Fagron N.V. — Annual Report 2016

Feb 20, 2018

Publication

Fagron NV

Waregem

Konzernabschluss zum Geschäftsjahr vom 01.01.2016 bis zum 31.12.2016

Financial annual report 2016

Consolidated financíaI statements

Statement

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial positiοn

Consolidated statement of changes in equity

Consolidated cash flow statement

Notes to the соnsolidated financial statements

1	GeneraI 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 taxes
13	Discontinued operations
14	Earnings per share
15	intangible fixed assets
16	Property, plant and equipment
17	Financial assets
18	Taxes, remuneration and social securíty
19	Inventories
20	Trade receivables, other receivaЫes, cash and cash equivalents
21	Equity
22	Provisions
23	Pension obligations
24	Financial debts and financial instruments
25	Trade payables
26	Other current paya bles
27	Contingencies
28	Related parties
29	Business combinations
30	Discontinued operations
31	Information on the Statutory Auditor, his remuneratiοn and related services
32	Significant events afteг the balance sheet date
33	Additional notes
34	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 December 31,2016, prepared In accordance with International Financial Reporting Standards(IFRS) as adopted by the European Union, and the legal and regulatory 'equirements 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.

April 7,2017

In the name and on behalf of the Board of Directors,

ans Stols, CEO

Karin de Jong, CFO

Consolidated income statement

(x 1,000 euros)	Note	2016	2015 1
Operating income		425,054	436,182
Turnover	6	421,839	427,550
Other operating income	7	3,215	8,622
Operating expenses		407,173	407,336
Trade goods		155,191	158,316
services and other goods		79,218	77,535
Employee benefit expenses	8	96,301	103,839
Depreciation and amortization	9	21,119	16,111
Impairment	9	48,364	47,338
Other operating expenses	13	3,480	4,197
Operating profit		17,881	28,845
Financial income	11	12,996	2,013
Financial expenses	11	(37,242)	(46,967)
Profit before income tax		(6,364)	(16,108)
Taxes	12	11,748	8,840
Net result for the year from continuing operations		(18,112)	(24,948)
Net result from discontinued operations (attributable to
shareholders)	13	(2,045)	(177,064)
Net result		(20,157)	(202,012)
Attributable to:
Equity holders of the comρany (net result)		(20,562)	(202,328)
Non-controlling interests		405	315
Earnings per share from continuing and discontinued operations attributable to the equity holders of the parent entity during the year attributable to the ordinary equity holders of the parent entity
Profit (loss) for the year per share [in euros)	14	(0.38)	(6,46)
From continuing operations	14	(0.34)	(0.81)
From discontinued operations	14	(0.04)	(5.66)
Diluted profit for the year per share (in euros)	14	(0.38)	(6.44)
From continuing operations	14-	(0.34)	(0.80)
From discontinued operations	14	(0.04)	(5.63)

1 The consolídated income statement for 2015 has been revised for applicatíon of IFRS 5.

Consolidated statement of comprehensive income

(x 1,000 euros)	Note	2016	20152
Profit for the year		(20,157)	(202,012)
Other comprehensive income
Items that will not be reclassified to profit or loss	23
- Remeasurements of post- employment benefit obligations		(599)	791
- Tax relating to items that will not be reclassified		150	264
Items that may be subsequently reclassified to profit or loss
- Currenсу translation differences		22,077	(26,335)
Other comprehensive Income for the year net of tax		21,628	(25,280)
Total comprehensive income for the year		1,471	(227,292)
Attributable to:
Equity holders of the company		1,083	(227,672)
Νon -controlling interests		384	380
Total comprehensive income for the year		1,471	(227,292)
Total comprehensive income for the year attributable to equity owners of the company:
From continuing operations		3,133	(50,608)
From discontinued operations	13	(2,045)	(177,064)
Total comprehensive income for the equity holders		1,088	(227,672)

2 The consolidated statement of comprehensive income for 2015 has been revised for application of IFRS 5.

The unrealized exchange rate differences of 22.1 million euros are mainly due to the strengthening of the Brazilian real against the euro.

Consolidated statement of financial positiοn

(x 1,000 eur05)	Note	2016	2015
Non-current assets		455,707	501,535
Intangible fixed assets	15	371,006	410,601
Property, plant and equipment	16	72,379	71,133
Financial assets	17	2,123	5,859
Deferred tax assets	18	9,698	13,942
Current assets		412,346	187,846
Inventories	19	60,054	67,251
Trade receivables	20	32,878	34,090
Other receivables	20	23,829	11,031
Restricted funds	20	220,622	0
Cash and cash equivalents	23	74,962	75/474
Total assets		868,053	689,381
Equity	21	152,875	(64,772)
Shareholders' equity (parent)		149,792	(67,473)
Non-controlling interests		3,083	2,700
Non-current liabilities		309,125	27,064
Provisions	22	12,776	15,98/
Pension obligations	23	5,680	5,146
Deferred tax liabilities	18	236	1,519
Borrowings	24	290,433	4,411
Current liabilities		406,053	727,090
Borrowings	24	290,559	594,908
Trade payables	25	53,163	63,043
Taxes, remuneration and social security	18	34,977	25,282
Other current payables	26	18,825	41,859
Financial instruments	24	8,530	1,996
Total liabilities		715,178	754,154
Total equity and liabilities		868,053	689,381

Consolidated statement of changes in equity

(x 1,000 euros)	Note	Share capital & share premium	Other reserves	Treasury shares	Profit carried forward	Total	Non-con-trolling interest	Total equity
Balance at January 1,2015		319,660	(223,781)	(20,235)	78,983	154,628	2,319	156,948
Profil for the year					(202,328)	(202328)	315	(202,013)
other comprehensive income for the year			(25,344)			(25,344)	64	(25,280)
Total comprehensive incóme for the year			(25,344)		(202,328)	(227,672)	379	(227,293)
Capital increase		26,101				26,101		26,101
Treasury shares				4,792		4,792		4,792
Result on treasury shares				(3,380)		(3,380)		(3,380)
Dividends					(31,156)	(31,156)		(31,156)
Share-based payments			9,216			9,216		9,216
Balance at December 31,2015		345,760	(239,909)	(18,823)	(154,501)	(67,473)	2,700	(64,772)
Profit for the year					(20,562)	(20,562)	405	(20,157)
Other comprehensive income for the yeaг			21,650			21,650	- 22	21,628
Total comprehensive income
for the year			21,650		(20,562)	1,088	384	1,471
Capital increase	21	216,092				216,092		216,092
Treasury shares	21
Result on treasury shares	21
Dividends	21
Share-based payments	21					85		85
Balance at December 31,2016		561,852	(218,174)	(18,823)	(175,063)	149,792	3,083	152,875

Consolidated cash flow statement

(x 1,000 euros)	2016	2015'
Operating activities
Profit before income tax from continuing 0perations	(6.364)	(16,108)
Profit before income tax from discontinued operations	(2,422)	(181,814)
Taxes paid	(12,831)	(19,413)
Adjustments for finanсial items	24,103	44,991
Total adjustments for non-cash items	62,049	243,835
Total changes in working capital	2,969	1,820
Total cash flow from operating activities	67,504	73,311
Investment activities
Capital expenditure	(14,777)	(22,052)
Investments in existing shareholdings (subsequent payments) and in new holdings	(8,155)	(96,674)
Proceeds from disposal of assets	0	72,450
Total cash flow from investing activities	(22,932)	(46,276)
Financing activities
Capital increase	216,092	106
Sale (purchase) of treasury shares	0	1,412
Dividends paid	0	(31,366)
New borrowings	147,814	100,289
Reimbursement of borrowings	(156,206)	(100,917)
Interest received	2,240	2,013
Interest paid	(38,501)	(32,998)
Total cash flow from financing activities	171,438	(61,460)
Total net cash flow for the period	216,010	(34,426)
Cash and cash equivalents-start of the period	75,474	108,552
Gains or losses on exchange on liquid assets	(4,100)	(1,349)
Cash and cash equivalents —end of the period (including restricted cash)	295,585	75/174
Changes in cash and cash equivalents (including restricted cash)	216,010	(34,426)
Net cash flow from discontinued operations
Total cash flow from operating activities	(9,279)	8,474
Total cash flow from investment activities	(6,147)	(6,743)
Total cash flow from financing activities	0	- 677
Total net cash flow from discontinued operations	(15,426)	1,054

3 The consolidated cash flow statement of December 2015 has been revi sed for application of IFRS 5.

Corilus was sold on March 13,2015. No cash flow was generated from this discontinued ореrataion in 2015. In Аргil 2016, the Board of Directors decided to close Bellevue Pharmacy; consequently the cash flows from Bellevue Pharmacy were classified in discontinued operations, both for 2016 and 2015.

The item 'adjustments for financia| items' relates to interest paid and received and to other financial expenses and income not being cashflows, such as the revaluation of the financial Instruments. The item 'total adjustments for non-cash flow items' relates in particular to depreciation, amortizatiοn, impairment and changes in provisions. The item 'total changes in working capital' concerns movements in the inventories, trade receivables and payables, other receivables and debts, and a|| other balance sheet elements that are part of the working capital. The afórementioned changes are adj usted as appropriate for non-cash flow items as presented above, for conversion differences and for changes in the consolidation scope.

Notes to the соnsolidated financial statements

1 General information

Fagrori is a leading global company active in pharmaceutical compounding and focused on delivering tailored pharmaceutical care to hospitals, pharmacies, clinics and patients in 32 countries around the world.

The Belgian company Fagron NV is located at Venecoweg 20A, 9810 Naza reth, Belgium. The company's registration number is BE 0890 535 026. The operational activities of Fa gron are driven by the Dutch company Fagron BV. The company's heed 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 April 6, 2017.

2 Financial reporti ng principles

The principal accounting policies applied in preparing these consolidated financial statements are detailed below. These policies have seen consistently applied by all of the consolidated entities including subsidaries 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 co nvention, with the exception of derivative financial instruments and con tingedes which a restated at fair value,

The consolidated financial statements for Fagron NV and its subsidaries for 20l6 as a whole have been prepared on the going concern basis, which assumes thatthe company will continue to be able to meet its liabilities astheyfall due in the foreseeable future. Based on the situation at the end of 2015, the directors indicated that there was a material uncertainty which could cast doubt on the company's ability to continue as a going concern. On May 5, 2016, the Group received a long term waiver for the Revolving Loan Facility Agreement and Note Purchase Agreement On May 20,2016, the Group received the first tranche of the capital increase and on July7 2016, the second tranche of the capital increase was completed, which means there is currently no material uncertainty about the Company's ability to continue as a going concern.

IFRS developments

The following amendments to standards and interpretations have been issued, approved by the EU and are mandatory for the first time for the financial year beginning January 1.2016.

Mandatory and applied		Impact
Amendments to IAS1 Presentationoffinandal statements	Theamendments to IAS1 are part of the IASB's initiative to improve the presentation of financial statements and the disclosures therein and are intended to further encourage companies to use professional judgement in determining what information should be disclosed in their financial statements. The amendments make clear that materiality applies to the financial statements as a whole and that including unimportant information can diminish the usefulness of the financial disclosures. The amendments also make it dear that companies should use their professional judgement In deciding where and in what order the information is presented in the notes to the financial statements.	Fagron has determined the impact of the amendments and applied them,
Amendments to IAS 19	The amendment clarifies the accounting of employee contributions set оut in the formal terms of a defined benefit plan.	Fagron has established that the application of these standards will not have a materia1 impact on the consolidated financial statements,
Annual improvements to IFRS standards(2012-2014 cycle)	These improvements resulted in minor amendments to the following standards:	Fagron has determined the impact of the amendments and applied them.
	• IFRS 5'Non-current assets held for sale and discontinued operations'
	• IAS 19 'Employee benefits'
	• IFRS 7'Financial instruments: disclosures'
	• IAS 34 'Interim financia1 reporting'
Annual improvements tо IFRS standards (2010-2012 cycle)	These improvements resulted in minor amendments to the following standards:	Fagron has established that the application of these standards wi| not have a material impact on the consolidated financial statements.
	• IFRS 2 'Conditions governing unconditional commitment '
	• IFRS 3 'Accounting of conditional remunerations'
	• IFRS 8 'Aggregation of operational segments'
	• IFRS 13 'Fair value measurement'
	• IAS16'Property, plant and equipment'
	• IAS 38 'Intangible assets'
	• IFRS 9 Financial Instru ments
	• IAS 37 ' Provisions, contingencies and conditional assets',
	• IAS 39 'Financial instruments - Valuation upon "First recognition and after recognition'
Amendments to IFRS 10 Consolidated financial statements. IFRS 12 Disclosure of interests in other entities and IAS 28 Investments in associates and joint ventures	Theseamendmentsdarifytheconditionsforexempting investment entities from consolidation.	Fagron has established that the application of these standards wil not have a materia1 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 nandatoryforthefirsttimeforthefinancialyearbeginringJanuary1,2016.

Issued and approved by the EU, but not yet mandatory		Anticipated impact
IFRS 9 Financial Instruments January 1,2018	The standard addresses the classification, measurement and derecognition of financial assets and liabilities.	Fagron has established that the application of these standards will not have a material impact on the consolidated financial statements.
IFRS 15 Revenues from contracts with customers January 1,2018	The IASB and FASB have jointly published a standard concerning the recognition of revenue 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. Entities that apply IFRS are required to apply this standard.	Fagron is currently analyzing the potentia1 impact on the consolidated financial statements and expects а first reasonable estimate in the interim financial information on the first half of 2017,

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 January 1,2016.

Issued, not yet approved by the EU and not yet mandatory		Anticipated impact
IFRS16 Leases January 1,2019	The standard replaces the сurrent standard, IAS 17, and contains a major change to the accounting for leases by the lessee. According to IAS 17, the lessee had to make a distinction between a financial lease (to be recognized in the balance sheet) and an operational lease (should not be recognized in balance sheet). IFRS 16, on the other hand, requires the lessee to recognize a debt in the balance sheet equal to the future lease payments and a 'right-of-use asset' for virtually all leases, For lessors, the recording in the accounts remains almost entirely the same. However, the IASB has amended the definition of a lease (as well as the sections concerning the combination and segregation of contracts), which means lessors are also impaсted by the new standard. According to IFRS 16, a contract contains a lease if the contract includes a right to control an identified asset for a specified period of time in exchange for compensation,	Fagron expects the new standard will have a significant impact.The impact is expected to be of a magnitude as reported in note 24c.
Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and Joint ventures Effect date not yet known	These amendments address the contradiction between the provisions in IFRS 10 and those in IAS 28 in the event of the sale or contribution of assets between an investor and its associate or joint venture. The most important effect of the amendments is that the profit or less is recognized in full if a transaction involves a business (regardless of the fact of whether this business is accommodated in a subsidiary or not). The profit or loss is only included in part if the transaction includes assets that do not constitute э business, even if these assets are accommodated in a subsidiary.	Fagron will review the effects of these amendments and consider adoption when appropriate.
Amendments to |AS12 Income taxes January 1, 20V	These amendments c|arify the accounting for deferred tax claims arising from debt instruments valued at fair value.	Fagron wi| review the effects of these amendments and consider adoption when appropriate.
Amendments to IAS 7 Statement of cash flows January 1,2017	The amendments introduce an additional disclosure that will prompt readers of the financial statements to evaluate changes in liabilities originating from financing activities, These amendments are part of the IASB 'Disclosure initiative,' which has the goa1 of constantly seeking to improve the notes to the financial statements.	Fagron will review the effects of these amendments and consider adoption when appropriate.
Amendments to IFRS 15 Revenue from contracts with customers January 1,2018	These amendments clarify the identification of the various performance obligations, the accounting for licenses relating to intellectual property and the differences between principal and agent relations. The amendment also contains examples for clarification.	Fagron will review the effects of these amendments and соnsider adoption when appropriate.
Amendments to IFRS 2 Share-based payments January1, 2018	The amendment clarifies the valuation method for cash- settled share-based payment transactions and the accounting for adjustments of the payment transaction of cash-settled to equity-settled share-based payment transactions. The amendment also provides for deviation from the IFRS 2 principles for regarding a payment transaction whereby the employer must withhold part of the payment for tax reasons and must pay this to the tax authorities as an equity-settled share-based payment transaction.	Fagron will review the effects of these amendments and соnsider adoption when appropriate.
Annual Improvements to IFRS standards(2014-2016 cycle)	These improvements resulted in minor amendments to the fallowing standards:	Fagron will review the effects of these amendments and consider adoption when appropriate.
IFRS 1: January 1,2018	• IFRS 1 ' First application of International Financial Reporting Standards'
IAS 28: January 1 2018	• 1 FRS 28 'Investments in associates and joint ventures'
IFRS 12: January 1, 2017	• IFRS 12 'Disclosure of interests in other entities'
IFRIC 22 Foreign currency transactions and advance consideration January 1, 2018	This interpretation relates to transactions in foreign currencies or parts of transactiοns in foreign currencies where the advance payment is expressed in a foreign currency. The interpretation contains additional information if a single payment/receipt occurs as well as if multiple payments/ receipts occur. The purpose of this interpretation is to reduce the current diversity in how these transactions are recognized.	Fagron will review the effects of these amendments and consider adoption when appropriate.

Other new standards, amendments of standards and interpretations which were published but are not yet mandatory for this financial year starting January 1, 2016, are not applicable for Fagron.

Consolidation criteria

The consolidated financial statements include the account s of Fag ron and its subsidiaries. Subsidiaries are entities over which the Group has соntrol. The Group соntrols 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 Fag ron. 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 dееmed to be an asset or liability are recognized in accordance with IAS 39 in the income statement. Contingent соnsiderations 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 fairvalue 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 valu e of the share of Fagron in the net identifiable assets of the acq uired subsidiary on the date of acquisition forms goodwi11 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 bean 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 pricethat 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

Items 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 a nd liabilities the year-end rate;
•	Income statement at the average exchange rate for the year;
•	Components of the equity at histórical exchange rate.

Exchange rate differences arising from the conversion of the net investment in foreign subsidiaries at year-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 usingthe 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
	2016	2015	2016	2015
---	---	---	---	---
US dollar	1.054	1.089	1.107	1.109
Brazilian real	3.431	4.312	3.859	3.700
Polish zloty	4.410	4.264	4.363	4.183
Swiss franc	1.074	1.084	1.090	1.068

Assets held for sale and discontinued operations (13)

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

To be classified as held for sale, the following сriteria of IFRS 5 sho uld be met;

•	Management must be committed to the sale;
•	An active program to locate a buyer is initiated;
•	The assets (or disposal groups) are availablefor 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 abcve 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 sell.

A discontinued operation i s a component of the Group that represents a sepa ate, important operation or geographic business area, is part of a single coordination plan to hive off a separate, important operation on geographic business area, or concerns a subsidiary that has been acquired exclusively with the intention of selling it on.

The classification as a discontinued operation will take place on the date at which the transaction satisfies the conditions for recognition as held for sale or when an operation is hived off.

If an operation is classified as a discontinued operation, the result from the discontinued operations for the reporting period will be presented separately in the income statement and in the statement of comprehensive income.

In supplement to the cniteria forthe presentation in the balance sheet of groups of assets t hat are being hived off, comparable figures are included in the Income statement and in the statement of comprehensive income for the presentation of the results of

discontinued operations. Furthermore, the net cash flows attributable to the operating, investing and financing activities of the discontinued operations are reported separately.

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.

Goodwil

Goodwill represents the excess of the cost of an acquisition over the f air 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 goodwi11 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 overa period of 5to7years, 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 a re 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 fоllowing 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

Jnique products develοped 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 cur rently 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 cha nges 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. Forthe 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 appilicable. Deprciation 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 affair 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 a mortized 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 affair 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)

Incometaxes 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 taχ 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 a11 temporary differences arising from investments in subsidiaries and associates, except for differences where by 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 endtheirfscal book value resulting from any acquisitions. Deferred taxes are recognized to the ratiо 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 taχ benefit will be realized.

Fagron will offset tax assets and taxliabilities 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) atthe 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 probabil ity 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 provi ded that (1) there is no longer a right to receive cash flows and (2) Fagron ha s substantially transferred all risks and rewards. The factoring balance at December 31,2016 cameto 15.4 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 balanсе sheet date realization value is lower than the book value.

Capital (21)

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

If a company of Fagran purchases share capital of Fagron (treasury shares), the consideration paid, including any directly attributable incremental costs (net of incometaxes), 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.

Ρrovisions(22)

Provisions exist for restructuring costs, legal claims, risk of losses or costs potentially arising from personal securities or collateral соnstituted as guarantees for creditors or commitments to third parties, from оbligations to buy or sell non-current assets, from the fulfilment of соmpleted or received оrders, technical guarantees ass ociated with turnоver or services already completed by Fagron, unresolved disputes, fines and penalties related to taxes, or compensat ion for dismissal. Fagron recognizes a provision if;

•	Fagron has an existing legal or actual obligation as a result of past events;
•	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 оperating losses.

Provisions are recognized based on management's best estimate of the expenditure required to settle the present obligation at bаlance 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,

Employее benefit expenses

Share-based payments (21)

Fagron operates an equity-based compensation plan, which is paid in sha res. The total amount to be recognized as costs over the vesting period is determined by reference to the fair value of the war rants 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 (23)

The companies of Fagron operate various pension schemes. The pension schemes are funded through payments to insurance companies. determined by periodiс actuarial calculations. Fagron has b oth defìned 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 approxim ating 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 parys 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 momentthey are made.

Borrowings (24)

Borrowings are recognized initiallу 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 valuéis recognized in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities,unless Fagron h as an unconditional right to defer settlement of the liability for at| east 12 months after the balance sheet date. Consultanсу costs for the refinаncing are part of the financial costs.

Lease contracts—Operating leases (24)

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

Lease contracts - Financial leases (24)

Lease contracts regarding property, plantand equipment whereby Fagran retains virtually a11 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 l 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 a eh ieve s constant perioodic 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 reasonablу certain that ownership wi11 be obtained at the end of the lease term.

Derivative financial instruments (24)

Fagron utilizes derivative financial instruments to limit risks relating to unfavorable fluctuations in interest rates and exchange 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 сriteria asset 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 re cognized at the moment that deli very of the products has been made to the сustomer, 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 activites from wh ich it may earn revenues and incur expenses;
•	in whose operating results are regularly reviewed by the entity's Chi ef 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 t hat is internally provided to the Executive Committee, the body that was Chief Operating Decision Maker during 2016. An ope rat ing 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.

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 HLTechnology These are the segments within Fagron as per 2015

With effect from the first quarter of 2017, Fagron will adjust the reporting structure and presentation of the financial results per segment to bring these in line with the way π which the business will be managed. Fagron's results will be reported in the segments Fagron Europe, Fagron North America, Fagron South America and HL Technology.

Earnings per share (EPS) (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 соmmon 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 a|| 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 re porting is essential for both the internal management reports and the external reporting. Group-wide reporting guide lines have been drawn up within Fagron to th is 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 fore casts 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

OnJujy 2,2012, 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 FJE0002180462onJuly 2,2012. The issue price of the bonds was 101.875 %. The bonds nave a maturity of five years and offer a fixed annual gross interest of 4.75 %. The bonds are redееmable at 100 % of the nominal value on July 2,2017. 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 percent of the consolidated Group EBITDA. The companies that act as guarantors for the Fagron loans are listed in note 24.

Multi-currenсу facility

On December 16,2014, Fagron NV amended and extended the existing credit facility with an originating amount of 150 million euros and maturity date in July 2017. The amended multi-currency facility of 220 million euros was given a term until December 2019 with two one-year extension options via a consortium of existing and new international banks. In 2016, this facility, along with the long term waiver of May 5, 2016, was renewed until April 2021 for an amount of at least 180 million euros by exercising the extension options. The consortium consists of ING (coordinator), BNP Paribas, HSBC, KBC Bank, Fifth Third Bank and Commerzbank. The key covenants of this сredit facility are the net financial debt/recurring EBITDA ratio and the recurring EB|TDA/net interest expenses ratio. The financial covenants were adjusted to give Fagron extra latitude with respect to the original levels of the financial covenants. The extra latitude in the financial covenants will decrease with every six-month test period, starting with the first test period ending on December 31,2016 until the test period ending on June 30,2018. For every test period ending after June 30,2018, the levels of both financial covenants revert to the original levels. The test periods and accompanying levels are shown below.

Financial covenants

Test period	Net financial debt/REBITDA	REBITDA/ net interest expenses
December 3l, 2016	Max. 5.02x	Min.l.Slx
June 30,2017	Max. 4.60x	Min.l.98x
December 31, 2017	Max. 4.09x	Min. 2.32X
June 30,2018	Mах, 3.60X	Mln.2.aox
After June 30,2018	mах. 3.25x	Min,4,UUX

At year-end 2016, an amount of 191 million euros had been withdrawn (2015:199 million euros).

Privately placad loans (senior unsecured notes)

Fagran NV issued a serious of privately placed loans pursuant to a loa n agreement originаllу dated April 15,2014, which includes 45.0 million US dollars 4.15 % Series A Senior Notes due April 15, 2017,22.5 million euros 3.55 % Series В Senior Notes due April 15,2017, 15.0 million euros 4.04 % Series С Senior Notes due April 15.2019,5.0 million euros Floating Rate Series D Senior Notes due April 15, 2019,20.0 million US dollars 5.07 % Series E Senior Notes due April 15,2019 and 60.0 million US dollars 5.78 % Series F Senior Notes due April 15,2021.

The agreement dated April 15,2014 was amended in 2016 as a result of t he Long Term waiver of May 5, 2016. The key covenants of this credit facility are the net financial debt/recurring EBITDA ratio and the recurring EBITDA/net interest expenses ratio. The financial covenants were adjusted to give Fagron extra latitude with respect to the original levels of the financial covenants. The extra latitude in the financial covenants will decrease with every six-month test period, starting with the first test period ending on December 31,2016 until the test period ending on June 30,2018. For every test period ending after June 30,2018, the levels of both financial covenants revert to the original levels. The test peniods and accompanying levels are shown below.

Financial covenants

Test period	Net financial debt/ REBITDA	REBITDA/ net interest expenses
December 31, 2016	Max. 5.02X	Min. 1.81x
June 30,2017	Мах. 4.60X	Min. 1.98x
December 31, 2017	Max. 4.09X	Min. 2.32x
June 30,2018	Max. З6Ох	Min. 2.80x
After June 30,2018	Max. 3.25X	Min. 4.00x

Capital management

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

•	to safeguard the company's equity in order to guarantee it contin uity, and
•	to maintain the best possible capital structure so as to reduce ca pital costs.

The amount to be paid on dividends can be adjusted by the Group (see note 21) in order to retain or adjust the capital structure. It may also issue new shares or dispose of assets inorderto 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 inte rest coverage ratio of 4.0, measured by dividing the recurrent ЕВITDA with the consolidated net interest expenses.

The covenant levels above were temporarily relaxed by the signed waiv ers of May 5,2016, after which the above levels will once again apply. These temporary levels are reported in the chapter "Privately placed loans (senior unsecured notes)."

Policy in relation to capital management is being reviewed at present following the recent changes in the Executive Committee and the Board of Directors.

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. Fagron has in total three local cash pools in the regions of North America and Europe (the Netherlands and Belgium). These are used by the operating companies, whereby zero balancing is applied in Europe and target balancing in North America. The three local cash pools are pooled daily into one central notional cash pool

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 trie accounts receivable balance.

Interest risk

Fagron regularly assesses the maintained mix of financial debts with fixed and variable interest rates. At this moment, the financing consists in part of financing with a variable interest rate ranging from 1 to 6 months. A higher Euribor rate of 10 base points would have increased the variable interest charges by approximately 91 thousand euros before tax (2015:131 thousand euros). The interest risk of the variable interest rate for70 million euros of financing is hedged with financial derivatives with an expiry date of June 26, 2017. 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 2016, these entities collectively represent approximately 52.2 % of the consolidated turnover

Some of the Group's revenue is realized in currencies other than the eu ro, such as in Brazil, the United States, Poland and Switzerland, The table below sets out the hypothetical supplementary effect of the e uro strengthening or weakening by 10 % against the US dollar, the Brazilian real, the Polish zloty and the Swiss franc forthe year 2016 and its subsequent effect on profit before tax, impairment loss and equity capital. The impairment losses in 2015 and 2016 resulted in negative equity in the United States. The hypothetical supplementary impact consequently has a loss-reducing effect.

(x 1,000 euros)	Profit before tax and impairment loss		Equity
	Strengthening	Weakening	Strengthening	Weakening
---	---	---	---	---
US dollar	1,499	(1,832)	5,538	(6,768)
Brazilian real	(1,731)	2,116	(11,648)	14,236
Polish zloty	(883)	1,079	(3,448)	4,214
Swiss franc	218	(266)	(395)	483

The company also incurs indirect currency risk as a large part of its purchases in Brazil are actually trans actions in US dollars.

This means that the Group's products becom e relatively more expensive to the consumer each time the US dollar rises against the

3razi|ian real. The risk's difficult to quantify, as such price increases are directly charged to the consumer entirely or partly.

Currency risks in relation to debt in foreign currency, privately placed loans (senior unsecured notes), some of which were borrowed in US dollars, have been hedged in part with intercompany loans to the US subsidiary. A portion of the multi-currency facility raised in US dоllars was converted to euros in 2016. This has caused part of t he natural hedge with the intercompany loans to evaporate, prompting Fagron to decide to hedge this risk with FX derivatives. The nominal value of these derivatives was 157 million US dollars at the end of 2016, with a fair value of-7.8 million euros. The expiry dates are in April and May 2017

Fair value risk

Fagron utilizes financial derivatives to hedge interest and currency risks. Fagron hedged the variable interest rate for 70 million euros of financing. Derivatives (FX forwards) with nominal value of 157 million US dollars are used to hedge the US dollar debt.

In accordance with IFRS, all financial derivatives are recognized either as assets or as liabilities. In accordance with IAS 19, financial derivatives are recognized at fair value. Changes in fa rvalue are reco gnized by Fagron directly in the income statement because these are financial derivatives that do not quality as cash flow hedging instruments. At the end of 2016, the cummulative revaluation of financial derivatives amounted to -8.5 million euros (2015: -2.0 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 reasonаble given the circ umstances.

Critical estimates and judgments

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

Estimated impairment loss of goodwill and intangible 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 the higher of the asset's fairvalue less the sale costs and value in use. These calculations require the application of estimates. Primarily as a consequence of the ongoing impact of the changes to the reimbursement system in the United 5tates, Fagron had to recognize an impairment loss of 484 m Ilion euros in 2016. This contributes to the book value of goodwill as per December 31,2016 of 342,8 million euros (2015; 373.6 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 wi11 be written off. A deferred taχ asset is recognized when the booк value of good will is less than the tax base and it is expected that taxable profits will arise against which the temporary differences can be utilized.

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 nate. Any changes in these assumptions will impact the book value of pension obligations. The gross defìned benefit obligation is calculated period icallу by independent actuaries.

The book value of pension obligations as at December 31,2016 is 5.7 million euros (2015:5.1 million euros).

Provi sions 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 cannot 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.

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 forwhich the ultimate taxable amount is uncertain. When the final income tax is determined, the deviations will affect the current and d eferred taxes and liabilities for the period in which the determination is made.

5 Segment information

Fagron's divisional struture 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, reporting has taken place in four segments from 2015 onwards. The four 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 o n 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.

With effect from the first quarter of 2017, Fagron will adjust the reporting structure and presentation of the financial results per segment to bring these in line with the way in which the business will be managed. Fagron's results will be reported in the segments Fagron Europe, Fagron North America, Fagron South America and HL Technology.

agron was organized in four main operational segments in 2015 and 2016;

1.	Fagron Specialty Pharma Services (FSPS) refers to a11 personalized medication that is prepared in Fagron's sterile and non -sterile compounding facilities in Europe, the United States, Colombia and South Africa,
2.	Fagron Trademarks (FTM) encompasses the innоvative concepts, vehicle sand formulations developed by Fagron, often in close cooperation with preseribers, pharmacies and universities.
3.	Fagron Essentials (FE) refers to all pharmaceutical raw materials, eq uipment 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 the dental and medical industry.

The segment results for continuing operations forthe reporting period ending December 31,2016 are as follows:

2016

(x 1,000 euros)	FSPS	FTM	FE	HL Technology	Total
Turnover	150,558	53,761	209,861	7,659	421,839
Intersegment turnover			1,679		1,679
Total turnover	150,558	53,761	211,540	7,659	423,518
Operating result per segment	23,722	14,409	(16,810)	(3,440)	17,881
Financial result					(24,245)
Profit before taxes					(6,364)
Taxes on profits					11,748
Net result from continuing operations					(18,112)

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

2015

(x 1,000 euros)	FSPS	FTM	FE	Hl Technology	Total
Tu mover	142,458	50,343	225,212	9,547	427,560
Intersegment turnover			6,889		6,889
Total turnover	142,458	50,343	232,101	9,547	434,449
Operating result per segment	18,763	13,184	7,S71	(10,773)	28,845
Financial result					(44,954)
Profit before taxes					(16,108)
Taxes on profits					8,840
Net result from continuing operations					(24,948)

Other segmented items recognized in the income statement for continuing operations are as follows: 2016

(x 1,000 euros)	FSPS	FTM	FE	Hl Technology	Total
Depreciation, amortization and Impairment	7,630	2,527	54,806	1,579	66,543
Write-down on inventories	18	316	1,272	826	2,432
Write-down on receivables	251	132	116	9	508

2015

(x 1,000 euros)	FSPS	FTM	FE	Hl Technology	Total
Depreciation, amortization and impairment	12,868	1,506	35,413	11,938	61,724
Write-down on inventories	201	117	918		1,236
Write-down on receivables	94	56	310	28	488

The assets and liabilities, and the capital expenditure (investments) are as follows: 2016

(x 1,000 euros)	FSPS	FTM	FE	Hl Technology	Total
Total assets	212,646	89,653	562,130	5,814	868,053
Tota inabilities	270,666	87,325	357,903	1,469	715,178
Capital expenditure	7,628	1,271	4.589	118	13,606

2015

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

segment assets consist primarily of property, plant and equipment, inta ngible fixed assets, inventories, receivables and cash from operations.

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

(x 1,000 euros)	2016	2015
The Netherlands	116,822	117,945
Brazil	88,795	79,072
United States	76,147	92,643
Belgium	33,732	31,858
Poland	22,457	19,113
Germany	15,374	15,734
France	12,730	14,952
Italy	11,082	10,642
Czech Republic	10,362	8,983
Spain	9,331	9,627
Switzerland	7,659	9,547
Denmark	6,838	6,819
Greece	2,681	2,290
Colombia	2,334	2,712
United Kingdom	2,283	2,761
South Africa	2,068	1,973
Australia	1,143	888
Total	421,839	427,560

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

Concerning the geographical segments, Fagron applies the following allo cation for fixed assets excluding deferred tax assets, for continuing operations;

(x 1,000 euros)	2016	2015
The Netherlands	123,812	125,096
United States	114,849	173,593
Brazil	89,067	70,678
Belgium	27,962	27,245
Other	90,294	90,997
Total	445,984	487,609

6 Turnover

(x 1,000 euros)	2016	2015
Sale of goods	421,839	427,550
Turnover	421,139	427,560

7 Other operating income

(x 1,000 euros)	2016	2015
Gain on disposal of fixed assets	219	318
Other operating income	2,995	8,303
Total other operating income	3,215	8,622

The change in the tern Other operating income' relates mainly to one-off occurrences in 2015, specifically the release of an earn-out regarding JCB Laboratoriesand the sale of the headquarter office in Belgium. The other operating income in 2016 related mainly to incomefrom the sale of activities in the past.

8 Employee benefit expenses

(x 1,000 euros)	2016	2015
Wages and salaries	65,882	67,868
Social security costs	14,042	14,602
Pension costs-defined benefit plans	58	687
Pension costs - defined contribution plans	2,242	1,444
Other post-employment benefit contributions	2,527	6,070
Other employee expenses	12,050	13,168
Total employee benefit expenses	96,801	103,839

Full-time equivalents continuing operations

Full—TIme equivalents (rounded to one unit)	2016	2015
Brazil	S09	495
The Netherlands	422	417
United States	313	308
Czech Republic	123	114
Poland	121	120
France	95	131
Belgium	85	101
Colombia	66	72
Switzerland	61	61
Germany	38	40
Spain	36	38
Italy	36	36
Greece	31	32
South Africa	27	23
Denmark	9	11
China	9	9
United Kingdom	7	7
Australia	4	4
Total	1,991	2,017

At December 31,2016, Fagrcn's workforce (fully consolidated companies), for continuing operations, comprised 2,106 (2015: 2,163) employees or 1,990.7 (2015:2,017.2) full-time equivalents. The geographical distribution of the number of full-time equivalents is as follows:

Full—time equivalent: (rounded to one unit)	2016	2015
Europe	1,063	1,107
North America	313	308
South America	575	567
Rest of the world	40	36
Total	1,991	2,017

9 Depreciation, amortization and impairment

(x 1,000 euros)	2016	2015
Depreciation and amortization	18,179	14,386
Impairment	48,364	47,338
Write-down on inventories	2,432	1,236
Write-down on receivables	508	468
Tota1 depreciation, amortization and impairment	68,483	63,449

Depreciation, amortization and impairments increased in 2016, partly es a result of accelerated depreciation in the United States and Switzerland. Amounts written off on inventories alsо increased because of the building up of provisions in the United States and Switzerland.

Fagron recognized an impairment of 48.4 million euros in 2016 and 47.4 million euros in 2015, mainly as a result of the changed reimbursement system for non-ster ile compounding in the United States and the consequences of this change for the profitability of Freedom Pharmaceuticals. Further details involving the impairment a re stated in note 15.

10 Other operating expenses

(x 1,000 euros)	2016	2015
Increase (decrease) in provisions for current liabilities	(4,022)	306
In crease (decrease) in provisions for pension liabilities	108	99
Taxes and levies (excluding income tax)	1,101	725
Other operating expenses	6,292	3,067
Total other operating expenses	3,480	4,197

An amount of 4.4 million euros of the decrease in provisions for cur rent liabilities in 2016 relates to a release of a provision following a settlement with Henry Schein concerning a dispute on the sale of seve ral companies in 2013. This decrease was compensated in part by the creation of a provision for a tax assessment in Brazil (0.8 million euros). In 2016, the line Otheroperatingexpenses' includes 5.3 million euros relating to the settlement with Henry Schein.

In 2015, the line'Other operating expenses' included 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)	2016	2015
Financial income	11,713	1,147
Revaluation of financial derivatives	1,284	856
Total financial income	12,996	2,013
Financial expenses	(7,994)	(19,291)
Interest expenses	(29,714)	(24,758)
Currency translation differences	467	(2.917)
Total financial expenses	(37,242)	(46,967)
Total financial result	(24,245)	(44,954)

The positive revaluation of financial derivatives, 1.3 million euros in 2016 and 0.9 million euros in 2015, relates to the change in the market value of the interest rate hedges that are nota cashflow 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-25.5 million euros, compared to-45.8 million euros in 2015. This improvement was chiefly the result of the Long Term Waivers received. These waivers resulted in a change in the expected cash flows, whereby the extra costs of 10.0 millionn euros recognized in 2015 have been recognized as proceeds in the 2016 re porting yea r.

12 Income taxes

Income taxes from continuing operations are as follows :

(x 1,000 euros)	2016	2015
Current tax expenses	7,939	10,082
Deferred taxes	3,809	(1,243)
Tax on profits	11,748	8,840
Effective tax rate	184,59 %)	(54.88 %)
Profit before income tax from continuing operations	(6,364)	(16,108)
Tax calculated at weighted Fagron NV's statutory tax rate	(2,163)	(5,475)
Effect of rate differences compared with foreign jurisdictions	(3,959)	(1,576)
Income not subject to taxes	1,177	(2,615)
Expenses not deductible for tax purposes	960	1,369
Tax on profit previous years	(571)	(593)
Effect of impairment	16,439	16,090
Other	(135)	1,640
Tax on profits	11,748	8,840

The Tax calculated based on Fagron NV's statutory tax rate' is the taxes expected based on the Belgian statutory rate. The'Effect of rate differences compared with foreign jurisdictions' pertains to the impact of the statutory rates to which the entities in the Group are subject compared to the Belgian statutory rate.

The 'Income not subject to taxes'is the exempt income and costs and mainly pertains to the untaxed capital loss resulting from the sale of a French compounding pharmacy.

The Expenses not deductible for tax purposes' are a 11 costs that are n ot tax deductible and relate mainly to non-deductible inte rest expenses, non-deductible intercompany expenses and other non-deductible expenses.

The Tax on profit previous years'is a reflection of all adjustments to earlier estimates for taxes.

The 'Effect of impairment' concerns the impact of the impairments. In 2016 this concerned the impairment on Fagron United States Essentials & Trademarks and in 2015 this mainly concerned an impairment on Bellevue Pharmacy and Fagron United States Essentials &i Trademarks. The impairment is not tax deductible.

The item 'Other'concerns all other movements that impact the effective tax rate. This pertains to, among other things, the use of tax losses that were not recognized earlier as a deferred tax claim or tax losses in the current yeatr which have not been recognized bесаuse of insufficient expected future tax profits.

13 Discontinued operations

Fagron sod the ICT division Corilus to AAC Capital on March 13, 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 o n the sold assets and liabilities and on the calculation of the result on the sale are explained in note 30.

Fa ron announced in April 2016 it would be closing Bellevue Pharmасу. The changed reimbursement system in the United States had a major impact on the turnover and profitability of Bellevue Pharmacy. After the impairment on Bellevue Pharmacy at the end of 2015 and the losses in the first quarter of 2016, the Group decided to dose Bellevue Pharmacy. Bellevue was included in the discontinued operations for 2015 and 2016. Because Bellevue Pharmacy is being shut down, it has not been included as an asset or liability held for sale.

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

Net result from discontinued operations

(x 1,000 euros)	2016	2015
Operating Income	4,340	¿5,483
Turnover	4,192	45,436
Other operating income	148	47
Expenses	6,762	227,297
Profit before income tax	(2,422)	(181,814)
Attributable income tax expenses	3,317	1,886
Profit / (loss) from fair value revaluation, settlement costs and selling costs	(2,940)	2,864
Profit / (loss) for the year from discontinued operations (attributable to the company's shareholders)	(2,045)	(177,064)

Net cash flows from discontinued operations

(x 1,000 euros)	2016	2015
Total cash flow fro m operating activities	(9,279)	8,474
Total cash flow from investment activities	(6,147)	(6,743)
Total cash flow from financing activities	0	(677)
Total net cash flows from discontinued operations	(15,426)	1,054

14 Earnings per share

(in euro)	2016	2015
Basic earnings (loss) per share	(0.38)	(6.46)
- from continuing operations	(0.34)	(0.81)
- from discontinued operations	(0,04)	(5.66)
Diluted earnings (loss) per share	(0.38)	(644)
- from continuing operations	(0.34)	(0.80)
- from discontinued operations	(0.04)	(5.63)

The earnings used in the calculations are as follows:

(x 1,000 euros)	2016	2015
Profit (loss) attributable to equity holders of the company	(20,562)	(202,328)
- from continuing operations	(18,518)	(25,263)
- from discontinued operations	(2,045)	(177,064)

The dilutedearnings are equaltothe'basic'earnings.

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

(number of shares χ 1,000)	2016	2015
Weighted average number of ordinary shares	53,957	31,304
Effect of warrants and stock options		122
Weighted average number of ordinary shares (diluted)	53,957	31,425

The increase in the number of ordinary shares was the result of the capital increases in May 2016 and July 2016.

No ordinary share transactions were executed after the balanсе 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 1,657,277. These are warrants with an exercise price higher than the average stock price of Fagron in 2016.

15 Intangible fixed assets

(χ 1,0 00 euros)	Goodwill	Development	Concessions & patents	Brands and customer relations	Software	Other	Total
Net book value as at January 1,2015	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
Transfersand disposals		(307)		341	266	(295)	6
Amortization		(984)	(165)	(8,549)	(2,460)		(12,158)
Impairment	(200,239)	(160)		(24,420)	(44)		(224,863)
Exchange differences	5,387	53	(75)	3,732	(253)		8,844
Net book value as at December 31,2015	373,608	2,302	1,392	25,163	8,136		410,601
Gross carrying amount	573,847	6,366	2,064	89,079	19,234	24	690,613
Accumulated amortization	(200,239)	(4,065)	(671)	(63,915)	(11,098)	(24)	(280,012)
Net book value	373,608	2,302	1,392	25,163	8,136		410,601
Net book value as at January 1,2016	373,608	2,302	1,392	25,163	8,136		410,601
Investments		2,215	97	89	635		3,035
Acquisitions
Transfersand disposals	371	215	13	(1,515)	644		(271)
Amortization		(960)	(L64)	(6,677)	(4,245)		(12,046)
Impairment	(48,364)						(48,364)
Exchange differences	17,169	25	29	387	439		18,050
Net book value as at December 31,2016	342,785	3,797	1,368	17,447	5,610		371,006
Cross carrying amount	591,828	5,678	2,117	89,324	17,159	22	706,128
Accumulated amortization	(294,043)	(1,891)	(749)	(71,877)	(11,549)	(22)	(335,122)
Net book value	342,785	3,797	1,368	17,447	5,610		371,006

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. The develοpment costs were fully capitalized in 2016. These are mainly related to employee costs.

Impairament

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

In 2015 the Group was confronted with a change in the reimbursement system for non-sterile com pounds in the United States. The impact of this change affected the profitability of the cash-generating units Fagron United States Essentials & Trademarks and Bellevue Pharmacy,

Especially the change in reimbursement system resulted in a downward revision of projected cashflows in such way that the recoverable amount of some cash-gene rating units is lower than its ca rrying amount. The recoverable amount of the cash-generating unit has been determined based on a value-in-use calculation. The impairment test resulted in an impairment of the goodwill by 200.2 million euros and of other intangible fixed assets by 24.6 million euros in 2015. The impairment is included in the section 'impairment loss' and for Bellevue Pharmacy in the section 'net result from discontinued operations' in the consolidated income statement.

The negative impact of the changed reimbursement system on the turnover and profitability of Fagron United States Essentials & Trademarks emerged to be greater and more structural than initially estimated. This resulted in 2015 in an impairment of the goodwill (48A million euros),

The impairment loss in 2016 and discount rate used forth is are as follows:

(x million euros)	Recoverab|e value	Impairment loss	Discount rate	Pre-tax discount rate*
Fagron United States Essentials and Trade marks	39.2	48.4	10.4 %	12.4 %

* De pre-tax discount rate in 2015 was 15.7 %.

The following changes in assumptions have an impact on the impairment loss as shown in the table below:

(x million euros)	Increase/decrease in maintenance capex as %ofsalesby2 %	Increase/ decrease In discount rate by 2 %	Increase/ decrease in longterm growth by 2 %	Increase/ decrease in gross margin by 2 %
	1.3	6.5	(7.4)	(4.0)
Fagron United States Essentlals and Trade marks	(1.3)	(10.6)	+.5	4.0

Goodwil

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 2016	December 2015
Fagron Europe Essentials and Trademarks	111.6	105.3
Fagron Europa Specialty Pharma	63.8	71.4
Fagron United States Essentials and Trademarks	30.9	79.1
JCB Laboratories	18.3	17.7
Anazao Health	32.7	31.3
Fagron Brazil Essentials and Trademarks	76.7	61.0
Fagron Rest of the World	8.8	7.8
H L Technology	0.0	0.0
Total	342.8	373.6

The decline in goodwill is due to the impairment in 2016 and to exchange differences,

Goodwill Impairment tests on continuing operations

The methodology for testing impairment is in accordance with IAS 36. Goodwill is tested at least annuallу 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 model is based on detailed financial budgets approved by Management and the Board of Directors.
•	The year-one budget figures are extra polated for the years two to five, taking into account an internal growth rate or using a business plan. The figures take into account economic assumptions and historical experience of market share, revenue and expenses, capital expend tures and working capital.
•	For the following years, an estimate of the perpetual growth is u sed. For the main cash-generating units, the following long-term growth rates are used: 2 % for Fagron Europe Specialty Pharma, Fagron Europe Essentials and Trademarks, 2 % for Fagron United States Essentials and Trademarks, JCB Laboratories and AnazaoHealth, and 7 % for Fagron Brazil Essentials and Trademarks. The same growth rates were used in 2015.
•	Projections made for Вrazil and the United States are done in their f unctional currenсу 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: 8.8 % (pre-tax: 11.3 %) for Fagron Europe Specialty Pharma, 8.8 % (pre-tax: 12.6 %)for Fagron Europe Essentials and Trademarks, 10.4 % (pre-tax: 12.4 %) for Fagron United States Essentials and Trademarks, 10.4- % (pre-tax: 15.6 %) for JC3 Laboratories, 10.4 % (pre-tax: 15.5 %) for AnazaoHealth, and 18.6 % (pre-tax: 27.4 %) for Fagron Brazil Essentials and Trademarks.
•	The corpo rate assets and goodwill have been allocated on the basis of turnover to the cash-generating units Fagron Europe Specialty Pharma and Fagron Europe Essent als and Trademarks. It would have no mater al impact on the results if the assets and goodwi11 were allocated to all cash-generating и nits.

Of the main cash-generating units, AnazaoHealth and Fagron Brazil Es sentíais and Trademarks have the smallest relative difference between the net book value of the asset and its enterprise value. The difference is estimated at 7.3 million euros and 24.4 m llior euros, respectively. The following changes in assumptions соuld individually decrease the enterprise value to its net book value.

	Increase in maintenance capex as %of sales (basis points)	Increase in discount rate (basis points)	Decrease in longterm growth (basis points)	Decrease in gross margin (basis points)
Anazao Health	714	178	253	237
Fagron Brazil Essentials and Trademarks	805	343	562	466

The outcome of the impairment test for Fagron Europe specialty Pharma, Fagron Europe Essentials and Trademarks, JCB Laboratories and Fagron Brazil Essentials and Trademarks shows that a reasonable с hange in the assumptions used 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 un its, the enterprise value exceeds the net book value, except for Fagron United States Essentials and Trademarks, for which the net book value equa Is the enterprise value.

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 January 1,2015	37,269	10,257	6,231	1,330	3,760	1,123	39,969
Investments	2,622	7,745	2,142		1,412	10,158	24,079
Acquisitions	256	724	228	145	732	30	2,114
Transfers and 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 December 31,2015	35,119	15,694	6,119	719	3,504	9,978	71,133
Gross carrying amount	46,786	38,386	16,439	6,705	11,827	9,978	130,439
Accumulated depreciation	(11,668)	(22,691)	(10,320)	(5,986)	(8,323)		(58,306)
Net book value	35,119	15,694	6,119	719	3,504	9,978	71,13 S
Net book value as at January 1,2016	35,119	15,694	6,119	719	3,504	9,978	71,133
Investments	1,000	1,359	1,183		310	6,719	10,571
Acquisitions
Transfers and disposals	5,308	2,843	(242)	7	2,857	(6,516)	4,257
Depreciation	(4,423)	(3,553)	(2,599)	(580)	(3,756)	(460)	(15,371)
Impairment
Classified as assets held for sale Other movements		(326)	(49)				075)
Exchange differences	1,482	571	301	7	(1)	305	2,666
Net book value as at December 31,2016	38,485	16,587	4,713	153	2,915	10,026	72,879
Gross carrying amount	54,420	40,746	15,903	6,572	8,018	10,026	135,686
Accumulated depreciation	(15,535)	(24,159)	(11,190)	(6,420)	(5,103)		(62,807)
Net book value	38,485	16,587	4,713	153	2,915	10,026	72,879

The Group's liability regarding financial leasing is guaranteed as the lessor holds the legal property title 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 З3: additional notes.

17 Financial assets

(x 1,000 euros)	Financial assets avaliable for sale	Loans and receivables	Total
Net book value as at January 1,2015	1,595	3,469	5,064
Investments		1,479	1,479
Transfersand disposals	(55)	(197)	252
other movements		(432)	(432)
Net book value as at December 31,2015	1,540	4,319	5,859
Investments	3	822	825
Transfersand disposals	(272)	(4,304)	(4,376)
Other movements		16	16
Net book value as at December, 2016	1,271	853	2,123

The assets available for sale mainly consist of a minority interest participation of 1.2 million euros. This asset is stated at cost due to the unavailability of reliable information on Its fair value. The loans and receivables decreased because a loan was converted Into a fixed asset.

An analysis of the assets above showed that none of these assets needs to be impaired in 2016 and 2015, 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)	2016	2015
Tax liabilities for the currеnt year	7,333	(964)
Other current tax and VAT payable	12,767	10,934
Remuneration and social security payable	14,876	15,312
Current taxes, remuneration and social security	34,977	25,282

b) Deferred tax assets

(x 1,000 euros)	Differences in depreciation rates	Employee benefits	Provisions	Tax losses	Other	Total
Balance at January 1,2015	23,231	950	1,724	4,127	(7,670)	22,362
Result	64,441	271	(1,569)	12,700	3,301	79Д44
change in scope of consolidation	(719)					(719)
Impairment	(79,038)			(7,808)		(86,846)
Balance at December 31,2015	7,915	1,221	155	9,019	(4,369)	13,942
Result	12,426	(269)	1,193	59,338	2,102	75,291
Change in scope of consolidation
Impairment	(18,620)			(60,914)		(79,534)
Balance at December 31,2016	1,721	952	1,348	7,943	(2,266)	9,698

The category 'Other' mainly concerns netting with deferred tax liabilit es.

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 арproved by the management for the first yea r and an extrapolation of these figures for the second through fifthyear. Extending the result projections for one year will result in the deferred taxes increasing by 2.0 million euros.

In 2016 goodwill was impaired at Fagron United States Essentials and Trademarks for an amount of 48.4 million euros. For tax purposes, the goodwill can be amortized as a result of which the relate d 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 18.6 million euros.

In 2016, Fagron Holding USA LLC achieved a tax loss in connection with the write-down of its participating interest in Bellevue Pharmacy. This loss amounted to 165.9 million euros.

Based on the impairment test on tax losses, an amount of 60.9 million euros was written back. This is related to deferred tax claims for tax losses of the current year not being assessed, or the (further) write-down of deferred tax claims for losses of previous years. This concerns, among others, Fagron Holding USA LLC, Fagron NV, Fagron Compounding Services NV, Arseus Dental Solution SAS, Fagron Compounding Services France SAS and HL Technology SA. At yea r-end 2016, the tax losses came to 244.0 million euros, of which 27.2 million euros have been assessed, resulting in a deferred tax claim of 7.9 million euros.

C) Deferred tax liabilities

(x 1,000 euros)	Differences in depreciation rates	Other	Total
Balance at January 1,2015	13,666	(7,504)	6,162
Result	(5,518)	875	(443)
Change in scope of consolidation
Discontinued operations
Balance at December 31,2015	8,148	(6,629)	1,519
Result	(5,469)	4,186	(1,285)
Change in scope of consolidation
Discontinued operations
Balance at December 31,2016	2,679	(2.443)	236

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

On the balance sheet date the Group has not included any deferred tax I lability for taxes payable as the result of any dividend payment. The Group has not included any deterred tax liability because no adopted intercompany dividend policy applies and an autonomous decision can therefore be made as to when a dividend will be paid and in what amount. The deferred tax liability not assessed amounts to 2.5 million euros. There were no indications on the balance sheet date that these deferred tax liabilities would materialize.

19 Inventories

(x 1,000 euros)	2016	2015
Raw materials	19,609	23,708
Work in progress	1,690	3,757
Finished goods	9Д41	9,394
Trade goods	29,314	30,392
Inventories	60,054	67,251

The decrease in inventories is mainly due to a phasing out of inventory positions because of the changed reimbursement system for non-sterile compounds in the United States. The inventories are not encumbered with collateral.

20 Trade receivables, other receivables, cash and cash equivalents

a) Trade receivables and other receivables

(xl,ООО euros)	2016	2015
Trade receivables	33,375	36,223
Provision for impairment of receivables	(2,496)	(2,133)
Total trade receivables	32,879	34,090
Other receivables	23,829	11,031

There is no concentration of credit risк with respect to trade receivables as the majority of Fagran's customers are internationally dispersed. If there are indications that trade receivables will be unco llectible, a provision has been made.

The increase In the other receivables Is mainly attributable to Income taxes that can be claimed back In the United States (1Б.2 million euros). Other receivables also include value-added tax, prepayments and various smaller receivables,

Fagron applies a strict credit policy with regard to 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 overdue at year-end	Less than 30 days	Of which due at year-end
				Between 31 and 90 days	Between 91 and 150 days	More than 150 days
---	---	---	---	---	---	---
Trade receivables at December 31,2016	32,879	25,588	4,377	1,B37	486	591
Trade receivables at December 31,2015	34,090	23,236	6,320	3,207	346	981

(x 1,000 euro:)	Provision for impairment of receivables
Balance at January 1,2015	(2,787)
Additions:
- Through business combinations	(378)
- Other	(833)
Amounts used	1,814
Other	51
Balance at December 31,2015	(2,133)
Additions:
- Through business combinations	0
- Other	(982)
Amounts used	634
Other	(65)
Balance at December 31,2016	(2.496)

b) Cash and cash equivalents

(x 1,000 euros)	2016	2015
Investments with a maturity of less than three months	1,668	1,544
Cash and cash equivalents	73,294	73,930
Restricted cash	220,622	0
Cash and cash equivalents	295,585	75.474

The increase in the cash and cash equivalents was mainly a result of" t he capital increases in May 2016 and July 2016. These are сlassified as cash that may not freely be disposed of and must excl usively be used for the repayment of the 4.15 % Series A Notes (45.0 million US dollars), the 3.55 % Series В notes (22.5 million euros) and the Eurobonds (225.0 million euros) in 2017.

The majority of the cash comprises 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 close range of their maturities. Therefore, the carrying amount approximates their fair value.

21 Equity

Authorized capital

By resolution adopted by the Extraordinary General Meeting of September 7,2007, 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, Ordersand Decrees.

The Extraordinary General Meeting decided on May 14, 2012 to renew the Board of Director's authorization to increase the authorized share capital, such with in the limits of the existing authоrization as set оut in Article 5bis of the Articles of Association, in one or тоге 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 Bullet in of Acts, Orders and De crees. This proxy to increase the capital may be exercised only subject to the approval of atleast three fourths (3/4) of the director s present or lawfully represented.

On June 29,2015, 224,133 new shares were issued in the context of the a uthorized capital. The number of voting securities of Fagron amounted to 31,667,794. The total number of voting rights (denominator) amounted to 31,667,794. The authorized capital amounted to 322,217,493.06 euros in order to increase the capital by 2,297,363.25 euros in the context of the authorized capital by contribution in kind upon the issue of new shares bringing it to 324.514,856.31 euros.

On August 4, 2015,444,033 new shares were issued in the context of the authorized capital. The number of voting securities of -agron amounted to 32,111,827. The total number of voting rights (denominator) amounted to 32,111,827. The authorized capital amounted to 324,514,856.31 euros in order to increase the capital by 4,551,338.25 euros in the context of the authorized capital by contribution in kind upon the issue of new shares bringing it to 329,066,194.56 euros.

Since the granting of the authorized capital authorization to the Board of Directors, the Companys capital was therefore increase bу 6,848,701.50 euros (on June 29,2015 and August 4,2015). No use was made during the 2016financialyearcfthe authorized capital authorization.

If the capital is increased within the limits of the authorized capital then the Board of Directors will be competent to request payment of a share premium. If the Board of Directors adopts this decision, then this share premium will be deposited into a blocked account, thee balance of which may only be reduced or transferred on th e basis of a resolution adopted by a General Meeting of Share holders in accordance with the clauses governing an amendment of the Articles of Association.

This power of the Вoard of Directors will apply to capital increases th at 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 2016, no treasury shares were bought back (2015:54,000). The decrease in treasury shares by 224,133 was due to the transfer of shares related to the takeover of AnazaoHealth. As at December 31, 2016. Fagron NV owned a total of 103,627 treasury shares (2015:327.760). In accordance with IFRS, these shares are deducted from equity and do not affect the income statement. No new shares were issued in the context of the warrant plans in 2016 (2015:12,301). The nominal number of shares issued at December 31,2016 is 71,843,904(2015; 32,111,827). The total number of shares outstanding at December 31,2016 was 71,740,277 (2015; 31,784,0 67).

Number oF ordinary shares and the equity value thereof	2016		2015
	Numberof shares x 1,000	Χ 1,000 euros	Number of shares x 1,000	X 1,000 euros
---	---	---	---	---
Issued shares as at January 1	32,112	345,760	31,431	319,650
Issue of shares under Warrant Plan			12	106
Issue of shares related to acquisition payments in shares			668	25,995
Issue of shares in relation to capital increases	39,732	216,092
Issued shares as at December 31	71,844	561,852	32,112	345,750
Treasury shares as at December 31	104	18,823	328	18,823
Shares outstanding as at December 31	71,740	543,029	31,784	326,937

All ordinary shares are fully paid. The ordinary shares have no nominal value denotation but have an accounting par value of l/71,843,904th of the capital as at December 31,2016 (2015:1/32,111,827th). Each ordinary share carries one vote and a right to dividends.

Thecapital increases in 2016 had a net effect of 216.1 million euroson the equity.The costs were 3.3 million euros.

Share-based payments

On September 6,2007, 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 eight years 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.

Pursuantto a decision taken by the Board of Directors dated May 11, 2009, held in the presence of the civil-law notary Mr. Dirk van Haesebrouck, the period during which the warrants granted to beneficiar es prior to August 31,2008 in the context of Warrant Plan 1 are exercisable was extended by five years to December 17,2020, in acco rdance 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 exe rcised as реr December 31, 2015.

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

On June 13, 2016, the company's Board of Directors approved the Warrant Plan 2016 for employees, directors and consultants of the company and/or its subsidiaries. The warrants were issued in response tothe decision taken by the Board of Directors dated 1 September 2016 in presence of notary Liesbet Degroote. In total 1,000,000 warrants were issued. In 2016, 983,091 warrants were granted at an exercise price of 7.38 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 have been determined at the warrants' real value on grant date and are spread over the vesting period of the warrants. The costs are recognized at the item 'Other employee benefits expenses'for the amount of 1.4 million euros for the 2016 financial year and 2.0 million euros for the 2015 financial year. A release of 1.3 million euros occurred in 2016 for forfeited warrants, however. The warrants are settled via equity instruments,

Mo shares were issued in 2016 (June 5,2015:12,301) as a result of the exercise of warrants under the Warrant Plan 2014. The number of Fagron shares with voting rights is currently 71,543,9 04 (2015:32,111,827). The total number of voting rights (denominator) is currently 71,843,904(2015: 32,111,827). The authorized capital amounts to 494,192,221.68 euros (2015: 329,0 66,195 euros).

The movements in the number of outstanding warrants under Warrant Plan 1, Warrant Plan 2, Warrant Plan 2014 and Warrant Plan 2016 and their related weighted average exercise prices are as follows;

	Average exercise price in euros	Number of warrants
Outstanding as at January 1,2015	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 December 31,2015	39.04	622,27
Granted	7.38	983,091
Forfeited	10.25	(1,750)
Forfeited	7.77	(2,752)
Forfeited	8.11	(125)
Forfeited	39.37	(80,000)
Forfeited	38.06	(50,000)
Forfeited	7.38	(15,000)
Outstanding as at December 31,2016	18.10	1,456,091

The weighted average exercise price per share at year-end amounted to 18.10 euros in 2016 (2015:39.04 euros).

As at December 31, 2016, the total number of warrants not yet exercised which could prompt the issue of the same number of shares of the Company amounted to 1,456,091. Their average exercise price amounts to 18.10 euros. Outstanding warrants at year-end have the following expirv dates and exercise orices:

Expiry date	Average exercise price in euros	Number of warrants
2017-March	39.37	239,000
2018-March	39.37	127,000
2019-March	39.37	122,000
2019 — November	7.38	484,046
2020-November	7.38	242,023
2021-July	7.38	242,023
	18.10	1,456,091

stock option plan

On December 7, 2009, the Board of Directors аpproved the Fagron NV Stock option plan (Stock option plan) for employees, directors and consultants of the company and/or subsidiaries, which approval was s ubsequently ratified by the Extraordinary General Meeting of January 27,2010.

The options granted under the Stock option plan were granted free of ch arge 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 ter m, on January 16,2016 therefore, are void by operat on of law,

In accordance with the provisions of selection 43, paragraph 4,1 * of th e Act of March 26, 1999 concerning the Belgian Action Plan for Employment 1998 (the stock options Act), the exercise price shall be determined on the basis of the share's average dosing price during the thirty days preceding the date of the offer of the options, a nd 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 timefor 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 оptions 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 October 27,2011, the company's Board of Directors approved the Stock Оption 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 May 14,2012. 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 v a equity instruments. In 2014,4,650 stock options were granted at an exercise price of 32.82 euros. No new stock options were granted in 2016.

During the financial years 2015 and 2016, the following number of optio ns were exercised and forfeited, including their corresponding average exercise price:

	Average exercise price in euros	Numberof stock options
0utstanding as at January 1,2015	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 December 31, 2015	14.17	199,650
Forfeited	13.73	(7,500)

outstanding stock opt ons at year-end have the following theoretical expiry dates and exercise prices:

Theoretical expiry date	Average exercise price In euros	Number of stock options
2017-April	13.73	187,500
2018-April	32.82	2,325
2019-April	32.82	1,163
2020-April	32.82	1,162
	14.19	192,150
Outstanding as at December 31,2016	14.19	192,150

Fair value

The fair value of the warrants and stock options was determined using the ' Вlаck & Scholes' valuation model at grant date. The main data used in the model were the share price at grant date,1he 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 granted in 2016 is 2.846 euros. The main data used for the warrants granted in 2015 were the above-mentioned exercise p rice, the standard deviation of expected share price returns of 28.2 % with an expected dividend yield of 1.7 %, an average expected option life of 3.8 years, and the annual risk-free interest rate of 0.5 %. The man data used for the warrants granted in 2016 were the above-mentioned exercise price, the standard deviation of expected share price returns of 58.3 % with an expected dividend yield of 1.7 %, an average expected warrant life of 3.3 years, and the annual risk-free interest rate of-0.2 %.

Dividend

No dividend was made payable in 2016 (2015:31.2 million euros). At the Annual General Meeting of May 8,2017, a proposal will be made not to pay any dividend for 2016.

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

Other reserves

(x 1,000 euros)	Consolidated reserves	Cumulative conversion differences	Transactions with noncontrolling interest	Remeasurements of post-employment benefit obligations	Sharebased payments	Total
Balance at January 1,2015	(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 December 31,2015	(195,967)	(54,321)	(377)	(1,547)	12,302	(239,909)
Other comprehensive result		22,077		(449)		21,650
Share-based payments					85	85
Change in non-controlling interest		22
Balance at December 31, 2016	(195,967)	(32,222)	(377)	(1,996)	12,387	(218,174)

22 Provisions

(χ 1,000 eu ros)	Taxes	Disputes	Other	Total
Balance at January 1,2015	47	63	8,780	8,891
Additions;
- Through business combination			9,174	9,174
- Other	294	123	900	1,317
Amounts used	(48)	(45)	(2,969)	(3,062)
Currency translation differences	(4L)	(299)	7	(333)
Transfers		1,393	(1,393)
Balance at December 31,2015	252	1,236	14,499	15,987
Additions;
- Through business combination
- Other	881	14	2,214	ЗД09
Amounts used	(282)	(108)	(6,649)	(7,040)
Currency translation differences	140	284	296	720
Transfers
Balance at December 31,2016	991	1,426	10,359	12,776

The US government is сonducting an investigation into the pricing of pharmaceutical products in the period primarily prior to the acquisition of Bellevue Pharmacy and Freedom Pharmaceuticals. The investigation relates to the sector as a whole. In order to limit the uncertainty and further attorneys'fees and (internal) investigation costs, Fagron is considering reaching a settlement with the government. The opening balance sheet of Bellevue Pharmасу included a provision of 10 million US dollars for costs arising from this investigation. The provision is an estimate of attorneys' fees, (intern al) investigation costs and the costs of a possible settlement with the government. At уear-end 2016, the provision amounts to 7.9 million euros. It's expected that this provision will be further used between 2017 and 2018. The same expectation applies for the other long-term provisions.

The additions to the provision for taxes relate to a tax assessment in В razil. The additions to the otherprovisions mainly relate to

provisions for loss-making contracts in the United States. The use of t he other provisions mainly involves the utilization of a provision

for Schein. This was a provision for a claim from Henry Schein concern ing a dispute relating to the sale of several businesses in 2013.

23 Pension obligations

Pension obligations and costs

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

(x 1,000 euros)	2016	2015
Defined benefit obligations	4,905	4,358
Other defined benefit obligations	775	788
Pension obligations	5,680	5Д46

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 IAS19 using the Projected Unit Credit method. Underthis 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 a reattributed one 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 before 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 BVare determined as follows;

(x 1,000 euros)	2016	2015
Present value of defined benefit obligations	21,644	18,988
Fair value of plan assets	(16,739)	(14,630)
Present value of net defined benefit obligations	4,905	4,358
Net liability arising from defined benefit obligation	4,905	4,358

Movements in the present value of the defined benefit obiligations andthe fair value ofthe plan assets were as follows;

(x 1,000 euros)	Present value of defined benefit obligations	Fair value of plan assets	Total
Balance at January 1,2015	20,367	(15,062)	5,305
Service costs
Interest expense (income)	446	(338)	108
Re measurements:
- Return on plan assets (excluding interest income)		605	605
- (Gains)/|osses 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 December 31,2015	18,988	(14,630)	4,358
Service costs
Interest expense (income)	490	(392)	98
Re measurements:
- Return on plan assets (excluding interest income)		(2,000)	(2,000)
- (Gains)/losses arising from changes in demographic assumptions	(54)		(54)
- (Gains)/losses arising from changes in financial assumptions	2,503		2,503
- (Gains)/losses arising from experience adjustments
Employer contributions
Benefit payments from plan	(283)	283
Balance at December 31, 2016	21,644	(16,739)	4,905

The assets comprise qualifying insurance policies and are not part of the in-house financial instruments of Fagron. The pensior insurer invested the asset s 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:

	December 31,2016	December 31,2015
Weighted average discount rate	2,00 %	2.60 %
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 'PrügnosetarfelAC2016'.

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)	December 31,2016	December 31,2015
Net interest costs	98	108
Defined benefit plan costs recognized in Income statement	98	108
Remeasurement on the present value of the non-financed lia bilities :
- Return on plan assets (excluding interest income)	(2,000)	605
- (Gains)/losses arising from changes in demographic assumptions	(54)
- (Gains)/losses a rising from changes in financial assumpions	2,503	(1,660)
Defined benefit costs recognized in other comprehensive income	449	(1,055)
Total defined benefit costs	547	(947)

There were no new entrants to the defined benefit plan; further accrual only takes place in a defined contribution plan. New employees are offered a defined contribution plan.

The expected defined benefit costs for 2017 are 0.1 million euros and only concerns interest costs.

Sensitivity analysis

The sensitivity analysis shows the sensitivity of the defined benefit ob ligation as at December 31,2016 and the 'Pension costs attributed fortheyear of service' compared to the principal actuarial assumptions.

The following table sets оut the defined benefit obligation as at Decem ber 31,2016 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	2.00 %	2.50 %	1.50 %
Defined benefit obligation	21,644	19,527	24,115
Pension increase	+ 0.00 %	+ 0.50 %	(0.50 %)
Defined benefit obligation	21,644	22,525	20,745
Life expectancy	+/- 0year	+ 1 year	- 1 year
Defined benefit obligation	21,644	22,157	21,124

Pension plans In Belgium

Fagron has nine 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 ' Vandenb roueke 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 3.759ίοn employee contributions and 3.25 % on employer contributions. This law was amended in 2015asfollows;

•	The employer must continue to guarantee a minimum return of 3.75 % on employee contributions and 3.25 % on employer contributions made until December 31,2015;
•	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 perio d 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 topayfurther 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 IA519,

In the past, Fagron did not apply the defined benefìt accounting for th ese 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 guaran teed return than in the past As a result, these plans need to D e considered as defined benefit plans.

Management made an estimate of the potential additional liabilities as at 31 December 2016. Based on this estimation, it has been established that there are no substantive obligations. The 2016 employer contribution for these Belgian pension plans amounts to 0.1 million euros (2015:0.1 million euros). The employee contribution for 2016 is nil (2015: nil), the employee contribution was stopped in 2014. The total amount of the plan assets as per December 31,2016 amounts to 0.9 million euros (2015:0.8 million euros).

24 Financial debts and financial instruments

(x 1,000 euros)	2016	2015
Non-current
Financial lease liabilities	184	260
Bank borrowings	290,149	3,845
Other borrowings	100	307
Total non-current	290,433	4,411
Current
Financial lease liabilities	84	238
Bank borrowings	290,475	594670
Total current	290,559	594,908
Total financial debts	580,992	599,320

(x 1,000 euros)	Financial leases	2016 Bank borrowings	Financial leases	2015 Bank borrowings
Non-currenrt borrowings by term
More than 1 year butless than 5 years	184	288,730	260	2,162
More than 5 years		1,519		1,990
Total non-current borrowings	184	290,249	260	4,152

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 2016 was 4.50 % (2015:3.51 %).

On July 2,2012, Fagron MV 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 inferest of 4.75 %. The bonds are redeemable at 100 % of the nominal value on July 2,2017. The total EBITDA, calculated as result before interest, taxes, depreciation and amortization, of the guarantors is at least 70 percent of the consolidated Group EBITDA.

Эп April 15,2014, Fagron NV issued a series private loans comprising of 45.0 million US dollars 4.15 % Series A Senior Notes due April 15, 2017,22.5 million euros 3.55 % Series B Senior Notes due Арril 15,2017,15.0 million euros 4.04 % Series C Senior Notes due April 15,2019, 5.0 million euros Floating Rate Series D Senior Notes due April 15,2019,20.0 million US dollars 5.07 % Series E Senior Notes due April 15, 2019 and 60.0 million US dollars 5.73 % Series F Senior Notes due April 15,2021.

Эп December 16,2014, Fagron NV amended and extended the existing credit facility with an originating amount of 150 million euros and maturity date in July 2017. The amended multi-currency facility of 220 million euros was given a term until December 2019 with two one-year extension options via a consortium of existing and new inte rnational banks. In 2016, this fасility, along with the long term waiver of May 5,2016, was renewed until April 2021 for an amount of at least 180 million euros byexerc sing the extension options. The consortium consists of ING (coordinator), BNP Paribas, HSBC, КВС Bank. Fifth Third Bank and Commerzbank.

The key covenants of the credit facility and the private loans are the n et financial debt/recurring EBITDA ratio and the recurring EB|TDA/net interest expenses ratio. The financial covenants were adjusted to give Fagron extra latitude with respect to the original levels of the fin ancial covenants. The extra latitude in the financial covenants will decrease by each six-month test period, starting with the first test period ending on December 31,2016 through the test period ending on June 30, 2018. For every test period ending after June 30,2018, the levels of both financial covenants revert to the original levels. The test periods and accompanying levels are shown below.

Test period	Net financial debt/REBUDA	Financial covenants REBITDA/net interest expenses
December 31, 2016	Max. 5.02X	Min. 1.81.x
June 30,2017	Max. 4.60x	Min. 1.98.x
December 31, 2017	Max. 4.09x	Min. 2.32x
June 30,2018	Max. З.60х	Min. 2.80Χ
After June 30,2018	Max. 3.25X	Min. 4.00x

The interest risk relating to 70 million euros of these loans has been hedged with financial derivatives. The currency risk relating to 157 million US dollars has also been hedged using financial derivatives. These instruments have been valued 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 th e 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 2016 was -8 .5 million euros (2015: -2.0 million euros). The full movement in fair value, a loss of 6.5 million euros (2015: profit of 0.9 million euros), wa s charged to the result in 2016. Fagron has no other financial derivatives.

All financial instruments are measured at a morti zed cost except for derivative financial instruments and contingent considerations for acquisitions, which are valued at fair value,

The fair value of the financial instruments valued at the amortized cost price approximates the carrying a mount, The fair value of the bond loan is approximately 228 million euros.

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

Company name of guarantors
АСА Pharma NV	Fagron Poland Sp, Zuo.o.
Arseus Beigle NV	Freedom Pharmaceuticals Inc.
B&B Pharmaceuticals Inc.	GMPApotheekMierlo-Hout BV
Fagron Belgie MV	Pharma Cosmetic K.M. AdamowiczSp.Z.o.o.
Fagron GmbH & Co KG	SM Empreendimentos Farmacéuticos Ltd a
Fagron Inc.	Spruyt hillen BV
Fagron Nederland BV

b. Financial leases

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

(x 1,000 euros)	2016	2015
Cost-capitalized financial leases	6,572	6,513
Accumulated depreciation	(6,420)	(5,794)
Net amount of assets in leasing	153	719

The Group's liability regarding financial leasing s 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)	2016	2015
Machinery and installations	150	704
Furniture and vehicles	2	15
Net amount of assets in leasing	153	719

Financial lease liabilities-minimum lease payments:

(xl,ООО euros)	2016	2015
Within 1 year	91	260
More than 1 year but less than 5 years	228	325
Total	319	585
Future charges on financial leases	51	88
Present values of financial lease liabilities	268	497

c. operating leases

Operating lease liabilities-minimum lease payments:

(x 1,000 euros)	2016	2015
Within 1 year	4,690	4,026
More than 1 year but less than 5 years	12,226	7,451
More than 5 years	11,930	3,337
Total	28,846	14,814

Most of the lease contracts relate to the US entities.

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. The increase in 2016 was mainly the result of the expansions in the FSPS companies in the United states.

25 Trade payables

(x 1,000 euros)	2016	2015
Trade payables	50,292	58,250
Investment paya bles	2,871	4,793
Total trade payables	53,163	63,043

Trade payables generally have due dates that are close to each other. The reported values approximate their fair values. The decrease with respect to the previous year is mainly due to an improved punchasing process in Brazil and discontinuation of the activities at Bellevue Pharmacy.

26 Other current payables

(x 1,000 euros)	2016	2015
Prepayments	30	124
Other payables	7,615	26,532
Accrued expenses	11,180	15,204
Other current payables	18,825	41,859

The due date for all other current payables is in 2017.

1.9 million euros (2015: 21.7 million euros) of the other payables reláte to amounts to be paid to existing participations (subsequent payments). The decrease with respect to 2015 is mainly due to payments and the release of the SARs obligation. The SARs obligation pertains to an incentive plan in favour of certain senior executive s at Вellevue Pharmасу. In May 2016, an agreement was reасhed between the Group and the former employees of Bellevue Pharmacy, which resulted in a release (114 million euros) of part of the SARs obligation.

The'Accrued expenses' includes an amount of 8.6 million euros (2015:7.4 million euros) related to interest still to be paid.

The remainder of this item concerns various accurals and deferrals. The dеcrease with respect to 2015 pertains mainly to the lower interest rates, the payment of the waiver fees and the payment of the former CEO's severance pay.

The debts generally have due dates that are close to each other. The reported values approximate their fair values. All other current payables are expected to be paid in 2017.

27 Contingencies

Fagron is involved in a number of claims, disputes and legal proceedings within the normal conduct of its business. Management belives that these сlaims, disputes and legal proceedings will not, on a ggregate, 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.

28 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 2016 and 2015 financial years was as follows:

(x 1,000 euros)	Fixed remuneration component4	Variable remuneration component	Other remuneration components5
2015 financial year
Gervan jeveren, CEO until 14 December 2015	569		35
HansStols, 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
2016 financial year
HansStols, CEO	600	720	36
Exec utive Committee, including the CEO	2,171	1,053	152
Non-executive members of the Board of Directors	266

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

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

The variable remuneration component for the 2016 financial year is the bonus effectively paid out in 2017. The Nomination and Remuneration Committee prepares proposals annually for the remuneration policy and/or other benefits for members of the executive Committee and the CEO.

In 2016,893,091 warrants and no stock options were granted to the members of the Executive Committee, in the composition in effect on December 31,2016. Mr. Stolsand the other members of the Executive Committee exercised no stock options or warrants in 2016. The members of the Executive Committee, in the composition in effect on December 31,2016, together hold 1,205,591 stock options and warrants.

29 Business combinations

Fagron did not complete any acquisitions in the 2016 financial year.

Fair value of the acquired assets and liabilities Anazao Health 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 compounds. The acquisition involved a payment of approximately 36.6 million euros (3.1 million in shares), representing an increase in goodwill of 30.5 million euros. Expectation was that the goodwill will be fully tax deductible. The final fair value of the acquired assets and liabilities was determi ned as detailed below.

(x 1,000 euros)
Intangible fixed assets	11,994
Property, plant and equipment	1,189
Inventories	1,101
Trade receivables	2,775
Other receivables	980
Cash and cash equivalents	250
Total assets	18,290
Borrowings	1,224
Trade payables	976
Other current payables	10,068
Net acquired assets	6,022
Gocdwil	30,539
Total acquisition amount	36,561

Fair value of the acquired a ssets and liabilities of ABC Che mieals SA

In July 2015, АЗС 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 final 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
Sorrowings	5,806
Trade payables	640
Other current payables	1,463
Net acquired assets	(5,299)
Goodwil	11,484
Total acquisition amount	6,185

The final determination of the fair value of the assets and liabilities acquired in the earlier mentioned minor acquisitions in 2015 die not result in any adjustment of goodwill. The total increase in good will by acquisitions amounts to 0.4 million euros.

At year-end, the Group had an amount of approximately 1.3 million euros in contingencies. These fees payable to former share holders were determined on the basis of business plans at the time of acquisition and all have a due date in 2017.

The contingencies relate to Greece, south Africa and Colombia.

The contingency ranges from 0 euros to a maximum of 1.3 million euros. The соnsiderations are measured at the fair value at the moment of acquisition. This is estimated based on the maximum compensation if the conditions are met.

30 Discontinued operations

Consideration received

(x 1,000 euros)	2016	2015
Consideration received in cash and cash equivalents		74,001
Subsequent payments		(4,374)
Total consideration received		69,627

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. There was no material sale of operations in 2016.

Analysis of the assets and liabilities disposed of;

(x 1,000 euros)	2016	2015
Current assets		11,300
Inventories		1,440
Trade receivables		4,783
Other receivables		3,525
Cash and cash equivalents		1,552
Non-current assets		73,636
Goodwill		72,746
Other intangible fixed assets
Property, plant and equipment		831
Deferred tax assets
Other non-current assets		59
Current liabilities		14,453
Trade payables		7,201
Taxes, remuneration and social security		6,173
Other current payables		1,078
Non -current liabilities		1,127
Provisions
Pension obligations		61
Borrowings		109
Deferred tax assets		957
Net assets disposed of		69,357

Gain(loss) on disposal of assets

(x 1,000 euros)	2016	2015
Consideration received		69,627
Net assets disposed of		69,357
Cain (loss) on disposal		270

31 Information on the Statutory Auditor, its remuneration and related services

The Company's Statutory Auditor is Pricewaterhouse Coopers Bedrijfsrevisoren BCVBA, represented by Mr. Peter Van den Eynde,

(x 1,000 euros)	2016	2015
Audit fee for the Group audit
Fagron Group	474	595
Audit fee for Pricewater house Coopers Bed rijfsrevisoren	236	237
Audit fee for parties linked to Pricewaterhou se Coopers Bedrijfsrevi soren	237	359
Additional services rendered by the Statutory Auditor to Fagron
Other audit assignments	14	25
Other non-auditing assignments	342	1
Additional services rendered by parties linked to the statutory Audito r
Tax advisory services	131	130
Other non-auditing assignments	38	374

The item Other non-auditing assignments' in 2015 mainly related to due diligence work, consulting and the preparation of special re ports. In 2016, these mainly related to special reports, in the co ntext of the capital increase, for instance.

32 Significant events after the balance sheet date

No significant events occurred after the balance sheet date.

33 Additional notes

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

4L Technology SA has a current liability in the amount of 1.0 rn Ilion euros (1.0 million Swiss francs), the initial mortgage loan amounts to 1.8 million Swiss francs. Fagron Services BV has a liability in the amount of 0.7 million euros, the initial mortgage loan amounts to 2.0 million euros. ABC Chemicals SA has a liability in the amount of 0.4 million eunos, the initial pledge on the commercial property fund amounts to 1.9 million euros. The Group does not have any material obligations to purchase fixed assets at the moment.

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

	Fagron Brazil Holding BV
	Fagron BV
	Fagron Nederland BV
	Fagron Services BV
	Fagron Steriele Bereidingsapotheek BV
	CMP Apotheek Mierlo-Hout BV
	Hoogeveen Bereidingsapotheek BV
	Panonamix BV
	Pharmaline BV
	Pharma Assist BV
	Spruyt hillen BV
	Twipe BV

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

Fagron GmbH &CoKG

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

34 List of the consolidated companies

Name	Address	Ownership
ABC Chemicals SA	Parc Industrie1 19,1440 Wauthier- Вraine (Belgium)	100.0 %
ABC Dental & Pharmaceutical Consultancy NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
АСА Pharma NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
Fagron TechnologiesLtda	Avenida 9 de Ju1hо 3575,13.20 3-05 6 Jundiai (Brazil)	100.0 %
Anazao Health Inc.	5710 Hoover Boulevard, 33634Tampa, Florida (United States)	100.0 %
Apodan Nordic Pharmа асkaging A/S	Kigkurren 8M 2. Sal. 2300 Copenhagen (Denmark)	100,0 %
APPEG SA	Ruede la Sambre 6, 6032 Cha rieroi (Belgium)	100.0 %
Arseus Belgie NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
Arseus Capital NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
Arseus Dental Solutions SAS	Boulevard Ornano Zac Axe Pi eye 130,93200 St-Den is (France)	100.0 %
B&B Pharmaceuticals Ine	17200 East Ohio Drive, 80017 Aurora, Colorado (united States)	100.0 %
Belgophar NV	Hillestraat 12,8800 Róesela re (Belgium)	100.0 %
Coast Quality Pharmacy LLC	5710 Hoover Boulevard, 33634Tampa, Florida (United States)	100.0 %
DPI Inc.	5967 S. Gar nett Rd., 74146 Tulsa. Oklahoma (United States)	100.0 %
Ducere LLC	5710 Hoover Boulevard, 311634Tampa, Florida (United States)	100.0 %
Dynaceutica|s Ltd	5514th Avenue, Northcliff, Gauteng (South Africa)	100.0 %
Euphaco NV	Hillestraat 12, 8800 Róese lare (Belgium)	100.0 %
Fagron ü.s.	1098/31 M, 779 00 0|omouс(Czech Republic)	73.1 %
Fagron Academy LLC	1111В rickeil Avenue, Suite ISSO, 33131 Miami, Florida (United	100.0 %
	States)
Fagron Belgie NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
Fagron Brazil Holding BV	Lichtenauerlaan 182, 3062 ME Rotterdam (The Netherlands)	100.0 %
Fagron BV	Lichtenauedaan 182, 3062 ME Rotterdam (TheNetherlands)	100.0 %
Name	Address	Ownership
Fagron Colombia SAS	Calle9547A-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 Helene Muller, 94-320 Thíais (France)	100.0 %
Fagron Compounding Supplies Australia Pty Ltd	Atkinson Road 2/16, Taren Point, 2229 Sydney (Australia)	100.0 %
Fagron GmbH 8< co KG	Von-Bronsart-Strafsel2,22885 Barsbüttel (Germany)	100.0 %
Fagron Hellas A.B.E.E.	12 km NR, 42100 Tri kala-La ri ssa (Greece)	100.0 %
Fagron Holding USA LLC	1209 Orange street, 19 8 01 Wi1mington, Dellaware (United States)	100.0 %
Fagron Iberica SAU	Carrer de Josep Tapiólas 150,08226 Terrassa (Spain)	100.0 %
Fagron Inc.	2400 Pilot Knоbroad, 551205t. Paul, Minnesota (United States)	100.0 %
Fagron Italia SrL	Via Lazzari 4-6,40057Quarto 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 Ya n An East Road, 200001 Shanghai, (China)	100.0 %
Fagron Nederland BV	Venkelbaan 101,2908 KE Capelle aan den lissel (The Netherlands)	100.0 %
Fagron NcrdicA/S	Kigkurren 8M 2.Sal, 2300Copenhagen (Denmark)	100.0 %
Fagron NV	Venecoweg 20A, 9810 Nazareth (Belgium)	100.0 %
Fagron Poland Sp. z o.o	Albatrosowi, 30-176 Krakau (Poland)	100.0 %
Fagron Sari	Intendente Neyer 924, BI643 Béccar (Argentina)	100.0 %
Fagron SAS	37 Rue Helene Muller, 94320 Thíais (France)	100.0 %
Fagron Services BV	Molenwerfl 3,1911 DB Uitgeest(The Netherlands)	100.0 %
Fagron Services BVBA	Industrieweg 2,2850 Boom (Belgium)	100.0 %
Fagron South Africa Ltd	5514th Avenue, Morthclff, G auteng (South Africa)	100.0 %
Fagron Steriele Bereidingsa potheek BV	Siemensstraat4,7903 AZ Hoogeveen (The Netherlands)	100.0 %
Fagron UK Ltd	4 В Coquet Street, NEI 2QB Newcastle upon Туne (United Kingdom)	100.0 %
Flores e Ervas Comercio Farmaceutico Ltd a	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 %
GMPApotheekMierlo-Hout BV	Steenovenweg 15,5708 HN Helmond (The Netherlands)	100.0 %
H L Technology SA	Rue Jard niere 153,2300 La Chaux-de-Fonds (Switzerland)	100.0 %
Hoogeveen БегеidingsapoLreek (HBA) BV	Lichtenauerlaan182,3062MERotterdam(TheNetherlands)	100.0 %
JCB Laboratories LLC	3510 N. Ridge Rd. STE.900, 67205 Wichita, Kansas (United States)	100.0 %
Jupiter Health Holding LLC	Millwell Dr've 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Liberty Rx LLC	Millwell Drive 212, Maryland Heights. 63043Missouri (United States)	100.0 %
Link Medical LLC	Millwell Dr've 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Mаг-Kem Ltd	Main Road 20, Knysna, 6570 George (South Africa)	100.0 %
Mercury Innovations LLC	Millwell Dr've 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Midwest Rx LLC	Millwell Dr've 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Northern RxLLC	Millwell Dr've 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Panoramix BV	Miinsterstraat 4, 7575 ED 0|denzaa| (The Netherlands)	100.0 %
Pharma Assist BV	Diesel straat 3,7903 AR Hoogeveen (The Netherlands)	100.0 %
Pharma Cosmetic K.M. Adamowicz S p. z.o.o.	U|. Pasternik26,31-3S4 Krakau (Poland)	100.0 %
Pharmacy Services Inс.	Millwell Drive 212, Maryland Heights, 63043Missouri (United States)	100.0 %
Pharmaline BV	Münsterstraat 4,7575 ED Oldenzaal (The Netherlands)	100.0 %
PPH Ga Harm Sp. z.o.o.	UI. Przemysłowa, 12,30701 Krakow (Poland)	100.0 %
PSI Services Inc.	Millwell Drive 212, Maryland Heights, 63043 Missouri (United States)	100.0 %
Ra usa Kern Pharm асу Ltd	Clarendon Street 61, Parow Valley. 7500 Kaapstad (South Africa)	100.0 %
Slovgal s.r.o	Sturava 19,058 01 Poprad (Slovakia)	100.0 %
SM Empreendimenrtos Farmacéuticos Ltd a	Rus Jjrupari, 803—Jardim Orienta1,0434-8-070Sao Paulo (Brazil)	100.0 %
Southern Rx LLC	Mi 11 well Drive 212, Maryland Heights, 63043 Missouri (United states)	100.0 %
Spruythillen FJV	Ti n berge n I aa n 1,3401 MT IJssel stein (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 Net her lands)	100.0 %

Statutory Auditor's Report

Free Translation

STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS MEETING ON THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016

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 accounts, as well as the required additional statements. The consolidated financia) statements comprise the consolidated statement of financial position as at 31 December actio, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Report on the consolidated accounts - Unqualified opinion

We have audited the consolidated accounts of Fagron NV ΐ'the Company") and its subsidiaries (jointly "the group'} for the year ended 31 December 2016 , prepared in accordance with Internationa) Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. The total of the consolidated statement of financial position amounts to KEUR 868.053 and the consolidated income statement shows a loss for the year attributable to the shareholders of KEUR 20.56a.

Board 0/directors* responsibility/or the preparation of the consotidated accounts

The board of directors is responsible for the preparation and fair presentation of these consoli elated accounts 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 accounts that arc free from material misstatement, whether due to fraud or error.

Statutory auditors responsibility

Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit In accordance with International Standards on Auditing (1SA0 as endorsed in Belgium. Those standards require that we ramply with ethical requirements And plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risks of material misstatement of the consolidated accounts, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the group's preparation and fair presentation of the consolidated accounts in order to design audit procedures that are appropriate in the circumstances, hut not for the purpose of expressing an opinion on the effectiveness of the group's internal control. An audit also includes Dating the fiteness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated accounts.

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

We believe that the until evidence are have obtained is sufficient and appropriate to provide a basis for our opinion.

Unqualifieded Opinion

In our opinion, the consolidated accounts give a true and (air view of the group's net equity and Consolidated financial position as at gi December 2016 and of its consolidated financial performance and ili consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Report on other legal and regulatory requirements

The board of directors ts responsible for the preparation and the content of the directors' report on the consolidated actounts-

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 legal and regulatory requirements. On this basis, we provide the following additional statement which does not impact our opinion on the consolidated financial statements:

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

Antwerp, 6 April 2017

**Pwc Bedrijfsrevisoren BCVBA

Represented by**

The Statutory Auditor

PeterVandenEynde

Reviseur d’Entreprises / Bedrijfsrevtsor

Statutory financial statement

Condensed stand-alone income statement Fagron NV

(x 1,000 euros)	2016	2015
Operating income	14,314	10,098
Turnover
Other operating income	8,407	10,096
Non - recurring operating income	5,907
Operating expenses	13,344	6,708
Trade goods, raw materials and auxiliary materials
Services and other goods	3,135	4,695
Employee benefit expenses	1,412	(10)
Depreciation and amortization	51
Provisions for risks and costs	(58)	(5,701)
Other operating expenses	4,312	6,914
Non - recurring operating expenses	4492	811
Operating profit	970	3,390
Financial result	5,296	(111,773)
Recurring financial result	(1,351)	(8,678)
Non - recurring financia1 result	6,647	(103,095)
Profit for the year before taxes	6,265	(108,384)
Tax on result		(1)
Net result for the year	6,265	(108,385)
Non-current assets	460,398	294,522
Formation expenses
Intangible fixed assets	43
Property, plant and equipment	2
Financial fixed assets	460,354	294,522
Current assets	396,228	250,300
Debtоrs due after one year	123,274	190,921
Inventories and orders in progress
Debtors due within one year	25,746	22,148
Investments	221,629	2,314
Cash and cash equivalents	23,818	32,924
Other receivables	1,761	1,993
Total assets	856.626	544,822
Equity	502,772	277,198
Capital	494,192	329,066
Share premiums		19,202
Legal reserves	313	7,986
Unavailable reserves	1,007	2,314
Available reserves	7,260	27,015
Profit carried forward		(108,385)
Provisions and deferred tax	21	50
Provision for other risks	21	50
Liabilities	353,833	267,574
Сreditors due after one year	284,327	91,000
Сreditors due within оne year	67,082	173,195
Other current payables	2,424	3,379
Total liabilities	856,626	544,822

Appropriation of profits Fagron NV

(x 1,000 euros)	2016	2015
Profit to be appropriated	(102,119)	(108,385)
Profitfortheyearto be appropriated	6,265	(108.385)
Profit carried forward from the previous year	(108,385)
Transfers from capital and reserves	108,385
From the capital and share premiums	73,384
To reserves	3S,00C
Transfers to capital and reserves	6,265
To statutory reserves	313
Toother reserves	5,952
Profit to be carried forward		(108,385)
Profitto be carried forward		(108,385)
Profittobedistributedasdividends
Dividend

Accounting policies

The accounting policies usedforthe stand-alone Stat utory financial statements of Fagran 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's a condensed version of the Statutory financial statements of Fagron NV. The annual report and the Statutory Auditor's report will be tiled and will be available for inspection at the company's registered office.

The Statutory Auditar has expressed its unqualified opinion on the stat utory financial statements of Fagron NV for the 2016 financial year,

Alphabetical terminology list

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

Operating result	Result of operating activities, ΕВIT ("Earnings Before Interests and Taxes")
Cross 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
ϊΒΙΤ	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 wrte-downs on inventories and receivables
-mandai result	The sum cf current and non-current interest-bearing financial obligations plus derivative financial instruments and less cash and cash equivalents
Met operational capex	Net capital expenditure, intangible assets and property, plant and equipment that have been acquired or produced (excluding acquisitions), less assets sold
Net financial debt	Non-current and current financial liabilities, less cash and cash equivalents (excluding financial Instruments)
Non-recurring items	One off charges or gains not related to ordinary operations
Net result	Profit (loss)forthe reporting period, consolidated result
Operational working capital	inventories + Trade receivables - Trade payables
^EBITDA	Recurring Earnings Before Inte rests, Taxes, Depreciations and Amortizations', Profit (loss) from operating activities plus depreciations and amortizations and adjusted for all non-recurring items
Recurrent net profit	Profit (lcss)forthe reporting period, adjusted for non-recurring items

Forward-looking statements caution

This annual report may contain forward-looking statements. Forward-look ng statements are statements that are not historical facts, containing information such as, but not limited to, communicatio ns expressing or implying believes, expectations, intentions, fo recasts, estim ates 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 reportare 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.

In the event of differences between the English translation and the Dutch original of the annual report the latter prevails.