and offer a fixed annual gross interest of 4.75%. The bonds are redeemable at 100% of the nominal value on 2 July 2017. As main covenant Fagron must ensure that total EBITDA, calculated as result before interest, taxes, depreciation, amortization and impairment, of the guarantors is at least 70 per cent of the consolidated Group EBITDA. The companies that act as guarantors for the Fagron loans are listed in Note 25.

Multi-currency facility

On 16 December 2014, Fagron NV amended and extended the existing credit facility with an originating amount of 150 million euros and maturity date in July 2017. This new multi-currency facility of 220 million euros, which will mature in December 2019 and including two additional one year extension options, is arranged through a consortium of existing and new international banks. The new syndicate consists of ING (Coordinator), BNP Paribas, HSBC, KBC Bank, Fifth Third Bank and Commerzbank. The main covenant of this credit facility is a net financial debt/recurring EBITDA ratio with a maximum of 3.25. As at the closing date of 2015, an amount of 199 million euros had been withdrawn (2014:178 million euros).

Privately placed loans (senior unsecured notes)

Fagron NV issued a series of privately placed loans pursuant to a loan agreement originally dated 15 April 2014 and amended by a waiver and amendment agreement on 30 December 2015, which includes 45.0 million US dollars 4.15% Series A Senior Notes due 15 April 2017, 22.5 million euros 3.55% Series B Senior Notes due 15 April 2017,15.0 million euros 4.04% Series C Senior Notes due 15 April 2019, 5.0 million euros Floating Rate Series D Senior Notes due 15 April 2019, 20.0 million US dollars 5.07% Series E Senior Notes due 15 April 2019 and 60.0 million US dollars 5.78% Series F Senior Notes due 15 April 2021.

The loan agreement dated 15 April 2014 provides for the following financial covenants: a leverage ratio measured as net financial debt to recurring EBITDA-ratio with a maximum 3.25 and a minimum interest coverage ratio of 4.0, measured by dividing the recurring EBITDA by the consolidated net interest expenses.

Waiver

On 30 December 2015, anticipating the covenant testing date of the credit facilities, Fagron has been granted a waiver by the lenders in respect of the financial covenants on the multi-currency credit facility and the privately placed loans. The waiver postpones the covenant testing, in respect of the financial covenants, from the original testing date on 31 December 2015 to 31 March 2016. Hereby ensuring that there will be no event of default on the financial covenants at 31 December 2015 and therefore no cross default will be triggered in respect of the bond loan as well. As a result, the company's bond loan of 225 million euros, the multi-currency credit facility of 119 million euros and the privately placed loans of 167 million euros are reclassified within current debts on the balance sheet as at 31 December 2015. In 2016, during the period of the waiver, the interest costs will increase. More details on the granted waiver, the possible solutions and the option to continue as a going concern are presented in note 2 Accounting Policies.

Capital management

The group's objectives in relation to capital management are:

•	to safeguard the company's equity in order to guarantee its continuity, and
•	to maintain the best possible capital structure so as to reduce capital costs.

The amount to be paid on dividends can be adjusted by the Group (see note 22) in order to retain or adjust the capital structure. It may also issue new shares or dispose of assets in order to reduce indebtedness.

In keeping with the conditions governing the largest credit facilities, the group is obliged to comply with the following financial covenants:

a) a maximum net financial debt/recurrent EBITDA-ratio of 3.25 and

b) a minimum interest coverage ratio of 4.0, measured by dividing the recurrent EBITDA with the consolidated net interest expenses.

On 30 December 2015, in anticipation of the covenant test date for the credit facilities, a waiver was provided by the loan providers in relation to the financial covenants of the multi-currency credit facility and the private loans. The waiver allows for the covenant testing of the financial covenants with an original date of 31 December 2015 to be extended to 31 March 2016. Further details on the waiver and on the possible solutions and the option to continue using the continuity principles are provided in note 2 Accounting Policies.

Policy in relation to capital management is being reviewed at present following the recent changes in the Executive Committee and the Board of Directors and in view of the current situation concerning the refinancing of the group.

Cash Pool

Fagron manages the cash and financing flows and the risks arising from these by means of a group-wide treasury policy. In order to optimize the financial position and keep the related interest charges to a minimum, the cash flows of the companies are centralized as much as possible by means of domestic and cross border cash pooling.

Credit risk

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

Interest risk

Fagron regularly assesses the maintained mix of financial debts with fixed and variable interest rates. At this moment, financing is partly based on a credit facility in euros with a variable interest rate of one to six months. A higher Euribor rate of 10 base points would have adversely affected the variable interest charges by approximately 131 thousand euros before tax (2014:113 thousand euros). The interest risk of the variable interest rate for 70 million euros of financing is hedged with financial derivatives. This hedging was taken into account in calculating the impact of an increase in the Euribor rate by 10 base points.

Exchange rate risk

The exchange rate risk is the risk on results due to fluctuations in the exchange rates. Fagron 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 Fagron operating in a functional currency other than euros and on the other hand of the circumstance that purchasing and retail prices of Fagron have foreign currencies as reference. The risk involved in entities of Fagron operating in a functional currency other than the euro concerns entities operating in US dollars, Brazilian reals, Polish zloty, Czech crowns, Swiss francs, British pounds, Danish crowns, Colombian pesos, Chinese yuan, South African rand, Australian dollars and Argentinian pesos. In 2015, these entities collectively represent approximately 57.1% of the consolidated turnover. Currency risk due to translation of assets and liabilities of foreign subsidiaries into euros is not hedged.

Some of the Group's revenue is realized in currencies other than the euro, such as in Brazil, the United States, Poland and Switzerland. The table below sets out the hypothetical supplementary effect of the euro strengthening or weakening by 10% against the US dollar, the Brazilian real, the Polish zloty and the Swiss franc for the year 2015 and its subsequent effect on profit before tax, impairment loss and equity capital. The impairment loss of 225.6 million euros in 2015 resulted in a negative equity for the United States, and the consequent hypothetical supplementary impact has a loss reducing effect.

	Profit before tax and impairment loss			Equity
(x 1,000 euros)	Strengthening	Weakening	Strengthening	Weakening
---	---	---	---	---
US dollar	(616)	753	12,123	(14,817)
Brazilian real	(858)	1,048	(8,230)	10,059
Polish zloty	(747)	913	(3,003)	3,671
Swiss franc	109	(133)	(603)	737

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 become relatively more expensive to the consumer 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 entirely or partly.

Fair value risk

Fagron utilizes financial derivatives to hedge its interest risks. Fagron hedged the variable interest rate for 70 million euros of financing. In accordance with IFRS, all financial derivatives are recognized either as assets or as liabilities. In accordance with IAS 39, financial derivatives are recognized at fair value. Changes in fair value are recognized by Fagron directly in the income statement because these are financial derivatives that do not qualify as cash flow hedging instruments. At the end of 2015, the cumulative revaluation of financial derivatives amounted to -2.0 million euros (2014: -2.9 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 estimates and judgments

Fagron makes estimates and judgments 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.

Going concern

As a consequence of the described Accounting Policies under note 2, the directors believe that Fagron will have significant funds in the future to continue its operations. On this basis, the Executive Committee uses the going concern assumption in preparing this financial information. For more information see note 2.

Estimated impairment loss of goodwill and intangible fixed assets

Fagron performs annual goodwill impairment tests in accordance with the Accounting Policies specified in note 15. 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. As a consequence of the in changes in the reimbursement system in the United States referred to in note 2, Fagron has recognized an impairment loss of 224.9 million euros. This contributes to the book value of goodwill as per 31 December 2015 of 373.6 million euros (2014: 522.1 million euros).

Estimated deferred tax assets

Deferred tax assets are mainly accounted for by differences in depreciation rates, tax deductible losses and goodwill acquired in business acquisitions. The tax deductible losses are tested twice a year for impairment. If these losses may not be used within a reasonable time, they will be written off. A deferred tax asset is recognized when the book value of goodwill is less than the tax base and it is expected that taxable profits will arise against which the temporary differences can be utilized.

Estimated future cash outflows to determine the carrying amount of the loans

As a result of the reclassification of the loans to current liabilities, changes arise in the expected future cash flows related to these loans. This revaluation difference is recognized in the income statement.

Pension obligations

The present value of the pension obligations depends on a number of actuarially determined factors based on a number of assumptions. The assumptions applied to determine net costs (net income) for pensions include expected rates for salary increases, price inflation, pension increases 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 2015 was 5.1 million euros (2014: 6.1 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 the 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 can not be absolutely precluded if a ruling or judgment proves not as expected. Estimates and judgments are continuously evaluated on the basis of past experience and other factors including projected development of future events that are regarded as reasonable given the circumstances.

Estimated contingent liabilities

If a contingent payment is agreed in a business takeover, the liability is valued at fair value based on expected future cash flows. This fair value is determined annually based on the terms agreed between the parties and the status of those conditions at the end of the reporting period.

Uncertain tax positions

The company is subject to tax on profits in different jurisdictions. Significant judgments must be made in determining the income tax provision. There are some transactions and calculations for which the ultimate taxable amount is uncertain. When the final income tax is determined, the deviations will affect the current and deferred taxes and liabilities for the period in which the determination is made.

5 Segment information

Fagron's divisional structure is tailored to the various activities of Fagron; effective decision-making and individual responsibility are also accounted for. Because of the announced change in the reporting structure, the Fagron segment was to be reported in three segments as from 2015. The four new segments are Fagron Specialty Pharma Services, Fagron Trademarks, Fagron Essentials and HL Technology. This is in accordance with IFRS 8, which states that the operational segments must be determined on the basis of the components that the Executive Committee applies to assess the performance 'other' of the operational activities and on which the decisions are based. The corresponding figures have been adjusted in accordance with the new segments.

Fagron is organized into four main operational segments:

1.	Fagron Specialty Pharma Services (FSPS) refers to all personalized medication that is compounded in the 23 sterile and non-sterile compounding facilities Fagron has in Europe, United States, South America (Colombia) and South Africa.
2.	Fagron Trademarks (FTM) refers to the innovative concepts, vehicles and formulations for Specialty Pharma developed by Fagron's own R & D team, often in dose collaboration with prescribers, pharmacies and universities.
3.	Fagron Essentials (FE) refers to all pharmaceutical raw materials, equipment and supplies a pharmacist needs to prepare medication in its own pharmacy.
4.	HL Technology develops and produces innovative precision components and orthopedic tools for dental and medical professionals.

The segment results for continuing operations for the reporting period ending 31 December 2015 are as follows:

2015

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Total
Turnover	187,894	50,343	225,212	9,547	472,996
Intersegment turnover			6,889		6,889
Total turnover	187,894	50,343	232,101	9,547	479,885
Operating result per segment	(160,420)	13,184	7,671	(10,773)	(150,338)
Financial result					(44,991)
Profit before taxes					(195,329)
Taxes on profits					(6,954)
Net result					(202,283)

The segment results for continuing operations for the reporting period ending 31 December 2014 are as follows:

2014

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Total
Turnover	147,780	45,652	245,047	8,577	447,056
Intersegment turnover			5,095		5,095
Turnover	147,780	45,652	250,142	8,577	452,151
Operating result per segment	33,298	12,481	49,488	(931)	94,336
Financial result					(24,483)
Profit before taxes					69,852
Taxes on profits					(26,663)
Net result					43,190

Other segmented items recognized in the income statement for continuing operations are as follows:

2015

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Total
Depreciation, amortization and impairment	197,823	1,506	35,413	11,938	246,679
Write-down on inventories	201	117	918		1,236
Write-down on receivables	873	56	310	28	1,267

2014

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Total
Depreciation, amortization and impairment	7,785	1,329	5,575	1,653	16,343
Write-down on inventories	(84)	35	1,295		1,246
Write-down on receivables	893	55	488		1,436

The assets and liabilities, and the capital expenditure (investments) are as follows:

2015

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Held for sale	Total
Assets	172,069	52,823	456,077	8,413		689,381
Liabilities	316,200	77,517	358,655	1,783		754,154
Capital expenditure	16,485	1,888	7,619	166		26,159

2014

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Held for sale	Total
Assets	336,779	57,920	483,745	21,059	74,249	973,752
Liabilities	275,781	76,273	444,198	2,500	18,051	816,804
Capital expenditure	2,204	1,235	8,495	557		12,492

Segment assets consist primarily of property, plant and equipment, intangible fixed assets, inventories, receivables and cash from operations.

Turnover of Fagron for continuing operations by geographical segments is as follows:

(x 1,000 euros)	2015	2014
United States	138,079	127,924
The Netherlands	117,945	114,813
Brazil	79,072	81,914
Belgium	31,858	26,341
Poland	19,113	16,201
Germany	15,734	15,475
France	14,952	14,272
Italy	10,642	10,851
Spain	9,627	9,733
Switzerland	9,547	8,577
Czech Republic	8,983	7,921
Denmark	6,819	7,046
United Kingdom	2,761	2,909
Colombia	2,712	975
Greece	2,290	858
South Africa	1,973	751
Australia	888	495
Total	472,996	447,056

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

Concerning the geographical segments, Fagron applies the following allocation for fixed assets excluding deferred tax assets, for continuing operations:

(x 1,000 euros)	2015	2014
United States	173,593	299,028
The Netherlands	125,096	125,091
Brazil	70,678	93,583
Belgium	27,245	17,312
Other	90,997	105,272
Total	487,609	640,286

6 Turnover

(x 1,000 euros)	2015	2014
Sale of goods	472,996	447,056
Turnover	472,996	447,056

7 Other operating income

(x 1,000 euros)	2015	2014
Gain on disposal of fixed assets	318	476
Other operating income	8,350	2,877
Total other operating income	8,668	3,353

The change in the item 'Other operating income' relates mainly to a release of an earn-out regarding JCB Laboratories and the sale of the headquarter office in Belgium. These deals are regarded on a one off basis and thus form no part of the REBITDA.1

1 REBITDA is EBITDA before non-recurrent result.

8 Employee benefit expenses

(x 1,000 euros)	2015	2014
Wages and salaries	81,185	67,043
Social security costs	16,855	15,156
Pension costs - defined benefit plans	687	642
Pension costs - defined contribution plans	1,444	1,237
Other post-employment benefit contributions	6,070	257
Other employee expenses	19,145	17,307
Total employee benefit expenses	125,385	101,642

Full-time equivalents continuing operations

Full-time equivalents (rounded at one unit)	2015	2014
Brazil	495	534
United States	474	384
The Netherlands	417	443
France	131	142
Poland	120	112
Czech Republic	114	100
Belgium	101	121
Colombia	72	25
Switzerland	61	67
Germany	40	54
Spain	38	42
Italy	36	36
Greece	32	32
South Africa	23	17
Denmark	11	10
China	9	7
United Kingdom	7	13
Australia	4	4
Total	2,184	2,143

At 31 December 2015, Fagron's workforce (fully consolidated companies), for continuing operations, comprised 2,334 (2014: 2,277) employees or 2,183.9 (2014: 2,142.7) full-time equivalents. The geographical distribution of the number of full-time equivalents is as follows:

Full-time equivalents (rounded to one unit)	2015	2014
Europe	1,107	1,172
North America	474	384
South America	567	559
Rest of the world	36	28
Total	2,184	2,143

9 Depreciation, amortization and impairment

(x 1,000 euros)	2015	2014
Depreciation and amortization	21,116	16,343
Impairment	225,563
Write-down on inventories	1,236	1,246
Write-down on receivables	1,267	1,436
Total depreciation, amortization and impairment	249,183	19,025

Depreciation and amortization increased from 16.3 million euros in 2014 to 22.1 million euros in 2015, mainly as a consequence of increased depreciation on intangible fixed assets related to the acquisition of Bellevue in April 2014 and the acquisition of AnazaoHealth in April 2015.

Fagron recognized an impairment of 225.6 million euros in 2015, mainly as a result of the changed reimbursement system for non-sterile compounding in the United States and the consequence of this change on the profitability of Bellevue Pharmacy, as well as Freedom Pharmaceuticals. Further details involving the impairment are stated in note 15.

10 Other operating expenses

(x 1,000 euros)	2015	2014
Increase (decrease) in provisions for current liabilities	306	(700)
Increase (decrease) in provisions for pension liabilities	99	(630)
Taxes and levies (excluding income tax)	839	669
Other operating expenses	3,067	1,157
Total other operating expenses	4,311	496

In 2015, the line 'Other operating expenses' includes 1.1 million euros relating to acquisition costs, 0.8 million euros relating to losses on realized receivables and 0.5 million euros relating to results on fixed assets sold.

11 Financial result

The financial results are presented in the consolidated income statement as follows:

(x 1,000 euros)	2015	2014
Financial income	1,147	731
Revaluation of financial derivatives	866
Total financial income	2.013	731
Financial expenses	(19,328)	(3,305)
Interest expenses	(24,758)	(20,672)
Currency exchange differences	(2,917)	(839)
Revaluation of financial derivatives		(399)
Total financial expenses	(47,004)	(25,215)
Total financial result	(44,991)	(24,483)

The positive revaluation of financial derivatives of 0.9 million euros 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. The interest hedging instruments are valued on the basis of discounted cash flows. This instrument hedges the interest risk on 70 million euros of the total financing.

The financial result, excluding the revaluation of the financial derivatives, amounts to -45.9 million euros, an increase of 90.4% compared to 2014 (-24.1 million euros). This increase is mainly due to costs related to the waiver (1.9 million euros), increased interest expenses as a result of a higher outstanding debt (1.3 million euros), exchange rate differences mainly as a result of a negative impact of the Brazilian Real (2.1 million euros), additional financing costs in relation to the privately placed loans (10.5 million euros), and costs incurred in relation to the multi-currency credit facility and privately placed loans (2.0 million euros). The latter two have been accelerated in the income statement recognition as a result of changes in the expected cash flows related to the loans.

12 Income tax expenses

Tax on profits from continuing operations are as follows:

(x 1,000 euros)	2015	2014
Current tax expenses	7,885	17,989
Deferred taxes	(931)	8,673
Tax on profits	6,954	26,663
Effective tax rate	(3.56%)	38.17%
Profit before income tax from continuing operations	(195,329)	69,852
Tax calculated at weighted Fagron NV's statutory tax rate	(66,392)	23,743
Effect of rate differences compared with foreign jurisdictions	(3,521)	(687)
Income not subject to taxes	(2,615)	(688)
Expenses not deductible for tax purposes	1,598	955
Tax on profit previous years	340	828
Effect of goodwill impairment (225.6 million euros)	76,669
Other	875	2,511
Tax on profits	6,954	26,663

The increase in the item 'Income not subject to taxes' mainly concerns a release of an earn-out in relation to JCB Laboratories.

The increase in the item 'Expenses not deductible for tax purposes' mainly relates to non-deductible interest costs and financing costs.

The item 'Other' in 2015 relates to changes in nominal tax rates. In 2014 this relates to dividends.

13 Discontinued operations

In 2014, Fagron completed the divestment program in respect of its divisions Healthcare Specialities and Healthcare Solutions.

The sale of Corilus represented the last part of the divestment program concerning the dental, medical and ICT activities announced in 2013.

Fagron sold the ICT division Corilus to AAC Capital on 13 March 2015 for a total consideration of 74 million euros. Management recognized no impairment, given that the sale value was higher than the carrying amount of the assets held for sale minus related liabilities. Further details on the sold assets and liabilities and on the calculation of the result on the sale are explained in notes 21 and 31.

The combined results of the discontinued operations included in the profit for the year and cash flows are set out below.

Result for the year from discontinued operations

(x 1,000 euros)	2015	2014
Operating income		90,217
Turnover		88,573
Other operating income		1,644
Expenses		86,303
Profit before tax		3,914
Attributable income tax expenses		(3,480)
Profit (loss) on sale of discontinued operations including sale costs	270	(27,467)
Profit (loss) for the year from discontinued operations (attributable to equity holders of the company)	270	(27,033)

Cash flows from discontinued operations

(x 1,000 euros)	2015	2014
Total cash flow from operating activities		11,172
Total cash flow from investment activities		(13,322)
Total cash flow from financing activities		3,660
Total net cash flow from discontinued operations		1,510

14 Earnings per share

(in euros)	2015	2014
Basic earnings (loss) per share	(6.46)	0.53
• from continuing operations	(6.47)	1.41
• from discontinued operations	0.01	(0.88)
Diluted earnings (loss) per share	(6.44)	0.52
from continuing operations	(6.45)	1.39
from discontinued operations	0.01	(0.87)

The earnings used in the calculations are as follows:

(x 1,000 euros)	2015	2014
Profit (loss) attributable to equity holders of the company	(202,328)	16,226
• from continuing operations	(202,598)	43,259
• from discontinued operations	270	(27,033)

The diluted earnings are equal to the 'basic' earnings.

The weighted average number of shares used in the calculations are as follows:

(number of shares x 1,000)	2015	2014
Weighted average number of ordinary shares	31,304	30,759
Effect of warrants and stock options	122	359
Weighted average number of ordinary shares (diluted)	31,425	31,118

No ordinary share transactions were executed after the balance sheet date which have impacted on earnings per share. The effect on the number of warrants and stock options that are anti-dilutive for the period but which could dilute basic earnings per share in the future is 932,500. These are warrants with an exercise price higher than the average stock price of Fagron in 2015.

15 Intangible fixed assets

(x 1,000 euros)	Goodwill	Development	Concessions & patents	Brands	Software	Other	Total
Net book value as at 1 January 2014	371,630	23,108	1,411	1,335	3,103		400,587
Investments		8,818	80	12	1,592		10,502
Acquisitions	168,021		6	41,027	5,071	295	214,419
Disposals		(114)			100		(14)
Amortization		(4,327)	(126)	(4,895)	(2,176)		(11,523)
Impairment
Classified as assets held for sale	(46,912)	(24,478)	(293)	(1,047)	(16)		(72,746)
Other movements	(113)	(45)	(5)	(30)	376		183
Exchange differences	29,441	34	1	4,160	208		33,844
Net book value as at 31 December 2014	522,069	2,996	1,073	40,560	8,259	295	575,252
Gross carrying amount1	522,069	13,248	1,613	46,095	22,951	317	606,293
Accumulated amortization2		(10,252)	(540)	(5,535)	(14,692)	(22)	(31,040)
Net book value	522,069	2,996	1,073	40,560	8,259	295	575,252
Net book value as at 1 January 2015	522,069	2,996	1,073	40,560	8,259	295	575,252
Investments		702	16	36	2,369		3,123
Acquisitions	46,392		543	13,463			60,397
Disposals		(307)		341	266	(295)	6
Amortization		(984)	(165)	(8,549)	(2,460)		(12,58)
Impairment	(200,239)	(160)		(24,420)	(44)		(224.863)
Classified as assets held for sale
Other movements
Exchange differences	5,387	53	(75)	3,732	(253)		8,844
Net book value as at 31 December 2015	373,608	2,302	1,392	25,163	8,136		410,601
Gross carrying amount	373,608	6,206	2,064	64,659	19,190	24	465,750
Accumulated amortization		(3,905)	(671)	(39,495)	(11,054)	(24)	(55,149)
Net book value	373,608	2,302	1,392	25,163	8,136		410,601

1 Excluding gross value of assets sold and assets transferred to assets reclassified as held for sale.

2 Excluding gross value of assets sold and assets transferred to assets reclassified as held for sale.

The intangible fixed assets have not been pledged as security for obligations.

The category 'Development' consists mainly of unique software developed in-house in full control of Fagron. Part of the development costs are expensed and not capitalized, in accordance with IAS 38. These are mainly related to employee costs.

Impairment

Goodwill is tested at least annually for impairment and consistently when a trigger event occurs.

In May 2015 the Group was confronted with a change in the reimbursement system for non-sterile preparations in the United States. The impact of this change affected the profitability of the cash-generating units Freedom Pharmaceuticals and Bellevue Pharmacy.

Especially the change in reimbursement system resulted in a downward revision of projected cash flows in such way that the recoverable amount of some cash-generating units is lower than its carrying amount. The recoverable amount of the cash-generating unit has been determined based an a value-in-use calculation. The impairment test resulted in an impairment for goodwill of 200.2 million euros and 24.6 million euros for the other intangible fixed assets. The impairment charge is included in the section impairment loss in the consolidated income statement.

The following table provides an overview of the impairment, plus the discount rate used in the calculation.

(x million euros)	Segment	Recoverable value	Impairment loss	Discount rate	Pre-tax discount rate
Bellevue Pharmacy	FSPS	3.5	178.2	10.3%	17.6%
Freedom Pharmaceuticals	ESS & TM	59.5	27.0	10.3%	15.7%
HL Technology	HLT	7.4	9.6	9.4%	11.8%

The losses at Bellevue Pharmacy and Freedom Pharmaceuticals are caused due to the decline in results in the United States for Bellevue Pharmacy and Freedom Pharmaceuticals as a result of the change in the reimbursement system (205.3 million euros). The impairment loss of 9.6 million euros at HL Technology is due to the decreasing results and cash flow in the light of developments in the market in which HL Technology operates.

Goodwill

Goodwill acquired in business mergers and acquisitions is allocated to cash-generating units or groups of cash-generating units which are expected to have future economic benefits following the merger or acquisition. Where a group of cash-generating units are operational in several segments, they are not regarded as comprising a segment. Goodwill is recognized at cost price less accumulated impairment losses.

The net book value of goodwill was attributed as follows to the cash-generating units:

(x million euros)	December 2015	December 2014
Fagron Europe Trademarks & Essentials	105.3	96.2
Fagron Netherlands Speciality Pharma	66.3	66.3
Fagron Brazil Trademarks & Essentials	61.0	81.6
Freedom Pharmaceuticals	53.5	72.7
AnazaoHealth	31.3
Fagron United States Trademarks & Essentials	25.6	23.0
JCB Laboratories	17.7	15.9
Bellevue Pharmacy		140.9
Fagron France Specialty Pharma/Rest of World/HL Technology	12.9	25.5
Total	373.6	522.1

The decline in goodwill is due to the impairment loss in 2015, as described above.

Goodwill impairment tests on continuing operations

The methodology for testing impairment is in accordance with IAS 36. Goodwill is tested at least annually for impairment with respect to cash-generating units and consistently when a trigger event occurs during the year which may result in an impairment loss. The realizable value of the cash-generating units is determined on the basis of the 'value in use' calculations.

The key judgments, estimates and assumptions that are commonly used are as follows:

•	The first year of the mode) is based on detailed financial budgets approved by Management and the Board of Directors.
•	The year-one budget figures are extrapolated for the years two to five, taking into account an internal growth rate. These figures take into account economic assumptions and historical experience of market share, revenue and expenses, capital expenditures and working capital.
•	For the following years, an estimate of the perpetual growth is used. For the main cash-generating units, the following long term growth rates are used: 2% for Fagron Europe Specialty Pharma, Essentials and Trademarks, 2% for Fagron US Specialty Pharma, Essentials and Trademarks, and 7% for Fagron Brazil Essentials and Trademarks.
•	Projections made for Brazil and the United States are done in their functional currency unit and are discounted at the weighted average capital cost of the unit. For the main cash-generating units the following weighted average cost of capital is used: 9.4% for Fagron Europe Specialty Pharma, Essentials and Trademarks, 10.3% for Fagron US Specialty Pharma, Essentials and Trademarks and 17.5% for Fagron Brazil and Essentials trademarks.

Of the main cash-generating units, Fagron Brazil Essentials and Trademarks has the smallest relative difference between the net book value of the asset and its enterprise value. The difference is estimated at 25 million euros. The following changes in assumptions could individually decrease the enterprise value to its net book value.

	Increase in maintenance capex as % of sales	Increase in discount rate (basis points)	Decrease in long-term growth (basis points)	Decrease in gross margin (basis points)
Fagron Brazil Essentials and Trademarks	1,526	353	558	552

The outcome of the impairment test for Fagron Europe Essentials and Trademarks, Fagron Netherlands Specialty Pharma and Fagron United States Specialty Pharma and Essentials and Trademarks with the exception of Bellevue Pharmacy and Freedom Pharmaceuticals shows that a reasonable change in the applied assumptions will not lead to an impairment.

The value of each cash-generating unit, according to the above mentioned calculations is compared with the net book value of the assets of the cash-generating unit. For all cash-generating units, the enterprise value exceeds the net book value, except for Bellevue Pharmacy, Freedom Pharmaceuticals, France Specialty Pharma and HL Technology for which the net book value equals the enterprise value.

Goodwill impairment tests an discontinued operations

As per 31 December 2015 no operations are classified as held for sale, see note 13. Therefore no impairment test can be performed.

16 Property, plant and equipment

(x 1,000 euros)	Land and buildings	Machinery and installations	Furniture and vehicles	Leasing and other similar rights	Other tangible assets	Assets under construction	Total
Net book value as at 1 January 2014	29,321	7,758	4,285	2,011	2,077	2,002	47,454
Investments	1,905	1,844	2,013	63	705	2,755	9,285
Acquisitions	6,288	3,622	1,851		2,061		13,822
Disposals	(181)	(5)	(93)		(176)		(454)
Depreciation	(2,033)	(2,861)	(1,756)	(697)	(1,658)		(9,006)
Classified as assets held for sale	(101)	(137)	(420)	(80)	(94)		(831)
Other movements	2,089	(55)	130		727	(3.753)	(862)
Exchange differences	(20)	92	220	32	119	118	561
Net book value as at 31 December 2014	37,269	10,257	6,231	1,330	3,760	1,123	59,969
Gross carrying amount	45,707	29,317	16,734	5,797	9,267	1,123	107,945
Accumulated depreciation	(8,439)	(19,060)	(10,503)	(4,468)	(5,507)		(47,976)
Net book value	37,269	10,257	6,231	1,330	3,760	1,123	59,969
Net book value as at 1 January 2015	37,269	10,257	6,231	1,330	3,760	1,123	59,969
Investments	2,622	7,745	2,142		1,412	10,158	24,079
Acquisitions	256	724	228	145	732	30	2,114
Disposals	(738)	(23)	(363)	(7)	(1,871)	(995)	(3,996)
Depreciation	(2,706)	(2,698)	(1,951)	(686)	(587)	(330)	(8,959)
Impairment	(318)	(135)	(1)	(192)	(54)		(699)
Classified as assets held for sale
Other movements
Exchange differences	(1,266)	(175)	(167)	130	111	(8)	(1,375)
Net book value as at 31 December 2015	35,119	15,694	6,119	719	3,504	9,978	71,133
Gross carrying amount	46,786	38,251	16,438	6,513	11,774	9,978	129,740
Accumulated amortization	(11,668)	(22,556)	(10,319)	(5,794)	(8,270)		(58,607)
Net book value	35,119	15,694	6,119	719	3,504	9,978	71,133

The Group's liability regarding financial leasing is guaranteed as the lessor holds the legal ownership of the leased assets. The other tangible fixed assets have no restrictions on the title of ownership. Nor have these assets been pledged as security for obligations, with the exception of a building owned by HL Technology on which a mortgage rests, see note 34: Additional notes.

17 Financial assets

(x 1,000 euros)	Financial assets available for sale	Loans and receivables	Total
Net book value as at 1 January 2014	867	14,901	15,767
Investments	731	2,509	3,240
Transfers and disposals		(13,875)	(13,875)
Discontinued operations	(2)	12	10
Classified as assets held for sale		(29)	(29)
Reimbursements		(49)	(49)
Other movements
Net book value as at 31 December 2014	1,595	3,469	5,064
Investments		1,479	1,479
Transfers and disposals	(55)	(197)	(252)
Reimbursements
Other movements		(432)	(432)
Net book value as at 31 December 2015	1,540	4,319	5,859

The assets available for sale mainly consist of a minority interest participation of 1.3 million euros. This asset is stated at cost due to the unavailability of reliable information an its fair value.

An analysis of the assets above showed that none of these assets needs to be impaired in 2015 and 2014.

Loans and receivables concern receivables with different due dates. The book value approximates the fair value.

18 Taxes, remuneration and social security

a) Current taxes, remuneration and social security

(x 1,000 euros)	2015	2014
Current income tax liabilities/(receivables) for the current year	(964)	10,962
Other current tax and VAT payable	10,934	8,827
Remuneration and social security payable	15,312	18,879
Current taxes, remuneration and social security	25,282	38,668

b) Deferred tax assets

(x 1,000 euros)	Differences in depreciation rates	Employee benefits	Provisions	Tax losses	Other	Total
Balance at 1 January 2014	19,542	1,078	1,402	7,599	(1,330)	28,292
Result	(1,539)	(128)	30	(2,986)	(6,339)	(10,963)
Change in scope of consolidation	5,228		292			5,520
Impairment				(486)		(486)
Balance at 31 December 2014	23,231	950	1,724	4,127	(7,670)	22,362
Result	64,441	271	(1,569)	12,700	3,301	79,144
Change in scope of consolidation	(719)					(719)
Impairment	(79,038)			(7,808)		(86,846)
Balance at 31 December 2015	7,915	1,221	155	9,019	(4,369)	13,942

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

In 2015 goodwill has been impaired at the level of Bellevue Pharmacy and Freedom Pharmaceuticals for an aggregated amount of 205.3 million euros. For tax purposes, the goodwill can be amortized as a result of which the related deferred tax asset further increased. It is expected that limited future taxable profits are derived, as a result of which the deferred tax asset has been impaired for 79.0 million euros.

An impairment test on tax losses is performed twice per year. If it becomes clear that the losses cannot be assigned within a reasonable time, they are written off. This calculation is based on result projections with a five-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 to fifth year. Extending the result projections for one year will result in the deferred taxes increasing by one million euros.

Based on the impairment test on tax losses, an amount of 7.8 million euros has been written down. This relates to the envisaged rationalization of the corporate holding structure, but also to non-recognizing the current year tax losses of, amongst others, the US entities, Fagron NV, and the French entities. By year-end 2015, the tax losses came to 88.7 million euros, of which 32.5 million euros have been assessed, resulting in a deferred tax claim of 9.0 million euros.

c) Deferred tax liabilities

(x 1,000 euros)	Differences in depreciation rates	Other	Total
Balance at 1 January 2014	4,654	(203)	4,451
Result	4,211	(6,484)	(2,273)
Change in scope of consolidation	4,801		4,801
Discontinued operations		(817)	(817)
Balance at 31 December 2014	13,666	(7,504)	6,162
Result	(5,518)	875	(4,643)
Change in scope of consolidation
Discontinued operations
Balance at 31 December 2015	8,148	(6,629)	1,519

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

19 Inventories

(x 1,000 euros)	2015	2014
Raw materials	23,708	19,681
Work in progress	3,757	3,617
Finished goods	9,394	8,700
Trade goods	30,392	33,184
Inventories	67,251	65,181

The increase in inventories is mainly due to the acquired companies in Belgium and the US, see note 30. The inventories are not encumbered with collateral.

20 Trade receivables, other receivables, cash and cash equivalents

a) Trade receivables and other receivables

(x 1,000 euros)	2015	2014
Trade receivables	36,223	39,124
Provision for impairment of receivables	(2,133)	(2,787)
Total trade receivables	34,090	36,337
Other receivables	11,031	18,043

There is no concentration of credit risk with respect to trade receivables as the majority of Fagron's customers are internationally dispersed. If there are indications that trade receivables will be uncollectible, a provision has been made. Other receivables consist mainly of taxes to be refunded for the period and value added tax.

The decline in 'Other receivables' concerns capitalized financing costs in the amount of 2.0 million euros in connection with credit facilities re-classified from long-term to short-term in the result.

Fagron applies a strict credit policy towards its customers, ensuring that the company controls and minimizes credit risk. No individual customers make up a substantial part of either turnover or outstanding receivables.

(x 1,000 euros)	Carrying amount	Of which not over- due at year-end	Of which due at year-end
Less than 30 days	Between 31 and 90 days	Between 91 and 150 days	More than 150 days
---	---	---	---	---	---	---
Trade receivables at 31 December 2015	34,090	23,236	6,320	3,207	346	981
Trade receivables at 31 December 2014	36,337	27,522	4,791	2,784	758	482

(x 1,000 euros)	Provision for impairment of receivables
Balance at 1 January 2014	(1,951)
Additions
• Via business combinations	(215)
• Other	(1,734)
Amounts used	897
Discontinued operations	247
Classified as held for sale	(31)
Balance at 31 December 2014	(2,787)
Additions
• Via business combinations	(378)
• Other	(833)
Amounts used	1,814
Other	51
Amount at 31 December 2015	(2,133)

b) Cash and cash equivalents

(x 1,000 euros)	2015	2014
Investments with a maturity of less than three months	1,544	9,359
Cash at bank and in hand	73,930	99,193
Cash and cash equivalents	75,474	108,552

The decrease in cash and cash equivalents is mainly due to subsequent payments related to acquisitions and investments. The decrease in investments with a maturity of less than three months is due to fewer investments of cash in Poland.

The majority of liquid assets comprise cash and cash equivalents in bank accounts and cash. The cash and cash equivalents are centralized as much as possible in a cash pool, held in accounts with banks that mostly have an A-rating. All new bank accounts are only opened with banks awarded at least an A-rating.

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

21 Assets held for sale and related liabilities

(x 1,000 euros)	2015	2014
Assets held for sale		82,989
Liabilities directly associated with assets classified as held for sale		20,394

The assets held for sale as per 31 December 2014 related to Corilus activities which Fagron sold in March 2015, see note 13. No new assets were held for sale. Therefore the assets held for sale and liabilities directly associated with assets held for sale come to nil.

22 Equity

Authorized 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 319,810,475.00 euros by means and on terms to be decided by the Board of Directors, such within a period of five years as of the publication date of said resolution in the Annexes of the Belgian Bulletin of Acts, Orders and Decrees.

The Extraordinary General Meeting decided on 14 May 2012 to renew the Board of Director's authorization to increase the authorized share capital, such within the limits of the existing authorization 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.

As at 31 December 2015, the Board of Directors remains authorized to increase the capital by a maximum amount of 320,023,050.35 euros.

If the capital is increased within the limits of the authorized capital, the Board of Directors has the power 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 may only be reduced or transferred 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 capitalization 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 authorized capital.

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 2015, 54,000 own shares were purchased (2014: 59,539). The decrease of own shares with 249,719 is due to the exercise of stock options (289,625), the acquisition of own shares (54,000) and the transfer of shares (14,094) relating to the variable remuneration of Fagron employees in 2015. As at 31 December 2015, Fagron NV owned a total of 327,760 own shares (2014: 577,479). In accordance with IFRS, these shares are deducted from equity and do not affect the income statement. In the context of Warrant Plan 1,12,301 new shares were issued during 2015.

In 2014, 73,002 new shares were issued. As at 31 December 2015, the total number of shares issued is 32,111,827 (2014: 31,431,360).

The total number of shares outstanding as at 31 December 2015 is 31,784,067 (2014: 30,853,881).

Number of ordinary shares and the equity value thereof	2015		2014
Number of shares x 1,000	x 1,000 euros	Number of shares x 1,000	x 1,000 euros
---	---	---	---	---
Issued shares as per 1 January	31,431	319,660	31,358	318,927
Issue of shares under Warrant Plan	12	106	73	733
Issue of shares related to acquisition payments in shares	668	25,995
Issued shares as per 31 December	32,112	345,760	31,431	319,660
Treasury shares as per 31 December	328	18,823	577	20,235
Shares outstanding as per 31 December	31,784	326,937	30,854	299,425

All ordinary shares are fully paid. The ordinary shares have no face value; the par value is 1/32,111,827th of capital as of 31 December 2015 (2014: 1/31,431,360th). Each ordinary share carries one vote and a right to dividends.

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 1 and Warrant Plan 2).

The warrants granted under Warrant Plan 1 (for employees) have a lifetime of eightyears as of the date on which they are granted.

For employees (Warrant Plan 1) 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 civil-law 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 1 are exercisable was extended by five 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 five years as of the date on which they are granted. The warrants granted under Warrant Plan 2 were fully exercised as per 31 December 2015.

On 3 June 2014, the company's Board of Directors approved the Warrant Plan 2014 for employees, directors and consultants of the company and/or its subsidiaries. The warrants were issued in response to the decision taken by the Board of Directors dated 2 September 2014 in presence of notary Luc De Ferm. In total 2,140,000 warrants were issued. In 2015 50,000 warrants were granted at an exercise price of 38.06 euros.

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

The costs of the warrants are determined at the warrants' fair value on grant date and is spread over the vesting period of the warrants. The costs are recognized at the item `Other Employee expenses' for the amount of 2.0 million euros for the financial year 2015 (2014: 2.1 million euros). The warrants are equity settled share based payment transactions.

On 5 June 2015,12,301 (16 June 2014: 73,002) new shares were issued as a result of exercising warrants under the Warrant Plan 2014. The number of Fagron shares with voting rights is 32,111,827 (2014: 31,431,360). The total number of voting rights (denominator) is 32,111,827 (2014: 31,431,360). The authorized capital amounts to 329,066,195 euros (2014: 322,111,646 euros).

The movements in the number of outstanding warrants under Warrant Plan 1, Warrant Plan 2 and Warrant Plan 2014 and their related weighted average exercise prices are as follows:

	Average exercise price in euros	Number of warrants
Outstanding as at 1 January 2014	9.70	94,064
Exercised	10.25	(63,238)
Exercised	8.14	(6,888)
Exercised	7.77	(2,751)
Exercised	8.11	(125)
Forfeited	10.25	(2,759)
Forfeited	8.14	(1,000)
Forfeited	7.77	(375)
Granted	39.37	932,500
Outstanding as at 31 December 2014	38.82	949,428
Exercised	10.25	(3,150)
Exercised	8.14	(6,462)
Exercised	7.77	(2,564)
Exercised	8.11	(125)
Forfeited	39.37	(364,500)
Granted	38.06	50,000
Outstanding as at 31 December 2015	39.04	622,627

The related weighted average exercise price per share at year-end amounted to 39.04 euros in 2015 (2014: 38.82 euros).

As at 31 December 2015, the total number of warrants not yet exercised which could prompt the issue of the same number of shares of the company, amounted to 622,627. Their average exercise price amounts to 39.04 euros. Outstanding warrants at year-end have the following expiry dates and exercise prices:

Expiry date	Average exercise price in euros	Number of warrants
2016 – May	10.25	1,750
2016 – May	7.77	2,752
2016 – May	8.11	125
2017 – March	39.37	279,000
2017 – March	38.06	25,000
2018 – March	39.37	144,500
2018 – March	38.06	12,500
2019 – March	39.37	142,000
2019 – March	38.06	12,500
2020 – March	39.37	2,500
	39.04	622,627

Stock Option Plan

On 7 December 2009, the Board of Directors approved the Fagron 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 Extraordinary General Meeting of 27 January 2010.

The options granted under the Stock Option Plan were granted free of charge and, in line with the plan, have a term of six years from the date of offer. Options not exercised at the end of the six-year term, an 16 January 2016 therefore, are void by operation of law.

In accordance with the provisions of Section 43, paragraph 4,1° of the Act of 26 March 1999 concerning the Belgian Action Plan for Employment 1998 (the Stock Options Act), the exercise price shall be determined an 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 maximum	Time
25% of the options granted	April 2012
50% of the options granted	April 2013
75% of the options granted	April 2014
100% of the options granted	April 2015

On 27 October 2011, the company's Board of Directors approved the Stock Option Plan 2011 for consultants and employees of Fagron NV and/or its subsidiaries, such under the suspensive condition of approval by the General Meeting. The Stock Option Plan 2011 was approved by the Annual General Meeting of 14 May 2012. In 2012, the procedure of Article 523 of the Belgian Companies Code was applied.

In June 2012, 250,000 stock options were granted at an exercise price of 13.73 euros. The options are settled via equity instruments. In 2014, 4,650 stock options were granted at an exercise price of 32.82 euros. In 2015, no stock options were granted.

During the financial year 2014 and 2015 the following number of options were exercised, granted and forfeited, including their corresponding average exercise price:

	Average exercise price in euros	Number of stock options
Outstanding as at 1 January 2014	10.20	840,750
Exercised	10.25	(48,625)
Exercised	8.52	(282,500)
Exercised	13.73	(22,500)
Granted	32.82	4,650
Outstanding as at 31 December 2014	11.21	491,775
Exercised	10.25	(13,625)
Exercised	8.52	(246,000)
Exercised	13.73	(27,500)
Forfeited	13.73	(5,000)
Outstanding as at 31 December 2015	14.17	199,650

Outstanding stock options at year-end have the following theoretical expiry dates and exercise prices:

Theoretical expiry date	Average exercise price in euros	Number of stock options
2016 – April	13.73	133,750
2017 – April	13.73	61,250
2018 – April	32.82	2,325
2019 – April	32.82	1,163
2020 – April	32.82	1,162
	14.17	199,650

Fair value

The fair value of the warrants and stock options was determined using the 'Black & Scholes' valuation model at grant date. The main data used in the model were the share price at grant date, the above-mentioned exercise price, the standard deviation of Fagron share price returns during option life and expected dividend, the option life specified above, and the annual risk-free interest rate.

The calculated fair value of the warrants is 6.895 euros. The calculated fair value of the stock options is 4.146 euros. The main data used to determine the fair value of the granted stock options during 2014 were the abovementioned exercise price, the standard deviation of expected share price returns of 25.6% with an expected dividend of 4.3%; the average expected option life of 3.5 years, and the annual risk-free interest rate of 1.0%. The main data used for the in 2014 granted warrants were the above mentioned exercise price, the standard deviation of expected share price returns of 28.24% with an expected dividend of 1.73%, an average expected warrant life of 3.8 years, and the annual risk-free interest rate of 0.47%. The same data are applied for the warrants granted in 2015.

In 2015, 50,000 new warrants were granted. No new stock options were granted. The costs of the warrants and stock options amounted in 2015 to 2.0 million euros (2014: 2.1 million euros).

Dividend

A dividend of 31.2 million euros was made payable in 2015 (2014: 22.2 million euros). This equates to a gross dividend of 1.00 euros per share (2014: 0.72 euros per share).

At the Annual General Meeting of 9 May 2016, a proposal will be made not to pay any dividend for 2015.

A further explanation of the equity is included in the Corporate Governance Statement.

Other reserves

(x 1,000 euros)	Consolidated reserves	Foreign currency translation reserve	Trans-actions with non-controlling interests	Remeasurement post-employment benefits	Share based payments	Total
Balance at 1 January 2014	(195,967)	(33,923)	(1,575)	(61)	1,026	(230,499)
Other comprehensive result		6,001		(2,541)		3,460
Share based payments					2,060	2,060
Change in non-controlling interest			1,198			1,198
Balance at 31 December 2014	(195,967)	(27,922)	(377)	(2,602)	3,086	(223,781)
Other comprehensive result		(26,399)		1,055		(25,344)
Share based payments					9,216	9,216
Change in non-controlling interest
Balance at 31 December 2015	(195,967)	(54,321)	(377)	(1,547)	12,302	(239,909)

The change in non-controlling interests in 2014 is related to the purchase of 49% of the shares of Unit Dose Pack BV without paying any consideration.

23 Provisions

(x 1,000 euros)	Taxes	Disputes	Other	Total
Balance at 1 January 2014	48	628	8,522	9,197
Additions:
• Through business combinations	2		50	52
• Other		15	43	58
Amounts used		(801)		(801)
Discontinued operations		35	(51)	(16)
Classified as assets held for sale		582	51	633
Related to disposed subsidiaries		(467)		(467)
Others		46		46
Transfers	(3)	25	166	188
Balance at 31 December 2014	47	63	8,780	8,891
Additions:
• Through business combinations			9,174	9,174
• Other	294	123	900	1,317
Amounts used	(48)	(45)	(2,969)	(3,062)
Discontinued operations
Classified as assets held for sale
Related to disposed subsidiaries
Others	(41)	(299)	7	(333)
Transfers		1,393	(1,393)
Balance at 31 December 2015	252	1,236	14,499	15,987

In 2013 a provision was formed for unused accommodation. In 2015, the company made use of the provision, because the building lease of the unused accommodation was terminated in 2015.

In the acquisition balance sheet of Bellevue Pharmacy, a provision is made of 10 million US dollars for costs arising from an investigation initiated by the US government regarding pricing of compounded products in the period prior to acquisition of Pharmacy Services Inc. The survey of the US government covers the entire sector. The provision covers attorney fees and the possible settlement with the government. At year-end 2015, the provision amounts to 8.5 million euros. It is expected that this provision will be used between 2016 and 2018. Other provisions at year-end 2015 mainly relates to subsequent payments relating to settlements of the sale of companies, deferred taxes, employee benefits and social costs resulting from sales transactions. lt is expected that these subsequent payments will take place in 2016.

24 Pension obligations

Pension obligations and costs

The amounts recognized in the balance sheet are determined as follows:

(x 1,000 euros)	2015	2014
Defined benefit obligations	4,358	5,305
Other defined benefit obligations	788	748
Pension obligations	5,146	6,053

The category 'Defined benefit obligations' include Fagron's Dutch defined benefit plans held by Fagron Services BV and Spruyt hillen BV. The 'Other defined benefit obligations' include multiple insignificant defined benefit plans, which are not further disclosed.

Defined benefit obligations are estimated in accordance with IAS 19 using the Projected Unit Credit method. Under this method each participant's benefits under the plan are attributed to years of service, taking into consideration future salary increases and the plan's benefit allocation formula. Thus, the estimated total pension to which each participant is expected to become entitled at retirement is broken down into units, each associated with a year of past or future credited services. If an employee's service in later years will lead to a materially higher level of benefit than in earlier years, these benefits are attributed on a straight-line basis.

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

The amounts recognized regarding the Dutch defined benefit plans held by Fagron Services BV and Spruyt hillen BV are determined as follows:

(x 1,000 euros)	2015	2014
Present value of defined benefit obligations	18,988	20,367
Fair value of plan assets	(14,630)	(15,062)
Present value of net defined benefit obligations	4,358	5,305
Net liability arising from defined benefit obligation	4,358	5,305

Movements in the present value of the defined benefit obligations and the fair value of the plan assets were as follows:

(x 1,000 euros)	Present value defined benefit obligations	Fair value of plan assets	Total
Balance at 1 January 2014	16,458	(13,071)	3,387
Service costs	(1,329)		(1,329)
Interest expense (income)	586	(519)	67
Remeasurements:
• Return on plan assets (excluding interest income)		(2,215)	(2,215)
• (Gains)/losses arising from changes in demographic assumptions	110		110
• (Gains)/losses arising from changes in financial assumptions	5,989		5,989
• (Gains)/losses arising from experience adjustments	(1,261)		(1,261)
Employer contributions		557	557
Benefit payments from plan	(186)	186
Balance at 31 December 2014	20,367	(15,062)	5,305
Service costs
Interest expense (income)	446	(338)	108
Remeasurements:
• Return on plan assets (excluding interest income)		605	605
• (Gains)/losses arising from changes in demographic assumptions
• (Gains)/losses arising from changes in financial assumptions	(1,660)		(1,660)
• (Gains)/losses arising from experience adjustments
Employer contributions
Benefit payments from plan	(165)	165
Balance at 31 December 2015	18,988	(14,630)	4,358

The assets comprise qualifying insurance policies and are not part of the in-house financial instruments of Fagron. The pension insurer invested the assets fully in Aegon Strategic Allocation Fund 80/20. This fund has a market quotation.

Actuarial assumptions

The principal actuarial assumptions used for the actuarial valuations are:

	31 December 2015	31 December 2014
Discount rate	2.60%	2.20%
Expected rate of salary increase	N/A	N/A
Expected rate of price inflation	N/A	N/A
Future rate of pension increases actives	2.00%	2.00%

The life expectancy is based on the 'Prognosetafel AG2014'.

Realized and unrealized result

The amounts recognized in the realized and unrealized result in respect of these defined benefit plans are as follows:

(x 1,000 euros)	31 December 2015	31 December 2014
Service costs		(1,329)
Net interest costs	108	67
Administrative expenses and taxes		82
Defined benefit plan costs recognized in profit or loss	108	(1,180)
Remeasurement on the present value of the defined benefit liability:
• Return on plan assets (excluding interest income)	605	(2,297)
• (Gains)/losses arising from changes in demographic assumptions		110
• (Gains)/losses arising from changes in financial assumptions	(1,660)	5.989
• (Gains)/losses arising from experience adjustments		(1,261)
Defined benefit costs recognized in other comprehensive income	(1,055)	2,541
Total defined benefit costs	(947)	1,361

From the end of 2014 there have been no new entrants to the defined benefit plan; further accruing only takes place in a defined contribution plan. New employees are offered a defined contribution plan. This explains the past service costs of zero in 2015.

The expected defined benefit costs for 2016 are 0.1 million euros and only concerns interest costs.

Sensitivity analysis

The sensitivity analysis shows the sensitivity of the defined benefit obligation as at 31 December 2015 and the 'Pension costs attributed for the year of service' compared to the principal actuarial assumptions.

The following table sets out the defined benefit obligation as at 31 December 2015 for each principal actuarial assumption compared to the corresponding amounts if the actuarial assumption of the various scenarios are applied. The increase in salary and price inflation is not included in the sensitivity analysis because the pension is non-contributory.

	Base scenario	Increase base scenario	Decrease base scenario
Weighted average discount rate	2.60%	3.10%	2.10%
Defined benefit obligation	18,988	17,084	21,097
Pension increase	2.00%	2.50%	1.50%
Defined benefit obligation	18,988	19,796	18,244
Life expectancy	+/-0 year	+1 year	-/-1 year
Defined benefit obligation	18,988	19,390	18,577

Pension plans in Belgium

Fagron has 9 pension plans in place in Belgium which are legally structured as Defined Contributions plans. Because of the Belgian legislation applicable to 2nd pillar pension plans (so-called 'Vandenbroucke Law'), all Belgian Defined Contribution plans have to be considered under IFRS as Defined Benefit plans. The Vandenbroucke Law stated that in the context of defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions. This law was amended in 2015 as follows:

•	The employer must continue to guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions made until 31 December 2015;
•	As from 2016 the employer must guarantee a minimum return ranging between 1.75% and 3.75% for all contributions, depending on the development of the average interest on OLO 10 years over a period of 24 months. The current guaranteed minimum return is 1.75%.

Because of this minimum guaranteed return for defined contributions plans in Belgium, the employer is exposed to a financial risk. The employer has a legal obligation to pay further pension contributions to the pension fund if the fund does not hold sufficient assets to pay all current and future pension commitments. These Belgian defined contributions plans should therefore be classified and accounted for as a defined benefit plans under IAS 19.

In the past, Fagron did not apply the defined benefit accounting for these plans because higher discount rates were applicable and the return on plan assets provided by insurance companies was sufficient to cover the minimum guaranteed return. As a result of continuous low interest rates offered by the European financial markets, the employers in Belgium effectively assumed a higher financial risk related to the pension plans with a minimum fixed guaranteed return than in the past. As a result, these plans need to be considered as defined benefit plans.

Management made an estimate of the potential additional liabilities as at 31 December 2015. Based on this estimation, it has been established that there are no substantive obligations. The 2015 employer's contributions for these Belgium pension plans amounts to 0.1 million euros (2014: 0.6 million euros). The employees' contributions 2015 is nil (2014: nil), the employees' contributions were stopped in 2014. The total amount of the plan assets as per 31 December 2015 amounts to 0.8 million euros (2014: 3.2 million euros).

25 Financial debts and financial instruments

(x 1,000 euros)	2015	2014
Non-current
Financial lease liabilities	260	435
Bank borrowings	3,845	550,966
Other borrowings	307	103
Total non-current	4,411	551,504
Current
Financial lease liabilities	238	361
Bank borrowings	594,670	5,318
Other borrowings		31
Total current	594,908	5,710
Total financial debt	599,320	557,214

	2015		2014
(x 1,000 euros)	Financial leases	Bank borrowings	Financial leases	Bank borrowings
---	---	---	---	---
Non-current borrowings by term
More than 1 year but less than 5 years	260	2,162	435	550,620
More than 5 years		1,990		450
Total non-current borrowings	260	4,152	435	551,069

a. Bank borrowings and financial instruments

The book value of the bank borrowings is expressed in euros. The effective interest rate at balance sheet date on 31 December 2015 was 3.51% (2014: 3.50%).

On 2 July 2012, Fagron NV issued bonds for an amount of 225 million euros. The nominal value of the bonds is 1,000 euros. The bonds have a maturity of five years and offer a fixed annual gross interest of 4.75%. The bonds are redeemable at 100% of the nominal value on 2 July 2017. The total EBITDA, calculated as result before interest, taxes, depreciation and amortization, of the guarantors is at least 70 per cent of the consolidated Group EBITDA.

On 15 April 2014, Fagron NV issued a series private loans comprising of 45.0 million US dollars 4.15% Series A Senior Notes due 15 April 2017, 22.5 million euros 3.55% Series B Senior Notes due 15 April 2017,15.0 million euros 4.04% Series C Senior Notes due 15 April 2019, 5.0 million euros Floating Rate Series D Senior Notes due 15 April 2019, 20.0 million US dollars 5.07% Series E Senior Notes due 15 April 2019 and 60.0 million US dollars 5.78% Series F Senior Notes due 15 April 2021.

Fagron NV has also amended and extended the existing multi-currency facility on 16 December 2014. This new multi-currency facility of 220 million euros, which will mature in December 2019 and includes two additional one year extension options, was arranged through a syndicate of existing and new international banks. The new syndicate consists of ING (Coordinator), BNP Paribas, HSBC, KBC Bank, Fifth Third Bank and Commerzbank. The main covenant of this credit facility is a net financial debt/recurring EBITDA ratio with a maximum of 3.25. As at the closing date of 2015, an amount of 199 million euros had been withdrawn (2014:178 million euros). The interest payable related to the multi-currency facility agreement is a variable interest rate ranging from one to six months.

On 30 December 2015, anticipating the covenant testing date for the credit facility, the company was granted a waiver by the lenders in respect of the financial covenants of the multi-currency credit facility and the privately placed loans. The waiver postpones the covenant testing, in respect of the financial covenants, from the original testing date on 31 December 2015 to 31 March 2016, hereby ensuring that there will be no event of default on the financial covenants at 31 December 2015 and therefore no cross default will be triggered in respect of the bond loan. The waivers are valid until the end of June 2016. The company will be in breach of its financial covenants on 30 June 2016 if a further amendment of the waiver is not granted by the lenders. As a consequence of the above, the bond loan of 225 million euros, the multi-currency credit facility of 199 million euros and the privately placed loans of 167 million euros are included within the current debts on the balance sheet at 31 December 2015. Interest expenses will rise in 2016 during the waiver period. More information on the granted waiver, possible solutions and the option to maintain the going concern principles are set out in note 2: Accounting Policies.

The interest risk relating to 70 million euros of these loans has been 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 1. The fair values of all derivatives held for hedging purposes are based on valuation methods. These methods maximize the use of detectable market data where available and minimize the impact of the company's estimates and projections. The interest hedging instruments are valued on the basis of discounted cash flows. The parameters used for these models are those applicable as at year-end and are therefore classified as Level 2. The valuation is calculated using the discounted cash flows of the nominal value and interest flows.

The fair value of these financial derivatives at year-end 2015 was -2.0 million euros (2014: -2.9 million euros). The full movement in fair value, 0.9 million euros profit (2014: 0.4 million euros loss), was charged to the result of 2015. Fagron has no other financial derivatives.

All financial instruments are measured at amortized cost except for derivative financial instruments and contingent considerations for acquisitions, which are valued at fair value. The amortized cost of the privately placed loans, the bond loan and the multi-currency credit facility, takes into account revised expected cash flows as a result of the expected overrun of the covenants as described above. The change of 12.5 million euros in the amortized cost was charged to the result of 2015. In the most positive scenario for expected cash flows, the carrying amount could be 10.0 million euros lower. In a worst case scenario for expected cash flows, the carrying amount could be 7.5 million euros higher. The fair value of the financial instruments valued at the amortized cost price approximates the carrying amount, with the exception of the bond loans. The fair value of the bond is approximately 197 million euros.

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

Company name of guarantors

	Fagron Nederland BV
	SM Empreendimentos Farmaceuticos Ltda
	Spruyt hillen BV
	Pharma Cosmetic K.M. Adamowicz Sp. Z.o.o.
	ACA Pharma NV
	Fagron GmbH & Co KG
	Arseus Belgie NV
	Fagron Belgie NV
	GMP Apotheek Mierlo-Hout BV
	B&B Pharmaceuticals Inc.
	Fagron Inc.
	Freedom Pharmaceuticals Inc.
	Pharmacy Services Inc. (part of Bellevue Pharmacy)

b. Financial leases

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

(x 1,000 euros)	2015	2014
Cost-capitalized financial leases	6,513	5,797
Accumulated depreciation	(5,794)	(4,468)
Net amount of assets in leasing	719	1,330

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)	2015	2014
Machinery and installations	704	1,284
Furniture and vehicles	15	46
Net amount of assets in leasing	719	1,330

Financial lease liabilities – minimum lease payments:

(x 1,000 euros)	2015	2014
Within 1 year	260	377
More than 1 year but less than 5 years	325	483
Total	585	860
Future charges on financial leases	88	64
Present values of financial lease liabilities	498	796

c. Operating leases

Operating lease liabilities – minimum lease payments:

(x 1,000 euros)	2015	2014
Within 1 year	4,026	5,933
More than 1 year but less than 5 years	7,451	10,727
More than 5 years	3,337	4,906
Total	14,814	21,567

There are no leases that individually represent an important part of the total. 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.

26 Trade payables

(x 1,000 euros)	2015	2014
Trade payables	58,250	57,440
Investment payables	4,793
Total trade payables	63,043	57,440

Trade payables generally have due dates that are dose to each other. The reported values approximate their fair values.

27 Other current payables

(x 1,000 euros)	2015	2014
Prepayments	124	101
Other payables	26,532	108,235
Accrued expenses	15,204	10,783
Other current payables	41,859	119,120

(x 1,000 euros)	Total	Due as per 2016	Due as per 2017	Due as per 2018
Prepayments	124	124
Other payables	26,532	12,113	8,278	6,140
Accrued expenses	15,204	15,204
Other current payables	41,859	27,441	8,278	6,140

The 'Other payables' includes an amount of 21.7 million euros (2014: 87.6 million euros) related to amounts to be paid to existing participations (subsequent payments). The 'Accrued expenses' includes an amount of 7.4 million euros (2014: 7.6 million euros) related to interest payments on the bond loan. Other items of these expenses relate to various accruals, for which the majority relates to payable customers bonuses, the costs related to the refinancing and the severance payment to the former CEO.

Other current payables generally have due dates that are dose to each other. The reported values approximate their fair values.

28 Contingencies

Fagron 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 Fagron' financial position. The term 'material' in this context is defined as a financial risk exceeding 0.750 million euros.

29 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 2015 and 2014 financial years was as follows:

(x 1,000 euros)	Fixed remuneration component3	Variable remuneration component	Other remuneration components4
2014 financial year
Ger van Jeveren, CEO	600	720	31
Executive Committee, including the CEO	1,609	1,150	31
Non-executive members of the Board of Directors	123
2015 financial year
Gervan Jeveren, CEO until 14 December 2015	569		35
Hans Stols, CEO as from 14 December 2015	30		2
Executive Committee, including the CEO	2,481	222	109
Non-executive members of the Board of Directors	162
Severance pay, Gervan Jeveren			1,785

3 Costs incurred by Fagron, i.e. the gross amount including any social security contributions.

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

The variable remuneration component for the 2015 financial year is the bonus effectively paid out in 2016. The Remuneration Committee prepares proposals annually for the remuneration policy and/or other benefits for members of the Executive Committee and the CEO.

In 2015 no new stock options were granted.

In 2015 Mr Van Jeveren exercised 125,000 stock options, while other members of the Executive Committee exercised 74,125 stock options. The members of the Executive Committee, in the composition in efFect on 31 December 2015, together hold 397,875 stock options.

30 Business combinations

Fagron completed a number of acquisitions in the 2015 financial year. Full control was acquired of all group companies. As the acquired activities were immediately – in their entirety or to a significant degree – integrated in existing entities of Fagron, their respective contributions to the profit of Fagron have not been reported separately.

Fair value of the acquired assets and liabilities Pharmacy Services Inc (Bellevue Pharmacy)

In April 2014, US company Bellevue Pharmacy was acquired. Fagron has further strengthened its worldwide market leadership with this acquisition of compounding facilities. Through this acquisition, Fagron gained the number one Position in the US compounding market. The acquisition involved a payment of approximately 142.1 million euros (part of which comprised shares), representing an increase in goodwill of 124.7 million euros. Expectation was that the goodwill will be fully tax deductible. The fair value of the acquired assets and liabilities was determined as detailed below.

(x 1,000 euros)
Intangible fixed assets	31,861
Property, plant and equipment	2,853
Deferred tax assets	2,681
Inventories	1,428
Trade receivables	3,726
Other receivables	125
Cash and cash equivalents	6,290
Total assets	48,965
Financial debts	4,352
Trade payables	819
Other current payables	26,359
Net acquired assets	17,435
Goodwill	124,656
Total acquisition amount	142,091

Fair value of the acquired assets and liabilities Panoramix BV

In January 2014, Panoramix BV was acquired. The acquisition involved a payment of approximately 49.3 million euros, representing an increase in goodwill of 40.8 million euros. The fair value of the acquired assets and liabilities was determined as detailed below.

(x 1,000 euros)
Intangible fixed assets	1,987
Property, plant and equipment	6,022
Other non current assets	3
Deferred taxes	292
Inventories	1,853
Trade receivables	2,314
Other receivables	2,225
Cash and cash equivalents	(287)
Total assets	14,408
Financial debts	1,806
Trade payables	869
Other current payables	3,195
Net acquired assets	8,538
Goodwill	40,792
Total acquisition amount	49,330

Fair value of the acquired assets and liabilities AnazaoHealth Inc.

In April 2015, AnazaoHealth Inc. was acquired. AnazaoHealth Inc. is a sterile compounding pharmacy in the United States, specialized in nuclear, pain and intrathecal compounding. The acquisition involved a payment of approximately 36.6 million euros (8.1 million with shares) representing an increase in goodwill of 30.2 million euros. It was expected that the goodwill would be fully deductible. The provisional fair value of the acquired assets and liabilities was determined as detailed below.

(x 1,000 euros)
Intangible fixed assets	11,994
Property, plant and equipment	1,561
Inventories	1,101
Trade receivables	2,775
Other receivables	980
Cash and cash equivalents	250
Total assets	18,662
Financial debts	1,224
Trade payables	976
Other current payables	10,068
Net acquired assets	6,394
Goodwill	30,168
Total acquisition amount	36,562

Fair value of the acquired assets and liabilities ABC Chemicals SA

In July 2015, ABC Chemicals SA was acquired in Belgium. The acquisition involved a payment of approximately 6.2 million euros, representing an increase in goodwill of 11.5 million euros. The provisional fair value of the acquired assets and liabilities was determined as detailed below.

(x 1,000 euros)
Intangible fixed assets	19
Property, plant and equipment	104
Inventories	1,559
Trade receivables	582
Other receivables	708
Cash and cash equivalents	638
Total assets	3,610
Financial debts	6,806
Trade payables	640
Other current payables	1,463
Net acquired assets	(5,299)
Goodwill	11,484
Total acquisition amount	6,185

Fair value of the acquired assets and liabilities other acquisitions

Furthermore, some smaller companies and operations were acquired during 2015. The total net assets acquired, before allocation of the acquisition price, amounted to 4.9 million euros.

(x 1,000 euros)
Intangible fixed assets	1,993
Property, plant and equipment	449
Other non current assets	6
Inventories	210
Trade receivables	322
Other receivables	45
Cash and cash equivalents	18
Total assets	3,043
Financial debts	207
Trade payables	214
Other current payables	388
Net acquired assets	2,234
Goodwill	2,702
Total acquisition amount	4,936

The fair value of a number of acquired assets and liabilities, acquired in 2015, 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 ongoing. The provisional fair value of intangible fixed assets, property, plant and equipment, deferred tax and working capital can change when the final fair value of the assets and liabilities acquired is established.

The final determination of the fair value of the assets and liabilities from previous minor acquisitions, acquired in 2014, resulted in an adjustment of 2.3 million euros (increase of goodwill).

The total increase in goodwill by acquisitions amounts to 46.4 million euros. 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 realizing market leadership in both new and existing markets.

At year-end, the Group had an amount of approximately 3.3 million euros in contingencies. These fees payable to former shareholders were determined on the basis of business plans at the time of acquisition.

(x 1,000 euros)	Total	Due in 2016	Due in 2017
Contingencies	3,264	1,137	2,127

The contingencies relate to Greece, South Africa and South America.

The contingencies vary between 0 euros and a maximum of 3.3 million euros. The considerations are measured at the fair value at the moment of acquisition. This is estimated based on the maximum compensation if the conditions are met.

31 Discontinued operations

Consideration received

(x 1,000 euros)	2015	2014
Consideration received in cash and cash equivalents	74,001	30,831
Subsequent payments	(4,374)	2,251
Total consideration received	69,627	33,232

Fagron successfully finalized the sale of Duo-Med, Owandy Radiology, Eurotec Germany, Eurotec France and Arseus Medical. Duo-Med was sold to ABN Amro Participaties, Owandy Radiology to Villa Sistemi Medicali based in Milan and Arseus Medical was acquired by entrepreneurs Cedric De Quinnemar and Jan Ponnet. A sum of 30.8 million euros was received in these transactions, excluding earn-outs and vendor loans. The earn-outs are valued at fair value. The fair value is estimated at 0 euros.

In March 2015, Fagron sold the ICT division, Corilus, to AAC Capital. With the sale of Corilus, Fagron completed the last part of the divestment program of the dental, medical and ICT operations, as announced in 2013. For this transaction Fagron received an amount of 74.0 million euros.

Analysis of the assets and liabilities disposed of:

(x 1,000 euros)	2015	2014
Current assets	11,300	44,805
Inventories	1,440	11,849
Trade receivables	4,783	18,112
Other receivables	3,525	7,054
Cash and cash equivalents	1,552	7,789
Non-current assets	73,636	22,789
Goodwill	72,746	16,104
Other intangible fixed assets		472
Property, plant and equipment	831	3,960
Deferred tax assets		1,786
Other non-current assets	59	466
Current liabilities	14,453	26,771
Trade payables	7,201	15,359
Taxes, remuneration and social security	6,173	6,048
Other current payables	1,078	5,326
Non-current liabilities	1,127	7,779
Provisions		6,497
Pension obligations	61	726
Borrowings	109	557
Deferred tax liabilities	957
Net assets disposed of	69,357	33,232

Gain (loss) on disposal

(x 1,000 euros)	2015	2014
Consideration received	69,627	33,232
Net assets disposed of	69,357	(33,232)
Gain (loss) on disposal	270

32 Information on the Statutory Auditor, his remuneration and related services

The company's Statutory Auditor is PricewaterhouseCoopers Bedrijfsrevisoren BCVBA, represented by its permanent representative, Mr Peter Van den Eynde.

(x 1,000 euros)	2015	2014
Audit fee for the Group audit
Fagron Group	595	501
Audit fee for PricewaterhouseCoopers Bedrijfsrevisoren	237	188
Audit fee for parties linked to PricewaterhouseCoopers Bedrijfsrevisoren	359	313
Additional services rendered by the Statutory Auditor to Fagron
Other audit assignments	25	162
Other non-auditing assignments	1
Additional services rendered by parties linked to the Statutory Auditor
Tax advisory services	130	165
Other non-auditing assignments	374	572

The item 'other non-auditing assignments' mainly relates to due diligence work, consulting and the preparation of special reports.

33 Significant events after the balance sheet date

Waterland

In the first quarter of 2016, Fagron successfully completed negotiations with a cornerstone investor (WPEF VI Holdco III BE B.V., a holding company whose shares are held (in)directly by Waterland Private Equity Fund VI CV and Baltisse NV) and five individual investors over a private capital increase in combination with a public capital increase amounting to a total of 220 million euros, subject to the approval of the General Meeting of Shareholders of Fagron. These investors made covenants with Fagron to subscribe, under certain conditions, for the first tranche of the capital increase in the approximate amount of 131 million euros and to exercise their preemptive rights in the second tranche of the capital increase. WPEF moreover committed itself, subject to certain conditions, to buy and to exercise all of the non-exercised rights in the second tranche.

Waiver

On 31 March 2015, anticipating the covenant testing date for the credit facilities, a waiver was granted by the lenders in respect of the financial covenants of the multi-currency credit facility and the privately placed loans. The waiver postpones to 30 June 2016 the covenant test in respect of the financial covenants with an original due date of 31 December 2015.

Bellevue Pharmacy

In May 2015, Fagron was confronted with a change in the reimbursement system for non-sterile preparations in the United States. The impact of this change impacted on the profitability of Bellevue Pharmacy. As a result of this, an impairment loss of 181.6 million euros was recorded for Bellevue Pharmacy in 2015. Due to the lossmaking results in the first quarter of 2016, the management has decided to dose down the Bellevue Pharmacy operations.

34 Additional notes

1. Off-balance sheet rights and liabilities – collateral:

HL Technology SA provided a mortgage registration in the amount of 1.0 million euros (1.1 million Swiss francs) related to its financing.

2. Fagron NV signed a liability statement on behalf of a number of Dutch subsidiaries, specifically:

	Fagron Nederland BV
	Arseus Dental BV
	Arseus Beheer BV
	Dutch BioFarmaceutics BV
	Fagron BVagron Brazil Holding BV
	Fagron Group BV
	Fagron Services BV
	Panoramix BV
	Pharmaline BV
	Pharma Assist BV
	Spruyt hillen BV
	GMP Apotheek Mierlo-Hout BV
	Twipe BV

3. Fagron NV signed a liability statement on behalf of a number of a German subsidiary, specifically:

Fagron GmbH & Co KG

Fagron GmbH & Co KG in Barsbüttel (Germany) is exempt from the obligation to set up its annual accounts and statements according to §264b of the German commercial code, and to audit and publish these in line with the applicable regulations for businesses.

35. List of the consolidated companies

Name	Address	Ownership
ABC Chemicals SA	Parc Industriel 19,1440 Wauthier-Braine (Belgium)	100.0%
ABC Dental & Pharmaceutical Consultancy NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0%
ACA Pharma NV	Venecoweg 20A, 9810 Nazareth (Belgium) )	100.0%
Alternate Sistemas E Informatica Ltda	Anchieta 285,13.201-804 Jundiai (Brazil)	100.0%
AnazaoHealth Inc.	5710 Hoover Boulevard, 33634 Tampa, Florida (United States)	100.0%
ApodanNordic PharmaPackagingA/S	Kigkurren 8M 2. Sal, 2300 Copenhagen (Denmark)	100.0%
APPEG SA	Rue de la Sambre 6, 6032 Charleroi (Belgium)	100.0%
Arseus Beheer BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Arseus België NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0%
Arseus Capital NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0%
Arseus Dental BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Arseus Dental Solutions SAS	Boulevard Ornano Zac Axe Pleyel 30, 93200 St-Denis (France)	100.0%
B&B Pharmaceuticals Inc.	17200 East Ohio Drive, 80017 Aurora Colorado (United States)	100.0%
Belgophar NV	Hillestraat 12, 8800 Roeselare (Belgium)	100.0%
Coast Quality Pharmacy LLC	5700 Hoover Boulevard 5710, 33634 Tampa (United States)	100.0%
DPI Inc.	5967 S. Garnett Rd., 74146 Tulsa, Oklahoma (United States)	100.0%
Ducere LLC	5710 Hoover Boulevard, 33634 Tampa, Florida (United States)	100.0%
Dynaceuticals Ltd	Kudu Street 606, White Thorn Office Park, Unit 2,1737 Johannesburg (South Africa)	100.0%
Euphaco NV	Hillestraat 12, 8800 Roeselare (Belgium)	100.0%
Fagron a.s.	1098/31M, 779 00 Olomouc (Czech Republic)	73.1%
Fagron Academy LLC	1111 Brickell Avenue, Suite 1550, 33131 Miami, Florida (United States)	100.0%
Fagron België NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0%
Fagron Brazil Holding BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Fagron BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Fagron Colombia SAS	Calle 9547A-28 Bogota (Colombia)	100.0%
Fagron Compounding Services LLC	1111 Brickell Avenue, Suite 1550,33131 Miami, Florida (United States)	100.0%
Fagron Compounding Services NV	Woestijnstraat 53, 2880 Bornem (Belgium)	100.0%
Fagron Compounding Services SAS	37 Rue Hélène Muller, 94320 Thiais (France)	100.0%
Fagron Compounding Supplies Australia Pty Ltd	Atkinson Road 2/16, Taren Point, 2229 Sidney (Australia)	100.0%
Fagron GmbH & Co KG	Von-Bronsart-Straße 12, 22885 Barsbüttel (Germany)	100.0%
Fagron Group BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Fagron Hellas A.B.E.E.	12 Th Klm Trikala Larisa N.R. (Greece)	100.0%
Fagron Holding USA LLC	1209 Orange street, 19801 Wilmington, Dellaware (United States)	100.0%
Fagron Iberica SAU	Carrer de Josep Tapiolas 150, 08226 Terrassa (Spain)	100.0%
Fagron Inc.	2400 Pilot Knobroad, 55120 St. Paul, Minnesota (United States)	100.0%
Fagron Italia SrL	Via Lazzari 4-6, 40057 Quarto Inferiore (Italy)	100.0%
Fagron Lékárna Holding s.r.o.	1098/31M, 779 00 Olomouc (Czech Republic)	100.0%
Fagron Ltd	2315 Ocean Tower, 550 Yan An East Road, 200001 Shanghai, (China)	100.0%
Fagron Nederland BV	Venkelbaan 101, 2908 KE Capelle aan den IJssel (The Netherlands)	100.0%
Fagron Nordic A/S	Kigkurren 8M 2. Sal, 2300 Copenhagen (Denmark)	100.0%
Fagron NV	Textielstraat 24, 8790 Waregem (Belgium)	100.0%
Fagron Poland Sp. z o.o	Albatrosów 1, 30-176 Krakau (Poland)	100.0%
Fagron Sari	Intendente Neyer 924, B1643 Béccar (Argentina)	100.0%
Fagron SAS	37 Rue Helene Muller, 94320 Thiais (France)	100.0%
Fagron Services BV	Molenwerf 13,1911 DB Uitgeest (The Netherlands)	100.0%
Fagron Services BVBA	Industrieweg 2, 2850 Boom (Belgium)	100.0%
Fagron South Africa Ltd	Erica Way 8, Somerset West Business Park, 7130 Cape Town (South-Africa)	100.0%
Fagron UK Ltd	4B Coquet Street, NE1 2QB Newcastle upon Tyne (United Kingdom)	100.0%
Flores e Ervas Comercio Farmaceutico Ltda	Estrada Vicente Bellini, No 17513.427-225 Piracicaba City (Brazil)	100.0%
Freedom Pharmaceuticals Inc.	801 W. New Orleans Street, 74011 Broken Arrow, Oklahoma (United States)	100.0%
GJD NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0%
GMP Apotheek Mierlo-Hout BV	Steenovenweg 15, 5708 HN Helmond (The Netherlands)	100.0%
HL Technology SA	Rue Jardiniere 153, 2300 La Chaux-de-Fonds (Switzerland)	100.0%
JCB Laboratories LLC	3510 N. Ridge RD. STE.900, 67205 Wichita, Kansas (United States)	100.0%
Jupiter Health Holding LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Liberty Rx LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Link Medical LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Mar-Kem Ltd	Main Road 20, Knysna, 6570 George (South Africa)	100.0%
Mercury Innovations LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Midwest Rx LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Northern Rx LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Panoramix BV	Münsterstraat 4, 7575 ED Oldenzaal (The Netherlands)	100.0%
Pharma Assist BV	Dieselstraat 3, 7903 AR Hoogeveen (The Netherlands)	100.0%
Pharma Cosmetic K.M. Adamowicz Sp. z.o.o.	Ul. Pasternik 26, 31-354 Krakau (Poland)	100.0%
Pharmacy Services Inc.	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Pharmaline BV	Münsterstraat 4, 7575 ED Oldenzaal (The Netherlands)	100.0%
PPH Galfarm Sp. z.o.o.	Ul. Przemysłowa, 12 30-701 Krakau (Poland)	100.0%
PSI Services Inc.	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Rausa Kem Pharmacy Ltd	Clarendon Street 61, Parow Valley, 7500 Cape Town (South Africa)	100.0%
Skinmaster Ltda	Calle 163A, 198-88, Bogota (Colombia)	100.0%
Slovgal s.r.o	Štúrova 19, 058 01 Poprad (Slovakia)	100.0%
SM Empreendimentos Farmaceuticos Ltda	Rua Jurupari, 803 – Jardim Oriental, 04348-070 Sao Paulo (Brazil)	100.0%
Southern Rx LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Spruyt hillen BV	Tinbergenlaan 1, 3401 MT IJsselstein (The Netherlands)	100.0%
Texas Southern Rx LLC	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0%
Twipe BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0%
Unit Dose Pack BV	Eijkenakker 12, 5571 SL Bergeijk (The Netherlands)	100.0%
Zenith Pharmaceuticals Cyprus Ltd	Doma Building Arch Makarios III Avenue 227, 3105 Limassol (Cyprus)	100.0%

Statutory Auditor's Report

Statutory Auditor's Report to the General Shareholders' Meeting on the consolidated accounts for the financial year ended 31 December 2015

In accordance with the legal requirements, we report to you on the performance of our mandate of statutory auditor. This report includes our opinion on the consolidated financial statements, as well as the required additional statement. The consolidated financial statements comprise the consolidated income statement as at 31 December 2015 the consolidated statement of financial position, the consolidated statement of changes in equity and consolidated statement of cash flows as at 31 December 2015 and the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Report on the consolidated financial statements – Unqualified opinion with explanatory notes

We have audited the consolidated financial statements of Fagron NV ("the Company") and its subsidiaries (jointly: "the Group"), prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements that apply in Belgium. The consolidated statement total assets amounts to KEUR 689,381 and the consolidated income statement shows a loss for the financial year in the amount of KEUR 202.328, attributable to the equity holders.

Board of Directors' responsibility for the preparation of the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines, is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Statutory Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing (ISAs). Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal financial control relevant to the Group's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control.

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Group's Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We have obtained from the board of directors and the company's officials the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our unqualified opinion.

Unqualified opinion

In our opinion, the consolidated financial statements give a true and fair view of the group's net equity and consolidated financial position as at 31 December 2015 and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Emphasis of matter

Without departing from our opinion as referred to above, we draw attention to note 2 Accounting policies and continuity' on pages 83 and 84 of the annual report, where detailed reference is made to the existence of uncertainty of material importance which may give rise to significant doubts regarding the Group's ability to maintain its continuity and in which the Board of Directors has cited the valuation rules in the assumption of continuity.

Report on other legal and regulatory requirements

The Board of Directors is responsible for the preparation and the content of directors' report on the consolidated financial statements.

In the context of our mandate and in accordance with the Belgian standard which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify in all material respects, compliance with certain statutory and regulatory requirements. On this basis, we provide the following additional statements which does not impact our opinion on the consolidated financial statements:

The directors' report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and does not present any material inconsistencies with the information that we became aware of during the performance of our mandate.

Antwerp, 8 April 2016

**The Auditor

PwC Bedrijfsrevisoren bcvba**

Represented by:

Peter Van den Eynde, Bedrijfsrevisor/Reviseur d'entreprises

Statutory financial statement

Condensed stand-alone income statement Fagron NV

(x 1,000 euros)	2015	2014
Operating income	10,098	5,068
Turnover
Other operating income	10,098	5,068
Operating expenses	6,708	2,577
Trade goods, raw materials and auxiliary materials
Services and other goods	5,505	3,649
Employee benefit expenses	(10)	251
Depreciation and amortization		1
Provision for risks and costs	(5,701)	(3,314)
Other operating expenses	6,914	1,990
Operating profit	3,390	2,491
Financial result	(20,532)	40,044
Profit from ordinary activities before taxes	(17,142)	42,535
Non-ordinary result	(91,242)
Profit for the year before taxes	(108,384)	42,535
Tax on result	(1)
Profit for the year	(108,385)	42,535

Condensed stand-alone balance sheet Fagron NV

(x 1,000 euros)	2015	2014
Non-current assets	294,522	393,760
Formation expenses
Intangible fixed assets
Tangible fixed assets
Financial fixed assets	294,522	393,760
Current assets	250,300	242,961
Debtors due after one year	190,921	152,526
Inventories and orders in progress
Debtors due within one year	22,148	58,872
Investments	2,314	13,189
Cash and cash equivalents	32,924	15,992
Other receivables	1,993	2,382
Total assets	544,822	636,721
Capital and reserves	277,198	359,482
Capital	329,066	322,112
Share premiums	19,202	56
Legal reserves	7,986	7,986
Unavailable reserves	2,314	13,144
Available reserves	27,015	16,184
Profit carried forward	(108,385)
Provisions and deferred tax	50	5,751
Provision for other risks	50	5,751
Liabilities	267,574	271,488
Creditors due after one year	91,000	236,457
Creditors due within one year	173,195	33,347
Other current payables	3,379	1,684
Total liabilities	544,822	636,721

Appropriation of profits Fagron NV

(x 1,000 euros)	2015	2014
Profit to be appropriated	(108,385)	44,117
Profit for the year to be appropriated	(108,385)	42,535
Profit carried forward from the previous year		1,582
Transfers from capital and reserves
To reserves
Transfers to capital and reserves		12,961
To statutory reserves		2,127
To other reserves		10,834
Profit to be carried forward	(108,385)
Profit to be carried forward	(108,385)
Profit to be distributed as dividends		31,156
Dividend		31,156

Accounting policies

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

Statutory financial statements of Fagron NV

As required under Article 105 of the Belgian Companies Code, this annual report is a condensed version of the Statutory financial statements of Fagron NV. The annual report and the Statutory Auditor's report will be filed and will be available for inspection at the company's registered office.

The Statutory Auditor has expressed his unqualified opinion an the Statutory financial statements of Fagron NV over financial year 2015.

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.

EBIT:	'Earnings Before Interests and Taxes', Profit (loss)from operating activities
EBITDA:	'Earnings Before Interests, Taxes, Depreciations and Amortizations', Profit (loss)from operating activities plus depreciations and amortizations, including write-down on inventories and receivables
Financial result:	Net financing costs, result of financing income and financing costs
Gross margin:	Turnover less acquired trade goods, raw and auxiliary materials and adjusted for changes in inventories and work in progress as a percentage of turnover
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 financial obligations plus derivative financial instruments and less cash and cash equivalents
Net result:	Profit (loss)for the reporting period, consolidated result
Non-recurring items:	One-off charges or gains not related to ordinary operations
Operating cash flow:	EBITDA 'Earnings Before Interests, Taxes, Depreciations and Amortizations', Result of operating activities plus depreciations and amortizations
Operating result:	Result of operating activities, EBIT ('Earnings Before Interests and Taxes')
REBITDA:	'Recurring Earnings Before Interests, Taxes, Depreciations and Amortizations', Profit (loss) from operating activities plus depreciations and amortizations and adjusted for all non-recurring items
Recurring operating cash flow:	Profit (loss) on operating activities plus depreciations and amortizations and adjusted for all non-recurring items
Recurring net operating cash flow:	Profit (loss) for the reporting period plus depreciations and amortizations and adjusted for all non-recurring items
Recurring net result:	Profit (loss) for the reporting period, adjusted for non-recurring items
Working capital:	Inventories + Trade receivables - Trade payables

Forward-looking statements caution

This annual report may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, containing information such as, but not limited to, communications expressing or implying beliefs, expectations, intentions, forecasts, estimates or predictions (and the assumptions on which they are based) on the part of Fagron. Forward-looking statements by definition involve risks and uncertainties. The actual future results or circumstances may therefore differ materially from those expressed or implied in forward-looking statements. Such a difference may be caused by a range of factors (such as, but not limited to, evolving statutory and regulatory frameworks within which Fagron operates, claims in the areas of product liability, currency risk, etcetera).

Any forward-looking statements contained in this annual report are based on information available to the management of Fagron at date of publication. Fagron cannot accept any obligation to publish a formal notice each time changes in said information occur or if other changes or developments occur in relation to forward-looking statements contained in this annual report.