BRACCO IMAGING S.p.A. a sole shareholder company subject to management and coordination by Bracco S.p.A.

Registered office - Via Folli, 50, Milan Share capital Euro 102,900,000 wholly paid Milan Register of Companies and Tax Number: 007785990156 Milan Business Database/R.E.A. no 1182274

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2013

1 COMPANY INFORMATION

Bracco Imaging S.p.A. is a joint stock company (“società per azioni”) incorporated in Italy and registered with the Milan Register of Companies. Its registered office is at Via Folli, 50 – Milan. The Company is wholly owned by its parent company Bracco S.p.A.

The main activities of the company and its subsidiaries are described in the Directors’ Report.

The consolidated financial statements are expressed in thousands of Euro. Foreign activities are included in the consolidated financial statements based on the accounting principles described in these Notes.

2 ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS

Following the introduction of Legislative Decree 38/2005 – regulating the possibility to prepare stand alone and consolidated financial statements in compliance with International Accounting Standards on the basis of the options set out by Article 5 of Regulation (EC) no 1606/2002, issued by the European Parliament and the Council of Europe in July 2002 – the Bracco Imaging S.p.A. Group (hereafter the Group) voluntarily adopted these accounting standards with effect from preparation of the consolidated financial statements at December 31, 2006. Therefore, effective from January 1, 2006, the Group applied International Accounting Standards (“IAS/IFRS) and the relevant interpretations by the IFRIC, previously called the Committee (“SIC”), as approved by the European Commission and considered applicable to the transactions entered into by the Group.

The Group has decided not to adopt IFRS 8 “Operating Segments” and IAS 33 “Earnings per Share” as holding company Bracco Imaging S.p.A. does not fall within the parameters that make application of said standards obligatory (company with listed shares or company filing its financial statements with a Stock Exchange Commission for the purposes of issuing ordinary shares on a regulated public market).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 1 The financial statements and information contained in these consolidated financial statements have been prepared in accordance with IAS 1. International Accounting Standards and the relevant interpretations in force as at December 31, 2013 have been applied.

The amounts reported in these financial statements are accompanied by comparative amounts from the prior year financial statements as prepared and disclosed on a consistent basis.

The consolidated financial statements comprise the obligatory schedules (statement of profit and loss, statement of comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows) and are accompanied by these notes.

The consolidated financial statements have been prepared on a going concern basis.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 2 3 CHANGES TO SCOPE OF CONSOLIDATION AND NON-RECURRING TRANSACTIONS

The changes in the Group scope of consolidation in 2013 and 2012 are summarised below:

2013 reporting period

The Group scope of consolidation did not change during the 2013 reporting period.

The following non-recurring transactions took place:

Acquisition of radiology injectors business

In January 2013, through subsidiary Bracco Injeneering S.A., the Group completed the acquisition from associated company Acist Medical System Inc. of its business in the radiology contrast injectors segment for a price of Euro 12.7 million. The price was determined based on an independent appraisal. This transaction led to the recognition of intangible assets with a total value of Euro 4.2 million (See Note “19 Intangible Assets”). It is classed as a transaction under common control as it took place between companies belonging to the same Group. Accordingly, as required by IAS/IFRS, the difference between the consideration paid and the net carrying amount of the assets acquired – Euro 8.5 million – was allocated to a specific reserve, reducing shareholders’ equity (See Note “30.4 Other Reserves”).

The balance sheet items acquired by the Group are shown in the following table:

Purchase price €/thousand at January 1st 2013 Ne t Book Value allocation Fa ir value

Intangible assets 4,162 4,162

Other reserves 8,495 8,495

Purchase price paid 12,657

Disposal of HPPD Business

In August 2013, the Group completed the sale of the assets and property of the HPPD (Healthcare Protective Product Division) business for a price of USD 26 million plus royalties on future sales. It generated a net gain on the sale of USD 10.5 million. We also note that the SPA provides for a commitment by the Group to continue to perform production for the buyer for a period of three years.

South Korean Market

Through subsidiary Bracco Imaging Korea, the Group has completed the transfer of the ”import product registration” and related licences and authorisations for the Korean market for a total price of USD 12 million, which was paid in the years 2010-2013. In accordance with IAS/IFRS, this transaction led – on the basis of an independent appraisal – to the recognition of intangible assets of Euro 8.3 million and goodwill of Euro 1 million.

2012 Reporting period

In 2012, the Group completed the acquisition from the Justesa Group of 100% of the share capital of three commercial companies in Latin America (in Brazil, Argentina and Mexico).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 3 In accordance with IAS/IFRS, the balance sheet assets and liabilities of the companies acquired were recorded in the consolidated financial statements at fair value, as determined based on an independent appraisal.

As required by IAS/IFRS, the financial statements of the companies acquired were consolidated on a line-by- line basis from the date of acquisition and, therefore, contributed to the results of the Group for a period of around eight months in 2012.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 4 4 SUMMARY OF ACCOUNTING POLICIES AND VALUATION CRITERIA

General principles

The criterion generally adopted when accounting for assets and liabilities (after the date of transition to IAS/IFRS when certain assets were recorded at fair value rather than at cost) is historical cost, except for financial instruments which are recorded at fair value in accordance with IAS 39. Details of the structure and content of the financial statements adopted in accordance with IAS 1 are provided below. Details of the key accounting principles and valuation criteria applied when preparing these financial statements are also provided.

Financial statements: structure and content

The Consolidated Income Statement has been prepared with revenues and costs classified by type. It shows the operating profit and profit before taxation so as to provide a better representation of the performance of ordinary operating activities.

The “Consolidated Statement of Comprehensive Income” has been prepared starting from the net profit and highlights the other items relating to comprehensive income net of the related tax effects. These items include changes in:

. The reserve for the effective portion of gains and losses on cash flow hedges (Hedging reserve); . The reserve relating to the Employee Severance Indemnity for actuarial gains and losses from defined benefit plans; . The reserve for gains and losses resulting from restatement at fair value of financial instruments classified as available for sale; . The reserve for translation into Euro of financial statements of foreign companies.

The Consolidated Statement of Financial Position has been prepared based on a split between "current/non- current" assets and liabilities. Assets/liabilities are classified as current when they meet any of the following criteria: . they are expected to be realised or settled, sold or utilised during ordinary business activities; or . they are held mainly for trading purposes; or . they are expected to be realised or settled within twelve months of the reporting date.

If none of the three conditions are met, the assets/liabilities are classified as non-current.

The Consolidated Statement of Cash Flows has been prepared using the indirect method.

The Consolidated Statement of Changes in Shareholders’ Equity shows the changes in shareholders’ equity items in relation to: . the allocation of net profit for the year of the parent company and the subsidiaries to minority shareholders; . amounts relating to transactions with shareholders (sale and purchase of treasury shares); . as required by IAS/IFRS, each profit and loss item, net of any tax effect, is allocated directly to shareholders’ equity (actuarial gains or losses on valuation of defined benefit plans) or is covered by a shareholders’ equity reserve (effect of transactions under common control whose impact is reflected directly under Group shareholders’ equity); . the restatement at fair value of financial instruments classified as available for sale; . the effect of any changes in accounting principles.

For each significant item included in the above schedules, references should be made to the subsequent notes which provide information thereon and details of their make-up and changes compared to prior year.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 5 Consolidation principles

Subsidiaries

Subsidiaries are entities controlled by the Group as defined in IAS 27 – Consolidated Financial Statements and Separate Financial Statements. Control exists when the Group has the power, directly or indirectly, to determine the financial and operating policies of an entity in order to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control is transferred to the Group and are deconsolidated from the date that control ends. The portion of shareholders’ equity and net profit/loss pertaining to non-controlling interests are disclosed separately in the consolidated statement of financial position and consolidated income statement, respectively.

Associated companies

Associated companies are companies over which the Group exercises significant influence on financial and operational policy, as defined in IAS 28 – Investments in Associates but without their being subsidiary companies or companies subject to joint control. The consolidated financial statements includes the Group share of the results of associated companies, accounted for under the equity method, from the date the significant influence began until the date that it ends. When the Group’s share in the losses of an associate exceeds the carrying amount of the investment, the amount of the investment is written down in full and the amount of any additional losses is not recognised except insofar as the Group is required to cover them.

Transactions eliminated during the consolidation process

When the consolidated financial statements are prepared, all significant balances and transactions between Group companies are eliminated, as are unrealised gains and losses on intra-Group transactions. Unrealised gains and losses on transactions with associated companies or companies under common control are eliminated on the basis of the percentage interest held by the Group in such companies.

Transactions in foreign currency

Transactions denominated in foreign currency are recorded at the exchange rate as at the date of the transaction. At the reporting date, assets and liabilities denominated in foreign currency are translated using the exchange rate as at that date. Gains and losses arising from the settlement of receivables and payables or from their translation at different rates than those at which they were translated when they were first recorded during the period or in prior year financial statements are reflected in the income statement.

Consolidation of foreign entities

All of the assets and liabilities of foreign entities in currencies other than the Euro which form part of the scope of consolidation are translated using the exchange rates in force as at the reporting date. Revenue and costs are translated at the average exchange rate for the year. Translation differences resulting from the application of this method are classified as equity items until the investment is sold. Goodwill and restatements at fair value resulting from the acquisition of a foreign entity are recorded in the relevant currency and translated into Euro using the reporting date exchange rate. Upon first-time adoption of IFRS, the cumulative translation differences generated by the consolidation of foreign entities outside the Eurozone were eliminated, as permitted by IFRS 1. The gains or losses arising from the subsequent disposal of said entities shall include only the translation differences accumulated after 1 January 2005.

The main exchange rates to translate into Euro the 2013 and 2012 financial statements of foreign entities are shown in the following table.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 6 December 31, 2013 December 31, 2012

Average Closing Average Closing USD 1.328 1.379 1.285 1.319

CHF 1.231 1.228 1.205 1.207

JPY 129.663 144.720 102.492 113.610

GBP 0.849 0.834 0.811 0.816

CAD 1.368 1.467 1.284 1.314

CNY 8.165 8.349 8.105 8.221

HKD 10.302 10.693 9.966 10.226

BRL 2.869 3.258 2.508 2.704

KRW 1,453.91 1,450.93 1,447.69 1,406.23

SGD 1.662 1.741 1.606 1.611

SEK 8.652 8.859 8.704 8.582

CZK 25.980 27.427 25.149 25.151

PLN 4.198 4.154 4.185 4.074

ARS 7.278 8.977 5.901 6.486

MXN 16.964 18.073 16.850 17.185

Business combinations and goodwill

Business combinations are accounted for in accordance with IFRS 3. Under said standard, the consideration transferred in a business combination is measured at fair value, calculated as the sum of the fair value of the assets transferred and the liabilities taken on by the Group at the acquisition date and the equity instruments issued in exchange for control of the entity acquired. Incidental expenses relating to the transaction are recorded in the income statement when they are incurred At the date of acquisition, the identifiable assets acquired and liabilities taken on are recognised at fair value. This is except for Deferred tax assets and liabilities, Assets and liabilities for employee benefits. Liabilities or equity instruments relating to payments based on shares in the entity acquired or payments based on shares in the Group issued in replacement for contracts of the entity acquired and Assets destined for sale and Discontinued Operations, all of which are measured in accordance with the applicable accounting standard. Goodwill is determined as the excess of the sum of the consideration transferred upon the business combination, the value of shareholders’ equity pertaining to non-controlling interests and the fair value of any investment previously held in the entity acquired over the fair value of the net assets acquired and liabilities taken on at the date of acquisition. If the value of the net assets acquired and liabilities taken on at the date of acquisition exceeds the amount of the consideration transferred, the value of shareholders’ equity pertaining to non-controlling interests and the fair value of any investment previously held in the entity acquired, that excess is recorded immediately in the income statement as income from the transaction. The portion of shareholders’ equity pertaining to non-controlling interests at the date of acquisition may be measured at fair value or as a percentage of the value of the net assets recognised for the entity acquired. The choice of valuation method is made on a transaction by transaction basis. Any conditional consideration in the business combination agreement is measured at fair value at the date of acquisition and included in the amount of the consideration transferred as part of the business combination for the purposes of determining goodwill. Any subsequent changes in said fair value, which may be classed as adjustments arising in the measurement period, are included in the goodwill on a retrospective basis. Changes in fair value that may be classed as adjustments arising in the measurement period are those resulting from additional information about facts and circumstances which existed at the date of acquisition

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 7 but which came to light during the measurement period (which cannot exceed one year from the business combination). In the case of a business combination achieved in stages, the investment previously held by the Group in the entity acquired is restated at fair value at the date of acquisition of control and any gain or loss arising is recorded in the income statement. Any amounts resulting from the investment previously held and recorded under other comprehensive income are reclassified in the income statement as if the investment had been disposed of. If the opening balances of a business combination are incomplete at the reporting date of the period in which the business combination took place, in its consolidated financial statements, the Group reports the provisional amount of the items which are incomplete. These provisional amounts are adjusted during the measurement period to take account of new information obtained about facts and circumstances existing at the date of acquisition which, if known, would have had an effect on the amount of the assets and liabilities recognised at that date. Goodwill is subsequently reduced only for impairment of value. Once a year – or more frequently if specific events or altered circumstances suggest the possibility of an impairment of value – the goodwill undergoes an impairment test in accordance with IAS 36 (Impairment of Assets); the original value is not restored if the reasons that led to the impairment cease to apply. Goodwill is never revalued, not even under specific legislation, and any impairment adjustments are never reversed. Business combinations which took place prior to January 1, 2009 were accounted for in accordance with the previous version of IFRS 3 as the Group adopted in advance the revised version of the standard which became obligatory for the accounting treatment of business combinations after January 1, 2010. For the purposes of the first-time application of IFRS, the acquisition method required by IFRS 3 was applied retrospectively to all business combinations commencing from January 1, 2001.

Non-controlling shareholders The portion of shareholders equity pertaining to non-controlling shareholders in consolidated subsidiaries and the portion of the net profit or loss for the year of consolidated subsidiaries pertaining to non-controlling shareholders are disclosed separately in the consolidated statement of financial position and in the consolidated income statement. Changes in percentage interests in subsidiaries that do not lead to the acquisition/loss of control are recorded as changes in equity.

Acquisition of non-controlling interests Once control of an entity has been obtained, any transactions in which the parent company acquires or sells minority interests without affecting its control over the subsidiary are transactions with shareholders and must be recognised in equity. It follows that the carrying amount of the controlling investment and non- controlling interests must be adjusted to reflect the change in the interest in the subsidiary and any difference between the amount of the adjustment to non-controlling interests and the fair value of the consideration paid or received for the transaction is recorded directly in equity and allocated to the shareholders of the parent company. There are no adjustments to the amount of goodwill and to profits or losses recorded in the income statement. Charges relating to such transactions must be recorded in equity in accordance with Paragraph 35 of IAS 32.

Intercompany dividends Dividends distributed between Group companies are eliminated from the consolidated income statement.

Transactions under common control A business combination involving entities or groups under common control (a transaction under common control) is a combination in which all of the entities or businesses are, ultimately, controlled by the same party both before and after the business combination and the control is not temporary in nature.

If a significant impact on future cash flows after the transfer of the interested parties can be demonstrated, these transactions are treated in accordance with the “Business combinations and goodwill” paragraph”.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 8 If, rather, this cannot be demonstrated, these transactions are accounted for in accordance with the principle of continuity of values.

Specifically, the accounting method, in application of the principle of continuity of values, falling within the scope of IAS 8.10 and consistent with international practice and the approach of the Italian accounting profession on the issue of business combinations under common control, provides that the buyer shall recognise the assets acquired based on their historical carrying amounts as determined on a cost basis. Where the transfer values are higher than the historical amounts, the excess is eliminated by adjusting the shareholders’ equity of the purchase Group, with a specific entry to a reserve. Similarly, in the seller Group’s financial statements, the accounting principle adopted requires that any difference between the transaction price and the carrying amount of the assets transferred shall not be recorded in the income statement but, rather, in a shareholders’ equity reserve.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 9 Accounting principles

Investments in other entities

Investments in other entities that constitute non-current financial assets not held for trading (i.e. equity investments available for sale) are initially recognised at fair value, if determinable, and gains and losses from changes in fair value are directly allocated to equity until the investments are transferred or their value is impaired. At that time, all of the gains or losses previously recorded under shareholders’ equity are posted in the income statement for the period. Investments in other entities whose fair value is not available are recorded at cost, as written down for any impairment through the income statement. Dividends received from such entities are included in the line item profits (losses) from equity investments.

Intangible assets

Intangible assets with a determinate useful life, purchased or produced internally, are capitalised, in accordance with IAS 38 (Intangible assets), when it is probable that use of the asset shall generate future benefits and the cost of the asset may be reliably determined. Intangible assets with a determinate useful life are amortised on a straight line basis over their expected useful life i.e. the estimated period over which the assets will be used by the entity. Intangible assets with a determinate useful life are also tested for impairment of value once a year or whenever there are indicators of impairment. Other intangible assets with an indefinite useful life are not amortised but subjected to an impairment test at least on an annual basis. The test performed is described in the “Impairment of assets” paragraph.

Research and development costs

Research costs are charged in full to the income statement for the year in which they are incurred, in accordance with IAS 38. IAS 38 also provides that development costs shall be capitalised if the technical feasibility of the related asset so that it will become available for sale can be demonstrated. The inherent uncertainty involved in the research and development of pharmaceutical products, together with external regulatory and legal uncertainties, are so significant that, in the Group’s opinion, the capitalisation criteria are not fully satisfied. Consequently, development costs are charged to the income statement for the year in which they are incurred.

Property, plant and equipment

Property, plant and equipment owned by the Group is recognised at purchase or production cost. The land, buildings and equipment used for production or for the supply of goods and services (primarily relating to Bracco Imaging S.p.A. and Spin S.p.A.) were recorded upon transition to IFRS at deemed cost at the date of transition (January 1, 2005) i.e. fair value based on their state of use at the date in question less subsequent depreciation and accumulated writedowns. The amount was determined based on specific appraisals commissioned from a leading independent appraisal firm. The additional amount was allocated, upon transition to IAS/IFRS, directly to an equity reserve, net of the related tax effect.

Costs incurred after the purchase of the asset are capitalised only if they lead to an increase in the future economic benefits obtainable from said asset. All other costs (including financial expenses directly attributable to the purchase, construction or production of the asset) are recorded in the income statement as incurred.

After the transition date, the Group chose to adopt the cost method.

Assets consisting of components of significant amounts and with different useful lives are considered separately when determining depreciation.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 10 Depreciation is determined, on a straight-line basis, over the estimated useful lives of the assets, applying percentage rates determined with the support of an independent expert which, for the main asset categories, provided the Group with assistance in determining the value – as previously described – and the remaining useful lives of tangible assets at the date of transition.

The useful lives utilised are as follows:

Buildings 38 years Plant and machinery from 10 to 20 years Equipment 3 years Other tangible assets from 4 to 9 years

Land is not depreciated.

Assets held under finance lease agreements whereby all of the risks and benefits of ownership of the asset are substantially transferred to the Group are recorded at the lower of their current value and the present value of the minimum finance lease payments due, including any amount payable to exercise the final purchase option. The corresponding liability towards the leasing company is recorded under financial liabilities. Assets held under finance leases are depreciated, like owned assets, over their estimated useful life or, if shorter, over the remaining period of the finance lease agreement.

If a contract entered into by the Group does not have the legal form of a finance lease but provides for the right to use certain assets and other specific conditions laid down by IFRIC 4, it shall be considered akin to a finance lease and accounted for in accordance with IAS 17.

Operating lease costs are recorded on an accrual basis in the income statement.

Gains and losses arising on the sale or disposal of fixed assets shall be determined as the difference between the sale proceeds and the net carrying amount of the asset and recorded in the income statement for the period.

If there are indicators of impairment, tangible assets are subjected to an impairment test. The test performed is described in the “Impairment of assets” paragraph. Impairment adjustments recorded may be subsequently reversed. Pursuant to revised IAS 23 “Borrowing costs”, borrowing costs are directly attributable to the acquisition, construction or production of a qualifying asset in relation to which the Group has commenced an investment, incurred borrowing costs or begun preparing the asset for its intended use or sale are capitalised as from 1 January 2009. The changes to this accounting standard have not had a significant effect on the consolidated financial statements of the Group.

Investment property

Investment property was recorded upon transition to IFRS at deemed cost at the date of transition (January 1, 2005) i.e. fair value based on their state of use at the date in question i.e. fair value based on their state of use at the valuation date, less subsequent depreciation and accumulated writedowns. The amount was determined based on specific appraisals commissioned from a leading independent appraisal firm. The additional amount was allocated, upon transition to IAS/IFRS, directly to an equity reserve, net of the related tax effect.

Costs incurred after the purchase of the asset are capitalised only if they lead to an increase in the future economic benefits obtainable from said asset. All other costs (including financial expenses directly attributable to the purchase, construction or production of the asset) are recorded in the income statement as incurred. After the transition date, the Group chose to adopt the cost method.

Depreciation is determined on a straight-line basis over the estimated useful life of the property (38 years),

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 11 as per the appraisal performed by the independent firm mentioned above.

Land is not depreciated.

Impairment of assets

At every reporting date, the Group reviews the carrying amount of its tangible assets and intangible assets to ascertain if there are any signs that they have been impaired. If there are indicators of impairment, the recoverable value of the assets is estimated so as to determine the amount of any writedown. Where it is not possible to estimate the recoverable value of an individual asset, the Group estimates the recoverable value of the cash generating unit to which the asset belongs.

The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. When determining the value in use, the estimated future cash flow is discounted to present value at a rate that reflects current market valuations of the value of money and the specific risks relating to the asset.

If the estimated recoverable amount of an asset (or a cash generating unit) is lower than its book value, book value is reduced to bring it into line with the recoverable value. Any impairment is recorded immediately in the income statement.

When an impairment adjustment need no longer be maintained, the carrying amount of the asset (or cash generating unit) – except for goodwill – is increased to a new valuation based on an estimate of its recoverable value; this cannot be greater than the net carrying amount the asset would have had if the impairment adjustment had never been made. The write-back is recorded in the income statement.

Financial instruments

Principle

IFRS 7 requires a description of the objectives, policies and procedures implemented by the Group for each category of financial risk (liquidity, market and credit risks) to which it is exposed, including sensitivity analysis for each type of market risk (exchange rate, interest rate, equity and commodity risks) and information on the concentration and average, minimum and maximum exposures to the various types of risk during the reporting period, when the reporting date exposure is not sufficiently representative of the typical situation. IAS 1 regulates disclosure requirements on objectives, policy and capital management processes. When capital requirements have been imposed by third parties, it sets out the nature, management methods and possible consequences of non-compliance. For qualitative and quantitative analysis, see note 26 “Financial instruments”.

Presentation

The financial instruments held by the Group are included in the following balance sheet items:

- Non-current assets: Non-consolidated equity investments and Other financial assets. - Current assets: Trade receivables, Current financial assets, Other receivables and current assets and Cash and cash equivalents. - Non-current liabilities: Bank borrowing, Financial payables and liabilities and Other non-current liabilities. - Current liabilities: Trade payables, Bank borrowing, Current financial liabilities and Other current liabilities.

Cash and cash equivalents includes bank accounts, fund units and other securities that may be converted into cash very quickly and are not subject to a significant risk of a change in value.

Financial assets consisting of debt or equity securities are initially recognised at the date of settlement while derivative contracts are recognised on the date of signature.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 12 Financial assets held for trading purposes are initially recognised at fair value, not including transaction costs or income relating to the instrument which are recorded in the income statement.

Derivative contracts incorporated or embedded in financial instruments or other forms of contract which have economic characteristics and risks not related to the host instruments or which have features qualifying them to be classed as derivative contracts are accounted for separately in the category of financial assets held for trading purposes. This is except in cases where the instrument containing them is measured at fair value through profit and loss.

Measurement

Equity investments included in non-current financial assets are accounted for as described in the consolidation principles section.

Other financial assets, intended to be held to maturity, are initially measured at acquisition cost (representative of fair value) including – except for assets held for trading purposes – costs relating to the transaction. Subsequently, these assets are measured at amortised cost determined using the effective interest method.

Trade receivables, Current financial assets, Other receivables and current assets, Cash and cash equivalents, except for assets resulting from derivative financial instruments and all financial assets for which no listed value is available on an active market and whose fair value cannot be reliably determined, are measured, if they have a pre-determined maturity date, at amortised cost determined using the effective interest method. When financial assets do not have a pre-determined maturity date, they are measured at cost. Receivables falling due after more than a year and which are interest-free or mature interest at less than the market rate are discounted using market rates of interest. Tests are performed regularly to check if there is objective evidence that financial assets considered individually or as part of a group of assets might have suffered an impairment of value. If such evidence exists, the impairment of value is recorded as a cost in the income statement for the period.

Current financial assets and securities intended to be held to maturity are accounted for based on the date of settlement and, upon first-time recording, are measured at purchase cost, including expenses relating to the transaction. After initial recognition, financial instruments available for sale and those for trading are measured at fair value. If market price is not available, the fair value of financial instruments available for sale is measured using the most appropriate valuation method e.g. analysis of discounted cash flows, performed using market information available at the reporting date. Gains and losses on financial assets available for sale are recorded directly under equity until the financial asset is sold or written down. At that time, the gains or losses accumulating, including those previously recorded under equity, are included in the income statement for the period. Gains and losses generated by changes in the fair value of financial assets classed as held for trading are recorded in the income statement for the period. Current assets denominated in foreign currency for which hedging transactions have been arranged using derivative instruments are measured based on the hedge accounting method, where applicable.

Trade payables, Bank borrowing, Current and non-current financial liabilities and Current and non-current other liabilities are recorded, upon first time recognition, at fair value (normally represented by the cost of the transaction), including expenses relating to the transaction. Subsequently, except for derivative financial instruments, financial liabilities are stated at amortised cost using the effective interest method.

Derivative financial instruments

Derivative financial instruments are primarily utilised for hedging purposes to reduce the exchange rate risk and the interest rate risk. In compliance with IAS 39, derivative financial instruments are accounted for under the hedge accounting method only when:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 13 a) At the inception of the hedge, there is formal designation and documentation of the hedging relationship; b) The hedge is expected to be highly effective; c) The effectiveness of the hedge can be reliably measured; d) The hedge is actually highly effective throughout the financial reporting periods for which it was designated.

All derivative financial instruments are measured at fair value, as established by IAS 39.

When financial instruments qualify to be treated based on the hedge accounting method and the Group decides to act in this manner, the accounting treatment provided for by the cash flow hedge method is applied as follows: if a derivative financial instrument is designated as a hedge of the risk of changes in future cash flows relating to an asset or a liability recorded in the financial statements or to a highly probable expected transaction and it could have an effect on the income statement, the effective portion of the gains or losses (intrinsic value) on the derivative financial instrument is recorded under equity. Gains or losses associated with a hedge that has become ineffective are recorded in the income statement under financial income / expenses. If a hedging instrument or a hedging relationship is closed at the same time as the hedged transaction, cumulative gains and losses, until then recorded in equity, are recorded in the income statement under Other income / Other operating expenses. If, however, a hedging instrument or a hedging relationship is closed but the hedged transaction has not yet taken place, cumulative gains and losses until then recorded under equity are recorded in the income statement under Financial income/expenses at the time the related transaction does take place. If the hedged transaction is no longer considered probable, gains or losses not yet realised and suspended under equity are recorded immediately in the income statement as Financial income / expenses.

If the hedge accounting method is not applied, gains and losses arising from the fair value measurement of the derivative financial instrument are recorded in the income statement.

The foreign exchange risk regarding intercompany balances (e.g. a receivable/payable between two subsidiaries) is classed as a hedged risk in these consolidated financial statements if it leads to a risk of exchange gains or losses that are not completely eliminated upon consolidation as provided for by IAS 21 – The Effects of Changes in Foreign Exchange Rates.

Inventories

Inventories are recorded at the lower of purchase or production cost and estimated realisable value. Cost is determined based on the weighted average cost method and includes direct materials and, where applicable, directly labour, general production expenses and other expenses incurred to bring the inventories to their current location and condition. Net realisable value represents the best estimate of selling price less costs to completion and costs to sell.

Factoring of receivables

Factored receivables are derecognised from the statement of financial position only if the related risks and benefits of ownership have been transferred to the factor. Receivables factored with recourse and without recourse which do not meet this requirement remain in the Group’s financial statements even though they have been legally transferred. In such cases, a financial liability for the same amount is recorded in relation to the advance payment received.

Non-current assets held for sale (discontinued operations)

Non-current assets (and groups of assets) classified as held for sale are measured at the lower of their previous carrying amount and market value less costs to sell. Non-current assets (and groups of assets) are classified as held for sale when it is expected that their carrying amount will be recovered through their sale rather than through their utilisation in the operating

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 14 activities of the business. This condition is satisfied only when the sale is considered highly probable and the asset (or group of assets) is available for immediate sale in its current state. The former condition is met when the Group has made a commitment to make the sale which should take place within twelve months from the date of classification under this caption. In accordance with IAS/IFRS, amounts relating to discontinued operations are presented as follows: - under two specific statement of financial position captions: Assets destined for sale and Liabilities relating to assets destined for sale; - under a specific income statement caption: Net profit/loss from discontinued operations.

Post-employment benefits

Group employees benefit from defined benefit and/or defined contribution pension plans depending on local conditions and practice in the countries where the Group operates. Defined benefit pension plans are based on the working life of the employees and on the remuneration received by the employee during a pre- determined period of service.

The employee severance indemnity provision (Fondo Trattamento di Fine Rapporto -TFR), compulsory for Italian companies under Article 2120 of the Italian Civil Code, constitutes a form of deferred remuneration and depends on the duration of the working life of the employees and the remuneration received during the period of service.

The rules on the TFR were amended by Law no 296 of December 27, 2006 (“Finance Act 2007”) and the subsequent Decrees and Regulations issued early in 2007. As a result of the supplementary pension reform contained in said Decrees, the TFR entitlement accruing up to December 31, 2006 shall remain with the company and shall be classed as a defined benefit plan (obligation for benefits accruing subject to actuarial valuation).

Following the actuarial valuation, the current service cost i.e. the amount accruing in favour of employees during the period is recorded in the income statement under “Personnel costs” while the amount representing the theoretical amount the entity would incur to raise a loan on the market for the same amount as the TFR provision is recorded under financial income and expenses. Actuarial gains and losses which reflect the effects of changes in the actuarial assumptions used are recorded directly under equity.

Amounts accruing after January 1, 2007 as a result of decisions made by employees during the first half of 2007 are allocated to supplementary pensions or transferred by the entity to the treasury fund managed by Italian social security and pensions institution INPS. From the moment the decisions were made by the employees, these funds are classed as defined contribution plans (no longer subject to actuarial valuation).

As “Defined contribution plans”, these plans involve the recording on an accrual basis of contributions to the supplementary pension funds in relation to the services of the employees. If, at the annual or internal reporting date, these contributions have already been paid by the entity, no liability is recorded in the statement of financial position.

Provisions for risks and charges

The Group records provisions for risks and charges when it has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made based on available information. Changes in estimates are reflected in the income statement for the period in which the change took place.

Revenue recognition

Revenue is recognised insofar as it is probable that the Group will obtain economic benefits and their amount can be reliably determined. Revenues are stated net of any adjusting items. Sales of goods are recognised when the Group has transferred to the customer all significant risks and

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 15 benefits connected with ownership of the goods (generally upon shipment of the goods).

Financial income and expenses

Financial income and expenses are recorded in the income statement on an accrual basis. Interest income and expenses are recorded on an accrual basis, on the basis of the amount financed and the effective rate of interest applicable, which represents the rate which discounts future receipts/payments estimated along the estimated life of the financial asset/liability in order to bring them into line with the carrying amount of the asset.

Government grants

Government research grants are recognised in the income statement upon approval by the disbursing entity. Government grants received for the construction/purchase of tangible assets are recognised as income in the income statement, based on a straight-line depreciation method over the same period as the useful life of the relevant tangible assets. Grants are recorded as deferred income on the liabilities side of the statement of financial position.

Taxes on income

Taxes on income for the reporting period represent the sum of current and deferred taxation.

Current taxation for the year is calculated based on taxable income. Taxable income may differ from the result reported in the income statement as a result of income and expense items that will be taxable or deductible in other periods and also excludes items that will never be taxable or deductible. The liability for current taxation is calculated using the rates in force at the reporting date. Provision for taxation that could arise from the transfer of undistributed earnings of the subsidiaries is only made if there is genuine intent to transfer such earnings.

Deferred taxes are taxes expected to be paid or recovered on temporary differences between the book value of assets and liabilities and the corresponding fiscal value used to calculate taxable income. They are determined at the tax rates expected to be applicable in the various jurisdictions where the Group operates in the years when the temporary differences shall be realised or extinguished.

Deferred taxes are recorded based on the global recognition of liabilities method. They are calculated on all temporary differences emerging between the fiscal value of an asset or liability and its carrying amount in the consolidated financial statements, except for goodwill not deductible for tax purposes and those differences resulting from investments in subsidiaries that are not expected to be reversed in the foreseeable future. Meanwhile, deferred tax assets are recognised insofar as it is considered probable that there will be future taxable income to enable utilisation of deductible temporary differences.

The carrying amount of deferred tax assets is revised at every reporting date and reduced to the extent that it is no longer likely that there will be sufficient taxable income to enable all or part of the assets to be recovered.

Deferred taxes are recorded directly in the income statement, except for those relating to items recorded directly under equity; in that case, the related direct taxes are also booked under equity.

Deferred tax assets and liabilities are offset when there is a legal right to offset current tax assets and liabilities and when they refer to taxes due to the same tax authority and the company intends to liquidate current tax assets and liabilities on a net basis.

For the three years 2010-2012, Bracco Imaging S.p.A., Spin S.p.A., Bracco Imaging Italia S.r.l. and Tofin S.p.A. have renewed their participation in the consolidated taxation arrangement set up by parent company Bracco S.p.A. in terms of Article 117/129 of the Consolidated Income Taxes Act (T.U.I.R.).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 16 Companies participating in the consolidated taxation arrangement transfer their taxable income or tax loss to the consolidating company. The consolidating company records a receivable from companies which transfer taxable income equal to the IRES (national corporate income tax) due. Meanwhile, it records a liability towards companies transferring tax losses equal to the IRES on the portion of such losses actual offset at group level.

Dividends distributed

Dividends payable are shown as movements on equity in the reporting period in which they are approved by a General Meeting.

Use of estimates

The preparation of the financial statements and the accompanying notes in accordance with IFRS involves the use by Management of estimates and assumptions which have an effect on the amount of the assets and liabilities reported and on information regarding contingent assets and liabilities at the reporting date. The estimates and assumptions used are based on experience and on other factors deemed relevant. Therefore, actual results may differ from the estimates. The estimates and assumptions are revised periodically and the effects of any change are reflected in the income statement for the period in which the estimate adjustment takes place if the change only regards that period or also in subsequent periods if the adjustment will affect both the current year and future periods. We summarise below the valuation processes and the key assumptions used by the Group when applying the accounting principles with regard to future events that may have a significant impact on the figures reported in the consolidated financial statements or which may lead to the need for significant adjustments to assets and liabilities in the financial year following the current one.

Provision for doubtful debts

The provision for doubtful debts reflects the Group’s estimate of likely losses on trade receivables. The provision for doubtful debts is estimated based on losses expected, as determined bearing in mind past experience for similar receivables, overdue receivables, losses and collections, careful monitoring of receivables quality and projected economic and market conditions.

Recoverable value of non-current assets

Non-current assets include property, plant and machinery, investment property, intangible assets, equity investments and other financial assets. The Group periodically reviews the carrying amount of non-current assets held and utilised and of those destined for sale, when circumstances require such a review. This review is performed based on estimates of the cash flows expected from utilisation or sale of the asset and applying appropriate discount rates to calculate present value. When the carrying amount of a non-current asset has been impaired, the Group records an impairment adjustment for the difference between the carrying amount of the asset and its recoverable value through use or sale, as determined with reference to the Group’s most recent plans. Further information on the method adopted is provided in the note “Impairment of assets”.

Deferred tax assets

The Group records current taxation and deferred taxation/deferred tax income in accordance with the law in the countries where it operates. Accounting for taxation requires the use of estimates and assumptions regarding the interpretation (with reference to transactions during the period) of the applicable rules and their effect on the tax situation of the individual companies and the Group. Moreover, accounting for deferred tax assets / liabilities requires the use of estimates of the prospective taxable income of each Group company and estimates of the tax rates that will be applicable. These activities are performed through analysis of transactions taking place and their tax profile, also with the support, as necessary, of external advisors for the various issues covered. Simulations of prospective income are performed together with sensitivity analysis.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 17 Pension plans

The Group companies participate in pension plans in several different countries. The Group’s main pension plans are in the United States and Germany while, in Italy, the TFR/Employee Severance Indemnity provision is a defined benefit plan (except for TFR accruing since January 1, 2007 which takes the form of a defined contribution plan). The Group uses a range of statistical assumptions and valuation factors with the aim of anticipating future events in order to calculate the expenses, liabilities and assets relating to these plans. The assumptions regard the discount rate, the expected return on plan assets and future remuneration increases. Also, the Group’s actuarial advisors use subjective factors e.g. mortality and resignation rates and assumptions regarding expected return on plan assets.

Contingent liabilities

The Group is involved in a number of legal and tax disputes regarding various issues under the jurisdiction of several different countries. Given the inherent uncertainty regarding these issues, it is difficult to predict if an to what extent they will lead to any expense for the Group. The litigation and claims against the Group can be the result of difficult and complicated legal problems, possibly subject to varying degrees of uncertainty, including the facts and circumstances of each case, jurisdiction and the different laws applicable. In the ordinary course of its business, the Group consults as necessary with its legal and tax advisors. The Group recognises a contingent liability for legal and tax disputes when it considers a future cash outflow probable and the amount involved can be reasonably estimated. When there is the possibility of a future cash outflow but its amount cannot be determined, this amount is disclosed in the notes to the financial statements.

Risk management

Liquidity risk

The liquidity risk is the risk that the Group might have difficulty in raising – at reasonable conditions – the funds needed to support its operating activities. Cash flows, funding requirements and the liquidity of the Group are constantly monitored with the aim of ensuring the efficient and effective management of financial resources in order to meet the requirements resulting from operations and investment and to settle liabilities as they fall due.

Exchange rate risk

The exchange rate risks arises in relation to both commercial and financial operations. As regards commercial operations, a significant portion of turnover is denominated in currencies other than the Euro, in particular, the US Dollar and the Japanese Yen. On the costs side too, some purchases of raw materials, finished products and services are denominated in currencies other than the Euro. For this reason, the Group has decided to use derivative financial instruments to manage the risks resulting from its ordinary activities. The objective is to reduce the potential negative impact on cash flows resulting from unfavourable exchange rate fluctuation. Hedging activities concentrate on risks which, given their size or inherent risk (volatility), could have a significant impact on profitability. Risks relating to transactions denominated in US Dollars are managed by hedging budget cash flows. The economic hedging objective is measured against the budget exchange rate. For transactions denominated in other currencies, the exchange risk is hedged for each transaction except for transactions in foreign currency with a limited impact on profitability.

When managing the exchange risk, the Group uses both options and forward sales/purchases. These instruments, intended to hedge the risk of exchange rate fluctuation, are easy to manage and their fair value

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 18 can be readily determined ( “Plain Vanilla” instruments).

The counterparties to these contracts are leading financial institutions and the Group does not engage in any speculative activities. Information on the fair value of derivative financial instruments at the reporting date is provided in note 27 “Derivative financial instruments”

Interest rate risk

The risk management objective is to reduce the impact that any variation in the interest rate curve could have on Group cash flow. In particular, the aim is to achieve the right mix between fixed rate borrowing and variable rate borrowing, in order to reduce the effect of interest rate fluctuation while, at the same time, minimising the cost of protecting against such events through the selected hedging instruments. For interest rate risk management purposes, the Group may use options, interest rate swaps (IRS) or forward rate agreements (FRA). The counterparties to these contracts are leading financial institutions and the Group does not engage in any speculative activities. Information on the fair value of derivative financial instruments at the reporting date is provided in note 27 “Derivative financial instruments”.

Credit risk

The credit risk represents the Group’s exposure to potential losses due to non-fulfilment of commercial and financial obligations taken on by counterparties. This risk is primarily the result of economic and financial factors i.e. the possibility that a counterparty might default and of more technical/commercial or legal/administrative factors (i.e. complaints about the nature/quality of goods, the interpretation of contractual terms and conditions, supporting invoices, etc). In order to manage this risk, the Group has adopted appropriate means of monitoring constantly the status of collections and undertaking prompt recovery measures.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 19 Scope of consolidation

We provide below a list of the subsidiaries, controlled directly or indirectly by Bracco Imaging S.p.A., included in the scope of consolidation on a line-by-line basis as at December 31, 2013:

 Bracco Imaging B.V. – approved share capital Euro 2,269 thousand, share capital subscribed and paid Euro 453,780, registered office: Amsterdam (Netherlands) –100% subsidiary.

 Spin S.p.A. – share capital Euro 25,000 thousand, registered office: Milan –100% subsidiary.

 Bracco International B.V. – approved share capital Euro 454 thousand, share capital subscribed and paid Euro 107 thousand, registered office: Amsterdam (Netherlands) - 100% subsidiary.

 Bracco Diagnostics Inc. - share-premium USD 44,496 thousand, registered office: Delaware (USA) - 100% subsidiary.

 Bracco Imaging Italia S.r.l. – quota capital Euro 10,000 thousand, registered office: Milan –100% subsidiary.

 Bracco U.K. Ltd. – share capital GBP 2, registered office: High Wycombe (UK) - 100% subsidiary.

 Bracco Suisse S.A. – share capital CHF 45,000 thousand, registered office: Manno (Switzerland) - 100% subsidiary.

 Bracco Osterreich GmbH – share capital Euro 1,200 thousand, registered office: Vienna (Austria) - 100% subsidiary.

 Bracco Far East Ltd. – share capital and share premium HK$ 6,240 thousand: Hong Kong –100% subsidiary.

 Bracco Imaging Europe B.V. – approved share capital Euro 100 thousand, share capital subscribed and paid Euro 20 thousand, registered office: Amsterdam (Netherlands) –100% subsidiary.

 Bracco Imaging France S.A.S. – share capital Euro 2,000 thousand, registered office: Courcouronnes (France) - 100% subsidiary.

 Bracco Imaging Deutschland GmbH – share capital Euro 2,000 thousand, registered office: Costanza (Germany) - 100% subsidiary.

 Bracco-Eisai Co. Ltd. – share capital Yen 340,000 thousand, registered office: Tokyo (Japan) - 51% subsidiary.

 Shanghai Bracco Sine Pharmaceutical Corp. Ltd. – share capital and share premium USD 13,260 thousand, registered office: Shanghai (China) - 70% subsidiary.

 Bracco Research USA Inc. - share-premium USD 6,633 thousand, registered office: Delaware (USA) - 100% subsidiary.

 Bracco Imaging Holding B.V. – approved share capital Euro 100 thousand, share capital subscribed and paid Euro 20 thousand, registered office: Amsterdam (Netherlands) – 100% subsidiary.

 Bracco Diagnostics Asia Ltd – share capital S$ 20,916 thousand, registered office: Singapore - 100% subsidiary.

 Bracco Holding B.V. – approved share capital Euro 454 thousand, share capital subscribed and paid Euro 228 thousand, registered office: Amsterdam (Netherlands) - 100% subsidiary.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 20  Bracco USA Inc. - share-premium USD 162,448 thousand, registered office: Delaware (USA) - 100% subsidiary.

 American Husky III S.r.l. – quota capital Euro 50,000, registered office: Milano – 100% subsidiary.

 E-Z-EM Inc. – share premium USD 58,787 thousand, registered office: Delaware (USA) – 100% subsidiary.

 E-Z-EM Canada Inc. – share capital CAD 5,459 thousand, registered office: Montreal (Quebec – Canada) –100% subsidiary.

 Bracco Imaging Korea Ltd. – share capital KRW 773,200 thousand, registered office: Seoul (Korea) – 100% subsidiary.

 Bracco Imaging do Brasil Importacao e Distribucao de Medicamentos Ltda. – share capital BRL 53,500 thousand, registered office: Sao Paulo (Brazil) – 100% subsidiary.

 Heart Leaflet Technologies Inc. – share capital USD 25,413 thousand – registered office Minnesota (United States) – 100% subsidiary.

 Bracco Imaging Scandinavia AB – share capital SEK 100 thousand – registered office: Gothenburg (Sweden) –100% subsidiary.

 Bracco Imaging Baltics OU – share capital Euro 2,556 – registered office: Tallin (Estonia) – 100% subsidiary.

 Bracco Imaging Czech s.r.o – share capital CZK 3,700 thousand – registered office: Prague (Czech Republic) – 100% subsidiary.

 Bracco Imaging Polska Sp. z o.o – share capital PLN 700 thousand – registered office: Warsaw (Poland) – 100% subsidiary.

 Bracco Imaging Slovakia s.r.o – share capital Euro 300 thousand – registered office: Bratislava (Slovakia) –100% subsidiary.

 Dafri G.m.b.H. – share capital Euro 1,250 thousand – registered office: Munich (Germany) – 100% subsidiary.

 BIPSO G.m.b.H. – share capital Euro 26 thousand – registered office: Singen (Germany) – 100% subsidiary.

 Bracco Injeneering S.A. (formerly Swiss Medical Care S.A.) – share capital CHF 6,000 thousand – registered office: Lausanne (Switzerland) – 100% subsidiary.

 Justesa Imagen Argentina S.A. – share capital ARS 22,535 thousand – registered office: Buenos Aires (Argentina) – 100% subsidiary.

 Justesa Imagen Mexicana S.A. DE C.V. – share capital MXN 15,960 thousand – registered office: Tlalpan (Mexico) – 100% subsidiary.

The investments in Bracco PTY Ltd (Australia, share capital and share premium US$ 12- 100% subsidiary) and Parco della Bassa Friulana S.r.l. (Italy, quota capital Euro 10 thousand – 100% subsidiary) are valued at cost as they are not material.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 21 The Bracco Imaging Group organisation chart at December 31, 2013 is shown below:

BRACCO IMAGING S.p.A.

Italy

100% 100% 100% 100% 100% 100%

Bracco Imaging Italia Bracco Imaging American Husky III Bracco Imaging Spin S.p.A. Bracco Holding B.V. S.r.l. Europe B.V. S.r.l. Holding B.V.

Italy Ne therland Italy Ne therland Italy Ne therland 100%

100% 100% Bracco International Bracco Usa Inc. Bracco Suisse S.A. B.V.

Usa Switzerland Ne therland

100% 100% 100% Bracco Imaging 100% 100% Bracco Imaging B.V. Deutschland G.m.b.H. Bracco Diagnostics HLT - Heart Leaflet Bracco Research Usa Inc. Technologies Inc. Inc. Germany Ne therland Usa Usa Usa 100% 100% 100% Bracco Uk Ltd. Bracco PTY E-Z-EM Inc. UK Australia Usa

51% 100% Bracco Diagnostic Asia Bracco Eisai Co. Ltd. Ltd. 100% Japan Singapore E-Z-EM Canada Inc. 70% Shanghai Bracco Sine Canada 100% Bracco Far East Ltd. Pharmaceutical Corp. Ltd. Hong Kong China

Bracco Osterreich 100% 100% Bracco Imaging Korea G.m.b.H. Ltd.

Austria Republic of Korea 1% Bracco Imaging S.p.A.

Bracco Imaging 100% Bracco Imaging 100% 99% Bracco Imaging Baltics OU Scandinavia AB do Brasil L.t.d.a.

Estonia Sweden Brasil

1% Bracco Imaging S.p.A. Bracco Imaging 99% 100% Bracco Imaging Polska Sp. Zo.O France S.A.S.

Poland France

1% Bracco Imaging S.p.A. Bracco Imaging Czech 99% 99% Bracco Imaging 1% Bracco Imaging S.p.A. S.R.O. Slovakia S.R.O

Czech Republic Slovakia

Bracco Injeenering 100% 100% Dafri G.m.b.H. S.A.

Switzerland Germany 100%

2% Bracco Imaging S.p.A. Justesa Imagen 98% BIPSO G.m.b.H. Argentina S.A.

Argentina Germany

5% Bracco Imaging S.p.A. Justesa Imagen 95% Mexicana S.A.

Mexico

Accounting standards, amendments and interpretations applied in 2013

The following accounting standards and amendments were applied for the first time by the Group from January 1, 2013:

 Amendments to IAS 19 – Employee benefits;

 IFRS 13 – Fair value measurement;

 Amendments to IAS 1 – Presentation of financial statements: Presentation of other comprehensive income;

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 22  Amendments to IFRS 7 – Financial instruments: Additional disclosures on the offsetting of financial assets and liabilities;

 Amendment to IAS 1 – Presentation of financial statements (part of 2009-2011 cycle of Annual Improvements to IFRS);

The nature and effects of these amendments are described as follows.

Amendments to IAS 19 – Employee benefits

The new standard eliminates the option to defer recognition of actuarial gains and losses under the corridor method, requiring that all actuarial gains and losses must be recorded immediately in Other Comprehensive Income so that the entire net amount of provisions for employee benefits (net of available plan assets) is shown in the consolidated statement of financial position. The amendment also requires that changes from one year to the next in the provision for employee benefits and plan assets must be divided into three components: costs relating to employee service during the period must be recorded in the income statement as “service costs”; net financial expenses calculated applying the appropriate discount rate to the net amount of the provision for defined benefits less assets at the start of the period must be recorded in the income statement as such; and actuarial gains and losses arising from the remeasurement of assets and liabilities must be recorded in Other Comprehensive Income.. Moreover, the return on plan assets included in net financial expenses as above must be calculated based on the discount rate of the liabilities and no longer based on the expected return. Finally, the amendment introduces additional new disclosures that must be provided in the notes to the financial statement. The amendment is applicable retrospectively from reporting periods commencing on or after 1 January 2013. The introduction of the new standard did not have any significant effects on these financial statements because, upon the transition to IAS/IFRS, the Group did not opt to use the corridor method to defer recognition of actuarial gains and losses.

IFRS 13 - Fair Value Measurement

The new standard clarifies how fair value must be determined for financial reporting purposes and applies to all circumstances where IFRS require or permit fair value measurement or the presentation of information based on fair value, with some limited exceptions. The standard also requires more extensive disclosures about fair value measurement (fair value hierarchy) than currently required by IFRS 7. The standard is applicable prospectively from 1 January 2013. Other than the additional disclosures provided in Note 27 “Financial instruments” on the measurement of fair value, adoption of this standard did not have any significant effects for the Group.

Amendments to IAS 1 – Presentation of financial statements: Presentation of Other Comprehensive Income

The amendments require entities to group together all items presented as Other comprehensive income/(losses) based on whether or not they can subsequently be reclassified to the income statement. The Group has adopted these amendments in these financial statements, amending its presentation of Other Comprehensive Income. Comparative information has been restated accordingly.

Amendments to IFRS 7 – Financial instruments: Additional disclosures – Offsetting of financial assets and liabilities

The amendments require further information on the effects or potential effects of the offsetting of financial assets and liabilities under IAS 32 on the statement of financial position of an entity. The amendments are applicable to periods commencing on or after 1 January 2013. Information must be provided retrospectively. Application of the amendments did not have any effect on the consolidated financial statements of the Group.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 23 Amendments to IAS 1 – Presentation of financial statements: (part of 2009-2011 cycle of “Annual Improvements” to IFRS)

On 17 May 2012, the IASB published a series of amendments to IFRS. Among the, the amendment to IAS 1 – Presentation of financial statements is applicable from January 1, 2013. The amendment clarifies the rules on presentation of comparative information in case of changes of accounting policy and restatement or reclassification of comparative information and in cases where additional statements of financial position are provided. Application did not have any effect on the consolidated financial statements of the Group.

New standards and interpretations not yet applicable

In May 2011. The IASB issues a series of three standards: IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements and IFRS 12 – Disclosure of interests in other entities. Consequently, IAS 27 – Consolidated and separate financial statements (renamed IAS 27 – Separate financial statements) and IAS 28 – Investments in associates (renamed IAS 28 – Investments in associates and joint ventures) were amended. These standards were later amended to clarify the transition rules to be applied upon first-time adoption. The new standards are applicable, retrospectively, for periods commencing on or after January 1, 2013. The relevant European Union bodies have completed the approval process for this standard, postponing its date of application to January 1, 2014 but permitting early adoption from January 1, 2013. The Company will adopt the new standards from January 1, 2014, as follows:

 IFRS 10 – Consolidated Financial Statements replaces SIC-12 - Consolidation: Special purpose entities and parts of IAS 27 – Consolidated and separate financial statements (which has been renamed IAS 27 – Separate financial statements and which regulates the accounting treatment of investments in the separate financial statements). The new standard moves on from the existing ones, identifying a single model of control applicable to all entities, including “structured entities”. It also provides guidelines for use in determining the existence of control where this is complicated. As at the reporting date, the first-time application of this standard was not expected to have any effect because there were no differences in the conclusions on control reached before and after its application.

 IFRS 11 – Joint arrangements replaces IAS 31 – Interests in Joint Ventures and SIC-13 – Jointly controlled entities: Non-monetary contributions by venturers. Without affecting the criteria for determining whether joint control exists, the new standard provides criteria for the accounting treatment of joint arrangements based on rights and obligations arising from such arrangements rather than on their legal form, distinguishing between joint ventures and joint operations. Under IFRS11, the existence of a separate vehicle entity is not a sufficient condition for a joint arrangement to be classified as a joint venture. For joint ventures, where the parties have rights only on the equity of the joint venture, the standard establishes that the equity method is the sole accounting method to be used in the consolidated financial statements. Meanwhile, for joint operations, where the parties have rights to the assets and obligations for the liabilities of the arrangement, the standard provides for the direct recognition in the consolidated financial statements (and in the separate financial statements) of the proportionate amount of the assets, liabilities, costs and revenue resulting from the joint operation. The new standard is applicable retrospectively from January 1, 2014. Since the issue of IFRS 11, IAS 28 – Investments in associates has been amended to include interests in jointly controlled entities in its scope of application from the effective date of the standard. Application of this new standard is not expected to produce significant effects on the consolidated financial statements of the Group.

 IFRS 12 – Disclosure of interests in other entities is a complete new standard on the additional disclosures required on any type of investment, including those in subsidiaries, joint arrangements, associates, special purpose entities and other non-consolidated vehicles. Application of the new standard will result in more information in the notes to the Group’s consolidated financial statements.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 24 On December 16, 2011, the IASB issued several amendments to IAS 32 – Financial instruments: presentation, to clarify the application of certain criteria for the offsetting of financial assets and liabilities included in IAS 32. The amendments are applicable retrospectively for periods commencing on or after 1 January 2014. The first-time adoption of these amendments is not expected to have any significant effect.

On May 29, 2013, the IASB published an amendment to IAS 36 Financial instruments: Impairment of Assets – Disclosure of recoverable amount of non-financial assets which regulates the disclosures which must be provided on the recoverable amount of assets whose value has been impaired if said recoverable amount is based on fair value less costs to sell. The amendments must be applied retrospectively from annual periods commencing on or after January 1, 2014. The amendment may be applied in advance for periods in which the entity has already applied IFRS 13. Application of the amendment may result in additional disclosures in the notes to the financial statements.

On June 27, 2013, the IASB published several minor amendments to IAS 39 Financial instruments: Recognition and measurement – Novation of derivatives and continuation of hedge accounting. The amendments permit the continued use of hedge accounting where an existing derivative, designated as a hedging instrument, is to be replaced with a new derivative in order to replace the original counterparty in order to ensure that the commitment made is fulfilled and if certain conditions are satisfied. The same amendment shall also be included in IFRS 9 – Financial instruments. The amendments must be applied retrospectively from annual periods commencing on or after 1 January 2014. No significant effects are expected due to adoption of the amendments.

At the reporting date, the relevant European Union bodies had not yet completed the approval process required for application of the following accounting standards and amendments:

 On November 12, 2009, the IASB published IFRS 9 – Financial instruments: the standard was later reissued in October 2010 and amended in November 2013. The standard regards both the classification, recognition and measurement of financial assets and liabilities and hedge accounting. It is intended to replace – on these issues - IAS 39 – Financial assets: recognition and measurement. Through the amendments dated November 2013 and other amendments, the IASB eliminated the date of obligatory first-time adoption of the standard, previously set at January 1, 2015. This date will be reintroduced with the publication of a complete standard, upon completion of the IFRS 9 project.

 On May 20, 2013, the IASB issued IFRIC 21 - Levies, an interpretation of IAS 37 – Provisions, contingent liabilities and contingent assets. This interpretation, provides clarification on when an entity should recognize a liability for levies imposed by governments, other than taxes on income. IFRIC 21 is applicable for annual periods commencing on or after January 1, 2014. Early adoption is permitted.

 On November 21, 2013, the IASB published several minor amendments to IAS 19 – Employee benefits called “Defined benefit plans: Employee contributions. These amendments regard the simplification of the accounting treatment of employee or third party contributions to defined benefit plans, in specific circumstances. The amendments are applicable, retrospectively, for annual periods commencing on or after July 1, 2014. Early adoption is permitted.

 On December 12, 2013, the IASB issued a number of improvements to IFRSs (Annual Improvements to IFRSs: 2010-2012 Cycle and Annual Improvements to IFRSs: 2011-2013 Cycle). The main issues covered by these improvements include: the definition of vesting conditions in IFRS 2 – Share based payments, the aggregation of operating segments in IFRS 8 – Operating Segments and the definition of key management personnel in IAS 24 – Related party disclosures, the exclusion of all types of joint arrangements (as defined in IFRS 11- Joint Arrangements) from the scope of application of IFRS 3 – Business combinations and certain clarification on exceptions to the application of IFRS 13 – Fair value measurement.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 25 The Group will adopt these new standards and improvements based on the planned date of application and shall assess their potential impact on the financial statements when they have been approved by the European Union.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Income Statement

5 REVENUE

Revenue for the year ended December 31, 2013 totalled Euro 852,100 thousand, a net increase of Euro 3,596 thousand on the year ended December 31, 2012.

2013 % 2012 % Change

North America 362,312 42.5% 378,618 44.6% (16,306) Europe 294,894 34.6% 271,461 32.0% 23,433 Rest of the World 190,922 22.4% 179,722 21.2% 11,200 Sub-total 848,128 99.5% 829,801 98% 18,327

Disposal of HPPD business in 2013 3,972 0.5% 18,703 2.2% (14,731)

Total 852,100 100% 848,504 100% 3,596

The 5.5% increase on prior year – without considering the negative exchange rate effect or the change in the business perimeter due to the disposal of the North American HPPD business – is due to:

 A turnover increase for the “Imaging Agents” core business, with especially good performances in major European countries and in the Rest of the World  A strong performance by the “Injectors” business, across all geographical areas.

Revenue may be broken down by business segment as follows:

2013 % 2012 % Change

Imaging Agents 761,184 89.3% 755,981 89.1% 5,203 Injectors 44,974 5.3% 34,610 4.1% 10,364 Pharmaceutical products 2,303 0.3% 3,089 0.4% (786) Other 39,667 4.7% 36,121 4.3% 3,546 Sub-total 848,128 102.0% 829,801 100% 18,327

Disposal of HPPD business in 2013 3,972 0.5% 18,703 2.2% (14,731)

Total 852,100 100.0% 848,504 100.0% 3,596

Revenue includes sales to parent company Bracco S.p.A. and to associated companies as follows:

2013 2012 Change

Imaging Agents Centro Diagnostico Italiano 231 209 22 Total 231 209 22 Pharmaceutical Products Bracco S.p.A. 2,275 2,999 (724) Total 2,506 3,208 (702)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 27 6 OTHER INCOME

Other income amounts to Euro 25,798 thousand and has increased by Euro 6,590 thousand compared to 2012. It may be analysed as follows:

2013 2012 Change

Contingent assets 8,925 3,445 5,480 Cash flow hedging 2,425 0 2,425 Other income 8,906 7,610 1,296 Billback of miscellaneous services 1,456 1,432 24 Billback of research costs 367 1,048 (681) Royalties received 3,088 3,877 (789) Grants received 631 1,796 (1,165)

Total 25,798 19,208 6,590

“Contingent assets” mainly includes the reversal of several accruals made in prior reporting periods as the reasons for them no longer apply.

“Cash Flow hedging” refers to the recognition of hedging instruments of Euro 4.385 thousand net of the exchange differences of Euro 1,959 thousand realised on the underlying USD receivables. In 2012, this item was classified under “other operating expenses”.

“Billback of research costs” mainly refers to the recharge of costs for research, medical services and regulatory matters to parent company Bracco S.p.A.

“Grants towards research costs” refers to various research projects carried out by the holding company in respect of which grants have been received.

The following table summarises “Other income” from parent company Bracco S.p.A. and other associated companies:

2013 2012 Change

Billback of miscellaneous services: Bracco S.p.A. 1,456 1,432 24 Billback of research costs: Bracco S.p.A. 136 917 (781) Other income: Acist Medical System Inc. 720 602 118 Centro Diagnostico Italiano 45 64 (19) Bracco Real Estate S.r.l. 122 117 5 Total 2,479 3,132 (653)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 28 7 PURCHASES OF RAW MATERIALS AND GOODS FOR PRODUCTION AND RESALE, SERVICES AND LEASE/RENTAL COSTS

These amount to a total of Euro 538,537 thousand (Euro 536,800 thousand in 2012). The balance may be analysed as follows:

2013 2012 Change

Purchases of raw ma terials and goods for production and resale - Raw materials and goods 138,049 140,916 (2,867) - Finished products 72,206 63,309 8,897 - Packaging and wrapping material 27,332 33,964 (6,632) - Ancillary and consumable material 8,499 8,216 283 - Other purchases and accessory charges 5,282 3,127 2,155 (A) 251,368 249,531 1,836 Services and use of third-parties assets: - Consultancy 47,332 41,373 5,959 - Sub-contracted ma nufacturing 57,991 55,668 2,323 - Rents 12,565 11,997 568 - Fees to Directors and Statutory Auditors 1,546 1,666 (120) - Commission, contribution and agents expenses 1,127 1,262 (135) - Utilities 20,243 20,405 (162) - Insurance 4,746 4,917 (171) - Promotional, advertising and marketing expenses 31,499 31,893 (394) - Transports 21,371 22,272 (901) - Canteen and other employee-related expenses 6,001 7,065 (1,064) - Travel 12,354 13,488 (1,134) - Royalties paid 633 1,938 (1,305) - Maintenance 15,879 17,343 (1,464) - Testing, scientific consultancy and research 13,738 16,718 (2,980) - Other costs 40,144 39,264 880 (B) 287,169 287,269 (100) Total (A)+(B) 538,537 536,800 1,736

“Purchases of raw materials and goods for production and resale” and “Costs for services and lease/rental costs” include costs relating to parent company Bracco S.p.A. and associated companies, as shown in the following table:

2013 2012 Change

Purchases of raw ma terials and goods for production and resale Acist Medical System Inc. 24,819 18,795 6,024 Services and lease/rental costs: Bracco S.p.A. 2,677 3,124 (447) Acist Medical System Inc. 5,023 351 4,672 Bracco Advance Medical Technologies Inc. 0 40 (40) Centro Diagnostico Italiano 322 308 14 Bracco Real Estate S.r.l. 1 0 1 Total 32,842 22,618 10,224

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 29 8 PERSONNEL COSTS

Personnel costs are analysed as follows:

2013 2012 Change

Wages and salaries 149,062 149,712 (650) Social security contributions 34,033 33,668 365 Defined benefit plan cost 4,455 4,731 (276) Other employee-related costs 10,845 9,523 1,322 Total 198,395 197,634 761

The actual number of employees at December 31, 2013 and December 31, 2012 was broken down as follows:

Units Units Change 2013 2012 Executives 156 159 (3) Middle Managers 483 495 (12) White-collar 1133 1132 1 Blue-collar 723 734 (11) Total 2,495 2,520 (25)

The average number of employees is shown below:

Units Units Change 2013 2012 Executives 158 158 0 Middle Managers 487 485 2 White-collar 1138 1139 (1) Blue-collar 730 731 (1) Total 2,513 2,513 0

9 OTHER OPERATING EXPENSES

In 2013, other operating expenses totalled Euro 29,996 thousand, in line with 2012, and may be analysed as follows:

2013 2012 Change

Indirect taxes and duties 11,292 8,479 2,813 Contingent liabilities 1,446 4,076 (2,630) Cash flow hedge 170 7,024 (6,854) Other expenses 17,088 9,408 7,680 Total 29,996 28,987 1,009

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 30 “Other expenses” includes non-recurring selling costs incurred during the year in relation to production problems.

“Cash flow hedge” refers to derivative hedging instruments and the exchange differences realised on the underlying USD receivables and to forward contracts for currency purchases arranged to hedge USD payables, as recorded on a hedge accounting basis.

10 DEPRECIATION AND AMORTISATION

Depreciation and amortisation amount to Euro 51,084 thousand, in line with 2012. Depreciation and amortisation are broken down by asset category in the following table:

2013 2012 Change

Amortization of intangible assets with a definite useful life: - Industrial patent rights and copyrights (note 18) 2,129 2,022 107 - Concessions, licenses, trademarks and similar rights (note 18) 4,837 5,374 (537) - Customers List (nota 18) 8,522 8,828 (306) - Other intangible assets (note 18) 3,107 1,242 1,865 (A) 18,595 17,466 1,129 Depreciation of owned property, plant and equipment: - Industrial buildings (note 16) 2,973 2,982 (9) - Plant (note 16) 17,720 17,295 425 - Machinery and industrial equipment (note 16) 8,175 7,852 323 - Other assets (note 16) 2,453 2,307 146 Depreciation of investment property: - Civil buildings (note 17) 225 225 0 (B) 31,546 30,661 885 Depreciation of property, plant and equipment under finance leases and leasehold improvements: - Industrial buildings (note 16) 132 1,536 (1,404) - Plant (note 16) 720 831 (111) - Machinery and industrial equipment (note 16) 21 51 (30) - Other assets (note 16) 71 74 (3) (C) 944 2,492 (1,548) Total (A)+(B)+(C) 51,084 50,619 465

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 31 11 PROVISIONS AND WRITEDOWNS

In 2013, this caption amounted to Euro 14,675 thousand (Euro 3,477 thousand in 2012) and may be broken down as shown in the following table:

2013 2012 Change

Provisions 6,122 97 6,025 Impairme nt of intangible and tangible assets 8,541 3,365 5,176 Writedowns of equity investments 12 15 (3) Total 14,675 3,477 11,198

“Provisions” mainly refers to amounts allocated in relation to production problems encountered during the year where the related costs are expected to be incurred in the coming year.

“Impairment of intangible and tangible assets” mainly refers to impairment adjustments made during the period to certain intangible assets owned by the Group; see Note 19 Goodwill and Consolidation Differences.

12 FINANCIAL INCOME

Financial income amounts to Euro 10,768 thousand, Euro 1,545 thousand less than in 2012, and is analysed as follows:

2013 2012 Change

Other financial income Interest income from current securities 413 413 0 Interest income from receivables from 706 525 181 associated companies Interest from bank deposits 190 209 (19) Income from fair value hedge derivatives 2,293 853 1,440 Other financial income 681 711 (30) (A) 4,283 2,711 1,572 Exchange gains Exchange gains 6,409 9,590 (3,181) (B) 6,409 9,590 (3,181) Fair value of derivatives Positive adjustme nt to fair value of hedging 76 12 64 derivatives (C) 76 12 64 Total (A)+(B)+(C) 10,768 12,312 (1,545)

“Financial income and expenses” includes amounts relating to derivative contracts to hedge risks relating to loans (exchange rate and interest rate risks) while income and expenses relating to hedging contracts for commercial transactions are recorded under “Other income” and “Other operating expenses”.

“Income from fair value hedge derivative instruments” refers to forward contracts for the sale of currency, arranged to hedge loans granted by holding company Bracco Imaging S.p.A to Group companies Bracco Diagnostics Inc. and Bracco Imaging Korea Ltd.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 32 13 FINANCIAL EXPENSES

Financial expenses amount to Euro 35,373 thousand, Euro 6,299 thousand more than in 2012, and are analysed as follows:

2013 2012 Change

Interest expense and other financial charges

Interest expense on loans and borrowings 9,717 9,094 623

Interest expenses with banks 17 118 (101) Commissions 3,153 2,476 677 Charges from interest rate hedging 1,163 1,375 (212) derivatives Charges from discounting employee 1,341 1,210 131 benefits Losses on swap-FRA 56 872 (816) Other financial charges 3,702 2,885 817 (A) 19,149 18,030 1,119 Exchange losses Exchange losses 12,617 9,704 2,913 Unrealized exchange losses 3,298 734 2,564 (B) 15,915 10,438 5,477 Fair value of derivatives Negative adjustment to fair value of 310 369 (59) derivatives hedging currency receivables Negative adjustment to fair value of 0 238 (238) derivatives hedging currency loans

(C) 310 607 (297) Total (A)+(B)+(C) 35,373 29,075 6,299

“Interest expenses on loans and borrowing” mainly refers to interest expenses on loans arranged by the holding company with Banca Nazionale del Lavoro (Euro 1,174 thousand), Mediobanca (Euro 2,069 thousand), Centrobanca (Euro 717 thousand) and Banca Intesa San Paolo (Euro 3,516 thousand). The increase in 2013 was mainly due to an increase in the average level of bank loans and borrowing (see Note 32 “Financial payables and liabilities”).

“Expenses from derivative instruments to hedge interest rate risk” essentially regards hedging of the interest rate risk on loans arranged by the holding company.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 33 14 TAXES ON INCOME

Taxes on income for the years ended December 31, 2013 and 2012 may be analysed as follows:

2013 2012 Change

Provisions for taxes for the year IRES/IRAP 18,674 20,287 (1,613) Other direct taxes 10,596 50,093 (39,497)

Total taxes (A) 29,270 70,380 (41,110)

Provisions for deferred tax liabilities 1,854 729 1,125 Reversal of deferred tax liabilities (11,985) (7,998) (3,987)

Total deferred tax liabilities (B) (10,131) (7,269) (2,862)

Deferred tax assets (6,328) (2,307) (4,021) Reversal of deferred tax assets 6,569 (1,808) 8,377

Total deferred tax assets (C) 241 (4,115) 4,356 Total (A)+(B)+(C) 19,380 58,996 (39,616)

In 2012, “Other taxes” included tax expenses relating to the tax dispute settled by holding company Bracco Imaging S.p.A. with the Lombardy Regional Head Office of the Italian Tax Authorities.

Deferred taxes relating to amounts recorded in the balance sheet totalled Euro 7,707 thousand (Euro 104 thousand in 2012); for more details, see Note 29 “Deferred tax assets/liabilities”. The following table contains a reconciliation between the theoretical tax rate and the effective rate per the financial statements and the corresponding theoretical and effective tax charges:

2013 2012 Value % Value %

Income before taxes 46,201 68,793 Tax calculated based on the current tax rates 12,705 27.5% 18,918 27.5%

Permanent differences: Different rates of foreign companies (4,615) -10.0% (5,117) -7.4% Companies closing with a loss 3,567 7.7% 127 0.2% Taxes from previous years 0 0.0% 41,600 60.5% Other net changes 4,170 9.0% (431) -0.6% IRAP calculated based on results other than income before taxes 3,552 7.7% 3,898 5.7%

Total effective taxes charged to the income statement 19,380 41.9% 58,996 85.8%

15 NET PROFIT/LOSS FROM DISCONTINUED OPERATIONS

This item shows a profit of Euro 7.9 million representing the net gain on the sale of the assets and property of the HPPD business (see Note“3 Change of scope of consolidation and non-recurring transactions”).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 34 Consolidated Statement of Financial Position

16 PROPERTY, PLANT AND EQUIPMENT

The following tables provide a breakdown of this caption and movements thereon in 2013 and 2012:

December 31, 2013 December 31, 2012 (Net value) Historical Accumulated Historical Accumulated Ne t value Ne t value cost depreciation cost depreciation Land 20,451 0 20,451 20,567 0 20,567 Leased land 0 0 0 0 0 0 Total land 20,451 0 20,451 20,567 0 20,567

Owned industrial buildings 66,365 (25,622) 40,743 67,206 (23,120) 44,086 Industrial buildings under finance lease and leasehold 3,743 (3,004) 739 3,841 (2,997) 844 improvements Total industrial buildings 70,108 (28,626) 41,482 71,047 (26,117) 44,930

Owned plant 207,504 (123,003) 84,501 196,551 (107,939) 88,612 Plant under finance lease and leasehold improvements 8,947 (7,687) 1,260 8,680 (6,967) 1,713 Total plant 216,451 (130,690) 85,761 205,231 (114,906) 90,325

Owned machinery and industrial equipment 71,642 (56,598) 15,044 65,171 (49,403) 15,768 Machinery and industrial equipment under finance lease (1) 0 (1) 616 (192) 424 and leasehold improvements Total machinery and industrial equipment 71,641 (56,598) 15,043 65,787 (49,595) 16,192

Other owned assets 21,984 (16,411) 5,573 21,665 (14,579) 7,086 Other assets under finance lease and leasehold 696 (535) 161 788 (489) 299 improvements Total other assets 22,680 (16,946) 5,733 22,453 (15,068) 7,385

Advance payments and fixed assets in progress 23,544 0 23,544 22,305 0 22,305

Total 424,874 (232,860) 192,012 407,389 (205,687) 201,702

The following table provides details of historical cost and accumulated depreciation for each item in the reporting periods ended December 31, 2013 and December 31, 2012.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 35 Exchange December Write December (Historical cost) Increases Decreases Reclass. gains 31, 2012 downs 31, 2013 (losses)

Land 20,567 0 0 0 0 (116) 20,451 Leased land 0 0 0 0 0 0 0 Total land 20,567 0 0 0 0 (116) 20,451

Owned industrial buildings 67,206 20 0 0 38 (899) 66,365 Industrial buildings under finance lease and leasehold 3,841 172 (133) 0 0 (137) 3,743 improvements Total industrial buildings 71,047 193 (133) 0 38 (1,036) 70,109

Owned plant 196,551 4,312 0 (678) 8,370 (1,051) 207,504 Plant under finance lease and leasehold 8,680 267 0 0 0 0 8,947 improvements Total plant 205,231 4,579 0 (678) 8,370 (1,052) 216,450

Owned ma chinery and industrial equipment 65,171 6,957 (830) 0 2,340 (1,996) 71,642 Machinery and industrial equipment under finance 616 0 (190) 0 (402) (25) (1) lease and leasehold improvements Total machinery and industrial equipment 65,787 6,957 (1,020) 0 1,938 (2,021) 71,641

Other owned assets 21,665 1,061 (284) 0 762 (1,220) 21,984 Other leased assets and leasehold improvements 788 6 (34) 0 0 (64) 696 Total other assets 22,452 1,067 (318) 0 762 (1,284) 22,679

Advance payments and fixed assets in progress 22,305 13,354 (219) (113) (11,120) (663) 23,544

Total original cost 407,389 26,150 (1,690) (791) (12) (6,172) 424,873

Exchange December Write December (Accumulated depreciation) Amortization Decreases Reclass. gains 31, 2012 downs 31, 2013 (losses)

Owned industrial buildings 23,120 2,973 0 0 0 (471) 25,622 Industrial buildings under finance lease and leasehold 2,997 132 0 0 0 (125) 3,004 improvements Total industrial buildings 26,117 3,105 0 0 0 (596) 28,626

Owned plant 107,939 17,722 0 (207) (1,833) (618) 123,003 Plant under finance lease and leasehold 6,967 720 0 0 0 0 7,687 improvements Total plant 114,906 18,442 0 (207) (1,833) (618) 130,690

Owned ma chinery and industrial equipment 49,403 8,175 (627) 0 962 (1,315) 56,598 Machinery and industrial equipment under finance 192 21 (190) 0 (22) (1) 0 lease and leasehold improvements Total machinery and industrial equipment 49,595 8,196 (817) 0 940 (1,316) 56,598

Other owned assets 14,579 2,453 (285) 0 530 (866) 16,411 Other leased assets and leasehold improvements 489 71 0 0 5 (30) 535 Total other assets 15,068 2,524 (285) 0 535 (896) 16,946

Advance payments and fixed assets in progress 0 0 0 0 0 0 0

Total accumulated depreciation 205,686 32,267 (1,102) (207) (358) (3,426) 232,860

(Net value) 201,702 (6,117) (588) (584) 346 (2,746) 192,012

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 36 Change in Exchange December Write December (Historical cost) scope of Increases Decreases Reclass. gains 31, 2011 downs 31, 2012 consolidation (losses)

Land 20,382 0 162 0 0 0 23 20,567 Leased land 0 0 0 0 0 0 0 0 Total land 20,382 0 162 0 0 0 23 20,567

Owned industrial buildings 62,971 14 1,440 0 0 2,591 190 67,206 Industrial buildings under finance lease and leasehold 7,547 0 361 (3,725) 0 (366) 24 3,841 improvements Total industrial buildings 70,518 14 1,801 (3,725) 0 2,225 214 71,047

Owned plant 189,565 0 4,689 (361) (95) 2,639 114 196,551 Plant under finance lease and leasehold 8,576 0 44 0 0 60 0 8,680 improvements Total plant 198,141 0 4,733 (361) (95) 2,699 114 205,231

Owned machinery and industrial equipment 60,530 447 6,470 (607) 0 (941) (728) 65,171 Machinery and industrial equipment under finance 396 0 132 (207) 0 327 (32) 616 lease and leasehold improvements Total machinery and industrial equipment 60,926 447 6,602 (814) 0 (614) (760) 65,787

Other owned assets 18,500 172 3,581 (9,639) 0 9,369 (318) 21,665 Other leased assets and leasehold improvements 455 280 101 (14) 0 0 (34) 788 Total other assets 18,955 452 3,682 (9,653) 0 9,369 (353) 22,452

Advance payments and fixed assets in progress 11,083 1,204 18,084 (2,040) (149) (5,672) (205) 22,305

Total original cost 380,005 2,117 35,064 (16,593) (244) 8,007 (967) 407,389

Change in Exchange December Write December (Accumulated depreciation) scope of Amortization Decreases Reclass. gains 31, 2011 downs 31, 2012 consolidation (losses)

Owned industrial buildings 19,022 0 2,982 0 0 995 121 23,120 Industrial buildings under finance lease and leasehold 4,270 0 1,536 (3,716) 0 919 (12) 2,997 improvements Total industrial buildings 23,292 0 4,518 (3,716) 0 1,914 109 26,117

Owned plant 90,658 0 17,362 (275) 0 81 113 107,939 Plant under finance lease and leasehold 6,136 0 831 0 0 0 0 6,967 improvements Total plant 96,794 0 18,193 (275) 0 81 113 114,906

Owned machinery and industrial equipment 44,377 0 7,852 (551) 0 (1,908) (367) 49,403 Machinery and industrial equipment under finance 338 0 51 (207) 0 0 10 192 lease and leasehold improvements Total machinery and industrial equipment 44,715 0 7,903 (758) 0 (1,908) (357) 49,595

Other owned assets 12,300 0 2,239 (9,574) 0 9,793 (179) 14,579 Other leased assets and leasehold improvements 416 0 74 (6) 0 0 5 489 Total other assets 12,716 0 2,313 (9,580) 0 9,793 (174) 15,068

Advance payments and fixed assets in progress 0 0 0 0 0 0 0 0

Total accumulated depreciation 177,517 0 32,927 (14,329) 0 9,880 (309) 205,686

(Net value) 202,488 2,117 2,137 (2,264) (244) (1,873) (658) 201,702

The increase of Euro 26,150 million in property, plant and machinery in 2013 (Euro 35,064 thousand in 2012) mainly regarded capex on increasing production capacity and on plans to make the Group’s manufacturing facilities more efficient.

In 2012, the “change in scope of consolidation” of Euro 2,117 thousand referred to the inclusion of the property, plant and equipment of Justesa Imagen Argentina S.A., Justesa Imagen Mexicana S.A. DE C.V. and Justesa Imagen do Brasil S.A. which were acquired on April 19, 2012.

As already stated in prior year financial statements, effective from the date of transition to IAS/IFRS (January 1, 2005), the value of certain land, buildings and plant (recorded under “Property, plant and equipment” of Bracco Imaging S.p.A. and Spin S.p.A.) was recalculated, in application of the option available

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 37 under IFRS 1 which allowed for the adoption of the fair value of land, buildings, plant and machinery in place of their historical cost, as under the previous accounting principles. In particular, the fair value (fair value as deemed cost) of the manufacturing facilities in Ceriano Laghetto (the main manufacturing facility of Bracco Imaging S.p.A.) and Torviscosa (manufacturing facility of Spin S.p.A.) was determined with the value of the relevant assets appraised by an independent firm.

Fair value was determined using generally accepted valuation methods and principles, also in this case using valuation criteria based on the “Comparative method” and the “Cost method”.

The reserves created upon first-time application of IAS/IFRS are subject to the rules under Article 7 (6) of Legislative Decree no. 38 of February 25, 2005 which provides that equity increases due to the recognition of tangible assets at fair value (fair value as deemed cost) in place of cost shall be allocated to capital or to a specific reserve. When not allocated to capital, the reserve can only be reduced in compliance with Article 2445 (2) and (3) of the Italian Civil Code. If the reserve is used to cover losses, earnings cannot be distributed until such time as the reserve has been restored or reduced to the extent approved by a resolution of the Extraordinary General Meeting, as the provisions of Article 2445(2) and (3) of the Italian Civil Code do not apply. On July 12, 2007, an Extraordinary General Meeting of holding company Bracco Imaging S.p.A. approved the utilisation of the full amount of these reserves (Euro 32,327 thousand) to cover losses recorded under “Prior year accumulated losses”.

The following table shows, for each category of revalued property, plant and equipment, a comparison between net carrying amount in these financial statements and the net carrying amount which would have been reported using the accounting principles in force prior to the transition to IAS/IFRS:

December 31, 2013 December 31, 2012

Ne t book value Ne t book value Deemed Deemed before deemed before deemed Cost Cost cost cost

Land 1,398 9,359 1,398 9,359 Owned industrial buildings 7,436 8,279 7,849 8,739 Plant 17,849 25,364 22,246 33,432

Total 26,683 43,002 31,493 51,530

The Group also operates through production facilities owned by it and short/medium-term sub-contract agreements with third parties.

The Group is party to several contracts which are similar to finance leases (IFRIC 4) even though they do not have the legal form of finance leases. Such contracts provide for the right to use certain assets and other specific conditions and, as such, are akin to finance leases and must be accounted for accordingly, based on the method required by IAS 17.

In more detail, the Group is party to several contracts with Bioindustry Park Silvano Fumero S.p.A. for the construction of pilot chemical/pharmaceutical plants and for the construction of a pharmaceutical plant to develop and produce specialist injectable medicines, as well as for a Research Centre at the Biopark in Colleretto Giacosa (TO). These contracts provided for payment of regular instalments and the construction of said plants which was completed in prior years. The contracts are for between six and eight years – renewable for similar periods – and are scheduled to expire by 2016.

The Group’s property, plant and equipment is not subject to any ownership restrictions or secured guarantees, except for the Spin S.p.A. facilities in Torviscosa on which a lien has been granted in favour of Mediocredito Friuli Venezia Giulia (see Note 32 “Financial payables and liabilities”).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 38 17 INVESTMENT PROPERTY

The following tables show movements in the last two reporting periods on historical cost, accumulated depreciation and net carrying amount.

December 31, 2013 December 31, 2012 Historical Historical (Net value) Accumulated Ne t Value Accumulated Ne t Value Cost Cost depreciation depreciation

Land 1,280 0 1,280 1,280 0 1,280 Non-industrial buildings 6,080 (2,027) 4,053 6,080 (1,802) 4,278

Total 7,360 (2,027) 5,333 7,360 (1,802) 5,558

Exchange December December 31, (Historical cost) Increases Decreases gains 31, 2012 2013 (losses)

Land 1,280 0 0 0 1,280 Non-industrial buildings 6,080 0 0 0 6,080

Total 7,360 0 0 0 7,360

Exchange December December 31, (Accumulated depreciation) Amort. Decreases gains 31, 2012 2013 (losses)

Industrial buildings 1,802 225 0 0 2,027

Total 1,802 225 0 0 2,027

(Net value) 5,558 (225) 0 0 5,333

Exchange December December 31, (Historical cost) Increases Decreases gains 31, 2011 2012 (losses)

Land 1,280 0 0 0 1,280 Non-industrial buildings 6,080 0 0 0 6,080

Total 7,360 0 0 0 7,360

Exchange December December 31, (Accumulated depreciation) Amort. Decreases gains 31, 2011 2012 (losses)

Industrial buildings 1,575 227 0 0 1,802

Total 1,575 227 0 0 1,802

(Net value) 5,785 (227) 0 0 5,558

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 39 At the date of transition to IAS/IFRS, the value of certain land and buildings (recorded under “Investment property”) was recalculated, in application of the option available under IFRS 1 which allowed for the adoption of the fair value of land and buildings in place of their historical cost, as under the previous accounting principles. In particular, the fair value (fair value as deemed cost) of the investment property in Cesano Maderno was determined by means of an independent appraisal performed by a leading firm.

Fair value was determined based on generally accepted valuation methods and principles. In particular, the “Comparative (or market) method” was used based on a comparison between the assets in question and other similar assets recently involved in sale and purchase transactions or available for sale on the same or competing markets.

Income of Euro 373 thousand was recorded in 2013 from the rental of these assets, Euro 82 thousand more than in 2012.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 40 18 INTANGIBLE ASSETS

These are intangible assets with a determinate useful life and may be analysed as follows:

December 31, December 31, 2013 2012

Patents and intellectual property rights 18,732 19,688

Concessions, licenses, trademarks and similar rights 40,217 45,209 Customer list 59,016 70,538 Other intangible assets 16,956 8,236 Other intangible assets in progress 22,617 23,100 Total 157,538 166,771

Movements on intangible assets in 2013 and 2012 were as follows:

Exchange December December (Historical cost) Increases Decreases Writedowns gains Reclass. 31, 2012 31, 2013 (losses) Patents and intellectual property rights 128,176 1,085 0 0 (3,615) 175 125,821 Concessions, licenses, trademarks and similar rights 85,264 1,615 (2) (610) (4,063) 3,712 85,916 Customer list 108,420 2,454 0 (4,777) (4,743) 0 101,354 Other intangible assets 21,088 2,353 0 0 (177) 6,547 29,812 Intangible assets in progress 23,100 2,443 0 (2) (910) (2,014) 22,617 Total 366,048 9,950 (2) (5,389) (13,508) 8,420 365,520

Exchange December December (Accumulated depreciation) Amort. Decreases Writedowns gains Reclass. 31, 2012 31, 2013 (losses) Patents and intellectual property rights 108,488 2,130 0 0 (3,446) (83) 107,089 Concessions, licenses, trademarks and similar rights 40,055 4,837 (1) 0 (2,264) 3,072 45,699 Customer list 37,882 8,523 0 (1,831) (2,014) (222) 42,338 Other intangible assets 12,852 3,104 0 0 (186) (2,914) 12,856 Total 199,277 18,594 (1) (1,831) (7,910) (147) 207,982

(Net Value) 166,771 (8,644) (1) (3,558) (5,598) 8,567 157,538

December Change in scope Exchange December (Historical cost) Increases Decreases Writedowns Reclass. 31, 2011 of consolidation gains (losses) 31, 2012 Patents and intellectual property rights 130,733 0 0 0 0 (972) (1,585) 128,176 Concessions, licenses, trademarks and similar rights 86,626 68 132 0 (397) (2,091) 926 85,264 Customer list 116,445 2,871 0 0 (4,729) (1,573) (4,594) 108,420 Other intangible assets 12,297 0 4,335 0 0 (238) 4,694 21,088 Intangible assets in progress 25,876 0 1,783 0 (7) (415) (4,137) 23,100 Total 371,977 2,939 6,250 0 (5,133) (5,289) (4,696) 366,048

December Change in scope Exchange December (Accumulated depreciation) Amort. Decreases Writedowns Reclass. 31, 2011 of consolidation gains (losses) 31, 2012 Patents and intellectual property rights 108,142 0 2,022 0 0 (922) (754) 108,488 Concessions, licenses, trademarks and similar rights 35,880 0 5,374 0 0 (1,199) 0 40,055 Customer list 31,557 0 8,828 0 0 (685) (1,818) 37,882 Other intangible assets 10,706 0 1,240 0 0 (222) 1,128 12,852 Total 186,285 0 17,464 0 0 (3,028) (1,444) 199,277

(Net Value) 185,692 2,939 (11,214) 0 (5,133) (2,261) (3,252) 166,771

The increase during the year in “Patents and intellectual property rights”, “Concessions, licences, trademarks and similar rights” and “Customer list” includes the acquisition by the Group – through subsidiary Bracco Injeneering S.A. – of the radiology contrast injectors business of Acist Medical System Inc. This transaction is classed as an operation under common control as it involved companies belonging to the same Group. Pursuant to IAS/IFRS, the difference of Euro 8.5 million between the amount paid and the shareholders’

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 41 equity of the company acquired has been allocated to a specific reserve as a reduction to equity (see Note 3 “Change in scope of consolidation and non-recurring transactions”).

The increase during the year in “Other intangible assets in progress” and “Other intangible assets” mainly relates to the implementation of information and management systems that were not completed during the year and capex on information systems for the implementation of a new version of a software package.

The change in the scope of consolidation – a total of Euro 2,939 thousand – referred to the acquisition of Justesa Imagen Argentina S.A., Justesa Imagen Mexicana S.A. DE C.V. and Justesa Imagen Do Brasil S.A. on April 19, 2012. For more information, see Note 3 “Change in scope of consolidation”.

The intangible assets reported in the financial statements mainly relate to HLT Inc., E-Z-EM Inc., Bracco Diagnostics Inc. and Bracco Injeneering S.A.

For HLT Inc., as at December 31, 2012, “Other intangible assets in progress” represented the valuation of intangible assets under development, at the start-up phase.

For E-Z-EM, the following table provides details of intangible assets with a determinate and indeterminate useful life, relating to the acquisition by the Group in 2008. The increase during the year refers to the acquisition of the radiology injectors business from associated company Acist Medical System Inc. in 2013 (see Note 3 “Change in Scope of Consolidation and Non-recurring transactions”). These amounts were allocated at the date of acquisition based on an appraisal performed by an independent US firm and undergo a specific recoverability test every year:

Exchange April 1st December 31, December 31, December 31, December 31, December 31, December 31, Increases Amortization Reclass. Writedowns gains 2008 2008 2009 2010 2011 2012 2013 (losses)

Patents 5,248 5,480 4,931 4,924 4,680 3,360 1,085 (447) 92 0 (137) 3,954 Trademarks 7,822 8,201 7,488 7,604 7,369 6,752 623 (678) 0 0 (275) 6,422 Customer list 34,941 33,043 30,703 30,917 29,065 23,410 2,453 (2,736) 222 (2,946) (1,141) 19,262

Total 48,011 46,724 43,122 43,445 41,114 33,522 4,161 (3,861) 314 (2,946) (1,553) 29,638

Intangible assets also include the allocation to some intangible assets with a determinate useful life of US company Bracco Diagnostics Inc. of the merger deficit arising in 2006. This allocation process was based on an appraisal commissioned from a US appraisal firm which was confirmed in the fairness opinion issued by another independent expert. The amounts in question undergo a specific annual recoverability test.

Exchange December 31, December 31, December 31, December 31, December 31, December 31, December 31, Amortization Writedowns gains 2007 2008 2009 2010 2011 2012 2013 (losses)

Patents 2,195 2,031 1,682 1,511 1,249 919 (304) 0 (29) 586 Trademarks 44,134 44,068 39,825 40,229 38,747 34,870 (2,699) (610) (1,387) 30,174 Customer list 47,500 46,379 41,071 40,254 37,413 32,613 (3,900) 0 (1,412) 27,301

Total 93,829 92,478 82,578 81,993 77,408 68,402 (6,904) (610) (2,827) 58,061

Patents refer to ProHance, a product applied in the MRI segment.

Trademarks relate to the following products which are currently sold and distributed in the USA:

Trademark Modality Isovue X-Rays/CAT Gastrografin X-Rays/CAT Prohance MRI Kinevac Nuclear Medicine CardioGen Nuclear Medicine

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 42 Trademarks also include several “injectable iodinated products” and “radio-pharmaceutical products”.

Finally, with regard to Bipso G.m.b.H. and Bracco Injeneering S.A., the following table shows the value of intangible assets with a determinate useful life relating to the acquisition by the Group in 2011. These allocations were performed at the date of acquisition on the basis of an independent appraisal and undergo annual recoverability tests:

August 31, December 31, December 31, December 31, BIPSO G.m.b.H. Amortization Writedowns 2011 2011 2012 2013

Patents 9,000 8,800 8,200 (600) 0 7,600 Customer list 3,700 3,453 2,710 (740) 0 1,970 Total 12,700 12,253 10,910 (1,340) 0 9,570

July 26, December 31, December 31, December 31, Bracco Injeneering S.A. Amortization Writedowns 2011 2011 2012 2013

Patents 7,566 7,038 6,601 (492) 0 6,109 Trademarks 1,548 1,439 1,349 (96) 0 1,253 Customer list 16,079 14,957 9,306 (739) 0 8,567

Total 25,193 23,434 17,256 (1,327) 0 15,929

Intangible assets also include the following:

Patents and intellectual property rights Rights to patents and production know-how purchased from third parties. These rights are amortised on a straight-line basis over their estimated useful lives which vary from three to eight years.

Concessions, licences, trademarks and similar rights Distribution and marketing rights purchased from third parties. These rights are amortised on a straight-line basis over their estimated useful lives which vary from five to ten years.

Other intangible assets This item mainly consists of document management information systems relating to research and development activities.

In 2013, the Group again confirmed its strong commitment to research and development in the Imaging Agents segment with a total investment of around Euro 70.9 million, all of which was expenses to the income statement for the year in accordance with IAS/IFRS as capitalisation requirements were not met.

19 GOODWILL AND CONSOLIDATION DIFFERENCES

The following tables contains details of these balances at December 31, 2013 and December 31, 2012:

December December 31, Exchange Increases Writedowns Reclass. 31, 2012 gains (losses) 2013

Goodwill 108,469 4,131 (4,400) (8,525) (4,007) 95,668

Total 108,469 4,131 (4,400) (8,525) (4,007) 95,668

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 43 Change in Exchange December December 31, scope of Increases Writedowns Reclass. gains 31, 2011 consolidation (losses) 2012

Goodwill 99,669 10,856 1,935 (1,229) (1,632) (1,130) 108,469

Total 99,669 10,856 1,935 (1,229) (1,632) (1,130) 108,469

Increases of Euro 4,131 thousand in 2013 refer to the final instalment of the payment regarding the transfer to the Group of the ”import product registration” and related licences and authorisations for the Korean market (see Note 3 “Change in scope of consolidation and non-recurring transactions”); as a result of allocation to specific intangible assets during the year, on the basis of an independent appraisal, Goodwill was the subject of a reclassification adjustment of Euro 8,525 thousand.

The reported goodwill totalling Euro 95,668 thousand refers – in addition to the above – to the acquisition of E-Z-EM in 2008, the acquisition of Heart Leaflet Technologies Inc. in 2010, the acquisitions of BIPSO G.m.b.H. and Bracco Injeneering S.A. in 2011 and the acquisitions of Justesa Imagen Argentina S.A., Justesa Imagen Mexicana S.A. DE C.V. and Justesa Imagen Do Brasil S.A. in 2012.

Impairment of assets

As required by IAS 36, the Group has performed an impairment test to check the recoverability of the net book value of the tangible and intangible assets recorded in the Group consolidated financial statements at December 31, 2013. In particular, the goodwill recorded in the consolidated financial statements is subjected to an impairment test at least once a year even if there are no indicators of impairment.

Under the method required by IAS 36, the Group has identified CGUs (Cash Generating Units) which represent the smallest identifiable units in the consolidated financial statements that are capable of generating cash flow on a broadly independent basis. The organisational structure, the type of business and the manner in which control is exercised over the operations of the CGUs themselves were taken into account when identifying the CGUs.

The Group operates in various business segments and the CGUs identified by Management based on “modality” are as follows: - X Rays /CAT - X Rays/CAT – EZEM core - MRI - Ultrasuond - Nuclear Medicine - HLT Business - Injectors Business We note that the radiology contrast injectors business acquired by the Group from associated company Acist Medical Systems Inc. in January 2013 (see Note 3 “Changes in scope of consolidation and non-recurring transactions”) was combined with the Injectors Business CGU in 2013. This was consistent with the method used by Group Management to monitor and check on the performance of this CGU.

The amounts tested for each CGU are listed below: 2013 €/milion Total tested Goodwill assets CGU

X-Ray/Ct 222.9 20.8 X-Ray/Ct - E-Z-EM core 71.6 42.7 Magnetic Risonance 35.6 4.1 Ultrasound 20.5 - Nuclear 30.9 - HLT Business 27.9 7.0 Injector Business 41.1 21.0 Total 450.5 95.7

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 44 Impairment test structure

As in prior years, Management appointed an independent appraisal firm to assist it to test the recoverable amount of some intangible assets included in the consolidated financial statements on which an impairment test was performed. In more detail:

Bracco Diagnostics Inc. - Intangible assets Industrial patents Royalty rate method Trademarks Royalty rate method

E-Z-EM -Intangible assets Industrial patents Royalty rate method Trademarks Royalty rate method Customer list Excess Earnings method

Bracco Injeenering S.A. - Intangible assets Goodwill Value in use - Discounted Cash Flow Industrial patents Royalty rate method Trademarks Royalty rate method Customer list Excess Earnings method

Bracco Imaging do Brasil - Intangible assets Goodwill Value in use - Discounted Cash Flow Customer list Excess Earnings method

Justesa Imagen Mexicana - Intangible assets Goodwill Value in use - Discounted Cash Flow Customer list Excess Earnings method

The first level impairment test revealed that the value of some intangible assets had been impaired. Consequently, impairment adjustments were made to certain intangible assets classified under “Goodwill” and “Customer List” whose value in use was lower than their carrying amount, as follows: - E-Z-EM Canada Inc.: impairment adjustment of Euro 2.9 million; - Bracco Injeneering S.A.: impairment adjustment of Euro 1.9 million; - Bracco Imaging do Brasil Importacao e Distribucao de Medicamentos Ltda: impairment adjustment of Euro 1.7 million; - Justesa Imagen Mexicana S.A. DE C.V.: impairment adjustment of around Euro 0.8 million; These adjustments were made in order to bring carrying amount into line with recoverable amount.

As required by IAS/IFRS, the impairment adjustments were recorded in the income statement under “Provisions and writedowns of intangible assets”.

Management also performed a second level impairment test to check that the overall recoverable value of intangible and tangible assets was not lower than their carrying amount, in application of IAS 36. This test was performed based on the aforementioned CGUs.

The recoverable amount of the CGUs was determined as the “value in use”. Value in use is the present value of the operating cash flows expected from the continuing use of the assets of the CGU, also at the end of their estimated useful lives (applying the perpetuity method).

The Group performed the impairment test using the most recent income statement and cash flow forecasts for a period of five years, presuming that assumptions would materialise and targets would be met. When processing the forecast financial information, Management made certain assumptions based on its prior experience and expectations for future developments in the business segments in which it operates.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 45 The Business Plan 2014-2018 prepared and utilised for impairment test purposes includes both variables that can be controlled by Group management and variables not directly controllable or foreseeable by it.

The main assumptions made for the CGU cash flow forecasts included in the plan relate to sales margins, sales volumes, price trends and operating expenses.

Production costs are expected in line with historical trend also thanks to capex forecast and greater economies of scale. Research and development costs are expected to be in line with historical levels and regard the improvement of existing technologies as well as the development of new applications.

General and administrative expenses are expected to decrease in relation to cost containment measures and improvements in related processes and procedures.

Operating cash flow forecasts beyond the Business Plan period were made by extrapolating cash flows from the Business Plan. These projects and the estimated cash flows at the end of the useful life (“terminal value”) were determined using an appropriate rate of growth (“g rate”).

The assumptions sued for 2013 and 2012 are summarised in the following table:

2013 2012

Long term growth Long term growth Discount Rate Discount Rate rate rate

X-Ray/Ct (without E-Z-EM products) 1.5% 9.1% 1.5% 9.7% X-Ray/Ct E-Z-EM products 2.5% 9.1% 2.5% 9.3% Magnetic Risonance 1.5% 9.1% 1.5% 9.7% Ultrasound 1.5% 9.1% 1.5% 9.7% Nuclear 1.5% 9.1% 1.5% 9.7% HLT Business 2.5% 27.5% 2.5% 26.4% Injector Business 2.2% 13.4% 3.0% 14.4%

As the companies involved in the HLT CGU are still at the start-up phase, revenue has only been forecast in the long-term. Therefore, for impairment test purposes, a Business Plan for a significantly longer period was used and the related uncertainties are reflected in the utilisation of a much higher Weighted Average Cost of Capital (WACC) than for the other CGUs. Moreover, for the Injectors CGU, as the company is still finalising its business model and R&D expenditure on new product development is still underway, for impairment test purposes, we referred to cash flows which incorporate sales forecasts relating to the years beyond the explicit period with the resulting uncertainties reflected in the use of a significantly higher Weighted Average Cost of Capital (WACC) than for the other CGUs. The test performed did not identified any impairment of assets in addition to that identified during the first level test. Nonetheless, given that recoverable amount is determined based on estimates, the Group cannot be certain that the value of goodwill will not be impaired in future years. The continuing difficult market situation means that several factors used to perform the estimates might have to be revised.

The Group has also performed sensitivity analysis considering changes in the underlying assumptions for the impairment tests and, specifically, changes in the variables with the greatest impact on recoverable amount (discount rates, growth rates, terminal value and, where possible, revenue growth rate and resulting costs trend) determining the level of these variables which render value in use equal to carrying amount as shown below:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 46 - X-Ray/CAT Modality, X-Ray/CAT EZEM Core Modality, MRI Modality, Ultrasound Modality, Nuclear Medicine Modality: the sensitivity analysis produced positive results even considering a growth rate of zero and a significantly higher WACC than that used in the impairment test.

- HLT: the recoverable amount of the assets of this CGU is particularly sensitive to the Business Plan variables depending on the outcome of the development phase of products whose market launch is scheduled for 2015. Any significant changes to the Business Plan could make it difficult to recover the assets recorded.

- Injectors: the recoverable amount of the assets of this CGU is particularly sensitive to the Business Plan variables and, especially, to the scheduled timetable for the product launch on the North American market. Any significant changes to the Business Plan could make it difficult to recover the assets recorded .

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 47 20 INVESTMENTS

Investments in other entities, carried at cost, are as follows:

December 31, Movements for the year December 31, Writedowns 2012 Increases Decreases 2013

Other entities Bioindustry Park Silvano Fumero S.p.A. 2,130 0 0 0 2,130 Other investments 901 1,284 0 (12) 2,173

T O T A L 3,031 1,284 0 (12) 4,303

December 31, Movements for the year December 31, Writedowns 2011 Increases Decreases 2012

Other entities Bioindustry Park Silvano Fumero S.p.A. 2,130 0 0 0 2,130 Other investments 67 849 0 (15) 901

T O T A L 2,197 849 0 (15) 3,031

The increase for the year is due to: - Euro 750 thousand regarding the subscription of a share issue by Halo Industry S.p.A.; the Group has thus completed its subscription of 15% of the company’s share capital. - Euro 514 thousand for the future purchase of shares currently held by Friulia S.p.A., based on shareholder agreements as described below. The objectives of the company include the design, construction and operation of a state of the art chlor alkali membrane plant. When Halo Industry was incorporated, shareholder agreements were signed in order to regulate their relations. These agreements granted put and call options (on the interest held by Friulia S.p.A.) exercisable from July 1, 2016 and July 1, 2017, respectively, at a price equal to the amount paid by Friulia S.p.A. to subscribe its equity interest plus interest equal to the Euribor 3 month rate plus a spread.

At December 31, 2013, holding company Bracco Imaging’s interest in Bioindustry Park Silvano Fumero S.p.A. stood at 17.34%.

21 OTHER ASSETS AND NON-CURRENT FINANCIAL ASSETS

At 31 December 2013, these amounted to Euro 5,145 thousand and were in line with the December 31, 2012 level.

December 31, 2013 December 31, 2012 Between one After five Between one After five Total Total and five years years and five years years

Other financial receivables - third party 823 823 0 59 59 0 Other non-current financial assets 4,322 4,322 0 4,701 4,701 0 Total 5,145 5,145 0 4,760 4,760 0

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 48 22 INVENTORIES

Inventories are analysed as follows:

December 31 December 31 Gross value Provision 2013 2012 Raw materials 82,174 (556) 81,618 66,257 Semi-finished and contract work in progress 22,265 0 22,265 23,757 Finished products 130,447 (13,173) 117,274 116,120 Advance payaments 0 0 0 0 Total 234,886 (13,729) 221,157 206,134

The inventory provision is carried to take account of obsolete and slow moving inventories and to reflect commercial risks relating to products.

The following table shows movements on the inventory provision in 2013 and 2012.

December 31 Provision Utilization Exchange December 31 2012 for the year for the year gains (losses) 2013 Inventory provision 10,303 4,634 (1,032) (176) 13,729

Total 10,303 4,634 (1,032) (176) 13,729

December 31 Change in scope Provision Utilization Exchange December 31 2011 of consolidation for the year for the year gains (losses) 2012 Inventory provision 10,269 51 614 (611) (20) 10,303

Total 10,269 51 614 (611) (20) 10,303

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 49 23 TRADE RECEIVABLES

At December 31, 2013, trade receivables totalled Euro 116,621 thousand, Euro 4,140 thousand less than at December 31, 2012. They were analysed as follows:

December 31, December 31, 2013 2012 Trade receivables from third parties 115,296 120,684 Trade receivables from parent company 1,075 2 Trade receivables from other associated companies 250 76 Total 116,621 120,762

Details of trade receivables from the parent company and other associated companies are shown below:

December 31, December 31, Receivables from parent & and associated companies 2013 2012 Bracco S.p.A. 1,075 2 Acist Medical Systems, Inc. 215 0 Bracco Real Estate S.r.l. 0 0 Centro Diagnostico Italiano 35 76 Total 1,325 78

Trade receivables are stated net of the allowance for doubtful debts of Euro 7,701 thousand (Euro 7,658 thousand at 31 December 2012), as determined based on historical bad debt information. During the year, movement on the provision was as follows:

December 31, Provisions Utilizations Exchange December 31, 2012 for the year for the year gains (losses) 2013

Allowance for doubtful accounts 7,658 2,512 (2,358) (111) 7,701 Total 7,658 2,512 (2,358) (111) 7,701

December 31, Change in scope Provisions Utilizations Exchange December 31, 2011 of consolidation for the year for the year gains (losses) 2012

Allowance for doubtful accounts 7,994 13 579 (906) (22) 7,658 Total 7,994 13 579 (906) (22) 7,658

In 2013, on the Italian market only, the Group carried out the non-recourse factoring of receivables from hospital companies totalling Euro 38,130 thousand (Euro 31,771 thousand in 2012).

The factoring terms and conditions provide that the credit risk, the late payment risk and the interest rate risk are transferred to the factor. In 2013, IAS/IFRS rules whereby the receivables in question were eliminated from the statement of financial position on the effective date of transfer to the factoring company were applied.

The carrying amount of trade receivables, less the provision for doubtful debts, reflects their fair value.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 50 24 CURRENT FINANCIAL ASSETS

At December 31, 2013, Current financial assets amounted to Euro 52,115 thousand (Euro 51,778 thousand at December 31, 2012) and were detailed as follows:

December 31, December 31, 2013 2012

Financial receivables from associated companies 39,680 39,143 Financial receivables for derivative instrume nts 322 0 Other financial receivables 12,114 12,635 Total 52,115 51,778

The financial receivable from associated companies refers to a loan agreement with associated company Acist Medical Systems Inc. which will expire within a year.

“Other financial receivables” mainly refers to an investment in bonds issued by the European Investment Bank (EIB) at a fixed rate of 4.125% and maturing on April 15, 2014.

25 OTHER RECEIVABLES AND CURRENT ASSETS

Other receivables are analysed as follows:

December 31, December 31, 2013 2012 VAT receivables 14,368 15,907 Prepaid expenses 5,433 5,274 Other receivables from tax authorities 4,333 4,963 Receivables from parent company 5,571 6,286 Advance payments to suppliers 1,028 1,370 Accrued income 25 36 Receivables from affiliated companies 426 205 Cash Flow Hedge 0 2,887 Other receivables 1,055 857 Total 32,239 37,784

“VAT receivables” mainly regards holding company Bracco Imaging’s VAT receivable of Euro 11,318 thousand (Euro 11,891 thousand at December 31, 2012) inclusive of interest accruing at the reporting date (Euro 146 thousand).

The receivable from the parent company includes: - IRES/corporate income tax receivable by the Italian Group companies, totalling Euro 1,662 thousand and resulting from their participation in the Consolidated Taxation Arrangement; - Prior year IRES receivables of Euro 2,034 thousand representing the amount of the deduction of regional business tax IRAP relating to personnel costs now deductible under Article 2(1) of Decree Law 201/2011 (Monti Decree). A request for a refund of the IRES in question was filed on March 12, 2013.

“Receivables from associated companies” may be detailed as follows:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 51 December 31, December 31, Receivables from associated companies 2013 2012 Acist Medical Systems, Inc. 331 91 Centro Diagnostico Italiano 38 58 Bracco Real Estate S.r.l. 57 56 Total 426 205

26 CASH AND CASH EQUIVALENTS

At December 31, 2013, this caption was analysed as follows:

December 31, December 31, 2013 2012

Bank and post office accounts 101,545 63,426 Cash 41 45 Time deposit 1 3,916 Total 101,587 67,387

Further information on changes in the Group’s net financial position are provided in Notes 31 “Financial payables and liabilities” and 38 “Net financial position” and reflected in the Consolidated Statement of Cash Flows.

Bank and post office accounts represent amounts held on current accounts. They include Euro 71,782 thousand (Euro 31,037 thousand at December 31, 2012) denominated in currencies other than the Euro (mainly US Dollars).

The carrying amount of cash and cash equivalents was in line with fair value at both December 31, 2013 and December 31, 2012.

The credit risk relating to cash and cash equivalents may be considered limited as it is spread over several banks. Moreover, the amounts in question are held with leading Italian and international banks which are constantly measured using valuation methods specifically adopted by the Group.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 52 27 FINANCIAL INSTRUMENTS

A financial instrument is any contract that gives rise to a financial asset, a financial liability or an instrument represent capital in another entity (any contract representing a stake in the residual assets of an entity following settlement of all of its liabilities). The financial instruments held by the Group are included in the captions listed in the specific paragraph of the section “Summary of accounting principles and valuation methods”.

The following schedules show, separately for 2013 and 2012, the additional disclosures requested by IFRS 7 in order to measure the significance of financial instruments with regard to the Group’s statement of financial position and income statement.

Financial Instruments – Statement of Financial Position at December 31, 2013

Principles applied in measuring financial instruments (as per IAS 39)

Assets at fair Book value at Investments held Loans and Available-for-sale Financial instrume nts - Assets at December 31, 2013 value held for December 31, Notes to maturity receivables assets trading 2013

Investments 0 0 0 4,303 4,303 20 Financial assets and other non current assets 0 0 5,145 0 5,145 21 Trade receivables from third parties 0 0 115,297 0 115,297 23 Trade receivables from parent company and affiliated companies 0 0 1,325 0 1,325 23 Other receivables and current assets 0 0 32,239 0 32,239 25 Current financial assets 0 39,690 0 12,104 51,794 24 Cash and cash equivalents 0 0 101,587 0 101,587 26 Derivatives designated as hedging derivatives 322 0 0 0 0 24

Total 322 39,690 255,593 16,407 311,690

Principles applied in measuring financial instrume nts (as per IAS 39)

Liabilities at fair Book value at Liabilities at Financial instruments - Liabilit ies at December 31, 2013 value held for December 31, Notes amortized cost trading 2013

Financial liabiliteis due to other lenders 0 2,055 2,055 32 Finance leases 0 597 597 32 Trade payables due to third parties 0 115,057 115,057 34 Trade payables due to parent company and affiliated companies 0 3,771 3,771 34 Other liabilities 0 112,161 112,161 35 Bank debts 385,695 0 385,695 32 Derivatives 2,273 0 2,273 32 Cash flow hedging derivative payables 451 0 451 35 Total 388,419 233,641 622,060

Financial Instruments – Statement of Financial Position at December 31, 2012

Principles applied in measuring financial instruments (as per IAS 39)

Assets at fair Book value at Investments held Loans and Available-for-sale Financial instrume nts - Assets at December 31, 2012 value held for December 31, Notes to maturity receivables assets trading 2012

Investments 0 0 0 3,031 3,031 20 Financial assets and other non current assets 0 0 4,760 0 4,760 21 Trade receivables from third parties 0 0 120,684 0 120,684 23 Trade receivables from parent company and affiliated companies 0 0 78 0 78 23 Other receivables and current assets 0 0 37,784 0 37,784 25 Current financial assets 0 39,371 0 12,407 51,778 24 Cash and cash equivalents 0 0 67,387 0 67,387 26 Derivatives designated as hedging derivatives 2,887 0 0 0 2,887 24

Total 2,887 39,371 230,693 15,438 288,389

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 53 Principles applied in measuring financial instrume nts (as per IAS 39)

Liabilities at fair Book value at Liabilities at Financial instruments - Liabilit ies at December 31, 2012 value held for December 31, Notes amortized cost trading 2012

Financial liabiliteis due to other lenders 0 1,689 1,689 32 Finance leases 0 1,014 1,014 32 Trade payables due to third parties 0 99,581 99,581 34 Trade payables due to parent company and affiliated companies 0 4,585 4,585 34 Other liabilities 0 74,321 74,321 35 Bank debts 0 377,949 377,949 32 Derivatives 3,961 0 3,961 32 Cash flow hedging derivative payables 456 0 456 35 Total 4,417 559,139 563,556

Income and Expenses generated by Financial Instruments in 2013

Income and Expenses generated by financial Changes in fair From equity Exchange gains From interest Total instrume nts - FY 2013 value reserve (losses)

Derivative Instruments 0 840 840 Investments held to maturity 413 413 Loans and receivables/payables 1,577 (9,930) (8,353) Liabilities at amortized cost (16,586) 424 (16,162) Total (14,596) 840 0 (9,506) (23,262)

Other income and expenses (1,342) Total net financial income and charges (24,604)

Income and Expenses generated by Financial Instruments in 2012

Income and Expenses generated by financial Changes in fair From equity Exchange gains From interest Total instrume nts - FY 2012 value reserve (losses)

Derivative Instruments 0 (1,991) 0 0 (1,991) Investments held to maturity 413 0 0 0 413 Loans and receivables/payables 1,445 0 0 (848) 597 Liabilities at amortized cost (14,511) 0 0 (14,511) Total (12,653) (1,991) 0 (848) (15,492)

Other income and expenses (1,271) Total net financial income and expenses (16,763)

Liquidity risk

The liquidity risk is the risk that the Group might have difficulty in raising – at reasonable conditions – the funds needed to support its operating activities. Cash flows, funding requirements and the liquidity of the Group are constantly monitored with the aim of ensuring the efficient and effective management of financial resources in order to meet the requirements resulting from operations and investment and to settle liabilities as they fall due.

The following table shows - by contractual maturity period and considering the Worst case scenario – the undiscounted amounts of the Group’s financial obligations. It takes account of the earliest date on which the Group could be asked to make payment and contains references to the Notes for each type of liability.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 54 December 31, 2013 Between one Between two Between Between four Within one After five Book value and two and three three and and five Total Notes year years years years four years years Bank borrowing 385,695 204,426 25,543 72,717 23,952 76,893 378 403,910 32 Due to other lenders 2,054 275 366 880 366 183 0 2,071 32 Finance leases 597 304 233 60 0 0 0 597 32 Financial liabilities for derivatives 0 0 0 0 0 0 0 0 32 instruments Financial liabilities for derivatives 2,273 1,118 624 173 (49) 407 0 2,273 32 instruments IRS Trade payables 115,056 115,056 0 0 0 0 0 115,056 34 Total 505,675 321,178 26,767 73,830 24,270 77,483 379 523,906

December 31, 2012 Between one Between two Between Between four Within one After five Book value and two and three three and and five Total Notes year years years years four years years Bank borrowing 377,949 179,187 58,213 22,083 39,775 21,849 75,731 396,836 32 Due to other lenders 1,689 228 330 329 330 330 164 1,711 32 Finance leases 1,014 414 309 233 60 0 0 1,015 32 Financial liabilities for derivatives 166 166 - - - - - 166 32 instruments Financial liabilities for derivatives 3,793 1,179 1,121 620 346 114 447 3,827 32 instruments IRS Trade payables 98,982 98,982 98,982 34 Total 479,800 280,155 59,972 23,265 40,510 22,293 76,342 502,537

The Group has sufficient financial resources to cover its current liabilities as it can count on available liquidity, on unutilised committed lines of credit and on cash flows generated by its operating activities.

Credit risk

Receivables are stated net of the provision for doubtful debts. This amount represents the fair value of the trade receivables.

December 31, December 31, Credit risk 2013 2012

Trade receivables from third parties 115,297 120,684 Trade receivables from parent and associated companies 1,324 78 Non-current financial receivables 890 114 (Current) Financial receivables from subsidiaries and associated companies39, 680 39,143 Current financial receivables 12,436 12,635

Total 169,627 172,654

The following tables show the trade receivables ageing analysis at December 31, 2013 and 2012:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 55 of which: of which: expired Credit risk at December 31, 2013 Amount not expired 1-3 months 3-6 months 6-9 months 9-12 months

Trade receivables Europe 55,382 42,453 7,498 1,957 1,018 2,455

Trade receivables North America 34,156 26,158 6,733 1,065 80 120

Trade receivables Rest of the world 25,761 23,588 1,041 237 (16) 911

Total trade receivables from third parties 115,297 92,200 15,272 3,259 1,082 3,485

Trade receivables Europe 1,109 574 535 0 0 0

Trade receivables North America 215 (175) 106 284 0 0

Trade receivables Rest of the world 0 0 0 0 0 0

Total trade receivables from Parent company and 1,324 399 641 284 0 0 affiliated companies

Total trade receivables 116,621 92,599 15,913 3,543 1,082 3,485

of which: of which: expired Credit risk at December 31, 2012 Amount not expired 1-3 months 3-6 months 6-9 months 9-12 months

Trade receivables Europe 48,792 33,545 6,416 2,381 1,645 4,804

Trade receivables North America 40,761 31,396 8,851 102 282 130

Trade receivables Rest of the world 31,132 25,381 4,498 928 321 2

Total trade receivables from third parties 120,684 90,322 19,766 3,411 2,248 4,936

Trade receivables Europe 78 78 0 0 0 0

Trade receivables North America 0 0 0 0 0 0

Trade receivables Rest of the world 0 0 0 0 0 0

Total trade receivables from Parent company and associated 78 78 0 0 0 0 companies

Total trade receivables 120,762 90,400 19,766 3,411 2,248 4,936

Movements on the provision for doubtful debts in 2013 and 2012 are shown below:

December 31, Provisions Utilizations Exchange December 31, 2012 for the year for the year gains (losses) 2013

Allowance for doubtful accounts 7,658 2,512 (2,358) (111) 7,701 Total 7,658 2,512 (2,358) (111) 7,701

December 31, Change in scope Provisions Utilizations Exchange December 31, 2011 of consolidation for the year for the year gains (losses) 2012

Allowance for doubtful accounts 7,994 13 579 (906) (22) 7,658 Total 7,994 13 579 (906) (22) 7,658

Fair value of financial assets and liabilities and calculation models utilised

The fair value of financial assets and liabilities are set out below, as divided based on the methods and calculation models used to determine them.

Note that financial assets whose fair value cannot be reasonably determined are not shown.

The fair value of Bank borrowing was calculated based on interest rates at the reporting date without making any assumptions re the credit spread.

The fair value of financial instruments listed on an active market is based on market price at the reporting date. The market prices used are the bid/ask price depending on the position held. The fair value of

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 56 financial instruments not listed on an active market and of derivative instruments was determined using the valuation models and techniques in most widespread use on the market, considering data available on the market.

Note that we did not calculate the fair value of trade receivables, trade payables and other financial assets as their carrying amount approximates fair value.

Meanwhile, we do not believe that the fair value of payables under finance leases and payables to other lenders differs significantly from their carrying amount.

Mark to Market Mark to Model

Net book value Total Fair Fair Value Fair Value Notes 12.31.2013 Value €/thousand

Financial assets available for sale 12,104 12,104 12,104 24 Bank borrowing (385,695) - 405,318 (405,318) 32 Financial liabiliteis due to other lenders (514) - 514 (514) 32 Cash flow hedge derivatives: - Plain vanilla - Forw ard (451) - 451 (451) 28 - IRS (2,273) - 2,273 (2,273) 28 Fair value hedge derivatives: - Forw ard 322 322 322 28

Exchange rate risk and interest rate risk: sensitivity analysis

This sensitivity analysis was performed in accordance with IFRS 7 as described in the section “Summary of accounting principles and valuation methods”. It applies to all of the financial instruments reported in the financial statements.

The Group performed a sensitivity analysis to measure the impact on the income statement and on the statement of financial position of an exchange rate fluctuation of “+/-10%” and an interest rate fluctuation of “+/-1%” compared to the exchange rates and interest rates applicable at December 31, 2013 to each class of financial instruments, while all other variables remained constant. The analysis is for illustrative purposes only given that, in reality, such rate fluctuation rarely occurs in isolation.

As at December 31, 2013, the Group was not exposed to additional risks e.g. an equity risk or a commodity risk.

The sensitivity analysis of the exchange rate took account of the risk that may arise in relation to any financial instrument denominated in a currency other than the Euro. Consequently, the translation risk was also taken into account. Financial instruments whose value could vary as a result of interest rate fluctuation are as follows: - Instruments with a variable rate of interest - Instruments with a fixed rate of interest but measured at fair value

The results of the sensitivity analysis at December 31, 2013 and December 31, 2012 are shown below:

2013

Values at December 31, 2013 EXCHANGE RATE IMPACT EXCHANGE RATE IMPACT INTEREST RATE IMPACT INTEREST RATE IMPACT INCOME STATEMENT BALANCE SHEET INCOME STATEMENT BALANCE SHEET

-10% 10% -10% 10% -1% 1% -1% 1% Net effect 3,989 (3,107) 1,273 (1,648) 1,967 (1,967) (2,442) 2,442

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 57 2012

EXCHANGE RATE IMPACT EXCHANGE RATE IMPACT INTEREST RATE IMPACT INTEREST RATE IMPACT

Values at December 31, 2012 INCOME STATEMENT BALANCE SHEET INCOME STATEMENT BALANCE SHEET

-10% 10% -10% 10% -1% 1% -1% 1% Net effect 5,431 (4,691) (2,556) 5,290 1,932 (1,932) (3,382) 3,382

Hierarchical levels of Fair Value measurement

IFRS 7 requires that financial instruments stated at fair value in the financial statements be classified based on a hierarchy with three levels that reflect the level of input used in determining the fair value. The following levels must be shown:

− Level 1: quoted prices on an active market for the asset or liability being measured; − Level 2: input other than the quoted prices per level 1 that may be observed directly or indirectly on the market; − Level 3: input not based on observable market data.

In order to determine the fair value of financial instruments, the Group uses various measurement and valuation models, as summarised in the following table for 2013:

December 31, 2013 Instrument Level 1 Level 2 Level 3 Total No tes

Financial Assets Bonds 11,689 11,689 24 Cash Flow Hedge Derivatives Options 28 Fair Value Hedge Derivatives Forward 287 287 28 Cash Flow Hedge Derivatives Forward (451) (451) 28 Fair Value Hedge Derivatives Forward 36 36 28 Fair Value Hedge Derivatives Interest Rate Swap (2,273) (2,273) 28

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 58 28 DERIVATIVE FINANCIAL INSTRUMENTS

During the year and in line with prior years, holding company Bracco Imaging S.p.A. continued to apply its financial risk management policy, especially for the exchange rate risk and the interest rate risk, in order to minimise the impact of these risks on cash flows. The derivative instruments used are simple in nature and they are entered into for hedging purposes only.

The company operates with leading financial institutions in order to reduce the counterparty risk.

These instruments are recorded under the following captions in the Statement of Financial Position: - derivatives relating to cash flow hedges with a positive fair value: “Other receivables and current assets” and “Current financial assets” - derivatives relating to cash flow hedges with a negative fair value: “Other payables” - derivatives held for trading with a positive fair value: “Current financial assets” - derivatives held for trading with a negative fair value: “Current financial liabilities”

Derivatives at December 31, 2013 and 2012 are analysed as follows:

12/31/2013 12/31/2012 No tional value Positive fair Ne gative fair No tional value Positive fair Ne gative fair value value value value

Cash flow hedge Exchange Rate Risk Currency options Forward contracts (sales) 87,926 2,887 Forward contracts (purchases) 20,390 (451) 32,103 (456) Interest rate risk Interest rate swap 130,000 (2,273) 130,000 (3,793)

Total cash flow hedge 150,390 - (2,724) 250,029 2,887 (4,249)

Fair Value hedge Exchange Rate Risk Forward contract (sales) 30,016 287 3,014 (6) Forward contract (purchases) 50,000 (185) Spot contract (sales) 50,000 25

Total cash flow hedge 30,016 287 0 103,014 25 (191)

Derivatives held for trading Exchange Rate Risk Currency options Forward contract (sales) 660 36 - Forward contract (purchases) - -

Total derivatives held for trading 660 36 - - - -

Total financial instruments and derivatives - Assets (liabilities) 181,066 323 (2,724) 353,043 2,912 (4,440)

The fair value of the derivative instruments was calculated considering market parameters at the reporting date and using valuation models in widespread use in the financial sector.

Cash flow hedges

Group policy provides that hedge accounting shall be applied to hedging instruments as follows: - hedging of the exchange rate risk on transactions in US Dollars - hedging of the interest rate risk - hedging of the exchange rate risk on transactions in other foreign currencies.

If a derivative financial instrument is designated as a hedge of the risk of changes in future cash flows relating to an asset or a liability recorded in the financial statements or to a highly probable expected

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 59 transaction and it could have an effect on the income statement, the effective portion of the gains or losses (intrinsic value) on the derivative financial instrument is recorded under equity. Cumulative gains and losses are reversed out of equity and booked in the income statement for the same period in which the hedged transaction takes place. Gains and losses associated with a hedge that has become ineffective are recorded in the income statement If a hedging instrument is closed but the hedged transaction has not yet taken place, cumulative gains and losses until then recorded under equity are recorded in the income statement at the time the related transaction does take place. If the hedged transaction is no longer considered probable, gains or losses not yet realised and suspended under equity are recorded immediately in the income statement.

If hedge accounting is not applied, gains or losses resulting from the fair value measurement of the derivative instrument are recorded immediately in the income statement. The hedging policy in relation to the US Dollar was adopted also taking account of the forecasts of a selected panel of leading international banks.

In terms of the nature of the financial instruments in place at the reporting date, details of the main transactions are provided below:

At December 31, 2013

Cash flow hedge derivatives

Interest rate swaps includes: - a hedging contract with a notional amount of Euro 10,000 thousand and a maturity date of March 18, 2014 which provides for annual payment of a fixed rate of 0.93% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - a hedging contract with a notional amount of Euro 50,000 thousand and a maturity date of March 2, 2018 which provides for annual payment of a fixed rate of 1.75% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - A hedging contract with a notional amount of Euro 20,000 thousand and a maturity date of March 14, 2014 which provides for annual payment of a fixed rate of 0.91% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - A hedging contract with a notional amount of Euro 50,000 thousand with a maturity date of June 30, 2017 which provides for annual payment of a fixed rate of 0.80% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate.

These contracts have been entered into to hedge the risk of interest rate fluctuation, given that the loans arranged by the Company are at variable rates of interest (See Note 32 “Financial payables and liabilities”). In line with Company policy, only part of variable rate borrowing is hedged in order to optimise the mix between fixed rate and variable rate.

Forward contracts refers to contracts for the forward purchase of US Dollars with a notional value of USD 27,500 thousand at a weighted average exchange rate of €1:USD 1.3487, with various maturity dates throughout 2014.

Fair value hedge derivatives

These include: - A forward contract for the sale of US Dollars with a notional value of USD 35,000 thousand and a forward exchange rate of €1:USD 1.364 maturing on March 25, 2014; - A forward contract for the sale of US Dollars with a notional value of USD 6,000 thousand and a forward exchange rate of €1:USD 1.3776 maturing on June 30, 2014.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 60 Currency derivatives held for trading

Forward contracts for the sale of currency at December 31, 2013 with a positive fair value of Euro 36 thousand. They include: - a contract for the forward sale of JPY against CHF with a notional value of 45.5 million, forward exchange rate of 107.828 maturing on February 20, 2014; - A contract for the forward sale of JPY against CHF with a notional value of 45 million, forward exchange rate of 116.03 maturing on April 22, 2014;

At December 31, 2012

Cash flow hedge derivatives

Forward contracts (sales) refers to forward contracts for the sale of US Dollars with a notional value of USD 112,520 thousand at a weighted average exchange rate of €1:USD 1.2797, with several maturity dates throughout 2013.

Forward contracts (purchases) refers to forward contracts for the purchase of US Dollars with a notional value of USD 41,840 thousand at a weighted average exchange rate of €1:USD 1.3033, with several maturity dates throughout 2013.

Interest rate swaps includes: - a hedging contract with a notional amount of Euro 10,000 thousand and a maturity date of March 18, 2014 which provides for annual payment of a fixed rate of 0.93% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - a hedging contract with a notional amount of Euro 50,000 thousand and a maturity date of March 2, 2018 which provides for annual payment of a fixed rate of 1.75% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - A hedging contract with a notional amount of Euro 20,000 thousand and a maturity date of March 14, 2014 which provides for annual payment of a fixed rate of 0.91% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate. - A hedging contract with a notional amount of Euro 50,000 thousand with a maturity date of June 30, 2017 which provides for annual payment of a fixed rate of 0.80% and six-monthly collection (June and December) of a variable rate equal to the Euribor 6 month rate.

These contracts have been entered into to hedge the risk of interest rate fluctuation, given that the loans arranged by the Company are at variable rates of interest (See Note 32 “Financial payables and liabilities”). In line with Company policy, only part of variable rate borrowing is hedged in order to optimise the mix between fixed rate and variable rate.

Fair value hedge derivatives

These include: - A forward contract for the sale of US Dollars with a notional value of USD 4,000 thousand and a forward exchange rate of €1:USD 1.3268 maturing on June 28, 2013; - A forward contract for the sale of Swiss Francs with a notional value of Euro 50,000 thousand and a forward exchange rate of €1:CHF 1.2116, maturing on January 4, 2013 - A forward contract for the purchase of Swiss Francs with a notional forward purchase amount of Euro 50,000 thousand and a forward exchange rate of €1: CHF 1.2078, maturing on January 4, 2013

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 61 29 DEFERRED TAX ASSETS/LIABILITIES

At December 31, 2013, this caption includes deferred tax liabilities of Euro 62,407 thousand (Euro 75,546 thousand at December 31, 2012) less deferred tax assets of Euro 40,546 thousand (Euro 50,696 thousand at December 31, 2012), where offset is possible, as emerging in relation to each consolidated company. The net balance of Deferred tax assets and Deferred tax liabilities is as follows:

December 31, December 31, Change 2013 2012

Deferred tax assets 40,546 50,696 (10,150) Deferred tax liabilities (62,407) (75,546) 13,140 Total (21,860) (24,850) 2,990

Each Group company recognised deferred tax assets after performing a critical evaluation of their future recoverability based on current strategic plans, accompanied by the relevant tax plans.

Deferred taxes have not been recorded in relation to earnings not distributed by the subsidiaries as the Group is unable to control the timing of the distribution of these reserves and it is probable that they will not be distributed in the foreseeable future.

The following tables show movement in the reporting periods ended December 31, 2013 and December 2012 on deferred tax assets and deferred tax liabilities.

December 31, (Charge) Credit to (Charge) Credit to Exchange December 31, Reclass. 2012 income statement balance sheet differences 2013 Deferred tax assets - Provision for inventory obsolescence 1,990 0 0 0 0 1,990 - Provisions for risks and charges 4,225 (2,762) 0 0 0 1,463 - Valuation of derivatives 835 0 0 (412) 0 423 - Tax losses carried-forward (172) 492 0 (1,447) (11) (1,137) - Difference between IFRS/Tax depreciation and amortization 1,493 (66) 0 0 (63) 1,364 - Elimination of inter-group ma rgins 15,028 478 0 0 (464) 15,042 - Defined benefit plans 11,533 0 0 (6,738) (435) 4,360 - Derivatives hedging reserve 0 0 0 0 0 0 - Foreign CFC tax 1,065 191 0 0 0 1,256 - Restructuring costs 397 (397) 0 0 0 0 - Valuation exchange differences/not realized 372 25 0 0 0 397 - Other deferred tax assets 13,929 1,797 0 55 (393) 15,389

Total ( A ) 50,696 (241) 0 (8,542) (1,365) 40,547

Deferred tax liabilities - Accelerated depreciation 976 (49) 0 0 0 927 - Valuation exchange differences 0 0 0 0 0 0 - Defined benefit plans 2,401 945 0 (42) (151) 3,153 - Fair value (deemed cost) 13,311 (1,280) 0 6 (7) 12,030 - Accounting of finance leases 40 0 0 0 0 40 - Derivatives hedging reserve 1,296 0 0 (799) 0 497 - Merger deficit depreciation 35,733 (3,424) 0 0 (1,410) 30,899 - Allocation of E-Z-EM aquisition 12,460 (4,380) 118 0 (498) 7,700 - Allocation of SMC aquisition 5,177 (398) 0 0 (0) 4,779 - Allocation of Justesa aquisition 823 503 0 0 (174) 1,153 - Other deferred tax liabilities 3,328 (2,047) 0 0 (52) 1,230

Total ( B ) 75,546 (10,130) 118 (835) (2,293) 62,407

Total deferred tax assets (net of deferred tax liabilities) ( A )-( B ) (24,850) 9,888 (118) (7,707) 928 (21,860)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 62 December 31, Change in scope of (Charge) Credit to (Charge) Credit Exchange December 31, Reclass. 2011 consolidation income statement to balance sheet differences 2012

Deferred tax assets -Provision for inventory obsolescence 1,990 0 0 0 0 0 1,990 - Provisions for risks and charges 4,290 0 (65) 0 0 0 4,225 - Valuation of derivatives 237 0 0 0 598 0 835 - Tax losses carried-forward 2,443 0 (427) 0 (2,151) (36) (172) - Difference between IFRS/Tax depreciation and amortization 1,335 0 189 0 0 (31) 1,493 - Elimination of inter-group margins 10,853 0 4,377 0 0 (202) 15,028 - Defined benefit plans 9,562 0 (404) 0 2,553 (178) 11,533 - Derivatives hedging reserve 1,412 0 0 0 (1,412) 0 0 - Foreign CFC tax 1,005 0 60 0 0 0 1,065 - Restructuring costs 0 0 397 0 0 0 397 - Valuation exchange differences/not realized 0 0 372 0 0 0 372 - Other deferred tax assets 14,102 364 (382) 0 0 (154) 13,929

Total ( A ) 47,229 364 4,116 0 (411) (602) 50,696

Deferred tax liabilities - Accelerated depreciation 1,023 0 (47) 0 0 0 976 - Valuation exchange differences 72 0 (72) 0 0 0 0 - Defined benefit plans 3,086 0 809 0 (1,420) (74) 2,401 - Fair value (deemed cost) 14,427 0 (996) 0 (118) (2) 13,311 - Accounting of finance leases 84 0 (44) 0 0 0 40 - Derivatives hedging reserve 274 0 0 0 1,022 0 1,296 - Merger deficit depreciation 39,256 0 (2,838) 0 0 (685) 35,733 - Allocation of E-Z-EM aquisition 14,631 0 (1,917) (124) 0 (130) 12,460 - Allocation of SMC aquisition 7,030 0 (1,905) 0 0 52 5,177 - Allocation of Justesa aquisition 0 949 (66) 0 0 (60) 823 - Other deferred tax liabilities 3,522 0 (193) 0 0 0 3,328

Total ( B ) 83,405 949 (7,269) (124) (516) (900) 75,546

Total deferred tax assets (net of deferred tax liabilities) ( A )-( B ) (36,176) (585) 11,385 124 104 298 (24,850)

The effect of Euro 585 thousand due to changes in the scope of consolidation in 2012 refers to the acquisition that year of Justesa Imagen Argentina S.A., Justesa Imagen Mexicana S.A. DE C.V. and Justesa Imagen Do Brasil S.A..

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 63 30 SHAREHOLDERS’ EQUITY

Group Shareholders’ Equity at December 31, 2013 and December 31, 2012 and movements thereon in the years then ended are shown in the following table:

Other reserves Available Ne t Share Legal Other Valuation Exchange Retained Group Minority Total reserves income capital reserve reserves reserve reserve earnings Equity Interests Equity Fair value (loss) for

Balances at January 1, 2012 102,900 20,580 (3,922) (12,152) 1,207 (18,199) 114,625 85,524 290,563 7,978 298,541

Allocation of net income (loss) for FY 2011

Ordinary Shareholders' Meeting held on May 22, 2012: - Retained earnings & reserves 0 0 15,130 0 0 0 70,394 (85,524) 0 0 0

- Dividends 0 0 0 0 0 0 (34,300) 0 (34,300) 0 (34,300)

Other moveme nts (3,913) (3,913) (3,913) Comprehensive Income for 2012 0 0 0 (2,464) 881 (2,403) 0 9,183 5,197 115 5,312

Balances at December 31, 2012 102,900 20,580 11,208 (14,616) 2,088 (20,602) 146,806 9,183 257,547 8,093 265,640

Other reserves Available Ne t Share Legal Other Valuation Exchange Retained Group Minority Total reserves income capital reserve reserves reserve reserve earnings Equity Interests Equity Fair value (loss) for

Balances at January 1, 2013 102,900 20,580 11,208 (14,616) 2,088 (20,602) 146,806 9,183 257,547 8,093 265,640

Allocation of net income (loss) for FY 2012

Ordinary Shareholders' Meeting held on May 23, 2013:

- Retained earnings & reserves 0 0 375 0 0 0 8,808 (9,183) 0 0 0 - Dividends 0 0 0 0 0 0 (29,400) 0 (29,400) 0 (29,400)

Other moveme nts 0 0 (8,495) 0 0 0 0 0 (8,495) 0 (8,495)

Comprehensive Income for 2013 0 0 0 8,778 300 (13,270) 0 33,097 28,905 699 29,604

Balances at December 31, 2013 102,900 20,580 3,088 (5,838) 2,388 (33,872) 126,214 33,097 248,557 8,792 257,349

The following table provides a reconciliation between the Shareholders’ Equity and Net Profit of holding company Bracco Imaging S.p.A. and the amounts reported in the consolidated financial statements:

December 31, 2013 December 31, 2012

Ne t income Ne t income Ne t Equity Ne t Equity (loss) (loss)

Bracco Imaging S.p.A. 184,709 41,563 173,385 375

Net income for the year / Effect of 131,157 24,778 149,983 47,370 consolidating subsidiaries

Dividends (32,200) (32,200) (29,000) (29,000)

Consolidation differences 0 0 0 0

Unrealised Intra-group margins (31,114) (1,044) (32,828) (9,562)

Other consolidation adjustme nts (3,995) 0 (3,993) 0

Consolidated Bracco Imaging Group 248,557 33,097 257,547 9,183

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 64 30.1 NOTE ON SHAREHOLDERS’ EQUITY OF BRACCO IMAGING S.P.A.

On May 23, 2013, an Ordinary General Meeting of holding company Bracco Imaging S.p.A. approved the following: a) Allocation of net profit of Euro 375 thousand for 2012 to Extraordinary Reserve b) Payment of a dividend of Euro 0.12 for each of 245,000,000 shares for a total amount of Euro 29,400 thousand.

30.2 SHARE CAPITAL

At December 31, 2013, the share capital of holding company Bracco Imaging S.p.A. amounted to Euro 102,900 thousand, unchanged compared to prior year. It is wholly subscribed and paid and consists of 245,000,000 ordinary shares with a nominal value of Euro 0.42 each.

30.3 LEGAL RESERVE

At December 31, 2013, this reserve stood at Euro 20,580 thousand, unchanged on prior year.

30.4 OTHER RESERVES

Other reserves are analysed as follows:

December 31, December 31, 2013 2012

Other reserves: 3,088 11,207 Extraordinary reserve 49,894 49,519 Other reserves related to Under Common Control transaction (46,806) (38,312)

Valuation reserve: (5,838) (14,615) Fair value reserve (deemed cost ) 1,596 1,896 Available for sale reserve 1,312 1,619 Actuarial gains (losses) reserve (7,397) (17,462) Derivatives hedging reserve (1,349) (668)

Available fair value reserve 2,388 2,088

Translation reserve (33,872) (20,602)

Total (34,234) (21,922)

Other reserves

At December 31, 2013, the reserves included under this caption totalled Euro 3,088 thousand. Movements thereon followed the aforementioned General Meeting resolution and the allocation to reserves of the premium paid for the acquisition from associated company Medical System Inc. of its radiology contrast injectors business, as required for transactions under common control.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 65 Valuation reserves

Movement of December 31, Increases/ available fair December 31, Valutation reserve Deferred taxes 2012 (decreases) value reserve 2013 (deemed cost)

Fair Value Reserve (deemed 1,896 0 (300) 0 1,596 cost) Available for sale reserve 1,618 (306) 0 0 1,312 Actuarial gains (losses) reserve (17,464) 14,673 0 (4,606) (7,397) Derivatives hedging reserve (665) (995) 0 311 (1,349)

Total (14,615) 13,373 (300) (4,296) (5,838)

Movement of December 31, Increases/ available fair December 31, Valutation reserve Deferred taxes 2011 (decreases) value reserve 2012 (deemed cost)

Fair Value Reserve (deemed 2,725 51 (880) 0 1,896 cost) Available for sale reserve 772 846 0 0 1,618 Actuarial gains (losses) reserve (11,300) (8,983) 0 2,819 (17,464) Derivatives hedging reserve (4,349) 5,367 0 (1,683) (665)

Total (12,152) (2,718) (880) 1,135 (14,615)

Fair value reserve (deemed cost)

This reserve relates to the Fair Value (deemed cost) measurement of Property, plant and machinery and Investment property performed upon first-time application of IAS/IFRS.

The Fair value (deemed cost) reserve arising upon first-time application of IAS/IFRS is subject to regulation by Article 7(1)(6) of Legislative Decree no 38 of February 28, 2005 which provides that equity increases due to accounting for tangible assets at fair value rather than at cost shall be allocated to capital or to a specific reserve. If not allocated to capital, the reserve can only be reduced in compliance with Article 2445(2) and (3) of the Italian Civil Code. If the reserve is used to cover losses, earnings cannot be distributed until such time as the reserve has been restored or reduced to the extent approved by a resolution of the Extraordinary General Meeting, as the provisions of Article 2445(2) and (3) of the Italian Civil Code do not apply.

Reserve for financial assets available for sale

This reserve regards unrealised gains arising on the restatement at fair value of assets available for sale.

Reserve for actuarial gains (losses)

The “Reserve for actuarial gains (losses)” at December 31, 2013 includes, net of deferred taxation, actuarial components relating to the valuation of defined benefit plans, as allocated directly to equity.

At December 31, 2013, movements on the reserve mainly refer to the actuarial effects resulting from defined benefit plans, as described in Note 30 “Provisions for employee benefits”.

Hedging reserve derivative instruments

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 66 At the end of 2006, the Hedging reserve was created in relation to cash flow hedges. This regards unrealised gains and losses – net of related tax effects – resulting from the restatement at fair value of financial instruments designated as hedging instruments. At December 31, 2013, this reserve decreased by Euro 682 thousand, net of the tax effect.

December 31, Adjustme nt of initial December 31, Hedging Reserve Transfer to P&L Change in fair value 2012 hedged value 2013

Hedging Reserve (667) (1,538) 856 - (1,349)

Total (667) (1,538) 856 - (1,349)

December 31, Adjustme nt of initial December 31, Hedging Reserve Transfer to P&L Change in fair value 2011 hedged value 2012

Hedging Reserve (4,349) 3,723 (41) - (667)

Total (4,349) 3,723 (41) - (667)

Available fair value (deemed cost) reserves

These relate to the difference between depreciation calculated on the fair value of tangible assets and depreciation calculated in accordance with Italian GAAP.

Translation reserve

The translation reserve – negative by Euro 33,872 thousand (Euro 20,601 thousand at December 31, 2012) – moved as a result of exchange rate fluctuation regarding currencies other than the Euro when translating the financial statements of Group companies.

30.5 RETAINED EARNINGS

At December 31, 2013, this item amounted to Euro 126,214 thousand. Changes during the year mainly related to the allocation to retained earnings of the net profit for 2012 (Euro 8,808 thousand) and the distribution of dividends to parent company Bracco S.p.A. (Euro 29,400 thousand).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 67 30.6 SHAREHOLDERS’ EQUITY PERTAINING TO NON-CONTROLLING INTERESTS

Shareholders’ equity pertaining to non-controlling interests is analysed as follows:

December 31 December 31 2013 2012

Bracco-Eisai Co. Ltd 3,236 3,465 Shanghai Bracco Sine Pharmaceutical Corp. Ltd 5,556 4,628 Total 8,792 8,093

Bracco-Eisai Co. Ltd.

Bracco-Eisai Co. Ltd was incorporated under an agreement signed in November 1990 by the Group and EISAI Co. Ltd. with the objective of promoting and distributing Contrast Agents in Japan. Its share capital is currently owned 49% by EISAI Co. Ltd. and 51% by Bracco Imaging Holding B.V. The Japanese company has a limited duration which is scheduled to end in 2019 although it can be extended. At the end of the scheduled duration of the company, Bracco Imaging Holding B.V. may exercise a call option to acquire the shares held by Eisai Co. Ltd. In turn, Eisai Co. Ltd. has a put option entitling it to ask Bracco Imaging Holding B.V. to purchase its sales. If the shareholders do not exercise their respective options, Bracco-Eisai Co. Ltd shall be put into liquidation, unless its duration is extended. The method for use in calculating the sale and purchase price of the shares is predetermined and is based on the book shareholders’ equity of the company at the option exercise date with no amount payable for goodwill. The company is managed by a Board of Directors with five members, three of them appointed by the Group including the Chairman who also acts as the company’s legal representative in dealings with the non-controlling shareholders. The shareholders have also agreed that the company shares cannot be provided as collateral or disposed of except to companies belong to their respective groups and always subject to notifying the other shareholder in advance.

Shanghai Bracco Sine Pharmaceutical Corp. Ltd.

Shanghai Bracco Sine Pharmaceutical Corp. Ltd was incorporated on December 19, 2001 under a joint venture between Shanghai Sine Laboratories and Bracco Diagnostics Asia Pte. Ltd with the primary objective of manufacturing and distributing Contrast Agents in China. The share capital is currently subscribed 30% by Shanghai Sine Laboratories and 70% by Bracco Diagnostics Asia Pte. Ltd.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 68 31 PROVISIONS FOR EMPLOYEE BENEFITS

The Group companies guarantee post-employment benefits to personnel both in direct form and through contributions to funds external to the Group.

The ways in which these benefits are provided vary depending on the legal, fiscal and economic conditions in the countries where the Group companies operate.

Post-employment benefits are guaranteed through defined contribution plans and defined benefit plans.

In the former case, the Group companies pay contributions to public and/or private pensions institutions based on legal or contractual obligations or on a voluntary basis. In such cases, the companies fulfil all of their obligations upon payment of the contributions. The period cost is recorded on an accrual basis under Personnel costs, in relation to the service rendered by the employee. In 2013, the costs incurred by the Italian companies for contributions to Supplementary Pension Funds (Fonchim – Previndai) was Euro 1,981 thousand (Euro 2,034 thousand in 2012).

Defined benefit plans may be unfunded or wholly or partially funded by the contributions paid by the companies or, in some cases, by the employees to a company or a find, legally separate from the entity providing the benefits to the employees.

In the case of funded or unfunded post-employment benefits, the Group liability, as determined based on actuarial methods using the “unit credit cost” method, is reported net of the fair value of any plan assets under Provisions for employee benefits. Note that actuarial gains and losses are recorded directly under equity.

The introduction of the amendment to IAS 19 did not produce any significant effects on these financial statements because, upon transition to IAS/IFRS, the Group did not opt to use the corridor method to defer recognition of actuarial gains and losses. Therefore, Group Management has decided not to restate the comparative figures at December 31, 2012 as the retrospective application of this amendment at January 1, 2012 was not considered material and such as to affect the comparability of the financial statements for the two periods. The estimated effect is around Euro 1.6 million before the tax effect and would have led to the reclassification from net profit to comprehensive income without any impact on Group shareholders’ equity at December 31, 2012.

Details of provisions for employee benefits at December 31, 2013 and December 31, 2012 and movements thereon are shown below:

December Exchange December Increases Decreases 31, 2012 differences 31, 2013 Provision for employee benefit Provision for severance indemnities 11,944 347 (633) 0 11,658 Provision for US pension plans 21,912 3,669 (24,107) (872) 602 Provision for German pension plans 15,385 2,163 (204) 0 17,344 Provision for Swiss pension plans 5,094 2,126 (1,249) (79) 5,892 Other provisions for employee benefits 3,120 5,108 (3,434) (335) 4,459 Total 57,454 13,413 (29,627) (1,286) 39,954

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 69 December Exchange December Increases Decreases 31, 2011 differences 31, 2012 Provision for employee benefit Provision for severance indemnities 10,263 2,246 (565) 0 11,944 Provision for US pension plans 19,804 8,763 (6,367) (288) 21,912 Provision for German pension plans 10,309 5,269 (193) 0 15,385 Provision for Swiss pension plans 0 5,059 0 35 5,094 Other provisions for employee benefits 2,184 2,882 (1,823) (123) 3,120 Total 42,559 24,219 (8,948) (376) 57,454

“Other personnel related provisions” represents the best estimate, at the reporting date, of the short-term benefits due by the Group to its employees.

TFR/Employee severance indemnity provision

Movements on this caption are summarised in the following table:

Reserve for severance indemnities 2013 2012

Provision at January 1 11,944 10,264 Service cost 14 13 Financial expenses (Interest cost) 289 482 Actuarial gains (losses) -243 1684 Benefit paid -390 (565) Transfers to / from Group companies 44 66 Provision at December 31 11,658 11,944

“Actuarial gains and losses” and “Financial expenses (interest cost)” are generated by the actuarial method valuation of the provision and redetermined at January 1, 2007. As previously stated, the Group makes use of the option under IAS 19 of recording actuarial gains and losses directly under equity.

As already stated in the section on accounting principles and valuation methods, as a result of amendments introduced by Law no 296 of December 27, 2006 (“Finance Act 2007”) and the subsequent Decrees and Implementation regulations, only the TFR liability remaining with the company has been valued for IAS 19 purposes because, as a result of decisions made by employees in the first half of 2007, the amounts maturing after January 1, 2007 have been paid to a separate entity (supplementary pension funds or INPS funds). As a result of these payments, Bracco Imaging S.p.A. and Spin S.p.A. will have no more obligations in relation to the future services provided by employees (amounts now paid to defined contribution plans).

The Group expects to incur interest costs of around Euro 267 thousand in 2014.

In summary, the assumptions made in relation to the TFR provision are as follows:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 70 Economic assumptions 2013 2012

Increase in the cost of living 2.00% 2.00% Discount rate 2.80% 2.50% Increase in benefit and salaries N/A N/A

Demographic assumption

Death probability SIM/SIF 2010 SIM/SIF 2002 Invalidity probability INPS 1998 MF INPS 1998 MF

Personnel dismissal probability 2% - 2.5% 2% - 2.5%

The discount rates used to measure liabilities are determined based on the return on high quality fixed rate securities (AA rating) whose amounts and maturity dates match the amounts and maturity dates of the estimate payments for the benefits. The effect of a 0.5% increase or decrease in the cost of living increase rate and in the discount rate used, all other assumptions remaining equal, would be:

Impact of increase in cost of Discount rate impact Values at December 31,2013 living rate 0.50% -0.50% 0.50% -0.50%

Net effect 278 (268) (396) 422

Pension plans

If funded, pension plans provide for the payment of contributions to a separate fund (trust) which administers the plan assets on an independent basis. The funds provide for contributions by the employees and companies based on legislative and regulatory requirements in the various countries.

Provisions for pension plans - USA

For full information about these plans, we provide the analysis and comparative prior year information required by the amendment to IAS 19.

The Group’s US companies have a defined benefit plan whose participants include Bracco Research USA Inc., Bracco Diagnostics Inc. (now Group subsidiaries) and, also, associated company Acist Medical Systems Inc. (controlled by Bracco S.p.A. but excluded from the Imaging Group scope of consolidation).

The plan – called the Bracco Retirement Plan –does not provide for the specific allocation of the plan assets to each individual company. Consequently, the Group has always adopted a policy of determining the net liability and costs of the plan using a method of sharing, generally agreed with the actuary, primarily based on the number of persons from each company participating in the plan. The method of sharing is agreed annually by the companies when the Budget is prepared.

The amounts relating to the pension plans of the US companies at December 31, 2013 and December 31, 2012 are as follows:

December 31, 2013 December 31, 2012 Associated Associated US Companies companies Total US Companies companies Total (Acist) (Acist)

Present value of defined benefit obligations (A) 57,803 1,606 59,409 69,086 1,961 71,047 Fair value of plan assets (B) 57,201 1,615 58,816 47,176 1,381 48,557 Provisions for US pension plan (A-B) 602 (8) 593 21,910 581 22,490

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 71 Movements during the year on defined benefit obligations are as follows:

December 31, 2013 December 31, 2012 Associated Associated US Companies companies Total US Companies companies Total (Acist) (Acist)

At January 1 69,086 1,961 71,047 60,295 1,808 62,103 Service cost 2,801 78 2,879 2,752 79 2,831 Interest cost 2,708 75 2,783 2,770 79 2,849 Actuarial gains (losses) (9,745) (335) (10,080) 5,686 67 5,753 Exchange differences (3,185) (89) (3,274) (1,286) (40) (1,326) Past service cost (1,840) (51) (1,891) 0 0 0 Benefit paid (2,022) (33) (2,055) (1,131) (32) (1,163) At December 31 57,803 1,606 59,409 69,086 1,961 71,047

Changes in the fair value of pension plan assets are set out below:

December 31, 2013 December 31, 2012 Associated Associated US Companies companies Total US Companies companies Total (Acist) (Acist)

At January 1 47,176 1,381 48,557 40,491 1,284 41,775 Expected return (interest cost) 1,804 50 1,854 3,185 92 3,277 Actuarial gain (losses) 7,937 158 8,095 2,445 (29) 2,416 Contribution of the year 4,393 125 4,518 3,182 95 3,277 Exchange differences (2,314) (66) (2,380) (996) (29) (1,025) Payme nts (1,795) (33) (1,828) (1,131) (32) (1,163) At December 31 57,201 1,615 58,816 47,176 1,381 48,557

The pension plan assets mainly consist of equity instruments and bonds issued by third parties as follows at December 31, 2013 and December 31, 2012:

December 31, December 31, 2013 2012

Shares 67% 67% Bonds 26% 28% Buildings 0% 0% Other assets 7% 5% Total 100% 100%

The main assumptions adopted by the actuary when determining the amounts in question were as follows:

December 31, December 31, Calculation assumptions: 2013 2012

Discount rate 5.00% 3.90% Expected long term rate of return on plan asset N/A 7.75% Expected rate of increase in benefit and salaries 3.50% 3.50%

As required by the amendment to IAS 19, with effect from January 1, 2013, the expected return of plan assets has been calculated based on the discount rate of the liability.

The companies are entirely responsible for the plan and there are no employee contributions.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 72 The amounts recorded under Actuarial gains / (losses) in 2013 had a negative effect of around USD 24.4 million. The change due to actuarial gains/losses recorded during the year was due, on the one hand, to the new method of determining Expected return on Assets in accordance with the amendment to IAS 19 and, on the other hand, to a significant increase in the fair value of plan assets.

The actuary’s best estimate of the expected contribution to these pension funds for the next year is around USD 6 million.

The effect of a 1% increase or decrease in the expected rate of salary increases and in the discount rates used, all other assumptions remaining constant, would be:

Salaries increase impact Discount rate impact Values at December 31,2013 1% -1% 1% -1%

Net effect 1,035 (1,344) (7,792) 9,696

Provisions for pension plans - Switzerland

At December 31, 2013, the amounts relating to the pension plan of the Swiss company were as follows:

December 31, December 31, 2013 2012

Present value of defined benefit obligations (A) 29,197 27,332 Fair value of plan assets (B) 23,307 22,240 Provisions for Swiss pension plan (A-B) 5,890 5,092

Movements during the year on defined benefit obligations were as follows:

December 31, December 31, 2013 2012

At January 1 27,332 25,814 Service cost 1,617 1,652 Interest cost 509 487 Actuarial gain (losses) 514 0 Exchange differences (448) 176 Benefit paid (327) (797) At December 31 29,197 27,332

Changes in the fair value of plan assets are shown below:

December 31, December 31, 2013 2012

At January 1 22,240 20,964 Expected return (interest cost) 381 363 Actuarial gain (losses) (72) 0 Contribution of the year 1,511 1,567 Exchange differences (369) 143 Payments (384) (797) At December 31 23,307 22,240

The main assumptions made by the actuary when determining the amounts reported were as follows:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 73 December 31, December 31, Calculation assumptions: 2013 2012

Discount rate 2.25% 1.90% Expected long term rate of return on plan asset N/A 1.75% Expected rate of increase in benefit and salaries 0.50% 0.50%

The actuary’s best estimate of the expected contribution to these pension plans for the next year was around CHF 2.5 million, including CHF million borne by the company and CHF 0.6 million borne by the employees.

Provisions for pension funds - Germany

Total movements on pension funds relating to Bracco Imaging Deutschland G.m.b.H. and BIPSO G.m.b.H. amounted to Euro 1,959 thousand.

The main assumptions used to determine the obligation at year-end compared with those used at prior year end were as follows:

December 31, December 31, Calculation assumptions: 2013 2012

Discount rate 3.50% 3.70% Expected rate of increase in benefit and salaries 4.50% 4.50% Expected rate of increase in cost of living 2.00% 2.00%

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 74 32 FINANCIAL PAYABLES AND LIABILITIES

At December 31, 2013, these amounted to Euro 390,619 thousand compared to Euro 384,613 thousand at December 31, 2012 and may be analysed as follows:

December 31, 2013 Between one Within one After five Total and five year years years Bank borrowing 385,695 177,740 207,532 423 Due to other lenders 2,055 271 1,784 0 Finance leases 596 304 292 0 Financial liabilities for derivative instruments 2,273 2,273 0 0 Total 390,619 180,588 209,608 423

December 31, 2012 Between one Within one After five Total and five year years years Bank borrowing 377,950 158,629 218,799 522 Due to other lenders 1,688 223 1,465 0 Finance leases 1,014 414 600 0 Financial liabilities for derivative instruments 3,961 3,961 0 0 Total 384,613 163,227 220,864 522

Bank borrowing

This caption includes the following payables: a) a committed revolving line of credit of around Euro 90,000 thousand for a period of seven years. At December 31, 2013, the line was utilised in full. This line is not subject to any secured guarantees but requires compliance with covenants calculated based on the consolidated financial statements of Bracco Imaging S.p.A.

If said covenants are not respected, Mediobanca may ask the Company to make early repayment of the full amount of the loan. The covenants were respected as at December 31, 2013. b) two committed lines of credit totalling Euro 50,000 thousand, Euro 39,286 thousand were used at December 2016; duration of five years, expiry in 2016.

Neither line of credit is subject to any secured guarantees but both require compliance with covenants calculated based on the consolidated financial statements of Bracco Imaging S.p.A..

If said covenants are not respected, Centrobanca may ask the Company to make early repayment of the full amount of the loans. The covenants were respected as at December 31, 2013. c) An uncommitted loan of Euro 20,000 thousand granted by Credito Emiliano for a period of three years, expiring in 2014. At December 31, 2013, the debt stood at Euro 5,119 thousand. The loan is not subject to any secured guarantees and does not require compliance with any covenants. d) a committed loan of Euro 50,000 thousand for a period of five years, expiring in 2007, which provides for a repayment plan commencing on June 30, 2014; at December 31, 2013, the full amount of the loan was

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 75 utilised. The loan is not subject to any secured guarantees but requires compliance with covenants calculated based on the consolidated financial statements of Bracco Imaging S.p.A.. If said covenants are not respected, Intesa SanPaolo may ask the Company to make early repayment of the full amount of the loan. The covenants were respected as at December 31, 2013. e) a committed revolving line of credit of Euro 30,000 thousand for a period of three years, maturing in 2015. At December 31, 2013, this line was not utilised. The line is not subject to any secured guarantees but requires compliance with covenants calculated based on the Bracco Imaging S.p.A. consolidated financial statements.

If the Company fails to respect at least one of the covenants for two consecutive years, Banca Popolare di Milano may demand early repayment of the entire loan. f) a committed revolving line of credit of Euro 25,000 thousand for a period of three years, maturing in 2015. At December 2013, the line of credit was not utilised. The line is not subject to any secured guarantees but requires compliance with covenants calculated based on the Bracco Imaging S.p.A. consolidated financial statements.

If the Company fails to respect the covenants, Barclays Bank may demand early repayment of the entire loan. g) A club deal for a total financed amount of Euro 70,000 thousand plus USD 35,000 thousand, coordinated by Mediobanca, for a period of three years. At December 31, 2013, the line was utilised to the extent of Euro 40,000 thousand. The USD amount can be utilised only by Bracco Diagnostic Inc..

The club deal is not subject to any secured guarantees but requires compliance with covenants calculated based on the Bracco Imaging S.p.A. consolidated financial statements:

If the Company fails to respect the covenants, the bank may demand early repayment of the entire loan. At December 31, 2013, the covenants were respected. h) Three loans from Mediocredito Friuli Venezia Giulia repayable in six-monthly instalments in arrears – low rate of interest of 80% of Euribor 6-month rate:  A loan of Euro 157 thousand at December 31, 2013, agreement signed on September 27, 2006 with expiry in January 2014. The loan is guaranteed by a lien on plant and machinery and by a surety. Principal repayments of Euro 315 thousand were made during the year;  A loan of Euro 1,119 thousand received on March 20, 2009 with final expiry in January 2021. It is guaranteed by a surety. Principal repayments of Euro 149 thousand were made during the year.  A loan of Euro 1,690 thousand arranged in 2013 for a period of 15 years. It is guaranteed by a lien on company plant and machinery. On December 31, 2013, the company received the first disbursement of Euro 124 thousand. i) A medium/long-term loan from Saitama Reisona Bank to Bracco Eisai, arranged on March 31, 2009 for a period of five years. The loan was disbursed in Yen and is subject to a fixed rate of interest. As at December 31, 2013, it was utilised in its full amount of JPY 14,500 thousand, equal to Euro 100 thousand. The loan is not subject to any guarantees or compliance with covenants. l) A line of credit of CHF 25,000 arranged on November 19, 2012 with Credit Suisse and expiring on January 1, 2018; guaranteed by a surety of the same amount issued by holding company Bracco Imaging S.p.A. As at December 31, 2013, the line was utilised to the extent of CHF 15,000 thousand (Euro 12,219 thousand). The line of credit offers the possibility of early repayment and is subject to an interest rate equal to the CHF LIBOR rate plus a spread. There is a repayment plan, commencing on March 31, 2013, with

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 76 instalments of CHF 1,250 per quarter. This line of credit is not subject to any guarantees or compliance with covenants. m) A loan of € 10,000 thousand from Commerzbank out of L-bank funds to subsidiary Bipso G.m.b.H. The loan agreement was signed on January 18, 2013 and it will expire on September 30, 2018. At December 31, 2013, the loan – guaranteed by holding company Bracco Imaging S.p.A. – was utilised in the amount of Euro 9,500 thousand.

Pursuant to IAS 39, where applicable, loans have been recorded at amortised cost, determined based on the effective rate of interest method (taking account of market rates of interest and related expenses incurred to arrange the loans) i.e. the rate which discounts future cash flows over the life of the financial instrument in order to arrive at its net carrying amount.

Payables to other lenders

“Payables to other lenders” refers to:

- Euro 1,449 thousand (Euro 1,626 thousand at December 31, 2012) regarding the loan from Intesa Sanpaolo S.p.A. out of the Research Assistance Fund (Legislative Decree 297/1999) of the Ministry of Education, the Universities and Research (MIUR) in relation to a research project “Intravascular contrast agents for MRI for cardiology and oncology applications”. The loan is repayable in six- monthly instalments in arrears, the last of them due on January 1, 2018. The applicable rate of interest is 0.25% six-monthly. During the year, funding of Euro 181 thousand was received and repayments of Euro 358 thousand were made.

- Euro 514 thousand representing the amount payable by subsidiary Spin S.p.A. for the future acquisition of shares in Halo Industry.

Finance lease payables

The Group is party to both finance lease agreements and contracts without the legal form of finance leases but which provide the right to use certain assets and include certain other conditions making them akin to finance leases (in terms of IFRIC 4) and which must, therefore, be accounted for in accordance with IAS 17. Finance lease payables include several contracts for the development of production methods and research which fall within the scope of application of the above principles.

Present value of minimum payments due for Minimum payments due for leases leases December 31, December 31, December 31, December 31, 2013 2012 2013 2012 Finance leases: due within one year 326 450 303 412 due within five years 305 636 293 602 due after five years Total 631 1,086 596 1,014

Less amounts due for future interest expenses 34 72 1,014 Present value of payables for finance leases 596 1,014

Financial payables for derivative contracts

Payables for derivative contracts amounting to Euro 2,273 thousand (Euro 3,961 thousand at December 31, 2012) mainly refers to a number of contracts arranged to hedge the risk of interest rate fluctuation given that the Company’s loans payable are subject to variable rates of interest. The payables represent the mark to market valuation of the derivatives in question under the hedge accounting method.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 77 Fair value is determined using the discounted cash flow method. The effective portion of gains or losses on derivative financial instruments is recorded under Equity.

Bank credit facilities

As at December 31, 2013, the Group had the following short-term committed revolving lines of credit: - A line of Euro 85,000 thousand with Unicredit for a period of 12 months. At December 31, 2013, the line was utilised by Euro 55,000 thousand. The line is not subject to any secured guarantees or compliance with any covenants;

- A line of Euro 70,000 thousand with Intesa Sanpaolo for a period of 12 months. At December 31, 2013, the line was utilised by Euro 45,000 thousand. The line is not subject to any secured guarantees or compliance with any covenants

- A line of Euro 25,000 thousand with Banca Popolare di Bergamo for a period of 18 months, 1 day. At December 31, 2013, the line was unutilised. The line is not subject to any secured guarantees or compliance with any covenants;

- A line of Euro 15,000 thousand with Antonveneta for a period of 17 months. At December 31, 2013, the line was unutilised. The line is not subject to any secured guarantees or compliance with any covenants;

- A line of Euro 10,000 thousand with Cariparma for a period of 18 months, 1 day. At December 31, 2013, the line was unutilised. The line is not subject to any secured guarantees or compliance with any covenants;

- A revolving line of credit of Euro 28,000 thousand with ICBC for a period of 12 months. At December 31, 2013, the line was unutilised. The line is not subject to any secured guarantees or compliance with any covenants.

33 PROVISIONS FOR RISKS AND CHARGES

At December 31, 2013, provisions for risks and charges amounted to Euro 42,495 thousand, Euro 26,776 thousand less than at December 31, 2012. They are analysed as follows:

December 31, Exchange December 31, Increases Decreases Reclassification 2012 differences 2013 NON-CURRENT Litigation reserves 0 0 0 0 0 0 Other provisions 0 0 Total non-current provisions (A) 0 0 0 0 0 0

CURRENT Litigation reserves 0 0 0 0 0 Reserves for product and return guarantee 472 0 (97) 0 (17) 358 Other current provisions 68,798 25,260 (19,038) (32,142) (742) 42,136 Total current provisions (B) 69,271 25,260 (19,135) (32,142) (759) 42,495

Total provisions for risks and 69,271 25,260 (19,135) (32,142) (759) 42,495 charges (A+B)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 78 December 31, Change in scope Exchange December 31, Increases Decreases Reclassification 2011 of consolidation differences 2012 NON-CURRENT Litigation reserves 0 0 0 0 0 0 Other provisions 0 0 0 0 0 0 Total non-current provisions (A) 0 0 0 0 0 0 0

CURRENT Litigation reserves 0 0 0 0 0 0 Reserves for product and return guarantee 583 (101) 0 (10) 472 Other current provisions 22,828 224 54,078 (11,075) 2,782 (39) 68,798 Total current provisions (B) 23,412 224 54,078 (11,176) 2,782 (49) 69,271

Total provisions for risks and 23,412 224 54,078 (11,176) 2,782 (49) 69,271 charges (A+B)

The changes in “other provisions” in 2013 are mainly due to:  A decrease of Euro 16,788 thousand due to payment during the year of extraordinary expenses regarding prior year tax disputes that were settled in 2013 by holding company Bracco Imaging S.p.A. with the Lombardy Regional Head Office of the Italian Tax Authorities;  A reclassification of Euro 32,142 thousand to “Other Current Liabilities” (2014 portion) and “Other non-Current Liabilities” (portion due after more than a year in respect of costs relating to the same tax disputes as above;  Increases mainly attributable to the provision made during the year for possible price adjustments to be recognised in favour of US wholesalers under a new government program 340B introduced in the United States in 2013. Given the complexity of the program and uncertainty over its interpretation, in many cases, the hospitals involved have not yet input into the public healthcare administrative system the prices which then give rise to subsequent adjustments for wholesalers and manufacturers. Given the lack of clarity in relation to the regulations, the clarification expected in 2014 and the difficulty of making an estimate without clear input from the end customer, the Group has decided to record this item under Provisions for Risks, representing the best estimate possible based on information currently available.

In 2012, holding company Bracco Imaging S.p.A. received tax demands from the Lombardy Regional Headquarters of the Italian Tax Authorities in relation to the 2006 and 2007 tax years. Said company remains convinced that it has acted correctly but in light of the risks and uncertainty involved in commencing a formal tax dispute and taking account the significant amounts involved, the company decided to seek a settlement. A final settlement for 2006 was signed in April 2013 followed, in May, by a settlement for 2007.

Also, in July 2013, holding company Bracco Imaging S.p.A. received a questionnaire from the Lombardy Regional Headquarters of the Italian Tax Authorities asking for information about transactions in 2008. It has responded providing the information requested.

34 TRADE PAYABLES

At December 31, 2013, trade payables amounted to Euro 118,829 thousand, Euro 14,663 thousand more than at December 31, 2012. They may be analysed as follows:

December 31 December 31 2013 2012 Trade payables due to parent company 378 790 Trade payables due to associated companies 3,393 3,795 Trade payables due to third parties 115,058 99,581 Total 118,829 104,166

Payables to associated companies are analysed as follows:

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 79 December 31 December 31 Due to associated companies 2013 2012 Acist Medical Systems, Inc. 3,313 3,692 Bracco Real Estate S.r.l. 1 0 Centro Diagnostico Italiano S.p.A. 79 103 Total 3,393 3,795

This item is generated by purchases of goods and services.

The carrying amount of trade payables and other payables approximates their amortised cost.

35 OTHER CURRENT AND NON-CURRENT LIABILITIES

At December 31, 2013, this item amounted to Euro 112,613 thousand, Euro 37,836 thousand more than at December 31, 2012. It may be analysed as follows:

December 31, 2013 December 31, 2012 Between Between Within one After Within one After Total one and five Total one and five year five years year five years years years Payables due to employees 26,215 26,215 0 0 24,593 24,593 0 0 Accrued expenses 8,280 7,782 498 0 8,345 7,691 654 0 Income taxes due to tax authorities 42,988 24,917 18,071 0 7,811 7,811 0 0 Cash Flow Hedge 451 451 0 0 456 456 0 0 Payables due to social security institutions 3,389 3,389 0 0 3,197 3,197 0 0 Payables due to parent company Bracco S.p.A. 1,176 1,176 0 0 2,451 2,451 0 0 VAT liabilities 2,861 2,861 0 0 1,831 1,831 0 0 Deferred income 404 404 0 0 378 378 0 0 Other liabilities 26,849 16,159 10,690 0 25,715 14,843 10,872 0 Total 112,613 83,353 29,259 0 74,777 63,251 11,526 0

Due to associated companies December 31, 2013 December 31, 2012 Between Between Within one After Within one After Total one and five Total one and five year five years year five years years years Bracco PTY Ltd. 79 79 0 0 106 106 0 0 Acist Medical Systems Inc. 1,046 1,046 0 0 185 185 0 0 Total 1,125 1,125 0 0 291 291 0 0

Payables to employees mainly includes holiday pay and bonuses accruing but not paid.

“Tax payables” includes Euro 32,142 thousand representing the current and non-current portions of the liability for tax disputes already commented upon in Note 33 “Provisions for risks and charges”. The remainder refers to amounts due to the tax authorities for deductions at source from employees and consultants.

Payables to social security and pensions institutions represents the liability towards such institutions for employer and employee contributions on wages and salaries for the month of December 2013.

“Other payables” includes the deferred earn-out payment on the acquisition of Bracco Injeneering SA which is subject to certain conditions being satisfied and certain business targets achieved.

36 CONTINGENT LIABILITIES

Holding company Bracco Imaging S.p.A. is party to a dispute with the Italian Tax Authorities over alleged breaches of transfer pricing regulations in relation to subsidiary Bracco Altana GmbH in 2002. The company

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 80 received an initial tax demand for Euro 3,934 thousand and lost the legal case at the court of first instance. However, the company then successfully appealed on October 12, 2007 to the second tier Regional Tax Commission. On January 13, 2009, the Italian Tax Authorities filed a further appeal to the Supreme Court of Cassation; the Company has filed a cross-appeal of its own. At the date these financial statements were presented to the Board of Directors, the Court of Cassation had not yet scheduled a hearing of the matter.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 81 37 RELATED PARTY TRANSACTIONS

Intra-Group transactions

The Bracco Imaging Group’s related party transactions mainly involve:

 Commercial relations  Services  Relations under the Bracco Group consolidated tax arrangement and VAT arrangement, for the Italian companies.

The following table shows the balance sheet and income statement relations of the Bracco Imaging Group with other entities identified as related parties belonging to the Bracco Group (parent company, associated companies and non-consolidated subsidiaries) at both December 31, 2013 and December 31, 2012:

Balance sheet transactions

Current and non- Other Current and non- Trade Other current December 31, 2013 current financial receivables and Trade payables current financial receivables liabilities assets current assets liabilities

Parent company Bracco S.p.A. 1,075 0 5,571 (378) 0 (1,176)

Associated companies Bracco Real Estate S.r.l. 0 0 57 (1) 0 0 Bracco Advance Medical Technologies Inc. 0 13,805 0 0 0 0 Acist Medical System Inc. 215 25,875 331 (3,313) 0 (1,046) Centro Diagnostico Italiano 35 0 38 (79) 0 0 No n consolidated subsidiaries Bracco Pty L.t.d. 0 0 0 0 (79)

Total 1,325 39,680 5,997 (3,771) 0 (2,301)

Current and non- Other Current and non- Trade Other current December 31, 2012 current financial receivables and Trade payables current financial receivables liabilities assets current assets liabilities

Parent company Bracco S.p.A. 2 0 6,286 (790) 0 (2,451)

Associated companies Bracco Real Estate S.r.l. 0 0 56 0 0 0 Bracco Advance Medical Technologies Inc. 0 14,431 0 0 0 0 Acist Medical System Inc. 0 24,713 91 (3,692) 0 (185) Centro Diagnostico Italiano 76 0 58 (103) 0 0 Non consolidated subsidiaries Bracco Pty L.t.d. 0 0 0 0 0 (106)

Total 78 39,144 6,491 (4,585) 0 (2,742)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 82 Income statement transactions

Purchases, Ne t financial Other services and income December 31, 2013 Revenues income use of third- (expenses) party assets Parent company Bracco S.p.A. 2,275 1,456 (2,678) 0

Associated companies Bracco Real Estate S.r.l. 0 122 0 0 Bracco Advance Medical Technologies Inc. 0 0 0 (291) Acist Medical System Inc. (1) 720 (30,119) (416) Centro Diagnostico Italiano 231 45 (322) 0

Total 2,505 2,343 (33,119) (707)

Purchases, Ne t financial Other services and income December 31, 2012 Revenues income use of third- (expenses) party assets Parent company Bracco S.p.A. 2,999 1,432 (3,147) 0

Associated companies Bracco RE Srl 0 117 (308) 0 Bracco Real Estate S.r.l. 0 0 1 0 Bracco Advance Medical Technologies Inc. 0 0 (40) 31 Acist Medical System Inc. 0 603 (19,530) 493 Centro Diagnostico Italiano 209 64 0 0

Total 3,208 2,216 (23,024) 524

Pursuant to Article 2427 (22-bis) of the Italian Civil Code, we note that the related party transactions cannot be classed as atypical or unusual and form part of the ordinary business activities of the Group.

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 83 Remuneration of directors, statutory auditors and key management personnel

In 2013, the emoluments paid to the members of the Board of Directors of holding company Bracco Imaging S.p.A. amounted to Euro 1,000 thousand (Euro 1,000 thousand in 2012) while the emoluments paid to the directors for taking part in the Board of Directors’ meetings of other Group companies amounted to Euro 115 thousand (Euro 140 thousand in 2012).

The members of the holding company Board of Directors are:  Diana Bracco  Fulvio Renoldi Bracco  Pietro Mascherpa  Giordano Righini

The emoluments paid to the members of the Board of Statutory Auditors of holding company Bracco Imaging S.p.A. in 2013 amounted to Euro 149 thousand (Euro 146 thousand in 2012). The members of the Board of Statutory Auditors of Bracco Imaging S.p.A., as appointed by the General Meeting of May 23, 2013 are:  Angelo Casò (Chairman)  Enrico Nicolini  Lorenzo Pozza

The remuneration of key management personnel for 2013 totalled around Euro 4.3 million (Euro 4.6 million in 2012).

Fees of the external auditors The fees of external auditors Deloitte & Touche S.p.A., incurred by holding company Bracco Imaging S.p.A. in 2013, amounted to Euro 200 thousand (Euro 200 thousand in 2012).

Transactions with other related parties

Transactions with other related parties – as defined by IAS 24 and not including the parent company or direct and indirect subsidiaries – regard the legal services rendered by Studio Legale Associato Santa Maria (Euro 1.1 million in 2013 and Euro 4.1 million in 2012) and donations to the Bracco Foundation (Euro 1.4 million in 2013 and Euro 1.5 million in 2012).

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 84 38 NET FINANCIAL POSITION

At December 31, 2013, the net financial position was as follows:

December December (€ thousand) 31, 2013 31, 2012

Cash and cash equivalents 101,587 67,387

Current financial receivables - associated companies 39,680 39,143

Current financial receivables - third parties 12,436 12,635

Current financial liabilities - third parties (180,588) (163,227)

Short-term net financial position (26,885) (44,062)

Financial liabilities - third parties (210,032) (221,385)

Net financial position (236,917) (265,447)

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 85 39 SUBSEQUENT EVENTS

In the first few months of 2014, parent company Bracco SpA began a preliminary study with a view to rationalising the chain of control and achieving economies of scale in terms of general and administrative expenses as well as combining similar business activities. Holding company Bracco Imaging S.p.A. is also involved in this process.

These financial statements are submitted to the General Meeting following a resolution by the Board of Directors on March 28, 2014.

For the Board of Directors President and Chief Executive Officer

Diana Bracco

Bracco Imaging Group – Notes to the consolidated financial statements at December 31, 2013- page 86