Fagron N.V.

Interim / Quarterly Report • Aug 5, 2014

Ger van Jeveren, CEO of Arseus: "The results of Arseus over the first six months of 2014² are outstanding. Turnover increased 34.7% to € 209.1 million. At constant exchange rates, Fagron generated organic growth of 14.9% in the second quarter of 2014. With its successful R&D and innovation strategy, Fagron's REBITDA margin rose to 28.5%, an increase of 400 basis points compared to the previous year.

An important strategic milestone was reached in the first half of the year with the completion of the divestment of Healthcare Solutions and Healthcare Specialties, which has transformed Arseus into a pure and innovative pharmaceutical R&D company. In line with this strategic decision, the Board of Directors decided to initiate the process of divesting Corilus. From now on, Arseus will focus fully on the expansion of Fagron as a successful and innovative pharmaceutical R&D company. In the first half of the year, the global market leadership in the fast-growing niche market for pharmaceutical compounding was further strengthened with the acquisition of pharmaceutical compounding pharmacies in the US, Europe, South Africa and Australia. Fagron has further acquisitions in the pipeline in Europe, the United States and South America.

The outlook for 2014 has been adjusted due to the divestment of Corilus, and Arseus expects to achieve turnover from continued operations of at least € 435 million3, with a REBITDA⁴ margin from continued operations of 26%."

¹ This press release was sent out by Arseus NV and Arseus BV.

² Based on continuing operations (Fagron and HL Technology). ³ Based on constant exchange rates (EUR/US dollar 1.324 and EUR/BRL 3.112)

Income Statement (x 1,000 euros)	H1 2014	H1 2013	Evolution
Net turnover	209,149	162,566	28.7%
Gross margin	132,945	89,650	48.3%
As % of net turnover	63.6%	55.1%	8.4%
Operating costs	-73,929	-50,765	45.6%
EBITDA before corporate costs and non	59,016	38,885	51.8%
recurrent result
As % of net turnover	28.2%	23.9%	4.3%
Corporate costs	-3,346	-3,072	8.9%
EBITDA before non-recurrent result	55,670	35,813	55.4%
As % of net turnover	26.6%	22.0%	4.6%
Non-recurrent result	-2,516	-1,209	108.1%
EBITDA	53,154	34,604	53.6%
As % of net turnover	25.4%	21.3%	4.1%
Depreciation and amortisation	-7,166	-4,070	76.1%
EBIT	45,988	30,534	50.6%
As % of net turnover	22.0%	18.8%	3.2%
Financial result, excluding revaluation of financial derivatives	-10,023	-8,111	23.6%
Revaluation of financial derivatives	-613	1,284	-147.7%
Profit before taxes	35,352	23,707	49.1%
Taxes	-10,864	-6,804	59.7%
Net profit	24,488	16,903	44,9%
Result from discontinued operations	-17,879	1,893	-1,044.5%
Recurrent net profit5 from continued operations	26,575	16,825	57.9%
Net profit per share from continued operations (in €)	0.80	0.55	45.5%
Recurrent net profit per share from continued operations (in €)	0.87	0.55	58.4%
Average number of shares	30,604,868	30,696,597

Balance sheet (x 1.000 euros)	30-06-'14	31-12-'13
Intangible non-current assets	544,419	400,587
Property, plant and equipment	57,344	47,454
Deferred tax assets	28,135	28,292
Other non-current assets	15,374	15,767
Operational working capital	48,216	32,977
Other working capital	(152,674)	(100,673)
Assets/liabilities held for sale6	60,436	40,342
Equity	153,916	155,168
Provisions	13,484	13,483
Financial instruments	3,077	2,463
Deferred tax liabilities	19,692	4,451
Net financial debt7	411,081	289,181

⁴ EBITDA after corporate costs and non-recurrent result.

⁵ Recurrent net profit is defined as the profit before non-recurrent items and the revaluation of financial derivatives, adjusted for taxation

based on the effective tax rate for the group.

⁶ Excluding net debt of discontinued operations.

⁷ Including net debt of discontinued operations.

Notes to the consolidated interim financial statement⁸

Income statement

Following the decision by the Board of Directors of Arseus to divest Corilus, the profit and loss from this division are reported as discontinued operations and the assets, respectively the liabilities, of this division are reported in the balance sheet on the lines assets and liabilities held for sale. Therefore, all commentary that follows, in terms of sales and earnings, refers to the continuing operations.

The consolidated turnover in the first six months of 2014 amounted to € 209.1 million, an increase of 28.7% (34.7% at constant exchange rates) compared to the first six months of 2013. Organic growth in the first six months of 2014 amounted to 9.0% (14.2%). The consolidated turnover in the second quarter of 2014 increased by 33.6% (38.8%) to € 118.3 million. Organic growth in the second quarter was 10.7% (15.1%).

(x 1,000 euros)	H1 2014	H1 2013	Growth	Org. growth
Turnover	209,149	162,566	28.7% (34.7%)	9.0% (14.2%)
	Q2 2014	Q2 2013

As a result of optimising the product portfolio and the continuous development and introduction of innovative products and concepts. the gross margin rose 48.3% in the first six months of 2014 to € 132.9 million. Compared with the first six months of 2013, gross margin as a percentage of turnover was 840 basis points higher at 63.6%.

Due to the strong increase in turnover and the higher gross margin, REBITDA⁹ increased substantially faster than turnover by 51.8% to € 59,0 million. The REBITDA as a percentage of turnover increased by 430 basis points to 28.2%.

Corporate costs as a percentage of turnover decreased by 30 basis points to 1.6% in comparison with the first six months of 2013.

The non-recurrent result amounted to -€ 2.5 million. This result consists primarily of acquisition costs, integration costs and reorganisation costs.

EBITDA increased 53.6% in the first six months of 2014 to € 53.2 million. The operational margin (EBITDA as a percentage of turnover) increased by 410 basis points to 25.4%.

Depreciation and amortisation increased to € 7.2 million in the first six months of 2014, of which € 1.8 million is related to depreciation of intangible assets as a result of the partial allocation of the total transaction consideration of recent acquisitions to brands and clients bases.

EBIT amounted to € 46.0 million. an increase of 50.6% in comparison with the first six months of 2013.

⁸ On the basis of continued operations (Fagron and HL Technology), unless otherwise stated. 9 EBITDA before corporate costs and recurrent-result.

Excluding the revaluation of the financial derivatives. the financial result amounted to -€ 10.0 million. The increase compared to the first six months of 2013 was due to an increase in the net financial debt.

The revaluation of the financial derivatives amounted to -€ 0.6 million. This revaluation was due to the declining trend in interest rates. This interest-rate hedge does not qualify for hedge accounting according to IAS 39.

The effective tax rate, as a percentage of the profit before taxes, was 30.7% in the first half of 2014, compared to 28.7% in the same period of the previous year. The effective cash tax rate¹⁰ is significantly lower than the effective tax rate due to optimal tax planning. We expect the effective cash tax rate over the year to be less than 20%.

Despite the increase in the tax rate, net profit from continued operations in the first six months of 2014 rose by 44.9% to € 24.5 million. The net profit per share from continued operations amounted to € 0.80.

Balance sheet

The main changes at balance-sheet level can be summarised as follows.

The intangible non-current assets increased by € 143.8 million, mainly due to the recognition of goodwill resulting from acquisitions.

Operational working capital¹¹ increased by 46.2% to € 48.2 million compared with 31 December 2013. As a result of the successful integration of acquisitions and operational excellence, the operational working capital as a percentage of the annual turnover, corrected for acquisitions, declined further by 1.5% compared to the same period in the previous year.

The net financial debt¹² rose by € 121.9 million in the first six months of 2014 to € 411.1 million. At the end of June 2014 the net financial debt/annualised REBITDA ratio stood at 2.96. As has been the case in previous years, this ratio is expected to decline substantially towards year-end.

Net operational capex¹³ amounted to € 5.3 million. or 2.6% of turnover in the first half of 2014. Capex includes primarily investments in new pharmaceutical compounding facilities for the Fagron Group.

¹⁰ The effective cash tax rate is defined as the taxes paid divided by the profit before tax.

¹¹ The operational working capital is defined as the sum of inventory and trade receivables less trade payables.

¹² The net financial debt is the sum of long-term and short-term financial borrowings (excluding financial instruments) less cash and cash equivalents.

¹³ Net operational capex is defined as intangible assets and property, plant and equipment that have been acquired or produced (excluding acquisitions), less assets sold.

KEY FIGURES PER DIVISION

Fagron
(x 1,000 euros)	H1 2014	H1 2013	Evolution
Turnover	204,131	158,158	29.1%
REBITDA	58,228	38,749	50.3%
REBITDA margin	28.5%	24.5%
	Q2 2014	Q2 2013	Evolution
Turnover	115,857	86,585	33.8%

Fagron closed the first half of 2014 with excellent results. Turnover increased by 29.1% (35.3% at constant exchange rates) to € 204.1 million. Organic turnover growth amounted to 8.9% (14.2%). Fagron's turnover increased by 33.8% (39.2%) in the second quarter of 2014. Organic turnover growth in the second quarter was 10.5% (14.9%).

The gross margin rose strongly in the first six months of 2014 to 63.1%, an increase of 860 basis points, driven by the successful introduction of the Fagron Advanced Derma concept and other innovations. The strong growth in turnover and the substantial increase in the gross margin led to significant increases in REBITDA, EBITDA and EBIT. Fagron's healthy organic growth is evidence of its successful strategy, in which innovation and optimisation of pharmaceutical compounding is the central priority with the aim of providing optimal customised pharmaceutical patient care. R&D is an essential element in this strategy. Over 200 Fagron pharmacists are working continually on the R&D pipeline, developing innovative concepts and solutions that add substantial value in meeting the increasing global demand for tailor-made medication.

December 2013 saw the global launch of Fagron Advanced Derma, an innovative total concept for dermatologists and pharmacists. This concept offers both prescribers and pharmacists a total solution for treating patients with dermatological conditions with patient-specific pharmaceutical preparations. After the introduction, the R&D team at Fagron worked on expanding this concept. Six new Fagron Advanced Derma vehicles will be launched globally in the fourth quarter of 2014 focusing on the treatment of dermatological conditions such as hypertrophic scars, scabies, psoriasis and xerosis. Fagron Advanced Derma is structured such that the patient's compounded medication is entirely tailored to the particular patient's unique needs and skin condition. In addition to the vehicles developed by Fagron R&D, dermatologists and pharmacists are also provided with indication and vehicle-specific formulations. Compatibility data, stability data, compounding protocols, therapeutic recommendations and references in scientific literature are part of this ever-growing set of formulations.

In the second half of the year, Fagron's R&D department will focus on developing a concept aimed at pain management which will be introduced worldwide in the first quarter of 2015. This total concept enables pharmacists and prescribers to offer patients individualised care in controlling pain. Central to this concept is innovative, non-systemic transdermal pharmaceutical compounding which can provide very localised pain treatment, thus limiting the side effects that

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frequently occur with the medication frequently used, which is usually systemic and can lead to problems such as addiction to pain-killers.

In the first half of the year, important steps were taken to further develop Fagron's worldwide market leadership in the fast-growing niche market of pharmaceutical compounding. Fagron acquired five pharmaceutical compounding pharmacies in the United States and Europe. In addition, the recently announced acquisitions of three compounding pharmacies in Greece, Australia and South Africa were completed.

(x 1,000 euros)	H1 2014	H1 2013	Evolution
Turnover	5,018	4,409	13.8%
REBITDA	788	136	478.3%
REBITDA margin	15,7%	3.1%
	Q2 2014	Q2 2013	Evolution
Turnover	2,524	2,049	23.2%

HL Technology – R&D innovation center

HL Technology focuses on the development and production of innovative precision components and orthopaedic tools for dental and medical specialists. HL Technology achieved turnover of € 5.0 million in the first half of the year, an increase of 13.8% (13.0%) compared to the same period in the previous year. REBITDA increased strongly from € 0.136 million in the first half of 2013 to € 0.788 million in the first half of 2014. Based in Switzerland, HL Technology achieved strong growth of 23.2% (22.0%) in the second quarter.

Development of treasury shares and exercise of warrants and stock options

At 31 December 2013 Arseus held 881,378 treasury shares. After the exercise of 353,625 stock options by Arseus directors, managers and employees. Arseus held 527,753 treasury shares on 30 June 2014.

On 13 June 2014, Arseus issued 73,002 new shares as a result of the exercise of warrants. Following the issue of these new shares, the number of Arseus shares with voting rights increased to 31,431,360. The total number of voting rights (denominator) is 31,431,360. The share capital is € 322,111,645.98. Detailed information can be found in the press release by Arseus of 13 June 2014. This press release can be viewed at www.arseus.com.

Outlook¹⁴

The outlook for 2014 has been adjusted due to the divestment of Corilus, and Arseus expects to achieve turnover from continued operations of at least € 435 million15, with a REBITDA¹⁶ margin from continued operations of 26%.

¹⁴ This press release contains data related to the future based on the current internal estimates and forecasts in addition to market forecasts. The forward-looking statements contain inherent risks and are only applicable on the date on which they are issued.There may be substantial differences between the actual results and the results cited in the forward-looking statements.

¹⁵ Based on constant exchange rates (EUR/US dollar 1.324 and EUR/BRL 3.112).

¹⁶ EBITDA after corporate costs and non-recurrent result.

Statement by the statutory auditor

For the complete interim financial information in accordance with IAS 34 and the corresponding statement from the statutory auditor, which is a statement without any particular comments, see the annex to this press release.

Other information

In the divestment process of Corilus, Arseus is represented by ING Corporate Finance as financial advisor and by Allen & Overy as legal counsel.

Conference call

Ger van Jeveren (CEO) and Jan Peeters (CFO) will provide further details on the results in the first six months of 2014 today in a conference call. The conference call starts at 09:30 CET. You may join the call from 09:15 CET onwards by calling +31 (0)10 713 72 95 (the Netherlands) or +32 (0)2404 04 03 34 (Belgium).

From 10:30 CET, the conference call can be heard on +31 (0)20 713 34 87 with access code 469446#. From 6 August 2014 the conference call may be listened to or downloaded from the corporate website of Arseus (www.arseus.com).

Financial calendar

The trading update on the third quarter of 2014 will be published at 07:30 CET on 8 October 2014. Ger van Jeveren (CEO) and Jan Peeters (CFO) will provide further details on this trading update in a conference call on 8 October. This conference call starts at 09:30 CET.

In the event of any discrepancy between the English translation and the original Dutch version of this press release, the latter shall prevail.

For further information:

Marieke Palstra Director Investor Relations +31 88 33 11 213 marieke.palstra@arseus.com

Arseus profile

Arseus is an innovative scientific pharmaceutical R&D company that is focused on optimising and innovating pharmaceutical compounding worldwide. Arseus consists of two divisions: Fagron and HL Technology. Fagron supplies pharmaceutical raw materials, equipment & supplies, concepts and pharmaceutical compounding to pharmacies and hospital pharmacies in 30 countries. Pharmaceutical compounding is an essential part of pharmaceutical care that enables pharmacists to fulfil the worldwide growing need for tailor-made medication. Fagron's own R&D organization consists of 200 pharmacists who are working continually on developing new formulations for specific patients and patient groups. HL Technology develops and produces innovative precision components and orthopaedic tools for dental and medical professionals.

The Belgian company Arseus NV is located in Waregem and is listed on NYSE Euronext Brussels and NYSE Euronext Amsterdam. The operational activities of the Arseus group are driven by the Dutch company Arseus BV. The head office of Arseus BV is located in Rotterdam.

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		Continued operations			Corilus			Total continued
								operations and Corilus
x € 1,000	H1 -14	H1-13	∆	H1 -14	H1-13	∆	H1 -14	H1-13	∆
Net sales	209,149	162,566	28.7%	21,220	20,453	3.8%	230,369	183,019	25.9%
Gross margin	132,945	89,650	48.3%	17,718	16,700	6.1%	150,663	106,350	41.7%
As % of net sales	63.6%	55.1%	8.4%	83.5%	81.6%	1.8%	65.4%	58.1%	7.3%
Operating costs	-73,929	-50,765	45.6%	-11,982	-11,341	5.6%	-85,911	-62,106	38.3%
As % of net sales	35.3%	31.2%	-4.1%	-56.5%	-55.5%	-1.0%	-37.3%	-33.9%	-3.4%
EBITDA before corp. costs and
non-recurrent result	59,016	38,885	51.8%	5,736	5,358	7.1%	64,752	44,244	46.4%
As % of net sales	28.2%	23.9%	4.3%	27.0%	26.2%	0.8%	28.1%	24.2%	3.9%
Corporate costs	-3,346	-3,072	8.9%	-	-	-	-3,346	-3,.072	8.9%
EBITDA before non-recurrent result	55,669	35,813	55.4%	5,736	5,358	7.1%	61,406	41,172	49.1%
As % of net sales	26.6%	22.0%	4.6%	27.0%	26.2%	0.8%	26.7%	22.5%	4.2%
Non-recurrent result	-2,516	-1,209	108.1%	-659	-64	924.0%	-3,157	-1,273	149.4%
EBITDA	53,153	34,604	53.6%	5,077	5,294	-4.1%	58,230	39,898	45.9%
As % of net sales	25.4%	21.3%	4.1%	23.9%	25.9%	-2.0%	25.3%	21.8%	3.5%
Depreciation and amortization	-7,166	-4,070	76.1%	-2,711	-2,541	6.7%	-9,877	-6,611	49.4%
EBIT	45,987	30,534	50.6%	2,366	2,753	-14.1%	48,354	33,287	45.3%
As % of net sales	22.0%	18.8%	3.2%	11.1%	13.5%	-2.3%	21.0%	18.2%	2.8%

Income statement, split into continued and discontinued operations (Corilus)

The average number of outstanding shares in the first six months of 2014 was 30,604,868. The average number of outstanding shares in the first six months of 2013 was 30,696,597.

Contents

1. Interim management report 2
2. Condensed consolidated income statement 2
3. Condensed consolidated statement of comprehensive income 3
4. Condensed consolidated statement of financial position 4
5. Condensed consolidated statement of changes in equity 5
6. Condensed consolidated statement of cash flows 6
7. Notes to the interim financial information 7
8. Profit per share 9
9. Non-recurring results 10
10. Segment information 10
11. Long Term Borrowings 12
12. Related parties 12
13. Business combinations 12
14. Discontinued Operations15
15. Assets held for sale and related liabilities16
16. Discontinued Operations17
17. Subsequent events18
18. Effective tax rate 18
19. Auditors' review report19

The undersigned hereby declare that, to the best of their knowledge, the condensed consolidated financial statements for the six-months period ended 30 June 2014, which have been prepared in accordance with the IAS 34 'Interim Financial Reporting' as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the company and the undertakings included in the consolidation as a whole, and that the interim management report includes a fair review of the important events that have occurred during the first six months of the financial year and of the major transactions with the related parties, and their impact on the condensed consolidated financial statements, together with a description of the principal risks and uncertainties for the remaining six months of the financial year.

Ger van Jeveren, CEO

Jan Peeters, CFO

1. Interim management report

During the first semester of 2014, the Board of Directors has decided to start the divestment of Corilus. A detailed report on the first semester of 2014 can be found in the Arseus press release of 5 August 2014.

2. Condensed consolidated income statement

(x 1,000 euros)	June 2014	June 20131
Operating income	210,015	162,771
Turnover	209,149	162,566
Other operating income	866	205
Operating expenses	(164,028)	(132,237)
Trade goods	(76,204)	(72,916)
Services and other goods	(33,940)	(23,117)
Employee benefit expenses	(45,820)	(33,319)
Depreciation and amortization	(7,166)	(4,070)
Other operating expenses	(898)	1,186
Operating profit	45,988	30,534
Financial income	355	1,529
Financial expenses	(10,991)	(8,355)
Profit before income tax	35,352	23,708
Taxes	(10,864)	(6,804)
Profit for the year from continuing operations	24,488	16,904
Profit (loss) for the year from discontinued operations
(attributable to equity owners of the company)	(17,879)	1,893
Profit (loss) for the year	6,608	18,796
Profit (loss) attributable to:
Equity holders of the company (net result)	6,597	18,774
Non-controlling interest	11	22
Profit (loss) for the year	6,608	18,796
Earnings (loss) per share attributable to owners of the parent during the year
Profit (loss) for the year per share (in euros)	0.22	0.61
Diluted profit (loss) for the year per share (in euros)	0.21	0.60

The income statement of 2013 is restated for the application of IFRS 5

3. Condensed consolidated statement of comprehensive income

(x 1,000 euros)	June 2014	June 20132
Profit after income tax for the period	6,608	18,796
Other comprehensive income:
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations	0	0
Items that may be subsequently reclassified to profit
or loss	0	0
Currency translation differences	9,800	(10,260)
Other comprehensive income from the period, net of
tax	9,800	(10,260)
Total comprehensive income for the period	16,408	8,536
Attributable to:
Equity holders of the company	16,399	8,587
Non-controlling interest	9	(51)
Total comprehensive income for the period
attributable to equity holders of the company:
From continuing operations	34,278	6,694
From discontinued operations	(17,879)	1,893
	16,399	8,587

The statemen of comprehensive income 2013 is restated for the application of IFRS 5

4. Condensed consolidated statement of financial position

(x 1,000 euros)	June 2014	December 2013
Non current assets	645,272	492,100
Intangible assets	544,419	400,587
Property, plant and equipment	57,344	47,454
Financial assets	813	867
Deferred tax assets	28,135	28,292
Other non current assets	14,561	14,900
Current assets	235,737	236,536
Stock	68,025	58,917
Trade receivables	39,150	29,611
Other current assets	21,764	19,137
Cash and cash equivalents	106,799	128,871
Assets held for sale	94,708	76,057
Total assets	975,718	804,693
Equity	153,916	155,168
Non current liabilities	551,364	389,097
Provisions	9,134	9,197
Pension obligations	4,350	4,286
Deferred tax liabilities	19,692	4,451
Borrowings	515,111	368,698
Financial instruments	3,077	2,463
Current liabilities	241,661	230,364
Borrowings	8,265	55,004
Trade payables	58,959	55,551
Taxes, remuneration and social security	34,770	28,842
Other current payables	139,668	90,968
Liabilities directly associated with assets classified as
held for sale	28,776	30,064
Total liabilities	821,802	649,525
Total equity and liabilities	975,718	804,693

5. Condensed consolidated statement of changes in equity

(x 1,000 euros)	Share capital & share premium	Other reserves	Treasury shares	Retained earnings	Total	Non control ling interest	Total equity
Balance at 31 December 2012	318,134	(208,349)	(4,263)	135,910	241,432	3,753	245,186
Profit for the period				18,774	18,774	22	18,796
Other comprehensive income for the period, net of income tax		(10,187)			(10,187)	(73)	(10,260)
Total comprehensive income for the period	318,134	(218,536)	(4,263)	154,684	250,019	3,703	253,722
Capital increase	793				793		793
Treasury shares			(2,061)		(2,061)		(2,061)
Result on treasury shares			(4,637)		(4,637)		(4,637)
Dividends				(18,842)	(18,842)		(18,842)
Share-based payments		153			153		153
Balance at 30 June 2013	318,927	(218,383)	(10,961)	135,842	225,425	3,703	229,128
Profit for the period				(50,876)	(50,876)	50	(50,826)
Other comprehensive income for the period, net of income tax		(12,363)			(12,363)	(136)	(12,499)
Total comprehensive income for the period	318,927	(230,746)	(10,961)	84,966	162,186	3,703	229,128
Treasury shares			(10,881)		(10,881)		(10,881)
Share-based payments		247			247		247
Balance at 31 December 2013	318,927	(230,499)	(21,842)	84,966	151,553	3,615	155,168
Profit for the period				6,597	6,597	11	6,608
Other comprehensive income for the period, net of income tax		9,802			9,802	(2)	9,800
Total comprehensive income for the period	318,927	(220,697)	(21,842)	91,563	167,952	3,624	171,576
Capital increase	733				733		733
Treasury shares			7,109		7,109		7,109
Result on treasury shares			(3,860)		(3,860)		(3,860)
Dividends				(22,209)	(22,209)		(22,209)
Share-based payments		568			568		568
Balance at 30 June 2014	319,660	(220,129)	(18,593)	69,354	150,292	3,624	153,916

6. Condensed consolidated statement of cash flows

(x 1,000 euros)	June 2014	June 2013
Operating activities
Profit before income taxes	24,656	25,121
Taxes paid	(3,273)	(4,317)
Adjustments for financial items	13,194	10,450
Total adjustments for non-cash items	21,631	8,903
Total changes in working capital	(9,755)	(15,908)
Total cash flow from operating activities	46,453	24,249
Investment activities
Capital expenditures	(9,826)	(10,499)
Investments in existing shareholdings (subsequent payments) and in new holdings	(161,879)	(76,117)
Proceeds from disposal of available-for-sale financial assets	28,627
Total cash flow from investing activities	(143,078)	(86,616)
Financing activities
Capital increase	733	793
Purchase of treasury shares	3,248	(7,371)
Dividends paid	(22,189)	(18,652)
New borrowings	221,914	105,935
Reimbursement of borrowings	(123,608)	(6,355)
Interest received	446	383
Interest paid	(7,612)	(5,703)
Total cash flow from financing activities	72,932	69,031
Total net cash flow for the period	(23,693)	6,665
Cash and cash equivalents – start of the period	135,412	72,352
Gains or losses on exchange on liquid assets	1,261	(377)
Cash and cash equivalents – end of the period	112,980	78,640
Change in cash and cash equivalents	(23,693)	6,665
Cash flows from discontinued operations
Cash flow from operating activities	4,416	2,853
Cash flow from investing activities	(9,844)	(16,666)
Cash flow from financing activities	3,729	10,143
Total net cash flow from discontinued operations	(1,699)	(3,670)

7. Notes to the interim financial information

1. General information

Arseus NV (the 'Company') and its subsidiaries (together, the 'Group') constitute a multinational group of companies that supplies products, services and concepts to professionals and institutions in the healthcare sector in Europe, North and South America, Australia, Asia, The Middle East, and Africa. The Company is subdivided into two divisions and operates in the markets for pharmaceutical compounding and precision components and orthopaedic tools for dental and medical professionals. The Company is a public company, founded and located in Belgium, with registered office at Textielstraat 24, 8790 Waregem. The company number is BE 0890 535 026. The operational activities of the Arseus group are driven by the Dutch company Arseus BV. The head office of Arseus BV is located in Rotterdam.

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

This condensed consolidated interim financial information was approved for issue by the Board of Directors on 4 August 2014.

2. Basis of preparation for condensed consolidated interim financial information

This condensed consolidated interim financial information for the first half of 2014, including the comparative figures for 2013, has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated interim financial information must be read in conjunction with the annual financial statements for the year 2013 (including the principles for financial reporting) which is available at www.arseus.com.

3. Summary of the most important accounting policies

The accounting policies used to prepare the consolidated interim financial statements for the first half of 2013 are consistent with those applied in the Arseus consolidated financial statements for the year ended 31 December 2013.

The accounting policies were consistently applied for all periods presented.

A summary of the most important accounting policies can be found in the 2013 annual report. The annual report can be consulted through the following web link: www.arseus.com.

This condensed consolidated interim financial information has been prepared in accordance with IFRS standards and IFRIC interpretations that apply, or which are applied early, as of 30 June 2014 and which have been endorsed by the European Union.

The following new standards, amendments to standards and interpretations have been endorsed by the European Union and are mandatory for the first time for the financial year beginning 1 January 2014:

• IFRS 10 'Consolidated financial statements', effective for annual periods beginning on or after 1 January 2014.
• IFRS 12 'Disclosure of interests in other entities', effective for annual periods beginning on or after 1 January 2014.
• Amendments to IFRS 10 'Consolidated financial statements', IFRS 11 'Joint arrangements' and IFRS 12 'Disclosure of interests in other entities'. These amendments will be effective for annual periods beginning on or after 1 January 2014 which is aligned with the effective date of IFRS 10, 11 and 12.
• Amendments to IAS 32 'Offsetting financial assets and financial liabilities', effective for annual periods beginning on or after 1 January 2014.
• Amendments to IAS 36 'Impairment of assets', effective for annual periods beginning on or after 1 January 2014.

The application of the aforementioned amendment does not constitute a significant impact on the financial information of the Company.

The following new standards and amendments to standards have been issued and have been endorsed by the European Union, but are not mandatory for the first time for the financial year beginning 1 January 2014:

IFRIC 21 'Levies', effective for annual periods beginning on or after 17 June 2014.

The application of the aforementioned amendments does not constitute a significant impact on the financial information of the Company.

The following new standard, amendments to standards and interpretation have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2014 and have not been endorsed by the European Union:

• IFRS 9 'Financial instruments', effective for annual periods beginning on or after 1 January 2018.
• 'Annual improvements (2010-2012 cycle)' with minor amendments to eight standards, effective for annual periods beginning on or after 1 July 2014.
• 'Annual improvements (2011-2013 cycle)' in response to four issues addressed during the 2011-2013 cycle, effective for annual periods beginning on or after 1 July 2014.
• Amendment to IAS 19 'Defined benefit plans', effective for annual periods beginning on or after 1 July 2014.
• Amendment to IAS 16 'Property, plant and equipment' and IAS 38 'Intangible assets' on depreciation and amortisation, effective for annual periods beginning on or after 1 January 2016.
• IFRS 15 'Revenue from contracts with customers'. Companies using IFRS will be required to apply the revenue standard for annual periods beginning on or after 1 January 2017, subject to EU endorsement.

No new standards, amendments to standards and interpretations were early-adopted. Management is currently assessing the impact on the annual statements.

8. Profit per share

(in euros)	June 2014	June 2013
Basic earnings (loss) per share	0.22	0.61
- from continued operations	0.80	0.55
- from discontinued operations	(0.58)	0.06
Diluted earnings (loss) per share	0.21	0.60
- from continued operations	0.79	0.54
- from discontinued operations	(0.58)	0.06
Basic earnings (loss) per share before non recurring items	0.83	0.64
- from continued operations	0.87	0.55
- from discontinued operations	(0.04)	0.09
Diluted earnings (loss) per share before non recurring items	0.82	0.63
- from continued operations	0.86	0.54
- from discontinued operations	(0.04)	0.09

The earnings used in the calculations are as follows:

(x 1,000 euros)	June 2014	June 2013
Profit (loss) attributable to equity holders of the company	6,597	18,774
- from continued operations	24,476	16,882
- from discontinued operations	(17,879)	1,893
Non-recurring items, after tax	18,782	909
- from continued operations	2,099	(56)
- from discontinued operations	16,683	965
Profit (loss) before non-recurring items attributable to equity holders of the company	25,379	19,683
- from continued operations	26,576	16,825
- from discontinued operations	(1,197)	2,858

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

Weighted average number of ordinary shares

(number of shares x 1,000) June 2014 June 2013
Weighted average number of ordinary shares	30,605	30,697
Effect of warrants and stock options	351	451

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

On 30 June 2013 the capital represented 31,431,360 shares, 527,753 of which are treasury shares held by Arseus NV. As result of the exercise of warrants 73,002 new shares have been issued.

(diluted) 30,956 31,147

The recurring earnings per share for the period are defined as the net profit for the period before non-recurring items.

See note 9 for definition and calculation of the non-recurring items (after tax), from continued operations. The non-recurring items from discontinued operations are defined as results see note 9 related to discontinued operations including impairments and costs to sell.

9. Non-recurring results

The total non-recurring result, from continued operations, included in the EBIT amount to 2.5 million euros cost (June 2013: 1.2 million euros costs). This negative result mainly includes acquiring costs, integration costs and reorganisation costs. In addition, the revaluation of the financial derivatives constitutes a non-recurring result of 0.6 million euros cost in the first semester of 2014 and 1.3 million euros profit in the first semester of 2013. The total non-recurring result after income taxes, from continued operations, are calculated by multiplying the sum of the non-recurring costs by the weighted average effective income tax rate and come to 1.0 million euros (June 2013: 19 thousand euros).

10. Segment information

Arseus divisional structure is tailored to the various activities of Arseus and also supports effective decision-making and individual responsibility. The two segments are Fagron and HL Technology. This is in accordance with IFRS 8, which states that the operational segments must be determined on the basis of the components that the Executive Committee applies to assess the performance of the operational activities and on which the decisions are based

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

• 1. Fagron supplies pharmaceutical raw materials, equipment & supplies, concepts and pharmaceutical compounding to pharmacies and hospital pharmacies in 30 countries. Pharmaceutical compounding is an essential part of pharmaceutical care that enables pharmacists to fulfil the worldwide growing need for tailor-made medication. Fagron's own R&D organization consists of 200 pharmacists who are working continually on developing new formulations for specific patients and patient groups;
• 1. HL Technology develops and produces innovative precision components and orthopaedic tools for dental and medical professionals.

The segment results for continued operations for the reporting period ending 30 June 2014 are as follows:

(x 1,000 euros)	Fagron	HL Technology	Total
Turnover	204,131	5,018	209,149
EBITDA before non recurring items and corporate costs	58,228	788	59,016
Corporate costs			(3,346)
Non-recurring items			(2,516)
Depreciations and amortizations			(7,166)
Operating profit			45,987

The segment results for continued operations for the reporting period ending 30 June 2013 are as follows:

(x 1,000 euros)	Fagron	HL Technology	Total
Turnover	158,158	4,408	162,566
EBITDA before non recurring items and corporate costs	38,749	136	38,885
Corporate costs			(3,072)
Non-recurring items			(1,209)
Depreciations and amortizations			(4,070)
Operating profit			30,534

In 2014 and 2013, there are no inter-segment revenues regarding Fagron and HL Technology.

As on 30 June 2014, the assets and liabilities, as well as the capital expenditure (investments) for continued operations, are as follows:

(x 1,000 euros)	Fagron	HL Technology	Un allocated	Total
Total Assets	769,176	22,857	88,977	881,010
Total liabilities	245,648	3,204	544,174	793,026
Capital expenditure	5,147		199	5,347

As on 31 December 2013, the assets and liabilities, as well as the capital expenditure (investments) for continued operations, are as follows:

(x 1,000 euros)	Fagron	HL Technology	Un allocated	Total
Total assets	518,970	22,602	187,064	728,636
Total liabilities	154,877 154,877	3,304	461,280	619,461
Capital expenditure	3,30 4,791 4	85	330	5,206

11. Long Term Borrowings

In April 2014, Arseus issued an US Private Placement (USPP) of 185 million US dollars. The USPP is in line with Arseus' financial strategy to further diversify its sources of financing. The USPP consists of several tranches with maturities of 3.5 and 7 years in both US dollars and euros. The average annual fixed interest rate is 4.6%.

The funds of the USPP are used to partly repay existing loans and to finance acquisitions.

12. Related parties

The members of the Executive Committee, the CEO and the non-executive directors are considered as related parties. The remuneration policy is described in the Corporate Governance Statement which is part of the 2013 annual report. The remuneration is determined on a yearly basis, therefore no further details are provided in these interim financial statements.

13. Business combinations

In the first semester of 2014 Arseus acquired several companies. Full control was acquired of all group companies. As the acquired activities were immediately - in their entirety or to a significant degree – integrated in existing entities of Arseus, their respective contribution to the profit of Arseus have not been reported separately.

In April 2013, US company Freedom Pharmaceuticals Inc. was acquired. The acquisition of Freedom Pharmaceuticals strengthens Fagron's global market leadership, creates a presence throughout the United States and allows Fagron to immediately deliver extra value to its customers. Fagron is perfectly positioned to provide compounding pharmacies in the United States with innovative products and concepts, as well as value added services and training, through its offices. The acquisition involved a payment of approximately 77.656 million euros. The final fair value of the assets and liabilities acquired was established, representing a decrease in goodwill of 5.1 million euros, mainly due to valuing and recognition of the customer base. Expectation is that the goodwill will be fully tax deductible. The fair value of the acquired assets and liabilities was determined as detailed below.

Fair value of the acquired assets and liabilities (x 1,000 euros)
Intangible assets	9,048
Property, plant and equipment	210
Deferred tax assets	25
Inventories	1,492
Trade receivables	1,556
Cash	64
Total assets	12,394
Financial debt	525
Deferred tax liabilities	3,555
Trade payables	754
Other current debts	316

Net acquired assets	7,243
Goodwill	70,413
Total acquisition amount	77,656

The end of 2013, US company JCB Laboratories Inc. was acquired. The acquisition involved a payment of approximately 15.972 million euros, representing an increase in goodwill of 14.812 million euros mainly recognised in 2013. This goodwill was allocated to the operating company segment Fagron. Expectation is that the goodwill will be fully tax deductible. The provisional fair value of the acquired assets and liabilities was determined as detailed below.

Fair value of the acquired assets and liabilities (x 1,000 euros)
Property, plant and equipment	718
Deferred tax assets	32
Inventories	320
Trade receivables	455
Cash	(83)
Total assets	1,442
Financial debt	44
Trade payables	113
Other current debts	125
Net acquired assets	1,160
Goodwill	14,812
Total acquisition amount	15,972

In April 2014, US company Pharmacy Services Inc. was acquired. Fagron has further strengthened its worldwide market leadership with this acquisition of compounding facilities. Through this acquisition Fagron gained the number one market position in US compounding.

The acquisition involved a payment of approximately 160.273 million euros, representing an increase in goodwill of 134.673 million euros. Expectation is that the goodwill will be fully tax deductible. The provisional fair value of the acquired assets and liabilities was determined as detailed below.

Fair value of the acquired assets and liabilities (x 1,000 euros)
Intangible assets	31,861
Property, plant and equipment	2,853
Deferred tax assets	57
Inventories	1,341
Trade receivables	4,085
Other receivables	108
Cash	6,290
Total assets	46,595
Deferred tax liabilities	11,094

Trade payables	819
Other current debts	9,082
Net acquired assets	25,600
Goodwill	134,673
Total acquisition amount	160,273

In January 2014, Panoramix B.V. was acquired. The acquisition involved a payment of approximately 49.082 million euros, representing an increase in goodwill of 39.844 million euros. This goodwill was allocated to the operating company segment Fagron. The provisional fair value of the acquired assets and liabilities was determined as detailed below.

Fair value of the acquired assets and liabilities (x 1,000 euros)
Property, plant and equipment	5,771
Other non-current assets	3
Inventories	3,171
Trade receivables	2,314
Other receivables	3,448
Cash	(287)
Total assets	14,420
Financial debts	210
Deferred tax liabilities	1,095
Trade payables	760
Other current debts	3,117
Net acquired assets	9,238
Goodwill	39,844
Total acquisition amount	49,082

Furthermore, some smaller companies and activities were acquired during 2014. The total net assets acquired, before allocation of the acquisition price, amounted to 0.322 million euros negative.

To a large extent, the goodwill relates to future profit potential due to operational benefits to be gained, including synergy and scale benefits and efficiency improvements, as well as commercial benefits in the form of access to new markets and realising market leadership in both new and existing markets.

The fair value of a number of acquired assets and liabilities, acquired in 2014, was determined on a provisional basis. The fair value as stated is provisional because the integration process of the acquired entities and their activities is still ongoing. The provisional fair value of intangible assets, property, plant and equipment, deferred tax and working capital can change when the final fair value of the assets and liabilities acquired is established.

The final determination of the fair value of the assets and liabilities from previous minor acquisitions, acquired in 2013, resulted in an adjustment of 1.814 million euros (decrease of goodwill). The changes are mainly the result of the recognition of intangible assets partly offset by the derecognition of inventories.

The total changes in goodwill from acquisitions represents an increase of 161.681 million euros.

Contingent liabilities

At first semester closing the Group had 68.375 million euros in contingencies. These fees payable to former shareholders were determined on the basis of business plans at the time of acquisition. In 2014 the actual payments were equal to the recognised contingencies (first semester 2013: - 1.810 million euros lower payments).

(x 1,000 euros)	2014
Balance at 1 January	58,063
Additions through business combinations	48,470
Used during the period	(38,159)
Unused amounts reversed
Balance at 30 June	68,375

The contingent liabilities mainly relate to earn-out agreements of acquisitions in the United States. The earn-out agreements are based on the companies' operating income before depreciation and amortisation of 2014 and 2015. The recognised contingencies are based on the companies' projected operating income.

14. Discontinued Operations

The end of June 2014, the divestment program of the Healthcare Specialties and Healthcare Solutions divisions has been virtually completed. The end of April 2014 Arseus completed the divestments of Medical Universal SAS and Eurotec SAS. The end of June 2014, Arseus finalised the sale of Duo-Med, Owandy Radiology and Arseus Medical. Duo-Med was sold to ABN Amro Participaties, Owandy Radiology to Villa Sistemi Medicali based in Milan and Arseus Medical was acquired by entrepreneurs Cedric De Quinnemar and Jan Ponnet.

The companies mentioned above were classified to 'Assets held for sale' in 2013. In 2014, management recognised an additional impairment loss of 6.512 million euros. Further details on the disposed assets and liabilities and the calculation of the gain on the disposal are explained in note 16.

Arseus intends to sell Corilus. The management expects the fair value less costs to sell of the discontinued operations will be higher than the carrying amount of the related assets and liabilities. Accordingly, no impairment loss was recognised by management, when the assets and liabilities of the discontinued operations were reclassified as held for sale. The determination of the fair value falls in level 2 of the fair value hierarchy as defined under IFRS13. The fair value is determined using observable market data such as prices obtained for recent sales of similar activities. Further details on the assets and liabilities reclassed as held for sale are explained in note 15.

The combined results of the discontinued operations included in the profit for the year are set out below. The comparative profit and cash flows from discontinued operations have been represented to include those operations classified as discontinued in 2014.

Result for the year from discontinued operations

(x 1,000 euros)	June 2014	June 2013
Operating income	64,024	120,326
Turnover	63,287	120,139
Other operating income	737	187
Expenses	65,553	118,912
Profit before tax	(1,529)	1,414
Attributable income tax expenses	(275)	479
Loss on remeasurement to fair value, settlement costs and costs to sell	(16,076)
Loss for the year from discontinued operations (attributable
to Equity holders of the company)	(17,879)	1,893

15. Assets held for sale and related liabilities

The 'Assets held for sale' mainly relate to the activities of Corilus which is expected to be sold within one year. An overview of the assets and liabilities to be sold is:

(x 1,000 euros)	June 2014
Intangible assets	72,362
Property, plant and equipment	1,717
Deferred tax assets	1,708
Other non-current assets	296
Inventories	4,400
Trade receivables	7,057
Other receivables	4,647
Cash and cash equivalents	2,522
Assets held for sale	94,708
Provisions	142
Pension obligations	74
Deferred tax liabilities	855
Borrowings	91
Trade payables	8,732
Taxes, remuneration and social security	5,081
Other current payables	13,803
Liabilities directly associated with assets classified as held for
sale	28,776

16. Discontinued Operations

The first semester of 2014, virtually all dental and medical activities are divested.

Consideration

(x 1,000 euros)	June 2014
Consideration received in cash and cash equivalents	30,322
Subsequent payments	2,251
Total consideration	32,573

The received consideration minus cost to sell amounts to 28.627 million euros.

Analysis of assets and liabilities disposed of

(x 1,000 euros)	June 2014
Current assets	32,209
Inventories	8,821
Trade receivables	15,409
Other receivables	4,320
Cash and cash equivalents	3,659
Non-current assets	21,505
Intangible assets	16,575
Property, plant and equipment	3,316
Financial assets
Deferred tax assets	1,326
Other non-current assets	288
Current liabilities	19,637
Trade payables	11,492
Taxes, remuneration and social security	5,546
Other current payables	2,599
Non-current liabilities	1,502
Provisions	482
Pension obligations	713
Deferred tax liabilities	(250)
Borrowings	557
Net assets disposed of	32,573

17. Subsequent events

For the outlook of the financial year 2013, please refer to the press release of 5 August 2014. The main risks and uncertainties are the same as those mentioned in the 2013 annual report.

18. Effective tax rate

Recognised income tax expenses are based on management's best estimate of the weighted average annual income tax rate of 30.7%, which is expected for the full financial year 2014 (2013: 25.2%).

To the Board of Directors Arseus NV

FREE TRANSLATION

Statutory auditor's report on review of condensed consolidated financial information for the period ended 30 June 2014

Introduction

We have reviewed the accompanying condensed consolidated statement of financial position of Arseus NV and its subsidiaries as of 30 June 2014 and the related condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the 6-month period then ended, as well as the explanatory notes. The board of directors is responsible for the preparation and presentation of this condensed consolidated financial information in accordance with IAS 34, as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial information is not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union.

Antwerp, August 4, 2014

The statutory auditor PwC Reviseurs d'Entreprises sccrl / Bedrijfsrevisoren bcvba Represented by

Peter Van den Eynde* Bedrijfsrevisor

*Peter Van den Eynde BVBA

Board Member, represented by its fixed representative, Peter Van den Eynde

PwC Bedrijfsrevisoren cvba, burgerlijke vennootschap met handelsvorm - PwC Reviseurs d'Entreprises scrl, société civile à forme commerciale - Financial Assurance Services Maatschappelijke zetel/Siège social: Woluwe Garden, Woluwedal 18, B-1932 Sint-Stevens-Woluwe Vestigingseenheid/Unité d'établissement: Generaal Lemanstraat 67, B-2018 Antwerpen T: +32 (0)3 259 3011, F: +32 (0)3 259 3099, www.pwc.com BTW/TVA BE 0429.501.944 / RPR Brussel - RPM Bruxelles / ING BE43 3101 3811 9501 - BIC BBRUBEBB / RBS BE89 7205 4043 3185 - BIC ABNABEBR