20-F

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                       to
o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

Commission file number 001-35193

GRIFOLS, S.A.

(Exact name of Registrant as specified in its charter)

Kingdom of Spain

(Jurisdiction of incorporation)

Avinguda de la Generalitat, 152-158

Parc de Negocis Can Sant Joan

Sant Cugat del Vallès 08174

Barcelona, Spain

(Address of principal executive offices)

David Ian Bell

General Counsel

Grifols Shared Services North America, Inc.

 2410 Lillyvale Ave

Los Angeles, CA 90032-3514

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered, pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares evidenced by American Depositary Receipts, each American Depositary Share representing one Class B non-voting share of Grifols, S.A.	The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None.

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None.

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.

426,129,798 Class A Shares

261,425,110 Class B Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes   o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o International Financial Reporting Standards as issued
by the International Accounting Standards Board x Other o

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

GRIFOLS, S.A.

TABLE OF CONTENTS(1)

		Page
PRESENTATION OF FINANCIAL AND OTHER INFORMATION		iii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		iv
PART I		1
Item 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
Item 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
Item 3.	KEY INFORMATION	1
Item 4.	INFORMATION ON THE COMPANY	26
Item 4.A.	UNRESOLVED STAFF COMMENTS	60
Item 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	60
Item 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	86
Item 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	99
Item 8.	FINANCIAL INFORMATION	102
Item 9.	THE OFFER AND LISTING	104
Item 10.	ADDITIONAL INFORMATION	110
Item 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	127
Item 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	128
PART II		134
Item 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	134
Item 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	134
Item 15.	CONTROLS AND PROCEDURES	134
Item 16.	[RESERVED]	135
Item 16.A.	AUDIT COMMITTEE FINANCIAL EXPERT	135
Item 16.B.	CODE OF ETHICS	135
Item 16.C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	135
Item 16.D.	EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	136
Item 16.E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	136
Item 16.F.	CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT	136
Item 16.G.	CORPORATE GOVERNANCE	136
Item 16.H.	MINE SAFETY DISCLOSURE	139

i

PART III		139
Item 17.	FINANCIAL STATEMENTS	139
Item 18.	FINANCIAL STATEMENTS	139
Item 19.	EXHIBITS	139

ii

GENERAL INFORMATION

As used in this annual report on Form 20-F, unless the context otherwise requires or as is otherwise indicated:

·all references to “Grifols,” the “Company,” “we,” “us” and “our” refer to Grifols, S.A., a company (sociedad anónima) organized under the laws of Spain, and our consolidated subsidiaries; and

·all references to the “Group” or the “Grifols Group” are to Grifols, S.A. and the group of companies owned or controlled by Grifols, S.A.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The basis of presentation of financial information of Grifols in this document is in conformity with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and other legislative provisions containing the applicable legislation governing our financial information, unless indicated otherwise.

All references in this annual report on Form 20-F to (i) “euro”, “€” or “EUR” are to the common currency of the European Union and (ii) “U.S. dollar”, “$” or “USD” are to the currency of the United States.

All tabular disclosures are presented in thousands of euro except share and per share amounts, percentages and as otherwise indicated.  Certain monetary amounts and other figures included in this annual report on Form 20-F have been subject to rounding adjustments.  Accordingly, any discrepancies in any tables between the totals and the sums of amounts listed are due to rounding.

Constant Currency

Net revenue variance in constant currency is determined by comparing adjusted current period figures, calculated using prior period monthly average exchange rates, to the prior period net revenue. The resulting percentage variance in constant currency is considered to be a non-IFRS-IASB financial measure. Net revenue variance in constant currency calculates net revenue variance without the impact of foreign exchange fluctuations. We believe that constant currency variance is an important measure of our operations because it neutralizes foreign exchange impact and illustrates the underlying change from one year to the next. We believe that this presentation provides a useful period-over-period comparison as changes due solely to changes in exchange rates are eliminated. Net revenue variance in constant currency, as defined and presented by us, may not be comparable to similar measures reported by other companies. Net revenue variance in constant currency has limitations, particularly because the currency effects that are eliminated constitute a significant element of our net revenue and expenses and could impact our performance significantly. We do not evaluate our results and performance without considering variances in constant currency on the one hand and changes prepared in accordance with IFRS-IASB on the other. We caution you to follow a similar approach by considering data regarding constant currency period-over-period revenue variance only in addition to, and not as a substitute for or superior to, other measures of financial performance prepared in accordance with IFRS-IASB. We present the fluctuation derived from IFRS-IASB net revenue next to the fluctuation derived from non IFRS-IASB net revenue.

See below for a reconciliation of reported net revenues to net revenues in constant currency:

	2017	2016	% Var			2016	2015	% Var
	(in millions of euros)					(in millions of euros)
Reported Net Revenues	4,318.1	4,049.8	6.6	%	Reported Net Revenues	4,049.8	3,934.6	2.9	%
Variation due to exchange rate effects	25.1				Variation due to exchange rate effects	5.2
Constant Currency Net Revenues	4,343.2	4,049.8	7.2	%	Constant Currency Net Revenues	4,055.0	3,934.6	3.1	%

PRESENTATION OF MARKET INFORMATION

Market information (including market share, market position and industry data for our operating activities and those of our subsidiaries or of companies acquired by us) or other statements presented in this annual report on Form 20-F regarding our position (or that of companies acquired by us) relative to our competitors largely reflect the best estimates of our management.  These

iii

estimates are based upon information obtained from customers, trade or business organizations and associations, other contacts within the industries in which we operate and, in some cases, upon published statistical data or information from independent third parties.  Except as otherwise stated, our market share data, as well as our management’s assessment of our comparative competitive position, has been derived by comparing our sales figures for the relevant period to our management’s estimates of our competitors’ sales figures for such period, as well as upon published statistical data and information from independent third parties, and, in particular, the reports published and the information made available by, among others, the Marketing Research Bureau, or the MRB.  You should not rely on the market share and other market information presented herein as precise measures of market share or of other actual conditions.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains statements that constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements are typically identified by words such as “may,” “anticipate,” “believe,” “estimate,” “predict,” “expect,” “intend,” “forecast,” “will,” “would,” “should” or the negative of such terms or other variations on such terms or comparable or similar words or expressions.

These forward-looking statements reflect, as applicable, our management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially.  These factors include, but are not limited to:

Risks Relating to Our Business:

·the complexity of our manufacturing processes and the susceptibility of our biological intermediates to contamination;

·our need to continually monitor our products for possible unexpected side effects;

·our ability to adhere to government regulations so that we may continue to manufacture and distribute our products;

·the impact of disruptions in our supply of plasma or in the operations of our plasma collection centers;

·the impact of competing products and pricing and the actions of competitors;

·the impact of product liability claims on our business;

·our reliance on a plasma supply free of transmittable disease;

·interest rates and availability and cost of financing opportunities;

·the impact of interest rate fluctuations;

·unexpected shut-downs of our manufacturing and storage facilities or delays in opening new planned facilities;

·reliance on third parties for manufacturing of products and provision of services;

·our ability to commercialize products in development;

·uncertainties involved in product research and development, including regarding clinical trials;

·breaches of data security or data privacy, or disruptions in our information technology systems; and

·our ability to protect our intellectual property rights.

Risks Relating to the Healthcare Industry:

·the impact of the 2010 Patient Protection and Affordable Care Act and companion Healthcare and Education Reconciliation Act, and potential repeal or amendment thereof,  new legislation, regulatory action or legal proceedings affecting, among other things, the U.S. healthcare system, pharmaceutical pricing and reimbursement, including Medicaid, Medicare and the Public Health Service Program;

iv

·legislation or regulations in markets outside of the United States affecting product pricing, reimbursement, access, or distribution channels; and

·changes in legal requirements affecting the industries in which we operate.

Please review a more detailed discussion of these and other risks that may impact our business set forth in this Form 20-F under “Item 3.D. Risk Factors.”

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those listed above, and actual results may differ materially from those in the forward-looking statements.

The forward-looking statements contained in this annual report speak only as of the date of this annual report.  Except as required by law, we do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

v

PART I

Item 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.Directors and Senior Management

Not applicable.

B.Advisers

Not applicable.

C.Auditor

Not applicable.

Item 2.OFFER STATISTICS AND EXPECTED TIMETABLE

A.Offer Statistics

Not applicable.

B.Method and Expected Timetable

Not applicable.

Item 3.KEY INFORMATION

A.Selected Financial Data

Selected Consolidated Financial Information

The following is a summary of our historical consolidated financial data for the periods ended and as of the dates indicated below.  You are encouraged to read this information together with Item 5 of this Part I, “Operating and Financial Review and Prospects,” and our audited consolidated financial statements and the accompanying notes included in this annual report on Form 20-F.

The following tables present our consolidated financial data for the periods and as of the dates indicated, prepared in conformity with IFRS, as issued by the IASB.  Our consolidated balance sheet data as of December 31, 2017 and 2016 and our consolidated statement of profit and loss data for the years ended December 31, 2017, 2016 and 2015 is derived from our audited consolidated financial statements for those years, which are included in this annual report on Form 20-F.  Our consolidated balance sheet data as of December 31, 2015, 2014 and 2013 and our consolidated statement of profit and loss data for the years ended December 31, 2014 and 2013 is derived from our consolidated financial statements for those years, which are not included in this Form 20-F.

	As of December 31,
Consolidated Balance Sheet Data	2017	2016	2015	2014	2013
	(in thousands of euros)
ASSETS
Goodwill	4,590,498	3,643,995	3,532,359	3,174,732	1,829,141
Other intangible assets	1,269,342	1,195,302	1,161,572	1,068,361	946,435
Property, plant and equipment	1,760,053	1,809,852	1,644,402	1,147,782	840,238
Investments in equity accounted investees	219,009	201,345	76,728	54,296	35,765
Non-current financial assets	69,889	89,545	30,388	9,011	15,196
Deferred tax assets	66,157	67,219	66,794	82,445	34,601
Total non-current assets	7,974,948	7,007,258	6,512,243	5,536,627	3,701,376
Inventories	1,629,293	1,642,931	1,431,391	1,194,057	946,913
Trade and other receivables:
Trade receivables	286,198	413,656	362,406	500,785	385,537
Other receivables	40,681	42,299	60,520	35,370	36,511
Current income tax assets	59,531	77,713	60,270	79,593	43,533

1

	As of December 31,
Consolidated Balance Sheet Data	2017		2016		2015		2014		2013
	(in thousands of euros)
Trade and other receivables	386,410		533,668		483,196		615,748		465,581
Other current financial assets	10,738		2,582		1,294		502		1,200
Other current assets	32,354		48,324		31,091		23,669		17,189
Cash and cash equivalents	886,521		895,009		1,142,500		1,079,146		708,777
Total current assets	2,945,316		3,122,514		3,089,472		2,913,122		2,139,660
Total Assets	10,920,264		10,129,772		9,601,715		8,449,749		5,841,036
EQUITY AND LIABILITIES
Share capital	119,604		119,604		119,604		119,604		119,604
Share premium	910,728		910,728		910,728		910,728		910,728
Reserves	2,027,648		1,694,245		1,371,061		1,088,337		883,415
Treasury stock	(62,422	)	(68,710	)	(58,575	)	(69,252	)	0
Interim dividend	(122,986	)	(122,908	)	(119,615	)	(85,944	)	(68,755	)
Profit for the year attributable to the Parent	662,700		545,456		532,145		470,253		345,551
Total Share Capital and Accumulated Results	3,535,272		3,078,415		2,755,348		2,433,726		2,190,543
Available for sale financial assets	4,926		(5,219	)	—		—		—
Cash flow hedges	—		—		3,329		(15,811	)	(25,791	)
Other	(656	)	(642	)	3,035		(406	)	—
Translation differences	89,537		648,927		534,491		240,614		(63,490	)
Other comprehensive expenses	93,807		643,066		540,855		224,397		(89,281	)
Equity attributable to the Parent	3,629,079		3,721,481		3,296,203		2,658,123		2,101,262
Non-controlling interests	4,886		6,497		5,187		4,765		5,942
Total Equity	3,633,965		3,727,978		3,301,390		2,662,888		2,107,204
LIABILITIES
Grants	11,822		12,196		13,120		6,781		7,034
Provisions	5,763		5,118		4,980		6,953		4,202
Non-current financial liabilities	5,901,815		4,712,071		4,597,654		4,154,630		2,553,211
Deferred tax liabilities	388,912		600,646		631,565		538,786		454,089
Total non-current liabilities	6,308,312		5,330,031		5,247,319		4,707,150		3,018,536
Provisions	106,995		89,588		123,049		115,985		51,459
Current financial liabilities	155,070		230,065		262,497		194,726		258,144
Debts with associates	0		0		443		3,059		2,683
Trade and other payables:
Suppliers	423,096		461,073		409,986		439,631		273,621
Other payables	141,720		142,894		106,171		90,965		42,388
Current income tax liabilities	6,709		7,957		16,196		87,462		2,934
Total trade and other payables	571,525		611,924		532,353		618,058		318,943
Other current liabilities	144,397		140,186		134,664		147,883		84,067
Total current liabilities	977,987		1,071,763		1,053,006		1,079,711		715,296
Total liabilities	7,286,299		6,401,794		6,300,325		5,786,861		3,733,832
Total Equity and Liabilities	10,920,264		10,129,772		9,601,715		8,449,749		5,841,036

2

	For the Year Ended December 31,
Consolidated Statement of Profit and Loss Data	2017		2016		2015		2014		2013
	(in thousands of euros, except per share data)
Continuing Operations
Net revenue	4,318,073		4,049,830		3,934,563		3,355,384		2,741,732
Cost of sales	(2,166,062	)	(2,137,539	)	(2,003,565	)	(1,656,170	)	(1,323,880	)
Gross Profit	2,152,011		1,912,291		1,930,998		1,699,214		1,417,852
Research and development	(288,320	)	(197,617	)	(224,193	)	(180,753	)	(123,271	)
Selling, general and administration expenses	(860,348	)	(775,266	)	(736,435	)	(660,772	)	(558,461	)
Operating Expenses	(1,148,668	)	(972,883	)	(960,628	)	(841,525	)	(681,732	)
Operating Result	1,003,343		939,408		970,370		857,689		736,120
Finance income	9,678		9,934		5,841		3,069		4,869
Finance costs	(263,344	)	(244,829	)	(240,335	)	(225,035	)	(239,991	)
Change in fair value of financial instruments	(3,752	)	(7,610	)	(25,206	)	(20,984	)	(1,786	)
Impairment and gains/(losses) on disposal of financial instruments	(18,844	)	—		—		(5	)	792
Exchange differences	(11,472	)	8,916		(12,140	)	(18,472	)	(1,303	)
Finance result	(287,734	)	(233,589	)	(271,840	)	(261,427	)	(237,419	)
Share of (losses) of equity accounted investees	(19,887	)	6,933		(8,280	)	(6,582	)	(1,165	)
Profit before income tax from continuing operations	695,722		712,752		690,250		589,680		497,536
Income tax expense	(34,408	)	(168,209	)	(158,809	)	(122,597	)	(155,482	)
Profit after income tax from continuing operations	661,314		544,543		531,441		467,083		342,054
Consolidated profit for the year	661,314		544,543		531,441		467,083		342,054
Profit attributable to the Parent	662,700		545,456		532,145		470,253		345,551
(Loss) attributable to non-controlling interests	(1,386	)	(913	)	(704	)	(3,170	)	(3,497	)
Basic earnings per ordinary share(1)	0.97		0.80		0.78		0.69		0.51
Average number of shares(1)	684,197,276		683,225,815		683,549,316		685,344,936		681,010,595
Basic earnings per ordinary share from continuing operations(1)	0.97		0.80		0.78		0.69		0.51
Cash dividend per ordinary share (2)	0.32		0.31		0.65		0.45		0.20
Cash dividend per preference share (2)	0.33		0.32		0.66		0.46		0.21

(1)On January 4, 2016, the share split approved on December 3, 2015 by the Company’s board of directors became effective. As a result of the share split, the nominal value of the new Class A shares becomes €0.25 per share (previously €0.50 per share), while the nominal value of the new Class B shares becomes €0.05 per share (previously €0.10 per share). In line with the audited financial statements included herein, average weighted number of ordinary shares and basic earnings per ordinary share for 2016 and 2015 have been calculated taking the split into consideration and comparative data for 2014 and 2013 has been modified accordingly.

(2)Cash dividends for 2017 and 2016 are not comparable to prior years due to the share split effect explained in note (1) above.

	For the Year Ended December 31,
Consolidated Statement of Comprehensive Income	2017		2016		2015		2014		2013
	(in thousands of euros)
Consolidated profit for the year	661,314		544,543		531,441		467,083		342,054
Other comprehensive expenses
Items for reclassification to profit or loss
Translation differences	(532,389	)	103,833		290,635		303,077		(91,610	)
Translation differences / Cash Flow Hedge	—		(6,809	)	—		—		—
Available for sale financial Assets	10,145		(5,219	)	—		—		—
Equity accounted investees	(27,134	)	10,671		2,673		1,287		(359	)
Cash flow hedges — effective part of changes in fair value	—		14,501		55,305		34,556		(22,943	)
Cash flow hedges — amounts taken to profit and loss	—		(7,426	)	(25,206	)	(20,711	)	(11,471	)
Other comprehensive income	(14	)	(4,810	)	4,575		(406	)	—
Tax effect	—		(2,462	)	(12,093	)	(3,865	)	(4,227	)

3

	For the Year Ended December 31,
Consolidated Statement of Comprehensive Income	2017		2016		2015		2014		2013
	(in thousands of euros)
Other comprehensive income/(loss) for the year, after tax	(549,392	)	102,279		315,889		313,938		(84,724	)
Total comprehensive income for the year	111,922		646,822		847,330		781,021		257,330
Total comprehensive income attributable to the Parent	113,441		647,667		848,603		783,931		261,509
Total comprehensive income/(expense) attributable to non-controlling interests	(1,519	)	(845	)	(1,273	)	(2,910	)	(4,179	)

Exchange Rates

The following tables show, for the periods indicated, the exchange rate between the U.S. dollar and the euro.  This information is provided solely for your information and we do not represent that euro could be converted into U.S. dollars at these rates or at any other rate, during the periods indicated or at any other time.  These rates are not the rates used by us in the preparation of our audited consolidated financial statements included in this annual report on Form 20-F.

As used in this annual report on Form 20-F, the term “Noon Buying Rate” refers to the rate of exchange for euro, expressed in U.S. dollars per euro, in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes.  The Noon Buying Rate for the euro on March 30, 2018 was $1.2320 = €1.00.  The following tables describe, for the periods and dates indicated, information concerning the Noon Buying Rate for the euro.  Amounts are expressed in U.S. dollars per €1.00.

Annual Data (Year Ended December 31,)	Period End ($)	Average Rate ($) (1)	High ($)	Low ($)
2013	1.3766	1.3281	1.3816	1.2774
2014	1.2098	1.3285	1.3934	1.2098
2015	1.0859	1.1100	1.2101	1.0524
2016	1.0552	1.1072	1.1516	1.0375
2017	1.2022	1.1301	1.2041	1.0416

Source:  Federal Reserve Bank of New York

(1)The average of the Noon Buying Rates for the euro on the last day reported of each month during the relevant period.

Recent Monthly Data	High ($)	Low ($)
October 2017	1.1847	1.1580
November 2017	1.1936	1.1577
December 2017	1.2022	1.1725
January 2018	1.2488	1.1922
February 2018	1.2482	1.2211
March 2018	1.2440	1.2216

B.Capitalization and Indebtedness

Not Applicable.

C.Reasons for the Offer and Use of Proceeds

Not Applicable.

D.Risk Factors

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Risk Relating to Our Structure, Shares and American Depositary Shares

Our substantial level of indebtedness could adversely affect our financial condition, restrict our ability to react to changes to our business, and prevent us from fulfilling our obligations under our debt.

We have a significant amount of indebtedness. As of December 31, 2017, our current and non-current financial liabilities were €6.1 billion, of which a substantial majority (€5.9 billion) was long-term debt.

Our high level of indebtedness could have significant adverse effects on our business, such as:

·making it more difficult for us to satisfy our obligations with respect to our outstanding debt;

·making us more vulnerable to economic downturns and adverse developments in our business;

·impairing our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes;

·reducing the funds available to us for operations and other purposes due to the substantial portion of our cash flow from operations which we use to pay interest on our indebtedness;

·placing a prior ranking claim on the underlying assets of all of the indebtedness outstanding under our purchase money indebtedness, equipment financing and real estate mortgages;

·limiting our ability to fund a change of control offer;

·placing us at a competitive disadvantage compared to our competitors that may have proportionately less debt;

·limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

·restricting us from making strategic acquisitions or exploiting other business opportunities.

We expect to use cash flow from operations to pay our expenses and amounts due under our outstanding indebtedness.  Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control.  Our business may not generate sufficient cash flow from operations in the future and our anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to repay indebtedness or to fund other liquidity needs.  If we do not have enough money, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money.  We may not be able to accomplish any of these alternatives on terms acceptable to us, or at all.  In addition, the terms of existing or future debt agreements may restrict us from adopting any of these alternatives.  The failure to generate sufficient cash flow or to achieve any of these alternatives could materially and adversely affect our business, results of operations and financial condition.

Despite our substantial indebtedness, we may still incur significantly more debt.  This could exacerbate the risks associated with our substantial leverage.

We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future.  Our business is capital intensive, and we regularly seek additional capital.  Although the indenture governing the 2017 Notes (as defined herein), the New Credit Facilities (as defined herein) and the European Investment Bank Term Loans (as defined herein) contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions, including secured debt, could be substantial.  Adding more debt, including under the New Credit Facilities, to current debt levels could exacerbate the leverage-related risks described above.  For more information on our indebtedness, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B.  Liquidity and Capital Resources — Sources of Credit.”

To service our indebtedness and other obligations, we will require a significant amount of cash.  Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future.  A significant reduction in our operating cash flows resulting from changes in economic conditions, increased competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could have a material adverse effect on our business, financial condition, results of operations, prospects and our ability to service our debt and other obligations.  If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing capital expenditures, selling assets, restructuring or refinancing

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our indebtedness or seeking additional equity capital.  We cannot assure you that any of these alternative strategies could be effected on satisfactory terms, if at all, or that they would yield sufficient funds to make required payments on our indebtedness.

In addition, our borrowings under the New Credit Facilities are at variable rates of interest and expose us to interest rate risk.  If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the New Credit Facilities or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.  We may need to refinance all or a portion of our indebtedness on or before the maturity of such indebtedness.  We cannot assure you that we will be able to refinance any of our indebtedness, including the New Credit Facilities, the 2017 Notes and the European Investment Bank Term Loans, on commercially reasonable terms or at all.

Covenants in our debt agreements restrict our business in many ways.

The agreements governing our indebtedness and other financial obligations applicable to us contain various covenants, with customary caveats, that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

·incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

·issue redeemable stock and preferred equity;

·pay dividends or make distributions to the shareholders of Grifols, S.A. or redeem or repurchase capital stock;

·prepay, redeem or repurchase debt;

·make loans, investments and capital expenditures;

·enter into agreements that restrict distributions from our restricted subsidiaries;

·sell assets and capital stock of our subsidiaries;

·enter into certain transactions with affiliates; and

·consolidate or merge with or into, or sell substantially all of our assets to, another person.

A breach of any of these covenants could result in a default under our New Credit Facilities, our 2017 Notes and/or the European Investment Bank Term Loans.  Upon the occurrence of an event of default under the New Credit Facilities and the European Investment Bank Term Loans, our creditors could elect to declare all amounts outstanding under the New Credit Facilities, the 2017 Notes and the European Investment Bank Term Loans to be immediately due and payable and terminate all commitments to extend further credit.  If we were unable to repay those amounts, the lenders under the New Credit Facilities and the European Investment Bank Term Loans could proceed against the collateral granted to them to secure that indebtedness.  We have pledged a significant portion of our assets as collateral under the New Credit Facilities and the European Investment Bank Term Loans.  If our creditors under the New Credit Facilities, the 2017 Notes or the European Investment Bank Term Loans accelerate the repayment of borrowings, we may not have sufficient assets to repay our indebtedness.

Our ability to meet our financial obligations depends on our ability to receive dividends and other distributions from our subsidiaries.

Our principal assets are the equity interests that we hold in our operating subsidiaries.  As a result, we are dependent on dividends and other distributions from our subsidiaries to generate the funds necessary to meet our financial obligations, including the payment of principal and interest on our outstanding debt.  Our subsidiaries may not generate sufficient cash from operations to enable us to make principal and interest payments on our indebtedness.  In addition, any payment of dividends, distributions, loans or advances to us by our subsidiaries could be subject to restrictions on dividends or, in the case of foreign subsidiaries, restrictions on repatriation of earnings under applicable local law and monetary transfer restrictions in the jurisdictions in which our subsidiaries operate.  In addition, payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings.  Our subsidiaries are permitted under the terms of our indebtedness to incur additional indebtedness that may restrict payments from those subsidiaries to us.  We cannot assure you that agreements governing current and future indebtedness of our subsidiaries will permit those subsidiaries to provide us with sufficient cash to fund payments on our indebtedness when due.

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Our subsidiaries are legally distinct from us and, except for existing and future subsidiaries that guarantee certain indebtedness, have no obligation, contingent or otherwise, to pay amounts due on our debt or to make funds available to us for such payment.

We are a foreign private issuer under the rules and regulations of the Securities and Exchange Commission and, thus, are exempt from a number of rules under the Securities Exchange Act of 1934 and are permitted to file less information with the Securities and Exchange Commission than a company incorporated in the United States.

As a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations.  Moreover, we are not required to file periodic reports and financial statements with the Securities and Exchange Commission, or the SEC, as frequently or as promptly as U.S. companies with securities registered under the Exchange Act; we are not required to file financial statements prepared in accordance with United States generally accepted accounting principles; and we are not required to comply with SEC Regulation FD, which imposes certain restrictions on the selective disclosure of material information.  In addition, our officers, directors and principal shareholders are not subject to the reporting or short-swing profit recovery provisions of Section 16 of the Exchange Act or the rules under the Exchange Act with respect to their purchases and sales of our Class A shares or Class B shares.  Accordingly, you may receive less information about us than you would receive about a company incorporated in the United States and may be afforded less protection under the U.S. federal securities laws than you would be afforded with respect to a company incorporated in the United States.  If we lose our status as a foreign private issuer at some future time, we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if we were a company incorporated in the United States.  The costs incurred in fulfilling these additional regulatory requirements could be substantial.

Additionally, pursuant to The NASDAQ Stock Market LLC, or NASDAQ, “Listing Rules,” as a foreign private issuer, we may elect to follow our home country practice in lieu of the corporate governance requirements of the NASDAQ Listing Rule 5600 Series, with the exception of those rules that are required to be followed pursuant to the provisions of NASDAQ Listing Rule 5615(a)(3).  We have elected to follow Spanish practices in lieu of the requirements of the NASDAQ Listing Rule 5600 Series to the extent permitted under NASDAQ Listing Rule 5615(a)(3).  See Item 16.G. of Part II, “Corporate Governance.”

If we discover material weaknesses or significant deficiencies in our internal control over financial reporting, it may adversely affect our ability to provide timely and reliable financial information and satisfy our reporting obligations under U.S. federal securities laws, which also could affect the market price of our American Depositary Shares or our ability to remain listed on NASDAQ.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company.  If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed.  A “significant deficiency” is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention of those responsible for oversight of our financial reporting.

To the extent that any material weakness or significant deficiency exists in our or our consolidated subsidiaries’ internal control over financial reporting, such material weakness or significant deficiency may adversely affect our ability to provide timely and reliable financial information necessary for the conduct of our business and satisfaction of our reporting obligations under U.S. federal securities laws, which could affect our ability to remain listed on NASDAQ.  Ineffective internal and disclosure controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our American Depositary Shares, or ADSs, or the rating of our debt.

The Grifols family may exercise significant influence over the conduct of our business.

The Grifols family and Scranton Enterprises B.V. own, directly and indirectly, 36.4% of our Class A shares.  The Class A shares exercise 100% of the voting control of our company.  As a result, the Grifols family and Scranton Enterprises B.V. may exercise significant influence over matters requiring shareholders’ approval, including, among other things, the election of our board of directors, or the Board, dividend policy and certain fundamental corporate action, such as the issuance of bonds, a merger or a dissolution.  Conflicts may arise between the interests of the principal shareholders and those of the other shareholders, and the principal shareholders may choose to resolve the conflict in a way that does not coincide with the interests of the other shareholders.

The market price of our Class B ADSs on NASDAQ may be volatile.

The market price of our Class B ADSs may be volatile as a result of various factors, many of which are beyond our control.  These factors include, but are not limited to, the following:

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·market expectations for our financial performance;

·actual or anticipated fluctuations in our results of operations and financial condition;

·changes in the estimates of our results of operations by securities analysts;

·potential or actual sales of blocks of our Class B ADSs in the market by any shareholder or short selling of our Class B ADSs.  Any such transaction could occur at any time or from time to time, with or without notice to us;

·the entrance of new competitors or new products in the markets in which we operate;

·volatility in the market as a whole; and

·the risk factors mentioned in this section.

The market price of our Class B ADSs may be adversely affected by any of the preceding or other factors regardless of operations and financial condition.

Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk of holding our ADSs or shares.

The Spanish securities market for equity securities consists of four stock exchanges located in Madrid, Barcelona, Bilbao and Valencia (collectively, the “Spanish Stock Exchanges”).  The majority of the transactions conducted on the Spanish Stock Exchanges are done through the Spanish Automated Quotation System (Sistema de Inteconexión Bursátil Español, or SIBE).

Our Class A shares and Class B shares are listed on the Spanish Stock Exchanges and quoted on SIBE in euros.  In addition, our Class B shares are traded in the United States on the NASDAQ Global Select Market in the form of ADSs, evidenced by American Depositary Receipts, or ADRs, in U.S. dollars.  Fluctuations in the exchange rate between the U.S. dollar and the euro may result in temporary differences between the value of our ADSs and the value of our shares, which may result in heavy trading by investors seeking to exploit such differences.  This may increase the volatility of, and have an adverse effect on, the price of our shares or ADSs.

In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of our ADSs would receive upon the sale in Spain of any shares withdrawn from the ADR depositary and the U.S. dollar equivalent of any cash dividends paid in euros on our shares represented by the ADSs could also decline.

Subscription (or preemptive) rights may be unavailable to U.S. holders of our shares or ADSs.

In the case of a future increase of our registered share capital, existing shareholders will generally be entitled to subscription (or preemptive) rights pursuant to Spanish law, unless waived by a resolution of the shareholders or, if such power has been delegated to the Board pursuant to a shareholders’ resolution, by a resolution of the Board and except in certain situations, such as capital increases made for an in-kind contribution, in which subscription (or preemptive) rights are not applicable by law. Holders of the Class B shares will generally not have a right to vote on any resolution on a capital increase or on the waiver of subscription (or preemptive) rights, unless such resolution does not treat the Class B shares in the same way as the Class A shares, except in the limited circumstances set out in the Articles of Association of Grifols, S.A. as amended, or the Articles of Association.

Even if preemptive rights are granted, holders of our ADSs or U.S. resident shareholders may not be able to exercise subscription (or preemptive) rights, in which case holders of our ADSs could be substantially diluted, unless a registration statement under the Securities Act of 1933, as amended, or the Securities Act, is effective with respect to such rights and the shares for which they give such right or an exemption from the registration requirements of the Securities Act is available.

We intend to evaluate at the time of any rights offering the costs and potential liabilities associated with any such registration requirements, as well as the benefits of enabling the exercise of subscription (or preemptive) rights for the shares.  In doing so, we will also evaluate any other factors that we may consider appropriate at the time.

There can be no assurance that we will decide to comply with such registration requirements.  If no such registration requirements are satisfied, the depositary will sell the subscription (or preemptive) rights relating to the ADSs on deposit and will distribute the proceeds of such sale, if any, to the holders of the ADSs.  If the depositary is unable to sell rights that are not exercised

8

or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case no value will be given for these rights.

ADS holders may be subject to limitations on the transfer of their ADSs.

ADSs are transferable on the books of the depositary.  However, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when the books of the depositary are closed or if such action is deemed necessary or advisable by the depositary or by us because of any requirement of law or of any government or governmental body or commission or under any provision of the deposit agreement.  Moreover, the surrender of ADSs and withdrawal of our shares may be suspended subject to the payment of fees, taxes and similar charges or if we direct the depositary at any time to cease new issuances and withdrawals of our shares during periods specified by us in connection with shareholders’ meetings, the payment of dividends or as otherwise reasonably necessary for compliance with any applicable laws or government regulations.

Your ability to enforce civil liabilities under U.S. securities laws may be limited.

We are a company organized under the laws of Spain, and many of our subsidiaries are also incorporated outside of the United States.  A substantial portion of our assets and the assets of our subsidiaries are located outside of the United States.  In addition, nearly all of our directors and officers and certain of our subsidiaries’ officers and directors are nationals or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States.  As a result, it may be difficult for investors to effect service of process within the United States upon us, certain of our subsidiaries or their directors or officers with respect to matters arising under the Securities Act or to enforce against them judgments of courts of the United States predicated upon civil liability under the Securities Act.  It may also be difficult to recover fully in the United States on any judgment rendered against such persons or against us or certain of our subsidiaries.

In addition, there is doubt as to the enforceability in Spain of original actions, or of actions for enforcement of judgments of U.S. courts of liabilities, predicated solely upon the securities laws of the United States.  If a judgment was obtained outside Spain and efforts were made to enforce the judgment in Spain, there is some doubt that Spanish courts would agree to recognize and enforce a foreign judgment.  Accordingly, even if you obtain a favorable judgment in a U.S. court, you may be required to re-litigate your claim in Spain.

Risks Relating to Our Business

Our manufacturing processes are complex and involve biological intermediates that may be susceptible to contamination and variations in yield.

Plasma is a raw material that is susceptible to damage and contamination and may contain human pathogens, any of which would render the plasma unsuitable for further manufacturing.  For instance, contamination or improper storage of plasma by us or third-party suppliers may require us to destroy some of our raw material.  If unsuitable plasma is not identified and discarded prior to its release to our manufacturing processes, it may be necessary to discard intermediate or finished product made from that plasma or to recall any finished product released to the market, resulting in a charge to cost of goods sold.

The manufacture of our plasma products is an extremely complex process of fractionation (separating the plasma into component proteins), purification, filling and finishing.  Our products can become non-releasable or otherwise fail to meet our specifications through a failure of one or more of our product testing, manufacturing, process controls and quality assurance processes.  We may detect instances in which an unreleased product was produced without adherence to our manufacturing procedures or plasma used in our production process was not collected or stored in a compliant manner consistent with cGMP (Current Good Marketing Practice) regulations enforced by the US Food and Drug Administration, or the FDA or other regulations, which would likely result in our determination that the impacted products should not be released and therefore should be destroyed.

Once we have manufactured our plasma-derived products, they must be handled carefully and kept at appropriate temperatures.  Our failure, or the failure of third parties that supply, ship or distribute our products, to properly care for our plasma-derived products may require that such products be destroyed.

While we expect to write off small amounts of work in process inventories in the ordinary course of business due to the complex nature of plasma, our processes and our products, unanticipated events may lead to write-offs and other costs materially in excess of our expectations.  Such write-offs and other costs could cause material fluctuations in our profitability.  Furthermore, contamination of our products could cause investors, consumers or other third parties with whom we conduct business to lose confidence in the reliability of our manufacturing procedures, which could adversely affect our sales and profits.  In addition, faulty or contaminated products that are unknowingly distributed could result in patient harm, threaten the reputation of our products and expose us to product liability damages and claims.

9

Due to the nature of plasma, there will be variations in the biologic properties of the plasma we collect or purchase for fractionation that may result in fluctuations in the obtainable yield of desired fractions, even if cGMP regulations are followed.  Lower yields may limit production of our plasma-derived products due to capacity constraints.  If such batches of plasma with lower yields impact production for extended periods, it may reduce the total capacity of product that we could market and increase our cost of goods sold, thereby reducing our profitability.

Our manufacture of intermediate immunoassay antigens and antibodies to screen human donated blood and blood products is also a complex biologic process, subject to substantial production risks. These processes typically involve an upstream or fermentation process and a downstream or purification process. Since in the upstream process we deal with living cells, we may face a contamination by undesired cells which would eventually translate in a low yield. Yields in general can also be greatly affected by the different nutrients compositions added to the reactors in this fermentation step. Likewise during the purification step, we can face low yields due to poor resins composition, equipment failure or procedural mistakes.

Once our products are approved and marketed, we must continually monitor them for signs that their use may result in serious and unexpected side effects, which could jeopardize our reputation and our ability to continue marketing our products.  We may also be required to conduct post-approval clinical trials as a condition to licensing a product.

As for all pharmaceutical products, the use of our products sometimes produces undesirable side effects or adverse reactions or events (collectively, “adverse events”).  For the most part, these adverse events are known, are expected to occur at some frequency and are described in the products’ labeling.  Known adverse events of a number of our products include allergic or anaphylactic reactions including shock and the transmission of infective agents.  Further, the use of certain products sometimes produces additional adverse events, which are detailed below.

·The use of albumin sometimes produces the following adverse events:  hypervolemia, circulatory overload, pulmonary edema, hyperhydration and allergic manifestations including urticaria, chills, fever and changes in respiration, pulse and blood pressure.

·The use of blood clotting Factor IX sometimes produces the following adverse events:  the induction of neutralizing antibodies; thromboembolism, including myocardial infarction; disseminated intravascular coagulation; venous thrombosis and pulmonary embolism; and in the case of treatment for immune tolerance induction, nephrotic syndrome.

·The use of the antihemophilic blood clotting factor, or Factor VIII, sometimes produces the following adverse events:  the induction of neutralizing antibodies, thromboembolic events and hemolytic anemia or hemolysis.

·The use of intravenous immunoglobulin, or IVIG, sometimes produces the following adverse events:  nausea, vomiting, asthenia, pyrexia, rigors, injection site reaction, allergic or anaphylactic reaction, aseptic meningitis, arthralgia, back pain, dizziness, headache, rash, pruritus, urticaria, hemolysis or hemolytic anemia, hyperproteinemia, increased serum viscosity and hyponatremia, thromboembolic reactions such as myocardial infarction, stroke, pulmonary embolism and deep vein thromboses, transfusion-related acute lung injury and renal dysfunction and acute renal failure.

·The use of anti-hepatitis B IVIG sometimes produces the following adverse events:  thromboembolic reactions such as myocardial infarction, stroke, pulmonary embolism and deep vein thromboses, aseptic meningitis, hemolytic anemia or hemolysis and acute renal failure.

·The use of Koate®-DVI, which we license exclusively in the United States to Kedrion S.p.A, a corporation organized under the laws of Italy, sometimes produces the following adverse events:  allergic reactions, tingling in the arm, ear and face, blurred vision, headache, nausea, stomach ache and a jittery feeling.

·The use of Prolastin®, Prolastin®-C, alpha-1 proteinase inhibitor, or A1PI, sometimes produces the following adverse events:  dyspnea, tachycardia, rash, chest pain, chills, influenza-like symptoms, hypersensitivity, hypotension and hypertension.

In addition, the use of our products may be associated with serious and unexpected adverse events, or with less serious reactions at a greater than expected frequency.  This may be especially true when our products are used in critically ill patient populations.  When these unexpected events are reported to us, we must undertake a thorough investigation to determine causality and implications for product safety.  These events must also be specifically reported to the applicable regulatory authorities.  If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with the product, we would be obligated to withdraw the impacted lot(s) of that product.  Furthermore, an unexpected adverse event caused by a new product may be recognized only after extensive use of the product, which could expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation.

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Once we produce a product, we rely on physicians to prescribe and administer it as we have directed and for the indications described on the labeling.  It is not, however, unusual for physicians to prescribe our products for unapproved, or off-label, uses or in a manner that is inconsistent with our directions.  To the extent such off-label uses and departures from our administration directions become pervasive and produce results such as reduced efficacy or other adverse effects, the reputation of our products in the marketplace may suffer.

Our ability to continue manufacturing and distributing our products depends on our continued adherence to cGMP regulations at our facilities.

The manufacturing processes for our products are governed by detailed written procedures and governmental regulations that set forth cGMP requirements for blood, blood products and other products.  Our quality operations unit monitors compliance with these procedures and regulations, and the conformance of materials, manufacturing intermediates and final products to their specifications.  Failure to adhere to established procedures or regulations, or to meet a specification, could require that a product or material be rejected and destroyed.

Our adherence to cGMP regulations and the effectiveness of our quality systems are periodically assessed through inspections of our facilities by the U.S. Food and Drug Administration, or the FDA, and analogous regulatory authorities of other countries.  If deficiencies are noted during an inspection, we must take action to correct those deficiencies and to demonstrate to the regulatory authorities that our corrections have been effective.  If serious deficiencies are noted or if we are unable to prevent recurrences, we may have to recall product or suspend operations until appropriate measures can be implemented. We are also required to report certain deviations from procedures to the FDA and even if we determine that the deviations were not material, the FDA could require us to take similar measures.  Since cGMP reflects ever-evolving standards, we regularly need to update our manufacturing processes and procedures to comply with cGMP.  These changes may cause us to incur costs without improving our profitability or the safety of our products.  For example, more sensitive testing assays (if and when they become available) may be required or existing procedures or processes may require revalidation, all of which may be costly and time consuming and could delay or prevent the manufacturing of a product or launch of a new product.

Changes in manufacturing processes, including a change in the location where the product is manufactured or a change of a third-party manufacturer, may require prior FDA review and approval or revalidation of the manufacturing processes and procedures in accordance with cGMP regulations.  There may be comparable foreign requirements.

For example, we are in the process of constructing a new, upgraded facility to assume production of the intermediate immunoassay antigen and antibody products now manufactured at our facility in Emeryville, California, or our Emeryville facility. The new facility is finished, fully fitted, commissioned and it is currently being validated by the FDA. Some areas of the facility have already been approved by the FDA and are in use, including the freezer farm, warehouse and cold storage, offices and utilities generation, storage and distribution.

To validate our manufacturing processes and procedures following completion of our upgraded facilities, we must demonstrate that the processes and procedures at the upgraded facilities are comparable to those currently in place at our other facilities.  To provide such a comparative analysis, both the existing processes and the processes that we expect to be implemented at our upgraded facilities must comply with the regulatory standards prevailing at the time that our expected upgrade is completed. In addition, regulatory requirements, including cGMP regulations, continually evolve.  Failure to adjust our operations to conform to new standards as established and interpreted by applicable regulatory authorities would create a compliance risk that could impair our ability to sustain normal operations.

Regulatory authorities, including the FDA and the European Medicines Agency, or the EMA, routinely inspect our facilities to assess ongoing compliance with cGMP.  If the FDA, the EMA or other regulatory authorities find our facilities to be out of compliance, our ongoing operations or plans to expand would be adversely affected.

A significant disruption in our supply of plasma could have a material adverse effect on our business and our growth plans.

The majority of our revenue depends on our access to U.S. source plasma (plasma obtained through plasmapheresis), the principal raw material for our plasma derivative products.  Our ability to increase revenue depends substantially on increased access to plasma.  If we are unable to obtain sufficient quantities of source plasma, we may be unable to find an alternative cost-effective source of plasma and we would be limited in our ability to maintain current manufacturing levels of plasma derivative products.  As a result, we could experience a substantial decrease in net revenues or profit margins, a loss of customers, a negative effect on our reputation as a reliable supplier of plasma derivative products or a substantial delay in our production growth plans.

Our current business plan envisages an increase in the production of plasma derivative products, which depends on our ability to increase plasma collections or improve product yield.  The ability to increase plasma collections may be limited, our supply of plasma could be disrupted or the cost of plasma could increase substantially, as a result of numerous factors, including:

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·A reduction in the donor pool.  Regulators in most of the largest markets for plasma derivative products, including the United States, restrict the use of plasma collected from specific countries and regions in the manufacture of plasma derivative products.  For example, the appearance of the variant Creutzfeldt Jakob, or mad cow disease, resulted in the suspension of the use of plasma collected from U.K. residents and concern over the safety of blood products, which has led to increased domestic and foreign regulatory control over the collection and testing of plasma and the disqualification of certain segments of the population from the donor pool, significantly reducing the potential donor pool.  The appearance of new viral strains could further reduce the potential donor pool.  Also, improvements in socioeconomic conditions in the areas in which our and our suppliers’ plasma collection centers are located could reduce the attractiveness of financial incentives for potential donors, resulting in increased fees paid to donors or a reduction in the number of donors.

·Regulatory requirements.  See “—Disruption of the operations of our plasma collection centers would cause us to become supply constrained and our financial performance would suffer.”

·Plasma supply sources.  In recent years, there has been vertical integration in the industry as plasma derivatives manufacturers have been acquiring plasma collection centers.  Any significant disruption in the supply of plasma or an increased demand for plasma may require us to obtain plasma from alternative sources, which may not be available on a timely basis.

Disruption of the operations of our plasma collection centers would cause us to become supply constrained and our financial performance would suffer.

In order for plasma to be used in the manufacturing of our products, the individual centers at which the plasma is collected must be licensed and approved by the regulatory authorities, such as the FDA and the EMA, of those countries in which we sell our products.  When a new plasma collection center is opened, it must be inspected on an ongoing basis after its approval by the FDA and the EMA for compliance with cGMP and other regulatory requirements, and these regulatory requirements are subject to change.  For example, on May 22, 2015, the FDA issued a final rule addressing the collection of blood components, such as plasma, intended for transfusion or further manufacturing use, including requirements with respect to donor education, donor history and donor testing.  The final rule became effective on May 23, 2016.  While we believe that our centers have timely adopted the new regulations, which generally reflect our current approaches, the compliance efforts may increase our costs. An unsatisfactory inspection could prevent a new center from being approved for operation or risk the suspension or revocation of an existing approval.

In order for a plasma collection center to maintain its governmental approval to operate, its operations must continue to conform to cGMP and other regulatory requirements.  In the event that we determine a plasma collection center did not comply with cGMP in collecting plasma, we may be unable to use and may ultimately destroy plasma collected from that center, which would be recorded as a charge to cost of goods.  Additionally, if noncompliance in the plasma collection process is identified after the impacted plasma has been pooled with compliant plasma from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted.  Consequently, we could experience significant inventory impairment provisions and write-offs.

We plan to continue to obtain our supplies of plasma for use in our manufacturing processes through collections at our plasma collection centers and through selective acquisitions or remodeling and relocations of existing centers.  This strategy is dependent upon our ability to successfully integrate new centers, to obtain FDA and other necessary approvals for any centers not yet approved by the FDA, to maintain a cGMP compliant environment in all centers and to attract donors to our centers.

Our ability to increase and improve the efficiency of production at our plasma collection centers may be affected by:  (i) changes in the economic environment and population in selected regions where we operate plasma collection centers; (ii) the entry of competitive centers into regions where we operate; (iii) our misjudging the demographic potential of individual regions where we expect to increase production and attract new donors; (iv) unexpected facility related challenges; or (v) unexpected management challenges at select plasma collection centers.

A significant portion of our net revenue has historically been derived from sales of our immunoglobulin products and we expect that they will continue to comprise a significant portion of our sales.  Any adverse market event with respect to these products could have a material adverse effect on us.

We have historically derived a significant portion of our net revenues from our immunoglobulin products, including our IVIG products.  In 2017, our IVIG products accounted for approximately 40% of our net revenues.  If any of these IVIG products were to lose significant sales or were substantially or completely displaced in the market, we would lose a significant and material source of our net revenue.  Similarly, if either Flebogamma® or Gamunex®-C/Gamunex® were to become the subject of litigation or an adverse governmental ruling requiring us to cease sales of it, our business could be adversely affected.  Although we do not currently anticipate any significant decrease in the sales of any of these products, a significant decrease could result from plasma procurement and manufacturing issues resulting in lower product availability for sales and changing market conditions.

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We face significant competition.

We face significant competition.  Each of Shire Plc, Biotest Pharmaceuticals Corporation, CSL Behring, Kedrion Biopharma, Octapharma Plasma and Bio Products Laboratory Ltd. (BPL) now has a 10% liquid IVIG product in the United States.  Both Octapharma and Bio Products Laboratory have launched 5% liquid IVIG products.  As competition has increased, some of our competitors have discounted the price of IVIG products as many customers have become increasingly price sensitive with respect to IVIG products.  If customers demand lower priced products, we may lose sales or be forced to lower our prices.

In 2015, the European Commission granted marketing authorization for CSL’s Respreeza® in all European Union member states. This product is a more concentrated intravenous formulation than the one we offer in Europe.  Another competitor offers an inhaled formula and submitted a Marketing Authorization Application with the EMA at the beginning of 2016 that was withdrawn in June 2017. The same competitor proposed a Phase III protocol to the FDA in July 2017. Our current and future competitors may increase their sales, lower their prices, change their distribution model or improve their products, causing harm to our product sales and market share.  Also, if the attrition rate of our A1PI patient base accelerates faster than we have forecast, we would have fewer patients and lower sales volume.

Other new treatments, such as small molecules, monoclonal or recombinant products, may also be developed for indications for which our products are now used.  Recombinant Factor VIII and Factor IX products, which are currently available and widely used in the United States and Europe, compete with our plasma-derived product in the treatment of hemophilia A and B and are perceived by many to have lower risks of disease transmission.  Additional recombinant products and new small molecules, some with extended half-lives, could compete with our products and reduce the demand for our products.  At the end of 2016, Kamada announced the BLA (Biologics License Application) submission of its rabies product to compete with our rabies hyperimmune product in the United States, and received FDA approval in August 2017.  In February 2009, GTC Biotherapeutics obtained FDA approval of a competitive antithrombin III, or ATIII, a product derived from the milk of transgenic goats for the treatment of hereditary antithrombin deficiency.  This product now directly competes with our product, Thrombate® III, which had previously been the only FDA-approved ATIII product.  In addition, alternatives exist for albumin in its application as a plasma volume expander.  If an increased use of alternative products for Factor VIII, Factor IX or albumin makes it uneconomical to produce our plasma-derived products, or if further technological advances improve these products or create other competitive alternatives to our plasma derivative products, our financial condition and results of operations could be materially adversely affected.

We do not currently sell any recombinant products.  We have recombinant versions of A1PI and plasmin in our pipeline, but we cannot be certain that any of these products will ever be approved or commercialized.  As a result, our product offerings may remain plasma-derived, even if our competitors offer competing recombinant products.

The introduction of products approved for alternative routes of administration, including the subcutaneous route of administration, may also adversely affect sales of our products. For example, CSL Behring and Shire introduced a preparation of human immunoglobulin at a 20% concentration for the treatment of people who need replacement of antibodies and Shire has an immune globulin with a recombinant human hyaluronidase indicated for the treatment of Primary Immunodeficiency (PI) in adults. According to the MRB, the global market for subcutaneous products is relatively small. Our 10% Gamunex® has the FDA approval to be administered intravenously or subcutaneously and we are working on a 20% concentration product to be administered in both ways.

We face competition from companies with greater financial resources.

We operate in highly competitive markets.  Our principal competitors include Shire, CSL Behring and Octapharma.  Some of our competitors have significantly greater financial resources than us.  As a result, they may be able to devote more funds to research and development and new production technologies, as well as to the promotion of their products and business.  These competitors may also be able to sustain for longer periods a deliberate substantial reduction in the price of their products or services.  The development by a competitor of a similar or superior product or increased pricing competition may result in a reduction in our net revenues or a decrease in our profit margins.

Technological changes in the production of plasma derivative and diagnostic products could render our production process uneconomical.

Technological advances have accelerated changes in recent years. Future technological developments could render our production processes uneconomical and may require us to invest substantial amounts of capital to upgrade our facilities. Such investments could have a material adverse effect on our financial condition and results of operations. In addition, we may not be able to fund such investments from existing funds or raise sufficient capital to make such investments.

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The discovery of new pathogens could slow our growth and adversely affect profit margins.

The possible appearance of new pathogens could trigger the need for changes in our existing inactivation and production methods, including the administration of new detection tests.  Such a development could result in delays in production until the new methods are in place, as well as increased costs that may not be readily passed on to our customers.

Product liability claims or product recalls involving our products or products we distribute could have a material adverse effect on our business.

Our business exposes us to the risk of product liability claims. We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and an even greater risk when we commercially sell any products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

·decreased demand for our products and any product candidates that we may develop;

·injury to our reputation;

·withdrawal of clinical trial participants;

·costs to defend the related litigation;

·substantial monetary awards to trial participants or patients;

·loss of revenue; and

·the inability to commercialize any products that we may develop.

Like many plasma fractionators, we have been, and may in the future be, involved in product liability or related claims relating to our products, including claims alleging the transmission of disease through the use of such products. Plasma is a biological matter that is capable of transmitting viruses and pathogens, whether known or unknown. Therefore, our plasma and plasma derivative products, if donors are not properly screened or if the plasma is not properly collected, tested, inactivated, processed, stored and transported, could cause serious disease and possibly death to the patient. See also “—Our ability to continue to produce safe and effective products depends on a plasma supply free of transmittable diseases.” Any transmission of disease through the use of one of our products or third-party products sold by us could result in claims by persons allegedly infected by such products.

Our potential product liability also extends to our Diagnostic and Hospital division products. In addition, we sell and distribute third-party products, and the laws of the jurisdictions where we sell or distribute such products could also expose us to product liability claims for those products. Furthermore, the presence of a defect in a product could require us to carry out a recall of such product.

A product liability claim or a product recall could result in substantial financial losses, negative reputational repercussions and an inability to retain customers. Although we have a program of insurance policies designed to protect us and our subsidiaries from product liability claims, and we self-insure a portion of this risk, claims made against our insurance policies could exceed our limits of coverage. We intend to expand our insurance coverage as our sales grow. However, as product liability insurance is expensive and can be difficult to obtain, a product liability claim could decrease our access to product liability insurance on acceptable terms. In turn, we may not be able to maintain insurance coverage at a reasonable cost and may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise.

Our ability to continue to produce safe and effective plasma derivative products depends on a plasma supply free of transmittable diseases.

Despite overlapping safeguards, including the screening of donors and other steps to remove or inactivate viruses and other infectious disease-causing agents, the risk of transmissible disease through plasma-derived products cannot be entirely eliminated.  If a new infectious disease was to emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the disease that would impair our ability to procure plasma, manufacture our products or both.  Such precautionary measures could be taken before there is conclusive medical or scientific evidence that a disease poses a risk for plasma-derived products.

In recent years, new testing and viral inactivation methods have been developed that more effectively detect and inactivate infectious viruses in collected plasma.  There can be no assurance, however, that such new testing and inactivation methods will adequately screen for, and inactivate, infectious agents in the plasma used in the production of our products.

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Plasma and plasma derivative products are fragile, and improper handling of our plasma or plasma derivative products could adversely affect results of operations.

Plasma is a raw material that is susceptible to damage.  Almost immediately after its collection from a donor, plasma is stored and transported at temperatures that are at least -20 degrees Celsius (-4 degrees Fahrenheit).  Once we manufacture plasma derivative products, they must be handled carefully and kept at appropriate temperatures.  Our failure, or the failure of third parties that supply, ship or distribute our plasma and plasma derivative products, to properly care for our plasma or plasma derivative products may require us to destroy some raw materials or products.  If the volume of plasma or plasma derivative products damaged by such failures were to be significant, the loss of that plasma or those plasma derivative products could have a material adverse effect on our financial condition and results of operations.

Our future success depends on our ability to retain members of our senior management and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our executive and scientific teams.  The loss of the services of any of these persons might impede the achievement of our research, development, operational and commercialization objectives.  In particular, we believe the loss of any member of our senior management team would significantly and negatively impact our business.  For details regarding the members of senior management, see Item 6 of this Part I, “Directors, Senior Management and Employees — A. Directors and Senior Management — Senior Management.” We do not maintain “key person” insurance on any of our senior management.

Recruiting and retaining qualified operations, finance and accounting, scientific, clinical and sales and marketing personnel will be critical to our success.  We may not be able to attract and retain these personnel on acceptable terms, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.  We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.  If we are unable to attract, retain and motivate qualified and experienced personnel, we could lose customers and suffer reduced profitability.  Even if we are successful in attracting and retaining such personnel, competition for such employees may significantly increase our compensation costs and adversely affect our financial condition and results of operations.

cGMP regulations also require that the personnel we employ and hold responsible for product manufacturing, including, for example, the collection, processing, testing, storage or distribution of blood or blood components, be adequate in number, educational background, training (including professional training as necessary) and experience, or a combination thereof, and have capabilities commensurate with their assigned functions, a thorough understanding of the procedures or control operations they perform, the necessary training or experience and adequate information concerning the application of relevant cGMP requirements to their individual responsibilities. Our failure to attract, retain and motivate qualified personnel may result in a regulatory violation, affect product quality, require the recall or market withdrawal of affected product or result in a suspension or termination of our license to market our products, or any combination thereof.

Our business requires substantial capital to operate and grow and to achieve our strategy of realizing increased operating leverage, including the completion of several large capital projects.

We have implemented several large capital projects to expand and improve our facilities and to improve the structure of our plasma collection centers in the United States. These projects may run over budget or be delayed.  We cannot be certain that these projects will be completed in a timely manner or that we will maintain our compliance with cGMP regulations, and we may need to spend additional amounts to achieve compliance.  Additionally, by the time these multi-year projects are completed, market conditions may differ significantly from our assumptions regarding the number of competitors, customer demand, alternative therapies, reimbursement and public policy, and as a result, capital returns might not be realized.

We also plan to continue to spend substantial sums on research and development, to obtain the approval of the FDA, and other regulatory agencies, for new indications for existing products, to develop new product delivery mechanisms for existing products and to develop innovative product additions.  We face a number of obstacles to successfully converting these efforts into profitable products, including, but not limited to, the successful development of an experimental product for use in clinical trials, the design of clinical study protocols acceptable to the FDA and other regulatory agencies, the successful outcome of clinical trials, our ability to scale our manufacturing processes to produce commercial quantities or successfully transition technology, the approval of the FDA and other regulatory agencies of our products and our ability to successfully market an approved product or new indication.

For example, when a new product is approved, the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase IV clinical trials.  If the results of such trials are unfavorable, this could result in the loss of the license to market the product, with a resulting loss of sales.

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We are expecting significant capital spending as we are undertaking an investment plan that involves among other investments, cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience division of approximately $360 million from 2016 through 2021.  The amount and timing of future capital spending is dependent upon a number of factors, including market conditions, regulatory requirements and the extent and timing of particular projects, among other things.  Our ability to grow our business is dependent upon the timely completion of these projects and obtaining the requisite regulatory approvals.

We may not be able to develop some of our international operations successfully.

We currently conduct sales in over 100 countries.  The successful operation of such geographically dispersed resources requires considerable management and financial resources.  In particular, we must bridge our business culture to the business culture of each country in which we operate.  In addition, international operations and the provision of services in foreign markets are subject to additional risks, such as changing market conditions, currency exchange rate fluctuations, trade barriers, exchange controls, regulatory changes, changes to tax regimes, foreign investment limitations, civil disturbances and war.  Furthermore, if an area in which we have significant operations or an area into which we are looking to expand suffers an economic recession or currency devaluation, our net revenues and accounts receivable collections in that region will likely decline substantially or we may not be able to successfully expand or operate in that region.

We are susceptible to interest rate variations.

We use issuances of debt and bank borrowings as a source of funding.  At December 31, 2017, $5.3 billion and €607 million of our senior interest bearing debt, which represented 81.2% of our senior interest bearing debt, bore interest at variable rates, at a spread over the London Interbank Offered Rate, or LIBOR, for our U.S. dollar denominated debt and at a spread over the Euro Interbank Offered Rate, or EURIBOR, for our euro denominated debt.  Any increase in interest rates payable by us, which could be adversely affected by, among other things, our inability to meet certain financial ratios, would increase our interest expense and reduce our cash flow, which could materially adversely affect our financial condition and results of operations.  See Item 11 of this Part I, “Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk.”

Our results of operations and financial condition may be affected by adverse changes in foreign currency exchange rates, especially a significant shift in the value of the euro as compared to the U.S. dollar.

A significant portion of our business is conducted in currencies other than our reporting currency, the euro.  In 2017, €3.3 billion, or 76%, of our net revenue of €4.3 billion was denominated in U.S. dollars.  We are also exposed to currency fluctuations with respect to other currencies, such as the British pound, the Brazilian real, the Canadian dollar and the Argentine, Mexican and Chilean pesos.  Currency fluctuations among the euro, the U.S. dollar and the other currencies in which we do business result in foreign currency translation gains or losses that could be significant.

We are also exposed to risk based on the payment of U.S. dollar denominated indebtedness.  At December 31, 2017, we had approximately $5.3 billion of U.S. dollar denominated senior debt.  See Item 11 of this Part I, “Quantitative and Qualitative Disclosures About Market Risk — Currency Risk.”

If the San Diego, Clayton, Emeryville, Los Angeles or Parets facilities were to suffer a crippling accident, or if a force majeure event materially affected our ability to operate and produce saleable products, a substantial part of our manufacturing capacity could be shut down for an extended period.

A substantial portion of our revenue is derived from plasma fractionation or products manufactured at our San Diego, Clayton, Emeryville, Los Angeles and Parets facilities. In addition, a substantial portion of our plasma supply is stored at facilities in City of Industry, California, as well as at our Clayton, North Carolina and Parets facilities. If any of these facilities were to be impacted by an accident or a force majeure event such as an earthquake, major fire, storm or explosion, major equipment failure or power failure lasting beyond the capabilities of our backup generators, our revenue would be materially adversely affected. In this situation, our manufacturing capacity could be shut down for an extended period and we could experience a loss of raw materials, work-in-process or finished goods inventory. Other force majeure events such as terrorist acts, influenza pandemic or similar events could also impede our ability to operate our business. In addition, in the event of the reconstruction of our Clayton, Los Angeles or Parets facilities or our plasma storage facilities, gaining the regulatory approval for such new facilities and the replenishment of raw material plasma could be time consuming. During this period, we would be unable to manufacture all of our products at other plants due to the need for FDA and foreign regulatory authority inspection and certification of such facilities and processes.

Our property damage and business interruption insurance may be insufficient to mitigate the losses from any such accident or force majeure event. We may also be unable to recover the value of the lost plasma or work-in-process inventories, as well as the sales opportunities from the products we would be unable to produce.

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If we experience equipment difficulties or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a timely manner, our manufacturing ability would be impaired and our product sales could suffer.

We depend on a limited number of companies that supply and maintain our equipment and provide supplies such as chromatography resins, filter media, glass and stoppers used in the manufacture of our products.  If our equipment should malfunction, the repair or replacement of the machinery may require substantial time and cost, which could disrupt our production and other operations.  Our plasma collection centers rely on disposable goods supplied by third parties and information technology systems hosted by third parties.  Our plasma collection centers cannot operate without an uninterrupted supply of these disposable goods and the operation of these systems.  Alternative sources for key component parts or disposable goods may not be immediately available.  And while we have experienced periodic outages of these systems, a material outage would affect our ability to operate our collection centers.  Any new equipment or change in supplied materials may require revalidation by us or review and approval by the FDA or foreign regulatory authorities, including the EMA, which may be time-consuming and require additional capital and other resources.  We may not be able to find an adequate alternative supplier in a reasonable time period, or on commercially acceptable terms, if at all. As a result, shipments of affected products may be limited or delayed.  Our inability to obtain our key source supplies for the manufacture of products may require us to delay shipments of products, harm customer relationships and force us to curtail operations.

If our shipping or distribution channels were to become inaccessible due to a crippling accident, an act of terrorism, a strike, earthquake, major fire or storm, or any other force majeure event, our supply, production and distribution processes could be disrupted.

Not all shipping or distribution channels are equipped to transport plasma.  If any of our shipping or distribution channels becomes inaccessible due to a crippling accident, an act of terrorism, a strike, earthquake, major fire or storm or any other force majeure event, we may experience disruptions in our continued supply of plasma and other raw materials, delays in our production process or a reduction in our ability to distribute our products directly to our customers.

We rely in large part on third parties for the sale, distribution and delivery of our products.

In the United States, we regularly enter into distribution, supply and fulfillment contracts with group purchasing organizations, or GPOs, home care companies, alternate infusion sites, hospital groups and others.  We are highly dependent on these agreements for the successful sale, distribution and delivery of our products.  For example, we rely principally on GPOs and on our distributors to sell our IVIG products.  If such parties breach, terminate or otherwise fail to perform under these contracts, our ability to effectively distribute our products will be impaired and our business may be materially and adversely affected.  In addition, through circumstances outside of our control, such as general economic decline, market saturation or increased competition, we may be unable to successfully renegotiate our contracts or secure terms which are as favorable to us.  Furthermore, we rely in certain countries on distributors for sales of our products.  Disagreements or difficulties with our distributors supporting our export business could result in a loss of sales.

We may not be able to commercialize products in development.

Before obtaining regulatory approval for the sale of our product candidates or for the marketing of existing products for new indicated uses, we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals and clinical trials to demonstrate the safety and efficacy of our product candidates in humans.  Preclinical and clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome.  A failure of one or more of our clinical trials can occur at any stage of testing.  We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including, without limitation:

·regulators or institutional review boards, or IRBs, may not authorize us to commence a clinical trial or conduct a clinical trial within a country or at a prospective trial site;

·the regulatory requirements for product approvals may not be explicit, may evolve over time and may diverge by jurisdiction;

·our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or we may be required by regulators, to conduct additional preclinical testing or clinical trials or to abandon projects that we had expected to be promising;

·the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we anticipate or participants may withdraw from our clinical trials at higher rates than we anticipate, any of which would result in significant delays;

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·our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;

·we may be forced to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any participant experiences an unexpected serious adverse event;

·regulators or IRBs may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

·undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies and result in the recall of any approved product distributed pursuant to data determined to be fraudulent;

·the cost of our clinical trials may be greater than we anticipate;

·the supply or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate, as we currently do not have any agreements with third-party manufacturers for the long-term commercial supply of any of our product candidates;

·an audit of preclinical or clinical studies by the FDA or other regulatory authorities may reveal noncompliance with applicable regulations, which could lead to disqualification of the results and the need to perform additional studies; and

·the effects of our product candidates may not achieve the desired clinical benefits or may cause undesirable side effects, or the product candidates may have other unexpected characteristics.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may be delayed in or unable to obtain marketing approval or reimbursement for our product candidates, or be unable to obtain approval for indications that are not as broad as intended or have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or approvals.  We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all.  Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market before we do, impairing our ability to commercialize our products or product candidates.

Even if preclinical trials are successful, we still may be unable to commercialize a product due to difficulties in obtaining regulatory approval for its engineering process or problems in scaling that process to commercial production.  Additionally, if produced, a product may not achieve an adequate level of market acceptance by physicians, patients, healthcare payors and others in the medical community to be profitable.  The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including:

·the prevalence and severity of any side effects;

·the efficacy and potential advantages over alternative treatments;

·the ability to offer our product candidates for sale at competitive prices;

·relative convenience and ease of administration;

·the willingness of physicians to prescribe new therapies and of the target patient population to try such therapies;

·the strength of marketing and distribution support; and

·sufficient third-party coverage or reimbursement.

Therefore, we cannot guarantee that any products we may seek to develop will ever be successfully commercialized, and to the extent they are not successfully commercialized, such products could involve significant expense with no corresponding revenue.

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A breakdown in our information technology systems could result in a significant disruption to our business.

Our operations are highly dependent on our information technology systems, including internet-based systems, which may be vulnerable to breakdown, wrongful intrusions, data breaches and malicious attack.  In addition, information security risks have generally increased in recent years, increasing our systems’ potential vulnerability, such as to data security breaches or cyber attack, whether by employees or others, which may expose sensitive data to unauthorized persons.  Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, customers, plasma donors and others or adversely impact the conduct of scientific research and clinical trials, including the submission of research results to support marketing authorizations.  Various evolving federal, state and foreign laws protecting the privacy and security of personal information may also be implicated by improper uses or disclosures of data, resulting in liabilities and requiring specified data breach notifications. For example, the privacy and security provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations (“HIPAA”) requires, among other things, the implementation of various recordkeeping, operational, notice and other practices intended to safeguard certain personal information, limit its use to allowed purposes and notify individuals in the event of privacy and security breaches.  Failure to comply with HIPAA and similar state laws could expose us to breach of contract claims, substantial fines, penalties and other liabilities and expenses, costs for remediation and harm to our reputation. Also, the European Parliament and the Council of the European Union have adopted a new pan-European General Data Protection Regulation (“GDPR”), effective from May 25, 2018, which increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located  in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe).  Noncompliance can result in penalties of up to the greater of EUR 20 million, or 4% of global company revenues.  While we expect to have substantially compliant programs and controls in place to comply with the GDPR requirements, our compliance with the new regulation is likely to impose additional costs on us, and we cannot predict whether the interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements, could have a material adverse effect on our business.  Our information technology systems also utilize certain third party service organizations that manage sensitive data, such as personal medical information regarding plasma donors, and our business may be adversely affected if these third party service organizations are subject to data security breaches.

Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries of the intellectual property relating to or incorporated into our technology and products.

Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products, especially intellectual property related to our purification processes.  The patent situation in the field of biotechnology and pharmaceuticals generally is highly uncertain and involves complex legal and scientific questions.  We may not be able to obtain additional issued patents relating to our technology or products.  Even if patents are issued to us or to our licensors, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of time our products have patent protection.  Additionally, most of our patents relate to the processes we use to produce our products, not to the products themselves.  In many cases, the plasma-derived products we produce or develop in the future will not, in and of themselves, be patentable.  Since our patents relate to processes, if a competitor is able to design and utilize a process that does not rely on our protected intellectual property, that competitor could sell a plasma-derived or other product similar to one we developed or sell.

Our patents also may not afford us protection against competitors with similar technology.  Because patent applications in the United States and many other jurisdictions are typically not published until 18 months after their filing, if at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in such patent applications.  If a third party has also filed a U.S. patent application covering our product candidates or a similar invention, we may be required to participate in an adversarial proceeding, known as an “interference proceeding,” declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States.  The costs of these proceedings could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated U.S. patent position.

Our patents expire at various dates.  Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will provide us with any competitive advantage.  Even if issued, we cannot guarantee that:  any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented, challenged or abandoned; our intellectual property rights will provide competitive advantages; our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties; any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or we will not lose the ability to

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assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments.  In addition, our competitors or others may design around our protected patents or technologies.

Effective protection of our intellectual property rights may be unavailable, limited or not applied for in some countries.  Changes in patent laws or their interpretation in the United States and other countries could also diminish the value of our intellectual property or narrow the scope of our patent protection.  In addition, the legal systems of certain countries do not favor the aggressive enforcement of patents, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.  As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.  In order to preserve and enforce our patent and other intellectual property rights, we may need to make claims or file lawsuits against third parties.  Such lawsuits could entail significant costs to us and divert our management’s attention from developing and commercializing our products.

We, like other companies in the pharmaceutical industry, may become aware of counterfeit versions of our products becoming available domestically and abroad.  Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials, and the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have no control.  Any reported adverse events involving counterfeit products that purport to be our products could harm our reputation and the sale of our products in particular and consumer willingness to use plasma-derived therapeutics in general.

Unauthorized use of our intellectual property may have occurred or may occur in the future.  Although we have taken steps to minimize this risk, any failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business.  For example, any unauthorized use of our trademarks could harm our reputation or commercial interests.  Moreover, if we are required to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time consuming, force us to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result in lower revenue and higher expenses.

In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how.

We generally seek to protect proprietary information by entering into confidentiality agreements with our employees, consultants, scientific advisors and third parties.  These agreements may not effectively prevent disclosure of confidential information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.  In addition, our trade secrets may otherwise become known or be independently developed by our competitors or other third parties.  To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.  Costly and time-consuming litigation could be necessary to determine and enforce the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.  We also rely on contractual protections with our customers, suppliers, distributors, employees and consultants and implement security measures designed to protect our trade secrets.  We cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of such contracts.

Since we rely on trade secrets and nondisclosure agreements, in addition to patents, to protect some of our intellectual property, there is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage.  We may not be able to detect the unauthorized use of such information, prevent such use or take appropriate and timely steps to enforce our intellectual property rights.

We may infringe or be alleged to infringe intellectual property rights of third parties.

Our products or product candidates may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights.  Third parties may own or control these patents or patent applications in the United States and/or abroad.  These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages.  Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

If we are found to be infringing on the patent rights of a third party, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both.  These licenses may not be available on acceptable terms, or at all.  Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property.  Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms.

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There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries.  In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products.  The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial.  Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources.  Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.  Patent litigation and other proceedings may also absorb significant management time.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.  We take steps to ensure that our employees do not use the proprietary information or know-how of others in their work for us.  We may, however, be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer.  Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management.  If we fail to defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

We have in-licensed certain patent rights and co-own certain patent rights with third parties.

Our rights in certain intellectual property that we have in-licensed or co-own with third parties and the value therein may depend on our third party licensors’ or co-owners’, as applicable, performance under our intellectual property agreements with them. If one of these third parties is unable to, or does not, enforce their own rights in such intellectual property or perform under our agreements with them, it could affect our ability to effectively compete in the marketplace and operate our business.

Our in-license agreements for certain patent rights may impose payment and/or other material obligations on us as a licensee.  Although we are currently in compliance with all of our material obligations under these licenses, if we were to breach any such obligations, our counterparty licensors may be entitled to terminate the licenses.  Such termination may restrict, delay or eliminate our ability to develop and commercialize our products, which could adversely affect our business.  We cannot guarantee that the third-party patents and technology we license will not be licensed to our competitors.  In the future, we may need to obtain additional licenses, renew existing license agreements or otherwise replace existing technology.  We are unable to predict whether these license agreements can be obtained or renewed or whether the technology can be replaced on acceptable terms, or at all.

Risks Relating to the Healthcare Industry

The implementation of the Healthcare Reform Law in the United States may adversely affect our business.

The United States Healthcare Reform Law, adopted through the March 2010 enactment of the Patient Protection and Affordable Care Act and the companion Healthcare and Education Reconciliation Act, increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.   The Healthcare Reform Law has materially expanded the number of individuals in the United States with health insurance.  The Healthcare Reform Law has faced ongoing legal challenges, including litigation seeking to invalidate some of or all of the law or the manner in which it has been interpreted.  As a result, while upholding the law generally, the United States Supreme Court has effectively made the Healthcare Reform Law’s Medicaid expansion voluntary for each state.  In addition, President Trump is seeking to repeal and replace the Healthcare Reform Law. Repeal and replace legislation was passed in the House of Representatives, but did not obtain the necessary votes in the Senate. Subsequently, the President has affirmed his intention to repeal and replace the Healthcare Reform Law and has taken a number of administrative actions to materially weaken the Healthcare Reform Law. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Healthcare Reform Law to waive, defer, grant exemptions from, or delay the implementation of any provision of the Healthcare Reform Law that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.  Further, on December 22, 2017, President Trump signed the Tax Cuts and Jobs Act, or the Tax Reform Law, into law, which is expected to cut the corporate and individual income rates, eliminate numerous deductions, and set up a new system for international taxation. The Tax Reform Law also repealed the individual mandate of the Healthcare Reform Law. The uncertain status of the Healthcare Reform Law affects our ability to plan, and its repeal without adequate replacement could have a material adverse effect on our United States operations.

Implementation of the Healthcare Reform Law has included significant cost-saving, revenue and payment reduction measures with respect to, for example, several government healthcare programs that cover our products, including Medicaid, Medicare Parts B and D and the 340B/Public Health Service, or PHS, program, and these efforts could have a material adverse impact on our financial performance.

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For example, with respect to Medicaid, in order for a drug manufacturer’s products to be reimbursed by federal funding under Medicaid, the manufacturer must enter into a Medicaid drug rebate agreement with the Secretary of the U.S. Department of Health and Human Services, or HHS, and pay certain rebates to the states based on utilization data provided by each state to the manufacturer and to the Centers for Medicare & Medicaid Services, or CMS, and pricing data provided by the manufacturer to the federal government.  The states share these savings with the federal government and sometimes implement their own additional supplemental rebate programs.  Under the Medicaid drug rebate program, the rebate amount for most brand name drugs is the greater of 23.1% of the Average Manufacturer Price, or AMP, per unit or the difference between the AMP and the Best Price per unit and adjusted by the Consumer Price Index-Urban, or CPI-U, based on launch date and current quarter AMP, subject to certain exceptions (for example, for certain clotting factors, such as our Factor VIII and Factor IX products, the amount of the rebate is the greater of 17.1% of the AMP per unit or the difference between the AMP and the Best Price per unit and adjusted by the CPI-U based on launch date and current quarter AMP).  For non-innovator multiple source (generic) drugs, the rebate percentage is equal to a minimum of 13.0% of AMP.  In 2010, the Healthcare Reform Law also extended this rebate obligation to prescription drugs covered by Medicaid managed care organizations.

In addition, the statutory definition of AMP changed in 2010 as a result of the Healthcare Reform Law. On February 1, 2016, CMS published a final rule, effective on April 1, 2016, providing a regulatory definition of “AMP” along with other changes to the price reporting process.  We believe our reporting meets the obligations contained in the final rule.

The Healthcare Reform Law also created new obligations for our products under Medicare Part D, a partial, voluntary prescription drug benefit created by the federal government primarily for persons 65 years old and over.  The Part D drug program is administered through private insurers that contract with CMS.  Beginning in 2011, the Healthcare Reform Law generally required that we provide a 50% discount to patients who fall within the Medicare Part D coverage gap, also referred to as the “donut hole,” which is a gap in Medicare Part D coverage for beneficiaries who have expended more than a certain amount, and less than a certain greater amount, for drugs.

The availability of federal funds to pay for our products under Medicaid and Medicare Part B programs requires that we extend discounts under the 340B/PHS program, and changes to this program under the Healthcare Reform Law could adversely affect our financial performance.  The 340B/PHS program extends discounts to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of certain low income individuals, and the Healthcare Reform Law expanded the number of qualified 340B entities eligible to purchase products for outpatient use, adding certain cancer centers, children’s hospitals, critical access hospitals and rural referral centers.  The PHS price, or ceiling price, cannot exceed the AMP (as reported to CMS under the Medicaid drug rebate program) less the Medicaid unit rebate amount.  We have entered into a pharmaceutical pricing agreement, or PPA, with the government in which we have agreed to participate in the 340B/PHS program by charging eligible entities no more than the PHS ceiling price for drugs intended for outpatient use. Evolving requirements with respect to this program continue to be issued by the Health Resources and Services Administration, or HRSA, of HHS, the federal agency responsible for oversight of the 340B/PHS program, which creates uncertainty.  For example, on January 5, 2017, a final rule was published in the Federal Register, including provisions on how to calculate the ceiling price for covered outpatient drugs under the 340B program and addresses the imposition of civil monetary penalties, or CMPs, on manufacturers that knowingly and intentionally overcharge covered entities.  However, HRSA has repeatedly delayed the effective date of the rule, and most recently delayed the effective date to July 1, 2018.  In another development, effective January 1, 2018, a new CMS rule went into effect substantially cutting reimbursement paid to hospitals and other providers for certain outpatient drugs and biologicals, including certain of our products, purchased by these providers under the 340B/PHS program.  The reimbursement was decreased from ASP plus 6% to ASP minus 22.5%.  The outcome of this reimbursement change on our business is uncertain, but it may decrease demand for our products and have an adverse effect on our business. We believe that we meet the requirements of the 340B/PHS program, and are continuing to review and monitor these and other developments affecting the 340B/PHS program.

The Healthcare Reform Law also introduced a new abbreviated regulatory approval pathway for biological products found to be “biosimilar” to or “interchangeable” with a biological “reference product” previously licensed under a BLA.  This abbreviated approval pathway is intended to permit a biosimilar product to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor, and the FDA’s previous review and approval of the reference product.   The law provides that no biosimilar application may be accepted by the FDA for review until 4 years after the date the reference product was first licensed by the FDA, and that the FDA may not make approval of an application effective until 12 years after the reference product was first licensed. Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under applicable laws to be “interchangeable with,” the previously approved reference product.  The extent to which a biosimilar product, once approved, will be substituted for any of our products, in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.  We expect in the future to face greater competition from biosimilar products, including a possible increase in patent challenges, all of which could adversely affect our financial performance.

Regarding access to our products, the Healthcare Reform Law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, as those terms are defined in the Healthcare Reform Law.  While the stated intent of Comparative Effectiveness Research is to develop information to guide providers

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to the most efficacious therapies, outcomes of Comparative Effectiveness Research could influence the reimbursement or coverage for therapies that are determined to be less cost effective than others.  Should any of our products be determined to be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.

A Healthcare Reform Law provision, generally referred to as the Physician Payment Sunshine Act, or the PPS Act, or Open Payments Program, has imposed new reporting and disclosure requirements for biologic, drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners, such as physicians and teaching hospitals, and for such manufacturers and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity.  CMS publishes information from these reports on a publicly available website, including amounts transferred and health care provider identities.  Under the PPS Act we are required to collect and report detailed information regarding certain financial relationships we have with covered health care providers, and we believe that we are substantially compliant with applicable PPS Act requirements.   The PPS Act pre-empts similar state reporting laws, although we or our subsidiaries may also be required to report under certain state transparency laws that address circumstances not covered by the PPS Act, and some of these state laws are also ambiguous.  We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers.  While we believe we have substantially compliant programs and controls in place to comply with these reporting requirements, we cannot assure you that regulations will not require us to take additional compliance steps. Our compliance with these rules imposes additional costs on us.

We could be adversely affected if other government or private third-party payors decrease or otherwise limit the amount, price, scope or other eligibility requirements for reimbursement for the purchasers of our products.

Certain pharmaceutical products, such as plasma derivative products, are subject to price controls in several of our principal markets, including Spain and countries within the European Union.  In the United States, where pricing levels for our products are established by governmental payors and negotiated with private third-party payors, if the amount of reimbursement available for a product is reduced, it may cause groups or individuals dispensing the product to discontinue administration of the product, to administer lower doses, to substitute lower cost products or to seek additional price-related concessions.  These actions could have a negative effect on our financial results, particularly in cases where our products command a premium price in the marketplace or where changes in reimbursement induce a shift in the location of treatment.  The existence of direct and indirect price controls and pressures over our products has affected, and may continue to materially adversely affect, our ability to maintain or increase gross margins.  In addition, the growth of overall healthcare costs and certain weak economic and financial environment in certain countries where we do business, as well as increased scrutiny over pharmaceutical pricing practices, such as in the United States, all enhance these pricing pressures.

In the United States, beginning in 2005, the Medicare drug reimbursement methodology for physician and hospital outpatient payment schedules changed to Average Sales Price, or ASP, + 6%.  This payment was based on a volume-weighted average of all brands under a common billing code.  After changes in certain prior years, CMS increased the rate back to ASP + 6% for 2013, and maintained the same rate for 2014 through 2018, except that effective January 1, 2018, a new CMS rule went into effect substantially cutting reimbursement paid to hospitals and other providers for certain outpatient drugs and biologicals, including certain of our products, purchased by these providers under the 340B/PHS program.  The reimbursement was decreased from ASP + 6% to ASP - 22.5%.  The outcome of this reimbursement change on our business is uncertain, but it may decrease demand for our products and have an adverse effect on our business.  In addition, under the Bipartisan Budget Act of 2013, and subsequent measures, Medicare is subject to a 2% reduction in federal spending, or “sequestration,” including drugs reimbursed under Medicare, for federal fiscal years 2013 through 2025.  The full ramifications of this sequestration for Medicare reimbursement are not yet clear, as Congressional action may reduce, eliminate or otherwise change this payment reduction.  Other pricing concerns in the United States include that President Trump has suggested that he would support pharmaceutical pricing negotiations on behalf of Medicare, and certain Senators have stated their intent to introduce a bill authorizing the importation of pharmaceuticals where pharmaceutical prices in the United States for a given product are deemed excessive.  It is not clear that any such pricing negotiation or importation measures will be enacted.

Also, the intended use of a drug product by a physician can affect pricing.  Physicians frequently prescribe legally available therapies for uses that are not described in the product’s labeling and that differ from those tested in clinical studies and that are approved by the FDA or similar regulatory authorities in other countries.  These off-label uses are common across medical specialties, and physicians may believe such off-label uses constitute the preferred treatment or treatment of last resort for many patients in varied circumstances.  Industry data indicates that a significant portion of IVIG volume may be used to fill physician prescriptions for indications not approved by the FDA or similar regulatory authorities.  In the United States, many off-label uses of drug products may be reimbursed by Medicare and other third-party payors, generally based on the payors’ determination that the intended use is for a medically accepted indication, for example, based on studies published in peer-reviewed medical journals or information contained in drug compendia, such as the United States Pharmacopeia-National Formulary. However, if reimbursement for off-label uses of products, including IVIG, is reduced or eliminated by Medicare or other third-party payors, including those in the United States or the European Union, we could be adversely affected.  For example, CMS could initiate an administrative procedure known as a National Coverage Determination by which the agency determines which uses of a therapeutic product would be reimbursable under Medicare and which uses would not.  This determination process can be lengthy, thereby creating a long period during which the future

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reimbursement for a particular product may be uncertain.  High levels of spending on IVIG products, along with increases in IVIG prices, increased IVIG utilization and the high proportion of off-label uses, may increase the risk of regulation of IVIG reimbursement by CMS.  On the state level, similar limits could be proposed for therapeutic products covered under Medicaid.

Certain of our products are subject to various cost-containment measures, such as government-imposed industry-wide price reductions, mandatory pricing systems, reference pricing systems, payors limiting access to treatments based on cost-benefit analyses, an increase in imports of drugs from lower-cost countries to higher-cost countries, shifting of the payment burden to patients through higher co-payments, limiting physicians’ ability to choose among competing medicines, mandatory substitution of generic drugs for the patented equivalent, and growing pressure on physicians to reduce the prescribing of patented prescription medicines.  Such pressures could have a material adverse impact on our business, financial condition or results of operations, as well as on our reputation.

Certain of our business practices are subject to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens under federal and state laws.  Failure to comply with applicable laws or an adverse decision in lawsuits may result in adverse consequences to us.

The laws governing our conduct in the United States are enforceable by criminal, civil and administrative penalties.  Violations of laws such as the Federal Food, Drug and Cosmetic Act, or the FDCA, the Federal False Claims Act, or the FCA, the PHS Act or provisions of the U.S. Social Security Act known as the “Anti-Kickback Law” and the “Civil Monetary Penalties Law,” or any regulations promulgated under their authority, may result in jail sentences, fines or exclusion from federal and state programs, as may be determined by Medicare, Medicaid, the Department of Defense, other regulatory authorities and the courts.  There can be no assurance that our activities will not come under the scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws.

For example, the Anti-Kickback Law prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a government health care program.  Many states have enacted similar laws.  Courts have interpreted this law very broadly, including by holding that a violation has occurred if even one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. There are statutory and regulatory exceptions, or safe harbors, that outline arrangements that are deemed lawful. However, the fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law. In sum, under the Anti-Kickback Law, and similar state laws and regulations, even common business arrangements, such as discounted terms and volume incentives for customers in a position to recommend or choose drugs and devices for patients, such as physicians and hospitals, must be structured to comply with applicable requirements. Also, certain business practices, such as payment of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of wrongfully influencing healthcare providers to prescribe or purchase particular products or as a reward for past prescribing.  Violations of the Anti-Kickback Law can result in substantial legal penalties, including, among others, civil and criminal penalties or exclusion from federal health care programs, including Medicare and Medicaid.

The federal FCA is violated by any entity that “presents or causes to be presented” knowingly false claims for payment to the federal government. In addition, the Healthcare Reform Law amended the FCA to create a cause of action against any person who knowingly makes a false statement material to an obligation to pay money to the government or knowingly conceals or improperly decreases an obligation to pay or transmit money or property to the government. For the purposes of these recent amendments, an “obligation” includes an identified overpayment, which is defined broadly to include “any funds that a person receives or retains under Medicare and Medicaid to which the person, after applicable reconciliation, is not entitled…”

Significant enforcement activity has been the result of actions brought by relators, who file complaints in the name of the United States (and if applicable, particular states) under the FCA or the equivalent state statutes.  “False claims” can result not only from noncompliance with the express requirements of applicable governmental reimbursement programs, such as Medicaid or Medicare, but also from noncompliance with other laws, such as the Anti-Kickback Law (which was explicitly confirmed in the Healthcare Reform Law), or laws that require quality care in service delivery.  The qui tam and whistleblower provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the government was defrauded, with tremendous potential financial gain (up to 30% of the government’s recovery plus legal fees) to private citizens who prevail.  When a private party brings a whistleblower action under the FCA, the defendant is not made aware of the lawsuit until the government starts its own investigation or makes a decision on whether it will intervene.  Many states have enacted similar laws, and these states have their own penalties which may be in addition to federal FCA penalties. The bringing of any federal FCA action could require us to devote resources to investigate and defend the action.  Violations of the FCA can result in treble damages, and each false claim submitted can be subject to a civil penalty, which, for penalties assessed after February 3, 2017 whose associated violations occurred after November 2, 2015, ranges from a minimum of $10,957 to a maximum of $21,916 per claim. Failure to comply with fraud and abuse laws and

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regulations could also result in other significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse effect on our business.  In addition, these measures may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses.  Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs.  Further, many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance.  While we believe that we are substantially compliant with applicable fraud and abuse laws and regulations, and have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response to changes in applicable law or interpretation of laws, could have a material adverse effect on our business.

Failure to satisfy requirements under the FDCA can also result in penalties, as well as requirements to enter into consent decrees or orders that prescribe allowable corporate conduct.  In this regard, our Los Angeles facility was previously managed pursuant to a consent decree that was entered into in February 1998 based on action by the FDA and the U.S. Department of Justice, or the DOJ, addressing FDCA violations committed by the former owner of the facility, Alpha Therapeutic Corporation, or Alpha.  The consent decree provided for annual inspection of the plant by the FDA.  On March 15, 2012, the United States District Court for the Central District of California entered an order vacating the consent decree on the Los Angeles facility.

Adverse consequences can also result from failure to comply with the requirements of the 340B/PHS program under the PHS Act, which extends discounts to a variety of community health clinics and other entities that receive health services grants under the PHS Act.  For example, the Healthcare Reform Law requires the Secretary of HHS to develop and issue regulations for the 340B/PHS program establishing standards for the imposition of sanctions in the form of civil monetary penalties, or CMP, for manufacturers that knowingly and intentionally overcharge a covered entity for a 340B drug, and on January 5, 2017, HHS published a final rule in the Federal Register addressing the application of CMPs.  The CMP may be up to $5,000 for each instance of overcharging a covered entity. However, HRSA has repeatedly delayed the effective date of the rule, and most recently delayed the effective date to July 1, 2018.

In addition, companies in the United States, Canada and the European Union are generally restricted from promoting approved products for other indications that are not specifically approved by the competent regulatory authorities (e.g., the FDA in the United States), nor can companies promote unapproved products.  In the United States, pharmaceutical companies have, to a limited extent, been recognized by the FDA as permitted to disseminate to physicians certain truthful and accurate information regarding unapproved uses of approved products, or results of studies involving investigational products.  In addition, in December 2012, a federal appeals court in New York found that the criminal prosecution of a pharmaceutical manufacturer for truthful, non-misleading speech promoting the lawful, off-label use of an FDA-approved drug would violate the manufacturer’s constitutional rights of free speech, and the FDA chose not to appeal that decision.  Improper promotion of unapproved drugs or devices or unapproved indications for a drug or device may subject us to warnings from, or enforcement action by, regulatory agencies, harm demand for our products, and subject us to civil and criminal sanctions.  Further, sanctions under the FCA have recently been brought against companies accused of promoting off-label uses of drugs, because such promotion induces the use and subsequent claims for reimbursement under Medicare and other federal programs.  Similar actions for off-label promotion have been initiated by several states for Medicaid fraud.  The Healthcare Reform Law significantly strengthened provisions of the FCA, the anti-kickback provisions of Medicare and Medicaid and other health care antifraud provisions, leading to the possibility of greatly increased qui tam suits by relators for perceived violations. Industry data indicates that a significant portion of IVIG volume may be used to fill physician prescriptions for indications not approved by the FDA or similar regulatory authorities.  Violations or allegations of violations of the foregoing restrictions could materially and adversely affect our business.

We are required to report detailed pricing information, net of included discounts, rebates and other concessions, to CMS for the purpose of calculating national reimbursement levels, certain federal prices and certain federal and state rebate obligations.  We have established systems for collecting and reporting this data accurately to CMS and have instituted a compliance program to assure that the information collected is complete in all respects.  If we report pricing information that is not accurate to the federal government, we could be subject to fines and other sanctions (including potential FCA liability) that could adversely affect our business.

To market and sell our products outside of the United States, we must obtain and maintain regulatory approvals and comply with regulatory requirements in such jurisdictions.  The approval procedures vary among countries in complexity and timing.  We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all, which would preclude us from commercializing products in those markets.  In addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals.  In these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval for a product.  To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidate to other available therapies.  Such

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trials may be time consuming and expensive and may not show an advantage in efficacy for our products.  If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, in either the United States or the European Union, we could be adversely affected.

We also are subject to certain laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery laws and related laws, and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity in recent years.  Under the FCPA, the United States has increasingly focused on regulating the conduct by U.S. businesses occurring outside of the United States, generally prohibiting remuneration to foreign officials for the purpose of obtaining or retaining business.  Also, in some countries we may rely on third parties for the marketing and distribution of our products, and these parties may lack sufficient internal compliance resources, and may operate in foreign markets involving substantial corruption.  If our efforts to monitor these parties fail to detect potential wrongdoing, we could be held responsible for the noncompliance of these third parties with applicable laws and regulations, which may have a material adverse effect on our business.

We are subject to extensive government regulatory compliance and ethics oversight.

Our business is subject to extensive government regulation and oversight.  We have enacted anticorruption, privacy, healthcare and corporate compliance policies and procedures that govern our business practices and those of our distributors and suppliers.  These policies and procedures are effectuated through education, training and monitoring of our employees, distributors and suppliers.  In addition, to enhance compliance with applicable health care laws and mitigate potential liability in the event of noncompliance, regulatory authorities, such as HHS’s Office of the Inspector General, or OIG, have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the elements of an effective compliance and ethics program described in Section 8B2.1 of the U.S.  Sentencing Commission Guidelines Manual.  Increasing numbers of U.S.-based pharmaceutical companies have such programs, and we have adopted U.S. healthcare compliance and ethics programs that generally incorporate the HHS OIG’s recommendations.  However, our adoption and enforcement of these various policies and procedures does not ensure that we will avoid investigation or the imposition of penalties by applicable government agencies.

We are subject to extensive environmental, health and safety laws and regulations.

Our business involves the controlled use and the generation, handling, management, storage, treatment and disposal of hazardous substances, wastes and various biological compounds and chemicals. The risk of contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals, substances or wastes occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. As owners and operators of real property, we could also be held liable for the presence of hazardous substances as a result of prior site uses or activities, without regard to fault or the legality of the original conduct that caused or contributed to the presence or release of such hazardous substance on, at, under or from our property. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials, chemicals and wastes.

Although we maintain workers’ compensation insurance to cover the costs and expenses that may be incurred due to injuries to our employees resulting from the use and handling of these materials, chemicals and wastes, this insurance may not provide adequate coverage against potential liabilities.

Additional or more stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future. We may incur substantial capital costs and operating expenses to comply with any of these laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities. In addition, fines and penalties may be imposed for noncompliance with environmental and health and safety laws and regulations or for the failure to have or comply with the terms and conditions of required environmental permits.

Item 4.INFORMATION ON THE COMPANY

A.History of and Development of the Company

Introduction

We were founded in 1940 in Barcelona, Spain by Dr. José Antonio Grifols i Roig, a specialist and pioneer in blood transfusions and clinical analysis and the grandfather of our current Chairman of the Board.  We have been making and selling plasma derivative products for more than 70 years.  Over the last 25 years, we have grown from a predominantly domestic Spanish company

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into a global company by expanding both organically and through acquisitions throughout Europe, the United States, Latin America and Asia.

We were incorporated in Spain as a limited liability company on June 22, 1987 under the name Grupo Grifols, S.A., and we changed our name to Grifols, S.A. in 2005.  We conduct business under the commercial name “Grifols.”  Our principal executive office is located at Avinguda de la Generalitat, 152 Parque Empresarial Can Sant Joan, 08174 Sant Cugat del Vallès, Barcelona, Spain and our telephone number is +34 93 571 0500.  Our registered office is located at c/Jesús y María, 6, Barcelona, Spain.

We are a vertically integrated global producer of plasma derivatives and we believe we rank in the top three largest producers in the industry. Our activities include sourcing raw material, manufacturing various plasma derivative products and selling and distributing final products to healthcare providers. We have expanded our plasma collection network and our manufacturing capacity through a combination of organic growth and acquisitions. As of December 31, 2017 we had 190 operating plasma collection centers located across the United States and a manufacturing capacity of approximately 12.5 million liters of plasma per year. We plan to reach approximately 19 million liters fractionation capacity by 2022 and, as previously announced, 230 FDA-approved plasma collection centers in the U.S. by 2019. In March 2018 we entered an agreement to acquire 100% of Haema AG, a German based pharmaceutical company that owns 35 collection centers throughout Germany. The transaction is subject to regulatory approval. See more details relating to the acquisition in Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures.”

We also research, develop, manufacture and market in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in clinical and blood bank laboratories and hospital products.

Our Class A shares have been listed on the Spanish Stock Exchanges since we completed our initial public offering on May 17, 2006 and are quoted on the SIBE under the ticker symbol “GRF.”  In January 2008, we became part of the IBEX-35 Index, which comprises the top 35 listed Spanish companies by liquidity and market capitalization.  Our Class B shares were issued as part of the consideration for the Talecris acquisition and are listed on the Spanish Stock Exchanges and quoted on the SIBE under the ticker symbol “GRF.P.”  Our Class B shares are also traded in the United States on the NASDAQ Global Select Market in the form of ADSs, evidenced by ADRs, under the symbol “GRFS.”  Each ADS represents one of our Class B shares.  Our ADSs are currently traded in U.S. dollars.  In November 2011, our ADSs were added to the NASDAQ Biotechnology Index.

Important Events

Acquisitions and Related Financing

The Hologic Transaction and Related Financing

On December 14, 2016, we entered into an asset purchase agreement, or the Hologic Agreement, with Hologic to acquire Hologic’s NAT (nucleic acid testing) Donor Screening Unit.  Prior to the transaction, we and Hologic jointly operated this business, with Hologic responsible for research and development and manufacturing of the Procleix® blood screening products and Grifols responsible for their commercialization worldwide. The transactions contemplated by the Hologic Agreement are referred to herein as the Hologic Transaction. The Hologic Transaction closed on January 31, 2017 and we paid a purchase price of $1.865 billion to Hologic.

In connection with the Hologic Transaction and the refinancing of the 2014 Credit Facilities (as defined herein), we (i) entered into a credit and guaranty agreement dated as of January 31, 2017, as amended, or the New Credit Facilities, which consists of senior term loans and revolving loans. As of the date of this annual report on Form 20-F, no amounts are drawn down on the Revolving Loans.  See Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Credit,” for terms of the New Credit Facilities, the 2017 Notes, European Investment Bank Term Loans and for more detailed information.

The Novartis Acquisition and Related Financing

On November 10, 2013, we entered into a share and asset purchase agreement, or the Novartis Agreement, with Novartis Vaccines and Diagnostics, Inc., or NVD, and, solely as a guarantor, Novartis Corporation, or Novartis, which was subsequently amended on December 27, 2013 and January 9, 2014, to acquire Novartis’ diagnostic business.  The transactions contemplated by the Novartis Agreement are referred to herein as the Novartis Acquisition. We acquired from NVD a complete line of products and systems to perform blood donor screening molecular tests aimed at detecting the pathogenic agents of transfusion-related infectious diseases such as HIV, hepatitis B, hepatitis C and West Nile Virus. We paid a purchase price of $1.7 billion (€1.2 billion).

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To finance the Novartis Acquisition, we entered into a credit and guaranty agreement with a syndicate led by Nomura Securities International, Inc., Banco Bilbao Vizcaya Argentaria, S.A., and Morgan Stanley Senior Funding, Inc., or the Bridge Loan Facility, pursuant to which we borrowed $1.5 billion of loans on January 3, 2014. The Bridge Loan Facility was refinanced pursuant to a credit and guaranty agreement dated as of February 27, 2014, as amended, or the 2014 Credit Facilities, which consisted of senior term loans and revolving loans.

The Talecris Acquisition

On June 1, 2011, pursuant to the Agreement and Plan of Merger, dated as of June 6, 2010, we completed the acquisition of 100% of the share capital of Talecris, a US-based biotherapeutics products company, for a total of $3.7 billion. The total value of the transaction, including Talecris’ net debt, was approximately $3.3 billion.

For further details of our principal capital expenditures and divestitures, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures.”

B.Business Overview

General

We are one of the leading global specialty pharmaceutical companies developing, manufacturing and distributing a broad range of biological medicines on plasma derived proteins.  Plasma derivatives are proteins found in human plasma, which once isolated and purified, have therapeutic value.  These protein-based therapies extend and enhance the lives of individuals who suffer from chronic and acute, often life-threatening, conditions, such as primary and secondary immunological deficiencies, Chronic Inflammatory Demyelinating Polyneuropathy, or CIDP, A1PI deficiency and related emphysema, immune-mediated ITP, Guillain Barré syndrome, Kawasaki disease, allogeneic bone marrow transplants, hemophilia A and B, von Willebrand disease, traumatic or hemorrhagic shock and severe burns. In addition, we have built a diagnostic business that focuses on researching, developing, manufacturing and marketing in vitro diagnostics products for use in clinical and blood bank laboratories. We also specialize in providing infusion solutions, nutrition products and medical devices for use in hospitals and clinics.

Our products and services are used by healthcare providers in over 100 countries to diagnose and treat patients with hemophilia, immune deficiencies, infectious diseases and a range of other medical conditions, and we have a direct presence, through the operation of commercial subsidiaries, in 30 countries.

In 2016, we believe we ranked in the top three largest producers in the industry in terms of total sales globally. We believe we have a top three market position in various segments of the plasma derivatives industry including A1PI, IVIG, pdFactor VIII, albumin as well as in terms of plasma collection centers and fractionation capacity.

On January 31, 2017, we completed the acquisition of the business of Hologic Inc. related to the development, production and, pursuant to the collaboration described below, sale to us of products in connection with nucleic acid probe-based testing human blood, plasma, other blood products, human cells, organs or tissue intended for or associated with transfusion or transplantation. The transaction consisted of, among other things, the acquisition of the assets and liabilities related to this business and the termination of the then-existing collaboration agreement between Hologic and us for the joint development, manufacture, commercialization, marketing and sale of such products. The acquired business is now part of our Diagnostic division.

We organize our business into five divisions:  Bioscience, Diagnostic, Hospital, Bio Supplies (formerly Raw Materials) and Others. These divisions also represent the operating segments of the Company.

Bioscience.  The Bioscience division includes activities relating to the manufacture of plasma derivatives for therapeutic use, including the reception, analysis, quarantine, classification, fractionation and purification of plasma and the sale and distribution of end products.  The main plasma products we manufacture are IVIG, Factor VIII, A1PI and albumin.  We also manufacture intramuscular (hyperimmune) immunoglobulins, ATIII, Factor IX and plasma thromboplastin component, or PTC. The Bioscience division accounted for €3.4 billion, or 79.4%, of our total net revenue in 2017.

Diagnostic.  The Diagnostic division focuses on researching, developing, manufacturing and marketing in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in clinical and blood bank laboratories, covering the entire value chain from donation to transfusion.  We concentrate our Diagnostic business in transfusion medicine (immunology, immunohematology) and specialty diagnostics such as hemostasis.  The Diagnostic division’s main customers are blood donation centers, clinical analysis laboratories and hospital immunohematology services.  The Diagnostic division accounted for €732.4 million, or 17.0%, of our total net revenue in 2017.  The Nucleic Acid Testing, or NAT, Donor Screening Unit is engaged in research, development, manufacturing and commercialization of assays and instruments based on NAT technology for transfusion and

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transplantation screening. NAT technology makes it possible to detect the presence of infectious agents in blood and plasma donations, contributing to greater transfusion safety. We expect that the impact of the Hologic Transaction will enhance our vertical integration and further promote the development of new tests and screening routines for emerging viruses.

Hospital.  The Hospital division manufactures products used by hospitals, as well as parenteral solutions and enteral nutritional fluids, which are sold almost exclusively in Spain and Portugal.  It also includes products that we do not manufacture but that we market as supplementary to the products that we do manufacture.  The Hospital division accounted for €105.6 million, or 2.4%, of our total net revenue in 2017.

Bio Supplies.  Since January 2017, net revenue from Bio Supplies primarily consists of revenue related to biological products for non-therapeutic use previously recorded under the Bioscience segment as well as all income derived from manufacturing agreements with Kedrion. Since January 2017, net revenues also include all transactions related to biological products for non-therapeutic use previously recorded under the Bioscience segment. The Bio Supplies division accounted for €66.8 million, or 1.6 %, of our total net revenue in 2017.

Others. Net revenue from Others primarily consists of revenue from the rendering of manufacturing services to third party companies.

Geographic Markets

We are a leading plasma derivatives producer globally, ranking in the top three largest producers in the industry in terms of total sales, along with Shire and CSL Group. We are the world’s largest producer of A1PI, which is used for the treatment of A1PI deficiency-related emphysema.

We currently operate in over 100 countries through distributors and subsidiaries in 30 countries. The United States is the largest sales region in the world for the plasma derivative sector.  For the year ended December 31, 2017, the United States and Canada accounted for 67.1% of our total net revenue while Europe accounted for 15.9% of our total net revenues (of which less than 6% was generated in Spain).

Certain sales regions, particularly in emerging markets, have experienced continuous growth, driven by enhanced socioeconomic conditions and more informed patients who are demanding better quality medical care, as well as increasing government healthcare spending on plasma derivative products. These emerging markets are expected to experience significant growth.  Our presence and experience in Latin America, in countries such as Mexico, Colombia, Argentina, Chile and Brazil, where we have been marketing and selling products for over 20 years, has positioned us to benefit from this additional growth in both our Bioscience and Diagnostic divisions.  In the Asia-Pacific region, we have established a presence through our subsidiaries and representative offices in Malaysia, China, Thailand, Singapore, Australia, Japan, India, Hong Kong, Taiwan and Indonesia. We have also opened a Middle Eastern representative office in Dubai.

Our continued focus on international expansion and acquisitions that generate operational synergies was demonstrated by our acquisition of Talecris in June 2011, a United States based producer of plasma-derived protein therapies with an established presence in the United States and Canada.  We also expanded internationally with the acquisition in March 2013 of a 60% stake in Progenika (increased to 90.23% as of December 31, 2017), a Spanish biotechnology firm headquartered in Bilbao, with operations in the United States, Europe and the Middle East. The Novartis Acquisition further reinforced our international operations, as it expanded our global portfolio of brands, patents and licenses and gained us the Emeryville facility and commercial offices in the United States, as well as additional commercial offices in Switzerland and Hong Kong. Pursuant to the Hologic Transaction, we acquired our former joint-business partner’s NAT Donor Screening business, including a manufacturing facility in San Diego and development rights, product licenses and access to product manufacturers. We will continue to selectively consider acquisitions that would further enhance our operations.

The following chart reflects a summary of net revenue by each of our geographic regions for the past three years:

Summary of Net Revenue by Region	Year ended December 31, 2017	% of total net revenue	Year ended December 31, 2016 (2)	% of total net revenue	Year ended December 31, 2015 (2)	% of total net revenue
	(in thousands of euros, except for percentages)
United States and Canada	2,896,505	67.1	2,707,579	66.9	2,604,315	66.2
European Union(1)	686,983	15.9	651,496	16.1	673,467	17.1
Rest of the World	734,585	17.0	690,755	17.0	656,781	16.7
Total	4,318,073	100.0	4,049,830	100.0	3,934,563	100.0

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(1)Net revenue earned in the European Union includes net revenue earned in Spain.

(2)Comparable considering the new divisional structure that allocates “ Raw Materials and Others” by region.

Principal Activities

We organize our business into five divisions:  Bioscience, Diagnostic, Hospital, Bio Supplies and Others. These divisions also represent the operating segments of the Company. The following chart presents our total net revenues by each of our divisions for the past three years:

Summary of Revenue by Division	Year ended December 31, 2017		% of total net revenue		Year ended December 31, 2016 (1)		% of total net revenue (1)		Year ended December 31, 2015 (1)		% of total net revenue
	(in thousands of euros, except for percentages)
Bioscience	3,429,785		79.4		3,195,424		78.9		3,032,111		77.1
Diagnostic	732,369		17.0		691,701		17.1		716,838		18.2
Hospital	105,649		2.4		102,251		2.5		96,245		2.4
Bio Supplies	66,791		1.6		57,239		1.4		24,466		0.6
Others	18,263		0.4		34,601		0.9		90,289		2.3
Intersegments	(34,784	)	(0.8	)	(31,386	)	(0.8	)	(25,386	)	(0.6	)
Total	4,318,073		100		4,049,830		100.0		3,934,563		100.0

(1)           Comparable revenues considering intersegment sales and the reclassification of the biological products for non-therapeutic use sales that are reported as Bio Supplies Division sales from January 2017.

The Bioscience Division

The Bioscience division is responsible for the research and development, production and marketing of plasma derivative products.  In 2017, the Bioscience division accounted for 79.4% of total net revenue.

Operational Structure

The following chart illustrates its operational structure:

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From plasma donation to therapeutic application, there are four major steps in the industry value chain process: (i) plasma collection, (ii) transport and logistics, (iii) manufacturing (fractionation and purification) and (iv) marketing and distribution.  We are present at all levels of the value chain, from collection centers to distribution of the final products.  This vertical integration enables us to leverage our position at each stage to control the overall process, to benefit from lower prices and to introduce complementary products, such as those offered through the Hospital division and the Diagnostic division, to our customers.

Plasma Collection

Plasma is the key raw material used in the production of plasma-derived products. We have expanded our plasma collection network through a combination of organic growth by opening new plasma collection centers and acquisitions. We obtain our plasma primarily from the United States through our 190 operating plasma collection centers and, to a much lesser extent, through agreements with third parties. In 2017, we obtained approximately 9.3 million liters of plasma (including specialty plasma required for the production of hyperimmunes and plasma acquired from third parties).

We have previously announced that we plan to reach 230 FDA-approved plasma collection centers by 2019 in the U.S. In March 2018 we entered an agreement to acquire 100% of Haema AG, a German based pharmaceutical company that owns 35 collection centers throughout Germany. We believe this acquisition, subject to the authorization by the applicable antitrust authorities among other closing conditions, will diversify the origin of our plasma and guarantee access to raw material for the future. See more details relating to the acquisition in Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures.”

We believe that our plasma requirements through 2018 will be met through plasma collected at our plasma collection centers and purchased from third-party suppliers pursuant to various plasma purchase agreements. As we source the majority of our plasma internally, we have been able to ensure the availability of plasma for our manufacturing needs, assure the quality of the plasma throughout our manufacturing process and improve control over our plasma costs and our margins.

We have implemented mechanisms to ensure that plasma donors meet the guidelines set forth by applicable regulations regarding, among other things, health, age and frequency of donations.  Once the plasma donation is completed, as required by applicable United States and European regulations, we test every donation for pathogens such as HIV, hepatitis A, B and C, parvovirus B19 and syphilis.  If we discover a unit of plasma that cannot be used in the fractionation process, we notify the donor and remove all plasma previously donated by such donor from our inventory.

Transport and Logistics

Once plasma has been collected, it is frozen at the collection center and sent to fractionation centers.  One essential aspect of this process is the implementation of safety procedures to guarantee the quality and safety of the donated plasma. To ensure preservation of the proteins found in plasma, plasma must be kept at a temperature of -20 degrees Celsius (-4 degrees Fahrenheit).  In accordance with European and United States requirements, we store our plasma at a temperature of -30 degrees Celsius (-22 degrees Fahrenheit).  During transportation, plasma is kept at a temperature of at least -20 degrees Celsius.  Our frozen plasma is transported by one of two transport companies, which are the same used throughout the industry.

Fractionation and Purification

Once plasma has been obtained, it may be used for plasma transfusions.  It may also be frozen (as fresh frozen plasma) and manufactured into plasma derivatives through the fractionation process.  The fractionation process consists of the separation of specific proteins through temperature and pH changes, as well as the use of filtration and centrifugation techniques.  This process also includes a phase of introducing various viral inactivation procedures.  Fractionation occurs in tanks at near freezing temperatures to maintain the integrity of the proteins.  All known plasma derivative products can be fractionated from the same batch of plasma.  As a result, the development of a new or higher yield plasma derivative product would likely generate incremental sales without increasing the requirement for additional plasma.

We currently operate three Bioscience manufacturing facilities in the United States and Spain.  Our plasma derivative products are manufactured at our Clayton, Los Angeles and Parets facilities, which have a combined fractionation capacity of approximately 12.5  million liters per year.  Our Clayton facility is one of the world’s largest integrated protein manufacturing sites, including fractionation, purification and aseptic filling and finishing of plasma-derived proteins.

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Currently, the Clayton, Los Angeles and Parets facilities are equipped and licensed to produce certain plasma derivative products for the United States, European and other markets.  For example, we produce our Flebogamma® DIF and Gamunex® IVIG products for all of our markets at the Clayton, Los Angeles and Parets facilities.

We optimize utilization of our fractionation capacity by obtaining FDA and EMA licenses, and completing further requirements, that allow us to purify at any of our other facilities intermediate products that are produced at one of our facilities.  We have obtained the following FDA licenses, among others:

·to purify at our Clayton facility the Fraction II+III (an intermediate product) made at both our Los Angeles and Parets facilities to make Gamunex®;

·to purify at our Los Angeles facility the Fraction II+III obtained at that facility to make Gamunex® 10%;

·to use Fraction V obtained at our Clayton facility to produce albumin at our Los Angeles facility;

·to use Fraction V obtained at our new fractionation facility at Clayton to produce Albutein® in our Los Angeles facility;

·to use Fraction IV-1 obtained at our Los Angeles facility to produce Prolastina®, an A1PI we market in Spain, at our Clayton facility;

·to use Fraction IV-1 obtained at our Clayton facility to produce Prolastin® at our Parets facility;

·to use Fraction IV-1 obtained at our Parets facility to produce Prolastin® at our Parets facility

·to use the same method currently in place in our Parets facility to produce Alphanate® in our Los Angeles facility;

·to use paste from the new fractionation facility at Clayton to produce Gamunex® and Prolastin®;

·to produce nano-filtered Gamunex®  and the 40 gram vial presentation; and

·to use Cryoprecipitate obtained at our Clayton Facility to produce Alphanate® at our Los Angeles facility.

We are continuing our efforts to obtain additional FDA licenses of this nature. The flexibility provided through such licenses allows us to increase production efficiency and to better address changes in demand between the United States, the European Union and other world markets.

For more information on our manufacturing facilities, see “— D.  Property, Plant and Equipment” below.

Safety

We have never experienced a recall of any batch of our finished biological products due to a safety risk, although certain of our other products have been subject to non-material recalls. Our philosophy is that the health of the plasma donor and the patient are the paramount considerations.  We strongly believe that our safety philosophy is consistent with the business objective of generating profit.  We also believe that we have a strong reputation for safety in our markets, thus making our products particularly attractive to customers.  Our vertically integrated business model allows us to assure the safety and quality of our plasma derivative products through the implementation of our safety standards throughout the value chain.

The plasma collection, fractionation and purification process is long, complex and highly regulated.  We have adopted and maintain rigorous safety standards that we believe exceed those required by health authorities in Europe and the United States.

We maintain standards consistent with other industry participants with regard to infectious disease screening and quarantine of units.  For example, source plasma inventory is held for not less than 60 days, because viruses may not be detectable until they reach a certain minimum mass, which may take as long as two months.  Some of our additional safety policies include look-back procedures for seroconversion.  We have also introduced innovative methods such as the Plasma Bottle Sampling™ system, which automatically prepares, codes and labels test samples at the time of plasma donation, and the PediGri™ On Line system, which provides full traceability of human plasma raw material throughout the plasma supply chain.  See “— Distribution Process” below.

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Fractionation plants must be cleaned and sterilized frequently.  Our facility was designed to minimize the clean area required for the plasma fractionation tanks and separates the tanks from the room temperature work area.  This allows us to perform all maintenance work from outside the room temperature area, decreasing the risk of contamination.

Periodically, we voluntarily shut down all of our manufacturing facilities to perform maintenance work, expansion projects and other capital investments.  Our manufacturing facilities have never been shut down because of regulatory noncompliance while under our operation.  We believe that our voluntary shutdown procedure lowers the risk of any mandatory shutdown.

After plasma derivatives are processed, we inspect each bottle for irregularities such as imperfect seals, bottle cracks, volume mismeasurements and the presence of foreign objects.

We have also developed and installed in our facility a proprietary process of sterile bottle filling designed to reduce the risk of contamination.  In our process, the bottle and stopper are sterilized together. Once both are sterilized the bottle is reopened in a small sterile room for only two seconds in order to insert the product and then resealed, greatly reducing exposure to the environment and reducing the risk of contamination.

Since January 1999, we have recorded the filling process to enable us to identify the cause of, and rectify more easily, any related problem.  Our policy is to maintain each recording for six years.  We also imprint an identification number on each of our bottles with a laser for easier identification in the event of a recall and to reduce the risk of tampering.  This allows us to protect the integrity of our manufacturing process.

We continually invest in the improvement of our manufacturing facilities and plasma fractionation process.

Distribution Process

With each batch of plasma derivatives, we deliver electronic information regarding the origin, characteristics and controls of each of the units of plasma that we used in the preparation of the batch to our customers.  This feature, called the PediGri™ On Line system, allows for healthcare users of our products and regulatory authorities to have immediate and easy access to this information, tangible proof of the full traceability of our products. We have had this system in place since 1996, and we believe we are the only fractionator that provides this feature to customers.

We have our own sales and distribution networks covering substantially all of our markets, staffed with highly trained personnel.  A majority of our sales in 2017 were made through our own distribution network, which is experienced in the proper handling of our products. This network provides for greater safety because it allows us to track our products and react quickly in the case of a potential product recall.  In countries where we do not have our own distribution network, we use carefully selected distributors who follow all of our safety standards.

For further information, see “— Marketing and Distribution” below.

Bioscience Products and Services

Collected plasma, whether source or recovered, is fractionated into different component proteins.  We fractionate and purify a broad range of plasma derivative products that improve patient care.

Our principal plasma derivative products are IVIG, A1PI, Factor VIII and albumin, each sold under various brand names, and their respective applications are as follows:

Product Description	Main Applications
Flebogamma® 5%. Immune Globulin Intravenous (Human).	IVIG assists in the treatment of: primary and secondary immunological deficiencies; immune-mediated ITP; Guillain Barré syndrome; Kawasaki disease; allogeneic bone marrow transplants; and CIDP (Gamunex®/Gamunex®-C only).
Flebogamma® 5% and 10% DIF. Immune Globulin Intravenous (Human).
Gamunex®/Gamunex®-C. Immune Globulin Injection (Human), 10% Caprylate/Chomatography Purified.

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Prolastin®/Prolastin®-C/Prolastina®/Pulmolast®. Alpha 1-Proteinase Inhibitor (Human).	Used to treat congenital alpha-1 antitrypsin deficiency-related emphysema.
Fahndi™ and Alphanate®. Antihemophilic Factor/von Willebrand Factor Complex (Human).	Used for the prevention and control of bleeding in Factor VIII deficiency (hemophilia A) and indication for von Willebrand disease (in the United States, for Alphanate® only).
Koate®-DVI. Antihemophilic Factor (Human).
Human Albumin Grifols®/Albutein®/Plasbumin®. Albumin (Human) 5%, 20% and 25%.	Used to re-establish and maintain circulation volume in the treatment of hypovolemia (i.e., traumatic or hemorrhagic shock and severe burns) and to treat complications related to cirrhosis.

Our acquisition of Talecris expanded our portfolio of IVIG and A1PI products.

Gamunex® IVIG, which was launched in the United States and Canada in 2003 as a ready-to-use liquid IVIG product, is the leading product in the IVIG segment. We believe Gamunex® IVIG is considered to be one of the premium products in its category since its launch due to a comprehensive set of differentiated product characteristics. Further, the FDA granted Gamunex® IVIG orphan drug status, which provided marketing exclusivity for the CIDP indication in the United States through September 2015. We had an estimated 23% market share in the United States for IVIG at the end of 2016.

In addition, we are the world’s largest producer of A1PI, which is used for the treatment of A1PI deficiency-related emphysema. It is licensed in 28 countries worldwide.  Prolastin®/ Prolastin®-C A1PI is the leading A1PI product in the United States and Europe, where it is licensed in 15 countries. In Italy and Spain, we previously distributed Prolastin® through third parties. We began distributing Prolastin® directly to those two countries in 2013 and we began conducting clinical trials in Europe in 2013 to obtain Prolastin®-C approval there.

We had an estimated 67% market share for this product globally at the end of 2017.  In September 2017, the FDA approved our liquid formulation of alpha-1 antitrypsin (Prolastin®-C Liquid) as a replacement therapy to treat alpha-1 antitrypsin deficiency. It is the first liquid formulation of an alpha-1 antitrypsin deficiency replacement therapy manufactured in the U.S.

Alphanate® and Fahndi™, our Factor VIII/von Willebrand factor products, are used both for the treatment of hemophilia and von Willebrand disease.  In addition, our albumin product meets U.S. and European requirements, making it attractive to biotechnology companies and genetic labs, as well as hospitals and physicians.

In addition to the products described above, we also produce intramuscular (hyperimmune) immunoglobulins, which are used for the prevention and treatment of tetanus, prevention and treatment of hepatitis B, and Rh factor complications during birth; Anbinex® and Thrombate® III, which are used in the prevention and treatment of thromboembolic complications; AlphaNine® and Factor IX Grifols®, which are used in the prevention and control of bleeding in patients with hemophilia B; and Niuliva® and Igantibe®, which are used after liver transplants to prevent hepatitis B reinfection of the graft. In 2017, we obtained FDA and EMA approval for a biological sealant composed of fibrinogen and human thrombin used in surgical operations to expedite the healing process.

To sell plasma derivative products, we must first register the products with the relevant authorities of the jurisdictions where the products are to be marketed and sold.  To comply with the regulatory requirements in a given jurisdiction, we have a core team in Spain and the United States that prepares files and coordinates the registration process with the technical personnel at the subsidiary assigned to that jurisdiction.  We have 683 hemoderivative product licenses registered in 93 countries throughout Europe, the United States, Latin America, Asia and the rest of the world.  Our most significant government-issued licenses for plasma derivative products are:

·Flebogamma®/Flebogamma® DIF/Gamunex®/Gamunex®-C Immunoglobulin.  We have 106 licenses for the marketing and sale of one or more of these immunoglobulin products;

·Fahndi™/Alphanate®/Koate® Factor VIII.  We have 97 licenses for the marketing and sale of one or more of these Factor VIII products;

·Human Albumin Grifols®/Albutein®/Plasbumin® Albumin.  We have 201 licenses for the marketing and sale of one or more of these albumin products in its various concentrations; and

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·Prolastin®/Trypsone® A1PI.  We have 33 licenses for the marketing and sale of one or both of these A1PI products.

Pursuant to the Consent Order, we have granted Kedrion the exclusive license to sell Koate®-DVI in the United States (as defined in Item 8 of this Part I, “Financial Information — A. Consolidated Statements and Other Financial Information — Antitrust Approval of Talecris-Grifols Merger”).

In addition to the sale of the products described above, we have entered into a series of arrangements with many Spanish transfusion organizations to fractionate recovered plasma (plasma separated from blood obtained from a blood donation) from such organizations and manufacture plasma derivatives under our own brand name for use by hospitals.  We charge the transfusion centers for the fractionation and manufacturing service. We also have contracts with Czech and Slovak organizations.  We also provide virus photo-inactivation of transfusion plasma to hospitals and clinics in Spain.  The plasma is inactivated at our manufacturing facilities and then sent back to the clinic or hospital at which it was collected, where it is used for transfusions.

The Diagnostic Division

The Diagnostic division focuses on researching, developing, manufacturing and marketing in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in diagnostic clinical and blood bank laboratories.  We believe that we have a significant market share of sales in NAT blood screening solutions. In addition, we have increased our sales of automated immunohematology systems and reagents to hospital transfusion and blood centers in several markets.  We also continue to grow our portfolio of clinical and diagnostic products in select areas, including autoimmunity and hemostasis, and have agreements to extend the number of antigens we manufacture for use in clinical and blood bank diagnostic tests.  The Diagnostic division accounted for €732.4 million, or 17.0% of total net revenue in 2017. Our principal diagnostic products are:

Product Description	Main Applications
Transfusion Medicine:
Procleix® Tigris®/Procleix® Panther® systems. Automated NAT blood screening systems, assays and software.	Used to detect infectious viruses in donated blood and plasma including: HIV (Types 1 & 2); Hepatitis A, Hepatitis B, Hepatitis C and Hepatitis E; parvovirus B19; West Nile Virus; Dengue Virus; Zika (CE marked and FDA approved as IND); and Babesia (FDA approved as an IND in selected centers).
WADiana®/Erytra® /Erytra® Eflexys analyzers. Automated immunohematology analyzers that use gel agglutination technology to enable automatic processing of DG Gel® blood determination cards.	Used to perform routine pre-transfusion blood typing, antibody screening, antibody identification and cross-match tests.
Antigens. Critical component of certain infectious disease tests.	Used in the manufacture of clinical diagnostic and blood donor screening immunoassays.
Leucored and standard blood bags. Blood bags configured according to all blood bank separation protocols. Leucored blood bags incorporate an in-line filtration system.	Used for collection and transfusion of blood.
Clinical and Specialty Diagnostics:
Triturus® analyzers. Open and fully automated analyzer for ELISA (enzyme-linked immunoabsorbent assay), tests with multi-test/multi-batch capability.	Automates the enzyme immunoassay testing in microtiter plate format and the processing of several batches of samples simultaneously.
Q-Coagulometer™ and Q-Smart™ analyzers. Fully automated hemostasis analyzers that use reagents to measure blood coagulation levels.	Used to diagnose and measure blood coagulation status of patients with blood coagulation-related and hemorrhagic disorders.
Coagulation reagents, instrumentation and software.	Used to establish the coagulation status of patients and to handle the corresponding results.
Promonitor. Highly specific ELISA kits for quantification of serum drug levels and anti-drug antibodies of various biological drugs	Used to measure quantity of drug and antibodies for a number of biological drugs, commonly used in the treatment of various inflammatory diseases.

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We assemble the majority of our instrument analyzers at our Parets facility. We manufacture antigens at our Emeryville facility, oligos and other critical components of the transcription-mediated amplified NAT kits for blood and plasma infectious diseases screening at our San Diego facility and our blood bags at our facility located in Las Torres de Cotillas, Murcia, Spain, or the Murcia facility, which has an estimated capacity of nine million blood bags per year.

The production, marketing and sale of many of our Diagnostic division products are subject to the prior registration of such products with the relevant authorities of the applicable jurisdictions.  We have over 2,323 diagnostic product licenses registered in 71 countries in Europe, the United States, Canada, Latin America, Africa and Asia.

In addition to the products noted above, we offer our customers products developed in collaboration with, or manufactured by, third-parties that we believe complement our product lines.

The Diagnostic division distributes products in Europe, North America, Asia-Pacific, the Middle East, Latin America and Africa.

In January 2014, we acquired from Novartis a complete line of products and systems to perform blood donor screening molecular tests aimed at detecting the pathogenic agents of transfusion-related infectious diseases such as HIV, hepatitis B, hepatitis C and West Nile Virus. The Novartis Diagnostic Business has been integrated in our current Diagnostic division, resulting in a significant expansion of our transfusion medicine product portfolio. More recently, in January 2017, we completed the Hologic Transaction. Prior to the Hologic Transaction, we and Hologic jointly operated this business, with Hologic responsible for research and development and manufacturing of the Procleix® blood screening products and Grifols responsible for their commercialization worldwide. Following the acquisition, we now control the research and development processes as well as the manufacturing of the reagents. We believe the Procleix® NAT solutions that we added to our portfolio in the Hologic Transaction, which we were already commercializing following the Novartis Acquisition, continue to lead the market, and are used to screen more blood and plasma donations worldwide each year than any other NAT system. The Procleix® products are designed to directly detect the genetic material of a virus using a technique called transcription-mediated amplification (TMA).

Transfusion Medicine

Grifols has a leadership position in transfusion medicine, with a broad portfolio of products that range from blood collection, blood and plasma testing to blood typing and transfusion. Our growth strategy in transfusion medicine has been strengthened by the January 2014 acquisition of the transfusion medicine and immunology diagnostic unit of Novartis and the recent Hologic Transaction. We focus primarily on meeting changing market needs with new and enhanced products for our Procleix NAT blood screening portfolio and on expanding sales of our immunohematology products in key markets (WADiana® and Erytra® analyzers and related DG Gel® blood determination cards).

We continue to focus on obtaining FDA and other regulatory approvals to expand our portfolio of NAT products. In 2015, a European Conformity, or CE mark, was granted for the NAT test that detects both parvovirus B19 and hepatitis A virus (Procleix® Parvo/HAV) in human plasma on the Procleix® Panther platform, enabling Grifols to increase the number of tests available for this platform and to expand its portfolio of products designed to meet the specific needs of the plasma industry.  In 2016, the Procleix® Tigris system underwent a series of significant software and hardware improvements to better address evolving market needs, including more functional and streamlined software and increased storage holding for key consumables. In 2017, a new assay to detect babesia, a tick borne disease, obtained FDA approval under an Investigational New Drug protocol. The assay is designed to be used for routine screening by U.S. blood banks on the Procleix® Panther® system.

In 2016, we began working on an Investigational Use Only (IUO) assay to accommodate requests to test blood in areas potentially affected by the Zika virus. In June 2016, the first samples were tested using Grifols Procleix® Zika virus assay on a Procleix®  Panther® system under an Investigational new drug (IND) protocol. In August 2016, the FDA issued non-binding recommendations that require NAT screening of all individual donations in the United States and its territories. Grifols is currently providing reagents, instruments and services to all of our U.S. customers to allow the screening of more than 85% of the U.S. blood supply.  The record-time development of the Procleix Zika virus assay, reinforces our commitment to blood safety worldwide. In 2017, we obtained CE marking for the Zika virus assay.

Clinical trials to support U.S. registration of the Procleix Ultrio Elite Assay (HIV and hepatitis B and C) and Procleix WNV Assay (West Nile Virus) on the Procleix Panther system were completed in 2016 and the corresponding Biologics License

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Applications (BLA) are now undergoing review by the FDA. A new version of the Procleix® Xpress (v.3.0) pipette was submitted for FDA approval during 2017.

As part of our strategy of geographic expansion and as a leader in this market segment, we continue to consider requests to include NAT screening for blood and plasma donations in countries as they develop their health systems. In this regard, it is important to highlight several new contracts in the Middle East. In 2015, we won a tender in Saudi Arabia to supply the Saudi Arabian National Guard, followed by a contract in 2016 to supply transfusion services to the Saudi Ministry of Health (MoH) and the majority of the member countries of the Cooperation Council for the Arab States of the Gulf (CCASG), establishing Grifols as the leading provider of NAT technology in the region. During 2016, we conducted our first sales in Oman and Kuwait. We opened a new training center in Dubai in 2016 to further support our growth in the region. The center offers single and multi-day training courses for laboratory technicians, engineers and specialists in Grifols’ broad portfolio of products in transfusion medicine and clinical diagnostic.

We continue to experience strong sales of our DG Gel® blood typing products. In December 2016, we obtained CE marking for Erytra Eflexis®, a fully automated, mid-size analyzer that performs pretransfusion compatibility testing using DG Gel® technology that was launched in June 2017. It has a smart and compact design, offering intuitive operation that has expanded our product portfolio, which already includes the WADiana® and Erytra® analyzers and DG Gel® cards. In the United States, our blood typing solutions have experienced solid growth. Grifols has expanded commercialization efforts and will continue to promote this area in light of its high growth potential.

In 2015, we opened the “Grifols Immunohematology Center” in our laboratories in San Marcos, Texas. The Grifols Immunohematology Center provides reference lab testing, consulting and education services to transfusion medicine professionals. In 2016, we expanded the number of tests offered by the center to include simple and complex serological tests.

In several countries, we distribute the BLOODchip® blood group genotyping tests manufactured by Progenika, a Grifols company. In 2017, Progenika obtained CE marking for the ID RHD XT Diagnostic Kit, a new molecular diagnostic kit that detects the most relevant RhD variations, and obtained FDA approval for a new genetic test to detect alpha-1 antitrypsin deficiency. This test has had CE mark approval since December 2016.

In select markets, we are working to expand the availability of Grifols’ blood collection bags and systems, as well as our Gricode™ transfusion component tracing systems. To strengthen our position in Brazil, we finished construction of a blood bag manufacturing plant in Campo Largo (Paraná) in November 2017, where we expect to commence operations in 2018.  The plant has an initial production capacity of two million units, expandable to four million units.

As part of the Novartis Acquisition, we also acquired a product line of high quality antigens, which are critical components of clinical diagnostic and blood screening immunoassay tests sold worldwide, which are produced through a joint business with Ortho Clinical Diagnostic.

As part of this joint business with Ortho Clinical Diagnostic, in 2015, Grifols signed a new contract with Abbott Laboratories for the supply of high quality antigens used in the manufacture of immunoassay diagnostics. This contract, with a total value of approximately $700 million, extended the supply of antigens until 2026, ensuring higher levels of recurring income in this area. In 2017, we extended our existing agreement with OraSure Technologies by five years, reinforcing our position as a flexible provider of antigens. In 2016, we obtained CE mark approval for the VITROS® HIV Combo test, developed by Grifols and Ortho Clinical Diagnostics for the early detection of HIV infection. This is an important milestone in the joint business between the two companies, in which Grifols is responsible for manufacturing the antigens for the test.

Clinical and Specialty Diagnostics

Our Q-Coagulometer™, Q-Smart™ and Triturus® analyzers remain key product lines in the clinical and specialty diagnostics product line.  In 2015, the Q-Smart™ analyzer (a mechanism for laboratories to automate and standardize hemostasis tests) was commercially launched in Latin America. We expects FDA approval for several products in our hemostasis line in 2018, including its new Q® Smart and Q® Next analyzers. In 2017, we strengthened our hemostasis line with an agreement with Beckman Coulter, a global supplier of diagnostic solutions. The exclusive, long-term agreement includes the worldwide distribution of our hemostasis instruments, reagents and consumables. The market launch for these products in Europe is expected in early 2018.

We also continue to offer a broad portfolio of hemostasis reagents in this line, including DG™-Chrom PC, a proprietary chromogenic kit for Protein C, and DG™-TT L human reagent, a liquid human thrombin for determining thrombin time.

Also within Clinical and Specialty Diagnostics, Progenika Biopharma obtained in 2015 CE marking for its first genetic diagnosis test for Familial Hypercholesterolemia (FH) using next generation sequencing technology (NGS). The division continues its efforts to broaden the Promonitor® line, used to monitor biologic drugs as sales continue in Chile, select European Union countries

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and Australia.  The Promonitor® product line includes an ELISA (enzyme-linked immunoabsorbent assay) device line also developed by Progenika to monitor patients being treated with biological medicines for rheumatoid arthritis and other chronic inflammatory diseases. In 2015, CE marking was granted for two new references of tests in the Promonitor family that enable treatment with the biological product golimumab. In 2016, we obtained CE marking for several new reference tests in the Promonitor family of products, to permit the use of a single dilution to measure quantity of drug and antibodies for a number of biological drugs, commonly used in the treatment of various inflammatory diseases, such as rheumatoid arthritis and ulcerative colitis. In 2017 the division launched the PromonitorQuick®, a point-of-care diagnostic kit that detects anti-infliximab antibodies, antibodies that appear in patients with chronic inflammatory diseases who are treated with biological drugs.

We also continue to distribute our Triturus® analyzer, an open and fully automated analyzer for ELISA tests with multi-test/multi-batch capability. As an open system, it can be used for the automatization of our autoimmunity and biological drug monitoring product lines and other products in our portfolio for which we are distributors.

In 2015, we signed an exclusive agreement for distribution of AESKU Diagnostics GmbH & Co.’s autoimmunity diagnostic products in the United States and Mexico. We also have various distribution agreements with AESKU in Chile, Italy, Portugal, Spain and the United Kingdom. In 2016, AESKU obtained FDA approval for Helios, the only fully automated platform capable of performing all immunofluorescence pipetting and reading steps in the United States, which strengthened our portfolio of products in the country.

We continue to sell the Intercept Blood System®, developed by Cerus, to inactivate pathogens in blood platelets and plasma in Spain and Mexico.

The Hospital Division

The Hospital division manufactures products used by hospitals, such as parenteral solutions and enteral nutritional fluids, which are sold almost exclusively in Spain and Portugal.  It also includes products that we do not manufacture but that we market as supplementary to the products that we do manufacture.  The Hospital division accounted for €105.6 million, or 2.4%, of our total net revenue in 2017.  We believe we are the leader in the Spanish intravenous therapy segment in intravenous solutions, with a 32% market share.

Hospital logistics and i.v. tools segments are also strategic areas for the Hospital division. With i.v. tools, we are the leaders in bringing GMP procedures and product solutions to the hospital pharmacy, increasing the safety of their compounding needs. With the hardware and software solutions offered by the Hospital logistics area, we are the market leader in Spain and Latin America in terms of offering solutions to manage the flow of medications in hospitals. During 2017, Grifols purchased an additional 40% stake in Kiro Grifols, for an aggregate 90% stake. Following the close of the fiscal year, we further reinforced the division by acquiring the U.S. technology firm MedKeeper, which develops and markets mobile and web-based technology solutions for the management of hospital pharmacies. The acquisition complements our Pharmatech line and enhances our presence in the U.S. market. See Item 5 of this Part I, “Operating and Financial Review and Prospects — A. Operating Results — Subsequent Events.”

The following table describes the principal hospital products that we manufacture, distribute or install and their respective applications:

Product Description	Main Applications
Intravenous therapy:
Intravenous fluid and electrolyte solutions. Main product groups include hypotonic solutions, isotonic solutions, hypertonic solutions and plasma volume expander solutions.	Fluid and electrolyte replacement and conduit for the administration of medicines.
Irrigation solutions.	Fluids for urological irrigation.
Intravenous mixtures. Ready-to-use intravenous mixtures of potassium, antibiotics and paracetamol.	Increases safety and efficiency by rendering unnecessary the mixing of solutions at in-hospital pharmacies.
Pharmatech:
i.v. Tools. Gri-fill® System uses sterile filtration to prepare intravenous mixtures at in-hospital pharmacies. Misterium™ are modular clean room facilities we sell in the United States and IBAM. Phocus RX® is a specific software and hardware tool for guiding the manual preparation of intravenous mixtures,	Improves safety of hospital pharmacy preparation procedures by assuring sterility, traceability and user safety.

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including cytotoxic drugs. The Kiro Oncology automation system is designed specifically for the preparation of cytotoxic drugs.
Hospital Logistics. Includes products such as: packaging instruments; software programs, including our own BlisPack®; and logistic dispensing systems, including Pyxis® and Kardex®, for inventory control.	Used in the logistical organization of hospital pharmacies and warehouses, in the preparation of unit dosing and in hospital management, admissions and accounting.
Nutrition:
Dietgrif® enteral liquid diets. Oral diets with all the requirements for balanced nutrition. Different diets include standard, standard fiber, polypeptidic, hyperproteic and energetic.	For patients who are unable to eat enough to maintain a nutritious diet, administered through feeding tubes as well as orally.
Probiotics. Special complementary diets composed of live microorganisms.	Improves gastroenterology conditions that are the result of a lack of intestinal microflora.
Medical Devices: Disposable sterile therapeutic medical products.	The products have therapeutics uses in urology, radiology, cardiology, neurology hemodynamics and anesthesia.

The production, marketing or sale of our various Hospital division products are subject to prior registration with authorities of the relevant jurisdictions.  We have close to 187 licenses for our Hospital division products registered in 39 countries throughout Europe, Latin America, Africa, Canada and the United States.  Our sales representatives sell primarily to pharmacy, nutrition and gastroenterology units in hospitals and other units in hospitals that use our medical devices, using our own distribution network and external distribution organizations in some Latin American markets.

As our Hospital division generates most of its revenue in Spain (68% of net revenue in 2017), it has been impacted by budgetary constraints in the Spanish health sector. In order to address these challenges more effectively, in 2014, we reorganized our commercial structure in Spain, by focusing on a more specialized, integrated model, both geographically and functionally. As a result of this reorganization, sales growth in Spain in 2017 was stable. We also continue to promote international expansion of this division. The most important milestone of 2017 was the FDA approval for Grifols 500 ml normal saline solution in polypropylene bags (0.9% sodium chloride) that reinforces the global expansion of the division and marks an important step forward.

The Hospital division has established a new commercial strategy to promote Pharmatech’s presence in Latin America through the use of specialist distributors in this sector, while also maintaining a direct sales effort.

Intravenous Therapy

We manufacture and distribute intravenous solutions, primarily in Spain. In 2017, the FDA approved Grifols’ 500 ml normal saline solution in polypropylene bags (0.9% sodium chloride), manufactured in our Murcia (Spain) plant, allowing the division to market this product in the U.S. market. The FDA approval also supports the group’s self-sufficiency, since the product will also be used in Grifols’ U.S. plasma collection centers to restore the circulatory volume in donors. The FDA approval reinforces the division’s global expansion and marks an important step forward that opens up the possibility of new future authorizations for other products manufactured in the Murcia and Barcelona facilities. Moreover, it bolsters Grifols’ global expansion efforts and confirms its strategy of fostering the complement of products and services among its divisions. In addition, we have increased our focus on manufacturing ready-to-use intravenous mixtures for third parties. We believe this approach will contribute to the Hospital division’s geographic diversification and allow us to maximize productive use of the Parets facility.

We are continuing to develop ready-to-use potassium solutions in polypropylene packaging. We have added to our portfolio of large volume parenterals a new system of needle-free Polypropylene bags, an added value product addressed to avoid injuries to health care practitioners.  Both Parets and Murcia, were audited by the FDA in June 2015, without any observation. We are also in the process of developing intravenous paracetamol for sale in Latin American countries and intravenous ibuprofen for sale both in Ibero American countries under the Grifols brand and through third-party distributors in Europe and the U.S. We have signed an agreement with Henry Schein for 0.9% Sodium Chloride distribution in the United States.

We continue to consolidate third-party manufacturing contracts. In 2015, and in line with the strengthening of the activity in third-party manufacturing contracts, the dossier for an analgesic in polypropylene bag for the North American market was submitted to the FDA. Development work continues on a ready-to-use, non-steroidal anti-inflammatory in bag presentation for Europe and the United States.  In 2017, we signed new third-party manufacturing contracts, consolidating our activity in this area at the same time that we obtained FDA authorization to manufacture a prediluted antiplatelet in the U.S. for a Canadian firm.

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Pharmatech: Hospital Logistics and i.v. Tools

We provide logistic solutions to hospital pharmacies by selling products related to the logistical organization of pharmacies and warehouses of hospitals, including packaging instruments and software programs for hospital management, admissions and accounting departments.  Most of these Hospital Logistics products are manufactured by third parties. However, our portfolio includes some products manufactured by Grifols such as StocKey®, an automated Kanban system designed to optimize hospitals’ healthcare material restocking processes, StockKey RFID®, a radiofrequency identification cabinet for the storage of high value medical devices, such as prosthetics and coronary stents, and BlisPack®, a system designed and manufactured by us to automate the cutting of prescription pill blister packs and the electronic identification of specific drugs for individual patients to be used by hospitals.

We also manufacture and distribute a complete portfolio of tools used in connection with the preparation of specific intravenous medication, which we refer to as i.v. Tools. We commercialize Misterium™, a cleanroom we designed to order and install on site to customer specifications. We have expanded our Misterium™ cleanroom solutions with the incorporation of airinspace®, a medically effective air and surface decontamination system. As the exclusive distributor of these products in the United States, Grifols is able to offer a broad portfolio of products for U.S. hospital pharmacies and pharmacies specialized in master formulas.

PhocusRx is a system of non-invasive cameras, used in many hospital pharmacies in the United States to validate and document the process of preparing intravenous mixtures. In 2016, this system was adopted at the Memorial Sloan Kettering Cancer Center in the United States and in 2017 the sales efforts have enabled the integration of the Phocus Rx® workflow management systems for hospital pharmacies in three of the five main U.S. hospital information systems.

We are managing the global introduction of the Kiro Oncology robot, which automates the preparation of intravenous medication for chemotherapy to reduce the risk that health professionals will come into contact with these hazardous products. We expect that the Kiro Oncology robot will be one of the principal drivers of i.v. Tools product line growth in the near future. This system enables us to offer to hospital pharmacies worldwide what we believe to be the most complete portfolio of solutions for controlling intravenous medication preparation processes.  In 2015, Kiro Grifols obtained FDA marketing approval in the United States for the Kiro Oncology system. The Ann & Robert H. Lurie Children’s Hospital in Chicago was the first center in the United States to adopt the system, and during 2016, Smilow Cancer Hospital at Yale became our second reference site in this market.

Nutrition

We develop and distribute enteral nutrition products, including accessories such as feeding tubes and nutritional bags, for sale in the Spanish market. During 2016, the main driver in the Nutrition segment continued to be our distribution of nasogastric probes manufactured by Halyard. In 2017, we launched a new Diet Grif container that is more adapted to market needs, and relaunched the enteral nutrition line to position it as a modern and innovative brand within the clinical nutrition sector.

Medical Devices

We also sell other medical devices, such as disposable sterile therapeutic medical products for urology, radiology, hemodynamics and anesthesia.  All of these products are manufactured by third parties and complement our portfolio of Hospital division products.  We are increasing our strategic efforts to sell medical devices that complement our portfolio of Bioscience division products.  We performed well in 2016 thanks, in part, to Brazilian sales and efforts to intensify our contacts to incorporate new distribution lines to the current portfolio.

Research and Development

Research and development is a significant aspect of our business. Our principal research and development objectives are (i) to discover and develop new products, (ii) to research new applications for existing products and (iii) the improvement of our manufacturing processes to improve yields, safety and efficiency. Research and development spending moved from €197.6 million in 2016 to €288.3 million in 2017. Recurring research and development spending, excluding the specific impairment of Aradigm’s assets, was €223.7 million in 2017. See Note 11 to our audited consolidated financial statements included in this annual report on Form 20-F for more detail. In addition, as of December 31, 2017, we had 963 scientists and support staff dedicated to research and development.

We have over 70 years of successful innovation history. For example, we developed a unique fractionation design that reduces the risk of contamination, reduces maintenance costs and increases the amount of product extracted per liter of plasma. We also developed the first centrifugation unit for the automated cleaning of blood cells. In addition, we were one of the first fractionators to conduct double viral inactivation processes for Factor VIII and have designed and implemented a new process for the sterile filling of vials that reduces exposure to potential contaminants as compared to other existing processes. Further, we have developed a

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nanofiltration method of viral inactivation for our IVIG, Alpha-1 PI, and ATIII products. As a result of our continuing investment in research and development, we believe that we are well positioned to continue as a leader in the plasma-derived therapies industry.

Bioscience Division Initiatives

The Talecris acquisition complemented our substantial Bioscience division research and development project portfolio, which we believe will ensure the quality of our research activity in the long term.

We have a number of patents and research and development projects in our Bioscience division underway, 26 of which are in the clinical development phase.  The following table reflects the total number of research and development projects in our Bioscience division by development phase as of the end of the last three years.

	As of December 31,
Development Phase	2017	2016	2015
Discovery	14	16	21
Preclinical	12	14	22
Clinical	26	27	26
Post Commercialization Studies	10	9	12
Rest of projects	18	20	22
Total Bioscience Research and Development Projects	80	86	103

The table below presents the most important of our research and development projects:

Product Candidate	Therapeutic Area	Product Type	Potential Use	Development Phase
Albumin and IVIG	Alzheimer’s	Plasma-derived	Alzheimer’s disease	Phase III (completed in Q1 2018)
Antithrombin	Intensive Care	Plasma-derived	Cardiovascular surgery	Phase II for Anbinex® (completed in June 2011) Phase II for Thrombate® III (completed in Q1 2018)
Fibrin glue	Surgical bleeding	Plasma-derived	Vascular, organ and soft-tissue surgery	Licensure (November 2017)

AMBAR Study.  We are continuing our ongoing research into possible treatments for Alzheimer’s disease. The Alzheimer Management by Albumin Replacement, or AMBAR, study is a multicenter trial that complements two previous trials and involves combining therapeutic plasmapheresis with albumin and IVIG in different intervals and in varying doses. Since the AMBAR project is mainly based on albumin, the study also includes a treatment arm with albumin alone in order for both approaches, the combination of  albumin plus IVIG, and albumin alone, to be covered. Therefore, we are conducting a Phase III clinical trial to demonstrate the efficacy of plasmapheresis with Albutein ® (5% and 20%) combined with Flebogamma ® DIF 5%, or Albutein ® alone, for improving the cognitive status of patients with Alzheimer’s disease. The study is being conducted in collaboration with hospitals in Spain and in the United States. We received approval for our study from both the Spanish Agency for Medicine and Health Products (Agencia Española del Medicamento y Productos Sanitarios) and the FDA, and more than 340 patients have enrolled. We will complete the trial in 2018.

We incurred costs in the amount of €10.1 million, €11.4 million and €10.8 million in connection with this project in 2017, 2016 and 2015, respectively. We hold significant granted patents and patent applications on the production of albumin and IVIG as well as on the combination of plasma exchange with albumin replacement for the treatment of Alzheimer’s disease.

Antithrombin. In 2008, we initiated research into the clinical efficacy of antithrombin for use on cardiac surgery patients with cardiopulmonary bypass. In June 2011, we concluded Phase II clinical trials involving the use of our antithrombin Anbinex. In June 2014, we began a second Phase II trial for the same indication using Thrombate III. Enrollment was completed in January 2018. We incurred costs in the amount of €4.2 million, €3.8 million and €2.0 million in connection with this project in 2017, 2016 and 2015 respectively.

Fibrin Glue.  We began clinical trials into the safety and efficacy of the use of fibrin glue as a supportive treatment for the improvement of hemostasis in vascular, organ and soft-tissue surgery in 2008. In 2014, we completed a clinical trial in the European Union for the use of fibrin glue in vascular surgery. Three additional clinical trials were performed: (i) a Phase III clinical trial in the United States for the use of fibrin glue in solid organ surgery; (ii) a Phase III clinical trial in the United States for the use of fibrin glue in soft-tissue surgery; and (iii) a Phase III clinical trial for the use of fibrin glue in vascular surgery in the United States. All of the

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U.S. clinical trials for fibrin glue were completed in 2015. Marketing authorization approvals were received from the FDA and EMA in November 2017.

We incurred costs in the amount of €2.2 million, €7.8 million and €16.8 million in connection with this project in 2017, 2016 and 2015, respectively. We hold significant granted patents on the fibrinogen and thrombin production processes.

Other Bioscience research and development projects undertaken during 2017 included:

·development of a high concentration immunoglobulin for subcutaneous administration;

·clinical programs to evaluate new indications of Flebogamma® DIF 5% and Gamunex®-C;

·Alpha-1 PI. A liquid formulation of Prolastin®- C is expected to provide an important advancement in manufacturing efficiency as well as improved patient convenience. After the clinical trial was completed, FDA approval was received in September 2017;

·a clinical study to evaluate the effects of the prolonged administration of human albumin on cardiovascular, hepatic and renal function in patients with advanced cirrhosis and ascites.  One study involves the administration of Albutein® 20% and is being conducted at six Spanish hospitals; and

·a study designed to evaluate the effects of plasma exchange on the functional capacity of serum albumin on cerebral, circulatory and renal dysfunction.

All clinical trials involve risks and uncertainties. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during or as a result of preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. For a discussion of these unforeseen events, see Item 3. of this Part I, “Key Information — D. Risk Factors —Risks Relating to Our Business — We may not be able to commercialize products in development.” Upon the completion of each of the development stages we evaluate the results achieved as compared to the objectives pursued. Each of the key projects listed above has met our expectations with respect to results at the various development stages and we expect to move forward with the development process for each.

We believe that our current liquidity is sufficient to fund the ongoing costs of our key projects listed above through their completion as well as our other research and development initiatives.

Diagnostic Division Initiatives

Research and development in the Diagnostic division is focused on the development of recombinant proteins and in vitro diagnostic reagents and equipment, principally for pretransfusional testing, hemostasis diagnosis and biological drug monitoring. It is based on enzymatic and immunologic reactions and molecular genetic testing, using different technologies as RBC agglutination, latex particles agglutination, solid phase capture, lateral flow and chromogenic substrates. The company has also been involved in research and development activities related to NAT testing of blood and plasma with molecular tests, and during 2017 it obtained FDA approval for a new genetic test to detect alpha-1 antitrypsin deficiency.

The principal research and development projects that we are undertaking in this division are: (i) development of recombinant proteins for the manufacture by third parties of finished kits, mainly for blood virus screening focused on HIV and hepatitis diagnosis, and also for the manufacture of Grifols finished kits for hemostasis testing as well as for the Immunohematology line of products; (ii) red blood cell typing tests and blood compatibility testing through the use of gel technology, liquid reagents and our patented Multicard device as well as the corresponding automated platforms (the division obtained  a CE Mark for the Erytra Eflexis analyzer to automate transfusion test based on gel cards) (iii) genetic detection of red blood cell and platelet antigens; (iv) the development of an automatic ELISA platform and a broad menu of drug and anti-drug ELISA kits; and (v) the development of a complete range of hemostasis reagents and automatic equipment; (vi) development of finished kits for NAT testing for infectious disease, including Zika virus detection; for which a BLA has been submitted to the FDA; and (vii)  development of further multiplexed tests based on NAT technology.

Additionally, the Diagnostic division is developing medical devices for the extraction and storage of blood components. In 2017, we received the marketing authorization approval from Spain CE Mark Notified Body for Leucored Platelet Kit. The principal products under development were phthalate (DEHP)-free blood bags and Leucored RC bags soft filter.

Hospital Division Initiatives

The research and development team in the Hospital division primarily focuses on developing complementary products and on improving the safety and efficiency of existing products. The principal projects currently under development are a flexible plastic

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container closure system for biological products, 0.9% Sodium Chloride in Fleboflex Luer container for Kiro Fill ®, an anticoagulant solution, a nonsteroidal anti-inflammatory solution (NSAID) and a new version of the Gri-fill ® system. During 2017, we received FDA marketing authorization approval for the 500ml physiological saline solution (0.9 % sodium chloride) manufactured at the Murcia facility and for a new set (peristaltic set) for the Gri-fill ® system in Europe and the U.S. In the fluid therapy market, work continues on the study of the stability of various ready-to-use mixtures in polypropylene packaging, in order to increase the range of mixtures available for hospital use. Additionally, the Hospital division is developing ready-to-use mixtures for third-party distribution.

The Hospital division is also researching and developing new software and devices using state-of-the-art technology, such as cloud systems, mobile apps and Radio-Frequency Identification (RFID), to improve the workflow and productivity in the IV compounding areas, traceability of the preparations and pharmaceutical products and improving the medication workflow as a whole. Other field of development is targeted to the traceability of the high cost implants and medical devices.

As part of the AMBAR study, the Hospital division is collaborating on the development of special devices and containers specifically designed for the procedures and protocols of the study. The Hospital division is also collaborating on the manufacturing of the cuvette of Q-Coagulometer for the Diagnostic division.

In 2017, the Kiro-Grifols joint venture became a subsidiary of Grifols. We now control the research and development activities of the entity and intend to focus on compounding procedures, preparation technologies and cleanroom development to create new compounding automated platforms that will be introduced in the coming years.

The Hospital division is collaborating with Bioscience Division in development of products such as plastic holder for syringes of Fibrin Glue, among others.

Other Initiatives

In addition, we are increasing our research and development activities in new fields. We conduct these activities through the creation of joint ventures participated in by Grifols Innovation and New Technologies Ltd (GIANT), established in 2016, through agreements to use patents owned by third parties and through selective acquisitions.

Our acquisitions of Araclón and VCN Biosciences in 2012 expanded our research and development capabilities in fields outside of our traditional business segments. Araclón is dedicated to finding solutions that promote new diagnostic and therapeutic approaches to Alzheimer’s disease. Araclón is working on the validation of an early diagnostic kit and the development of a vaccine to combat Alzheimer’s disease in the asymptomatic preclinical stage. The vaccine has passed the animal experimentation stage and a Phase I clinical trial in humans has been completed. In 2017 Araclón obtained approval by the Spanish Drug Regulatory Agency (Agencia Española del Medicamento y Productos Sanitarios) of a Phase II trial of the AB40 vaccine in Alzheimer disease patients and started the recruitment. VCN Biosciences is investigating and developing new therapeutic approaches based on oncolytic adenoviruses to treat tumors for which there is currently no effective treatment. Its most advanced project focuses of the treatment of pancreatic cancer. The Spanish Agency for Medicine and Health Products (Agencia Española del Medicamento y Productos Sanitarios) approved two Phase I clinical trials for this project and VCN Biosciences began recruiting patients for the Phase I trials in the first quarter of 2014. In 2017 VCN obtained approval by the Spanish Drug Regulatory Agency of another Phase I/II trial of VCN-01 in pediatric patients with Retinoblastoma.

In 2015 we initiated a partnership with Alkahest, acquiring 47.58% of the equity of the company, to develop plasma-based products for the treatment of cognitive decline in aging and other central nervous system (CNS) disorders, including Alzheimer’s. In 2017 Alkahest obtained approval by the FDA of a Phase I/II clinical trial of a plasma fraction (GRF-6019) in Alzheimer Disease patients.

In 2016, we acquired 30% of the equity of AlbaJuna Therapeutics, a spin-off company from the IrsiCaixa AIDS Research Institute, promoted jointly by “la Caixa” Foundation and the Department of Health of the Government of Catalonia, and established to promote the pre-clinical and clinical development of monoclonal antibodies that neutralize the action of HIV in the body while increasing the activity of the natural killer cells that have the task of destroying infected cells.

In 2017 we acquire a 43.96% equity stake in GigaGen Inc., a pre-clinical biotherapeutics company based in San Francisco (California) specialized in the research activities to develop recombinant plyclonal immunoglobulin therapies derived from human B cells for the treatment of human diseases

Seasonality

Our businesses are not significantly affected by seasonal trends.

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Raw Materials

The cost of plasma, the key raw material used in the production of plasma-derived products, slightly increased as compared to 2016, due to the investment plan to expand plasma collection centers in the United States to support growing demand for plasma proteins as well as the trend towards greater incentives to reward donors for their time. We continue to monitor the efficiency of our plasma collection platform and have concentrated all of our plasma testing into our two laboratories in Austin, Texas.

In March 2018, we entered into an agreement to acquire 100% of Haema AG, a German based pharmaceutical company that owns 35 collection centers throughout Germany. We believe this acquisition, subject to the authorization by the applicable antitrust authorities among other closing conditions, will diversify the origin of our plasma and guarantee access to raw material for the future. See more details relating to the acquisition in Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures.”

The principal raw materials for our intravenous therapy products are plastic and glass bottles, which we purchase from various European suppliers.

Marketing and Distribution

We currently sell Bioscience, Diagnostic and Hospital products to hospitals and clinics, GPOs, governments and other distributors in over 100 countries.

In the United States, the sales model is complex, with many intermediaries, requiring Grifols to execute multi-faceted arrangements for the distribution of our products.  Sales of finished goods are distributed through various channels such as distributors, wholesalers, specialty pharmacies, home health care companies, clinics, hospitals, government entities and directly to physician offices.  Payers and purchasers also control access to products, requiring separate negotiations with payers and GPO’s. GPO’s are entities that act as purchasing intermediaries for their members, which are primarily hospitals.  GPO’s negotiate the price and volume of supplies, equipment and pharmaceutical products, including plasma derivatives, used by their members.

We market our products to healthcare providers and other decision-makers, such as those in hospitals, through focused sales presentations.  Although price and volume are negotiated through contractual agreements with intermediaries, demand for our products is generated through promotional efforts by Grifols’ sales representatives.  In the case of GPO’s, the actual sales are made to each GPO’s authorized distributor(s) at the contract price, and the distributor then sells the products to that GPO’s members.  We promote our products directly to the GPO’s members.  For safety and post-sale service reasons, the distributor is required to provide us with the specifics of the ultimate delivery to the client.

The sales, marketing and distribution process is different in Europe, where the bulk of sales are generally made directly to hospitals. We have developed long-standing relationships with major hospitals in most of our European markets, and we believe that hospitals are loyal customers that recognize the high quality and safety of our products, our reliability as a supplier and the strong product expertise and service provided by our sales representatives.  Due to the nature of our customer base and the prevalence of repeat sales in the industry, we market our products through focused sales presentations rather than by advertising campaigns.

Sales to Eastern Europe, the Middle East and some Asian countries are made mostly by third parties outside of our sales network.  Our sales in Latin America are made mainly by our sales network.

Sales Representatives

We require our sales representatives to be able to highlight the technical differences between our products and those of our competitors.  This skill requires a high degree of training, as the salesperson must be able to interact and discuss product differences with doctors, pharmacists and other medical staff.  Sales representatives call on office-based healthcare providers and hospital-based healthcare providers, departmental heads, purchasing agents, senior hospital directors, lab directors and pharmacy managers.  We compensate our sales representatives by means of a fixed salary and a bonus component based on sales.  We divide our sales efforts along the lines of our main product categories.  Our sales personnel are primarily located in Europe and the United States, but we also have sales personnel in Latin America and Asia-Pacific.

In our Bioscience division, we utilize mixed sales units comprised of both marketing and sales personnel and product line-specific sales units for immunology & neurology, pulmonary and coagulation factors.

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Advertising

We do not conduct any widespread advertising.  Instead, we participate in medical conferences and fairs and occasionally publish advertisements in medical journals and trade magazines.

Distribution

We believe that having our own distribution network staffed with highly trained personnel is a critical element of a successful sales and marketing effort.  Through this network, we are able to provide high-quality pre- and post-sales service, which we believe enhances brand recognition and customer loyalty.  Our distribution network is experienced in the proper handling of our products and allows us to know where our products are located, enabling us to act quickly in the event of a suspected problem or product recall.

Our distribution network personnel are located in Europe, Latin America, the United States and Asia-Pacific and handle the distribution of our biological medicine, diagnostic and other medical products as well as goods manufactured by other premier healthcare companies that complement our own products.

During 2017, we distributed the majority of our products through our own distribution network.  In some cases, particularly in the field of Diagnostics, we distribute products through marketing partners and third-party distributors.  We have a direct presence in 30 countries and we carefully select distributors in the countries were we do not have a direct presence.  We have a responsive, effective logistics organization that is able to punctually meet the needs of hospital centers and other customers throughout the world.

Our sales, marketing and distribution network included 1,464 employees as of December 31, 2017, which included 1,227 sales and distribution personnel and 187 marketing employees.

Each of our commercial subsidiaries is responsible for the requirements of the local market.  It is our goal for each commercial subsidiary to be recognizable as one of our companies by its quality of service, ethical standards and knowledge of customer needs.  Strong local knowledge enables us to build and maintain long-term relationships with customers to earn their trust and confidence.

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Patents, Trademarks and Licenses

Patents and Trademarks

Through our patent ownership, co-ownership and licensing, we seek to obtain and maintain intellectual property protection for our primary products.

As of December 31, 2017, we owned 2,701 patents and patent applications in various countries throughout the world, of which 584 are in the final application process. In some countries, these patents grant a 20-year protection period. 1,036 of these patents are set to expire in the next ten years. As of December 31, 2017, we also owned 3,148 trademarks in various countries throughout the world, of which 112 are in the final application process. In addition, we co-own certain patents and patent applications with third parties, including patent rights co-owned with Novartis following the Novartis Acquisition.

We maintain a department with personnel in Spain and in the United States to handle the patent and trademark approval and maintenance process and to monitor possible infringements.

Plasma Derivative Products

As of December 31, 2017, we owned 1,746 patents and patent applications related to plasma derivatives, including 824 in Europe, 148 in the United States and Canada and 774 in the rest of the world. The most important of these patents relate to:

·the process for the production of virus-inactivated human Gamma Globulin G;

·use of therapeutic human albumin for the preparation of a drug for the treatment of patients suffering from cognitive disorders;

·the process for removing viruses in fibrinogen solutions; and

·the preparation of plasminogen.

Hospital and Diagnostic Products

As of December 31, 2017, we owned 941 patents and patent applications related to our Hospital and Diagnostic products in Europe (528), the United States and Canada (109), and in the rest of the world (304).  The most important of these patents relate to the:

·Gri-fill® System, a process for the sterile filling of flexible material bags;

·BlisPack®, a blister handling machine;

·Erytra Eflexys®, a mid-sized instrument to perform pre-transfusion compatibility tests using DG Gel® technology; and

·Composition for use as abnormal coagulation control plasma in in vitro assays.

As of December 31, 2017, we owned 14 patents and patent applications related to other areas of the business, including eight in Europe, three in the United States and Canada and three in the rest of the world.

Licenses from Third Parties

We license certain intellectual property rights from third parties, including Bayer, Singulex and Hologic. Under a licensing agreement with Bayer, Talecris was granted a royalty-free, worldwide and perpetual license covering certain intellectual properties not acquired by Talecris in connection with its formation transaction. We assumed this licensing agreement in connection with the Talecris acquisition. Singulex granted us an exclusive worldwide license under certain intellectual property rights for the use and sale of certain products and services for blood donor and plasma screening. Pursuant to an intellectual property license with Hologic, we obtained a fully paid-up license to certain of Hologic’s intellectual property for use in the NAT Donor Screening Unit.

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Licenses from Government Authorities

Government authorities in the United States, at the federal, state and local level, and in other countries throughout the European Union, Latin America, Asia and elsewhere, through licenses, approvals, reviews, inspections and other requirements, extensively regulate the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, promotion, storage, advertising, distribution, marketing and export and import of healthcare products such as those that we collect, manufacture, sell or are currently developing.

For example, in order to sell our plasma derivative products we must hold appropriate product licenses from applicable governmental authorities. We have 683 hemoderivative product licenses registered in 93 countries, which include the licenses we hold from the FDA for the sale in the United States of IVIG, A1PI, albumin, Factor VIII, Factor IX, ATIII and PTC. The production, marketing and sale of many of our Diagnostic division products are subject to the prior registration of such products with the relevant authorities of the applicable jurisdictions. We have over 2,323 diagnostic product licenses registered in a total of 71 countries in Europe, the United States, Canada, Latin America, Africa and Asia. With respect to our various Hospital division products, we have close to 187 licenses for our Hospital division products registered in 39 countries throughout the European Union, Latin America and the United States.

Governmental oversight extends to the various facilities involved in our operations. For example, our Parets and Murcia facilities are subject to applicable regulations and standards of the European health authorities. With respect to oversight by the FDA, our Instituto Grifols Bioscience plant at our Parets facility has been registered with the FDA since 1995, and our other manufacturing facilities maintain FDA registration, and all are subject to FDA standards. We lease most of our plasma collection centers as well as our main laboratory facility located in Austin, Texas, and maintain licenses with the appropriate regulatory authorities, including the FDA, for all of these locations.

For more information on government licenses and regulation, see “— Principal Activities” above and “— E. Regulatory Matters” below.

Regulatory

For detailed information regarding the regulations applicable to our business, see “— E. Regulatory Matters” below.

Insurance Coverage

General and Product Liability

We have a program of insurance policies designed to protect us and our subsidiaries from product liability claims. Effective May 1, 2017, we have product liability insurance coverage for up to $220 million per claim and in annual aggregate for products manufactured in all of our facilities and for third-party products we sell. This policy expires on May 1, 2018. We have elected to self-insure the first $38.5 million per claim and in annual aggregate of our product liability policy through the purchase by one of our subsidiaries of such portion of the insurance policy. See “— Self-insurance” below.

Our master liability program also protects us and our affiliates from certain environmental liabilities arising in those countries in which our subsidiary companies have operations, except in the United States. This risk is covered up to a maximum of $220 million per claim and in annual aggregate.

Biomat USA and Talecris Plasma Resources maintain a separate liability insurance policy. The policy covers their plasmapheresis business activities and expires on May 1, 2018. The maximum amount of coverage for liability claims under the policy is $10 million per claim and in the annual aggregate. In addition, we have general liability coverage for up to $220 million for those two subsidiaries.

Property Damage and Business Interruption

Our property damage and business interruption insurance program covers us and our subsidiaries (including our United States subsidiaries). This insurance program, which expires on May 1, 2018, covers damages suffered by plants and buildings, equipment and machinery. Under the current terms, the insurer will cover damages to our facilities produced by fire, smoke, lightning and explosions, among others, for up to $1.5 billion per occurrence. It also covers material damages produced by flooding, for up to €100 million per claim and in the annual aggregate.

In addition, this policy covers loss of profit for a period of 36 months with a deductible equivalent to up to five business days of lost profits. Pursuant to the loss of profit benefit, in the event that any or all of our plants stop production due to an event not excluded under the policy, the insurer covers fixed expenses, in addition to net profits we did not earn during the term of coverage.

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In addition, this policy covers property damage and business interruption caused by an earthquake in California, up to a limit of $20 million per year.

We also have a transit and inventory insurance program, which covers damages to raw materials, supplies, semi-finished products and finished products for up to $25 million per claim for transit and $850 million for inventory in annual aggregate.

Self-insurance

We are self-insuring part of the risks described above through the purchase of a portion of the relevant insurance policies by Squadron Reinsurance Ltd., one of our wholly owned subsidiaries. We self-insure the first $38.5 million per claim per year of our product liability policy, the first €200,000 per loss for property damage and the first ten days of lost profits, the first $27,000 per claim for transit losses, the first €200,000 per claim for inventory losses and $15 million for damages caused by an earthquake in California. These amounts are in excess of the deductibles for each of the policies that make up our insurance programs.

C.Organizational Structure

Grifols, S.A. is the parent company of the Grifols Group, which was comprised at December 31, 2017, of 56 companies.  Subsidiaries in which Grifols, S.A. directly or indirectly owned the majority of equity or voting rights have been fully consolidated.  In addition, there were nine companies that were accounted for using the equity method, because Grifols, S.A. owned between 20% and 50% of its share capital and had no power to govern its financial or operating policies.

See Notes 1 and 2(b) to our audited consolidated financial statements included in this annual report on Form 20-F for details of our consolidated and non-consolidated companies.

D.Property, Plant and Equipment

Our headquarters is located in Barcelona, Spain.  As of December 31, 2017, we owned or leased facilities in six countries.  We currently own or lease manufacturing facilities in 10 sites in nine different locations, three of which have plasma fractionation capabilities.  The table below shows the geographic location and business purpose of our principal properties as of December 31, 2017.

Location	Facility	Own/Lease (2)	Business Purpose
Parets del Vallès, Spain	Industrial Facility One Parets	66% owned; 34% of the property is leased from a third party	Plasma fractionation Manufacture of plasma derivatives & division support activities
	Industrial Facility Two Parets	80% owned; 20% of the property is leased from a third party	Manufacture of Diagnostic and Hospital products
	Industrial Facility Three Parets	63% owned; 37% of the property is leased from a third party	Plasma storage & other operating activities
Los Angeles, California, USA	Industrial Facility USA	93% owned; 7% of the property is leased from a third party	Plasma fractionation Plasma purification Manufacture of plasma derivatives
Clayton, North Carolina, USA	Clayton Facility	Own	Plasma fractionation Manufacture of plasma derivatives
Emeryville, California, USA	Emeryville Facility	81% owned; 19% of the property is leased from a third party	Manufacture of Diagnostic products
City of Industry, California, USA	City of Industry USA	Lease	Plasma storage

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Murcia, Spain	Industrial Facility Murcia	82% owned; 18% of the property is leased from a third party	Manufacture of Hospital products
Fribourg, Switzerland	Industrial Facility Switzerland	Lease	Manufacture of Diagnostic products
Melbourne, Australia	Industrial Facility Australia	Own	Manufacture of Diagnostic products
Austin, Texas, USA	Plasma Testing Lab	Lease	Plasma testing
San Marcos, Texas, USA	Plasma Testing Lab	Own	Plasma testing
San Diego, California	San Diego Facility	79% owned; 21% of the property is leased from a third party	Manufacture of components of the TMA amplified NAT kits
Dublin, Ireland	Global Operations Center	Own(1)	Operating activities related to the Bioscience division
Sant Cugat del Vallès, Spain	Headquarters	Lease	Headquarters
Campo Largo, Curitiba, Brazil	Industrial Facility Brazil	Own	Manufacture of Diagnostic products

(1)We hold a 999 year leasehold interest in the property.

(2)Lease percentage based on property size.

Plasma Fractionation Plants

Our plasma derivative products are manufactured at our Clayton, Los Angeles and Parets facilities.  All of our fractionation facilities have FDA and EMA certification.  The Spanish and American facilities currently have an aggregate fractionation capacity of approximately 12.5 million liters of plasma per year, and this capacity is sufficient to cover our current production needs.

The Parets facility has a fractionation capacity of 4.3 million liters per year and a unique design that separates the maintenance area from the clean areas required for the fractionation and purification procedures.  This design, which we developed in house, minimizes the risk of contamination and reduces maintenance costs.  In addition to licenses from the European Union and other authorities for the production of various plasma derivative products, the Parets facility is licensed by the FDA for the production of albumin and IVIG.  We are one of the few European plasma derivatives plants to be licensed by the FDA.  In addition to the plasma fractionation facilities, the Parets facility also has energy generation, research and development, packaging and storage facilities for the Bioscience division and manufacturing for the Hospital and Diagnostic divisions.  The Parets facility holds ISO 14000 and ISO 9001 certifications for its parenteral solutions and diagnostic manufacturing facilities. In addition, the Clayton facility in North Carolina holds the ISO 14001 certification by TÜV Rheinland Iberica Inspection, Certification & Testing S.A. The ISO 14001 certification recognizes excellence and continuous improvement in environmental performance. The scope of the certification includes research, development, production and quality control of pharmaceutical specialties derived from human plasma at the Grifols Clayton facility.

We acquired our Los Angeles facility in July 2003, in connection with our acquisition of Alpha’s plasma fractionation business.  We subsequently made significant capital investments in the facility, including the construction of purification and aseptic filling areas for coagulation factors, IVIG and albumin.  The Los Angeles facility is subject to regulation by the FDA and it has a fractionation capacity of 2.4 million liters per year

As a result of the Talecris acquisition, we acquired the Clayton facility.  Since the acquisition, the Clayton facility has benefited from significant capital investment, including compliance enhancements, general site infrastructure upgrades, capacity expansions and new facilities, such as its chromatographic purification facilities and its high capacity sterile filling facility.  The Clayton facility is one of the world’s largest fully integrated facilities for plasma-derived therapies, including plasma receiving, fractionation, purification, filling/freeze drying and packaging capabilities, as well as freezer storage, testing laboratories and a cGMP pilot plant for clinical supply manufacture.  We completed construction and received FDA approval of the new Clayton fractionation

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plant in 2014, which expanded our fractionation capacity at Clayton to approximately six million liters per year, taking its fractionation capacity to 7.2 million liters per year. In 2015 and 2016, we operated our two Clayton fractionation facilities while transitioning all fractionation to the newly constructed one. The transition of all significant production was successfully completed during 2016. We are currently working on a new fractionation plant with 5.9 million liter capacity per year. We expect it will be in operation in 2022.

Global Operations Center

In the last quarter of 2015, we officially opened a global operations center for our Bioscience division. The new facilities, located in Dublin, Ireland, occupy 22,000 square meters. The new facility centralizes decision-making with regard to commercial policy, R&D policy and supply chain global management. It houses Bioscience’s global logistics and distribution activities; warehousing of plasma, intermediate paste and finished product, labelling, packaging and final conditioning of the product; as well as regulatory and quality activities relating to the supply of plasma and plasma derivatives. It also centralizes our treasury function and acts as our point of access to the capital markets.

We are currently building an albumin purification and filling plant that we expect will be in operation in 2021.

E.Regulatory Matters

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, promotion, storage, advertising, distribution, marketing and export and import of healthcare products such as those we collect, manufacture, sell or are currently developing.  The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.  The following is a summary of the overall regulatory landscape for our business.

United States Government Regulation

In the United States, the FDA regulates drugs, biologics, plasma collection and medical devices under the FDCA and, as applicable, the Public Health Service Act, or PHS Act, and their implementing regulations.  Failure to comply with the applicable FDA requirements at any time during the product-development process, approval process or after approval may result in administrative or judicial sanctions.  These sanctions could include, as applicable, the FDA’s imposition of a clinical hold on trials for drugs, devices or biologics, refusal to approve pending applications, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution or any combination of these sanctions.  Any agency or judicial enforcement action could have a material adverse effect on us.

The BLA (Biologics License Application) Approval Process

Drugs that are also biological products, such as our plasma derivative products IVIG, A1PI, Factor VIII and albumin, and also certain in vitro diagnostic products associated with testing blood and blood components, must also satisfy the requirements of the PHS Act and its implementing regulations.  In order for a biological drug product, or for these in vitro diagnostic tests, to be legally marketed in the United States, the product must have a BLA approved by the FDA.

The steps for obtaining FDA approval of a BLA to market a biological product in the United States include:

·completion of preclinical laboratory tests, animal studies and formulation studies under the FDA’s good laboratory practices regulations;

·submission to the FDA of an Investigational New Drug Application, or IND, for human clinical testing, which must become effective before human clinical trials may begin and which must include approval by an independent IRB at each clinical site before the trials may be initiated;

·performance of adequate and well controlled clinical trials in accordance with “Good Clinical Practice,” as set forth by the FDA, to establish the safety and efficacy of the product for each indication;

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·submission to the FDA of a BLA, which contains detailed information about the chemistry, manufacturing and controls for the product, reports of the outcomes and full data sets of the clinical trials and proposed labeling and packaging for the product;

·satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review;

·satisfactory completion of an FDA Advisory Committee review, if applicable;

·satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to ensure the product’s identity, strength, quality and purity; and

·FDA approval of the BLA, including agreement on post-marketing commitments, if applicable.

Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.  An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.  Some preclinical testing may continue after the IND is submitted.  The IND must become effective before human clinical trials may begin.  An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials or supporting preclinical data as outlined in the IND.  In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed.  In other words, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators.  Clinical trials are conducted under strict requirements to ensure the protection of human subjects participating in the trial and protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.  A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.  In addition, an IRB (usually, but not necessarily specific to each study site) must approve the protocol, subject consent form and any amendments.  All research subjects must be informed, among other things, about the risks and benefits of the investigational product and provide their informed consent in writing.

Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined.

Phase I trials usually involve the initial introduction of the investigational drug into a small group of healthy volunteers (e.g., ten to 20 volunteers) to evaluate the product’s safety, dosage tolerance and pharmacokinetics and, if possible, to gain an early indication of its effectiveness.

Phase II trials usually involve controlled trials in a larger but limited patient population (e.g., a few hundred) to:

·evaluate dosage tolerance and appropriate dosage;

·identify possible adverse effects and safety risks; and

·provide a preliminary evaluation of the efficacy of the drug for specific indications.

Phase III trials usually further evaluate clinical efficacy and test further for safety in an expanded patient population (e.g., several hundred to several thousand patients).  Phase III trials usually involve comparison with placebo, standard treatments or other active comparators.  Usually two well controlled large Phase III or pivotal trials demonstrating safety and efficacy are required.  These trials are intended to establish the overall risk-benefit profile of the product and provide an adequate basis for physician labeling.  Phase III trials are usually larger, more time consuming, more complex and more costly than Phase I and Phase II trials.  Since most of our products are aimed at very small populations so that it is not always possible to conduct two large studies, regulators may accept one study on a smaller number of patients than would typically be required for pharmaceutical products in general, provided the data is sufficiently robust.

Phase I, Phase II and Phase III testing may not be completed successfully within any specified period, if at all.  Furthermore, we or the FDA may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk, have experienced a serious and unexpected adverse event, or that continued use in an investigational setting may be unethical.  Similarly, an IRB can suspend or terminate approval of research if the research is not being conducted in accordance with the IRB’s requirements or if the research has been associated with unexpected serious harm to patients.

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During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators, including reports regarding adverse events and safety issues.

Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical trials, together with other detailed information, including information on the chemistry, manufacture and composition of the product, are submitted to the FDA in the form of a BLA requesting approval to market the product for one or more indications.  Under the Pediatric Research Equity Act of 2003, BLAs, or supplements to BLAs, must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.  The FDA may grant deferrals for submission of data or full or partial waivers.  Unless otherwise required by regulation, the Pediatric Research Equity Act of 2003 does not apply to any drug for an indication for which orphan designation has been granted.  The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.  In most cases, the BLA must be accompanied by a substantial user fee.

The FDA will initially review the BLA for completeness before it accepts the BLA for filing.  After the BLA submission is accepted for filing, the FDA reviews the BLA to determine, among other things, whether a product is safe and effective for its intended use and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality, purity and potency.  The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation, and recommendation as to whether the application should be approved and under what conditions.  The FDA is not bound by the recommendations of the advisory committee, but it considers such recommendations carefully when making decisions.

Under the Pediatric Research Equity Act of 2003, BLAs, or supplements to BLAs, must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, the Pediatric Research Equity Act of 2003 does not apply to any drug for an indication for which orphan designation has been granted.

Before approving a BLA, the FDA generally will inspect the facility or the facilities at which the product is manufactured.  The FDA will not approve the product if it finds that the facility does not appear to be in cGMP compliance.  If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will either disapprove the application or issue a complete response letter in which it will outline the deficiencies in the BLA and provide the applicant an opportunity to meet with FDA representatives and subsequently to submit additional information or data to address the deficiencies.  Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

Further, the Healthcare Reform Law introduced a new abbreviated regulatory approval pathway for biological products found to be “biosimilar” to or “interchangeable” with a biological “reference product” previously licensed under a BLA.  This abbreviated approval pathway is intended to permit a biosimilar to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor, and the FDA’s previous review and approval of the reference product.  The law provides that no biosimilar application may be accepted for the FDA for review until 4 years after the date reference product was first licensed by the FDA, and that the FDA may not make approval of an application effective until 12 years after the reference product was first licensed. Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under applicable laws to be “interchangeable with,” the previously approved reference product.  The extent to which a biosimilar, once approved, will be substituted for any of our products, in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

The testing and approval processes require substantial time, effort and financial resources, and each process may take several years to complete.  Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.  The FDA may not grant approval on a timely basis, or at all.  We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our products.  The FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products.

Post-approval Requirements

After regulatory approval of a product is obtained, we are required to comply with a number of post-approval requirements.  For example, as a condition of approval of a BLA, the FDA may require post-marketing testing and surveillance to monitor the

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product’s safety or efficacy.  In addition, holders of an approved BLA are required to keep extensive records, to report certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products.  Also, quality control and manufacturing procedures must continue to conform to cGMP regulations and practices, as well as the manufacturing conditions of approval set forth in the BLA.  The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes certain procedural, substantive and recordkeeping requirements.  Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

Future FDA inspections may identify compliance issues at our facilities or at the facilities of our third-party suppliers that may disrupt production or distribution, or require substantial resources to correct and prevent recurrence of any deficiencies, and could result in fines or penalties by regulatory authorities.  In addition, discovery of problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.  Newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications.  The Healthcare Reform Law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research.  Also, new government requirements, including those resulting from new legislation, may be established that could delay or prevent regulatory approval of our products under development.

Orphan Drug Designation

The FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition” that affects fewer than 200,000 individuals in the United States, or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such a disease or condition will be recovered from sales in the United States for that drug.  Orphan drug designation must be requested before submitting an application for marketing approval.  Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.  Orphan drug designation can provide opportunities for grant funding towards clinical trial costs, tax advantages and FDA user fee exemptions.  In addition, if a product that has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or a meaningfully different mode of administration.  Competitors may receive approval of different drugs or biologics for the indications for which the orphan product has exclusivity.  However, if a company with orphan drug exclusivity is not able to supply the market, the FDA could allow another company with the same drug a license to market for said indication.  The FDA granted Gamunex® IVIG orphan drug status, which provided marketing exclusivity for the CIDP indication in the United States through September 2015.  Gamunex® IVIG was the first IVIG product approved for CIDP in the United States.

Fast Track Designation

The FDA’s fast track programs, one of which is fast track designation, are designed to facilitate the development and review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs for the conditions.  Fast track designation applies to a combination of the product and the specific indication for which it is being studied.  Thus, it is the development program for a specific drug for a specific indication that receives fast track designation.

The sponsor of a product designated as being in a fast track drug development program may engage in close early communication with the FDA, including through timely meetings and feedback on clinical trials.  Products in fast track drug development programs also may receive FDA priority review or accelerated approval; in other words, the review cycle has a six-month review clock instead of a ten- or 12-month review clock).  Sponsors may also be able to submit completed portions of an application before the entire application is completed; however, the review clock will not officially begin until the entire completed BLA is submitted to and filed by the FDA.  The FDA may notify a sponsor that its program is no longer classified as a fast track development program if the fast track designation is no longer supported by emerging data, the designated drug development program is no longer being pursued, or another product that meets the unmet medical need for the same indication is approved first. We do not currently have any products on fast track.

Plasma Collection

The FDA requires a licensing and certification process for each plasma collection center prior to opening and conducts periodic inspections of facilities and processes.  Many states also regulate plasma collection, imposing similar obligations and additional inspections and audits.  Collection centers are subject to periodic inspections by regulatory authorities, which if

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noncompliance is alleged, may result in fines, citations, the temporary closing of the centers, loss or suspension of licenses or recall of finished products.

Diagnostic Devices

Certain of our products are regulated as medical devices, which are typically subject to clearance for commercialization in the United States, based on a pre-market notification to the FDA demonstrating the device to be marketed is safe and effective by proving substantial equivalence to a legally marketed device (predicate device).  The manufacturers of medical devices must register their establishments with the FDA, and the production of the devices must accord with applicable current good manufacturing practices and quality system regulations.  With respect to the manufacture and sale of immunoassay antigens and antibodies to screen human donated blood and blood products, these products are manufactured and sold under a BLA issued by the FDA, and are subject to the heightened regulatory oversight associated with biological products.

Drug Supply Chain Security Act

The federal Drug Quality and Security Act of 2013 brought about significant changes with respect to pharmaceutical supply chain requirements and pre-empts state law.  Title II of this measure, known as the Drug Supply Chain Security Act, or the DSCSA, is being phased in over 10 years, and is intended to build a national electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States, including certain of our products.  The law’s track and trace requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs began to take effect in January 2015 and will continue to be implemented.  The DSCSA product tracing requirements replaced the former FDA drug pedigree requirements and pre-empt state requirements that are inconsistent with, more stringent than, or in addition to, the DSCSA requirements.  The DSCSA also establishes certain requirements for the licensing and operation of prescription drug wholesalers and third party logistics providers, or 3PLs, and includes the creation of national wholesaler and 3PL licenses in cases where states do not license such entities.  The DSCSA requires that wholesalers and 3PLs distribute drugs in accordance with certain standards regarding the recordkeeping, storage and handling of prescription drugs.  According to FDA guidance, states are pre-empted from imposing any licensing requirements that are inconsistent with, less stringent than, directly related to, or covered by the standards established by federal law in this area.  Current state licensing requirements will likely remain in effect until the FDA issues new regulations as directed by the DSCSA.  We believe that we are substantially compliant with applicable DSCSA requirements.

Anti-fraud and Abuse Regulation

Since we supply products and services that are reimbursed by U.S. federally funded programs such as Medicare and Medicaid, our activities are also subject to regulation by CMS and enforcement by HHS OIG.  The Anti-Kickback Law prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a government health care program.  Many states have similar laws.  Courts have interpreted this law very broadly, including by holding that a violation has occurred if even one purpose of the remuneration is to generate referrals, even if there are other lawful purposes.  There are statutory and regulatory exceptions, or safe harbors, that outline arrangements that are deemed lawful.  However, the fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law.  In sum, even legitimate business arrangements between the companies and referral sources could lead to scrutiny by government enforcement agencies and require extensive company resources to respond to government investigations.  Also, certain business practices, such as payment of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of wrongfully influencing healthcare providers to prescribe or purchase particular products or as a reward for past prescribing.  Violations of the Anti-Kickback Law can result in substantial legal penalties, including, among others, civil and criminal penalties or exclusion from participation in federal health care programs, including Medicare and Medicaid.  The Healthcare Reform Law strengthened provisions of the Anti-Kickback Law.

The FCA is violated by any entity that “presents or causes to be presented” knowingly false claims for payment to the federal government.  In addition, the Healthcare Reform Law amended the FCA to create a cause of action against any person who knowingly makes a false statement material to an obligation to pay money to the government or knowingly conceals or improperly decreases an obligation to pay or transmit money or property to the government.  For the purposes of these recent amendments, an “obligation” includes an identified overpayment, which is defined broadly to include “any funds that a person receives or retains under Medicare and Medicaid to which the person, after applicable reconciliation, is not entitled …”

Significant enforcement activity has been the result of actions brought by relators, who file complaints in the name of the United States (and, if applicable, particular states) under the FCA or equivalent state statutes.  “False claims” can result not only from noncompliance with the express requirements of applicable governmental reimbursement programs, such as Medicaid or Medicare,

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but also from noncompliance with other laws, such as the Anti-Kickback Law (which was explicitly confirmed in the Healthcare Reform Law), or laws that require quality care in service delivery.  The qui tam and whistleblower provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the government was defrauded, with tremendous potential financial gain (up to 30% of the government’s recovery plus legal fees) to private citizens who prevail.  When a private party brings a whistleblower action under the FCA, the qui tam plaintiffs file the complaint under seal and serve the complaint on the government only, with written disclosure of substantially all material evidence and information they possess. The government then uses the information provided by the qui tam plaintiff to investigate the claims and may elect to intervene in the case within 60 days of receiving the complaint, unless extended for good-cause. The defendant is not made aware of the lawsuit until the case is unsealed. Many states have enacted similar laws, and these state laws have their own penalties which may be in addition to federal FCA penalties.  The bringing of any federal FCA action could require us to devote resources to investigate and defend the action.  Violations of the FCA can result in treble damages, and each false claim submitted can be subject to a civil penalty, which, for penalties assessed after February 3, 2017 whose associated violations occurred after November 2, 2015, ranges from a minimum of $10,957 to a maximum of $21,916 per claim.

A Healthcare Reform Law provision, generally referred to as the PPS Act or Open Payments Program, has imposed new reporting and disclosure requirements for biologic, drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners, such as physicians and teaching hospitals, and for such manufacturers and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity.  CMS publishes information from these reports on a publicly available website, including amounts transferred and health care provider identities.  Under the PPS Act we are required to collect and report detailed information regarding certain financial relationships we have with covered health care providers, and we believe that we are substantially compliant with applicable PPS Act requirements.   The PPS Act pre-empts similar state reporting laws, although we or our subsidiaries may also be required to report under certain state transparency laws that address circumstances not covered by the PPS Act, and some of these state laws are also ambiguous.  We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers.  While we believe we have substantially compliant programs and controls in place to comply with these reporting requirements, our compliance with these rules imposes additional costs on us.

European Community Government Regulation

In addition to regulations in the United States, we are subject to a variety of regulations in other jurisdictions governing clinical trials and commercial sales and distribution of our products.  Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of countries outside the United States before we can commence marketing that product in those countries.  The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.  The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.  Also, in addition to approval of final products, U.S. plasma centers collecting plasma for manufacture into products to be distributed in the European Union must also be approved by the competent European health authority.

Medicines can be authorized in the European Union by using either the centralized authorization procedure or national authorization procedures.  The EMA is responsible for the centralized authorization procedure.

Centralized Authorization Procedure

The EMA is responsible for the centralized procedure, or Community authorization procedure, for human medicines.  This procedure results in Community marketing authorization, the single marketing authorization that is valid across the European Union, as well as in the European Economic Area/European Free Trade Association states Iceland, Liechtenstein and Norway.

The Community authorization procedure is compulsory for:

·medicinal products developed by using recombinant DNA technology, the controlled expression of genes coded for biologically active proteins in prokaryotes and eukaryotes, including transformed mammalian cells, or hybridoma or monoclonal antibody methods;

·advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines;

·medicinal products for human use containing a new active substance that did not receive Community marketing authorization when the Community authorization procedure was first implemented, for which the therapeutic indication is the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions or viral diseases; and

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·officially designated orphan medicines.

The Community authorization procedure is optional for products:

·containing new active substances for indications other than the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions or viral diseases;

·representing significant therapeutic, scientific or technical innovations; or

·for which the granting of a Community marketing authorization would be in the interests of European Union public health.

Our blood derivative products are not subject to compulsory Community authorization, but it is an option for our new products. Flebogamma® DIF 50 mg/ml and 100 mg/ml were approved through the Community authorization procedure.

Applications through the Community authorization procedure are submitted directly to the EMA.  Evaluation by the EMA’s relevant scientific committee takes up to 210 days, at the end of which the committee adopts an opinion on whether the medicine should be marketed.  This opinion is then transmitted to the European Commission, which has the ultimate authority for granting marketing authorizations in the European Union.

Once a Community marketing authorization has been granted, the holder of that authorization can begin to make the medicine available to patients and healthcare professionals in all European Union countries.

National Authorization Procedures

Each European Union member state has its own procedures for the authorization, within its own territory, of medicines that fall outside the scope of the Community authorization procedure.  There are two possible routes available to companies for the authorization of such medicines in several countries simultaneously.

·Decentralized procedure.  Using the decentralized procedure, companies may apply for simultaneous authorization in more than one European Union country of medicines that have not yet been authorized in any European Union country and that do not fall within the mandatory scope of the centralized procedure.

·Mutual-recognition procedure.  In the mutual-recognition procedure, a medicine is first authorized in one European Union member state, in accordance with the national procedures of that country.  Following such authorization, further marketing authorizations can be sought from other European Union member states in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

Our product Niuliva 250 I.U./ml was approved through the decentralized procedure.  Our products Prolastina® 1000 mg/ml and Gamunex® 10% were approved through the mutual-recognition procedure.  All our other products were approved pursuant to individual national procedures.  We expect to use the mutual-recognition procedure if we want to extend our product licenses to other European countries in the future.

In some cases, disputes arising in these procedures can be referred to the EMA for arbitration as part of a “referral procedure.”

Orphan Drug Designation

Applications for designation of orphan medicines are reviewed by the EMA through the Committee for Orphan Medicinal Products.  The criteria for orphan designation are:

·the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the European Union at the time of submission of the designation application (prevalence criterion); or

·the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition, and without incentives it is unlikely that the revenue after marketing of the medicinal product would cover the investment in its development; and

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·either no satisfactory method of diagnosis, prevention or treatment of the condition concerned is authorized, or, if such method exists, the medicinal product will be of significant benefit to those affected by the condition.

Companies with an orphan designation for a medicinal product benefit from incentives such as:

·protocol assistance (scientific advice for orphan medicines during the product-development phase);

·direct access to centralized marketing authorization and 10-year marketing exclusivity;

·financial incentives (fee reductions or exemptions); and

·national incentives detailed in an inventory made available by the European Commission.

Since December 2011, orphan medicinal products are eligible for the following level of fee reductions:

·full (100%) reduction for small- and medium-sized enterprises, or SMEs, for protocol assistance and follow-up, full reduction for non-SME sponsors for pediatric-related assistance and 75% reduction for non-SME sponsors for non-pediatric assistance;

·To determine which companies are eligible for SME incentives, the EMA applies the definition of micro-, small- and medium-sized enterprises provided in the Commission of the European Communities’ Commission Recommendation 2003/361/EC.  To qualify for assistance, companies must be established in the European Economic Area, employ less than 250 employees and have an annual turnover of not more than €50 million or an annual balance sheet total of not more than €43 million.

·full reduction for pre-authorization inspections and 90% reduction for post-authorization inspections for small- and medium-sized enterprises;

·full reduction for SMEs for new applications for Community marketing authorization and 10% reduction for non-SME sponsors; and

·full reduction for post-authorization activities including annual fees only to small and medium sized enterprises in the first year after granting a marketing authorization.

We have EMA Orphan Drug Designations for the following 3 products:

·Alpha-1 proteinase inhibitor (for inhalation use) for the treatment of cystic fibrosis; and

·Alpha-1 proteinase inhibitor (for inhalation use) for the treatment of congenital alpha-1 antitrypsin deficiency.

Because each of these products is already authorized for a non-orphan indication in the EU, in order to obtain marketing authorization for any of the above-mentioned orphan indications, we would be required to apply for a separate marketing authorization through the Community authorization procedure for such indication, using a different proprietary name.  It is not be possible to extend the existing marketing authorization to cover the new orphan indication.  Orphan and “non-orphan” indications cannot be covered by the same marketing authorization.

Canadian Regulatory Process

Authorization to Market.  Therapeutic products can be marketed in Canada after they have been subject to a review to assess their safety, efficacy and quality.  A New Drug Submission must be submitted to Health Canada for review, and a Notice of Compliance, or NOC, and/or a Drug Identification Number, or DIN, must be received by the sponsor prior to marketing a product in Canada.  Responsibility for review of pharmaceutical drug products resides with Health Canada’s Therapeutic Products Directorate, or TPD, while responsibility for review of biological products is under the Biologics, Radiopharmaceuticals and Genetic Therapies Directorate, or BGTD.  An active DIN is required for any product being marketed in Canada.  Our IVIG, A1PI, albumin and hyperimmune products are subject to these review and authorization processes.

Changes to Market Authorization.  There are four classes of changes to existing market authorizations in Canada.  Level 1 changes are considered “significantly different” and have the potential to impact safety, efficacy, quality or effectiveness of the product.  These require the filing of a Supplemental New Drug Submission, and a NOC must be issued by Health Canada prior to

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implementation of the change.  Level 2 changes are not considered “significant,” but a “Notifiable Change” submission must be filed to Health Canada for review, and approval is provided via a “No Objection” letter to the sponsor.  Level 3 changes have minimal potential to impact safety, quality or effectiveness and can be made without prior approval of Health Canada; a summary of these changes is reported to Health Canada with the sponsor’s Annual Drug Notification.  Level 4 changes are implemented without any notification to Health Canada, based on no expectation of risk.

Clinical Trials.  A Clinical Trial Application, or CTA, must be submitted to Health Canada prior to conducting any study protocol that proposes the use of a new product, or the use of an existing product, where the indication, target population, route of administration or dosing differs from the current market authorization.  The CTA should include summaries of preclinical and clinical studies conducted and (if applicable) chemistry, manufacturing and control data, and is submitted to either TPD (for drug products) or BGTD (for biological products) for review.  The TPD or BGTD are responsible for assessing protection and safety of the participants as well as quality of the product; they will issue a “No Objection” letter to sponsors for studies deemed acceptable.  Research ethics board approval for each trial is also required prior to conduct of the study.

Establishment Licensing.  All establishments in Canada that are involved in the fabrication, packaging/labeling, testing, import, distribution or warehousing of drug products must have a current establishment license (once an establishment license is issued, an annual report must be submitted by April 1 of each year to maintain the effectiveness of that license).  As an importer/distributor, part of the licensing requirements include demonstration that any foreign (non-Canadian) facilities involved in fabrication, packaging/labeling or testing of products imported/distributed under the license comply with cGMP.

Post-Approval Requirements.  The Health Products and Food Branch Inspectorate of Health Canada periodically inspects licensed establishments in Canada to verify compliance with cGMP.  Manufacturers and importers are required to monitor the safety and quality of their products and must report adverse reactions to the Marketed Health Products Directorate in accordance with a prescribed timeline and format.

Regulatory Process for Markets outside the United States, Canada and Europe

The majority of regulatory authorities in countries outside the United States, Canada and Europe require that a product first be approved by the FDA or European authority prior to granting the market authorization in their country.  There are a limited number of countries (Bahamas, Bermuda, Guam, Oman and Qatar) that do not require further local product registration for products and they may be distributed based on the existing FDA approval.

In addition to requiring the submission of a license application containing documentation supporting the safety, efficacy and quality of the product, many countries require the submission of FDA Export Certificates for our products to provide assurance that such products can be legally marketed in the United States.  The Certificate of Pharmaceutical Product, or CPP, and/or the Certificate to Foreign Government, or CFG, are issued by the FDA at the request of the manufacturer seeking licensing in the country outside the United States.  The CPP conforms to the format established by the World Health Organization, or WHO, and is intended for use by the importing country when considering whether to license the product in question for sale in that country.  The CFG serves to document that the product can be legally marketed in the United States and the manufacturer is in compliance with GMP.  A limited number of regulatory authorities in countries outside United States, Canada and Europe conduct onsite inspections to verify GMP compliance.  Failure to maintain and document GMP compliance could result in withdrawal of marketing authorization.  In addition changes to manufacturing or testing procedures for the product require approval of the change in the United States prior to the submission of the variation to the registration in the international market.  These changes may require approval in each market in order to maintain product distribution.  Furthermore, any changes in the distributors supporting our export business could result in a loss of sales.

Pharmaceutical Pricing and Reimbursement

In the United States and other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors.  Third-party payors include government health programs, managed care providers, private health insurers and other organizations.  These third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services.  In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products.  Our products may not be considered cost-effective.  Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

In the United States, our products are reimbursed or purchased under several government programs, including Medicaid, Medicare Parts B and D and the 340B/PHS program, and pursuant to our contract with the Department of Veterans Affairs.  Medicaid is a joint state and federal government health plan that provides covered outpatient prescription drugs for low income individuals.  Under Medicaid, drug manufacturers pay rebates to the states based on utilization data provided by the states.  The rebate amount for

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most brand name drugs is the greater of 23.1% of the AMP per unit or the difference between the AMP and Best Price per unit and adjusted by the CPI-U, subject to certain exceptions (for example, for certain clotting factors, such as Factor VIII and Factor IX, of the rebate amount is the greater of 17.1% of the AMP per unit or the difference between the AMP and the Best Price per unit and adjusted by the CPI-U.  For non-innovator multiple source (generic) drugs, the rebate percentage is equal to a minimum of 13.0% of AMP.  The Healthcare Reform Law also extended this rebate obligation to prescription drugs covered by Medicaid managed care organizations.

In addition, the statutory definition of AMP changed in 2010 as a result of the Healthcare Reform Law.  On January 21, 2016, CMS issued a final rule, effective on April 1, 2016, providing a regulatory definition of “AMP” along with other changes to the price reporting process.  We believe our reporting meets the obligations contained in the final rule.

Medicare Part B reimburses providers for drugs provided in the outpatient setting based upon ASP.  Beginning in 2005, the Medicare drug reimbursement methodology for physician and hospital outpatient schedules changed to ASP + 6%.  This payment was based on a volume-weighted average of all brands under a common billing code.  After changes in certain prior years, CMS increased the rate back to + 6% for 2013 and maintained the same rate for 2014 through 2018, except that effective January 1, 2018, a new CMS rule went into effect substantially cutting reimbursement paid to hospitals and other providers for certain outpatient drugs and biologicals, including certain of our products, that are purchased by these providers under the 340B/PHS program.  The reimbursement was decreased from ASP + 6% to ASP - 22.5%.  The outcome of this reimbursement change on our business is uncertain, but it may decrease demand for our products and have an adverse effect on our business. In addition, under the Bipartisan Budget Act of 2013 and subsequent measures, Medicare is subject to a 2% reduction in federal spending, or “sequestration,” including drugs reimbursed under Medicare, for federal fiscal years 2013 through 2025.  The full ramifications of this sequestration for Medicare reimbursement are not yet clear, as Congressional action may reduce, eliminate or otherwise change this payment reduction.  Other pricing concerns in the United States include that President Trump has suggested he would support pharmaceutical pricing negotiations on behalf of Medicare and certain Senators have stated their intent to introduce a bill authorizing importation of pharmaceuticals where pharmaceutical prices of certain products in the United States are deemed excessive.  It is not clear that any such pricing negotiation or importation measures will be enacted.

Medicare Part D is a partial, voluntary prescription drug benefit created by the federal government primarily for persons 65 years old and over.  The Part D drug program is administered through private insurers that contract with CMS.  Government payment for some of the costs of prescription drugs may increase demand for any products for which we receive marketing approval.  However, to obtain payments under this program, we are required to negotiate prices with private insurers operating pursuant to federal program guidance.  These prices may be lower than we might otherwise obtain.  In addition, beginning in 2011, the Healthcare Reform Law generally required that we provide a 50% discount to patients who have expended certain amounts for drugs and therefore fall within the Medicare Part D coverage gap.

The availability of federal funds to pay for our products under the Medicaid and Medicare Part B programs requires that we extend discounts under the 340B/PHS drug pricing program.  The 340B/PHS drug pricing program extends discounts to a variety of community health clinics and other specified entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of certain low income individuals.  The PHS ceiling price cannot exceed the AMP (as reported to CMS under the Medicaid drug rebate program) less the Medicaid unit rebate amount.  We have entered into a PPA with the government in which we agree to participate in the 340B/PHS program by charging eligible entities no more than the PHS ceiling price for drugs intended for outpatient use.  Evolving requirements with respect to this program continue to be issued by the HRSA of HHS, the federal agency responsible for oversight of the 340B/PHS program, which creates uncertainty.  For example, on January 5, 2017, a final rule was published in the Federal Register including provisions on how to calculate the ceiling price for covered outpatient drugs under the 340B/PHS program and addresses the imposition of civil monetary penalties, or CMP, would be imposed on a manufacturer that knowingly and intentionally overcharges a covered entity.  However, HRSA has repeatedly delayed the effective date of the rule, and most recently delayed the effective date to July 1, 2018.  In another development, effective January 1, 2018, a new CMS rule went into effect substantially cutting reimbursement paid to hospitals and other providers for certain outpatient drugs and biologicals, including certain of our products, purchased by these providers under the 340B/PHS program.  The reimbursement was decreased from ASP plus 6% to ASP minus 22.5%.  The outcome of this reimbursement change on our business is uncertain, but it may decrease demand for our products and have an adverse effect on our business. We believe that we meet the requirements of the 340B/PHS program and are continuing to review and monitor these and other developments affecting the 340B/PHS program.

We make our products available for purchase by authorized government users of the Federal Supply Schedule, or FSS, pursuant to their FSS contracts with the Department of Veterans Affairs.  Under the Veterans Health Care Act of 1992, companies are required to offer discounted FSS contract pricing to four federal agencies — the Department of Veterans Affairs, the Department of Defense, the Coast Guard and the PHS (including the Indian Health Service) — for federal funding to be made available for reimbursement of products under the Medicaid program and products eligible to be purchased by those four federal agencies.  FSS

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pricing to those four federal agencies must be equal to or less than the ceiling price, which is, at a minimum, 24% off the non-federal AMP for the prior fiscal year.

The Healthcare Reform Law imposed a fee on manufacturers and importers of branded prescription drugs and biologics based on their sales to United States government health programs.  An aggregate annual fee of $3.0 billion was imposed on all covered entities for 2014 through 2016. The aggregate fee is allocated among applicable manufacturers and importers, including us, based on their relative sales to government health programs.  The aggregate fee increased up to $4 billion for 2017, $4.1 billion for 2018, and is scheduled to be reduced to $2.8 billion for 2019 and thereafter.  Beginning in 2013, the Healthcare Reform Law also imposed a new excise tax on many medical devices equal to 2.3% of the sales price, and excludes devices generally purchased by the general public at retail for individual use.  However, with respect to the medical device excise tax, a two-year moratorium was imposed under the Consolidated Appropriations Act, 2016, suspending the imposition of the tax on device sales during the period beginning January 1, 2016 and ending December 31, 2017. On January 22, 2018, an additional two-year moratorium was imposed under Public Law No. 115-120, suspending the imposition of the tax on device sales during the period beginning January 1, 2018 and ending on December 31, 2019.  Diagnostic division equipment that we manufacture or import into the United States may be subject to these taxes.  In addition, the Prescription Drug User Fee Act, or PDUFA, first enacted in 1992, sets forth user fees that pharmaceutical and biological companies pay to the FDA for:  certain applications for approvals of drugs and biologicals; the establishments where the products are made; and the products themselves.  The fees under PDUFA cover a substantial portion of the FDA’s operating budget, and the measure also addresses aspects of the regulatory approval process, such as timing and procedures.  PDUFA is subject to reauthorization by Congress every five years, and in December 2016, after a lengthy process involving significant industry and other stakeholder input, the FDA submitted its final recommendations to Congress for the sixth PDUFA reauthorization, which was signed into law in August 2017, and which covers fiscal years 2018 through 2022.

The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement.  Federal, state and local governments in the United States have enacted and continue to consider additional legislation to limit the growth of healthcare costs, including the costs of prescription drugs.  Existing and future legislation could limit payments for our existing products or for drug candidates that we are developing, including possibly permitting the federal government to negotiate prices directly with manufacturers.  In addition, an increasing emphasis on managed care in the United States has increased and will continue to increase the pressure on pharmaceutical pricing.  For a discussion of certain risks related to reimbursement and pricing, see Item 3 of this Part I, “Key Information — D. Risk Factors — Risks Relating to the Healthcare Industry — The implementation of the Healthcare Reform Law in the United States may adversely affect our business.”

Other Governmental Regulation

Our operations and many of the products that we manufacture or sell are subject to extensive regulation by numerous other governmental agencies, both within and outside the United States non-compliance with which could adversely affect our business, financial condition and results of operations.  In the United States, apart from the agencies discussed above, our facilities, operations, employees, products (their manufacture, sale, import and export) and services are regulated by the Drug Enforcement Agency, the Environmental Protection Agency, the Occupational Health & Safety Administration, the Department of Agriculture, the Department of Labor, Customs and Border Protection, the Transportation Security Administration, the Department of Commerce, the Department of Treasury, the DOJ, the U.S. Office of Foreign Assets Control and others. State and local agencies also regulate our facilities, operations, employees, products and services within their respective states and localities.  Government agencies outside the United States also regulate public health, product registration, manufacturing, environmental conditions, labor, exports, imports and other aspects of our global operations.  For further discussion of the impact of regulation on our business, see Item 3 of this Part I, “Key Information — D. Risk Factors — Risks Relating to the Healthcare Industry — Certain of our business practices are subject to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens under federal and state laws.  Failure to comply with applicable law or an adverse decision in lawsuits may result in adverse consequences to us.”

Item 4.A.UNRESOLVED STAFF COMMENTS

None.

Item 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following is a review of our financial condition and results of operations as of December 31, 2017 and 2016, and for the three years ended December 31, 2017, and of the key factors that have affected or are expected to be likely to affect our ongoing and future operations.  You should read the following discussion and analysis in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this annual report on Form 20-F.

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Some of the information contained in this discussion, including information with respect to our plans and strategies for our business and our expected sources of financing, contain forward-looking statements that involve risk and uncertainties.  You should read “Cautionary Statement Regarding Forward-Looking Statements” in this Part I for a discussion of the risks related to those statements.  You should also read Item 3 of this Part I, “Key Information — D. Risk Factors” for a discussion of certain factors that may affect our business, financial condition and results of operations.

We have prepared our audited consolidated financial statements as of December 31, 2017 and 2016, and for the three years ended December 31, 2017 in accordance with IFRS, as issued by the IASB.  The financial information and related discussion and analysis contained in this item are presented in euro except as otherwise specified.  Unless otherwise specified the financial information analysis in this annual report on Form 20-F is based on our actual audited consolidated financial statements as of December 31, 2017 and 2016, and for the three years ended December 31, 2017.

See “Presentation of Financial and Other Information” in this Part I for further information on our presentation of financial information.

A.Operating Results.

Subsequent Events

On January 26, 2018, Grifols acquired, through its subsidiary Grifols Shared Services North America, Inc., the U.S. company Goetech, LLC, based in Denver, Colorado, doing business as MedKeeper.  This transaction, for a total of $ 98 million, included a 51% stake in the company and a call option for Grifols and put option for Medkeeper for the remaining 49% on the third anniversary of the deal. Grifols holds a majority position on the board of directors. Medkeeper’s core business is the development and distribution of web and mobile-based platforms for hospital pharmacies that improve quality standards, productivity in the process, control systems and monitoring different preparations while increasing patient safety. This investment will enhance the activity of the Grifols Hospital division and it is part of the strategy to underpin this division into the U.S. market.

In March 2018, we entered into an agreement to acquire 100% of Haema AG, a German based pharmaceutical company that owns 35 collection centers throughout Germany, for a purchase price of €220 million on a debt free basis. We believe this acquisition, subject to the authorization by the applicable antitrust authorities among other closing conditions, will diversify the origin of our plasma and guarantee access to raw material for the future.

Factors Affecting Our Financial Condition and Results of Operations

Price Controls

Certain healthcare products, including plasma derivative products, are subject to price controls in many of the markets where they are sold, including Spain and other countries in the European Union.  The existence of price controls over these products has adversely affected in the past, and may continue to adversely affect, our ability to maintain or increase our prices and gross margins.

Plasma Supply Constraints

Plasma is the key raw material used in the production of plasma-derived products.  Our ability to continue to increase our revenue depends substantially on increased access to plasma.  We currently obtain our plasma from the United States primarily through our plasma collection centers and, to a much lesser extent, through agreements with third parties.

A continued increase in demand for plasma products could lead to industry supply constraints.  In response, we and certain of our competitors and independent suppliers could open a number of new plasma collection centers.

We have 190 operating plasma collection centers located across the United States.  We have expanded our plasma collection network through a combination of organic growth by opening new plasma collection centers and acquisitions.  Our acquisitions of SeraCare (now renamed Biomat USA) in 2002; PlasmaCare, Inc. (merged with Biomat USA in 2015) in 2006; eight plasma collection centers from a subsidiary of Baxter (now Shire) in 2006; four plasma collection centers from Bio Medics, Inc. in 2007; and one plasma collection center from Amerihealth Plasma LLC in 2008 have given us reliable access to United States source plasma.  Our acquisition of Talecris in June 2011 expanded our network by an additional 67 centers. In 2016, we purchased equity interests in the Interstate Blood Bank Group (a 49.19% equity interest in Interstate Blood Bank, Inc., a 48.97% equity interest in Bio-Blood Components, Inc. and a 48.90% equity interest in Plasma Biological Services, LLC), one of the main private and independent plasma suppliers in the United States, with the option to purchase the remaining 51%. In February 2017, we purchased six collection centers from Kedplasma LLC.

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In March 2018, we entered into an agreement to acquire 100% of Haema AG, a German based pharmaceutical company that owns 35 collection centers throughout Germany, for a purchase price of €220 million on a debt free basis. We believe this acquisition, subject to the authorization by the applicable antitrust authorities among other closing conditions, will diversify the origin of our plasma and guarantee access to raw material for the future.

In 2017, our plasma collection centers obtained approximately 9.3 million liters of plasma (including specialty plasma required for the production of hyperimmunes and plasma acquired from third parties).  We believe that our plasma requirements through 2018 will be met through:  (i) plasma collected through our plasma collection centers and (ii) plasma purchased from third-party suppliers pursuant to various plasma purchase agreements.

Acquisitions

GigaGen Investment

In July 2017, we acquired a 43.96% equity interest in GigaGen Inc., or GigaGen, a pre-clinical biotherapeutics company, for $35 million. As part of this acquisition, we entered into a research and collaboration agreement with GigaGen whereby, in exchange for a collaboration fee of $15 million in the aggregate, GigaGen will commit to carry out research activities to develop recombinant plyclonal immunoglobulin therapies derived from human B cells for the treatment of human diseases.

Investment in Access Biologicals, LLC

On January 10, 2017, we acquired 49% of the voting rights in Access Biologicals for $51 million.  We were also granted the option, exercisable in 2022, to purchase the remaining 51% of the voting rights of the company for a multiple of its earnings within a five-year timeframe. Access Biologicals is based in Vista, California and collects and manufactures an extensive biological product portfolio. It provides support for various markets such as in-vitro diagnostic manufacturing, biopharmaceutical, cell culture and diagnostic research & development.

The Hologic, Inc. Acquisition

On December 14, 2016, we entered into the Hologic Agreement with Hologic.  The Hologic Transaction closed on January 31, 2017, at which time we paid a purchase price of $1.865 billion to Hologic.  The agreement included activities related to the research, development and production of reagents and instruments based on NAT technology. Prior to the transaction, we and Hologic jointly operated this business, with Hologic responsible for research and development and manufacturing of the Procleix® blood screening products and Grifols responsible for their commercialization worldwide.

Investment in Singulex, Inc.

On May 13, 2016, we invested $50 million in Singulex, Inc., or Singulex, to acquire 20% of the common stock interest in Singulex. In connection with the investment, Singulex also granted us an exclusive worldwide license under certain intellectual property rights for the use and sale of certain products and services for blood donor and plasma screening, which will help to further ensure the safety of our blood and plasma products.

Singulex is the developer of the Single Molecule Counting (SMC™) technology for clinical diagnostic and scientific discovery. This technology enables the detection of disease biomarkers that were previously undetectable. Singulex is developing a fully-automated in vitro diagnostics system that will allow the company to bring its technology to hospitals and laboratories worldwide. Singulex provides clinical laboratory testing services to enhance the early detection of cardiac and vascular disorders and sells immunoassay tests and services.

Investment in the Interstate Blood Bank Group

On April 11, 2016, Grifols Worldwide Operations Limited acquired a 49.19% equity interest in Interstate Blood Bank, Inc., a 48.97% equity interest in Bio-Blood Components, Inc., and a 48.90% equity interest in Plasma Biological Services, LLC, collectively referred to herein as the “IBBI Group”, for $100 million. We were also granted the option, exercisable in 2019, to purchase the remaining 51% of the voting rights of the IBBI Group for $100 million, and we paid an additional $10 million for this option. The transactions with the IBBI Group closed on May 11, 2016. IBBI Group’s principal business is the collection of plasma for the plasma fractionation industry.

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Acquisition of Progenika

On March 3, 2016, we announced the acquisition of shares representing 32.93% of the economic and voting rights of Progenika Biopharma, S.A., or Progenika, for a total amount of €25 million. The acquisition involved the execution of the put and call options that certain shareholders of Progenika and Grifols granted to each other on February 27, 2013. As a result, Grifols has increased its stake in Progenika to 90.23% of the share capital as of December 31, 2017.

Fifty percent of the purchase price was paid in exchange for 876,777 non-voting class B shares of Grifols, with a face value of € 0.05 each. The remaining 50% of the price was paid in cash.

AlbaJuna Therapeutics Investment

In January 2016, we acquired 30% of the equity of AlbaJuna Therapeutics S.L. for €3.75 million in cash to fund the development and manufacture of therapeutic antibodies against HIV. The initial investment will be increased upon achievements of agreed upon development milestones.

AlbaJuna Therapeutics, a spin-off from the AIDS Research Institute, IrsiCaixa, promoted jointly by Obra Social “La Caixa” Foundation and the Department of Health of the Generalitat de Catalunya, was established to promote the pre-clinical and clinical development of monoclonal antibodies that neutralize the action of HIV in the body while they increase the activity of the natural killer cells that have the task of destroying infected cells.

Alkahest Investment

In March 2015, we entered into a definitive agreement to acquire 47.58% of the equity of Alkahest, Inc., a California biopharmaceutical company, for a $37.5 million payment upon entry into the agreement and a further payment of $12.5 million as collaboration fees and to fund the development of Alkahest’s plasma-based products.  We provide Alkahest with milestone payments and royalties on the sales of such products.

Kiro Grifols Acquisition and Joint Venture

In September 2014, we acquired 50% of the voting and economic rights of Kiro Grifols for €21 million (which rights we increased to 90% in July 2017 by paying an additional €12.8 million).  Kiro Grifols, a spin-off of Mondragon Health, a strategic unit of the Mondragon Corporation, is a Spanish technological company that develops, manufactures and sells machinery and equipment designed to automate or control critical hospital processes, such as dose dispensing in hospital pharmacy and clinical diagnostic services.  It also develops technologies designed to improve the efficiency, safety and quality of hospital processes, such as the Kiro Oncology robot, which automates the preparation of intravenous medication for chemotherapy to reduce the risk that health professionals will come into contact with these hazardous products.

Simultaneously with the execution of the purchase agreement for the additional 40% stake in Kiro Grifols, S.L. in July 2017, together with the remaining shareholder of Kiro Grifols, S.L. (Mondragón Corporation) we signed an amendment to the then existing shareholders agreement, whereby certain provisions governing the management of the company, the distribution of dividends and the transfer of shares (i.e.: 4 year lock-up period, preferential purchase rights, drag and tag along rights) were rendered ineffective as of that time, and Mondragon Corporación maintained the right to appoint 1 member of the board of directors of Kiro Grifols, S.L.

Other Factors

Our financial and operating prospects can also be significantly affected by a number of other internal and external factors, such as unfavorable changes in governmental regulation or interpretation, increased competition, the inability to hire or retain qualified personnel necessary to sustain planned growth, the loss of key senior managers, problems in developing some of the international operations and lack of sufficient capital, among others.

Operating Results

Overview

The subsequent discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our consolidated results of operations.  You are encouraged to read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F.

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Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

The following discussion and analysis contains information regarding our results of operations for the year ended December 31, 2017, as compared to the year ended December 31, 2016:

	Year Ended December 31,				Change
	2017		2016		€		%
	(in thousands of euros, except for percentages)
Continuing Operations
Net revenue	4,318,073		4,049,830		268,243		6.6	%
Cost of sales	(2,166,062	)	(2,137,539	)	(28,523	)	1.3	%
Gross profit	2,152,011		1,912,291		239,720		12.5	%
Research and development	(288,320	)	(197,617	)	(90,703	)	45.9
Selling, general and administration expenses	(860,348	)	(775,266	)	(85,082	)	10.9	%
Operating expenses	(1,148,668	)	(972,883	)	(175,785	)	18.1	%
Operating result	1,003,343		939,408		63,935		6.8	%
Finance income	9,678		9,934		(256	)	(2.6	)%
Finance costs	(263,344	)	(244,829	)	(18,515	)	7.6	%
Change in fair value of financial instruments	(3,752	)	(7,610	)	3,858		50.7	%
Impairment and gains/(losses) on disposal of financial instruments	(18,844	)	—		—		—
Exchange differences	(11,472	)	8,916		(20,388	)	(228.7	)%
Finance result	(287,734	)	(233,589	)	(54,145	)	23.2	%
Share of (losses) of equity accounted investees	(19,887	)	6,933		(26,820	)	(386.8	)%
Profit before income tax	695,722		712,752		(17,030	)	(2.4	)%
Income tax expense	(34,408	)	(168,209	)	(133,801	)	(79.5	)%
Profit after income tax from continuing operations	661,314		544,543		116,771		21.4	%
Consolidated profit for the year	661,314		544,543		116,771		21.4	%

The consolidated profit for the year includes non-recurring items associated with the impact of the U.S. tax reform and the specific impairment of Aradigm’s assets. See to our audited consolidated financial statements included in this annual report on Form 20-F for more detail.

Net Revenue

Net revenue is calculated by subtracting certain chargebacks, cash discounts, volume rebates, Medicare and Medicaid discounts and other discounts from our gross revenue.  See Note 23 to our audited consolidated financial statements included in this annual report on Form 20-F.

Net revenue increased by €268 million from €4.0 billion in 2016 to €4.3 billion in 2017. This 6.6% (7.2% at constant currency) net revenue increase is the result of a significant upturn in revenues in all of our divisions and regions where we operate.

The following table reflects a summary of net revenue by each of our divisions for 2017, as compared to 2016:

Summary of Net Revenue by Division	Year ended December 31, 2017		% of total net revenue		Year ended December 31, 2016(2)		% of total net revenue		% var		% var CC(1)
	(in thousands of euros, except for percentages)
Bioscience	3,429,785		79.4	%	3,195,424		78.9	%	7.3	%	7.9	%
Diagnostic	732,369		17.0	%	691,701		17.1	%	5.9	%	6.8	%
Hospital	105,649		2.4	%	102,251		2.5	%	3.3	%	3.3	%
Bio Supplies	66,791		1.6	%	57,239		1.4	%	16.7	%	18.1	%
Others	18,263		0.4	%	34,601		0.9	%	(47.2	)%	(45.4	)%
Intersegments	(34,784	)	(0.8	)%	(31,386	)	(0.8	)%	10.8	%	11.3	%
Total	4,318,073		100.0	%	4,049,830		100.0	%	6.6	%	7.2	%

(1)Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue.  See “Presentation of Financial and Other Information.”

(2)Comparable revenues considering intersegment sales and the reclassification of the biological products for non-therapeutic use sales that are reported as Bio Supplies Division sales from January 2017.

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Bioscience.  Net revenue for the Bioscience division increased by 7.3% (7.9% at constant currency) from €3.2 billion in 2016 to €3.4 billion in 2017. This increase was primarily due to volume growth for our main plasma products, with a moderate increase in pricing. The geographic mix of our sales had a negative impact on revenues due to higher sales volumes of blood clotting factors in more competitive price environments, subject to public tenders in certain emerging markets.

·Immunoglobulin volume sales were robust throughout the year, especially in the United States and the main European markets, with growing contributions by specific countries such as Australia and Turkey. Growing global demand for this plasma protein to treat neurological conditions such as chronic inflammatory demyelinating polyneuropathy (CIDP) was evident in core geographies like the United States, where Grifols is the market leader. We also continue to promote diagnostic programs to identify patients with immunodeficiencies that could benefit from immunoglobulin therapies.

·Sales of Alpha-1 antitrypsin continued to grow. Higher rates of diagnosis of alpha-1 antitrypsin deficiency, particularly in the United States, Canada and several European countries, drove higher sales of this protein. Demand also grew in certain Latin American countries, although more incipiently.

·Sales of albumin, continued to drive the division’s growth, especially in China, the European Union and Latin America. Brazil, Indonesia and several Middle Eastern countries also saw an increase in sales attributable to the division’s commercial efforts.

·Sales volume of factor VIII continued to grow in a competitive price environment subject to public tenders in certain emerging markets.

·Specialty proteins also drove growth. Hyperimmune immunoglobulin sales were particularly strong. We also signed an agreement with Spain’s Ministry of Health to supply tetanus and diphtheria vaccines beginning in April 2017. We market these vaccines pursuant to an agreement with MassBiologics of the University of Massachusetts Medical School in the U.S.

Diagnostic.  Diagnostic division net revenue increased by 5.9% (6.8% at constant currency) from €692 million in 2016 to €732 million in 2017.  This increase was mainly due to the transfusion medicine business, the division’s main growth driver, as described below.

·Sales of NAT donor screening systems (Procleix® NAT Solutions), used to screen blood and plasma donations, were the division’s leading source of revenues. Additional revenue streams included sales of the Zika virus blood screening tests in the United States and greater market penetration in the Asia Pacific region, particularly in Japan, China, Saudi Arabia, Israel and Singapore.

·Sales of antigens used to manufacture diagnostic immunoassays, marketed as part of the joint business agreement with Ortho Clinical Diagnostics continued to increase.

·The blood typing and immunohematology line also contributed to the division’s revenues. Sales of blood typing reagents were exceptionally strong in China as a result of commercial efforts implemented in this key region, as well as in the U.S., a market where we believe we have substantial growth potential. This upward trend was also seen in certain European countries, including Hungary, Italy, Switzerland, Spain and France. Geographic expansion is one of the main drivers of growth in this division.

Specialty diagnostics revenues remained stable, and will benefit as the division progressively expands its clinical diagnostics product portfolio. We continue to concentrate our efforts on developing new diagnostic tests for personalized medicine through Progenika Biopharma. It has also strengthened the commercialization of Grifols’ hemostasis line thanks to an exclusive global distribution agreement with Beckman Coulter.

Hospital.  Net revenue from the Hospital division increased by 3.3% (3.3% at constant currency) from €102.3 million in 2016 to €105.6 million in 2017. We continue to promote the internationalization of the division. In 2017, 32% of net revenue was generated outside Spain, as compared to 29% in 2016. Sales are growing in Spain, the United States and Latin America as a result of our global expansion efforts By area of specialization, Pharmatech, which includes Hospital Logistics and i.v. Tools, and the Intravenous Therapies and the nutrition lines were the main drivers of growth. There was notable growth in the third-party manufacturing business line from new contracts in the U.S.

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Bio Supplies.  As of January 2017, the Bio Supplies division includes revenues previously included in Raw Materials. The division records sales of biological products for non-therapeutic use and other biological products, as well as those related to the fractionation and purification agreements signed with Kedrion.

Net revenue from Bio Supplies increased by 16.7% (18.1% at constant currency) from €57.2 million in 2016 to €66.8 million in 2017 mainly as a result of Kedrion related revenues and sales of biological products for non-therapeutic use.

The following table reflects a summary of net revenue by each of our geographic regions for 2017 as compared to 2016:

Summary of Net Revenue by Region	Year ended December 31, 2017	% of total net revenue	Year ended December 31, 2016 (3)	% of total net revenue	% var	% var CC(1)
	(in thousands of euros, except for percentages)
European Union(2)	686,983	15.9	651,496	16.1	5.4	5.9
United States and Canada	2,896,505	67.1	2,707,579	66.9	7.0	7.7
Rest of the World	734,585	17.0	690,755	17.0	6.3	6.9
Total	4,318,073	100.0	4,049,830	100.0	6.6	7.2

(1)Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue.  See “Presentation of Financial and Other Information.”

(2)Net revenue earned in the European Union includes net revenue earned in Spain.

(3)Comparable considering the new divisional structure that allocates “ Raw Materials and Others” by region.

We believe that our ongoing internationalization has helped to improve our sales performance.  We have seen a gradual reduction in the proportion of net revenue to total net revenue accounted for by Spain, as we continue to focus on increasing sales in regions less affected by austerity measures, with shorter payment periods and better margins. In 2017, 94% of net revenue, or €4.1 billion, was derived from countries outside of Spain. International expansion remains a strategic priority to stimulate the company’s organic growth, although each division focuses on specific markets and distinct strategies to optimize sales.

The United States has become a core market for the three main divisions. Revenues in the U.S. and Canada grew by 7.0% (7.7% at constant currency) in 2017 to €2,896.5 million. Meanwhile, sales in the European Union rose by 5.4% (5.9% at constant currency) to €687 million, headed by growth in countries like Spain, Germany, the United Kingdom and France. Sales in Rest of the World also expanded, registering a 6.3% (6.9% cc) increase to €734.6 million. Especially noteworthy were the positive sales trends in China and Australia, which led the Asia Pacific region; growth in Latin America, especially Brazil; and the gradual market penetration in Turkey and the Middle East, including Saudi Arabia and Israel.

Cost of sales

Cost of sales increased by 1.3% from €2.1 billion in 2016 to €2.2 billion in 2017.  Cost of sales as a percentage of net revenue improved to 50.2% compared to 52.8% in 2016. This was mainly due to the impact of the NAT donor-screening business acquired in January 2017 offset by the higher costs in the cost of sales as a the result of the investment plan to open new plasma collection centers.

Gross Profit

The increase in gross profit margin from 47.2% of net revenue in 2016 to 49.8% in 2017 was mainly due to the impact of the the NAT donor-screening business acquired in January 2017 offset by the higher costs as a result of the investment plan to open new plasma collection centers.

Research and development

Research and development spending increased from €197.6 million (4.9% of net revenue) in 2016 to €288.3 million (6.7% of net revenue) in 2017. Excluding the specific impact of the impairment of Aradigm’s assets, research and development expenses comprised €223.7 million euros (5.2% of net revenue), 13.2% higher than in 2016. Our spending was focused on strengthening our

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pipeline, including in-house and external investments in research. See Item 4 of this Part I, “Information on the Company — B.  Business Overview — Research and Development” for additional details.

Selling, general and administration expenses

Selling, general and administration expenses increased by 11.0% from €775.3 million in 2016 to €860.3 million in 2017 mainly as a result of expenses relating to the integration of the NAT technology donor-screening business acquired in January 2017. Excluding these integration expenses, selling, general and administration expenses increased by 8.3% year-over-year, explained by the activity growth in all divisions and the NAT donor-screening business acquired in January 2017, and comprised 19.4% of net revenue, compared to 19.1% in 2016.

Finance result

Finance result increased by 23.2% from €233.6 million in 2016 to €287.7 million in 2017. This increase was primarily a result of the higher levels of debt assumed after acquiring a portion of the NAT technology donor-screening business in January 2017, and from the specific impairment of Aradigm’s assets. See Note 11 to our audited consolidated financial statements included in this annual report on Form 20-F for more detail. Excluding the impacts of these specific events, the finance result would have been €269.3 million or 15.3% higher than in 2016. Finance result also includes the amortization of capitalized costs related to our debt.

Income tax expense

In 2017, we had a profit before income tax of €695.7 million and income tax expense of €34.4 million, which represents a tax rate of 4.9%.  The U.S. corporate tax reform approved on December 22, 2017 required Grifols to recognize non-recurring income that significantly affected our tax expense reported for 2017. The reduction from 35% to 21% on the U.S. federal corporate income tax rate (effective starting January 1, 2018) required a revaluation of Grifols U.S. deferred tax assets and liabilities. The net positive effect on the group’s 2017 results was €171.6 million. Excluding the non-recurring impact of the U.S. tax reform and the tax effect of the specific impairment of Aradigm’s assets and of costs resulting from the acquisition and subsequent integration of the NAT technology donor-screening business, the effective tax rate was 27.3%, compared to an effective tax rate of 23.6% in 2016.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

The following discussion and analysis contains information regarding our results of operations for the year ended December 31, 2016, as compared to the year ended December 31, 2015:

	Year Ended December 31,				Change
	2016		2015		€		%
	(in thousands of euros, except for percentages)
Continuing Operations
Net revenue	4,049,830		3,934,563		115,267		2.9
Cost of sales	(2,137,539	)	(2,003,565	)	(133,974	)	6.7
Gross profit	1,912,291		1,930,998		(18,707	)	(1.0	)
Research and development	(197,617	)	(224,193	)	26,576		(11.9	)
Selling, general and administration expenses	(775,266	)	(736,435	)	(38,831	)	5.3
Operating expenses	(972,883	)	(960,628	)	(12,255	)	1.3
Operating result	939,408		970,370		(30,962	)	(3.2	)
Finance income	9,934		5,841		4,093		70.1
Finance costs	(244,829	)	(240,335	)	(4,494	)	1.9
Change in fair value of financial instruments	(7,610	)	(25,206	)	17,596		(69.8	)
Exchange differences	8,916		(12,140	)	21,056		(173.4	)
Finance result	(233,589	)	(271,840	)	38,251		(14.1	)
Share of (losses) of equity accounted investees	6,933		(8,280	)	15,213		(183.7	)
Profit before income tax	712,752		690,250		22,502		3.3
Income tax expense	(168,209	)	(158,809	)	(9,400	)	5.9
Profit after income tax from continuing operations	544,543		531,441		13,102		2.5
Consolidated profit for the year	544,543		531,441		13,102		2.5

Net Revenue

Net revenue is calculated by subtracting certain chargebacks, cash discounts, volume rebates, Medicare and Medicaid discounts and other discounts from our gross revenue.  See Note 23 to our audited consolidated financial statements included in this annual report on Form 20-F.

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Net revenue increased by €115.3 million from €3.9 billion in 2015 to €4.0 billion in 2016.  This 2.9% (3.1% at constant currency) net revenue increase is the result of increased net revenue mainly driven by the Bioscience division, offset in part by the negative impact of USD/EUR and other exchange rate fluctuations in the amount of €5.2 million.

The following table reflects a summary of net revenue by each of our divisions for 2016, as compared to 2015:

Summary of Net Revenue by Division	Year ended December 31, 2016 (2)	% of total net revenue	Year ended December 31, 2015 (2)	% of total net revenue	% var		% var CC(1)
	(in thousands of euros, except for percentages)
Bioscience	3,228,275	79.7	3,032,111	77.1	6.5		6.6
Diagnostic	663,983	16.4	691,452	17.6	(4.0	)	(3.9	)
Hospital	98,583	2.4	96,245	2.4	2.4		4.5
Sub total	3,990,841	98.5	3,819,808	97.1	4.5		4.6
Raw Materials and Others(2)	58,989	1.5	114,755	2.9	(48.6	)	(49.0	)
Total	4,049,830	100.0	3,934,563	100.0	2.9		3.1

(1)Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue.  See “Presentation of Financial and Other Information.”

(2)Net revenues by division not comparable to 2017 due to intersegment sales and the reclassification of the biological products for non-therapeutic use sales that are reported as Bio Supplies Division sales from January 2017. Figures have not been restated according to the new divisional classification on the grounds of materiality.

Bioscience.  Net revenue for the Bioscience division increased by 6.5% (6.6% at constant currency) from €3.0 billion in 2015 to €3.2 billion in 2016.  The United States, China and Spain were the division’s principal country drivers, and the main plasma drugs marketed by Grifols saw significant growth.  Noteworthy items include the growth recorded for IVIG; the growth of albumin in China and Latin America; the significant increases in sales of alpha-1 antitrypsin resulting from the strategy of improving the diagnosis of the deficiency in this protein; and the growth of plasma-derived Factor VIII.  The significant increase in sales volume continues to be the main driver of growth, although there is also a positive price impact.  The geographic mix also had a positive impact on revenues in 2016.

The volume of sales of immunoglobulin (IVIG) remained solid throughout the year, with growth in all the regions.  We maintained our global leadership of IVIG sales. Demand for IVIG continued to be strong in the U.S. market as a result of the efforts made to promote better diagnosis and greater use for the treatment of neurological diseases such as CIDP, a segment led by us. Sales of albumin continued to make a significant contribution to the Bioscience division’s growth, supported by significant increases in sales in China and the United States.  There was substantial growth in Latin America, India and Indonesia as a result of marketing efforts focused on promoting expansion in these areas.  Additionally, there was gradual growth in countries such as Turkey, Thailand and Brazil. We are the leader in alpha-1 antitrypsin and actively promote the diagnosis of deficiency in this protein (AATD) in Europe and the United States and are beginning to do so in Latin America.  Improvements in the identification of patients and the diagnosis of AATD continues to be one of the strategic pillars for the growth of demand in the sector. Sales of Factor VIII rose significantly in the United States, driven by increased preference for the natural protection benefits of Alphanate®.  We also strengthened the position of Alphanate® as the most prescribed plasma-derived Factor VIII in the United States. In addition, the results of the Survey of Inhibitors in Plasma-Products Exposed Toddlers, or SIPPET, study are influencing the choice of treatment for previously untreated patients with severe hemophilia A.

Diagnostic.  Diagnostic division net revenue decreased by 4.0% (3.9% at constant currency) from €691.5 million in 2015 to €664 million in 2016.  This is the division of the group that has a presence in the most countries.  Growth was notable in the United States, Argentina, Saudi Arabia, Turkey, Switzerland, China and Australia. For comparison purposes, the revenues reported in 2015 included the impact of the contracts for systems using NAT technology (Procleix® NAT Solutions) signed with the Japanese Red Cross, as well as higher revenues deriving from the old contract with Abbott Laboratories for the production of antigens.  This contract, signed in July 2015, for a total value of approximately $700 million, extended the supply of antigens until 2026.

Revenues from sales of laboratory systems using NAT technology (Procleix® NAT Solutions) for virological screening of blood and plasma donations remained stable in the main markets, including the United States, where we have a market share close to 80%.  In the second half of the year, there was a positive impact from the Zika virus blood screening test, developed jointly with Hologic to tackle the Zika virus outbreak that occurred in 2016.  After the end of 2016, we completed the Hologic Transaction in order to enhance our vertical integration and further promote the development of new tests and screening routines for emerging viruses.  The blood typing line has continued to be one of the division’s growth drivers. Sales of analyzers (Wadiana® and Erytra®) maintained

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their upward trend, and a new autoanalyzer (Erytra® Eflexis®) was developed in order to offer differentiated products in mature markets such as Europe. Sales of antigens used to manufacture diagnostic immunoassays continue to be impacted by the major cost-reduction initiative being led by us within the framework of the joint-business agreement with Ortho Clinical Diagnostics, as well as by lower revenues obtained in 2016 under the old contract with Abbott Laboratories, from July 2015.

Hospital.  Net revenue from the Hospital division increased by 2.4% (4.5% at constant currency) from €96.2 million in 2015 to €98.6 in 2016.  Sales in Spain remained stable, whereas there were significant variations in the international markets. We continue to promote the internationalization of the division, and 29% of net revenue in 2016 are currently generated outside Spain.  There was notable growth in the United States and significant progress in Portugal.  The appointment in 2016 of a new commercial president of the division and the greater internationalization that is being pursued as the main growth strategy will contribute to a strengthening of revenues in the coming years. By product line, Intravenous Solutions and Pharmatech, which include intravenous therapy devices (i.v. Tools) and Hospital Logistics, were the main drivers of growth.

Raw Materials and Others.  Net revenue from Raw Materials and Others decreased by 48.6% (49.0% at constant currency) from €114.8 million in 2015 to €59 million in 2016 mainly as a result of the expected decrease of royalties’ revenue related to the transfusion diagnostic unit acquired with the Novartis Diagnostic Business.

The following table reflects a summary of net revenue by each of our geographic regions for 2016 as compared to 2015:

Summary of Net Revenue by Region	Year ended December 31, 2016 (4)	% of total net revenue	Year ended December 31, 2015 (4)	% of total net revenue	% var		% var CC(1)
	(in thousands of euros, except for percentages)
European Union(2)	640,249	15.8	662,917	16.8	(3.4	)	(2.7	)
Spain	217,497	5.4	207,641	5.4	4.7		4.7
United States and Canada	2,663,197	65.8	2,505,791	63.7	6.3		5.6
Rest of the World	687,395	17	651,100	16.6	5.6		8.4
Subtotal	3,990,841	98.5	3,819,808	97.1	4.5		4.6
Raw Materials and Others (3)	58,989	1.5	114,755	2.9	(48.6	)	(49.0	)
Total	4,049,830	100.0	3,934,563	100.0	2.9		3.1

(1)Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue.  See “Presentation of Financial and Other Information.”

(2)Net revenue earned in the European Union includes net revenue earned in Spain.

(3)We exclude net revenue derived from our Raw Materials division and, since January 2014, net revenue from “Others” from our reported net revenue by region, because we believe that such net revenue does not represent part of our core recurrent business lines.  Net revenue from Raw Materials and Others primarily consists of revenue from of third-party engineering projects performed by Grifols Engineering, as well as all income derived from manufacturing agreements with Kedrion and royalty income from the Bioscience and Diagnostic divisions, including royalties acquired with the Novartis Diagnostic Business.

(4)Net revenues by geographic region not comparable to 2017. From January 2017 revenues for all divisions are allocated to a region. Figures have not been restated according to the new divisional classification on the grounds of materiality.

We believe that our ongoing internationalization has helped to improve our sales performance.  We have seen a gradual reduction in the proportion of net revenue to total net revenue accounted for by Spain, remaining consistent at 5.4% in 2016 compared to 5.4% in 2015, as we continue to focus on increasing sales in regions less affected by austerity measures, with shorter payment periods and better margins. In 2016, 94.6% of net revenue, or €3.8 billion, was derived from countries outside of Spain.

Cost of sales

Cost of sales increased by 6.7% from €2.0 billion in 2015 to €2.1 billion in 2016.  Cost of sales as a percentage of net revenue has increased to 52.8% compared to 50.9% in 2015. The increase in the cost of sales is the result of an increase of the cost per liter of plasma due to investments in new plasma collection centers to support growing demand for plasma proteins as well as the trend towards greater incentives to reward donors for their time. These factors were partially offset by improved manufacturing and operating efficiencies at the group’s plants.

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Gross Profit

The decrease in gross profit margin during the period from 49.1% of net revenue in 2015 to 47.2% in 2016 was mainly due to the significant decrease in royalties relating to the transfusion diagnostics unit compared with 2015 and higher plasma costs associated with the investment in new donor centers, as well as the trend towards greater incentives to reward donors for their time. These factors were partially offset by improved manufacturing and operating efficiencies at the group’s plants.

Research and development

Research and development spending decreased from €224.2 million (5.7% of net revenue) in 2015 to €197.6 million (4.9% of net revenue) in 2016, and our spending was focused on strengthening our pipeline. See Item 4 of this Part I, “Information on the Company — B.  Business Overview — Research and Development” for details.

Selling, general and administration expenses

Selling, general and administration expenses increased by 5.3% from €736.4 million in 2015 to €775.3 million in 2016 as a result of intensifying sales and marketing efforts associated with key products and countries. However, selling, general and administration expenses as a percentage of net revenue increased to 19.1% in 2016, compared to 18.7% in 2015. Additionally, we recorded a charge in the amount of $0.2 million for the branded prescription drug, or BPD, fee in fiscal year 2016. The BPD fee is not tax deductible.

Finance result

Finance result decreased by 14.1% from €271.8 million in 2015 to €233.6 million in 2016. This decrease was primarily a result of the termination of interest rate derivatives and the positive impact of exchange rate variations.  Finance result also includes the amortization of capitalized costs related to our debt.

Income tax expense

In 2016, we had a profit before income tax of €712.8 million and income tax expense of €168.2 million, which represents an effective tax rate of 23.6%.  Our effective tax rate increased from 23.0% in 2015, primarily due to changes in the contribution to profits from different geographical regions.

Regulation

For detailed information regarding the regulations applicable to our business, see Item 4 of this Part I, “Information on the Company — E.  Regulatory Matters.”

Inflation

We historically have not been affected materially by inflation in our core geographies.

B.Liquidity and Capital Resources

Our principal liquidity and capital requirements consist of costs and expenses relating to the operation of our business, capital expenditures for existing and new operations and debt service requirements relating to our existing and future debt.  Historically, we have financed our liquidity and capital requirements through internally generated cash flows, mainly attributable to revenue and debt financings.  As of December 31, 2017, our cash and cash equivalents totaled €886.5 million. In addition, as of December 31, 2017, we had the equivalent of approximately €380 million available under our debt agreements, including the equivalent of approximately €250 million available as Revolving Loans under our New Credit Facilities.

We expect our cash flows from operations combined with our cash balances and availability under the Revolving Loans from the New Credit Facilities and other bank debt to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital expenditures for at least the next twelve months. Currently, we do not generate significant cash in any country that might have restrictions for funds repatriation, and we estimate that the existing cash located in Ireland, Spain and the United States, along with the cash generated from operations, will be sufficient to meet future cash needs in key countries.

Historical Cash Flows

Below are our consolidated statements of cash flow for the years ended December 31, 2017, 2016 and 2015, prepared under IFRS IASB.

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Statements of Cash Flows

For the Years Ended December 31, 2017, 2016 and 2015

	Year Ended December 31,
	2017		2016		2015
	(in thousands of euros)
Cash flows from operating activities
Profit before tax	695,722		712,752		690,250
Adjustments for:	556,792		391,986		460,564
Amortization and depreciation	215,490		201,869		189,755
Other adjustments:	341,302		190,117		270,809
(Profit)/losses on equity accounted investments	19,888		(6,933	)	8,280
Impairment of assets and net provision charges	66,047		(23,079	)	(564	)
(Profit)/losses on disposal of fixed assets	1,551		(2,987	)	6,721
Government grants taken to income	(286	)	(1,681	)	(1,854	)
Finance cost/(income)	263,657		236,034		256,129
Other adjustments	(9,555	)	(11,237	)	2,097
Changes in operating assets and liabilities	(65,800	)	(164,319	)	(77,058	)
Change in inventories	(165,508	)	(173,003	)	(120,641	)
Change in trade and other receivables	80,112		(25,180	)	144,405
Change in current financial assets and other current assets	(2,691	)	(2,610	)	(5,565	)
Change in current trade and other payables	22,287		(36,474	)	(95,257	)
Other cash flows from/(used in) operating activities	(344,968	)	(387,141	)	(330,978	)
Interest paid	(207,079	)	(180,497	)	(171,380	)
Interest recovered	9,492		8,685		4,316
Income tax (paid)/received	(147,015	)	(215,329	)	(163,914	)
Other recovered (paid)	(366	)	—		—
Net cash from operating activities	841,746		553,278		742,778
Cash flows from/(used in) investing activities
Payments for investments	(2,209,667	)	(509,078	)	(647,417	)
Group companies and business units	(1,857,210	)	(202,727	)	(58,609	)
Property, plant and equipment and intangible assets	(322,973	)	(292,690	)	(567,020	)
Property, plant and equipment	(251,507	)	(249,416	)	(522,587	)
Intangible assets	(71,466	)	(43,274	)	(44,433	)
Other financial assets	(29,484	)	(13,661	)	(21,788	)
Proceeds from the sale of investments	23,787		2,426		14,307
Property, plant and equipment	762		2,426		14,307
Other financial assets	23,025		—		—
Net cash (used in) investing activities	(2,185,880	)	(506,652	)	(633,110	)
Cash flows from/(used in) financing activities
Proceeds from and payments for equity instruments	—		(11,766	)	12,695
Issue	—		—		—
Payments for treasury stock	—		(12,686	)	(58,457	)
Sales of treasury stock	—		920		71,152
Proceeds from and payments for financial liability instruments	1,808,771		(80,149	)	28,953
Issue	1,912,615		81,513		178,686
Redemption and repayment	(103,844	)	(161,662	)	(149,733	)
Dividends and interest on other equity instruments	(218,260	)	(216,151	)	(216,772	)
Dividends paid	(218,260	)	(216,151	)	(221,772	)
Dividends received	—		—		5,000
Other cash flows from/(used in) financing activities	(156,446	)	(21,492	)	17,086
Financing costs included on the amortized costs of the debt	(142,288	)	—		—
Other amounts from / (used in) financing activities	(14,158	)	(21,492	)	17,086
Net cash from/(used in) financing activities	1,434,065		(329,558	)	(158,038	)
Effect of exchange rate fluctuations on cash	(98,419	)	35,441		111,724
Net increase in cash and cash equivalents	(8,488	)	(247,491	)	63,354
Cash and cash equivalents at beginning of the year	895,009		1,142,500		1,079,146
Cash and cash equivalents at year end	886,521		895,009		1,142,500

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Net Cash from Operating Activities

In 2015, we generated net cash from operating activities of €742.8 million.  The principal effects on working capital were:

·€170.0 million reduction in trade receivables (included in change in current trade and other receivables in the table above) related to the reduction in the average collection period, at 34 days in December 31, 2015, compared to 55 days in 2014;

·a €120.6 million increase in inventory levels due to the higher activity levels with respect to plasma-derived proteins and the Diagnostic division. We have continued to be successful in the management of inventory levels as confirmed by the reduction in inventory turnover to 261 days at December 31, 2015, compared to the figure of 266 at December 31, 2014; and

·a €71.7 million reduction in trade payables (included in change in current trade and other payables in the table above).

In 2016, we generated net cash from operating activities of €553.3 million.  The principal effects on working capital were as follows:

·increase of €43.3 million in trade receivables (included in change in current trade and other receivables in the table above). The average collection period was 37 days, as compared to the 34 days level at December 31, 2015;

·increase of €173.0 million in inventory levels due to the greater strength of sales, especially of plasma proteins, and the new openings of plasma collection centers. We continue to actively manage inventory levels on an anticipatory basis in order to match planned organic growth. In this regard, inventory turnover was 281 days at December 31, 2016, compared with 261 days reported at December 31, 2015; and

·trade payables (included in change in current trade and other payables in the table above) rose by €31.6 million due to the increase in the average payment period to 61 days in 2016.

In 2017, we generated net cash from operating activities of €841.7 million.  The principal effects on working capital were as follows:

·increase of €86.9 million in trade receivables (included in change in current trade and other receivables in the table above)  primarily due to improved accounts receivable balances. The average collection period at December 31, 2017 was 24 days, as compared to 37 days at December 31, 2016;

·increase of €165.5 million in inventory levels due to ongoing improvements in value chain management amid a strong sales environment, particularly for plasma proteins.  Grifols actively manages its inventory levels in advance to meet its expected growth plans, inventory turnover was 275 days at December 31, 2017, compared with 281 days reported at December 31, 2016; and

·trade payables (included in change in current trade and other payables in the table above) increased by €4.3 million, while the average payment period decreased from 61 days at December 31, 2016 to 53 days at December 31, 2017.

Net Cash from/(Used) in Investing Activities

Net cash used in investing activities amounted to €633.1 million in 2015, €506.7 million in 2016 and €2.2 billion in 2017.

Investments made in 2015 included capital expenditures during the year for a total of €266.4 million, focused on accelerating investments in manufacturing plants and opening new plasma collection centers (including relocation, renovation and new centers); the repurchase of industrial assets in the United States and Spain for a total of €277 million; and the acquisition of a 47.58% equity stake in Alkahest for a total of $37.5 million.

Investments made in 2016 included the acquisition of a 49% equity stake in the IBBI Group for $100 million and the acquisition of shares in Progenika Biopharma, S.A. for €25 million, increasing our equity stake in Progenika to 89.25%.

Investments made in 2017 included the acquisition of Hologic’s assets related to the research, development and production of reagents and instruments based on NAT technology for $1.8 billion, the acquisition of a 49% stake in Access Biologicals for $51 million, the acquisition of six plasma centers to Kedrion for €47 million, the acquisition of a 44% stake in GigaGen for $35 million,

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and the acquisition of a 40% stake in Kiro Grifols for a total of €12.8 million, increasing Grifols’ aggregate stake in Kiro Grifols to 90%. Investments also included capital expenditures for a total of €271.1 million, allocated mainly to opening new plasma donation centers and the expansion, renovation and relocation of existing centers, as well as in the production plants of its three divisions.

Net Cash from/(Used) in Financing Activities

Net cash used in financing activities was €158 million in 2015, primarily as a result of the payment of dividends of €221.8 million, including both the final dividend for 2014 and the interim dividend for 2015 distributed in December.

Net cash used in financing activities was €329.6 million in 2016, primarily as a result of the payment of dividends for a value of €216.2 million, including both the final dividend for 2015 and the interim dividend for 2016 distributed in December.

Net cash from financing activities was €1.4 billion in 2017, primarily as a result of our initial financing to acquire the share in the NAT technology donor-screening unit, and from dividend payouts of €218.3 million, which include the final dividend for 2016 and the interim dividend for 2017 distributed in December.

Working Capital

Our working capital, which is driven primarily by our trade receivables turnover and inventory aging, can vary significantly period to period depending on the activity.  Our capital requirements will depend on many factors, including our rate of sales growth, acceptance of our products, continued access to adequate manufacturing capacities, maintaining cGMP compliant facilities, the timing and extent of research and development activities, and changes in operating expenses, including costs of production and sourcing of plasma, all of which are subject to uncertainty.  We anticipate that our cash needs will be significant and that we may need to increase our borrowings under current or future debt agreements in order to fund our operations and strategic initiatives.  We anticipate that our working capital will increase in absolute terms in order to grow our business.

Inventory Aging

Inventory aging average increased from 2015 to 2016, as a result of investments made in the opening of new plasma collection centers. Inventory turnover rose to 281 days at December 31, 2016, compared to 261 days at December 31, 2015. In 2017, inventory turnover decreased to 275 days as a result of ongoing improvements in value chain management and a strong sales environment, particularly for plasma proteins.

Trade Receivables

Our receivables had an aging average of 24, 37 and 34 days at December 31, 2017, 2016 and 2015, respectively. We are focused on optimizing our working capital. The geographic redistribution of sales following the Talecris acquisition significantly increased our sales volume in countries with shorter collection periods and reduced sales in southern European countries, which have relatively longer collection periods (Spain, Italy, Portugal and Greece) to approximately 8% of our total net revenue in 2017.

It is common to experience extended collection periods for balances due from Greece, Italy, Spain and Portugal.  In particular, in Spain, Italy and Portugal, it is common practice for government or local authority-backed entities to pay suppliers well after the 30- to 60-day period normally applied, with payments occurring very often after one year.  The failure to receive timely payments for the sale of our products negatively affects our working capital levels and may require us to obtain more short-term financing than we would otherwise need.

The following table presents the breakdown of our trade receivables by country in each of Greece, Italy, Spain and Portugal as of December 31, 2017:

	Balances with Public Entities				Balances with Third Parties
	Balance (1)	Balance Past Due	Provision for Doubtful Receivables (2)		Balance (3)	Balance Past Due	Provision for Doubtful Receivables (4)		Net Debt (1+2+3+ 4)
	(in thousands of euros)
Greece	—	—	—		745	—	—		745
Italy	4,020	2,348	—		10,614	6,342	(4,016	)	10,618
Spain	33,702	7,785	—		23,444	8,926	(136	)	57,010
Portugal	1,078	490	(296	)	1,972	1,085	(126	)	2,628
Total	38,800	10,623	(296	)	36,775	16,353	(4,278	)	71,001

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Allowances for doubtful accounts are recognized when there are indicators that the debt will not be repaid.  Although we have historically collected all trade receivables due from the government or funded by the government in each of Greece, Italy, Spain and Portugal, we are aware of the economic difficulties presently facing some of those countries.  In each of 2017, 2016 and 2015, we made a provision for doubtful receivables from Portuguese public entities and from Italian public entities in 2015; however, this amount is not material. We believe we will recover the trade receivables from each of Greece, Italy, Spain and Portugal.

In the best interest of the Company, we may sell certain receivables with a maturity beyond 30 days.  Certain receivables are sold to financial institutions without recourse.  We sold €912 million, €870 million and €787 million of receivables to third parties during 2017, 2016 and 2015, respectively.

Capital Expenditures and Other Intangible Assets

The following table presents our capital expenditure additions in the years ended December 31, 2017, 2016 and 2015, by division.

	Year Ended December 31,
	2017	2016	2015
	(in thousands of euros)
Bioscience division	227,635	197,741	421,020
Hospital division	10,429	9,193	7,972
Diagnostic division	70,032	89,760	68,740
Bio Supplies	198	84	—
Others	20,911	13,313	—
Unallocated	11,268	12,011	79,082
Total	340,473	322,102	576,814

January 2015 through December 2017

Facilities.  The most important capital projects relating to the expansion and improvement of our manufacturing facilities during 2015, 2016 and 2017 were:

Parets site (Barcelona, Spain):

·investments to increase purification capacity of fibrin sealant and topic thrombin of €1.3M in 2017;

·investments in a plant to manufacture Prolastin-C® of €24.5 million in 2015, €13.2 million in 2016 and €4 million in 2017;

·investments in a new production line for diagnostic gel cards of €2.2 million in 2016 and €1.2 million in 2017;

·investments to increase the production of Intravenous solutions bags of €0.9 million in 2015, €1.2 million in 2016 and €1.4 million in 2017;

·investments to increase the albumin purification capacity of €1.3 million in 2015 and €0.1 million in 2016; and

·investments of €1 million in 2015 for a new solvents line.

Clayton site (North Carolina, United States):

·construction of a new immunoglobulins purification and filling plant for €0.4 million in 2017;

·construction of a new 6 million liter fractionation plan; for €2.6 million in 2016 and €29.1 million in 2017;

·completing the construction and bringing online a new plasma fractionation facility for €6.5 million in 2015 and €0.1 million in 2016 ;

·construction of a new plasma warehouse for €7.9 million in 2015 and €0.1 million in 2016;

·construction of a new raw materials warehouse for €4.6 million in 2015 and less than €0.1 million in 2016;

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·investments of €5.8 million in 2015, €4.8 million in 2016 and €0.9 million in 2017 for the construction of new aseptic filling areas, as well as validation of the new filling zone facilities and equipment for liquid and freeze-dried products;

·investments of €0.6 million in 2015 and €0.1 million in 2016 to expand the Gamunex purification area; and

·construction of a convalescent plasma immunoglobulin facility to help develop treatments for diseases such as Ebola and others for €7.5 in 2015, and €0.5 million in 2016.

Los Angeles (California, United States):

·increasing our albumin and purification capacity for €3.7 million in 2015, €4.4 million in 2016 and €1.5 million in 2017;

·investments to increase our IVIG purification capacity of €3.3 million in 2015, €7.2 million in 2016 and €2.6 million in 2017; and

·land and facilities acquisition in Los Angeles for €16.6 million in 2015, €1.5 million in 2016.

Dublin (Ireland):

·aggregate investments of approximately €58 million to build a new headquarters, global operations and logistics center to serve as part of the new global operations center of the Bioscience division from 2015 to 2017; and

·investment in a new albumin purification and filling plant of €2.6 million in 2016 and €28.5 million in 2017.

Other Investments:

·investments in serialization to enhance manufacturing and packaging identification of €1.4 million in 2016 and €4.7 million in 2017;

·significant investments in new donor centers and donor center expansions in the United States: investments of €21.8 million in 2015, €31 million in 2016 and €40.5 million in 2017;

·Emeryville, United States: investments of €13.4 million in 2015, €33.3 million in 2016 and €10.2 million in 2017 to consolidate the manufacturing of antigens in a new building;

·Campo Largo (Paraná), Brazil: land acquisition and construction of commercial offices and a plant to manufacture bags used for collection, storage and transfusion of blood components for €7.3 million in 2015, €9.3 million in 2016 and €3.3 million in 2017;

·Murcia, Spain:  investments of €1.3 million in 2015, €0.4 million in 2016 and €0.2 million in 2017 to increase capacity to manufacture parenteral solutions by approximately eight million units, to approximately 35 million units and investments to increase Fleboflex manufacturing capacity of €1.9 million in 2015, €2.3 million in 2016 and € 0.5million in 2017;

·refurbishment of the Barcelona headquarters included €16.4 million in acquiring a new office building and investments in the refurbishment of the existing building of €1.4 million in 2015, €0.2 million in 2016 and €0.6 million in 2017; and

·investment in a new office building at the Clayton plant for €3.7 million in 2015, €10.2 million in 2016 and €7.5 million in 2017.

January 2018 through December 2019

Pursuant to the Hologic transaction, which was completed on January 31, 2017, we acquired a facility located in San Diego, California.  At the San Diego facility, we will manufacture the oligos and other critical components of the TMA amplified NAT kits for blood and plasma infectious diseases screening. Specific components focused on HIV, Hepatitis B and C, Parvo and Zika are among those being manufactured at the San Diego facility.

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We are undertaking an investment plan that includes, among other capital expenditures, approximately $360 million from 2016 through 2021 to expand manufacturing capacity for our plasma derived therapies.  This is part of our total €1.2 billion investment plan from 2016 through 2021, which covers all divisions. We plan to finance our projected capital expenditures with internally generated cash flow, cash on hand and debt financing.   Additional capital expenditures have been, and will continue to be, needed as a result of the acquisition of Novartis’ assets.  These expenditures are included in our current investment plan.

The majority of our investments benefit our Bioscience division, with the goal of improving the structure of our plasma collection centers in the United States and expanding our manufacturing facilities.  We aim to optimize utilization of our fractionation capacity by obtaining FDA and EMA licenses and completing other requirements to purify any of our intermediate products at any of our plants.

We are also expanding and relocating plasma donation centers and improving infrastructures related to raw materials classification, preparation and storage facilities, logistics centers and analysis laboratories.

The most important planned capital projects relating to the expansion and improvement of our manufacturing facilities are:

·Clayton: construction of a new six million liters fractionation plant, construction of a new immunoglobulin purification and filling plant and remodeling of the Quality Operations labs;

·Parets: completion of a new Prolastin® plant already in validation and improvements in the albumin purification plant;

·Dublin: construction of a purification plant for albumin;

·Emeryville: completion of the construction of a new building to consolidate the manufacturing of antigens; and

·construction of new plasma collection centers as well as further relocation and renovation of our existing centers. As part of this expansion process, we have already added 40 new plasma collection centers since 2015 and plan to have 230 FDA-approved plasma collection centers by 2019.

We are undertaking research and development projects in all of our major product areas.  See Item 4 of this Part I, “Information on the Company — B.  Business Overview — Research and Development” for details of the major projects.

Sources of Credit

European Investment Bank Term Loans

On October 28, 2015, Grifols Worldwide Operations Limited entered into a loan agreement with the European Investment Bank for a term loan of €100 million under the European Fund for Strategic Investments, or the 2015 European Investment Bank Term Loan, which was amended on December 5, 2017. The financial terms of the loan agreement include a fixed interest rate for a tenor of ten years from October 28, 2015, and a repayment schedule with amortization in years three through ten. The loan will be used to support our research and development, primarily focusing on the search for new indications for plasmatic proteins, including the treatment of Alzheimer’s disease, vascular disease, cardiovascular surgery and arterial thrombosis, amongst others.

On December 5, 2017, Grifols, S.A. obtained a new long-term loan with the European Investment Bank totaling €85 million, together with the 2015 European Investment Bank Term Loan, the European Investment Bank Term Loans.  The financial terms of the loan include a fixed interest rate of 2.019% for a tenor of ten years and a two-year grace period.  The proceeds of this loan are being used for research and development initiatives, notably the discovery and development of new products (plasma proteins), the finding of new therapeutic indications for existing plasma proteins and the improvement of manufacturing processes to increase yields, safety and efficiency.

As of December 5, 2017, the European Investment Bank Term Loans are secured by a perfected first priority security interest (subject to permitted liens, as defined in the documentation governing the European Investment Bank Term Loans) on the same collateral securing the New Credit Facilities, subject to a customary pari pasu intercreditor agreement entered into by and among Grifols, S.A., Grifols Worldwide Operations Limited, certain subsidiaries of Grifols, S.A. party thereto, the European Investment Bank and Bank of America, N.A., as collateral agent under the New Credit Facilities.

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New Credit Facilities

On January 31, 2017 we entered into the New Credit Facilities with a syndicate led by Nomura Securities International, Inc., Bank of America Merrill Lynch International Limited, Bank of America, N.A., Goldman Sachs Bank USA and HSBC Bank plc, as the arrangers, which consists of the “Senior Term Loans” and the “Revolving Loans”.  The initial Senior Term Loans were fully drawn down on January 31, 2017, and the incremental Senior Term Loans in an aggregate principal amount of $175 million were further drawn down on February 14, 2017.  The tranche A term loans, in original principal amounts equal to $2,350 million and €607 million, will mature six years from January 31, 2017 and have a repayment schedule with quarterly amortization starting on the last business day of the fiscal quarter ending on March 31, 2019, equal to (i) 5.0%, 10.0% and 10.0% per annum of the original principal amount in fiscal years 2019, 2020 and 2021, respectively, payable in four equal quarterly installments in respect of each such fiscal year, and (ii) 75% per annum of the original principal amount in fiscal year 2022, payable in equal quarterly installments for the first three quarters of such fiscal year, with the remainder to be paid at maturity.  The tranche B term loans, in original principal amount equal to $3.0 billion, will mature eight years from January 31, 2017 and will have a repayment schedule with quarterly amortization equal to 1.0% per annum of the original principal amount, with the remainder to be paid at maturity.  The Revolving Loans, which amount to $300 million equivalent in multicurrencies, are available during the period commencing from January 31, 2017 and ending on the sixth anniversary of the closing of January 31, 2017.

The interest rates on the Senior Term Loans and the Revolving Loans are based on (a) in the case of dollar denominated loans, the base rate (the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) the applicable LIBOR rate plus 1.00%) plus an applicable margin or (b) the applicable LIBOR rate, plus an applicable margin.  The applicable margin for loans at the LIBOR rate is (a) 1.75% for the multicurrency revolving loans and the tranche A term loan and (b) 2.25% for the tranche B term loan.

Borrowings under the New Credit Facilities are subject to mandatory prepayment upon the occurrence of certain events, including the incurrence of certain debt and the sale or other disposition of certain assets.  In addition, a portion of the borrowings under the New Credit Facilities are subject to mandatory prepayment in the event we have excess cash flow, as defined therein.  Both the Senior Term Loans and the Revolving Loans are guaranteed by Grifols, S.A. and certain subsidiaries of Grifols, S.A. that together with Grifols, S.A. represent, in the aggregate, at least 80% of the consolidated assets and consolidated EBITDA, as defined in the agreements, of Grifols, S.A. and its subsidiaries, and are secured by a perfected first priority security interest (subject to permitted liens, as defined in the New Credit Facilities) in all of the tangible and intangible assets of the U.S. credit parties and plasma inventory of the Foreign Borrower, as defined therein and pledges of equity of certain subsidiaries of Grifols, S.A. (subject to certain exclusions and limitations). The New Credit Facilities require the borrowers to ensure that (i) the aggregate EBITDA attributable to the guarantors of the New Credit Facilities as a group is no less than 80% of the consolidated EBITDA of Grifols, S.A. and its subsidiaries, (ii) the aggregate total assets of the guarantors of the New Credit Facilities as a group are no less than 80% of the consolidated total assets of Grifols, S.A. and its subsidiaries, and (iii) any subsidiary of Grifols S.A. that has EBITDA or total assets representing 10% or more of the consolidated EBITDA or consolidated total assets, respectively, of Grifols, S.A. and its subsidiaries, is a guarantor.

The New Credit Facilities include customary affirmative and negative covenants and events of default.  Negative covenants include, among other limitations, limitations on additional debt, liens, asset sales and affiliate transactions.  Events of defaults include, among other events, violation of covenants, material breaches of representations, cross default to other material debt, bankruptcy and insolvency and material judgments.

The terms of the New Credit Facilities contain limitations on our ability to pay ordinary dividends.  We may pay dividends (a) in the ordinary course of business consistent with past practices in an amount not to exceed in respect of any fiscal year, 40% of the consolidated net income of Grifols, S.A. and its subsidiaries for such fiscal year, which may be paid in installments, the first, no earlier than December of such fiscal year and the last, no later than the following fiscal year or (b) whether or not in the ordinary course of business so long as after giving effect thereto, the leverage ratio is not greater than 3.5x.

The borrower under the U.S. dollar tranche A facility and the revolving facility is Grifols Worldwide Operations Limited, an Irish entity and our wholly owned direct subsidiary. The borrower under the Euro-denominated tranche A facility is Grifols, S.A.  The borrower under the tranche B facility is Grifols Worldwide Operations USA, Inc., a Delaware corporation and a direct wholly owned subsidiary of Grifols Worldwide Operations Limited. The New Credit Facilities are governed by New York law, however, certain collateral documents are governed under the local law of other jurisdictions.

The 2017 Notes

On April 26, 2017, Grifols, S.A. issued €1.0 billion senior unsecured notes, or the 2017 Notes, that will mature on May 1, 2025 and bear interest at 3.20% per annum.  The 2017 Notes were exchanged for 97.1% of the $1.0 billion senior unsecured notes issued in March 2014 by Grifols Worldwide Operations Limited, a 100% subsidiary of Grifols, S.A. with a maturity in 2022 and bearing interest at 5.25% per annum, or the 2014 Notes.  The remaining 2.9% of the 2014 Notes was redeemed before the exchange in

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an amount of €27 million.  On May 2, 2017, the 2017 Notes were listed on the Global Exchange Market of the Irish Stock Exchange.  This exchange has allowed us to reduce our finance costs and extend our maturities.

The 2017 Notes pay interest semi-annually in arrears on May 1 and November 1, commencing on November 1, 2017.  The 2017 Notes are guaranteed on a senior unsecured basis by Grifols, S.A. and the subsidiaries of Grifols, S.A. that are guarantors and co-borrowers under the New Credit Facilities.  As of the date of this annual report on Form 20-F, the 2017 Notes are guaranteed by Biomat USA, Inc., Grifols Biologicals Inc., Grifols Shared Services North America, Inc., Grifols Diagnostic Solutions Inc., Grifols Therapeutics Inc., Instituto Grifols, S.A., Grifols USA, LLC, Grifols Worldwide Operations Limited and Grifols Worldwide Operations USA, Inc.

Grifols, S.A. may redeem the 2017 Notes, in whole or in part, at any time on and after May 1, 2020, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the 2017 Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:

Fiscal Year	Percentage
2020	101.600	%
2021	100.800	%
2022 and thereafter	100.000	%

Grifols, S.A. may redeem up to 40% of the outstanding 2017 Notes with money raised in one or more equity offerings by Grifols, S.A. at any time (which may be more than once) prior to May 1, 2020, as long as at least 60% of the aggregate principal amount of 2017 Notes issued remains outstanding immediately following any such offerings.

Grifols, S.A. may redeem some or all of the 2017 Notes at any time prior to May 1, 2020 at a price equal to 100% of the principal plus a premium as defined under the indenture (computed using a discount rate equal to the Bund rate as of such redemption date plus 0.50%), plus accrued and unpaid interest, if any.

Grifols, S.A. is not required to make mandatory redemption or sinking fund payments with respect to the 2017 Notes.

If Grifols, S.A. experiences a change of control, it must give holders of the 2017 Notes the opportunity to sell to us their 2017 Notes at 101% of their face amount, plus accrued and unpaid interest.

Grifols, S.A. and the guarantors of the 2017 Notes may incur additional indebtedness if the fixed charge coverage ratio (as defined in the indenture governing the 2017 Notes) for Grifols, S.A. and the restricted subsidiaries (as defined in the indenture governing the 2017 Notes) on a consolidated basis for the most recently ended four full fiscal quarters immediately preceding the date on which such additional indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis.

The indenture governing the 2017 Notes contains certain covenants limiting, subject to exceptions, carve-outs and qualifications, Grifols, S.A.’s ability and its restricted subsidiaries’ ability to:  (i) pay dividends or make certain other restricted payments or investments; (ii) incur additional indebtedness or provide guarantees of indebtedness and issue disqualified stock; (iii) create liens on assets; (iv) merge, consolidate, or sell all or substantially all of our and our restricted subsidiaries’ assets; (v) enter into certain transactions with affiliates; (vi) create restrictions on dividends or other payments by our restricted subsidiaries; and (vii) create guarantees of indebtedness by restricted subsidiaries.  The indenture also contains certain customary events of default.

Other Debt

Certain other credit facilities and capital lease obligations are in place with various lenders and consist of long-term and short-term indebtedness of both us and Grifols, S.A. subsidiaries. As of December 31, 2017, we have €22.8 million of aggregate short-term credit under these facilities. The short-term credit facilities have maturity dates occurring in the next 12 months.

C.Research and Development, Patents and Licenses, etc.

We have made investments of €288.3 million, €197.6 million and €222.4 million in research and development in 2017, 2016 and 2015, respectively. Our research and development spending represented 6.7% of sales in 2017 and 4.9% of sales in 2016 and 5.7% of net revenues in 2015.

The following table reflects the composition of our total research and development expenses for each period presented.

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	Year ended December 31,
	2017	2016	2015
	(in thousands of euros)
Antithrombin in coronary surgery and severe burns	4,222	3,813	2,037
Fibrin glue in vascular, organ and soft-tissue surgery	2,222	7,808	16,826
Plasmapheresis with Albumin and IVIG for Alzheimer	10,137	11,436	10,829
Total Key Projects Expenses	16,581	23,057	29,692
Discovery	8,299	8,303	9,279
Preclinical	6,200	6,895	13,702
Clinical	42,356	35,217	39,297
Post Commercialization Studies	21,333	17,677	14,117
Rest of projects	26,453	21,320	18,137
Other Bioscience Research and Development Projects	104,641	89,412	94,532
Bioscience Core Research and Development (1)	41,994	39,717	38,627
Net Research and Development Capitalization/Amortization (2)	-28,252	-17,488	—
Bioscience	134,964	134,698	162,850
Diagnostic	60,028	41,280	53,260
Hospital	4,606	2,940	1,764
Other	19,812	14,400	0
Miscellaneous (3)	68,910	4,299	4,497
Total Research and Development	288,320	197,617	222,371

(1)Bioscience core research and development expenses consist of departments whose resources are utilized for general organization support including project management, medical affairs, regulatory licensing and quality assurance.

(2)Net Research and Development Capitalization/Amortization value in 2017 and 2016 reflects the capitalized expenses related with projects Fibrin Glue, high concentration immunoglobulin for subcutaneous administration and Alpha-1 Post Commercialization Study.

(3)Impairment of Aradigm’s R&D related assets.

We expect research and development expenditures to be in the range of 5% to 6% of net revenues in the near term.

We also expect that projects within our Bioscience division will continue to comprise the majority of our research and development expenses; however, we have in the past and may in the future invest in medical companies and projects outside the scope of our main activities to complement our Bioscience division projects. We do not anticipate the allocation of such expenses by division to differ materially from historical levels and current trends.

For detailed information regarding our research and development activities, see Item 4 of this Part I, “Information on the Company — B. Business Overview — Research and Development.”

D.Trend Information

Plasma-derived protein therapies are essential to extend and improve the lives of individuals suffering from chronic, acute and life-threatening conditions including infectious diseases, such as hepatitis, immunological diseases, such as multiple sclerosis, hemophilia, von Willebrand disease, liver dialysis and acute conditions such as burns and severe blood loss.  For this reason, the administration of these products cannot be interrupted or postponed without putting patients’ lives at risk.  This ensures a stable demand for such products.  In addition, because of the nature of the diseases treated, the reimbursement rates for plasma derivative products in the United States are high.  Any changes to such rates would likely elicit a strong lobbying response in the United States.

Based on recent MRB reports, sales in the human plasma-derived product industry have grown at a compound annual rate of 10.6% globally from 2005 to 2016 and 13.4% in the United States alone from 2005 to 2015. We believe that many plasma derivative products are underutilized and will continue to benefit from strong demand.  Additionally, new indications are being explored for a number of plasma-derived therapies, such as the treatment of Alzheimer’s disease.  We believe that the volume of global sales of plasma derivative products will continue to grow annually at 6% to 7% over the long term, driven primarily by the same factors that have contributed to its historical growth, including:

·population growth;

·the discovery and approval of new applications and indications for plasma-based products;

·an increase in the number of diagnosed patients and diagnosed but previously-untreated patients;

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·geographic expansion; and

·physicians’ greater awareness of conditions and treatments.

Approximately 15.9% of our sales were generated in the European Union in 2017, as compared to 16.1% in 2016 and 17.1% in 2015. We anticipate that the percentage of our sales generated in the European Union will not significantly increase in 2018.

There are significant barriers to entry into the plasma derivative products industry, as the industry is highly regulated and requires significant expertise and capital investments.  We do not expect these barriers to decrease in the near term.

Regulatory Environment.  In order to operate in the plasma derivatives industry, manufacturers and distributors must comply with extensive regulation by the FDA, the EMA and comparable authorities worldwide.  As a result, significant investments are required to develop, equip and maintain the necessary storage, fractionation and purification facilities and to develop appropriate sale, marketing and distribution infrastructures.  Additionally, only proteins derived from plasma collected at FDA-approved centers can be marketed in the United States, so securing an adequate supply of U.S. source plasma is required to operate in the United States.  We expect these regulatory restrictions to continue.

Product Pipeline.  We have an expanded portfolio of key products as a result of our recent acquisitions and will continue to invest in research and development with respect to new product and new indications for existing products.  Some key research and development projects underway include clinical studies of the use of albumin, diagnostic and vaccine therapies to treat Alzheimer’s disease, of albumin to treat advance cirrhosis and ascites, and of antithrombin in heart surgery.

Capital Expenditures.  From 2016 through 2020, we are undertaking a €1.2 billion investment plan that involves among other investments, cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience division as well as investments in the Diagnostic and Hospital divisions.

E.Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

F.Contractual Obligations

The following table presents our principal existing contractual obligations as of December 31, 2017, requiring future payments:

	Payments Due by Period
	Total	Less than one year	One to three years	Three to five years	More than five years
	(in thousands of euros)
Operating leases(1)	262,343	46,541	101,419	55,478	58,905
Financial debt obligations(2)	6,343,888	154,933	471,713	2,319,532	3,397,711
Interest — financial debt obligations(3)	1,136,124	184,651	371,854	440,602	139,017
Licenses and royalties(4)	43,717	20,033	8,532	11,783	3,370
Total	7,786,073	406,158	953,518	2,827,395	3,599,002

(1)Operating leases include primarily leases for our plasma collection centers, leases from sale-leaseback transactions and marketing offices worldwide.  These amounts reflect only our contractual obligations as of December 31, 2017, and therefore assume that these operating leases will not be renewed or replaced with new operating leases upon expiration.  Our operating lease expenses will likely be substantially higher than the amounts provided in this table because our operations will require us to either renew or replace our operating leases.

(2)Includes principal amortization for short- and long-term debt including, among other things, capitalized lease obligations.  The remaining financial debt was made up largely of bilateral facilities that bore interest at market rate.

(3)Interest payments on debt and capital lease obligations are calculated for future periods using interest rates in effect at the end of 2017.  Certain of these projected interest payments may differ in the future based on changes in floating interest rates, foreign currency fluctuations or other factors or events.  The projected interest payments only pertain to obligations and agreements

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outstanding at December 31, 2017.  Refer to Notes 20 and 30 to our audited consolidated financial statements included in this annual report on Form 20-F for further discussion regarding our debt obligations and related interest rate agreements outstanding at December 31, 2017.

(4)License and royalty payment formulas are generally based on volume of sales.  The amounts presented in the table are calculated based on the net revenue of 2017 without assuming any growth in sales.  Additionally, the column “More than five years” includes only one year of payments under the license agreement with Marca Grifols, S.L., which expires in January 2092.

G. Safe Harbor

See “Cautionary Statement Regarding Forward-Looking Statements” on page ii of this annual report.

Other Disclosures

Financial Derivatives

See Note 30 to our audited consolidated financial statements included in this annual report on Form 20-F for additional information regarding our derivative instruments.

The New Credit Facilities permit us to enter into hedging transactions.

Critical Accounting Policies

The preparation of consolidated financial statements in accordance with IFRS requires us to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures of contingent assets and liabilities.  A detailed description of our significant accounting policies is included in the notes to our audited consolidated financial statements included elsewhere in this annual report on Form 20-F.

We believe that certain of our accounting policies are critical because they require subjective and complex judgments, often requiring the use of estimates about the effects of matters that are inherently uncertain.  We apply estimation methodologies consistently from year to year.  Other than changes required due to the issuance of new accounting guidance, there have been no significant changes in our application of critical accounting policies during the periods presented.  We periodically review our critical accounting policies and estimates with the Audit Committee of our Board.  The following is a summary of accounting policies that we consider critical to our consolidated financial statements.

(a)Business combinations

We apply IFRS 3 (revised), Business combinations in transactions made subsequent to January 1, 2010, applying the acquisition method of this standard to business combinations.  The acquisition date is the date on which we obtain control of the acquiree.

The consideration paid excludes all amounts that do not form part of the exchange for the acquired business.  Acquisition related costs are accounted for as expenses when incurred.  Share capital increase costs are recognized as equity when the increase takes place and borrowing costs are deducted from the related financial liability when it is recognized.

At the acquisition date, we recognize at fair value the assets acquired and liabilities assumed.  Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured.  We also recognize indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.

Assets and liabilities assumed are classified and designated for subsequent measurement in accordance with the contractual terms, economic conditions, operating or accounting policies and other factors that exist at the acquisition date, except for leases and insurance contracts.

The excess between the consideration transferred and the value of net assets acquired and liabilities assumed, less the value assigned to non-controlling interests, is recognized as goodwill.

When a business combination has been determined provisionally, adjustments to the provisional values only reflect information relating to events and circumstances existing at the acquisition date and which, had they been known, would have affected the amounts recognized at that date.  Once this period has elapsed, adjustments are made to initial values only when errors must be

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corrected.  Any potential benefits arising from tax losses and other deferred tax assets of the acquiree that were not recorded because they did not qualify for recognition at the acquisition date are accounted for as income tax revenue, provided the adjustments were not made during the measurement period.

(b)Property, plant and equipment

(i)Depreciation

Property, plant and equipment are depreciated by allocating the depreciable amount of an asset on a systematic basis over its useful life.  The depreciable amount is the cost or deemed cost of an asset less its residual value.  We determine the depreciation charge separately for each component of property, plant and equipment with a cost that is significant in relation to the total cost of the asset.

Property, plant and equipment are depreciated using the following criteria:

	Depreciation method	Rates
Buildings	Straight line	1%–3%
Other property, technical equipment and machinery	Straight line	4%–10%
Other property, plant and equipment	Straight line	7%–33%

We review residual values, useful lives and depreciation methods at each fiscal year end.  Changes to initially established criteria are accounted for as a change in accounting estimates.

(ii)Subsequent recognition

Subsequent to the initial recognition of the asset, only those costs incurred which will probably generate future profits and for which the amount may reliably be measured are capitalized.  Costs of day-to-day servicing are recognized in profit or loss as incurred.

Replacements of property, plant and equipment which qualify for capitalization are recognized as a reduction in the carrying amount of the items replaced.  Where the cost of the replaced items has not been depreciated independently and it is not possible to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction.

(iii)Impairment

We test for impairment and reversals of impairment losses on property, plant and equipment based on the criteria set out below in (d).

(c)Intangible assets

(i)Goodwill

Goodwill is generated in the course of business combinations and is calculated using the criteria described in the section on business combinations.

Goodwill is not amortized, but tested for impairment annually or more frequently if events indicate a potential impairment loss.  Goodwill acquired in business combinations is allocated to the cash generating units, which we refer to as CGUs, or groups of CGUs that are expected to benefit from the synergies of the business combination, and we apply the criteria described in the footnotes to our audited consolidated financial statements included elsewhere in this annual report on Form 20-F.  After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

(ii)Internally generated intangible assets

Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.

Costs related with development activities are capitalized when:

·we have technical studies that demonstrate the feasibility of the production process;

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·we have undertaken a commitment to complete production of the asset to make it available for sale or internal use;

·the asset will generate sufficient future economic benefits; and

·we have sufficient technical and financial resources to complete development of the asset and have developed budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditures actually assigned to different projects.

The cost of internally generated assets is calculated using the same criteria established for determining production costs of inventories.  The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets through the consolidated statement of profit or loss.

Expenditures on activities that contribute to increasing the value of the different businesses in which we operate are expensed when incurred.  Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.

(iii)Other intangible assets

Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.

Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.

(iv)Intangible assets acquired in business combinations

The cost of identifiable intangible assets acquired in the business combination of Progenika includes the fair value of the currently marketed products sold, which are classified in “Other intangible assets” and “Development costs”.

The cost of identifiable intangible assets acquired in the business combination of Novartis includes the fair value of the existing royalty agreements.

(v)Useful life and amortization rates

We assess whether the useful life of each intangible asset acquired is finite or indefinite.  An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.

Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:

	Amortization method	Rates
Development expenses	Straight line	10%
Concessions, patents, licenses, trademarks and similar	Straight line	7%–20%
Computer software	Straight line	33%
Currently marketed products	Straight line	3%–10%

The depreciable amount is the cost or deemed cost of an asset less its residual value.

The Group does not consider the residual value of its intangible assets to be material.  The Group reviews the residual value, useful life and amortization method for intangible assets at each fiscal year end.  Changes to initially established criteria are accounted for as a change in accounting estimates.

(d)Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization

We evaluate whether there are indications of possible impairment losses on non-financial assets subject to amortization or depreciation to verify whether the carrying amount of these assets exceeds the recoverable amount.

We test goodwill, intangible assets with indefinite useful lives, and intangible assets with finite useful lives that are not available for use for potential impairment at least annually, irrespective of whether there is any indication that the assets may be impaired.

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The recoverable amount of the assets is the higher of their fair value less costs of disposal and their value in use.  An asset’s value in use is calculated based on an estimate of the future cash flows expected to derive from the use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows deriving from the asset.

Negative differences arising from comparison of the carrying amounts of the assets with their recoverable amounts are recognized in the consolidated statement of profit or loss.  Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.  If this is the case, recoverable amount is determined for the CGU to which the asset belongs.

Impairment losses recognized for cash generating units are first allocated, where applicable, to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset.  The carrying amount of each asset may not be reduced below the highest of (i) its fair value less costs of disposal, (ii) its value in use and (iii) zero.

At the end of each reporting period we assess whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased.  Impairment losses on goodwill are not reversible.  Impairment losses on other assets are only reversed if there has been a change in the estimates used to calculate the recoverable amount of the asset.

A reversal of an impairment loss is recognized in consolidated profit or loss.  The increase in the carrying amount of an asset attributable to a reversal of an impairment loss may not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized.

A reversal of an impairment loss for a CGU is allocated to its assets, except for goodwill, pro rata with the carrying amounts of those assets.  The carrying amount of an asset may not be increased above the lower of its recoverable value and the carrying amount that would have been obtained, net of amortization or depreciation, had no impairment loss been recognized.

(e)Inventories

Inventories are measured at the lower of cost and net realizable value.  The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The costs of conversion of inventories include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods.  The allocation of fixed indirect overheads is based on the higher of normal production capacity or actual production.

The raw material used to produce hemoderivatives is human plasma, which is obtained from our donation centers using the plasmapheresis method.  The cost of inventories includes the amount paid to plasma donors, or the amount billed by the seller when plasma is purchased from third parties, as well as the cost of products and devices used in the collection process, rental expenses and storage.  This plasma has to be stored before use, which is an essential part of the production process.  During the storage period, the plasma undergoes various virological tests and should be kept in quarantine in accordance with FDA and EMA regulations, in order to guarantee that all the plasma is suitable for use in the production process.

To the extent that plasma storage costs are necessary to the production process, they are included as cost of inventories.

Indirect costs such as general management and administration costs are recognized as expenses in the period in which they are incurred.

The cost of raw materials and other supplies and the cost of merchandise are allocated to each inventory unit on a weighted average cost basis.  The transformation cost is allocated to each inventory unit on a first in, first out basis.

We use the same cost model for all inventories of the same nature and with a similar use.

Volume discounts extended by suppliers are recognized as a reduction in the cost of inventories when it is probable that the conditions for discounts to be received will be met.  Discounts for prompt payment are recognized as a reduction in the cost of the inventories acquired.

When the cost of inventories exceeds the net realizable value, materials are written down to net realizable value.  Net realizable value is considered as detailed below.

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·Raw materials and other supplies:  replacement cost.  Nevertheless, raw materials and other supplies are not written down below cost if the finished goods into which they will be incorporated are expected to be sold at or above cost of production.

·Merchandise and finished goods:  estimated selling price, less costs to sell.

·Work in progress:  the estimated selling price of related finished goods, less the estimated costs of completion and the estimated costs necessary to make the sale.

The previously recognized write-down is reversed against profit or loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances.  The reversal of the write-down is limited to the lower of the cost and revised net realizable value of the inventories.  Write-downs may be reversed with a credit to “Changes in inventories of finished goods and work in progress and supplies”.

(f)Revenue recognition

Revenue from the sale of goods or services is measured at the fair value of the consideration received or receivable.  Revenue is presented net of VAT and any other amounts or taxes which are effectively collected on behalf of third parties.  Volume or other types of discounts for prompt payment are recognized as a reduction in revenue if considered probable at the time of revenue recognition.

We recognize revenue from the sale of goods when:

·we have transferred to the buyer the significant risks and rewards of ownership of the goods;

·we retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·the amount of revenue and the costs incurred or to be incurred can be measured reliably;

·it is probable that the economic benefits associated with the transaction will flow to us; and

·the costs incurred or to be incurred in respect of the transaction can be measured reliably.

We participate in government-managed Medicaid programs in the United States, accounting for Medicaid rebates by recognizing an accrual at the time a sale is recorded for an amount equal to the estimated claims for Medicaid rebates attributable to the sale.  Medicaid rebates are estimated based on historical experience, legal interpretations of the applicable laws relating to the Medicaid program and any new information regarding changes in the program regulations and guidelines that would affect rebate amounts.  Outstanding Medicaid claims, Medicaid payments and inventory levels are analyzed for each distribution channel and the accrual is adjusted periodically to reflect actual experience.  While rebate payments are generally made in the following or subsequent quarter, any adjustments for actual experience have not been material.

As is common practice in the sector, the purchase contracts we have signed with some of our customers entitle these customers to price discounts for a minimum purchase volume, volume discounts or prompt payment discounts.  We recognize these discounts as a reduction in sales and receivables in the same month that the corresponding sales are invoiced based on the customer’s actual purchase figures or on past experience when the customer’s actual purchases will not be known until a later date.

In the United States, we enter into agreements with certain customers to establish contract pricing for our products, which these entities purchase from the authorized wholesaler or distributor (collectively, “wholesalers”) of their choice.  Consequently, when the products are purchased from wholesalers by these entities at the contract price which is less than the price we charge to the wholesaler, we provide the wholesaler with a credit referred to as a chargeback.  We record the chargeback accrual at the time of the sale.  The allowance for chargebacks is based on our estimate of the wholesaler inventory levels, and the expected sell through of the products by the wholesalers at the contract price based on historical chargeback experience and other factors.  We periodically monitor the factors that influence the provision for chargebacks and make adjustments when we believe that actual chargebacks may differ from established allowances.  These adjustments occur in a relatively short period of time.  As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

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(g)Leases

(i)Lessee accounting records

We have rights to use certain assets through lease contracts.

Leases in which we assume substantially all the risks and rewards incidental to ownership are classified as finance leases, and all other leases are classified as operating leases.

·Finance leases:  We recognize finance leases as assets and liabilities at the commencement of the lease term, at the lower of the fair value of the leased asset and the present value of the minimum lease payments.  Initial direct costs are added to the asset’s carrying amount.  Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability.  The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.  Contingent rents are recognized as expenses in the years in which they are incurred.

·Operating leases:  We recognize lease payments under an operating lease, excluding incentives, as expenses on a straight-line basis unless another systematic basis is representative of the time pattern of the lessee’s benefit.

(ii)Sale-leaseback transactions

Any profit on sale leaseback transactions that meet the conditions of a finance lease is deferred over the term of the lease.

When the leaseback is classified as an operating lease:

·If the transaction is at fair value, any profit or loss on the sale is recognized immediately in consolidated statement of profit or loss for the year; or

·If the sale price is below fair value, any profit or loss is recognized immediately in the consolidated statement of profit or loss.  However, if the loss is compensated for by future below market lease payments, it is deferred in proportion to the lease payments over the period for which the asset is to be used.

Changes in Accounting Standards

More information on newly issued accounting standards is included in Note 2 to our audited consolidated financial statements included in this annual report on Form 20-F.

Item 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.Directors and Senior Management

Directors

Set forth below are the names and current positions of the members of the Board:

Name	Age	Title	Type	Director Since	Term Expires
Víctor Grifols Roura	68	Director, non-executive Chairman of the Board	Proprietary	July 1991(1)	May 2021
Víctor Grifols Deu	41	Director and Chief Executive Officer	Executive	May 2016	May 2020
Raimon Grifols Roura	54	Director and Chief Executive Officer	Executive	May 2015	May 2019
Ramón Riera Roca	63	Director	Executive	April 2000(2)	May 2021
Tomás Dagá Gelabert	62	Director and Vice-Secretary of the Board	Other External	April 2000	May, 2019
Thomas H. Glanzmann	59	Director and Vice-chairman of the Board of Directors	Other External	April 2006	May 2020
Anna Veiga Lluch	61	Director	Independent	December 2008	May, 2019
Luís Isasi Fernández de Bobadilla	61	Director	Independent	May 2011	May 2020
Steven Francis Mayer	59	Director	Independent	January 2011	May 2020
Belén Villalonga Morenés	50	Director	Independent	May 2013	May 2018
Marla E. Salmon	68	Director	Independent	May 2014	May 2018
Carina Szpilka Lázaro	49	Director	Independent	May 2015	May 2019
Iñigo Sánchez-Asiaín Mardones	54	Director and Lead Independent Director(3)	Independent	May 2015	May 2019
Nuria Martín Barnés	59	Secretary non-member of the Board of Directors	n/a	May 2015	n/a

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(1)Between July 8, 1991 and May 30, 2002, Mr. Víctor Grifols Roura was not a director but sat on the Board as representative of our then director Deria, S.A.

(2)Between May 25, 2001 and May 30, 2002, Mr. Ramón Riera Roca was not a director but sat on the Board as representative of our then director Grifols International, S.A.

(3)The lead independent director is a new figure introduced by Law 31/2014, adopted on December 3, 2014, that amended the Spanish Companies Act in matters of corporate governance, or Law 31/2014. It is mandatory to appoint a lead independent director when the office of Chairman of the Board and that of chief executive officer is held by the same person.  The lead independent director must (i) be an independent director and be authorized to request the calling of a board meeting or the inclusion of new points on the agenda of a board meeting already convened, (ii) coordinate and gather the non-executive directors and (iii) direct, when applicable, the Chairperson’s periodic evaluation by the Board. The Board in its meeting held on December 16, 2016, agreed to maintain Iñigo Sánchez-Asiaín Mardones as the Company’s Lead Independent Director as from January 1, 2017 even if from that date onwards the position is not mandatory since the office of the Chairman of the Board and that of chief executive officer is no longer held by the same person.

Director Biographies

Víctor Grifols Roura

Mr. Víctor Grifols Roura is non-executive Chairman and proprietary director since January 1, 2017. Prior to this date and since 1985 he held the role of Chief Executive Officer and top executive of the Grifols Group, succeeding his father Mr. Víctor Grifols Lucas at the performance of said tasks, spearheading the 1987 reorganization that created Grifols as it is today. Mr. Grifols Roura originally joined the Group in 1973 as an Export Manager and later served as Sales Manager. Since 2014, he has been a member of the Board of Directors of Criteria Caixa, S.A., Sociedad Unipersonal. Mr. Grifols Roura earned a business administration degree from the University of Barcelona. Mr. Grifols Roura acted as our CEO until December 31, 2016. As part of the approved succession plan on January 1, 2017, Mr. Víctor Grifols Deu and Mr. Raimon Grifols Roura were appointed co-CEO’s of the Company.

Víctor Grifols Roura is a shareholder of Deria S.A. (a non-controlling shareholder, pursuant the Spanish Securities Market Act). He is also a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act). Nuria Roura Carreras (Rodellar Amsterdam Holdings B.V.) is the mother of Víctor Grifols Roura.

Víctor Grifols Deu

Mr. Víctor Grifols Deu is Grifols’ joint and several Chief Executive Officer together with Raimon Grifols Roura since January 1, 2017. He succeeds his father Víctor Grifols Roura on the position. He is a member of the administration bodies of several companies within the Grifols Group and was appointed executive director in May 2016. He joined the Company in 2001 as an analyst in the Planning and Control Department of the Company. In 2008 he became the director of the Planning and Control Department and was also appointed member of the Executive Committees.  He has been part of the team that analyzed and was responsible for the integration of the operations after the acquisition of Alpha Therapeutics, Talecris Biotherapeutics and Novartis’ Transfusion Diagnostic Unit. He graduated in Business Administration and Management from the Ramon Llull University — Sarrià Chemical Institute and holds a postgraduate degree in Business Administration and Management from Michael Smurfit Business School in Dublin. Víctor Grifols Deu is the grandson of Nuria Roura Carreras (Rodellar Amsterdam Holdings B.V.).

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Raimon Grifols Roura

Mr. Raimon Grifols Roura is Grifols’ joint and several Chief Executive Officer together with Víctor Grifols Deu since January 1, 2017. He succeeds his brother Víctor Grifols Roura on the position. He is a member of the administration bodies of several companies within the Grifols Group. From 2001 to 2015 he held the role of non-member secretary of the Board of Directors of Grifols, S.A., serving as Director and Vice-Secretary of the Board of Directors since 2015. In May 2016, the Board accepted his resignation as vice secretary.  Until his appointment as executive director in July 2016, Mr. Grifols Roura was a partner at the law firm Osborne Clarke in Spain. Currently he is the Sole Director of Deria, S.A. Mr. Grifols Roura earned his degree in law from the University of Barcelona (Universidad de Barcelona).

Raimon Grifols Roura is the sole administrator and a shareholder of Deria S.A. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act). He is also a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act). Nuria Roura Carreras (Rodellar Amsterdam Holdings B.V.) is the mother of Raimon Grifols Roura.

Ramón Riera Roca

Mr. Ramón Riera Roca joined Grifols in 1977 and serves as Chief Operations Officer as well as being a member of the administration bodies of several companies of the Grifols Group. Mr. Riera earned a degree in Chemical Sciences from the Autonomous University of Barcelona.

Ramón Riera Roca is a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act).

Tomás Dagá Gelabert

Mr. Tomás Dagá Gelabert has served as director of Grifols, S.A. since April 2000 and also as vice secretary of the board since May 2016. He is a partner and founder of the law firm Osborne Clarke in Spain.  He was the managing partner of the law firm Osborne Clarke in Spain until June 30, 2017.  Prior to joining Osborne Clarke, he worked in the corporate and tax department of Peat Marwick Mitchell & Co. in Barcelona. He is currently a member of the Board of Directors of Kiro Grifols S.L., Biomat USA, Inc., Talecris Plasma Resources, Inc., Grifols Diagnostic Solutions Inc., Grifols Worldwide Operations Limited, Chiquito Acquisition Corp., Grifols Innovation and New Technologies Limited and PBS Acquisition Corp. He is also a trustee and the Secretary of the private foundation Víctor Grífols i Lucas, a trustee of the Probitas Fundación Privada foundation and the Secretary non-board member of the Board of Directors of Progenika Biopharma, S.A. and Araclon Biotech, S.L. Mr. Dagá earned his degree in Law from the University of Barcelona (Universidad de Barcelona).

Tomás Dagá Gelabert is a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant of the Spanish Securities Market Act).

Thomas H. Glanzmann

Mr. Thomas H. Glanzmann has served as a director of Grifols, S.A. since April 2006 and on January 1, 2017 he was appointed non-executive Vice Chairman of the Board of Directors.  He also serves as a Director on the Boards of Sulzer AG, Alkahest Inc., is a Healthcare Advisor to Madison Dearborn and Partners and is the General Partner in the Medtech Venture Fund in California. From 2006 until 2011 he was the Chief Executive Officer and Chairman of Gambro AB. Prior to this Mr. Glanzmann was the CEO and Managing Director of HemoCue AB. Between 1988 and 2004 he held various positions at Baxter Healthcare: Senior Vice President and Corporate Officer of Baxter Healthcare Corporation; President of Baxter Bioscience; Chief Executive Officer of Immuno International; and President of the European Biotech Group. Between 1984 and 1988 he worked at Philip Morris where he amongst other was the country manager for Norway, Denmark and Iceland. He also was a Senior Advisor to the Executive Chairman and a Managing Director at The World Economic Forum in Davos from 2004 - 2005 and the Chairman of the Plasma Protein Therapeutics Association (PPTA) between 2000 and 2001. Mr. Glanzmann holds a M.B.A. from IMD in Switzerland, a B.A. in Political Science from Dartmouth College, USA. and a Board of Directors Certification from the UCLA Anderson School of Management, USA.

Anna Veiga Lluch

Ms. Anna Veiga Lluch was awarded a B.S. in Biological Sciences and received a Ph.D in Biology (Cum Laude) from the Universidad Autónoma de Barcelona. She was the IVF laboratory Director at the Reproductive Medicine Service at Institut Universitari Dexeus from 1982 to 2005.  She is currently the Director of the Stem Cell Bank at the Barcelona Centre for Regenerative Medicine, the Director of the R+D Biological Area of the Reproductive Service of the Institut Universitari Dexeus,  and an Associate Professor at the Department of Experimental and Health Services of the Universitat Pompeu Fabra in Barcelona. In 2004 she was awarded the Creu de Sant Jordi by the Generalitat de Catalunya, and in 2013 she received the Medal of Honour from the Catalan

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Parliament. In May 2015, she was awarded  the degree of Doctor Honoris Causa from the Universitat Central de Catalunya. She specializes in clinical embryology, reproductive genetics, embryonic and pluripotent stem cells research and bioethics.

Steven F. Mayer

Mr. Steven F. Mayer is Senior Managing Director, Co-Head of Global Private Equity, and Chairman of the Investment Committee of Cerberus Capital Management, L.P. Mr. Mayer is the managing director of Cerberus California, LLC and predecessor entities since November 2002. Likewise, Mr. Mayer is a member of the boards of directors of BlueLinx Holdings, Inc., Starrus Holdings Limited, TransCentra Inc. and YP Holdings LLC. Mr. Mayer received his AB, cum laude, from Princeton University and his JD, magna cum laude, from Harvard Law School.

Luís Isasi Fernández de Bobadilla

Mr. Luis Isasi Fernández de Bobadilla is Managing Director of Morgan Stanley in Spain and Country Head for the Iberia region. He joined Morgan Stanley in London in 1987. Prior to that, he served as executive director at First Chicago Ltd. in London and, previously, worked in New York for the Latin American department of Morgan Guaranty Trust Co. Mr. Isasi started his professional career in Abengoa, in Seville (Spain) in 1977. Mr. Isasi has a Bachelor’s Degree in Business by the University of Seville, and holds a M.B.A. from Columbia Business School in New York, United States, obtained in 1982.

Belén Villalonga Morenés

Ms. Belén Villalonga Morenés is a Professor at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at Harvard Business School. She serves as an independent director at Acciona, leader in the renewable energy and infrastructure businesses, since 2006, and at Talgo, a high-speed train manufacturer, since 2015. She is also a Senior Associate Partner at Cambridge Advisors to Family Enterprise, a family business consulting company. Her teaching, research, and consulting activities are in the areas of corporate strategy, finance, and governance, with a special focus on family-controlled companies. Her award-winning research, which has been published in the top academic journals, has been cited extensively in academic articles and in the international media. She holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a second Ph.D. in Business Economics from the Complutense University of Madrid and a B.A. in Economic and Management Sciences from the Colegio Universitario de Estudios Financieros in Madrid. Before starting her doctoral studies, she worked at McKinsey & Co. in Paris.

Marla E. Salmon

Ms. Marla E. Salmon is a Professor at the University of Washington (USA), with appointments in nursing, global health, and public policy and governance. Her career has focused on health policy and capacity building in both global and US contexts, working with governments, international agencies and other health—related entities. Her recent work focuses on social enterprise and development in the health sector.

Ms. Salmon currently serves on the governing boards of IES Abroad, Inc., and The One City Project. Previous board service includes the Robert Wood Johnson Foundation and the National Center for Healthcare Leadership.  She has also served on the White House Task Force on Health Care Reform, the Commission to Build a Healthier America, the World Health Organization’s Global Advisory Group on Nursing and Midwifery, and the National Institutes of Health National Advisory Committee for the Institute of Nursing Research.”

Ms. Salmon holds a doctorate in health policy and administration from the Johns Hopkins University, degrees in political science and nursing from the University of Portland, and was a Fulbright Scholar at the University of Cologne (Germany).  She holds two honorary doctoral degrees recognizing her national and international service, and is a member of the National Academy of Medicine.

Carina Szpilka Lázaro

Ms. Carina Szpilka Lázaro earned a degree in Business Administration from the Universidad Pontificia de Comillas in Madrid (ICADE) and an Executive MBA from the Instituto de Empresa de Madrid. She began her professional career in the financial sector working at Banco Santander and Argentaria (now part of BBVA).  In 1998 she was part of the team that founded ING Direct in Spain, where she held the position of CEO from 2010 to 2013, having previously held that position in ING Direct France from 2008 to 2010. She is currently an independent director at Abanca and Meliá Hotels International, as well as a partner at KFund Venture Capital and a member of the Advisory Board of Reparalia.  She is also a member of the Professional Board of ESADE. In 2011 she was given the “Female Executive of the Year” award by the Spanish Federation of Female Directors, Executives, Professionals and Entrepreneurs (Federación Española de Mujeres Directivas - FEDEPE).  Likewise, she is the Chairwoman of Adigital.

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Iñigo Sánchez-Asiaín Mardones

Mr. Iñigo Sánchez-Asiaín Mardones is the Lead Independent director of the Board since May 2015.  He earned a degree in Business Administration from the Universidad Pontificia de Comillas in Madrid (ICADE) and an MBA from Harvard Business School. Since 2010 he is founding partner at Portobello Capital.  He is a member of the Executive Committee and Investment Committee at Portobello Capital, leading the investments in companies such as Angulas Aguinaga or Multiasistencia, companies in which he is Chairman and member of the Executive Committee. Previously he was Deputy General Director (Subdirector General) at Banco Santander (1993-2005) and was partner and member of the Board of Directors of Ibersuizas Gestión SGECR, S.A. (2005-2010).  He is also a member of the Executive Committee at the Harvard Club of Spain.

Biography of the Secretary Non-Member of the Board

Nuria Martín Barnés

Ms. Núria Martín Barnés has served as Vice-Secretary non-member of the Board of Directors from 2001 to 2015, serving as Secretary non-member of the Board of Directors since 2015. Ms. Martín has been the managing Partner at Osborne Clarke Spain since July 1, 2017.  Prior to joining Osborne Clarke she worked in the Corporate and Tax Department of KPMG Peat Marwick from 1982 to 1986. Ms. Martín is also secretary and member of the Board of Directors of Compañía General de Inversiones, S.A., S.I.C.A.V., Gesiuris Asset Management, S.G.I.I.C., S.A., CAT Patrimonis, S.I.C.A.V., S.A., URC Patrimonis, S.I.C.A.V., S.A. and Technetix Spain, S.L. Ms. Martín earned her law degree from the University of Barcelona.

Senior Management

Our senior management currently consists of the following persons:

Name	Age	Title	Since
Raimon Grifols Roura	54	Co-CEO	2017
Víctor Grifols Deu	41	Co-CEO	2017
Ramón Riera Roca	63	Chief Commercial Officer	1977
Alfredo Arroyo Guerra	60	Chief Financial Officer	2007
Carlos Roura Fernández	66	Chief Industrial Officer	1987
Miguel Pascual Montblanch	58	President, Commercial Operations Support	2012
Vicente Blanquer Torre	57	VP Quality and Regulatory Affairs	2007
Mateo Florencio Borrás Humbert	62	Chief Human Resources Officer	2008
Gregory Gene Rich	66	President and Chief Executive Officer of Grifols Shared Services North America, Inc.	2001
David Ian Bell	63	General Counsel and Chief Innovation Officer	2003
Nuria Pascual Lapeña	54	VP, CORP Treasury & Investor Relations	1997
Jose Antonio García García	61	Managing Director Laboratorios Grifols	2011
Lafmin Morgan	53	Deputy Chief Commercial Officer	2018
Carsten Schroeder	52	President of the Diagnostic Commercial Division	2014
Jose Oriol Duñach Fulla	73	President of the Diagnostic Industrial Group	2013
Peter Allen	59	President of Plasma Operations and Chief Executive Officer of Biomat USA Inc.	2017

Senior Management Biographies

The following are the biographies of our senior management who are not also directors:

Alfredo Arroyo Guerra

Mr. Arroyo has served as our Corporate Vice President and Chief Financial Officer since January 2007.  Previously, Mr. Arroyo served as a CFO and in various Senior Finance positions in companies including KPMG, Carrefour, Chupa Chups, Reckitt Benckiser and Winterthur.  Mr. Arroyo received a degree in Economics and is a Certified Public Accountant in Spain.

Carlos Roura Fernández

Mr. Roura joined us in 1977 and since 2013 he has been our Chief Industrial Officer. Previously, Mr. Roura served as Corporate Vice President and a co-President of the Global Industrial Division from 1987 to 2013. Beginning in 2002, he has served as

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President of Farmafluid, a Spanish association of medical parenteral nutritional fluid laboratories.  From 2008 to 2013, Mr. Roura served as deputy Vice President of the Industrial Division.  Mr. Roura is an Industrial Engineer.

Miguel Pascual Montblanch

Mr. Pascual has served as our President Commercial Operations Support since 2012 and he is also a member of the board of worldwide Grifols commercial affiliates. He joined us in 1974 and has held several positions since that time, beginning as General Manager of Grifols Movaco S.A. until 2007. He was also General Manager of Iberoamerica Sales from June 2007 until 2012.

Vicente Blanquer Torre

Mr. Blanquer has served as our VP Quality and Regulatory Affairs since 2007 and was Corporate Vice President and the Technical Director of the Biological Industrial Group (previously the Pharmaceutical Technical Director) since 1993. He is responsible for both Bioscience’s quality assurance and quality control.  From 1987 until 1993, he was the Deputy Technical Director, responsible for process quality control concerning plasma derivatives manufacturing.  Mr. Blanquer received a Degree in Pharmacy from the University of Barcelona.

Mateo Florencio Borrás Humbert

Mr. Borrás has served as our Corporate Vice President and Chief Human Resources Officer (previously Director of Global Human Resources) since 2008. Previously, he served as a HR Director at various companies, including EMAYA, Nissan Motor Ibérica and others.  He is a member of AEDIPE (Spanish Association of People Management and Development, of which he has also been Chairman) and he is an Arbitrator at the Arbitrator Corps of Catalonian Labor Court.  Mr. Borrás received a degree in Psychology and a Postgraduate on Labor and Social Security, both at the University of Barcelona.

Gregory Gene Rich

Mr. Rich has served as President and Chief Executive Officer of Grifols Shared Services North America, Inc. (previously Grifols, Inc.) since December 2001.  Previously, he held these positions in Grifols, Inc. Prior to working with us, Mr. Rich worked for Grupo Picking Pack, as Chief Operating Officer from December 2000 to December 2001 and from July 1997 to August 2000, as Senior Vice President for Green Cross International, the then parent of Alpha.  Mr. Rich also worked for Alpha as Vice President and General Manager of International Operations from October 1995 to July 1997.  In between his two terms at Alpha, Mr. Rich worked for us from January 1983 to October 1995 and served as our co-President for the period December 1985 through his departure in 1995.  Mr. Rich earned a Bachelor’s of Science degree from California Polytechnic University, Pomona.

David Ian Bell

Mr. Bell joined us as a Corporate Vice President of Grifols Shared Services North America, Inc. in July 2003 and has since been responsible for Corporate Operations and Development.  He has been the General Counsel since 2003 and Chief Innovation Officer since 2016. He also serves as a member of our Executive Committee in Spain.  Mr. Bell is responsible for all legal activities of our U.S. operations, including litigation, mergers and acquisitions, real estate transactions, intellectual property and contracts.  He is also responsible for regulatory, registrations and licensing, governmental and public affairs and human resources.  Prior to joining us, Mr. Bell was Vice President and General Counsel for Alpha.  Additionally, he was a partner in the U.S. law firm of Knapp, Petersen & Clarke where he specialized in complex litigation involving healthcare, pharmaceutical and biotechnology regulation and liability.  Mr. Bell attended the University of California, Irvine, Southwestern University School of Law and a postgraduate program at Harvard Law School.  He is a member of the California State Bar and is admitted to practice before the United States Supreme Court and numerous federal appellate and district courts.

Nuria Pascual Lapeña

Ms. Pascual joined us in 1996.  She currently serves as VP, CORP Treasury & Investor Relations.  Prior to joining us, she served in various positions at Deutsche Bank and Banco Santander de Negocios.  She is a member of the board of directors of several companies related to her family’s businesses.  Ms. Pascual received a degree in Economics & Business Administration and received a Masters of Sciences in Economics from the London School of Economics and Political Sciences.

Jose Antonio Garcia Garcia

Mr. García joined us in 1992 and has held several positions since that time, starting as Director of the Laboratorios Grifols S.A. manufacturing plant in Murcia (Spain) and acting later as Industrial Director. Since 2011, Mr. García has served as Managing Director of Laboratorios Grifols S.A. He is also responsible for the start-up of the new Campo Largo (Brazil) blood bags manufacturing plant. Mr. García received a Degree in Marine Engineering from the Polytechnic University of Madrid in 1979.

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Carsten Schroeder

Mr. Schroeder became President of the Grifols Diagnostic division in 2014. Prior to joining Grifols, Mr. Schroeder was president of Novartis Diagnostics, where he led growth in the global Transfusion Medicine market and oversaw improvements in manufacturing, quality, and commercial operations. At Novartis, Mr. Schroeder was a member of the Vaccines & Diagnostic Division Executive Committee and served as site head for the company’s Emeryville campus. He joined Novartis Diagnostics in 2010 as Vice President of Commercial Operations for the EMEA region. Mr. Schroeder has held executive positions with Boston Scientific and positions of increasing responsibility at Mallinckrodt (now Covidien) and Boehringer Ingelheim. Mr. Schroeder holds an MBA from the European School of Management in Paris (ESCP) and a Bachelor of Arts in Economics from the University of Cologne in Germany.

Lafmin Morgan

Lafmin Morgan has been Deputy Chief Commercial Officer since 2018 and had been President of the Global Bioscience Division for Grifols since 2014. Previously, Mr. Morgan led the Global Marketing function for all Grifols Divisions, Bioscience, Hospital and Diagnostics. Mr. Morgan also served as Grifols North American Vice President and General Manager for Pulmonary in 2011. Mr. Morgan joined Grifols (then Talecris) in 2010. He was the Vice President of Product Management at Talecris Biotherapeutics where he was responsible for the marketing of Gamunex-C, Prolastin-C, Thrombate, Koate —DVI and the company’s line of Hypermune products. Prior to Grifols, Mr. Morgan worked at GSK for 20 years. During that time, he held a variety of positions in a number of different functional areas. Mr. Morgan holds a Bachelor’s Degree in Business Administration and a MBA from the University of North Carolina in Chapel Hill.

Jose Oriol Duñach Fulla

Mr. Duñach joined us in 1985 and has held several positions since that time, starting as Sales Manager Deputy, later Diagnostic Division Manager and finally acting as General Manager of Diagnostic Grifols S.A. from 1987 to 2013. Since 2013, Mr. Duñach has served as President of the Diagnostic Industrial Group. Beginning in 2015, he has also been Managing Director of Medion Diagnostic A.G. Mr. Duñach is a member of the board of Fenin, the Spanish association of Medical Device Manufacturers. Mr. Duñach received a Degree in Organic Chemistry from the University of Barcelona in 1979.

Peter Allen

Mr. Allen has served as President of the U.S. Grifols Plasma Operations and Chief Executive Officer of Biomat USA Inc. since May 2017. He joined us in 2016 as President of the Hospital Commercial Operations Division. Previously, Mr. Allen was President of the Plasma Division for Haemonetics Corporation, where he held other positions such as Chief Marketing Officer and President, Donor Division. Additionally, he has worked for several other companies in his career including Syncor International and Baxter International.  Mr. Allen holds a Bachelor of Science Degree in Finance from Lehigh University in Bethlehem, Pennsylvania.

Family Relationships

Mr. Raimon Grifols Roura, director and one of our Chief Executive Officers, and Mr. Víctor Grifols Roura, a director and non-executive Chairman of the Board, are brothers.

Mr. Raimon Grifols Roura is the uncle of Mr. Víctor Grifols Deu, both being directors and co-Chief Executive Officers.

Mr. Víctor Grifols Deu, director and one of our co-Chief Executive Officers, is the son of Mr. Víctor Grifols Roura, a director and the non-executive Chairman of the Board.

Messrs. Víctor Grifols Roura and Raimon Grifols Roura are the grandchildren of Mr. José Antonio Grifols i Roig, our founder.

Mr. Carlos Roura Fernandez, the Chief Industrial Officer, is the cousin of Messrs. Víctor Grifols Roura and Raimon Grifols Roura.

Arrangements Pursuant to Which Certain Directors or Senior Management Were Selected

The following is a description of all arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person named above was appointed.

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Pursuant to the terms of the Merger Agreement, we agreed to appoint two individuals designated by Talecris to our Board, upon consummation of the Talecris acquisition, each for a five-year term.  Mr. Mayer is the only current director that was designated for such appointment and was appointed as a director in June 2011 and reelected in 2016, from such year under the category of independent director.

B.Compensation

Compensation of Members of the Board

Our directors are entitled to receive compensation for serving as directors on our Board.  The Articles of Association generally set forth the processes for the determination of the compensation paid to the members of the Board.  Article 20.bis of the Articles of Association provides that the directors’ remuneration shall be a fixed amount and that, at least every three years and valid for the three fiscal years following the year it is approved, the general shareholders’ meeting shall approve the directors’ remuneration policy, which, pursuant to Article 26 of the Regulations of the Internal Functioning of the Board of Directors of Grifols, S,A. (reglamento de funcionamiento interno del consejo de administración),  or Board Regulations, (i) with respect to directors in their condition as such shall necessarily determine the maximum amount of the annual remuneration to be paid to all the directors and (ii) with respect to the remuneration of the directors for performing their executive duties must include the amount of the annual fixed remuneration, the different parameters to set the variable components and the main terms and conditions of their contracts including, in particular, duration, severance payments or compensations for the termination of the employment relationship, and exclusivity, post-contractual non-competition, and retention or loyalty agreements.  The Board then determines, pursuant to Article 26.2 of the Board Regulations, how much of the shareholder-approved aggregate compensation amount will be allocated to each director as compensation, taking into account the recommendations of our appointments and remuneration committee (comisión de nombramientos y retribuciones), or Appointments and Remuneration Committee, and their dedication to our business. In this respect, the Company’s director remuneration policy is the one which was approved at the general shareholders’ meeting held on May 26, 2017 and which is applicable during three fiscal years following the year of its approval.

Our director compensation philosophy, as set forth in Article 27 of the Board Regulations, provides that the remuneration of non-executive directors (consejeros no ejecutivos) shall be established in a manner that provides incentives for our directors to be dedicated and involved while not creating an obstacle to their independence.  To that end, Article 27 further establishes that the Board, following the advice of the Appointments and Remuneration Committee, shall take the necessary measures to ensure that non-executive directors’ remuneration adheres to the following guidelines:  (a) their remuneration should be relative to their dedication, abilities and functions; and (b) they are excluded from any plans (x) consisting of the delivery of equity awards or options or other instruments linked to the value of our shares, (y) linked to our performance or (z) including retirement benefits.  However, non-executive directors may be remunerated with our shares only if they agree to hold them for the duration of the term that they hold their office.

In accordance with the compensation system outlined in the Articles of Association and the new Company’s directors’ remuneration policy, adopted at the general shareholders’ meeting held on May 26, 2017, which is applicable during three fiscal years following the year of its approval, the shareholders set the maximum annual amount available for compensation to the non-executive directors at €100,000 per director, other than those non-executive directors of the Board that render remunerated professional services to us.  Also, any director that is a member of one of the Board committees (Audit Committee and Appointments and Remuneration Committee) shall receive an additional gross annual remuneration of €25,000 as a result of the heavier workload (thus, the total remuneration would amount to €125,000). Similarly, the chairpersons of each Committee would receive an additional €25,000 for performing their duties as chairperson (thus, the total remuneration would amount to €150,000). The lead independent director would receive an additional remuneration amounting to €50,000 for performing his/her duties (thus, the total remuneration would amount to €150,000). Under no circumstances may the remuneration of a non-executive director exceed €150,000 per year.

As a result, in 2017, the following directors received compensation in their condition as such, namely, Anna Veiga Lluch, Steven F. Mayer, Luís Isasi Fernández de Bobadilla, Belén Villalonga Morenés, Marla E. Salmon, Carina Szpilka Lázaro, Iñigo Sánchez Asiaín Mardones.

As of the date of this annual report on Form 20-F, Anna Veiga Lluch, Luís Isasi Fernández de Bobadilla, Steven F. Mayer, Belén Villalonga Morenés, Marla E. Salmon, Carina Szpilka Lázaro and Iñigo Sánchez-Asiaín Mardones are our independent directors in conformity with Exchange Act requirements and NASDAQ Listing Rules. Messrs.  Dagá and Glanzmann serve as external directors (and not independent) and Mr. Víctor Grifols Roura serves as proprietary director (and not independent) in conformity with Spanish rules.

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The total compensation paid to directors in 2017, in the aggregate, amounted to €6.7 million. Of the total director compensation amount, executive directors (consejeros ejecutivos) received €2.5 million (€2.0 million in fixed compensation and €487 thousand in variable compensation for their service as executive directors). It must be noted that both executive directors Mr. Ramon Riera and Mr. Víctor Grífols Deu’s RSUs allocated in fiscal year 2015, and which had a vesting period of 2 years and 1 day, vested in 2017. Consequently, in 2017 both of them were awarded Class B shares with an equivalent value of €417 thousand and €36 thousand, respectively. External directors (other than those who render remunerated professional service to us) received €939 thousand.  These figures include accruals for contingent or deferred compensation.  None of our directors received attendance fees for meetings of the Board or committees of the Board.  Finally, pursuant to Article 20.bis of the Articles of Association, our directors are reimbursed for all expenses incurred in connection with their service as directors.

With respect to the €487 thousand received by the executive directors in variable compensation, this amount corresponds to 50% of the total amount of variable compensation. The remaining 50% is paid in Class B ordinary shares. The vesting period for the delivery of these shares is two years and one day.

Mr. Víctor Grifols Roura resigned as Chief Executive Officer on January 1, 2017, staying on the board as non-executive Chairman. Effective the same date, Raimon Grifols Roura and Víctor Grifols Deu became the co-Chief Executive Officers of the Company. Therefore, as of January 1, 2017, the Company’s remuneration policy changed due to the position held by Víctor Grifols Roura as non-executive Chairman of the Board, as his remuneration for his role in the Company is different to that of the other members of the Board. Thus, the Company’s directors’ remuneration policy, adopted at the general shareholders’ meeting held on May 26, 2017, reflects this change.

The remuneration of the Chairman of the Board for year 2017 was a fixed annual amount of €965,000, as established under the Company’s directors’ remuneration policy. The Chairman of the Board will no longer receive a variable remuneration. The remuneration of Mr. Grifols has been determined taking into account his proven experience as director and Chairman of the company, in addition to his knowledge in the sector where the Company operates. When deciding the remuneration of Mr. Grifols, which is the same fixed amount he had when he held an executive position, excluding any variable amount, the additional duties that he will carry out, as well as those set out in the Spanish Companies’ Act for the position of Chairman of the Board, were taken into account.

In addition, during 2017, the Chairman received payment for his executive role in certain activities in prior years. He received a bonus in cash related to fiscal year 2016, for an amount of €350 thousand; and in March 2017, RSUs allocated in fiscal year 2015, and which had a vesting period of 2 years and 1 day, vested. Hence, in 2017 he was awarded Class B shares with an equivalent value of €565 thousand.

Compensation of Senior Management

In 2017, members of our senior management (excluding those who also served as members of the Board) were paid compensation amounting to €13,671,670 in the aggregate.  This figure includes accruals for contingent or deferred compensation earned in respect of 2017 service. The breakdown of the aggregate amount paid to such senior management for discharging their duties in 2017 is set forth in the table below.

Component	Amount Paid in 2017
Salaries	€	8,417,344
Variable Compensation	€	5,254,326
Stock options or other securities	—
Other — e.g., life and health insurance	—
Other — e.g., pensions/savings	€	45,428.16

The above variable compensation includes €2,679,635 in RSUs allocated in fiscal year 2015, which had a vesting period of 2 years and 1 day, and have vested in 2017.

Salaries paid in U.S. dollars have been calculated at the exchange rate between the U.S. dollar and the euro of U.S. $1.1705 to €1.00.

The company has established a Restricted Share Unit Retention Plan, or RSU Plan, for eligible employees. Under the RSU Plan, an employee can elect to receive up to 50% of their yearly bonus in non-voting Class B shares or ADSs, and we will match their RSUs with an additional 50% of such employee’s election of RSUs, or Additional RSUs. Our Class B shares and ADSs are valued at the date of payment of the bonus such employee has elected to receive and no cash dividends will be paid with respect to these shares.

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These RSUs will have a vesting period of two years and one day and will subsequently be exchanged for Class B shares or ADSs representing Class B shares. If an eligible employee leaves the company, or is terminated before the end of the vesting period, they will not be entitled to the Additional RSUs. This commitment is treated as equity-settled and the total amount was €13,871,000. At December 31, 2017, the Company had settled the RSU Plan for an amount of €7,303 thousand.

Equity and Other Incentive Programs

In 2017, no compensation was paid pursuant to a profit sharing plan or any stock option and no other equity compensation was awarded to any of our directors or senior management.

Pension and Retirement Compensation Programs

Our directors and senior management employed by our U.S. subsidiaries participate in a tax-qualified 401(k) plan on the same terms as our other employees. The aggregate amount of employer contributions to the 401(k) plans for our directors and senior management during 2017 was €45,428.16 ($50,788.68). In 2017, neither we nor our subsidiaries set aside or accrued any other amounts to provide pension, retirement or similar benefits for our directors or senior management.

C.Board Practices

Board of Directors

Pursuant to the Articles of Association, we are managed by a Board, which may be composed of not less than three and not more than 15 directors.  Our current Board has 13 directors.  Directors may be either individuals or legal entities represented by individuals.  Under Spanish law, the Board is responsible for management, administration and representation in all matters concerning the business, subject to the provisions of the Articles of Association and the powers conferred at the general shareholders’ meeting.

Appointment and Dismissal

Pursuant to Spanish law and our Articles of Association, directors are elected by our shareholders to serve for a term of four years and may be reelected to serve for an unlimited number of terms, except in the case of independent directors, who pursuant to Spanish Law and the Board Regulations, shall not serve as such for more than 12 years.  We do not provide for the reelection of directors at staggered intervals or cumulative voting for such directors or otherwise.

A director may either be an individual or an entity represented by an individual.  If a director ceases to hold office prior to the expiration of his or her term, the Board may fill the vacancy by appointing a new director to replace the outgoing director.  Any director so appointed will hold office until the next general shareholders’ meeting when the appointment may be confirmed or revoked by our shareholders. If such appointment takes place between the time that a general shareholders’ meeting is called and the time the meeting takes place, then the director so appointed will hold office until the next general shareholders’ meeting, when this appointment is to be confirmed or revoked.  Any such appointment will be only for the remainder of the term of the outgoing director, without prejudice to such director’s eventual election.   A director may resign, or be removed, from office by a resolution of our general shareholders’ meeting at any time.  A director who is also a shareholder may vote freely on any of our shareholders’ resolutions relating to the appointment and dismissal of directors (including the appointment or dismissal of that director).

In addition, pursuant to the Board Regulations, a director must tender a resignation to the Board and the Board may accept such resignation, in its discretion, under the following circumstances:  (i) when the director ceases to hold the executive position to which such director’s appointment to the Board was related; (ii) when the director becomes unable to hold the office due to a legal cause of ineligibility or incompatibility; (iii) when the director has been formally charged with certain crimes (including, but not limited to, crimes against personal freedom, economic crimes and crimes against the justice administration) or a formal inquiry is opened against him or her by a regulator; (iv) when the director has been severely admonished by our Audit Committee for having breached his or her duties as director; (v) when the director’s participation on the Board may jeopardize our interests or when the reasons for his or her appointment cease to exist; and (vi) in the case of a proprietary director, when the relevant shareholder ceases to hold its stake in us, or reduces its stake below the level that reasonably justified the appointment of such director.

In addition, under Spanish corporate law, a holder of voting shares (or group of shareholders of voting shares acting together) may, subject to availability of seats on the Board, appoint a number of directors proportionate to that shareholder’s (or group of shareholders’) interest in our voting capital.  If the voting capital stock represented by the shares held by such shareholder (or group of shareholders) is equal to or greater than the result of dividing our total voting capital stock by the number of directors, such shareholder (or group of shareholders) shall have the right to appoint a proportionate number of directors.  For example, a shareholder holding 20 voting shares out of a total of 100 voting shares in a company with five directors will be entitled to appoint one director.  Should this power be exercised, shares so pooled shall not participate in the voting for the other members of the Board.  However,

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they may exercise their voting rights with respect to the removal of existing directors.  Since such rights apply only to voting shares or Class B shares that have recovered their voting rights, our Class B shares and the Class B ADSs that represent them in the United States do not count towards the proportional representation right.

The Board must appoint a Chairman of the Board from among its members.  Mr. Víctor Grifols Roura is the current non-executive Chairman.  The Board may also designate one or more Vice Chairmen, who shall be numbered consecutively, and who shall replace the Chairman in the event of impossibility to act or absence. Mr. Thomas Glanzmann is the current Vice Chairman.

The Board must also appoint a Secretary and may also designate one or more Vice-Secretaries.  Neither the Secretary nor the Vice-Secretary is required to be a member of the Board; however, the Secretary or the Vice-Secretary will not be entitled to vote on matters before the Board unless he or she is a member of the Board.  Mr. Tomás Dagá is the current Vice-Secretary of the Board and Ms. Nuria Martín Barnés is the current Secretary non-member of the Board.

Meetings of the Board

Pursuant to the Articles of Association, a meeting of the Board may be called by the Chairman whenever he considers such a meeting necessary or suitable.  The Chairman is also required to call a meeting at the request of one-third of the directors.  Meetings of the Board are called using any means of notice at least ten days before the date of the meeting, unless exigent circumstances require a shorter term.  Such notice of a meeting of the Board must state the place, date and time as well as the issues to be discussed.  The Board is required by Spanish law to hold a meeting at least every three months.  Our Articles of Association provide that a majority of the directors (half plus one of the directors present at a meeting) of the Board (represented in person or by proxy by another director on the Board) constitutes a quorum.  Except as otherwise provided by law or specified in the Articles of Association, resolutions of the Board must be passed by an absolute majority of the directors present or represented at a meeting, with the Chairman having the right to cast a deciding vote in the event of a tie.

Pursuant to the Articles of Association the Board of Directors may hold meetings by videoconference, conference call or by any other distance communication systems as long as said communications take place in real time and therefore, in one sole act, and both the identity of the participating or voting individual and the security of the electronic communications, are properly guaranteed.

Delegation of Powers

Pursuant to Spanish law and our Articles of Association, the Board may delegate its powers either to an executive committee (Comisión Ejecutiva) or to one or more chief executive officers.  Spanish corporate law provides that resolutions appointing an executive committee, any chief executive officer or authorizing the permanent delegation of all, or part of, such board of directors’ powers, requires a two-thirds majority of the members of such board of directors and the registration of such resolution in the Spanish Commercial Registry (Registro Mercantil).  The Board may also revoke such powers at any time. In addition, when a member of the Board is appointed chief executive officer or vested with executive functions, he/she will need to enter into an agreement with the Company, which shall be approved by a two-thirds majority of the Board. The director in question will have to refrain from participating in the deliberation and voting process of such agreement.

Under Spanish corporate law, a board of directors may also grant general or specific powers of attorney to any person whether or not that person is a director or a shareholder.  General powers of attorney must be registered in the Commercial Registry.  However, Spanish law provides that the following powers, among others, may not be delegated:  (i) the formulation and submission for approval of the yearly financial statements at the general shareholders’ meeting; and (ii) those powers granted to the board of directors by a general shareholders’ meeting (unless otherwise provided in the relevant shareholders’ resolution).

Mr. Raimon Grifols Roura and Mr. Víctor Grifols Deu currently serve as joint and several Chief Executive Officers of the Company, with delegation of all powers legally delegable from the Board.

Expiration of Current Terms

The periods during which our directors and senior management have served in their offices, as well as the date of expiration of each director’s term, are shown in the tables under “— A. Directors and Senior Management” above.

Termination Benefits

We have entered into employment contracts with all members of our senior management that entitle them to unilaterally rescind their employment contracts and receive termination benefits of two to five years’ salary in the event that we undergo a change of control.  In addition to this, nine members of our senior management are contractually entitled to termination benefits of one to four years’ salary under certain circumstances other than a change of control.

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See Notes 29(c) and 31(a) to our audited consolidated financial statements included in this annual report on Form 20-F for further details of the payments received by employees.

Committees of the Board

The Board has an Audit Committee and an Appointments and Remuneration Committee.  The following is a brief description of such committees.

Audit Committee

The Board established an Audit Committee in compliance with Articles 24.bis and 24.ter of the Articles of Association and Article 14 of the Board Regulations.

The regulations applicable to the Audit Committee are set forth in the provisions referred to above, as well as the bylaws of the Audit Committee, which were approved by the Board and the Audit Committee on December 9, 2008.  In connection with the Talecris acquisition, at a Board meeting held on May 24, 2011, the Articles of Association and Board Regulations were amended to conform to NASDAQ Listing Rules and to facilitate the listing of our Class B ADSs on NASDAQ. Furthermore, the bylaws of the Audit Committee were modified at a Committee meeting held on March 31, 2015, to adapt them to the requirements imposed by Law 31/2014. In 2017, article 24.ter of the Articles of Association and Article 14 of the Board Regulations concerning the composition and functions of the Audit Committee were amended in order to adequate their content to the latest amendments of the Companies Act introduced by the currently in force Spanish Audit Act.

Pursuant to our Spanish corporate governance requirements and our Articles of Association and the Board Regulations, the Audit Committee consists of a minimum of three directors and a maximum of five directors who are appointed by the Board based on such directors’ knowledge, competence and experience in accounting, audit and risk management matters.  All of the members of the Audit Committee must be non-executive directors, and the majority must be independent directors.  As a group, the members of the Committee must have the pertinent technical knowledge in relation to the sector of activity of the company. In addition, all members of the Audit Committee, including the chairman, must meet the independence, experience and other requirements set forth in the Exchange Act and NASDAQ Listing Rules.

The responsibilities of the Audit Committee include:

·reporting to the shareholders at general shareholders’ meetings regarding matters for which the Audit Committee is responsible;

·recommending to the Board the appointment, hiring and replacement of the external auditor regardless of the faculties vested in the general shareholders’ meeting and the Board with regard to the approval of such resolutions under Spanish law;

·oversight of our internal audit department, including selecting its manager, monitoring its budget,  receiving periodic information on the department’s activities and ensuring that management takes the conclusions and recommendations of the department’s reports into account;

·setting up and supervising procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters, as well as the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters;

·exercising oversight of the process for gathering financial information and the related internal control system; reviewing the financial statements and the periodic financial statements that should be submitted to the securities regulatory authorities and ensuring that the appropriate accounting standards are followed; reporting to the Board on any change in the accounting standards and on balance sheet and off balance sheet risks;

·receiving information from the auditors including relating to auditor independence and conduct of audits of the financial statements, and issuing on an annual basis a written opinion on the independence of the auditor;

·supervising any transactions entered into with significant shareholders as set forth in the Board Regulations; and

·(i) ensuring compliance with the Internal Code of Conduct of Grifols, S.A. in Matters Relating to the Stock Market, or Stock Market Code of Conduct, the Code of Conduct for Grifols’ Employees, the Board Regulations (each available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com) and, in general, any other corporate regulations and (ii) making any necessary proposals to improve such regulations.

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The Audit Committee currently consists of Mr. Mayer and Madames Szpilka and Villalonga. Each of the members is independent in conformity with Exchange Act requirements and NASDAQ Listing Rules, as well as in conformity with the Spanish Companies Act. Mr. Tomás Dagá Gelabert serves as Secretary non-member of the Audit Committee.

Appointments and Remuneration Committee

The Board established an Appointments and Remunerations Committee in compliance with Article 24.bis of the Articles of Association and Article 15 of the Board Regulations.

Pursuant to Spanish corporate governance requirements and Article 15 of the Board Regulations, the Appointments and Remuneration Committee is required to consist of between three and five members, all of which must be non-executive directors,  which includes at least two independent directors.

The responsibilities of the Appointments and Remuneration Committee include:

·assisting in the nomination of directors, including evaluating potential nominees in light of the level of knowledge, competence and experience necessary to serve on the Board;

·establishing a representation target for the gender that is least represented on the Board and prepare guidelines to achieve said target;

·reporting and making proposals to the Board on the appointment of members to the various committees of the Board and on the persons who should hold the office of Secretary and Vice-Secretary of the Board;

·examining and organizing the orderly and planned succession of the Chairman of the Board and the Chief Executive Officer;

·reporting on proposals for the appointment and removal of any members of senior management made by the Chief Executive Officer;

·making proposals on the remuneration plans for the Board and senior management;

·periodically reviewing the remuneration plans of senior management, including considering their suitability and performance; and

·reporting on transactions in which directors may have a conflict of interest.

Our Appointments and Remuneration Committee is required, pursuant to Spanish corporate governance requirements and Article 15 of the Board Regulations, to consist of between three and five members, all of which must be non-executive directors. Consistent with NASDAQ Listing Rules for foreign private issuers, our Appointments and Remuneration Committee currently consists of Messrs. Tomás Dagá Gelabert, Luís Isasi Fernández de Bobadilla and Ms. Salmon as directors. Each of Ms. Salmon and Mr. Isasi is independent in conformity with Exchange Act requirements and NASDAQ Listing Rules and Mr. Dagá is considered an “Other External” director under the Spanish Companies Act. Ms. Martín Barnés serves as Secretary non-member of the Appointments and Remuneration Committee.

D.Employees

The table below indicates the number of employees by department as of December 31, 2017, 2016 and 2015:

Department	2017	2016	2015
Manufacturing	14,577	11,400	11,409
Research & development — technical area	963	812	812
Administration and others	1,112	1,095	1,032
General management	230	238	215
Marketing	187	168	158
Sales and distribution	1,227	1,164	1,111
Total	18,296	14,877	14,737

The table below indicates the number of employees by geographic region as of December 31, 2017, 2016 and 2015:

Geographic Region	2017	2016	2015
Spain	3,649	3,430	3,256
North America	13,671	10,557	10,659
Rest of the World	976	890	822
Total	18,296	14,877	14,737

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We actively train our employees.  The Grifols Academy opened in Spain during the second quarter of 2011.  It is a meeting point for advanced training on all processes related to the preparation and production of plasma-derived medicines.  In addition, the Grifols Academy serves to actively spread and strengthen the “Grifols’ spirit” that guides employee actions and their understanding of the business.  It also acts as a center of technical, scientific and management training for the Group’s personnel, fostering a continued exchange among experts and external bodies, such as professional healthcare associations, hospitals, schools and universities.

The Grifols Academy works closely with the Grifols Academy of Plasmapheresis, which opened in Phoenix, Arizona in 2009.  The Grifols Academy of Plasmapheresis has two U.S. campuses, Glendale, Arizona and Indianapolis, Indiana.

Our Spanish employees are represented by two labor unions, the Workers’ Commissions (Comisiones Obreras) and the Workers General Union (Unión General de Trabajadores).  The employees of some of our subsidiaries in Spain, Germany, Italy, France and Argentina are covered by collective bargaining agreements.  The remainder of our employees are not represented by labor unions.  We have not experienced any significant work stoppages in the last 15 years, except for a one-day general strike in Spain in June 2002. We generally consider our employee relations to be good.

We subscribe to an insurance policy that covers death or permanent disability of employees caused by work accidents.  All of our employees are covered under this policy.  We implemented a defined contribution pension plan in all our Spanish entities beginning on January 1, 2002, which excludes top management and which requires us to make matching payments to these employees.  Our contribution to this pension plan was €725,000 in 2017, compared to €674,000 in 2016 and €647,000 in 2015.  We also sponsor a savings plan for the benefit of U.S. employees, which qualifies as a defined contribution plan under Section 401(a) of the Internal Revenue Code of 1986, as amended.  We make fully vested matching contributions to the savings plan which totaled $18.9 million for 2017, compared to $17 million in 2016 and $12.7 million for 2015.  For certain employees in Germany, we have a defined benefit pension plan, as required by statutory law.  The pension cost relating to this plan is not material.

E.Share Ownership

For information on the direct, indirect and represented holdings of our current directors and executive officers with respect to our Class A shares as of December 31, 2017, see Item 7 of this Part I, “Major Shareholders and Related Party Transactions — A. Major Shareholders.”

We do not have any agreements, plans or arrangements in effect that provide for the issue or grant of options or shares or securities.

Item 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.Major Shareholders

The following table sets forth certain information, including information regarding beneficial ownership of our Class A (voting) shares as of December 31, 2017, for (i) our major shareholders, including, in accordance with applicable Spanish regulations, each person or entity that is known to us to be the beneficial owner of more than 3% of our Class A shares, (ii) each of our directors and (iii) each member of our senior management.  As of that date, there were a total of 426,129,798 Class A shares issued and outstanding.

Since our Class A shares are represented through book entries, their exact ownership structure cannot be known, except through the information that the shareholders provide voluntarily or in compliance with applicable regulations, and information provided by the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A., or Iberclear, on which the shares are settled and cleared, and its participant entities (entidades participantes).

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Name of Beneficial Owner	Number of Ordinary Shares	Percentage of Ordinary Shares
Major Shareholders
Deria S.A.(1)	37,970,661	8.91
Scranton Enterprises B.V.(2)	36,953,048	8.67
Thorthol Holdings B.V.(3)	30,085,532	7.06
Núria Roura Carreras (4)	26,224,374	6.15
Blackrock, Inc. (5)	18,748,942	4.40
Oppenheimerfunds Inc. (6)	13,064,750	3.07
Jupiter Fund Management PLC	12,967,000	3.04
Oppenheimer International Growth Fund	12,929,406	3.03
Fidelity International Limited (7)	8,466,387	1.99
Directors
Víctor Grifols Roura	880,900	*
Ramón Riera Roca	338,170	*
Thomas H. Glanzmann(8)	167,122	*
Tomás Dagá Gelabert	103,796	*
Anna Veiga Lluch	200	*
Luís Isasi Fernández de Bobadilla	200	*
Víctor Grifols Deu	14,620	*
Steven F. Mayer	—	—
Belén Villalonga Morenés	—	—
Marla E. Salmon	—	—
Iñigo Sánchez-Asiaín Mardones	—	—
Raimon Grifols Roura	2,780	*
Carina Szpilka Lázaro	—	—
Senior Management
Gregory Gene Rich	143,196	*
Carlos Roura Fernández	123,578	*
Vicente Blanquer Torre	44,754	*
David Ian Bell	20,000	*
Nuria Pascual Lapeña	19,592	*
Mateo Florencio Borrás Humbert	982	*
Alfredo Arroyo Guerra	—	—
Lafmin Morgan	—	—
Carsten Schroeder	—	—
Peter Allen	—	—
Miquel Pascual Montblanch	15,000	*
José Antonio García García	13,032	*
Jose Oriol Duñach Fulla	55,418	*

*Less than 1%.

(1)The various members of the Grifols Roura family hold their respective shares indirectly through Deria S.A.

(2)Scranton Enterprises B.V. is a corporation whose shares are owned by certain of our directors. Some Grifols family members who are directors or executive officers hold part of their shares indirectly through Scranton Enterprises B.V.

(3)The various members of the Grifols Gras family hold their respective shares indirectly through Thorthol Holdings B.V.

(4)26,224,374 Class A shares are held directly by Rodellar Amsterdam B.V., through which Núria Roura Carreras exercises indirect voting rights.

(5)Blackrock, Inc. has indirect voting rights over 18,748,942 of our Class A shares.

(6)Oppenheimerfunds Inc. has indirect voting rights over 13,064,750 of our Class A shares.

(7)Fidelity International Limited has indirect voting rights over 8,466,387 of our Class A shares.

(8)24,000 Class A shares are held indirectly through Glanzmann Enterprises AG, and 106,000 Class A shares are held indirectly through Opulenta Holdings Ltd.

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To our knowledge, we are not controlled, directly or indirectly, by any other corporation, government or any other natural or legal person.  We do not know of any arrangements which would result in a change in our control.

Significant Changes in Ownership

In accordance with Spanish reporting requirements, the following transfers of shares were reported to the Spanish National Securities Market Commission (Spanish Comisión Nacional del Mercado de Valores), or CNMV, as of December 31, 2017:  Blackrock Inc. communicated to the Spanish National Securities Market Commission that on 20 March, 2017 its holding of Class A shares reached above 3%.

Oppenheimer International Growth Fund communicated to the Spanish National Securities Market Commission that on March 20, 2017 its holding of Class A shares reached above 3%.  Jupiter Fund Management PLC communicated to the Spanish National Securities Market Commission that on March 22, 2017 its holding of Class A shares reached above 3%.  Capital Research and Management Company communicated to the Spanish National Securities Market Commission that on November 28, 2017 its holding of Class A shares fell below 3%.

Voting Rights

Each of our Class A shares is entitled to one vote, except that the voting rights of Class A shares held in treasury by us or by any of our direct subsidiaries are suspended.  Class A shares held by our major shareholders, directors or senior management do not entitle such shareholders to different voting rights.

Our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters which require approval by a majority of outstanding Class B shares, as set forth in Item 10 of this Part I, “Additional Information — B. Memorandum and Articles of Association — Shareholder Rights — Class B Shares — Separate Vote at General Shareholder Meetings on Extraordinary Matters.”

See Item 10 of this Part I, “Additional Information — B. Memorandum and Articles of Association — Shareholder Rights” for further details regarding our Class A shares and Class B shares.

B.Related Party Transactions

Charitable Contributions

In 2017, we contributed to two charitable foundations, the Mr. Víctor Grifols i Lucas Foundation and the Probitas Private Foundation, which were formed by us, and certain of our current officers and directors serve as patrons of the Probitas Private Foundation.

The Mr. Víctor Grifols i Lucas Foundation provides grants to further the study of bioethics.  It was created in 1998 with the mission of promoting bioethics through dialogue between specialists in a range of areas.  The Víctor Grifols i Lucas Foundation seeks to foster ethical attitudes in organizations, companies and individuals active in the field of human health, offering a discussion platform that provides a forum for the exchange of different perspectives.  Mr. Víctor Grifols i Lucas is our former Chief Executive Officer and is the father of both Mr. Raimon Grifols Roura, our Chief Executive Officer, and Mr. Víctor Grifols Roura, a proprietary director and non-executive Chairman of the Board.  We contributed €0.4 million, €0.4 million and €0.4 million to the Víctor Grifols i Lucas Foundation in 2017, 2016 and 2015, respectively.

The Probitas Private Foundation provides medical and sanitary assistance to international communities that lack medical and sanitary resources or that have an urgent and essential need for such services due to catastrophes.  The Probitas Private Foundation was founded by us in 2008.  Messrs. Raimon Grifols Roura, our Chief Executive Officer, and Tomás Dagá Gelabert, one of our directors, are patrons of the Probitas Private Foundation. We contributed €6.8 million, €4.9 million and €4.8 million to the Probitas Private Foundation in 2017, 2016 and 2015, respectively. We contribute to the Probitas Private Foundation an amount equal to 0.7% of our profits before tax each year.

The Jose Antonio Grifols Lucas Foundation provides grants for education and research into the science of plasmapheresis.  Additionally, the foundation assists plasma donors who may be unable to care for themselves.  We did not contribute to the Jose Antonio Grifols Lucas Foundation in 2015, 2016 and 2017.

Consultant Agreement

In 2011, subsequent to the Talecris acquisition, one of our directors entered into a consulting services contract for a term of three years, pursuant to which he received compensation in the amount of $1.0 million per year with an additional $2.0 million

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payable upon the fulfillment of certain conditions.  In 2015, we extended this contract for a term of two years. In each of 2017, 2016 and 2015, we paid such director $1.0 million pursuant to this agreement.

Loans

We have not extended any advances or loans to members of the Board or key management personnel nor have we assumed any guarantee commitments on their behalf.  We also have not assumed any pension or life insurance obligations on behalf of former or current members of the Board or key management personnel.

C.Interests of Experts and Counsel

Not Applicable.

Item 8.FINANCIAL INFORMATION

A.Consolidated Statements and Other Financial Information

Financial Statements

SeeourauditedconsolidatedfinancialstatementsandtherelatednotesstartingonpageF-1ofthisannualreportonForm20-F.

Legal Proceedings

We are involved in various legal proceedings in the ordinary course of our business. In the event of adverse outcomes of these proceedings, we believe that resulting liabilities will either be covered by insurance or not have a material adverse effect on our financial condition or results of operations.

On February 3, 2017, bioMérieux, S.A and bioMérieux, Inc. filed suit against Hologic, Inc. (“Hologic”), Grifols, and Grifols Diagnostic Solutions Inc. (“GDS”) in the U.S. District Court for the Middle District of North Carolina, alleging infringement of U.S. Patent Nos. 8,697,352 and 9,074,262 by virtue of defendants’ activities with respect to the Procleix HIV-1/HCV Assay®, Procleix Ultrio Assay®, and Procleix Ultrio Plus® products. Hologic and GDS filed a motion to dismiss for failure to state a claim on April 3, 2017. As a result of a claim of improper venue, the case was transferred to the U.S. District Court for the District of Delaware in early 2018. Hologic and GDS are pursuing defenses of failure to state a claim, non-infringement, invalidity, and that the infringement claims are contractually barred. Additionally, Grifols intends to pursue dismissal for lack of personal jurisdiction.

On October 4, 2016, Enzo Life Sciences, Inc. (“Enzo”) filed suit against Hologic in the U.S. District Court for the District of Delaware, alleging infringement of U.S. Patent No. 6,221,581 by virtue of Hologic’s activities with respect to Progensa®, Procleix®, and Aptima®products. On November 9, 2017, the Court granted Enzo’s motion to amend its complaint to add Grifols and GDS as defendants with respect to the Procleix® products at issue. Hologic and GDS have answered the complaint, alleging non-infringement and invalidity among their defenses. GSA has moved to dismiss for lack of personal jurisdiction. The case schedule has been extended in light of the addition of Grifols-related entities as co-defendants, with Hologic and GDS currently engaged in fact discovery. Trial is scheduled for September 2019.

See note 29(e) to our audited consolidated financial statements included in this annual report on Form 20-F for additional information regarding the legal proceedings in which we are involved.

Foreign Corrupt Practices Act Investigations

We are continuing an internal investigation into potential violations of the FCPA by any of the companies acquired by us.  The FCPA investigation is being conducted by outside counsel under the direction of the Board.

In July 2009, Talecris voluntarily contacted the DOJ to advise it that it was conducting an internal investigation into potential violations of the FCPA.  The investigation into possible improper payments to individuals and entities made after Talecris’ formation initially focused on payments made in connection with sales in certain Central and Eastern European countries, specifically Belarus and Russia, although trading practices in Brazil, China, Georgia, Iran and Turkey are also being investigated, in addition to other countries as deemed appropriate.

As a result of this investigation, shipments to some of these countries have been suspended while we put additional safeguards in place.  In some cases, safeguards involved terminating consultants and suspending relations with or terminating

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distributors in countries under investigation as circumstances warranted.  In addition, as a consequence of the investigation, an agreement with a Turkish distributor was terminated giving rise to an arbitration between the parties that has now concluded.  Grifols has now identified a new distributor in Turkey for the distribution of its products.

In November 2012, we were notified by the DOJ that the proceedings would be closed, without prejudice to the fact that they could be re-opened in the future should new information arise.  We are continuing an in depth review of potential irregular practices.

In 2013, there was a criminal lawsuit initiated in Naples, Italy against five of our employees, including the former general director.  In 2014, Italian courts withdrew all claims, except for minor charges against two non-management employees. The Company has finalized the internal investigations opened in Italy and in November 2015 a meeting took place with the DOJ to report on the conclusions derived from the investigations. On September, 29 2016, the DOJ notified Grifols that it had closed its inquiry into Grifols, concerning possible violations of the U.S. Foreign Corrupt Practices Act. In its notice of declination to prosecute, the Department acknowledged the full cooperation of Grifols in the investigation.

Antitrust Approval of Talecris-Grifols Merger

On July 20, 2011, the Federal Trade Commission, or FTC, issued a final order, or Consent Order, to settle its May 31, 2011 charges that our acquisition of Talecris was anticompetitive and would have resulted in higher prices for consumers.  Pursuant to the Consent Order, we divested to Kedrion, on June 2, 2011, certain assets, including (i) Talecris’ Melville, New York manufacturing facility, which we refer to as the Melville facility, (ii) United States marketing rights to Koate® antihemophilic factor, (iii) an agreed quantity of plasma and (iv) two plasma collection centers located in Mobile, Alabama and Winston Salem, North Carolina.  Further, pursuant to the Consent Order, we and Kedrion entered into a contract manufacturing agreement under which we are supplying to Kedrion, for a period of seven years ending in 2018, Koate® and private label IVIG and albumin, for sale by Kedrion in the United States, and Kedrion exercised an option in 2014 to purchase a non-exclusive license to Koate®-related intellectual property for use in the United States.  In accordance with the Consent Order, we leased the Melville facility from Kedrion until July 1, 2013, when we turned over operations at the facility to Kedrion.

Effective July 1, 2013 Grifols and Kedrion agreed to an early termination of the lease agreement and completed the transfer of operations at the Melville facility to Kedrion.  The parties further entered into a three year fractionation agreement whereby Kedrion would continue to fractionate limited amounts of plasma for further manufacture by Grifols.

The Consent Order provides for a monitor to oversee our compliance with the Consent Order and requires us to submit to the FTC annual compliance reports for ten years.  We filed our first compliance report, pursuant to paragraph IX.B of the Consent Order, on July 20, 2012.  Grifols filed its sixth compliance report in July 2017.  There has been no further action by the FTC.  Our next compliance report is due in July 2018.

Dividend Policy

Class A Shares

Our dividend policy is to pay out approximately 40% of our net consolidated profits.  However, the New Credit Facilities contain limitations on our ability to pay cash dividends depending on our debt levels.  We may only pay cash dividends if our Leverage Ratio (as defined in the New Credit Facilities) is less than 3.50:1.00. As of the date of this Annual Report on Form 20-F, this restriction does not currently apply.  For a further discussion of the terms of the New Credit Facilities, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Credit—New Credit Facilities.”

The declaration and payment of dividends is reviewed annually by the Board based upon a review of our balance sheet and cash flow, the ratio of current assets to current liabilities, our expected capital and liquidity requirements, the provisions of our governing documents and the provisions in our financing arrangements governing cash dividends.  The payment of future dividend will be determined by the Board, based upon the factors described above and other factors that it deems relevant at the time that declaration of a dividend is considered.  There can be no assurance as to whether or in what amounts any future dividend might be paid.

In addition, the availability of the reserves for distribution is subject to limitations under Spanish law.  The distributable reserves of us and our Spanish subsidiaries are limited by the amount of mandatory reserves, which include, for us and each of our Spanish subsidiaries, the legal reserves and the amount of capitalized research and developments pending to be amortized by us and each of our Spanish subsidiaries.  This limitation on distributable reserves due to capitalized research and developments expenditure amounted, on a consolidated basis, to €40.1 million at December 31, 2017.

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At the general shareholders’ meeting held on May 26, 2017, our shareholders approved a dividend of €0.136 for each Class A share, for an aggregate dividend of €58 million, which was paid to the Class A shareholders on June 1, 2017.  Additionally, on October 27, 2017, our Board approved an interim dividend of €0.18 for each Class A share, for an aggregate interim dividend of €76.7 million, which was paid to the Class A shareholders on December 5, 2017.

The Board intends to propose to shareholders at the upcoming annual general meeting of shareholders that profits for the year ended December 31, 2017, in the amount of €76.2 million be transferred to reserves.

Class B Shares

Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year the share is outstanding equal to €0.01 per Class B share, if the aggregate preferred dividend does not exceed the distributable profits for that year and provided that the distribution of dividends has been approved by our shareholders.  In any given fiscal year, we will pay a preferred dividend to the holders of the Class B shares before any dividend out of the distributable profits for such fiscal year is paid to the holders of Class A shares.  The preferred dividend on all issued Class B shares will be paid by us within the nine months following the end of that fiscal year, in an amount not to exceed the distributable profits obtained during that fiscal year.

At the general shareholders’ meeting held on May 26, 2017, our shareholders approved a dividend of €0.136 for each Class B share, for an aggregate dividend of €34.9 million, and a preferred dividend of €0.01 for each Class B share, for an aggregate preferred dividend of €2.6 million, which were paid to the Class B shareholders on June 1, 2017.  Additionally, on October 27, 2017, our Board approved an interim dividend of €0.18 for each Class B share, for an aggregate interim dividend of €46.3 million, which was paid to the Class B shareholders on December 5, 2017. It is worth noting that the treasury Class B shares did not receive either dividend mentioned above.

B.Significant Changes

See Item 5 of this Part I, “Operating and Financial Review and Prospects — A. Operating Results — Subsequent Events.”

Item 9.THE OFFER AND LISTING

A.Offer and Listing Details

Price History of Class A Shares and Class B Shares

Our Class A shares have been listed on the Spanish Stock Exchanges since we completed our initial public offering on May 17, 2006 and are quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.”  The following table sets forth the high and low intraday market prices, in euro, for our Class A shares for the periods indicated, as reported on the Spanish Automated Quotation System (prices are non-adjusted and exclude the impact of distributions on historic data):

	Class A Shares
	High (€)	Low (€)
Fiscal Year 2013
Annual	35.15	23.51
Fiscal Year 2014
Annual	42.53	27.91
Fiscal Year 2015
Annual	46.00	31.72
Fiscal Year 2016
First Quarter(1)	21.32	17.85
Second Quarter	20.49	17.91
Third Quarter	20.70	18.62
Fourth Quarter	19.33	16.48
Fiscal Year 2017
First Quarter	23.41	18.75
Second Quarter	26.97	22.61
Third Quarter	24.93	22.73
Fourth Quarter	27.73	23.71
Recent Months
October 2017	26.90	23.71
November 2017	27.73	24.37
December 2017	25.00	23.83
January 2018	26.73	24.295
February 2018	26.02	22.12
March 2018	23.88	21.50

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(1)From January 4, 2016, prices reflect the two-to-one split executed by the Board effective from that date.

Our Class B shares have been listed on the Spanish Stock Exchanges since June 2, 2011 and quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.P.”  The following table sets forth the high and low intraday market prices, in euro, for our Class B shares for the periods indicated, as reported on the Spanish Automated Quotation System (prices are non-adjusted and exclude the impact of distributions on historic data):

	Class B Shares
	High (€)	Low (€)
Fiscal Year 2013
Annual	23.99	18.05
Fiscal Year 2014
Annual	34.60	22.61
Fiscal Year 2015
First Quarter	32.15	26.65
Second Quarter	33.00	26.73
Third Quarter	30.81	25.00
Fourth Quarter	33.69	27.22
Fiscal Year 2016
First Quarter(1)	15.30	12.70
Second Quarter	15.32	12.92
Third Quarter	15.65	14.01
Fourth Quarter	15.39	13.03
Fiscal Year 2017
First Quarter	17.86	15.05
Second Quarter	20.46	17.64
Third Quarter	18.66	16.76
Fourth Quarter	20.50	17.65
Recent Months
October 2017	19.90	17.65
November 2017	20.50	18.80
December 2017	19.35	18.26
January 2018	20.65	18.85
February 2018	20.35	17.38
March 2018	18.10	16.36

(1)From January 4, 2016, prices reflect the two-to-one split executed by the Board effective from that date.

Price History of the Class A ADSs and Class B ADSs

Our Class A ADSs are not listed on a national exchange and have traded on the Over the Counter Bulletin Board, an electronic stock listing service provided by NASDAQ, since July 2009.

Our Class B ADSs have been listed and traded on the NASDAQ Global Select Market under the symbol “GRFS” since June 2, 2011.  Since July 23, 2012, each Class B ADS has represented one Class B share.  Prior to July 23, 2012, each Class B ADS represented one-half of one Class B share.  We effected the adjustment to the ADS to share ratio through an amendment to the depositary agreement.

The following table sets forth the high and low intraday market prices, in U.S. dollars, for the Class B ADSs for the periods indicated, as reported by NASDAQ:

	Class B Shares
	High ($)	Low ($)
Fiscal Year 2014
Annual	46.66	29.24
Fiscal Year 2015
Annual	36.08	29.06
Fiscal Year 2016
First Quarter(1)	16.19	14.07
Second Quarter	17.40	14.45
Third Quarter	17.26	15.77
Fourth Quarter	16.39	14.27
Fiscal Year 2017
First Quarter	19.16	15.90
Second Quarter	22.825	18.77
Third Quarter	21.98	19.92
Fourth Quarter	24.20	20.88
Recent Months
September 2017	21.98	20.45
October 2017	23.69	20.88
November 2017	24.20	22.20
December 2017	23.10	21.31
January 2018	25.18	22.86
February 2018	24.86	21.45
March 2018	21.99	20.14

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(1)From January 4, 2016, prices reflect the two-to-one split executed by the Board effective from that date.

B.Plan of Distribution

Not Applicable

C.Markets

Our Class A shares have been listed on the Spanish Stock Exchanges since May 17, 2006 and are quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.”  Our Class B shares were issued as part of the consideration for the Talecris acquisition and were listed on the Spanish Stock Exchanges on June 2, 2011 and quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.P.”

Our Class B ADSs have been listed and traded on the NSADAQ Global Select Market under the symbol “GFRS” since June 2, 2011.

Spanish Securities Market

The Spanish Stock Exchanges consist of four stock exchanges located in Madrid, Barcelona, Bilbao and Valencia.  The majority of the transactions conducted on them are done through the Spanish Automated Quotation System.  During 2017, the Spanish Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish Stock Exchanges.

Spanish Automated Quotation System

The Spanish Automated Quotation System was introduced in 1989 and links the Spanish Stock Exchanges, providing those securities listed on it with a uniform continuous market that eliminates most of the differences among the Spanish Stock Exchanges.  The principal feature of the system is the computerized matching of buy and sell orders at the time of entry of the order.  Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed.  The activity of the market can be continuously monitored by investors and brokers.  The Spanish Automated Quotation System is operated and regulated by the Sociedad de Bolsas, a corporation owned by the companies that manage the Spanish Stock Exchanges.  All trades on the Spanish Automated Quotation System must be placed through a bank, brokerage firm, an official stock broker or a dealer firm member of a local exchange directly.

There is a pre-opening session held from 8:30 a.m. to 9:00 a.m. local time each trading day, during which orders are placed.  The computerized trading hours are from 9:00 a.m. to 5:30 p.m.  Each session ends with a five-minute auction, between 5:30 and 5:35 p.m., with a random closedown of 30 seconds.  The price resulting from each auction is the closing price of the session.

On May 14, 2001, new rules came into effect regarding the maximum price fluctuations in the price of stocks.  Under the new rules, each stock in the continuous market is assigned a static and a dynamic range within which the price can fluctuate.  The price of a stock may rise or fall by its static range (which is published once a month and is calculated according to the stock’s average historic price volatility) above or below its opening price (which is the closing price of the previous session).  When the stock trades outside of this range, the trading of the stock is suspended for five minutes, during which an auction takes place.  After this auction, the price of the stock can once again rise or fall by its static range above or below its last auction price (which will be considered as the new static price before triggering another auction).  Furthermore, the price of a stock cannot rise or fall by more than its dynamic price range (which is fixed and published once a month and is calculated according to the stock’s average intra-day volatility), from the last price at which it has traded.  If the price variation exceeds the stock’s dynamic range, a five-minute auction is triggered.

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Moreover, there is a block market (el mercado de bloques) allowing for block trades between buyers and sellers from 9:00 a.m. to 5:30 p.m. during the trading session.  Under certain conditions, this market allows cross-transactions of trades at prices different from prevailing market prices.  Trading in the block market is subject to certain limits with regard to price deviations and volumes.

Between 5:30 p.m. and 8:00 p.m., trades may occur outside the computerized matching system without prior authorization of the Sociedad de Bolsas, at a price within the range of 5% above the higher of the average price and closing price for the day and 5% below the lower of the average price and closing price for the day, if there are no outstanding bids or offers, as the case may be, on the system matching or bettering the terms of the proposed off-system transaction, and if the trade involves more than €300,000 and more than 20% of the average daily trading volume of the stock during the preceding quarter.  At any time before 8:00 p.m., a trade may take place (with the prior authorization of the Sociedad de Bolsas) at any price if:

·the trade involves more than €1.5 million and more than 40% of average daily trading volume of the stock during the preceding quarter;

·the trade relates to a merger or spin-off of a listed company;

·the trade relates to the reorganization of a business group;

·the trade is executed for the purposes of settling litigation;

·the trade involves certain types of contracts or complex transactions; or

·the Sociedad de Bolsas finds other justifiable cause.

Information with respect to computerized trades between 9:00 a.m. and 5:30 p.m. is made public immediately, and information with respect to trades outside the computerized matching system is reported to the Sociedad de Bolsas and published in the Stock Exchange Daily Bulletin (Boletín Diario de Cotización) and in the Spanish Automated Quotation System by the next trading day.

Clearance and Settlement System

Until April 1, 2003, transactions carried out on the Spanish Stock Exchanges and the continuous market were cleared and settled through the Servicio de Compensación y Liquidación de Valores, S.A. Since April 1, 2003, the settlement and clearance of all trades on the Spanish Stock Exchanges, the Public Debt Market (Mercado de Deuda Pública), the AIAF Fixed Income Market (Mercado AIAF de Renta Fija) and the Market for Latin-American Stocks in Euros (Mercado de Valores Latinoamericanos en Euros) have been made through Iberclear, which was formed as a result of a merger between the Servicio de Compensación y Liquidación de Valores, S.A and Central de Anotaciones del Mercado de Deuda Pública, which was managed by the Bank of Spain.

Book-entry System

Ownership of shares listed on any Spanish Stock Exchange is required to be represented by entries in a register maintained by Iberclear, and transfers or changes in ownership are effected by entries in such register.  The securities register system is structured in two levels:  the central registry managed by Iberclear, which keeps the securities balances of the participants, and a detailed registry managed by the participants where securities are listed by holder’s name.

Securities Market Legislation

The Spanish Securities Market Act (today known as Real Decreto Legislativo 4/2015, de 23 de octubre, que aprueba el texto refundido de la Ley del Mercado de Valores), or Securities Market Act, which first came into effect in 1989, among other things:

·established an independent regulatory authority, the CNMV, to supervise the securities markets;

·established a framework for the regulation of trading practices, tender offers and insider trading;

·required stock exchange members to be corporate entities;

·required companies listed on a Spanish Stock Exchange to file annual audited financial statements and to make public quarterly financial information;

·established a framework for integrating quotations on the Spanish Stock Exchanges by computer;

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·exempted the sale of securities from transfer and value added taxes;

·deregulated brokerage commissions as of 1992; and

·provided for transfer of shares by book-entry or by delivery of evidence of title.

The Securities Market Act was amended by, among others, Law 37/1998, which implemented two European Union directives that innovated the Securities Market Act.  The first was the recognition that both Spanish and other European Union member state companies authorized to provide investment services have full access to the official secondary securities markets, with full capacity to operate, thereby enabling the direct admission of banking entities into the stock exchange area.  The second innovation was that the scope of the Securities Market Act was enlarged to include a list of financial instruments, such as financial exchange contracts, or installment financial contracts, which expanded the categories of securities included.

The Securities Market Act was further amended by Law 44/2002 (November 22, 2002) on reform measures of the financial system, which introduced certain modifications to the laws governing financial markets and corporations generally, including:

·provisions requiring listed companies to establish an audit committee, redefining the reporting requirements for relevant events, establishing rules relating to the treatment of confidential and insider information and related party transactions, preventing manipulative and fraudulent practices with respect to market prices and otherwise regarding market transparency;

·the establishment of Iberclear; and

·the authorization of the Ministry of Economy and Finance (Ministerio de Economía y Hacienda) to regulate financial services electronic contracts.

On July 17, 2003, the Securities Market Act was amended by Law 26/2003 in order to reinforce the transparency of listed companies.  It introduced:

·information and transparency obligations including detailed requirements of the contents of the corporate website of listed companies and the obligation to file with the CNMV an annual corporate governance report; and

·the obligation to implement a series of corporate governance rules including, among others, regulations regarding the boards of directors and the general shareholders’ meeting.

On March 11, 2005, Royal Decree Law 5/2005 was approved, modifying the Securities Market Act in order to implement Directive 2003/71/EC of the European Parliament and of the Council of the European Union, or Council, on the prospectus to be published when securities are offered to the public or admitted to trading.  The Directive (i) harmonizes the requirements for the process of approval of prospectuses, which enables a prospectus to be valid throughout the European Union and (ii) incorporates the application of the country-of-origin principle later set forth in Spanish Royal Decree, or Royal Decree, 1362/2007.

Royal Decree 1333/2005, of November 11, 2005, developed the Securities Market Act in relation to market abuse.

Law 12/2006, of May 16, 2006, amended the Securities Market Act by (i) introducing a new article relating to notifications to the CNMV of transactions that might constitute insider dealing or market manipulation, (ii) completing the regulation of Bolsas y Mercados Españoles, which operates the Spanish Stock Exchanges and financial markets and (iii) clarifying the regulation of significant participations in the entities that manage the clearing and settlement of securities and the Spanish secondary securities markets.

Law 6/2007, of April 12, 2007, amended the Securities Market Act to modify the rules for takeover bids and for issuer transparency.  This Law came into effect on August 13, 2007, and partially integrates into the Spanish legal system Directive 2004/25/EC of the European Parliament and of the Council, of April 21, 2004, on takeover bids and Directive 2004/109/EC of the European Parliament and of the Council, of December 15, 2004, on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.  This Law was further developed by Royal Decree 1066/2007, of July 27, 2007, on rules applicable to takeover bids for securities; by Royal Decree 1362/2007, of October 19, 2007, on transparency requirements for issuers of listed securities; and by Royal Decree 1698/2012, of December 21, 2012, to implement Directive 2010/73/EC of the European Parliament and of the Council, of December 24, 2010 (amending Directive 2003/71/CE and Directive 2004/109/EC).

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Law 6/2007 (i) introduced several changes to the periodic financial information (annual, biannual and quarterly) to be published by issuers of listed securities and (ii) introduced new developments to the system that establishes the duty to provide notice of significant stakes in an enterprise.  These duties include notification requirements such as:

·anyone with a right to acquire, transfer or exercise voting rights granted by the shares, regardless of the actual ownership of the shares, and anyone owning, acquiring or transferring other securities or financial instruments that grant a right to acquire shares with voting rights must provide notice of the holding of a significant stake in accordance with the regulations;

·directors of listed companies, in addition to providing notice of any transaction concerning the shares or other securities or financial instruments of the issuer that are linked to these shares, must inform the CNMV of their stake upon appointment or resignation; and

·listed companies must provide notice of transactions concerning their treasury shares in certain cases, which will be established in the developing regulations.

Law 12/2010, of June 30, 2010, amended the Securities Market Act to require listed companies to create electronic shareholders forums on their websites to facilitate communication prior to the holding of general meetings.  It also established that shareholders of listed companies may create associations to exercise their rights and coordinate the defense of their common interests.  Such associations must enroll in a special CNMV registry.  Finally, Law 12/2010 also amended the Securities Market Act to change the regulations regarding the composition and functions of audit committees.

Royal Legislative Decree 1/2010, of July 2, 2010, approved the Spanish Companies Act in order to consolidate and clarify the laws applicable to public limited companies, limited share partnerships and limited liability companies.

Law 2/2011, of March 4, 2011, on Sustainable Economy (Ley de Economía Sostenible) amended the Securities Market Act’s provisions related to the requirements for annual reports on corporate governance and management reports.  The Law also made certain corporate governance and shareholder disclosure recommendations in the Spanish Unified Good Governance Code for Listed Companies (Código Unificado de Buen Gobierno de las Sociedades Cotizadas), or CNMV Governance Code, regarding the composition of boards of directors and its committees and the qualification of directors as executive, proprietary or independent mandatory.

Law 25/2011, of August 1, 2011, amended the Securities Market Act to implement Directive 2007/36/CE of the European Parliament and of the Council, regarding the exercise of certain rights of the shareholders of listed companies, to simplify and promote the right to information and shareholder voting rights.

Law 1/2012, of June 22, 2012, amended the Spanish Companies Act by making corporate websites mandatory for listed companies and introducing other new requirements regarding the creation, amendment, transfer and removal of corporate websites, as well as the obligations of directors arising in connection with the contents of such websites.

Law 31/2014 amended the Spanish Companies Act to improve the corporate governance practices, increase management efficiency and increase the transparency of companies listed on a Spanish Stock Exchange.

Royal Legislative Decree 4/2015, of October 23, 2015, approved the revised Securities Market Act and, thus, abolished the former Securities Market Act from 1988.  Certain adjustments have been made to the structure of the former Securities Market Act to improve its organization and eliminate a number of inconsistencies. Additionally, the new text has also been prepared to transpose Regulation (EU) No 596/2014 of the European Parliament and of the Council of  April 16, 2014, on market abuse and, also, the MIFID2 rules (Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014, on markets in financial instruments and Regulation (EU) No 600/2014 of the European Parliament and of the Council of May 15, 2014).

Royal Decree 878/2015, on the clearing, settlement and recording of transferable securities represented in book-entry form, on the legal regime of the central securities depositaries and central counterparties, and on the transparency requirements for issuers of securities admitted to trading in a regulated, which was published in the Spanish Official Gazette on October 3, 2015, meets the need to develop the latest amendments introduced in the Securities Market Act in matters of book-entries and clearing and settlement of securities, in addition to the need to adapt our legal system to a number of EU Law provisions. The reform of our post-trading system seeks to improve its efficiency and stability, in addition to equating the securities clearing, settlement and recording activities to those of the European markets, thus helping to reduce operational costs and improve the competitiveness of our markets, entities and infrastructures and, consequently, of the financial sector.  On April 27, 2016, the new post trading system of clearing and settlement of shares kicked off.

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Regulation (EU) No. 596/2014, on market abuse, which was directly applicable in all European Union member states, came into force in 2016 with the aim to ensure that European Union regulation keeps pace with market developments in order to combat market abuse on financial markets as well as across commodity and related derivative markets.

On January 3rd 2018, the implementation of the new regulatory framework on financial markets and instruments (the 2014/65/EU Directive on financial instrument markets,) has begun. The new rules, based on improved rules already adopted by MiFID, introduce organizational and behavioural requirements for market participants in order to improve investor protection.

D.Selling Shareholders

Not Applicable.

E.Dilution

Not Applicable.

F.Expense of the Issue

Not Applicable.

Item 10.ADDITIONAL INFORMATION

A.Share Capital

Not Applicable.

B.Memorandum and Articles of Association

The following is a summary of the material terms of our Articles of Association and Board Regulations, as amended and currently in effect.  This summary is not meant to be complete and is qualified in its entirety by reference to each of the Articles of Association and Board Regulations.  Because this is a summary, it does not contain all the information that may be important to you.  You should read the Articles of Association and Board Regulations carefully.  The current Articles of Association are included as Exhibit 1.1 and Exhibit 1.2 (English translation) to this annual report on Form 20-F.  The Articles of Association and the Board Regulations are also available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the headings “Investor Relations — General information — Articles of association” and “Investor Relations — Corporate governance — Board of directors regulations.”

The Articles of Association were originally approved and incorporated with the Commercial Registry on June 22, 1987.  The Board Regulations were initially approved by the Board on April 5, 2006.

At the general shareholders’ meeting held on May 29, 2015, the shareholders voted to amend our Articles of Association on matters pertaining to corporate governance in order to ensure compliance with the amended Spanish Companies Act. The shareholders renewed the delegation of authority to the Board to effect a two-to-one split of the Class A and Class B shares, within one year following the date of the meeting, by reducing the nominal value and increasing the number of such shares, without changing the total nominal value of the share capital. Finally, the shareholders provided the Board authorization for the derivative acquisition of treasury stock thereby revoking and leaving without effect the authorization granted to the Board during the shareholder meeting on extraordinary matters held on January 25, 2011.

At the general shareholders’ meeting held on May 27, 2016, the shareholders voted to delegate to the Board, with full power of substitution in any of its members, the authority to increase the Company’s share capital at once or in several times and at any given moment, within a maximum term of five (5) years as from the date of the May 27, 2016, general meeting, and in an amount that in no case may exceed half of the Company’s share capital at the time of this authorization. Pursuant to this authorization, the share capital increases will be carried out, if appropriate, by issuing and placing in circulation the new shares (whether of Class A and Class B, exclusively Class A or exclusively Class B), with or without share premium, with a consideration consisting in cash contributions. As long as there are non-voting Class B shares in circulation, the capital increases will observe, when applicable, the provisions of the Company’s Articles of Association as regards the pre-emptive right of acquisition that may correspond in said capital increases. Likewise, as long as Class B shares hold the redemption rights foreseen in paragraph 4 of article 6.bis of the Articles of Association,

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the nominal value of the Class B shares that may be issued in the execution of this delegation of authorities cannot exceed one fourth of the total amount of the share capital resulting from the capital increase resolution.

At the general shareholders’ meeting held on May 26, 2017, the shareholders voted to amend our Articles of Association concerning the composition and functions of the Audit Committee, in order to adequate its content to the latest amendments of the Companies Act introduced by the Audit Act currently in force. The shareholders also voted to amend the Regulation of the General Shareholders’ Meeting, concerning the competences of the General Shareholders’ Meeting, in order to adapt its content to the latest amendments of the Companies Act, introduced by Law 5/2015 of promotion of business financing (Ley 5/2005 de fomento de la financiación empresarial), on matters of issuance of bonds and other securities. The amendment consists of eliminating the issuance of numbered series of bonds or other securities, whether convertible or not, that may recognize or create a debt expressly as a competence of the General Shareholders’ Meeting.  The shareholders also renewed the delegation of authority to apply for the listing of the Class A shares on NASDAQ, via Class A ADSs, within three years following the date of the meeting.

The Board, with full power of substitution in any of its members, has the authority to set the terms and conditions of the capital increases and the characteristics of the shares in all aspects not foreseen by the general shareholders’ meeting, as well as to freely offer the new unsubscribed shares within the term(s) of exercise of the pre-emptive right of subscription; establish that, in the event of an incomplete subscription, the share capital will be increased only in the amount of the subscriptions effectively carried out;  redraft the articles of the Articles of Association related to share capital and number of shares; exclude, pursuant to the provisions of article 506 of the Companies Act, the pre-emptive right in the terms and conditions set forth therein and up to a maximum of 20% of the Company’s share capital; apply for, when appropriate, the listing of the shares issued pursuant to this authorization, as well as to carry out all the necessary actions and procedures and to file the documents that might be required before the competent bodies of the above-mentioned stock exchange markets, for admission to listing of the new shares issued as a consequence of the agreed capital increase; it is expressly put on record that Grifols agrees to be bound by already existing and future rules related to the Stock Exchange matters and, specially, as regards contracting, permanence and exclusion from official listing; request the inclusion of the new shares in the accounting registries of the company Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear).

The full text of the amendments to the Articles of Association detailed above is available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the heading “Investor Relations — Corporate Governance.”

General

As of December 31, 2017, our share capital was €119,603,705 and comprised:

·Class A shares:  426,129,798 ordinary shares with a par value of €0.25 each.  All of the Class A shares belong to the same class and series.

·Class B shares:  261,425,110 non-voting preference shares with a par value of €0.05 each.  All of the Class B shares belong to the same class and series and have the preferential rights set forth in the Articles of Association.

All of our shares are fully paid and non-assessable.  Both share classes are issued in book-entry form, governed by the Securities Market Act, as amended, and such other provisions as may be applicable.  The book-entry registry is maintained by Iberclear and its participant entities.

In exercise of the authorities granted to the Board of Directors by the Company’s general shareholders’ meeting held on May 29, 2015, on December 3, 2015, our Board agreed to carry out a two-to-one split of all of our existing Class A and Class B shares. Said split was carried out on January 4, 2016. The Board effected a two-to-one split of the Class A and Class B shares by reducing the nominal value and increasing the number of such shares, without changing the total nominal value of the share capital in accordance with the shareholder resolution passed at the general shareholders’ meeting held May 29, 2015.

Register

We are a public limited trading company registered with the Commercial Registry of Barcelona.  Our fiscal identification number is A-58389123.

Our principal executive office is located at Avinguda de la Generalitat, 152 Parque Empresarial Can Sant Joan, 08174 Sant Cugat del Vallès, Barcelona, Spain.  Our registered office is located at c/Jesús y María, 6, Barcelona (08022).  We were incorporated on June 22, 1987.  Our fiscal year runs from January 1 to December 31.

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Corporate Purpose

Article 2 of the Articles of Association states that our corporate purpose is to provide administration, management and supervision services of companies and businesses as well as investments in personal and real estate assets.

Board of Directors

Under Article 31 of the Board Regulations, a director shall abstain from attending or intervening in deliberations that affect matters in which he (or any person related to him) is personally involved, directly or indirectly.  A director cannot carry out professional or commercial transactions with us, directly or indirectly, unless he previously informs the Board about the conflict of interest, and the Board, following a report from our Appointments and Remuneration Committee, approves the transaction.

Under Article 15 of the Board Regulations, the Appointments and Remuneration Committee will in all cases be fully composed of non-executive directors, two of which shall be independent directors, and the chairperson must be an independent director.

The Board, with the advice of the Appointments and Remuneration Committee, sets director compensation.  As set forth in Article 20.bis of our Articles of Association the directors’ remuneration shall be a fixed amount. Furthermore, as set forth in Article 26 of the Board Regulations, every three years the general shareholders’ meeting must approve the remuneration policy for the directors which shall remain in force for the three fiscal years following the year of its approval and must be in line, where applicable, to the remuneration system laid down in the Articles of Association. As set forth in Article 27 of such Board Regulations, non-executive directors should be excluded from receiving remuneration linked to our profits or welfare systems, other than shares in Grifols, S.A., that they must hold until their resignation as directors.  Further, the establishment of equity compensation plans in which members of the Board participate must be authorized in the Articles of Association and requires the shareholders’ prior approval at a shareholders’ meeting.  Additionally, the amount of non-executive directors’ remuneration should be calculated in order to incentivize dedication but not become an obstacle to independence.

For more information regarding related party transactions, see Item 7 of this Part I, “Major Shareholders and Related Party Transactions — B. Related Party Transactions.”

We do not impose an age limit requirement for the retirement or non-retirement of directors.  We also do not impose a shareholding requirement for director qualification.  Article 6 of the Board Regulations does provide, however, that a director cannot qualify as an independent external director if he or she has a significant shareholding in us.

For information regarding the provisions of the Articles of Association as applied to the Board, see Item 6 of this Part I, “Directors, Senior Management and Employees — A. Directors and Senior Management — Directors” and “Directors, Senior Management and Employees — C. Board Practices.”

The following summary of material considerations concerning our share capital briefly describes certain material provisions of the Articles of Association and Spanish law relating to our share capital.  Because it is a summary, it is not meant to be complete, is qualified by reference to the applicable Spanish laws and our Articles of Association and does not contain all the information that may be important to you.

Neither Spanish law nor our Articles of Association limit the right to own our securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities.

Under Spanish law, the rights of shareholders may be changed only by an amendment to the articles of association of a company that complies with the requirements explained below under “— Class A Shares — Shareholders’ Meetings and Voting Rights.”  Our Articles of Association do not further specify what actions or quorums are required to change the rights of our shareholders, other than that they classify an amendment thereto as an extraordinary matter, as described below in “— Class B Shares — Separate Vote at General Shareholder Meetings on Extraordinary Matters.”

Class A Shares

Shareholders’ Meetings and Voting Rights

Pursuant to Article 13 of our Articles of Association and the Spanish Companies Act, the annual general shareholders’ ordinary meeting shall be held during the first six months of each fiscal year on a date fixed by the Board.  Resolutions presented at duly constituted general shareholders’ meetings are, except as indicated herein, passed by a simple majority vote of the voting capital present or represented at the meeting.

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Extraordinary meetings may be called by the Board whenever it deems it appropriate or at the request of one or more shareholders representing at least 3% of our share capital.  Per Spanish Law and the Articles of Association, we are required to publish a “calling of the meeting,” which sets forth the matters to be voted on at each general shareholders’ meeting, at least one month prior to the date set for the meeting in at least:  (i) the Official Gazette of the Commercial Registry (Boletin Oficial de Registro Mercantil) or one of the local newspapers of wide circulation in the province where we are domiciled (currently Barcelona, Spain); (ii) CNMV’s website; and (iii) our website.

Holders of ordinary and Class B shares duly registered in the book-entry records maintained by Iberclear and its participant entities at least five days prior to the day on which a shareholders’ meeting is scheduled, in the manner provided in the notice for such meeting, may attend such meeting (in person or represented by proxy) and, where so entitled, may vote.  Holders of our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters that require approval by a majority of our outstanding Class B shares, as set forth below in “— Class B Shares — Separate Vote at General Shareholder Meetings on Extraordinary Matters.”

For an ordinary or extraordinary general meeting of shareholders to be duly constituted, the presence in person or by proxy of shareholders representing 25% of our issued voting share capital is required.  On second call, there is no quorum requirement.

Under Spanish law, the following shareholder actions require approval by the affirmative vote of the holders of a majority of our Class A shares present in person or represented by proxy at a duly constituted meeting of holders of our Class A shares at which meeting, if (i) on first call, a quorum of at least 50% of the issued voting share capital is present or represented by proxy or (ii) on second call, a quorum of at least 25% of the issued voting share capital is present or represented by proxy (unless on such second call less than 50% of the issued voting share capital is present or represented by proxy, in which case those matters require the affirmative vote of at least two-thirds of the share capital present or represented at such meeting):

·the issuance of bonds;

·an increase or reduction of the share capital, or the suppression/limitation of pre-emptive rights in issuances of new shares;

·the transformation of Grifols (change in corporate nature);

·a merger, de-merger, split, spin-off or other structural change subject to Law 3/2009;

·any other amendment of the Articles of Association; and

·a dissolution.

For purposes of determining the quorum, those shareholders who vote by mail or through the internet are counted as being present at the meeting, as provided by the Regulations of the general shareholders’ meeting of Grifols, S.A (Reglamento de la Junta General de Accionistas).  Such Regulations are available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the heading “Investor Relations — Corporate governance — Regulations of the general shareholders’ meeting.”

In general, resolutions passed at a general shareholders’ meeting are binding upon all shareholders.  In very limited circumstances, Spanish law gives dissenting or absent shareholders, including those holding Class B shares, the right to have their Grifols’ shares redeemed by us at prices determined in accordance with established formulas or criteria.

Dividends

Payment of dividends must be proposed by the Board and authorized by our shareholders at a general shareholders’ meeting.  Interim dividends may be declared by the Board on account of profits for the then current fiscal year, subject to certain limitations.

Spanish law requires each company to apply at least 10% of its net income each year to a legal reserve until the balance of such reserve is equivalent to at least 20% of such company’s issued share capital.  A company’s legal reserve is not available for distribution to its shareholders except upon such company’s liquidation.  According to Spanish law, dividends may only be paid out of profits (after deduction of any amounts required to be applied to the legal reserve) or distributable reserves and only if the value of a company’s net worth is not, and as a result of distribution would not be, less than such company’s share capital.

In addition, no profits may be distributed unless the amount of the distributable reserves is at least equal to the amount of research and development expenses recorded as an asset on a company’s consolidated balance sheet.

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Spanish law also requires the creation of a non-distributable reserve equal to the amount of goodwill recorded as an asset on a company’s consolidated balance sheet and that an amount at least equal to 5% of such goodwill be transferred from the profit from each financial year to such non-distributable reserve until such time as the non-distributable reserve is of an amount at least equal to the goodwill recorded on such company’s consolidated balance sheet.  If, in any given financial year, there are no or insufficient profits to transfer an amount equal to 5% of the goodwill recorded as an asset on a company’s consolidated financial statement, Spanish law requires that the shortfall be transferred from freely distributable reserves to the non-distributable legal reserve.

In the event of a reduction in share capital to offset losses, dividends may not be distributed until the legal reserve reaches 10% of the new share capital.

Distributions of dividends to our Class A shareholders will be made in proportion to the capital that they have paid up.  The shareholders at the general shareholders’ meeting shall decide the amount, time and form of payment of the dividends.  If these details are not so determined, the dividend will be payable at our registered office on the day following the date of the resolution.

The right to a dividend lapses and reverts to us if it is not claimed within five years after it becomes payable.  Dividends payable by us to non-residents of Spain may be subject to a Spanish withholding tax of 19%, effective January 1, 2016.  However, residents of certain countries are entitled to the benefits of the Convention Between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, as described below in “— E. Taxation — Spanish Tax Considerations.”

As set forth below under “— Class B Shares — Preferred Dividend,” since the issuance of the our Class B shares, the dividend rights of our Class A shareholders have been subordinated to the €0.01 per share preferred dividend of our Class B shares.

Liquidation Rights

Upon our winding-up and liquidation, holders of our Class A shares and Class B shares will be entitled to receive a pro rata portion of any assets remaining after the payment of our debts, taxes and the expenses of the liquidation as follows:  (i) before any amount is distributed to the holders of Class A shares, the holders of Class B shares will receive the nominal value and share premium paid up for such Class B shares at the time of issuance and (ii) once such liquidation preference is received, the holders of the Class A shares and Class B shares will share pari passu in the amounts distributed.

Subscription (or Preemptive) Rights and Increases of Share Capital

Pursuant to the Spanish Companies Act, shareholders and holders of convertible bonds have subscription (or preemptive) rights to subscribe for any new shares (or other securities convertible into, or exchangeable for, shares) issued by a company in a capital increase via monetary contributions.

In accordance with the Spanish Companies Act, such subscription (or preemptive) rights may be waived under special circumstances by a resolution passed at a meeting of shareholders or the Board (such as when we listed on the Spanish Stock Exchanges), and the general shareholders’ meeting delegates to the Board the right to increase the share capital or to issue securities convertible into, or exchangeable for, shares and to waive subscription (or preemptive) rights).  See Item 3 of this Part I, “Key Information — D. Risk Factors — Risks Relating to our Structure, Shares and American Depositary Shares — Subscription (or preemptive) rights may be unavailable to U.S. holders of our shares or ADSs.”

Further, subscription (or preemptive) rights, in any event, will not be available in the event of certain capital increases, such as those in which we receive an in-kind contribution, those effected to meet the requirements of a convertible bond issue or those for a merger in which shares are issued as consideration.  Subscription (or preemptive) rights are transferable, may be traded on the Spanish Automated Quotation System and may be of value to existing shareholders because new shares may be offered for subscription at prices lower than prevailing market prices.  In the case of a share capital increase against reserves, the same rule applies to the free allotment (derecho de asignación gratuita) rights.

Finally, as described below in “— Class B Shares — Subscription Rights,” in connection with an issuance of securities where subscription (or preemptive) rights apply, our Class B shares may only be granted preemptive rights with respect to additional Class B shares if our Class A shares are granted preemptive rights with respect to additional Class A shares.  The preemptive rights of each class must be otherwise equal.

Registration and Transfers

Our Class A shares are in book-entry form on Iberclear and are indivisible.  Joint holders of one share must designate a single person to exercise their shareholders’ rights, but they are jointly and severally liable to us for all the obligations flowing from their status as shareholders, such as the payment of any pending capital calls.

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Iberclear maintains the central registry reflecting the number of shares held by each of its participant entities.  Each participant entity, in turn, maintains a registry of the owners of such shares.

Transfers of shares quoted on the Spanish Stock Exchanges are normally made through credit entities or investment companies that are members of the Spanish Stock Exchanges.

Reporting Requirements

Pursuant to Royal Decree 1362/2007, any individual or legal entity that, by whatever means, acquires or transfers shares with voting rights in a company for which Spain is listed as the Country of Origin (Estado Miembro) (as defined therein) and which is listed on an official secondary securities market or other regulated market in the European Union must notify the issuer and the CNMV, if, as a result of such transaction, the proportion of voting rights held by that individual or legal entity reaches, exceeds or thereafter falls below a 3% threshold of that company’s total voting rights.  The notification obligations are also triggered at thresholds of 5% and multiples thereof (excluding 55%, 65%, 85%, 95% and 100%).  The applicable threshold is 1% (or its successive multiples thereof) for persons or entities located in designated “tax havens” (as defined in Royal Decree 1080/1991) or other jurisdictions lacking adequate supervision.

The individual or legal entity obliged to provide the notification must serve the notification by means of the form approved by the CNMV from time to time for such purpose, within four business days from the date on which the transaction is acknowledged.  Royal Decree 1362/2007 deems that a transaction is “acknowledged” within two business days from the date on which such transaction is entered into.

The reporting requirements apply not only to the purchase or transfer of voting shares, but also to those transactions in which, without a purchase or transfer, the proportion of voting rights of an individual or legal entity reaches, exceeds or thereafter falls below the threshold that triggers the obligation to report as a consequence of a change in the total number of voting rights of a company on the basis of the information reported to the CNMV and disclosed by such individual or legal entity.

Regardless of the actual ownership of the voting shares, any individual or legal entity with a right to acquire, transfer or exercise voting rights of the shares, and any individual or legal entity that owns, acquires or transfers, whether directly or indirectly, other securities or financial instruments that grant a right to acquire shares with voting rights, will also have an obligation to notify us and the CNMV of the holding of a significant stake in accordance with the regulations.

Furthermore, all members of the Board must report to both us and the CNMV the percentage and number of voting rights in Grifols held by them at the time of becoming or ceasing to be a member of the Board.  All members of the Board must also report any change in the percentage of voting rights they hold, regardless of the amount, as a result of any acquisition or disposition of our shares or voting rights, or financial instruments that carry a right to acquire or dispose of shares that have voting rights attached, including any stock-based compensation that they may receive pursuant to any of our compensation plans.

In addition, pursuant to Royal Decree 1333/2005, of November 11, 2005, (implementing European Directive 2004/72/EC), any member of the Board or our senior management and any parties closely related to any member of the Board or our senior management must similarly report any acquisition or disposal of our shares (in this case, either Class A or Class B shares), derivatives or other financial instruments relating to our shares regardless of the size, including information on the percentage of voting rights which they hold as a result of the relevant transaction within five business days of such transaction. In this respect, Regulation (EU) No. 596/2014, on market abuse introduces certain changes as regards notifications from directors. From a practical viewpoint, the transactions that may be notified are broadened, the notification period is reduced from 5 to 3 business days and the prohibition against directors and executives to trade during 30 calendar days before the publication of an interim or annual financial report (restricted periods or “blackouts”) is regulated.

Additional disclosure obligations apply in respect of voting agreements.  In this respect, the Spanish Companies Act requires parties to disclose certain types of shareholders’ agreements that affect the exercise of voting rights at a general shareholders’ meeting or contain restrictions or conditions on the transferability of shares or bonds that are convertible or exchangeable into shares.

Moreover, persons holding a net aggregate short position in our shares must report the short position to the CNMV on a confidential basis whenever it reaches 0.2% and notify the CNMV of any subsequent decrease or increase by 0.1% (and successive multiples thereof) within the day immediately following the relevant trade.  The CNMV publishes individual net short positions of 0.5% or more and aggregate information on net short positions between 0.2% and 0.5%.

The Articles of Association do not contain additional provisions governing the ownership threshold above which shareholder ownership must be disclosed.

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Class B Shares

Our Class B shares have substantially similar dividend and other economic rights as our Class A shares, summarized above in “— Class A Shares,” but differ from the Class A shares in some important respects that are outlined below.

Voting Rights

Holders of our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters, with respect to which approval by a majority of our outstanding Class B shares is required.

Separate Vote at General Shareholder Meetings on Extraordinary Matters

Notwithstanding the lack of voting rights of our Class B shares generally, resolutions on the matters detailed below (each, an “extraordinary matter”) require the approval of a majority of our outstanding Class B shares.

·Any resolution (i) authorizing us or any of our subsidiaries to repurchase or acquire any of our Class A shares, except for pro rata repurchases available equally to holders of our Class B shares on the same terms and at the same price as offered to holders of our Class A shares or (ii) approving the redemption of any of our shares and any share capital reductions (through repurchases, cancellation of shares or otherwise), other than (a) those redemptions required by law and (b) those redemptions which affect equally our Class A shares and Class B shares and in which each Class B share is treated the same as a Class A share in such transaction.

·Any resolution approving the issuance, granting or sale (or authorizing the Board to issue, grant or sell) (i) any of our shares, (ii) any rights or other securities exercisable for or exchangeable or convertible into our shares or (iii) any options, warrants or other instruments giving the right to the holder thereof to purchase, convert, subscribe or otherwise receive any of our securities, except if (a) each Class B share is treated the same as a Class A share in the relevant issuance, grant or sale and, therefore, has a preferential subscription right (derecho de suscripción preferente) or a free allotment right in the relevant issuance, grant or sale to the same extent, if any, as a Class A share or (b) if the issuance is made in accordance with the subscription rights described in “— Subscription Rights” below.

·Any resolution approving unconditionally or not (i) a transaction subject to Law 3/2009 (including, without limitation, a merger, split-off, cross-border redomiciliation or global assignment of assets and liabilities), except if in such transaction each Class B share is treated the same as a Class A share or (ii) our dissolution or winding-up, except where such resolution is required by law.

·Any resolution for the delisting of any Grifols shares from any stock exchange.

·Generally, any resolution and any amendment of the Articles of Association that directly or indirectly adversely affects the rights, preferences or privileges of our Class B shares (including any resolution that adversely affects our Class B shares relative to our Class A shares or that positively affects our Class A shares relative to our Class B shares, or that affects the provisions in the Articles of Association relating to our Class B shares).

The general shareholders’ meeting has the power to decide on all matters assigned to it by law or by the Articles of Association and, in particular, without limitation to the foregoing, shall be the only corporate body or office entitled to decide on these extraordinary matters.

Preferred Dividend

Each of our Class B shares entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year the share is outstanding equal to €0.01 per Class B share.  In any given fiscal year, we will pay a preferred dividend to the holders of our Class B shares before any dividend out of the distributable profits for such fiscal year is paid to the holders of our Class A shares.  The preferred dividend on all issued Class B shares will be paid by us within the nine months following the end of that fiscal year, in an amount not to exceed the distributable profits obtained by us during that fiscal year.

If, during a fiscal year, we have not obtained sufficient distributable profits to pay in full, out of those profits, the preferred dividend on all the Class B shares outstanding, the preferred dividend amount exceeding the distributable profits obtained by us will not be paid and will not be accumulated as a dividend payable in the future.

Lack of payment, total or partial, of the preferred dividend during a fiscal year due to insufficient distributable profits to pay in full the preferred dividend for that fiscal year will not cause our Class B shares to recover any voting rights.

As set forth above in “— Class A Shares — Dividends,” the dividend rights of our Class A shareholders are subordinated to the preferred dividend described in this section.

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Other Dividends

Each Class B share is entitled to receive, in addition to the preferred dividend referred to above, the same dividends and other distributions (in each case, whether in cash, securities of Grifols or any of our subsidiaries, or any other securities, assets or rights) as one Class A share.  Each Class B share is treated as one Class A share for the purpose of any dividends or other distributions made on our Class A shares, including as to the timing of the declaration and payment of any such dividend or distribution.

Redemption Rights

Each holder of our Class B shares is entitled to redeem those shares as set forth in this section if a tender offer for all or part of our share capital is made and settled (in whole or in part), except if holders of our Class B shares were entitled to (i) participate in such offer and (ii) have their shares acquired in such offer equally and on the same terms as holders of our Class A shares (including, without limitation, for the same consideration).

Upon the closing and settlement (in whole or in part) of a tender offer for our shares in which holders of our Class B shares were not entitled to (i) participate and (ii) have their shares acquired in such offer equally and on the same terms as holders of our Class A shares (including, without limitation, for the same consideration), the redemption process will follow the process detailed below.

·We will, within ten days of the date on which the redemption event occurred (i.e., the date on which the triggering tender offer settled), publish in the Commercial Registry Gazette, the Spanish Stock Exchanges’ Gazettes and in at least two of the newspapers with widest circulation in Barcelona an announcement informing the holders of our Class B shares of the redemption event and the process for the exercise of redemption rights in connection with such redemption event.

·Each holder of our Class B shares will be entitled to exercise its redemption right for two months from the first date of settlement of the tender offer triggering the redemption right by notifying us of its decision.  We will ensure that mechanisms are in place so that the notification of the exercise of the redemption right may be made through Iberclear.

·The redemption price to be paid by us for each Class B share for which the redemption right has been exercised will be the sum of (i) the amount in euro of the highest consideration paid in the tender offer triggering the redemption right plus (ii) interest on the amount referred to in (i), from the date such tender offer is first settled until the date of full payment of the redemption price, at a rate equal to the one-year EURIBOR plus 300 basis points.  For the purposes of this calculation, the amount in euro corresponding to any non-cash consideration paid in the tender offer will be the market value of such non-cash consideration as of the date the tender offer is first settled.  The calculation of such market value shall be supported by at least two independent experts designated by us from auditing firms of international repute.

·We will, within 40 days of the date on which the period for notification of the exercise of redemption rights following a tender offer lapses, take all the necessary actions to (i) effectively pay the redemption price for our Class B shares for which the redemption right has been exercised and complete the capital reduction required for the redemption and (ii) reflect the amendment to Article 6 of the Articles of Association (related to share capital) deriving from the redemption.

The number of our Class B shares redeemed shall not represent a percentage over our total Class B shares issued and outstanding at the time the tender offer is made in excess of the percentage that the sum of our Class A shares (i) to which the tender offer is addressed, (ii) held by the offerors in that offer and (iii) held by persons acting in concert with the offerors or by persons having reached an agreement relating to the offer with the offerors represent over the total Class A shares issued and outstanding at the time the tender offer causing the redemption of our Class B shares is made.

Payment of the redemption price will be subject to us having sufficient distributable reserves but, after a tender offer occurs and until the redemption price for our Class B shares is paid in full, we will not be able to declare or pay any dividends nor any other distributions to our shareholders (in each case, whether in cash, securities of Grifols or any of our subsidiaries, or any other securities, assets or rights).

Liquidation Rights

Each Class B share entitles its holder to receive, upon our winding-up and liquidation, an amount equal to the sum of (i) the nominal value of such Class B share and (ii) the share premium paid up for such Class B share when it was subscribed for.

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We will pay the liquidation amount to the holders of our Class B shares before any amount on account of liquidation is paid to the holders of our Class A shares.

Each of our Class B shares entitles its holder to receive, in addition to the liquidation preference amount, the same liquidation amount paid for a Class A share.

Subscription Rights

Each Class B share entitles its holder to the same rights (including preferential subscription rights and free allotment rights) as one Class A share in connection with any issuance, granting or sale of (i) any shares in Grifols, (ii) any rights or other securities exercisable for, exchangeable or convertible into shares in Grifols or (iii) any options, warrants or other instruments giving the right to the holder thereof to purchase, convert, subscribe or otherwise receive any securities in Grifols.

As an exception, the preferential subscription rights and the free allotment rights of the Class B shares will only be for new Class B shares or for instruments giving the right to purchase, convert, subscribe for or otherwise receive Class B shares, and the preferential subscription right and the free allotment right of an Class A share will only be for new Class A shares or for instruments giving the right to purchase, convert, subscribe or otherwise receive Class A shares, for each capital increase or issuance that meets the following three requirements:  (i) the issuance of Class A shares and Class B shares is in the same proportion of our share capital as they represent at the time the resolution on the capital increase is passed; (ii) grants of preferential subscription rights or free allotment rights, as applicable, to the Class B shares for the Class B shares are under the same terms as the preferential subscription rights or free allotment rights, as applicable, granted to the Class A shares for the Class A shares; and (iii) no other shares or securities are issued.

Registration and Transfers

Class B shares are in book-entry form on Iberclear and are indivisible, as indicated with respect to Class A shares above in “— Class A Shares — Registration and Transfers.”

Change in Control

The Articles of Association do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of Grifols.

Changes in Share Capital

Changes in share capital are considered extraordinary matters and must be approved by our shareholders in accordance with the procedures explained above in “— Class A Shares — Shareholders’ Meetings and Voting Rights” and “— Class B Shares — Separate Vote at General Shareholder Meetings on Extraordinary Matters.”

A capital increase may be effected by issuing new shares or by increasing the par value of existing shares.  A capital reduction may be effected by reducing the par value of existing shares or by redeeming or repurchasing existing shares.

At the general shareholders’ meeting on extraordinary matters held on December 4, 2012, our shareholders agreed to increase share capital by issuing an additional 16,328,212 Class B shares, without a share premium and with a charge to voluntary reserves, in order to remunerate the Class A and Class B shareholders.  The issuance took the form of a free allocation of one new Class B share for every 20 Class A or Class B shares owned. The issuance of these shares increased share capital by a nominal amount of €1.63 million.

Also, at the general shareholders’ meeting on extraordinary matters held on December 4, 2012, our shareholders authorized the Board to increase share capital up to 50% of the existing share capital at that time.  Within this authorization, on April 16, 2013, the Board adopted an increase by issuing an additional 884,997 Class B shares, with a share premium of €23.02, in order to pay half of the purchase price of the Progenika acquisition.  The issuance of these shares increased share capital by a nominal amount of €0.09 million.

On January 4, 2016, the two-to-one share split of our existing Class A and Class B shares approved by the Board on December 3, 2015, became effective. The split reduced the nominal value of the shares by half, thus increasing the number of such shares, without changing the total nominal value of the share capital in accordance with the delegation of authorities granted to the Board by the Company’s general shareholders’ meeting held on May 29, 2015. As a result of the split, 426,129,798 Class A Shares are now issued and outstanding with a par value of €0.25 per share and 261,425,110 Class B Shares are now issued and outstanding with a par value of €0.05 per share. Our total share capital stands at €119,603,705.

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Sinking Fund

The Articles of Association do not contain any sinking fund provisions.

C.Material Contracts

The following contracts have been entered into by us within the two years immediately preceding the date of this annual report on Form 20-F or contain provisions under which we or another member of the Grifols Group has an obligation or entitlement that is material to us:

2017 Notes

For a summary of the material terms of the 2017 Notes, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Credit —The 2017 Notes.”

New Credit Facilities

For a summary of the material terms of the New Credit Facilities, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Credit — New Credit Facilities.”

European Investment Bank Term Loans

For a summary of the material terms of the European Investment Bank Term Loans, see Item 5 of this Part I, “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Credit — European Investment Bank Term Loans.”

Acquisitions and Related Financing

For a summary of the material terms of our acquisitions and related financing transactions substantially completed in 2016 and 2017, see Item 4 of this Part I, “Information of the Company — A. History of and Development of the Company — Acquisitions and Related Financing.”

D.Exchange Controls

Restrictions on Foreign Investment

Under present regulations, foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation on the amount other than applicable taxes.  Law 19/2003, of July 4, 2003, updated Spanish exchange control and money laundering prevention provisions, by recognizing the principle of freedom of the movement of capital between Spanish residents and nonresidents.

The law establishes procedures for the declaration of capital movements for purposes of administrative or statistical information and authorizes the Spanish government to take measures which are justified on grounds of public policy or public security.  It also provides the mechanism to take exceptional measures with regard to third countries if such measures have been approved by the European Union or by an international organization to which Spain is a party.

The Spanish Stock Exchanges and securities markets are open to foreign investors.  Royal Decree 664/1999, on Foreign Investments, of April 23, 1999, established a new framework for the regulation of foreign investments in Spain that, on a general basis, no longer requires any prior consents or authorizations from authorities in Spain (without prejudice to specific regulations for several specific sectors, such as television, radio, mining, telecommunications, etc.).  Royal Decree 664/1999 requires notification of all foreign investments in Spain and liquidations of such investments upon completion of such investments to the Investments Registry of the Ministry of Economy and Finance, strictly for administrative statistical and economical purposes.  Where the investment or divestiture is made in shares of a Spanish company listed on any of the Spanish Stock Exchanges, the duty to provide notice of a foreign investment or divestiture lies with the relevant entity with whom the shares (in book-entry form) have been deposited or that has acted as an intermediary in connection with the investment or divestiture.

Only investments from tax haven countries require notice before and after execution of the investment, except that no prior notice is required for:  (i) investments in listed or publicly negotiable securities or in participations in collective investment schemes that are registered with the CNMV and (ii) investments that do not increase the foreign ownership of the share capital of a Spanish company to over 50%.  In specific instances, the Council of Ministers may agree to suspend all or part of Royal Decree 664/1999

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following a proposal of the Ministry of Economy and Finance, or, in some cases, a proposal by the head of the government department with authority for such matters and a report of the Foreign Investment Body.  These specific instances include a determination that the investments, due to their nature, form or condition, affect or may potentially affect activities relating to the exercise of public powers, national security or public health.  Royal Decree 664/1999 is currently suspended for investments relating to national defense.  In those cases in respect of which Royal Decree 664/1999 is suspended, the affected investor must obtain prior administrative authorization in order to carry out the investment.

Exchange Controls

Law 10/2010, on the prevention of money laundering and funding of terrorism, was adopted on April 28, 2010 and entered into force on April 30, 2010.  This Law requires a person moving (i) paper money and coins in any currency, (ii) bearer checks in any currency or (iii) any other physical medium, including electronic media, designed for use as payment to the bearer to declare such payment to the Spanish exchange control authorities if it exceeds €10,000 (or the foreign currency equivalent).

E.Taxation

In General

Treatment of Holders of ADSs

This section describes the material United States federal income and Spanish tax consequences of owning shares or ADSs.  It applies to you only if you hold your shares or ADSs as capital assets for tax purposes.  This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

·a dealer in securities;

·a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;

·a tax-exempt organization;

·a life insurance company;

·a person liable for alternative minimum tax under the Code (as defined below);

·a person that actually or constructively owns 10% or more of our voting stock;

·a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction; or

·a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations, published rulings and court decisions, in each case as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, as well as the tax laws of Spain and regulations thereunder and the Convention Between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, or the Treaty, in each case as in effect as of the date hereof and subject to change.  On January 14, 2013, the United States and Spain signed a protocol amending the Treaty, or the Protocol, which, depending on a holder’s individual circumstances, could alter either the United States federal income tax consequences, the Spanish tax consequences, or both, of owning shares or ADSs.  However, the Protocol will not become effective until formal ratification procedures are completed by both countries, and the timing for the completion of such ratification procedures is not certain.  As a result, it is not certain when any changes to the United States federal income tax consequences or Spanish tax consequences of owning shares of ADSs resulting from the Protocol would come into effect, and in any case such changes would, in general, be prospective only.

You are a “U.S. Holder” if you are a beneficial owner of shares or ADSs and you are:

·a citizen or resident of the United States;

·a corporation or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

·an estate whose income is subject to United States federal income tax regardless of its source; or

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·a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

An “eligible U.S. Holder” is a U.S. Holder that:

·is a resident of the United States for purposes of the Treaty;

·does not maintain a permanent establishment or fixed base in Spain to which shares or ADSs are attributable and through which the U.S. Holder carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services); and

·is otherwise eligible for benefits under the Treaty with respect to income and gain from the shares or ADSs.

A “non-U.S. Holder” is a beneficial owner of shares or ADSs that is not a U.S. Holder.

In addition, if a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of shares or ADSs, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership.  A beneficial owner of shares or ADSs that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of owning and disposing of shares or ADSs.

You should consult your own tax advisor regarding the United States federal, state and local and the Spanish and other tax consequences of owning and disposing of shares and ADSs in your particular circumstances.  In particular, you should confirm your status as an eligible U.S. Holder with your advisor and should discuss any possible consequences of failing to qualify as an eligible U.S. Holder.

This discussion addresses only United States federal income taxation and Spanish income taxation, gift and inheritance taxation, wealth taxation and transfer taxation.

Treatment of Holders of ADRs

In general, and taking into account the earlier assumptions, for United States federal income and Spanish tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs.  Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to United States federal income or to Spanish tax.

Spanish Tax Considerations

This discussion of Spanish tax consequences applies only to owners of ADSs or shares who are eligible U.S. Holders.  The following is a summary of material Spanish tax matters and is not exhaustive of all the possible tax consequences to individuals or entities of the acquisition, ownership and disposition of ADSs or shares.

Taxation of Dividends

Under Spanish law, including Royal Legislative Decree 5/2004, of March 5, 2004, as amended by Law 26/2014 (which is effective from January 1, 2015), on the Non-Resident Income Tax Law, dividends paid by a Spanish resident company to a holder of ordinary shares or ADSs not residing in Spain for tax purposes and not operating through a permanent establishment in Spain are subject to Spanish Non-Resident Income Tax of 19%, effective January 1, 2016.

We will levy an initial withholding tax on the gross amount of dividends at a 19% tax rate, following the procedures set forth by the Spanish Ministerial Order, or Order, of April 13, 2000.  However, under the Treaty and subject to the fulfillment of certain requirements, individuals and entities may be entitled to a reduced rate of 15%.

To benefit from the Treaty’s reduced rate of 15%, an individual or entity must provide the depositary with a certificate from the U.S. Internal Revenue Service, or IRS, stating that, to the knowledge of the IRS, it is a resident of the United States within the meaning of the Treaty.  The IRS certificate may be obtained by filing an IRS Form 8802 and is valid for a period of one year.

According to the Order of April 13, 2000, to get a direct application of the Treaty’s reduced rate of 15%, the certificate referred to above must be provided to the depositary before the tenth day following the end of the month in which the dividends were distributable by us.  If an individual or entity fails to timely provide the depositary with the required documentation, it may obtain a

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refund of the 4% (effective January 1, 2016) in excess withholding that would result from the Spanish tax authorities in accordance with the procedures below.

Spanish Refund Procedure

According to Royal Decree 1776/2004, of July 30, 2004, as amended, which further develops the Royal Legislative Decree 5/2004 on the Non-Resident Income Tax Law, a refund of the amount withheld in excess of the rate provided by the Treaty can be obtained from the relevant Spanish tax authorities.  An eligible U.S. Holder may pursue the refund claim by filing all of the following:

·a Spanish 210 Form;

·the certificate from the IRS referred to above in “— Taxation of Dividends”; and

·evidence that non-resident income tax was withheld with respect to it.

The refund claim must be filed within four years of the date on which the withheld tax was collected by the Spanish tax authorities.  According to Order EHA/3316, of December 17, 2010, for dividends paid as of January 2011, the 210 Form must be filed as from February 1st of the calendar year following the year in which the dividend was paid.

Individuals and entities are urged to consult their own tax advisers regarding refund procedures and any U.S. tax implications of refund procedures.

Taxation of Capital Gains

Under Spanish law, any capital gains derived from securities issued by persons residing in Spain for tax purposes are considered to be Spanish source income and, therefore, are taxable in Spain.  For U.S. residents, income from the sale of ADSs or shares will be treated as capital gains for Spanish tax purposes.  Effective January 1, 2016, Spanish Non-Resident Income Tax is levied at a 19% rate on capital gains realized by persons not residing in Spain for tax purposes who are not entitled to the benefit of any applicable treaty for the avoidance of double taxation.

Notwithstanding the above, capital gains derived from the transfer of shares on an official Spanish secondary securities market by any holder who is a resident of a country that has entered into a treaty for the avoidance of double taxation with Spain containing a clause of “exchange of information” (as defined in Law 36/2006, of November 30, 2006, related to measures to prevent tax fraud) will be exempt from taxation in Spain.  In addition, under the Treaty, capital gains realized by an individual or entity upon the disposition of ADSs or shares will not be taxed in Spain provided that the individual or entity has not held, directly or indirectly, 25% or more of our stock during the twelve months preceding the disposition of the stock.  An individual or entity is required to establish that it is entitled to this exemption by providing to the relevant Spanish tax authorities an IRS certificate of residence in the United States, together with the appropriate Spanish 210 tax form, between January 1st and January 20th of the calendar year following the year in which the transfer of shares took place.

Spanish Wealth Tax

On September 16, 2011, Royal Decree 13/2011 approved the reintroduction of the Spanish wealth tax (originally introduced under Law 19/1991) for 2011 and 2012.  The Spanish wealth tax has been extended to apply through 2017 (in 2013 pursuant to Law 16/2012, of December 27, 2012, adopting various tax measures aimed at strengthening public finances and economic activity, in 2014, pursuant to Law 22/2013, of December 23, 2013 on the General State Budget for 2014, in 2015 pursuant to Law 36/2014, of December 26, 2014, on the General State Budget for 2015,  in 2016 pursuant to law 48/2015, of October 29, 2015, on the General State Budget for 2016) and in 2017 pursuant to Royal Decree-Law 3/2016, of December 2, 2016, adopting measures in the tax field aimed at the consolidation of public finances and other urgent social security measures.  As a result, individuals not residing in Spain who hold shares or ADSs located in Spain are subject to the Spanish wealth tax, which imposes a tax on property located in Spain on the last day of any year.  The Spanish tax authorities may take the view that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes.  If the tax authorities take this view, individuals subject to the Spanish wealth tax will be taxed at marginal rates of 0.2% to 2.5% (as published by the Spanish Ministry of Economy and Public Administrations) of the average market value of their shares or ADSs during the last quarter of the relevant year, subject to a tax-free allowance of €700,000.

An individual is required to file Spanish wealth tax forms if he or she has a positive wealth tax liability or has assets or rights in Spain valued, in the aggregate, at more than €2,000,000.

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Spanish Inheritance and Gift Taxes

Under Law 29/1987, transfers of shares or ADSs upon death or by gift are subject to Spanish inheritance and gift taxes if the transferee is a resident of Spain for tax purposes, or if the shares or ADSs are located in Spain at the time of gift or death, or the rights attached thereto could be exercised or have to be fulfilled in the Spanish territory, regardless of the residence of the beneficiary.  In this regard, the Spanish tax authorities may determine that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes.  The applicable tax rate, after applying all relevant factors, ranges between 0% and 81.6% for individuals.

Effective January 1, 2016, gifts granted to corporations not resident in Spain are subject to Spanish Non-Resident Income Tax of 19% of the fair market value of the shares as a capital gain.  If the donee is a United States corporation, the exclusions available under the Treaty described above in “— Taxation of Capital Gains” will be applicable.

Expenses of Transfer

Transfers of ADSs or shares will be exempt from any Spanish transfer tax or value-added tax.  Additionally, no Spanish stamp tax will be levied on such transfers.

United States Federal Income Tax Considerations

Taxation of Dividends

U.S. Holders

Under the United States federal income tax laws, and subject to the passive foreign investment company, or PFIC, rules discussed below, if you are a U.S. Holder, the gross amount of any dividend (including any preferred dividends on our Class B shares) we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation.  If you are a noncorporate U.S. Holder, dividends (including any preferred dividends on our Class B shares) paid to you that constitute qualified dividend income will be taxable to you at a maximum tax rate of 20% provided that you hold the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements.  Dividends we pay (including any preferred dividends on our Class B shares) with respect to the shares or ADSs generally will be qualified dividend income.

With respect to any dividend we pay (including any preferred dividends on our Class B shares) you must include any Spanish tax withheld from the dividend payment in the gross amount of such dividend even though you do not in fact receive it.  Dividends are taxable to you when you, in the case of shares, or the Depositary, in the case of ADSs, receive such dividend, actually or constructively.  Such dividends will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations.  The amount of a dividend distribution that you must include in your income as a U.S. Holder will be the U.S. dollar value of the euro payments made, determined at the spot euro/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars.  Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include a dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income.  The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes.  Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain.

Subject to certain limitations, the Spanish tax withheld in accordance with the Treaty and paid over to Spain will be creditable or deductible against your United States federal income tax liability.  Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 20% tax rate.  To the extent a refund of the tax withheld is available to you under Spanish law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your United States federal income tax liability.  See “— Spanish Tax Considerations — Spanish Refund Procedure” above for the procedures for obtaining a tax refund.

Dividends will be income from sources outside the United States, and dividends paid will, depending on your circumstances, be “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.

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A U.S. Holder may make an election to treat all foreign taxes paid as deductible expenses in computing taxable income, rather than as a credit against tax, subject to generally applicable limitations.  Such an election, once made, applies to all foreign taxes paid for the taxable year subject to the election.  The rules governing foreign tax credits are complex and, therefore, U.S. Holders are strongly encouraged to consult their own tax advisors to determine whether they are subject to any special rules that may limit their ability to make effective use of foreign tax credits and whether or not an election would be appropriate based on their particular circumstances.

Non-U.S. Holders

If you are a non-U.S. Holder, dividends (including any preferred dividends on our Class B shares) paid to you in respect of shares or ADSs will not be subject to United States federal income tax unless such dividends are “effectively connected” with your conduct of a trade or business within the United States, and such dividends are attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis.  In such cases you generally will be taxed in the same manner as a U.S. Holder.  If you are a corporate non-U.S. Holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Taxation of Capital Gains

U.S. Holders

Subject to the PFIC rules discussed below, if you are a U.S. Holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs.  Capital gain of a noncorporate U.S. Holder is generally taxed at a maximum rate of 20% where such noncorporate U.S. Holder has a holding period greater than one year.  Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Non-U.S. Holders

If you are a non-U.S. Holder, you will not be subject to United States federal income tax on gain recognized on the sale or other disposition of your shares or ADSs unless:

·the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis; or

·you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale, and certain other conditions exist.

If you are a corporate non-U.S. Holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Passive Foreign Investment Company Considerations

We believe that our shares and ADSs should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to be treated as a PFIC, gain realized on the sale or other disposition of your shares or ADSs would in general not be treated as capital gain.  Instead, if you are a U.S. Holder, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year.  With certain exceptions, your shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your shares or ADSs.  Certain elections may be available that would result in alternative treatments (such as mark-to-market or QEF treatment) of the ADSs or shares.  Dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are treated as a PFIC with respect to you either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

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Medicare Contribution Tax on Unearned Income

A U.S. Holder that is an individual is subject to a 3.8% tax on the lesser of (1) such U.S. Holder’s “net investment income” for the relevant taxable year and (2) the excess of such U.S. Holder’s modified adjusted gross income for the taxable year over a  certain threshold (between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. Holder that is an estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) such U.S. Holder’s undistributed “net investment income” for the relevant taxable year and (2) the excess of such U.S. Holder’s adjusted gross income for the taxable year over the amount at which the highest tax bracket begins for that taxable year (currently $7,500). A U.S. Holder’s net investment income will generally include, among other items, the amount of gross dividend income and the amount of any net gains from such U.S. Holder’s disposition of your shares or ADSs, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities).  U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to income and gains in respect of their investment in the shares or ADSs.

Backup Withholding and Information Reporting

If you are a noncorporate U.S. Holder, information reporting requirements, on Internal Revenue Service Form 1099, generally will apply to:

·dividend payments or other taxable distributions made to you within the United States; and

·the payment of proceeds to you from the sale of shares or ADSs effected at a United States office of a broker.

Additionally, backup withholding may apply to such payments if you are a noncorporate U.S. Holder that:

·fails to provide an accurate taxpayer identification number;

·is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns; or

·in certain circumstances, fails to comply with applicable certification requirements.

If you are a non-U.S. Holder, you are generally exempt from backup withholding and information reporting requirements with respect to:

·dividend payments made to you outside the United States by us or another non-United States payor; and

·other dividend payments and the payment of the proceeds from the sale of shares or ADSs effected at a United States office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax, and

·the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished the payor or broker:

·an Internal Revenue Service Form W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person, or

·other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations, or

·you otherwise establish an exemption.

Payment of the proceeds from the sale of shares or ADSs effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding.  However, a sale of shares or ADSs that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:

·the proceeds are transferred to an account maintained by you in the United States;

·the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or

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·the sale has some other specified connection with the United States as provided in U.S. Treasury regulations,

unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.

In addition, a sale of shares or ADSs effected at a foreign office of a broker will be subject to information reporting if the broker is:

·a United States person;

·a controlled foreign corporation for United States federal income tax purposes;

·a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or

·a foreign partnership, if at any time during its tax year:

·one or more of its partners are “U.S. persons,” as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or

·such foreign partnership is engaged in the conduct of a United States trade or business,

unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.  Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.

Backup withholding is not an additional tax.  You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the United States Internal Revenue Service.

Disclosure of Information with Respect to Foreign Financial Assets

Certain U.S. individuals who hold any interest in “specified foreign financial assets,” including our shares or ADSs, during such holder’s taxable year must attach to their U.S. tax return for such year certain information with respect to each such asset if the aggregate value of all of such assets exceeds $50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), unless such shares or ADSs are held in an account maintained by a U.S. payor, such as a U.S. financial institution or the U.S. branch of a foreign bank or insurer.  For this purpose, a “specified foreign financial asset” includes any depositary, custodial or other financial account maintained by a foreign financial institution, and certain assets that are not held in an account maintained by a financial institution, including any stock or security issued by a person other than a U.S. person.  A taxpayer subject to these rules who fails to furnish the required information may be subject to a penalty of $10,000, and an additional penalty may apply if the failure continues for more than 90 days after the taxpayer is notified of such failure by the Internal Revenue Service, unless the taxpayer demonstrates a reasonable cause for such failure to comply.  An accuracy-related penalty of 40% is imposed for an underpayment of tax that is attributable to an “undisclosed foreign financial asset understatement,” which for this purpose is the portion of the understatement of gross income for any taxable year that is attributable to any transaction involving an “undisclosed foreign financial asset,” including any asset that is subject to information reporting requirements under these rules, which would include our shares or ADSs if the dollar threshold described above were satisfied.

The applicable statute of limitations for assessment of U.S. federal income taxes is extended to six years if a taxpayer omits from gross income more than $5,000 and such omission is attributable to a foreign financial asset as to which reporting is required under the rules described in the preceding paragraph or would be so required if such rules were applied without regard to the dollar threshold or any other exceptions specified by the Internal Revenue Service.  In addition, the statute of limitations will be suspended if a taxpayer fails to provide in a timely manner either information with respect to specified foreign financial assets required to be reported or the annual information reports required for holders of PFIC stock, including PFIC stock for which a QEF election is made.  You should consult your own tax advisor concerning any obligation you may have to furnish information to the Internal Revenue Service as a result of holding our shares or ADSs.

Impact of U.S. Federal Tax Reform

Reform proposals have been recently put forth by members of Congress and the President. In 2016, the Speaker of the House

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of Representatives and the Chairman of the House Ways and Means Committee published “A Better Way.” Separately, the then-candidate, now-President published a one-page document on tax reform. Each of these proposals set forth a variety of principles to guide potential tax reform legislation. As of the date of registration of this annual report, no legislation in respect of either of these proposals has been introduced in the Congress. However, the principles set forth in both “A Better Way” and the President’s one-page proposal, if ultimately reduced to legislation enacted by the Congress and signed into law by the President in a form that is consistent with those principles, could change dramatically the U.S. federal taxation of the Grifols group and a holder of our shares or ADSs. While it is impossible to predict whether and to what extent any tax reform legislation (or other legislative, regulatory or administrative change to the U.S. federal tax laws) will be proposed or enacted, any such change in the U.S. federal tax laws could affect materially the value of any investment in the Company’s shares or ADSs. Investors should consult their own tax advisors regarding the effects of the Tax Cut and Jobs Act on an investment in the Company or its shares or ADSs.

F.Dividends and Paying Agents

Not Applicable.

G.Statement by Experts

Not Applicable.

H.Documents on Display

We are subject to the information requirements of the Exchange Act, except that, as a foreign private issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act.  In accordance with these information requirements, we file or furnish reports and other information with the SEC.  Reports and other information filed or furnished by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549, and at the SEC’s regional offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.

Copies of such material may also be inspected at the offices of NASDAQ, 4 Times Square, New York, New York 10036, on which our ADSs are listed.  In addition, information filed electronically with the SEC is publicly available on the SEC’s website, which does not form part of this annual report on Form 20-F, at http://www.sec.gov.

I.Subsidiary Information

Not Applicable.

Item 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risks inherent in our market-sensitive instruments are potential losses that may arise from adverse changes to interest rates, foreign exchange rates and market prices.  We are subject to market risk resulting from changes in interest rates because such changes may affect the cost at which we obtain financing.  We are subject to exchange rate risk with respect to our debt denominated in foreign currencies.

Currency Risk

We operate internationally and are exposed to currency risks when operating in foreign currencies, in particular with respect to the U.S. dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

We hold several investments in foreign operations, the net assets of which are exposed to currency risk.  Currency risk affecting net assets of our foreign operations in U.S. dollars are mitigated primarily through borrowings in the relevant foreign currency.  Our main exposure to currency risk is to the U.S. dollar, which is used in a significant percentage of our transactions in foreign currencies.

If the U.S. dollar had strengthened by 10% against the euro at December 31, 2017, equity would have increased by €416.1 million (€318.5 million at December 31, 2016) and profit would have increased by €14.6 million (would have decreased by €11.4 million at December 31, 2016).  This analysis assumes that all other variables are held constant, especially that interest rates remain constant.  A 10% weakening of the U.S. dollar against the euro at December 31, 2017, and 2016, would have had the opposite effect for the amounts shown above, all other variables being held constant.

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Interest Rate Risk

Our interest rate risks arise from current and non-current borrowings.  Borrowings at variable interest rates expose us to cash flow interest rate risks.  The purpose of managing interest rate risk is to balance the debt structure, maintaining part of borrowings at fixed rates and hedging part of variable rate debt.

A significant part of the financing obtained during 2017 accrues interest at fixed rates.  This fixed interest debt amounts to €1,000 billion as of December 31, 2017, which represents 56% of our total U.S. dollar denominated debt. The additional loans of €185 million in the aggregate from the European Investment Bank represent 10% of our total debt in euros.

Our senior euro denominated debt represented 12% of our total senior debt at December 31, 2017 and at December 31, 2016. Total fixed-interest debt represented a total of 19% of debt at December 31, 2017, and 21% at December 31, 2016.

As of December 31, 2017, we were not participating in hedging of Euros or U.S. dollars. In previous years, the fair value of interest rate swaps, contracted to reduce the impact of rises in variable interest rates (LIBOR and EURIBOR), were accounted for on a monthly basis. These derivative financial instruments comply with hedge accounting requirements.

If the interest rate had been 100 basis points higher during 2017, the interest expense would have increased by €53 million.  A 100 basis points decrease in interest rates during 2017 would have had the opposite effect for the amounts shown above.

Market Price Risk

We are subject to price risk with respect to raw materials, which is mitigated by the vertical integration of the hemoderivatives business in a sector that is highly concentrated.

Item 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

A.Debt Securities

Not Applicable.

B.Warrants and Rights

Not Applicable.

C.Other Securities

Not Applicable.

D.American Depositary Shares

Deutsche Bank Trust Company Americas serves as the depositary for both our Class A ADSs and our Class B ADSs, and its principal executive office is located at 60 Wall Street, New York, NY 10005, USA.  The custodian is Deutsche Bank Sociedad Anónima Española, and its principal office in Spain is located at Ronda General Mitre 72-74, 08017 Barcelona, Spain.

Each Class A ADS represents the right to receive one half of one Class A ordinary share of Grifols, S.A. Each Class B ADS represents the right to receive one Class B non-voting preference share of Grifols, S.A.

The following is a summary of the fee provisions of the deposit agreements for each of the Class A ADSs and Class B ADSs.  For more complete information, you should read each deposit agreement in its entirety.

Associated Fee	Depositary Action
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	Issuance of ADSs, including issuance resulting from a distribution of shares or rights or other property. Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates.
$2.00 (or less) per 100 ADSs (or portion of 100 ADSs)	Distribution of cash proceeds, including cash dividends or sale of rights and other entitlements.

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$2.00 (or less) per 100 ADSs (or portion of 100 ADSs) per calendar year, provided that this fee, when combined with the fee for distribution of cash proceeds, including cash dividends or sale of rights and other entitlements, shall not exceed $2.00 (or less) per 100 ADSs (or portion of 100 ADSs) in any calendar year	Depositary operation and maintenance costs.
Annual fee of $1.00 per 100 ADSs	Inspections of the relevant share register.
Registration or transfer fees	Transfer and registration of our shares on its share register to or from the name of the depositary or its agent when you deposit or withdraw our shares.
Expenses of the depositary	Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement). Converting foreign currency to U.S. dollars.
Taxes and other governmental charges the depositary or the custodian has to pay on any ADS or share underlying an ADS, including any applicable interest and penalties thereon and any share transfer or other taxes or governmental charges, for example, stock transfer taxes, stamp duty or withholding taxes	As necessary.
Any fees and expenses incurred by the depositary in connection with the conversion of a foreign currency in compliance with the applicable exchange control and other regulations, and the delivery of deposited securities, including any fees of a central depository, and any additional fees, charges, costs, or expenses, that may be incurred by the depositary from time to time	As necessary.
Any additional fees, charges, costs or expenses that may be incurred by the depositary from time to time.	As necessary.

The depositary collects its fees for issuance and cancellation of our ADSs directly from investors depositing shares or surrendering our ADSs for the purpose of withdrawal or from intermediaries acting for them.  The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The depositary may collect its annual fee for depositary services by deduction from cash distributions, by directly billing investors or by charging the book-entry system accounts of participants acting for such investors.  The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

The fees and charges holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary.  Our ADS holders will receive prior notice of such changes.

Fees Paid by the Depositary to Grifols

Deutsche Bank Trust Company Americas, as depositary, has agreed to reimburse or pay on behalf of Grifols, S.A. certain reasonable expenses related to our ADR programs and incurred by us in connection with the programs, such as investor relations activities and ongoing maintenance expenses and listing fees.  It has covered all such expenses incurred by us during 2017 for an amount of $1.6 million.  The amounts the depositary reimbursed or paid are not perforce related to the fees it collected from ADS holders.

As part of its service to us, Deutsche Bank Trust Company Americas has also agreed to waive the cost of providing administrative and reporting services, including the cost of accessing its intelligence database for our ADR programs, which totaled $190 for 2017.

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GLOSSARY OF TERMS

“AMP” means the average manufacturer price of certain outpatient drugs covered by Medicaid, as defined under the Medicaid drug rebate program, and is used to help calculate rebates paid by certain drug manufacturers that are shared by the U.S. and state governments.

“Alzheimer’s disease” is the most common form of dementia. This incurable, degenerative, and terminal disease was first described by German psychiatrist and neuropathologist Alois Alzheimer in 1906 and was named after him.

“Albumin” is the most abundant blood plasma protein and is produced in the liver and forms a large proportion of all plasma. Albumin normally constitutes about 60% of human plasma. It is important in regulating blood volume by maintaining the oncotic pressure of the blood compartment.

“ASP” means the average sales price of certain outpatient drugs covered by Medicare Part B, and is used to help calculate reimbursement of such drugs.

“Assays” are systems designed to detect antibodies, antigens or the nucleic acid of an infectious agent. For instance, the WNV assay detects the presence of the West Nile virus in blood donations. The main types of assay used for blood screening are Immunoassays and Nucleic acid technology, or NAT assays.

“A1PI” means alpha-1 proteinase inhibitor.

“BLA” (Biologics License Application) is a biological license application issued by the FDA, and serves as a U.S. marketing authorization for certain biological drug products.

“BlisPack” a blister handling machine.

“BLOODchip” blood group genotyping tests manufactured by Progenika, a company in which Grifols has a majority stake.

“BP” means the best price, as defined under the Medicaid drug rebate program, and is used to help calculate rebates paid by certain drug manufacturers that are shared by the U.S. and state governments.

“cGMP” means current Good Marketing Practice.

“CIDP” means chronic inflammatory demyelinating polyneuropathy, a neurological disease resulting in weakness, numbness, pain and difficulty in walking.

“Cirrhosis” is a medical condition which is a result of advanced liver disease. It is characterized by the replacement of liver tissue by fibrosis (scar tissue) and regenerative nodules (lumps that occur due to attempted repair of damaged tissue).

“Congenital Alpha-1 Antitrypsin Deficiency” is an inherited disease characterized by reduced levels in the blood of the substance Alpha-1 Antitrypsin, or AAT. This substance is a protein that is normally made by the liver and reaches other organs (such as the lungs) after being released into the blood circulation.

“CMS” refers to the U.S. Centers for Medicare & Medicaid Services.

“CNMV” means the Comisión Nacional del Mercado de Valores.

“CPP” is the certificate of pharmaceutical product, a certificate issued in the format recommended by the WHO, which establishes the status of a pharmaceutical product and of the applicant for a certificate in the relevant exporting country.

“Diabetes” is a metabolic disease in which a person has high blood sugar, either because the pancreas does not produce enough insulin, or because cells do not respond to the insulin that is produced.

“DOJ” refers to the United States Department of Justice.

“ELISA” means enzyme-linked immunosorbent assay.

“EMA” refers to the European Medicines Agency.

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“Erytra Eflexis” a fully automated, mid-size analyzer that performs pretransfusion compatibility testing using DG Gel technology.

“Factor VIII” or “FVIII” is an essential blood clotting factor also known as anti-haemophilic factor, or AHF. In humans, Factor VIII is encoded by the F8 gene. Defects in this gene results in hemophilia A, which is a sex-linked disease and occurs predominantly in males. FVIII concentrated from donated blood plasma, or alternatively recombinant FVIII, or rFVIII, can be given to hemophiliacs to restore hemostasis.

“Factor IX” is an important blood clotting factor also known as Christmas factor or plasma thromboplastin component, or PTC. It is one of the serine proteases of the coagulation system and belongs to the peptidase family S1. In humans, a deficiency of this protein causes haemophilia B, which is a sex-linked disease and occurs predominantly in males.

“FDA” is the U.S. Food and Drug Administration.

“Fibrin Glue or Fibrin Sealant” is surgical adhesive material that is utilized in a variety of surgical situations.

“Fractionation” is the process of fractionating plasma, or separating it into its different components or plasma derivatives.

“FSS” refers to the Federal Supply Schedule, a schedule managed by the U.S. Department of Veterans Affairs, which includes discounted drug pricing for certain U.S. government agency programs.

“GPO” means group purchasing organization.

“Gri-fill System”, a process for the sterile filling of flexible material bags.

“Hematology” is the study of blood, blood-forming organs, and blood diseases.

“Hemoderivative” is a substance obtained by fractionation of human blood plasma.

“Hemophilia A” is a genetic deficiency in clotting factor VIII, which causes increased bleeding (usually affects males).

“Hemostasis” is a complex process which causes the bleeding process to stop. It refers to the process of keeping blood within a damaged blood vessel (the opposite of hemostasis is hemorrhage). Most of the time this includes the changing of blood from a fluid to a solid state. Intact blood vessels are central to moderating blood’s tendency to clot. Hemostasis has three major steps: 1) vasoconstriction, 2) temporary blockage of a break by a platelet plug, and 3) blood coagulation, or formation of a clot that seals the hole until tissue are repaired.

“HHS” refers to the U.S. Department of Health and Human Services.

“HIV” refers to the human immunodeficiency virus.

“Immunohematology” is a branch of hematology relating to the study of antigens and antibodies and their effects on blood and the relationships between disorders of the blood and the immune system.

“Immunology” is a broad branch of biomedical science that covers the study of all aspects of the immune system in organisms. It deals with the physiological functioning of the immune system in states of both health and disease; malfunctions of the immune system in immunological disorders (autoimmune diseases, hypersensitivities, immune deficiency, transplant rejection); the physical, chemical and physiological characteristics of the components of the immune system in vitro, in situ, and in vivo.

“IND” means investigational new drug application, which is an application that must be accepted by the FDA and in effect prior to certain drug sponsors commencing clinical trials involving human subjects.

“IRB” refers to institutional review boards, oversight committees that approve and monitor clinical trials to protect the rights and welfare of human subjects.

“ITP” means idiopathic thrombocytopenic purpura.

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“IVIG” means intravenous immune globulin, which is a blood product administered intravenously. It contains the pooled IgG (immunoglobulin (antibody) G) extracted from plasma. It is mainly used as treatment in three major categories: (i) immune deficiencies, (ii) inflammatory and autoimmune diseases, (iii) neurological diseases and (iv) acute infections.

“Kawasaki disease” is a rare autoimmune disease that mostly affects children and causes inflammation of vessels, fever and rashes. This disease can be treated with IVIG.

“Koate-DVI” is

“Medicaid” is a social healthcare program in the United States for individuals with low income and resources.

“Medicare” is a national insurance program in the United States, primarily for persons 65 years old and over and certain younger persons with disabilities.

“Medicare Part B” is a portion of the Medicare program which includes, in part, reimbursement based on ASP for certain physician-administered drugs and drugs provided in the hospital outpatient setting.

“Medicare Part D” is a portion of the Medicare program which includes certain coverage for prescription drugs generally dispensed to patients by retail pharmacies.

“MRB” refers to the Market Research Bureau, Inc., an independent market research firm which supplies blood and plasma products industry data on a global level.

“NAT” means nucleic acid testing.

“NVD” means the share and asset agreement, executed with Novartis Vaccines and Diagnostics, Inc.

“OIG” is the HHS Office of the Inspector General, which is charged with protecting the integrity of HSS programs, including the Medicare and Medicaid programs.

“Orphan drug” is a pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease. The assignment of orphan status to a disease and to any drugs developed to treat it is a matter of public policy in many countries, and has resulted in medical breakthroughs that may not have otherwise been achieved due to the economics of drug research and development The Orphan Drug Act (ODA) of January 1983, passed in the United States, with lobbying from the National Organization for Rare Disorders, is meant to encourage pharmaceutical companies to develop drugs for diseases that have a small market. Under the law, companies that develop such a drug (a drug for a disorder affecting fewer than 200,000 people in the United States) may sell it without competition for seven to ten years, and may get clinical trial tax incentives.

“Open Payments Program” imposes new reporting and disclosure requirements for pharmaceutical and medical device manufacturers with regard to payments or other transfers of value made to certain U.S. healthcare practitioners, such as physicians and academic medical centers, and with regard to certain ownership interests held by physicians in reporting entities.

“PDUFA” is the Prescription Drug User Fee Act, which levies a user fee on certain human drug applications.

“Plasma” is the liquid part of the blood. The majority of plasma is composed of water. The remainder is essential proteins and antibodies that help sustain our body’s vital functions. A shortage of any one of these plasma proteins, such as albumin or immunoglobulins, can give rise to one of many life-threatening illnesses.

“Plasmapheresis” is a technique which separates plasma from other blood components, such as red blood cells, platelets, and other cells. These unused blood components are suspended in saline solution and immediately re-injected back into the donor while the plasma collection process is taking place. Because the donor is only providing plasma and not whole blood, the recovery process is faster and better tolerated, and the donor is therefore able to make donations more frequently. Plasmapheresis was developed by Jose Antonio Grifols Lucas in the year 1951. It is the only procedure that is capable of obtaining sufficient quantities of plasma to cover the needs of manufacturing our many different plasma protein therapies.

“Plasma derivatives” are proteins found in human plasma, which once isolated and purified, have therapeutic value.

“PTC” means plasma thromboplastin component.

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“Prolastin” is a concentrated form of alpha1-antitrypsin, or AAT, produced by Grifols and derived from human plasma and approved only for chronic, or ongoing, replacement therapy in people with emphysema caused by genetic AAT deficiency. Given as prescribed, Prolastin raises the levels of AAT in the blood and lungs. Raising the AAT level may help reduce the damage to the lungs caused by destructive enzymes.

“Promonitor” Highly specific ELISA kits for quantification of serum drug levels and anti-drug antibodies of various biological drugs

“Q-Coagulometer and Q-Smart analyzers” Fully automated hemostasis analyzers that use reagents to measure blood coagulation levels.

“Triturus analyzers” Open and fully automated analyzer for ELISA (enzyme-linked immunoabsorbent assay), tests with multi-test/multi-batch capability.

“Von Willebrand Disease” is the most common hereditary coagulation abnormality described in humans, although it can also be acquired as a result of other medical conditions. It arises from a qualitative or quantitative deficiency of von Willebrand factor, a multimeric protein that is required for platelet adhesion.

“WADiana/Erytra analyzers” Automated immunohematology analyzers that use gel agglutination technology to enable automatic processing of DG Gel® blood determination cards.

“WHO” refers to the world health organization.

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PART II

Item 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

Item 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

Item 15.CONTROLS AND PROCEDURES

A.Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officers and our Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this annual report on Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were effective.

B.Management’s Report on Internal Control over Financial Reporting

Our management, under the supervision of our Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Our internal control system is designed to provide reasonable assurance as to the reliability of financial reporting and the preparation of the published financial statements under generally accepted accounting principles.  For Grifols, S.A., “generally accepted accounting principles” means IFRS as issued by IASB.

Our internal control over the financial reporting system includes those policies and procedures that:  (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our company assets that could have a material effect on the financial statements.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by IASB.  Internal control over financial reporting has inherent limitations.  Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.  Internal control over financial reporting also can be circumvented by collusion or improper management override.  Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.  In making this assessment, they used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013).  Based on their assessment under these criteria, our management believes that, at December 31, 2017, our internal control over financial reporting is effective.

C.Attestation Report of the Registered Public Accounting Firm

KPMG Auditores, S.L., an independent registered public accounting firm, who also audit the Group’s consolidated financial statements, has audited the effectiveness of Grifols S. A.’s internal control over financial reporting, and has issued an unqualified report thereon, which is included on page F-3 of this annual report on Form 20-F.

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D.Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16.[RESERVED]

Item 16.A.AUDIT COMMITTEE FINANCIAL EXPERT

The Board has determined that Steven F. Mayer is an “audit committee financial expert,” as defined in Item 16A of Form 20-F, and is an independent director under Rule 10A-3 under the Exchange Act.

Item 16.B.CODE OF ETHICS

We have adopted the Employee Code of Conduct, which applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer and principal accounting officer.  This Code is intended to meet the definition of “code of ethics” under Item 16B of Form 20-F.

If the Code of Conduct for Grifols’ Employees is amended, or if a waiver is granted, we will disclose such amendment or waiver on our website.

Item 16.C.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The table below sets forth the total fees paid to KPMG Auditores, S.L., our principal accountants, and to other member firms of the KPMG international organization, for services performed in the years 2017 and 2016, and breaks down these amounts by category of service:

	2017	2016
	(in thousands of euros)
Audit fees	4,983	5,023
Audit-related fees(1)	626	19
Tax fees	51	72
All other fees(2)	7	131
Total	5,667	5,245

(1)Audit-related fees are fees for assurance services or other work traditionally provided to us by external audit firms in their role as statutory auditors. 2017 fees mainly includes limited review of semi-annual financial statements for filing with the CNMV and a comfort letter delivered in connection with the refinancing of the notes.

(2)All other fees primarily relate to due diligence of businesses acquired and training.

The table below sets forth the total fees paid to other auditors for services performed in the years 2017 and 2016, and breaks down these amounts by category of service:

	2017	2016
	(in thousands of euros)
Audit fees	52	51
Audit-related fees	—	—
Tax fees	—	35
All other fees	—	—
Total	52	86

Pre-approval Policies and Procedures

Subject to shareholder approval of the independent auditor in accordance with Spanish law, the Audit Committee makes recommendations to the Board regarding the appointment, retainer and replacement of the independent auditor.  The Audit Committee is also directly responsible for the compensation and oversight of the work of the independent auditor.  We have developed a policy regarding the engagement of professional services by our external auditor, in accordance with the Spanish Audit Law and the Sarbanes-Oxley Act of 2002.  This policy generally provides that we will not engage our independent auditors to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee.

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In accordance with the pre-approval policy, all audit and permitted non-audit services performed for us by our principal accountants, or any of its affiliates, were approved by the Audit Committee, which concluded that the provision of such services by the independent accountants was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

Item 16.D.EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

Item 16.E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

The following table includes information about our share purchases during 2017:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares that May Yet Be Purchased Under the Programs
—	—	—	—	—

As of December 31, 2017, we hold 4,297, 806 Class B shares and no Class B ADS’s in treasury. There were no purchases during the year.

Item 16.F.CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

Item 16.G.CORPORATE GOVERNANCE

Pursuant to NASDAQ Listing Rules, as a foreign private issuer, we may elect to follow our home country practice in lieu of the corporate governance requirements of the NASDAQ Listing Rule 5600 Series, with the exception of those rules that are required to be followed pursuant to the provisions of NASDAQ Listing Rule 5615(a)(3).  We have elected to follow Spanish practices in lieu of the requirements of the NASDAQ Listing Rule 5600 Series to the extent permitted under NASDAQ Listing Rule 5615(a)(3).  Set forth below is a summary of the significant differences between the corporate governance practices we follow under Spanish law (as in effect as of December 31, 2017) and those followed by NASDAQ-listed U.S. domestic issuers.

Corporate Governance

Under NASDAQ Listing Rules, a U.S. domestic issuer is required to establish a quorum as specified in its bylaws for any meeting of the holders of common stock, provided, however, that such quorum is not permitted to be less than 33 1/3% of the outstanding shares of voting stock.  The Articles of Association provide that, on the first call of our general shareholders’ meetings, a duly constituted meeting requires a quorum of at least 25% of our subscribed share capital with voting rights, and, if a quorum is not obtained on the first call, a meeting is validly convened on the second call regardless of the share capital in attendance.  However, certain major corporate actions (such as issuing additional ordinary shares, increasing or decreasing our share capital, issuing debt securities, amending the Articles of Association or approving merger transactions) require shareholder approval at a meeting at which at least 50% of our subscribed share capital with voting rights is present or represented on the first call or at least 25% of the share capital with voting rights present or represented on second call. However, when the number of shareholders attending our meeting represents less than 50% of our subscribed share capital with voting rights, resolutions on any of these major corporate actions must be adopted by the affirmative vote of at least two-thirds of the share capital present or represented at such meeting.

In addition, all actions described in Article 6.bis of the Articles of Association, which are considered to affect the economic rights of our Class B shares, must be approved at a shareholders’ meeting by the holders of at least a majority of Class B shares.

Under NASDAQ Listing Rules, U.S. domestic issuers are required to solicit proxies, provide proxy statements for all shareholders’ meetings and provide copies of such proxy materials to NASDAQ.  As a foreign private issuer, we are generally exempt from the SEC rules governing the solicitation of shareholder proxies.  However, under Spanish law and per the Articles of Association, we are required to publish a calling of the meeting at least one month prior to the date set for each general shareholders’ meeting in at least:  (i) the Official Gazette of the Commercial Registry or one of the local newspapers of wide circulation in the province where we are domiciled (currently Barcelona, Spain); (ii) CNMV’s website; and (iii) our website.  We distribute a copy of the notice of the meeting and a form of proxy to our U.S. shareholders and also make these materials available through our website in advance of such meeting.

136

Under NASDAQ Listing Rules, shareholders of U.S. domestic issuers must be given the opportunity to vote on equity compensation plans and material revisions thereto, with limited exceptions set forth in NASDAQ Listing Rules, including an exception for foreign private issuers who follow the laws of their home country.  Under Spanish law, equity compensation plans involving the issuance of our securities require prior shareholder approval.  Additionally, equity compensation plans in which our officers and employees participate can be approved by the Board without shareholder approval.  However, the establishment of equity compensation plans in which members of the Board participate must be authorized in the Articles of Association and requires the shareholders’ prior approval at a shareholders’ meeting.

Under NASDAQ Listing Rules, shareholders of U.S. domestic issuers must approve the issuance of securities when such issuance would result in a change in control of such issuer.  Under Spanish law, any issuance of our securities, regardless of whether such issuance would result in a change of control, requires prior shareholder approval.

In Spain, companies with securities listed on a Spanish Stock Exchange are:

(i)recommended to follow the provisions of the CNMV Governance Code;

(ii)required by law to publish an Annual Report on Corporate Governance as well as corporate governance information on their websites;

(iii)required by law to publish an Annual Report on Remuneration of the members of the Board; and

(iv)required by law to comply with the regulations with respect to audit committees and appointment and remuneration committees set forth in the Spanish Companies Act, as amended.

Board Practices

Independence of Directors

Pursuant to NASDAQ Listing Rules, a majority of the directors of a listed U.S. company are required to be “independent,” as such term is defined by NASDAQ Listing Rules.  As a foreign private issuer, we are exempt from such requirement, and Spanish law does not contain any such requirements.

Spanish law establishes the category of directors and the indispensable requirements to determine their independence.  The Board Regulations, consistent with Spanish law, recognize two main categories of directors:  (i) executive directors; and (ii) external directors, who can be divided into (a) proprietary directors, (b) independent directors and (c) other directors who cannot be considered proprietary or independent.

The definition of “independent director,” as set forth by Spanish law, provides that the persons listed below may not be nominated or designated as independent directors.

(i)Employees or executive directors of any Group companies, unless three or five years have elapsed, respectively, since the termination of the relationship.

(ii)Persons that have received some payment from us or from the Group in addition to their directors’ remuneration, unless the amount involved is not significant to the director.  Dividends or pension supplements received by a director for prior employment or professional services are excluded, provided that such payments are non-contingent (i.e., the paying company has no discretionary power to suspend, modify or revoke the payment).

(iii)Persons that have been, during the last three years, partners of the external auditors or the firm responsible for the audit report, whether with respect to the audit of us or any other company in the Group for those years.

(iv)Executive directors or senior officers of other companies in which any of our executive directors or senior officers is an external director.

(v)Persons that have or had, during the last year, material business relationships with us or with any other company in the Group, whether in their own name or as a significant shareholder, director or senior officer of a company that has or had such a relationship.  For purposes of this paragraph (v), “business relationships” means any relationship with suppliers of goods or services, including financial, advisory and consultancy services.

(vi)Significant shareholders, executive directors or senior officers of an entity which receives or has received, during the last three years, significant donations from us or the Group.  This provision does not apply to those who are merely trustees of a foundation receiving donations.

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(vii)Spouses or related persons maintaining an analogous relationship or close relatives of one of our executive directors or senior officers.

(viii)Any person not proposed for appointment or renewal by the Appointments and Remuneration Committee.

(ix)Persons in any of the situations set out in (i), (v), (vi) or (vii) above with regard to a significant shareholder or a shareholder with Board representation.  In the case of the family relations set out in (vii) above, the limitation applies not only in connection with the shareholder but also with our proprietary directors.

(x)Persons that have been directors for 12 consecutive years.

The proprietary directors who lose this status as a consequence of the sale of the shareholding by the shareholder they represent, can be reelected as independent directors only when such shareholder has sold the total amount of its shares.

Finally, any member of the Board that owns our shares can be considered independent, as long as the shareholding is not significant and satisfies all the above-mentioned conditions.

We have not determined whether our directors would be considered independent under NASDAQ Listing Rules, except for the three directors who are members of the Audit Committee and as such must meet NASDAQ independence criteria. As of the date of this report, seven members of the Board are independent directors in accordance with the Board Regulations and the CNMV Governance Code.

Furthermore, we follow the Spanish Companies Act, which does not, unlike NASDAQ Listing Rules, require independent directors to hold meetings where only such independent directors are present.

For a detailed discussion of the composition, responsibilities and terms of our Audit Committee, see Item 6 of Part I, “Directors, Senior Management and Employees — C. Board Practices — Committees of the Board — Audit Committee.”

Audit Committee

Responsibilities and Terms.  In accordance with NASDAQ Listing Rules, our Audit Committee is in charge of the appointment, compensation, retention and oversight of the services of any registered public accounting firm engaged for the purpose of preparing and issuing any audit report, or for performing other audit reviews or related services.  Notwithstanding the above, Spanish laws provide our shareholders with the authority to appoint and replace the independent auditor at a general shareholders’ meeting.

Independence of the Audit Committee.  All of the members of our Audit Committee meet the independence criteria set out in NASDAQ Listing Rules.  Subsequent to the entry into force of Law 31/2014 and Law22/2015, Spanish law requires that (a) the Audit Committee be composed of external directors (the majority of them being independent and one of them being appointed due to his knowledge and experience in accounting or auditing matters) and (b) the chairman of the Audit Committee is an independent director.  For a further discussion regarding the composition of our Audit Committee, see Item 6 of Part I, “Directors, Senior Management and Employees — C. Board Practices — Committees of the Board — Audit Committee.”

Internal Audit Department.  We have an internal audit department responsible for internal audit matters and ensuring the efficiency of the internal audit control process of our different business units.  Our internal audit department reports directly to the Audit Committee, supporting the adequate performance of all its functions.

Appointments and Remuneration Committee

Pursuant to NASDAQ Listing Rules, foreign private issuers are exempt from the requirements regarding independent nominating and compensation committees.  Foreign private issuers are permitted to follow their home country corporate governance practice in this respect.

Spanish law requires that all Spanish listed companies have an appointments and remuneration committee comprised of external directors, at least two of whom must be independent, and that the chairman of the appointments and remuneration committee be an independent director.

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Our Appointments and Remuneration Committee is comprised exclusively of external directors and is chaired by an independent director.  For a detailed discussion of our Appointments and Remuneration Committee, see Item 6 of Part I, “Directors, Senior Management and Employees — C. Board Practices — Committees of the Board — Appointments and Remuneration Committee.”

Internal Code of Conduct on Matters Related to the Securities Market and Business Ethics

Under NASDAQ Listing Rules, we are required to adopt a code of business conduct and ethics applicable to all directors, officers and employees, which must be publicly available.  Furthermore, under Spanish law, Grifols is required to adopt an internal code of conduct for securities markets, in order to prevent insider trading, misconduct, and to control possible conflicts of interest. In this respect, the Board, in its meeting held on October 28, 2016, resolved to approve the new Internal Code of Conduct on Matters Related to the Securities Market, in order to comply with recent European market abuse regulations, specifically European Regulation 596/2014.

Additionally, the Board Regulations set out in detail the directors’ main obligations relating to conflicts of interest concerning business opportunities, use of Grifols’ assets, confidentiality and non-competition.  Both the Internal Code of Conduct on Matters Related to the Securities Market and the Board Regulations are publicly available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com.  Although not mandatory under Spanish laws, the Board of Grifols also approved the Code of Conduct for Grifols Employees, which is publicly available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com.

Item 16.H.MINE SAFETY DISCLOSURE

Not applicable.

PART III

Item 17.FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18 of this Part III.

Item 18.FINANCIAL STATEMENTS

The audited consolidated financial statements as required under Item 18 of this Part III are attached hereto starting on page F-1 of this annual report on Form 20-F.  The audit report of KPMG, our independent registered public accounting firm, is included herein preceding the audited consolidated financial statements.

Item 19.EXHIBITS

Exhibit Number	Description
1.1	Articles of Association (Estatutos) of Grifols, S.A. (English translation)*
2.1	Amendment No. 1 to Deposit Agreement dated as of March 14, 2011 among Grifols, S.A., Deutsche Bank Trust Company Americas, as depositary, and all Holders from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder (incorporated herein by referenced to Exhibit (a)(2) to our Registration Statement on Form F-6 (File No. 333-182636 filed July 12, 2012))
2.2	Form of Deposit Agreement among Grifols, S.A., Deutsche Bank Trust Company Americas, as depositary, and all Holders from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder (incorporated herein by reference to Exhibit (a) to our Registration Statement on Form F-6 (File No. 333-172688) filed March 9, 2011)
2.3	Form of Deposit Agreement among Grifols, S.A., Deutsche Bank Trust Company Americas, as depositary, and all Holders from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder (incorporated herein by reference to Exhibit (a) to our Registration Statement on Form F-6 (File No. 333-159327) filed May 18, 2009)
2.4	Senior Notes Indenture, dated as of April 26, 2017, relating to the 3.20% Senior Notes due 2025, between Grifols S.A., the guarantors signatory thereto and BNY Mellon Corporate Trust Services Limited, as trustee*
2.5	Form of 3.200% Senior Note (included as Exhibit A to Exhibit 2.4)
4.1	Share and Asset Purchase Agreement, dated November 10, 2013, among Novartis Vaccines and Diagnostics, Inc., Novartis Corporation, Grifols Diagnostic Solutions Inc. (f/k/a G-C Diagnostics Corp.) and Grifols, S.A. (incorporated herein by reference to Exhibit 4.1 of our Annual Report on Form 20-F (File No. 001-35193) filed on April 4, 2014)†
4.2	Amendment No. 1 to Share and Asset Purchase Agreement, dated December 27, 2013, among Novartis Vaccines and Diagnostics, Inc., Novartis Corporation, Grifols Diagnostic Solutions Inc. and Grifols, S.A. (incorporated herein by reference to Exhibit 4.2 of our Annual Report on Form 20-F (File No. 001-35193) filed on April 4, 2014)
4.3	Amendment No. 2 to Share and Asset Purchase Agreement, dated January 9, 2014, among Novartis Vaccines and Diagnostics, Inc., Novartis Corporation, Grifols Diagnostic Solutions Inc. and Grifols, S.A. (incorporated herein by reference to Exhibit 4.3 of our Annual Report on Form 20-F (File No. 001-35193) filed on April 4, 2014)†
4.4	Asset Purchase Agreement by and among Hologic, Inc., Grifols Diagnostic Solutions, Inc. and Grifols, S.A., dated as of December 14, 2016 *
4.5	Credit and Guaranty Agreement, dated as of January 31, 2017, by and among Grifols Worldwide Operations Limited, Grifols Worldwide Operations USA, Inc., Grifols, S.A., certain subsidiaries of Grifols, S.A., the lenders party thereto and Bank of America, N.A., as administrative and collateral agent (incorporated herein by reference to Exhibit 4.12 of our Annual Report on Form 20-F (File No. 001-35193) filed on April 4, 2017)
8.1	List of subsidiaries (see Notes 1 and 2(b) to our audited consolidated financial statements starting on page F-11 of this annual report on Form 20-F)
12.1	Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

139

12.2	Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
13.1	Principal Executive Officer and Principal Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101	Interactive Data File

* Filed herewith.

† Portions of the exhibit have been omitted pursuant to an order granting confidential treatment dated June 30, 2014 by the Commission.

140

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

GRIFOLS, S.A.
By:	/s/ Víctor Grifols Deu
	Name: Víctor Grifols Deu
	Title: Director and Co-Chief Executive Officer
GRIFOLS, S.A.
By:	/s/ Raimon Grifols Roura
	Name: Raimon Grifols Roura
	Title: Director and Co-Chief Executive Officer

Date:  April 6, 2018

141

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Financial Statements

31 December 2017 and 2016

SUMMARY

Report of Independent Registered Public Accounting Firm F-3

·	Consolidated financial statements
		·	Consolidated Balance Sheets		F-5
		·	Consolidated Statement of Profit or Loss		F-7
		·	Consolidated Statements of Comprehensive Income		F-8
		·	Consolidated Statements of Cash Flows		F-9
		·	Consolidated Statements of Changes in Equity		F-10
·	Notes
		(1)		Nature, Principal Activities and Subsidiaries	F-11
		(2)		Basis of Presentation	F-11
		(3)		Business Combinations	F-19
		(4)		Significant Accounting Policies	F-21
		(5)		Financial Risk Management Policy	F-40
		(6)		Segment Reporting	F-43
		(7)		Goodwill	F-45
		(8)		Other Intangible Assets	F-47
		(9)		Property, Plant and Equipment	F-49
		(10)		Equity Accounted Investees	F-51
		(11)		Financial Assets	F-56
		(12)		Inventories	F-57
		(13)		Trade and Other Receivables	F-57
		(14)		Cash and Cash Equivalents	F-58
		(15)		Equity	F-59
		(16)		Earnings per Share	F-64
		(17)		Non-Controlling Interests	F-65
		(18)		Grants	F-66
		(19)		Provisions	F-66
		(20)		Financial Liabilities	F-68
		(21)		Trade and Other Payables	F-75
		(22)		Other Current Liabilities	F-75
		(23)		Net Revenues	F-75
		(24)		Personnel Expenses	F-78
		(25)		Expenses by Nature	F-78
		(26)		Finance Result	F-79
		(27)		Taxation	F-80
		(28)		Operating Leases	F-82
		(29)		Other Commitments with Third Parties and Other Contingent Liabilities	F-83
		(30)		Financial Instruments	F-86
		(31)		Balances and Transactions with Related Parties	F-93
		(32)		Events After the Reporting Period	F-94

F-1

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Financial Statements

31 December 2017 and 2016

SUMMARY

·	Appendices
		·	Appendix I Information on Group Companies, Associates and Others	F-96
		·	Appendix II Operating Segments	F-102
		·	Appendix III Changes in Other Intangible Assets	F-104
		·	Appendix IV Movement in Property, Plant and Equipment	F-106
		·	Appendix V Statement of Liquidity for Distribution of Interim Dividend	F-108

F-2

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Grifols, S.A.

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Grifols, S.A. and subsidiaries (the Company) as of 31 December 2017 and 2016, the related consolidated statements of profit and loss, comprehensive income, changes in consolidated equity, and cash flows for each of the years in the three-year period ended 31 December 2017, and the related notes and Appendix I to V (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of 31 December 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Grifols, S.A. and subsidiaries as of 31 December 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended 31 December 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management´s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Grifols, S.A. and subsidiaries in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

F-3

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

KPMG Auditores, S.L.

We have served as the Company’s auditor since 1990

Barcelona, Spain

5 April 2018

F-4

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

at 31 December 2017 and 2016

(Expressed in thousands of Euros)

Assets	31/12/17	31/12/16
Goodwill (note 7)	4,590,498	3,643,995
Other intangible assets (note 8)	1,269,342	1,195,302
Property, plant and equipment (note 9)	1,760,053	1,809,852
Investments in equity-accounted investees (note 10)	219,009	201,345
Non-current financial assets
Non-current financial assets measured at fair value	47,046	58,864
Non-current financial assets not measured at fair value	22,843	30,681
Total non-current financial assets (note 11)	69,889	89,545
Deferred tax assets (note 27)	66,157	67,219
Total non-current assets	7,974,948	7,007,258
Inventories (note 12)	1,629,293	1,642,931
Trade and other receivables
Trade receivables	286,198	413,656
Other receivables	40,681	42,299
Current income tax assets	59,531	77,713
Trade and other receivables (note 13)	386,410	533,668
Other current financial assets (note 11)	10,738	2,582
Other current assets	32,354	48,324
Cash and cash equivalents (note 14)	886,521	895,009
Total current assets	2,945,316	3,122,514
Total assets	10,920,264	10,129,772

The accompanying notes form an integral part of the consolidated financial statements.

F-5

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

at 31 December 2017 and 2016

(Expressed in thousands of Euros)

Equity and liabilities	31/12/17		31/12/16
Share capital	119,604		119,604
Share premium	910,728		910,728
Reserves	2,027,648		1,694,245
Treasury stock	(62,422	)	(68,710	)
Interim dividend	(122,986	)	(122,908	)
Profit for the year attributable to the Parent	662,700		545,456
Total equity	3,535,272		3,078,415
Available for sale financial assets	4,926		(5,219	)
Other comprehensive Income	(656	)	(642	)
Translation differences	89,537		648,927
Other comprehensive expenses	93,807		643,066
Equity attributable to the Parent (note 15)	3,629,079		3,721,481
Non-controlling interests (note 17)	4,886		6,497
Total equity	3,633,965		3,727,978
Liabilities
Grants (note 18)	11,822		12,196
Provisions (note 19)	5,763		5,118
Non-current financial liabilities (note 20)	5,901,815		4,712,071
Deferred tax liabilities (note 27)	388,912		600,646
Total non-current liabilities	6,308,312		5,330,031
Provisions (note 19)	106,995		89,588
Current financial liabilities (note 20)	155,070		230,065
Trade and other payables
Suppliers	423,096		461,073
Other payables	141,720		142,894
Current income tax liabilities	6,709		7,957
Total trade and other payables (note 21)	571,525		611,924
Other current liabilities (note 22)	144,397		140,186
Total current liabilities	977,987		1,071,763
Total liabilities	7,286,299		6,401,794
Total equity and liabilities	10,920,264		10,129,772

The accompanying notes form an integral part of the consolidated financial statements.

F-6

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Statements of Profit and Loss

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	31/12/17		31/12/16		31/12/15
Continuing Operations
Net revenue (notes 6 and 23)	4,318,073		4,049,830		3,934,563
Cost of sales	(2,166,062	)	(2,137,539	)	(2,003,565	)
Gross Profit	2,152,011		1,912,291		1,930,998
Research and Development (note 8 (e ))	(288,320	)	(197,617	)	(224,193	)
Selling, General and Administration expenses	(860,348	)	(775,266	)	(736,435	)
Operating Expenses	(1,148,668	)	(972,883	)	(960,628	)
Operating Result	1,003,343		939,408		970,370
Finance income	9,678		9,934		5,841
Finance costs	(263,344	)	(244,829	)	(240,335	)
Change in fair value of financial instruments	(3,752	)	(7,610	)	(25,206	)
Impairment and gains /(losses) on disposal of financial instruments	(18,844	)	—		—
Exchange differences	(11,472	)	8,916		(12,140	)
Finance result (note 26)	(287,734	)	(233,589	)	(271,840	)
Share of losses of equity accounted investees (note 10)	(19,887	)	6,933		(8,280	)
Profit before income tax from continuing operations	695,722		712,752		690,250
Income tax expense (note 27)	(34,408	)	(168,209	)	(158,809	)
Profit after income tax from continuing operations	661,314		544,543		531,441
Consolidated profit for the year	661,314		544,543		531,441
Profit attributable to the Parent	662,700		545,456		532,145
Loss attributable to non-controlling interest (note 17)	(1,386	)	(913	)	(704	)
Basic earnings per share (Euros) (see note 16)	0.97		0.80		0.78
Diluted earnings per share (Euros) (see note 16)	0.97		0.80		0.78

The accompanying notes form an integral part of the consolidated financial statements.

F-7

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	31/12/17		31/12/16		31/12/15
Consolidated profit for the year	661,314		544,543		531,441
Items for reclassification to profit or loss
Translation differences	(532,389	)	103,833		290,635
Translation differences / Cash Flow Hedge	—		(6,809	)	—
Available for sale financial Assets	10,145		(5,219	)	—
Equity accounted investees (note 10) / Translation differences	(27,134	)	10,671		2,673
Cash flow hedges - effective part of changes in fair value	—		14,501		55,305
Cash flow hedges - amounts taken to profit or loss	—		(7,426	)	(25,206	)
Other comprehensive income	(14	)	(4,810	)	4,575
Tax effect	—		(2,462	)	(12,093	)
Other comprehensive income for the year, after tax	(549,392	)	102,279		315,889
Total comprehensive income for the year	111,922		646,822		847,330
Total comprehensive income attributable to the Parent	113,441		647,667		848,603
Total comprehensive expense attributable to the non-controlling interests	(1,519	)	(845	)	(1,273	)

The accompanying notes form an integral part of the consolidated financial statements.

F-8

GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	31/12/2017		31/12/2016		31/12/15
Cash flows from operating activities
Profit before tax	695,722		712,752		690,250
Adjustments for:	556,792		391,986		460,564
Amortization and depreciation (note 25)	215,490		201,869		189,755
Other adjustments:	341,302		190,117		270,809
(Profit) / losses on equity accounted investments (note 10)	19,888		(6,933	)	8,280
Impairment of assets and net provision charges	66,047		(23,079	)	(564	)
(Profit) / losses on disposal of fixed assets	1,551		(2,987	)	6,721
Government grants taken to income	(286	)	(1,681	)	(1,854	)
Finance cost / (income)	263,657		236,034		256,129
Other adjustments	(9,555	)	(11,237	)	2,097
Change in operating assets and liabilities	(65,800	)	(164,319	)	(77,058	)
Change in inventories	(165,508	)	(173,003	)	(120,641	)
Change in trade and other receivables	80,112		(25,180	)	144,405
Change in current financial assets and other current assets	(2,691	)	(2,610	)	(5,565	)
Change in current trade and other payables	22,287		36,474		(95,257	)
Other cash flows used in operating activities	(344,968	)	(387,141	)	(330,978	)
Interest paid	(207,079	)	(180,497	)	(171,380	)
Interest recovered	9,492		8,685		4,316
Income tax (paid) / received	(147,015	)	(215,329	)	(163,914	)
Other recovered (paid)	(366	)	—		—
Net cash from operating activities	841,746		553,278		742,778
Cash flows from investing activities
Payments for investments	(2,209,667	)	(509,078	)	(647,417	)
Group companies, associates and business units (notes 3, 2 (b) and 10)	(1,857,210	)	(202,727	)	(58,609	)
Property, plant and equipment and intangible assets	(322,973	)	(292,690	)	(567,020	)
Property, plant and equipment	(251,507	)	(249,416	)	(522,587	)
Intangible assets	(71,466	)	(43,274	)	(44,433	)
Other financial assets	(29,484	)	(13,661	)	(21,788	)
Proceeds from the sale of investments	23,787		2,426		14,307
Property, plant and equipment	762		2,426		14,307
Other financial assets	23,025		—		—
Net cash used in investing activities	(2,185,880	)	(506,652	)	(633,110	)
Cash flows from financing activities
Proceeds from and payments for equity instruments	0		(11,766	)	12,695
Payments for treasury stock (note 15 (d))	—		(12,686	)	(58,457	)
Sales of treasury stock (note 15 (d))	—		920		71,152
Proceeds from and payments for financial liability instruments	1,808,771		(80,149	)	28,953
Issue	1,912,615		81,513		178,686
Redemption and repayment	(103,844	)	(161,662	)	(149,733	)
Dividends and interest on other equity instruments	(218,260	)	(216,151	)	(216,772	)
Dividends paid	(218,260	)	(216,151	)	(221,772	)
Dividends received	—		—		5,000
Other cash flows from / (used in) financing activities	(156,446	)	(21,492	)	17,086
Financing costs included on the amortised costs of the debt	(142,288	)	—		—
Other amounts from / (used in) financing activities	(14,158	)	(21,492	)	17,086
Net cash from/(used in) financing activities	1,434,065		(329,558	)	(158,038	)
Effect of exchange rate fluctuations on cash	(98,419	)	35,441		111,724
Net increase in cash and cash equivalents	(8,488	)	(247,491	)	63,354
Cash and cash equivalents at beginning of the year	895,009		1,142,500		1,079,146
Cash and cash equivalents at year end	886,521		895,009		1,142,500

The accompanying notes form an integral part of the consolidated financial statements.

F-9

GRIFOLS, S.A. AND SUBSIDIARIES

Statement of Changes in Consolidated Equity

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	Attributable to shareholders of the Parent
											Accumulated other comprehensive income
																			Equity
					Profit attributable														attributable
	Share	Share			to		Interim		Treasury		Translation		Available for sale		Other comprehensive		Cash flow		to		Non-controlling
	capital	premium	Reserves		Parent		dividend		stock		differences		financial assets		income		hedges		Parent		interests		Equity
Balance at 31 December 2014	119,604	910,728	1,088,337		470,253		(85,944	)	(69,252	)	240,614		—		(406	)	(15,811	)	2,658,123		4,765		2,662,888
Translation differences	—	—	—		—		—		—		293,877		—		—		—		293,877		(569	)	293,308
Cash flow hedges (note 15 (f))	—	—	—		—		—		—		—		—		—		19,140		19,140		—		19,140
Other comprehensive income	—	—	—		—		—		—		—		—		3,441		—		3,441		—		3,441
Other comprehensive income / (expense) for the year	—	—	—		—		—		—		293,877		—		3,441		19,140		316,458		(569	)	315,889
Profit/(loss) for the year	—	—	—		532,145		—		—		—		—		—		—		532,145		(704	)	531,441
Total comprehensive income / (expense) for the year	—	—	—		532,145		—		—		293,877		—		3,441		19,140		848,603		(1,273	)	847,330
Net change in treasury stock (note 15 (d))	—	—	2,018		—		—		10,677		—		—		—		—		12,695		—		12,695
Acquisition of non-controlling interests (note 15 (c))	—	—	(1,770	)	—		—		—		—		—		—		—		(1,770	)	1,767		(3	)
Other changes	—	—	324		—		—		—		—		—		—		—		324		(72	)	252
Interim dividend	—	—	—		—		(119,615	)	—		—		—		—		—		(119,615	)	—		(119,615	)
Distribution of 2014 profit																							—
Reserves	—	—	368,096		(368,096	)	—		—		—		—		—		—		—		—		—
Dividends	—	—	—		(102,157	)	—		—		—		—		—		—		(102,157	)	—		(102,157	)
Interim dividend	—	—	(85,944	)	—		85,944		—		—		—		—		—		—		—		—
Operations with shareholders or owners	—	—	282,724		(470,253	)	(33,671	)	10,677		—		—		—		—		(210,523	)	1,695		(208,828	)
Balance at 31 December 2015	119,604	910,728	1,371,061		532,145		(119,615	)	(58,575	)	534,491		—		3,035		3,329		3,296,203		5,187		3,301,390
Translation differences	—	—	—		—		—		—		114,436		—		—		—		114,436		68		114,504
Available for sale financial assets	—	—	—		—		—		—		—		(5,219	)	—		—		(5,219	)	—		(5,219	)
Cash flow hedges (note 15 (f))	—	—	—		—		—		—		—		—		—		(3,329	)	(3,329	)	—		(3,329	)
Other comprehensive income	—	—	—		—		—		—		—		—		(3,677	)	—		(3,677	)	—		(3,677	)
Other comprehensive income / (expense) for the year	—	—	—		—		—		—		114,436		(5,219	)	(3,677	)	(3,329	)	102,211		68		102,279
Profit/(loss) for the year	—	—	—		545,456		—		—		—		—		—		—		545,456		(913	)	544,543
Total comprehensive income / (expense) for the year	—	—	—		545,456		—		—		114,436		(5,219	)	(3,677	)	(3,329	)	647,667		(845	)	646,822
Net change in treasury stock (note 15 (d))	—	—	(182	)	—		—		(10,135	)	—		—		—		—		(10,317	)	—		(10,317	)
Acquisition of non-controlling interests (note 15 (c))	—	—	(2,737	)	—		—		—		—		—		—		—		(2,737	)	2,737		—
Other changes	—	—	6,816		—		—		—		—		—		—		—		6,816		(582	)	6,234
Interim dividend	—	—	—		—		(122,908	)	—		—		—		—		—		(122,908	)	—		(122,908	)
Distribution of 2015 profit
Reserves	—	—	319,287		(319,287	)	—		—		—		—		—		—		—		—		—
Dividends	—	—	—		(93,243	)	—		—		—		—		—		—		(93,243	)	—		(93,243	)
Interim dividend	—	—	—		(119,615	)	119,615		—		—		—		—		—		—		—		—
Operations with shareholders or owners	—	—	323,184		(532,145	)	(3,293	)	(10,135	)	—		—		—		—		(222,389	)	2,155		(220,234	)
Balance at 31 December 2016	119,604	910,728	1,694,245		545,456		(122,908	)	(68,710	)	648,927		(5,219	)	(642	)	—		3,721,481		6,497		3,727,978
Translation differences	—	—	—		—		—		—		(559,390	)	—		—		—		(559,390	)	(133	)	(559,523	)
Available for sale financial assets	—	—	—		—		—		—		—		10,145		—		—		10,145		—		10,145
Cash flow hedges (note 15 (f))	—	—	—		—		—		—		—		—		—		—		—		—		—
Other comprehensive income	—	—	—		—		—		—		—		—		(14	)	—		(14	)	—		(14	)
Other comprehensive income / (expense) for the year	—	—	—		—		—		—		(559,390	)	10,145		(14	)	—		(549,259	)	(133	)	(549,392	)
Profit/(loss) for the year	—	—	—		662,700		—		—		—		—		—		—		662,700		(1,386	)	661,314
Total comprehensive income / (expense) for the year	—	—	—		662,700		—		—		(559,390	)	10,145		(14	)	—		113,441		(1,519	)	111,922
Net change in treasury stock (note 15 (d))	—	—	—		—		—		6,288		—		—		—		—		6,288		—		6,288
Acquisition of non-controlling interests (note 15 (c))	—	—	(346	)	—		—		—		—		—		—		—		(346	)	(43	)	(389	)
Other changes	—	—	6,475		—		—		—		—		—		—		—		6,475		(49	)	6,426
Interim dividend	—	—			—		(122,986	)	—		—		—		—		—		(122,986	)	—		(122,986	)
Distribution of 2016 profit
Reserves	—	—	422,548		(422,548	)	—		—		—		—		—		—		—		—		—
Dividends	—	—	(95,274	)	—		—		—		—		—		—		—		(95,274	)	—		(95,274	)
Interim dividend	—	—	—		(122,908	)	122,908		—		—		—		—		—		—		—		—
Operations with shareholders or owners	—	—	333,403		(545,456	)	(78	)	6,288		—		—		—		—		(205,843	)	(92	)	(205,935	)
Balance at 31 December 2017	119,604	910,728	2,027,648		662,700		(122,986	)	(62,422	)	89,537		4,926		(656	)	—		3,629,079		4,886		3,633,965

The accompanying notes form an integral part of the consolidated financial statements.

F-10

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(1)Nature, Principal Activities and Subsidiaries

Grifols, S.A. (hereinafter the Company) was incorporated with limited liability under Spanish law on 22 June 1987. Its registered and tax offices are in Barcelona. The Company’s statutory activity consists of providing corporate and business administrative, management and control services, as well as investing in assets and property. Its principal activity involves rendering administrative, management and control services to its subsidiaries.

On 17 May 2006 the Company completed its flotation on the Spanish securities market, which was conducted through the public offering of 71,000,000 ordinary shares of Euros 0.50 par value each and a share premium of Euros 3.90 per share. The total capital increase (including the share premium) amounted to Euros 312.4 million, equivalent to a price of Euros 4.40 per share.

The Company’s shares were floated on the Spanish stock exchange IBEX-35 index on 2 January 2008.

All of the Company’s shares are listed on the Barcelona, Madrid, Valencia and Bilbao securities markets and on the Spanish Automated Quotation System (SIBE/Continuous Market). On 2 June 2011, Class B non-voting shares were listed on the NASDAQ (USA) and on the Spanish Automated Quotation System (SIBE/Continuous Market).

Grifols, S.A. is the Parent of the subsidiaries listed in Appendix I of this note to the Consolidated Financial Statements.

Grifols, S.A. and subsidiaries (hereinafter the Group) act on an integrated basis and under common management and their principal activity is the procurement, manufacture, preparation and sale of therapeutic products, especially haemoderivatives.

The main factory locations of the Group’s Spanish companies are in Parets del Vallés (Barcelona) and Torres de Cotilla (Murcia), while the US companies are located in Los Angeles (California), Clayton (North Carolina), Emeryville (California), and San Diego (California).

(2)   Basis of Presentation

The Consolidated Financial Statements have been prepared on the basis of the accounting records of Grifols, S.A. and of the Group companies. The Consolidated Financial Statements for 2017 have been prepared under International Financial Reporting Standard as issued by International Accounting Standard Board (IFRS-IASB) which for Grifols Group purposes, are identical to the standards as endorsed by the International Financial Reporting Standards as adopted by the European Union (IFRS-EU) to present fairly the consolidated equity and consolidated financial position of Grifols, S.A. and subsidiaries at 31 December 2017, as well as the consolidated results from their operations, consolidated cash flows and consolidated changes in equity for the year then ended.

The Group adopted IFRS-EU for the first time on 1 January 2004 and has been preparing its annual accounts under International Financial Reporting Standards, as adopted by the European Union (IFRS-EU) as required by capital market regulations governing the presentation of financial statements by companies whose debt or own equity instruments are listed on a regulated market.

The Board of Directors of Grifols, S.A. considers that these Consolidated Financial Statements authorized for issue at their meeting held on 3 April 2018.

In accordance with the provision of section 357 of the Irish Companies Act 2014, the Company has irrevocably guaranteed all liabilities of an Irish subsidiary undertaking, Grifols Worldwide Operations Limited (Ireland) (see Appendix I), for the financial year ended 31 December 2017 as referred to in subsection 1(b) of that Act, for the purposes of enabling Grifols Worldwide Operations Limited to claim exemption from the requirement to file their own financial statements in Ireland.

F-11

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(a)   Relevant accounting estimates, assumptions and judgments used when applying accounting principles

The preparation of the Consolidated Financial Statements in conformity with IFRS-EU requires management to make judgments, estimates and assumptions that affect the application of Group accounting policies. The following notes include a summary of the relevant accounting estimates and judgments used to apply accounting policies which have the most significant effect on the amounts recognized in the Consolidated Financial Statements.

·Assumptions used to test non-current assets and goodwill for impairment. Relevant cash generating units are tested annually for impairment. These are based on risk-adjusted future cash flows discounted using appropriate interest rates. The key assumptions used are specified in note 7. Assumptions relating to risk-adjusted future cash flows and discount rates are based on business forecasts and are therefore inherently subjective. Future events could cause a change in business forecasts, with a consequent adverse effect on the future results of the Group. To the extent considered a reasonably possible change in key assumptions could result in an impairment of goodwill, a sensitivity analysis has been disclosed to show the effect of changes to these assumptions and the effect of the cash generating unit (CGU) on the recoverable amount.

·Determination of the fair value of assets, liabilities and contingent liabilities related to business combinations. Details of the fair value methods used by the Group are provided in note 3.

·Evaluation of the capitalization of development costs (see note 4(h)). The key assumption is related to the estimation of sufficient future economic benefits of the projects.

·Evaluation of provisions and contingencies. Key assumptions relate to the evaluation of the likelihood of an outflow of resources due to a past event, as well as to the evaluation of the best estimate of the likely outcome. These estimates take into account the specific circumstances of each dispute and relevant external advice and therefore are inherently subjective and could change substantially over time as new facts arise and each dispute progresses. Details of the status of various uncertainties involved in significant unresolved disputes are set out in note 29.

·Evaluation of the recoverability of tax credits, including tax loss carryforwards and rights for deductions. Deferred tax assets are recognized to the extent that future taxable profits will be available against which the temporary differences can be utilized, based on management’s assumptions relating to the amount and timing of future taxable profits (see notes 4(t) and 27).

·Analysis that the refinancing of debt and bonds does not result in a new financial liability.

No changes have been made to prior year judgments relating to existing uncertainties.

The Group is also exposed to interest rate and currency risks. Refer to sensitivity analysis in note 30.

(b)   Basis of consolidation

Appendix I shows details of the percentages of direct or indirect ownership of subsidiaries by the Company at 31 December 2017, 2016 and 2015, as well as the consolidation method used in each case for preparation of the accompanying Consolidated Financial Statements.

Subsidiaries in which the Company directly or indirectly owns the majority of equity or voting rights have been fully consolidated. Associates in which the Company owns between 20% and 50% of share capital and over which it has no control but does have significant influence, have been accounted for under the equity method.

Although the Group holds 30% of the shares with voting rights of Grifols Malaysia Sdn Bhd, it controls the majority of the economic and voting rights of Grifols Malaysia Sdn Bhd through a contract with the other shareholder and a pledge on its shares. As a consequence it has been fully consolidated.

F-12

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Grifols (Thailand) Ltd. has two classes of shares and it grants the majority of voting rights to the class of shares held by the Group. As a consequence it has been fully consolidated.

Changes in associates are detailed in note 10.

Changes in subsidiaries

In 2017:

·On 4 December 2017, Progenika Biopharma, S.A., transferred the total shares of Abyntek Biopharma, S.L. to a third party. No profit or loss has been recognized on this transaction.

·On 11 October 2017, Grifols Diagnostic Solutions, Inc. acquired an additional 0.98% interest in Progenika Biopharma, S.A. from its non-controlling interests for a total amount of Euros 644 thousand in the form of a cash payment. As a result, Grifols owns 90.23% of Progenika’s share capital at 31 December 2017.

·On 24 July 2017, Grifols has acquired an additional 40% interest in Kiro Grifols, S.L. for a purchase price of Euros 12.8 million. With this new acquisition, Grifols has reached a 90% interest in equity of Kiro Grifols S.L. (see note 3(b)).

·On 13 March 2017, Progenika Latina, S.A. de C.V., was wound up. The assets and liabilities of Progenika Latina. S.A. de C.V. have been integrated into Progenika Biopharma, S.A.

·On 31 January 2017, Grifols closed the transaction for the asset purchase agreement to acquire Hologic’s business of NAT (Nucleic Acid Testing) donor screening unit, previously agreed on 14 December 2016, for a total amount of US Dollar 1,865 million (see note 3(a)).

·On 5 January 2017, the Group incorporated a new company called Chiquito Acquisition Corp.

·With effect as of 1 January 2017, Grifols Diagnostic Solutions, Inc. and Progenika, Inc. entered into a merger agreement. The surviving company was Grifols Diagnostic Solutions, Inc.

In 2016 Grifols incorporated the following companies:

·PBS Acquisition Corp. (USA)

·Grifols Diagnostics Equipment Taiwan Limited (Taiwan)

·Grifols Innovation and New Technologies Limited (Ireland)

·On 12 December 2016, the Group company Grifols Innovation and New Technologies Limited subscribed to an increase in the share capital of VCN Biosciences, S.L. amounting to Euros 5 million. Following this capital increase, Grifols’ interest rose to 81.34%. Grifols subscribed to another capital increase on 16 November 2015 through the Group company Gri-Cel, S.A. for an amount of Euros 2,549 thousand (see note 3(d)).

·With effect as of 1 November 2016, Grifols Brasil, Lda. and Gri-Cei, S.A Produtos para Trasfusao entered into a merger agreement. The surviving company was Grifols Brasil, Lda.

·In August 2016 and July 2015 Araclon Biotech , S.L carried out two share capital increases of Euros 6.7 million and Euros 6 million, respectively. After the latter capital increase Grifols’ interest rose to 73.22% (see note 15 (c)).

F-13

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

·In July 2016 the Group acquired an additional 20% of the assets of Medion Diagnostics AG in exchange for 59,951 treasury stocks (Class B Shares) from its non-controlling interests. After this acquisition, Grifols’ interest rose to 100%.

·On 3 March, 2016 the Group executed the call option on 32.93% of the shares in Progenika Biopharma, S.A. for Euros 25 million following the exercise of call and put options agreed in February 2013. Grifols paid 50% of this investment in Grifols B shares (876,777 shares) and the remaining 50% in cash (see note 15(d)). The Group guaranteed the selling shareholders the option to repurchase the Class B shares during the first five days following the sale date. As a result, Grifols owns 89.25% of Progenika’s share capital at 31 December 2016.

·With effect as of 1 January 2016, Progenika Biopharma, S.A and Brainco Biopharma, S.L entered into a merger agreement. The surviving company was Progenika Biopharma, S.A.

In 2015:

·On 9 February 2015 the Group acquired 100% of the assets of Gripdan Invest, S.L. for Euros 46 million in the form of a cash payment.

·Effective as of 1 January 2015, Plasmacare, Inc and Biomat USA, Inc. entered into a merger agreement, the surviving company being Biomat USA, Inc.

·Effective as of 1 January 2015, Proteomika, S.L.U. and Progenika Biopharma, S.A entered into a merger agreement, the surviving company being Progenika Biopharma, S.A.

·Effective as of 1 January 2015, Arrahona Optimus, S.L and Grifols, S.A entered into a merger agreement, the surviving company being Grifols, S.A.

Changes in associates and joint control

Changes in associates and joint control are detailed in note 10.

(c) Amendments to IFRS in 2017, 2016 and 2015

In accordance with IFRS, the following should be noted in connection with the scope of application of IFRS and the preparation of these Consolidated Financial Statements of the Group.

Effective date in 2015

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 19	Defined Benefit Plans: employee contributions (amendments to IAS 19)	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2010-2012 cycle	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2011-2013 cycle	1 July 2014	1 January 2015 (*)

(*) early adopted

F-14

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Effective date in 2016

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 16 IAS 38	Clarification of Acceptable Methods of Depreciation and Amortisation (issued on 12 May 2014)	1 January 2016	1 January 2016
IFRS 11	Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014)	1 January 2016	1 January 2016
IAS 27	Equity Method in Separate Financial Statements (issued on 12 August 2014)	1 January 2016	1 January 2016
Various	Annual Improvements to IFRSs 2012-2014 cycle (issued on 25 September 2014)	1 January 2016	1 January 2016
IAS 1	Disclosure Initiative (issued on 18 December 2014)	1 January 2016	1 January 2016

Effective date in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 12	Recognition of Deferred Tax Assets for Unrealized Losses (issued on 19 January 2016)	1 January 2017	1 January 2017
IAS 7	Disclosure Initiative (issued on 29 January 2016)	1 January 2017	1 January 2017
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016) - IFRS 12	1 January 2017	Pending

The modification to IFRS 12 issued by IASB is pending approval by the EU. Consequently, the Group confirms that despite the existing divergence between IFRS-IASB and IFRS-EU at 31 December 2017, it is a minor difference that requires additional information.

The application of these standards and interpretations has had no material impact on these Consolidated Financial Statements.

F-15

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Standards issued but not effective in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IFRS 15	Revenue from contracts with Customers (issued on 28 May 2014)	1 January 2018	1 January 2018
IFRS 15	Clarification to IFRS15 Revenue from Contracts with Customers (issued on 12 April 2016)	1 January 2018	1 January 2018
IFRS 9	Financial instruments (issued on 24 July 2014)	1 January 2018	1 January 2018
IFRS 2	Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)	1 January 2018	pending
IFRS 4 IFRS 9	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)	1 January 2018	1 January 2018
IFRIC 22	IFRIC 22 Interpretation: Foreign currency translations and Advance Consideration	1 January 2018	pending
IAS 40	Amendments to IAS 40: Transfers of Investment Property	1 January 2018	pending
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016)	1 January 2018	pending
IFRS 16	Leases (Issued on 13 January 2016)	1 January 2019	1 January 2019
IFRIC 23	Uncertainty over Income Tax Treatments (issued on 7 June 2017)	1 January 2019	pending
IFRS 9	Prepayment Features with Negative Compensation (issued on 12 October 2017)	1 January 2019	pending
IAS 28	Long-term interests in Associates and Joint Ventures (issued on 12 October 2017)	1 January 2019	pending
Various	Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)	1 January 2019	pending
IFRS 17	Insurance Contracts (issued on 18 May 2017)	1 January 2021	pending
IAS 19	Amendment to IAS19: Plan Amendment, Curtailment or Settlemet (issued on 77 February 2018)	1 January 2019	pending

At the date of issue of these Consolidated Financial Statements, the Group is analyzing the impact of the application of the above standards or interpretations published by the International Accounting Standards Board (IASB).

IFRS 9 Financial Instruments

Based on the analysis at the date these Consolidated Financial Statements were authorized for issue, the expected impacts of adopting IFRS 9 Financial Instruments are summarized below:

F-16

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

·Classification and measurement of financial assets:

In general terms, based on the analysis of the new classification vis-à-vis the business model, no significant impacts are foreseen and the majority of financial assets are expected to continue to be measured at amortized cost, the main exception being equity instruments, which will be measured at fair value.

·Impairment of financial assets:

For trade receivables the Group will use the simplified approach, estimating lifetime expected credit losses, while for all other financial assets the Group will use the general approach for calculating expected credit losses. In both cases, due to the customers’ credit rating, as well as the internal classification systems currently in place for new customers, and considering that collection periods are mostly under 30 days, the adoption of IFRS 9 will not have a significant impact.

·Modification or exchanges of financial liabilities that do not result in derecognition of liabilities

According to the IASB’s interpretation published in October 2017, when a financial liability measured at amortized cost is modified or exchanged and does not result in the derecognition of the financial liability, a gain or loss should be recognized in profit or loss, calculated as the difference between the original contractual cash flows from the liability and the modified cash flows, discounted at the original effective interest rate of the liability.

IFRS 9 must be applied retrospectively as of 1 January 2018, therefore any gains or losses from the modification of financial liabilities that arise from applying the new standard in years prior to 1 January 2018 will be recognized in reserves at that date. Grifols has retrospectively calculated the impact of adopting IFRS 9 on the refinancing of its senior debt and unsecured senior corporate bonds in 2014 and 2017. As a result of these new calculations, the 2014 refinancing of both debts did not cause the derecognition of the respective liabilities, therefore generating an adjustment to profit and loss in that year. Considering the retroactive adjustment generated in 2014, the 2017 refinancing of senior debt did not result in the derecognition of the financial liability either. However the unsecured senior corporate bonds refinancing did cause the derecognition of the liability as it did not pass the new quantitative test. The adoption of IFRS 9 entails a positive impact on reserves of Euros 24,636 thousand.

F-17

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Detail of the impact in reserves due to IFRS 9 aplication, were as follows:

	Thousand of Euros
			Impact
Senior Unsecured Noted	IAS 39	IFRS 9	01/01/2018
Total Debt	853,667	1,000,000	146,334
Deferred Expenses			(41,036	)
Negative Impact in reserves			105,298

	Thousand of Euros
			Impact
Senior Secured Debt	IAS 39	IFRS 9	01/01/2018
Total Debt	3,375,157	3,226,244	(148,913	)
Deferred Expenses			18,979
Positive impact in reserves			(129,934	)

	Thousand of Euros
			Impact
Total Impact	IAS 39	IFRS 9	01/01/2018
Total Debt	4,228,823	4,226,244	(2,579	)
Deferred Expenses			(22,056	)
Positive impact in reserves			(24,636	)

IFRS 15 Revenue from Contracts with Customers.

IFRS 15 provides a framework that replaces the previous guides on revenue recognition. According to the new criteria, a five-step model should be used to determine the timing and amounts of revenue recognition:

Step 1: Identify the contract.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue.

This new model specifies that revenue should be recognized when (or as) control of the goods or services is transferred from an entity to customers, for the amount the entity expects to be entitled to receive. Depending on whether certain criteria are met, revenue is recognized over time, reflecting that the entity has satisfied the performance obligation, or at a point in time, when control of the goods or services is transferred to customers.

Based on the analysis at the date of preparing these Consolidated Financial Statements, there has been no impact from adopting IFRS 15 Revenue from Contracts with Customers.

Under IFRS 15, entities may adopt the new standard retrospectively or through an adjustment for the accumulated effect at the start of the first year it is applicable. Grifols has opted for the accumulated effect approach as it deems the impact to be immaterial to the financial statements taken as a whole.

F-18

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(3)Business Combinations

2017

(a)Hologic Acquisition

On 14 December 2016 Grifols entered into an asset purchase agreement to acquire assets corresponding to Hologic’s NAT (Nucleic Acid Testing) business donor screening unit for US Dollars 1,865 million. The transaction was closed on 31 January 2017. The agreement encompasses the acquisition of the Hologic business engaged in research, development and manufacture of assays and instruments based on NAT technology for transfusion and transplantation screening. In addition, it was agreed to cancel the existing joint-collaboration agreement for the commercialization of NAT donor screening products by Grifols. NAT technology makes it possible to detect the presence of infectious agents in blood and plasma donations, contributing to greater transfusion safety.

The transaction is structured through the purchase of assets by Grifols Diagnostic Solutions, Inc., a U.S. incorporated and wholly-owned subsidiary of Grifols, S.A.

The assets acquired comprise a plant in San Diego, California (United States) as well as development rights, licenses to patents and access to product manufacturers.

Grifols consolidates itself as one of the only vertically integrated providers capable of offering comprehensive solutions to blood and plasma donation centers.

This acquisition strengthens cash flows and positively impacts the Group’s margins. The sales revenues of the Diagnostic Division will not change as a result of the acquisition due to the existing joint-business between Grifols and Hologic in place since 2014, under which Grifols already owns customer facing activities and records all revenues.

It is expected that this acquisition will strengthen the position of the Grifols Diagnostic Division in transfusion medicine and will increase significantly the profitability of Grifols Diagnostic Division having a direct impact on the Group’s EBITDA margin. By streamlining and integrating the NAT business, operational efficiency will be in terms of production, R&D, overheads and administrative expenses.

Details of the aggregate business combination cost, the fair value of the net assets acquired and goodwill at the acquisition date are provided below:

Cost of the business combination	Thousands of Euros	Thousands of US Dollars
Payment in cash	1,734,077	1,865,000
Result of the cancellation of the existing contract	41,894	45,057
Total business combination cost	1,775,971	1,910,057
Fair value of net assets acquired	309,551	332,923
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	1,466,420	1,577,134

As part of the purchase price allocation, the Company determined that the identifiable intangible assets were developed technology and IPR&D. The fair value of the intangible assets was estimated using the income approach. The cash flows were based on estimates used to price the transaction and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

F-19

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The developed technology assets are comprised of know-how, patents and technologies embedded in revenue. The Company applied the Relief-from-Royalty Method to determine its fair value.

IPR&D projects relate to in-process projects that have not reached technological feasibility as of the acquisition date. All of the IPR&D assets were valued using the Multiple-Period Excess Earnings Method approach.

The excess of the purchase price over the estimated fair value of the net assets acquired was recorded to goodwill. The factors contributing to the recognition of the amount of goodwill were the assembled workforce, cost savings and benefits arising from the vertical integration of the business that will lead to efficiencies of R&D, commercial and manufacturing activities.

The expenses incurred in this transaction in 2017 amount to approximately Euros 13 million (Euros 5.1 million in 2016).

The resulting Goodwill has been allocated to the Diagnostic segment.

The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities were as follows:

	Fair Value
	Thousands of Euros	Thousands of US Dollars
R&D in progress	137,756	148,157
Other Intangible assets	142,174	152,908
Property, plant and equipment	24,569	26,424
Deferred Tax Assets (note 27)	16,736	18,000
Inventories	30,157	32,434
Total Assets	351,392	377,923
Current Provisions (note 19 (b))	41,841	45,000
Total liabilities and contingent liabilities	41,841	45,000
Total net assets acquired	309,551	332,923

(b)Kiro Grifols, S.L.

On 25 July 2017 the Group subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 12.8 million, which represents 40% of the voting and economic rights of Kiro Grifols. In September 2014 the Group had already subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 21 million, by virtue of which Grifols acquired 50% of Kiro Grifols economic and voting rights. The capital increase was paid by means of a monetary contribution.

As a result, Grifols owns a total of 90% of the voting and economic rights of Kiro Grifols. The remaining 10% will continue to be held by Socios Fundadores Kiro, S.L. a company wholly owned by cooperatives of the Mondragon Corporation.

Grifols also entered into a joint venture & shareholders’ agreement (the “Joint Venture Agreement”) with Kiro Grifols’ partners: Mondragon Innovacion S.P.E, S.A.; Mondragon Assembly, S.Coop. and Agrupación de Fundición y Utillaje, S.Coop.. This agreement governs, among other matters, the capital increase subscribed by Grifols and the managing and governing bodies of Kiro Grifols, whether these are the Board of Directors or any other internal managing and governing bodies.

F-20

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

At the date of issue of these Consolidated Financial Statements, the Group is working to determine the definitive fair value of intangible assets, liabilities and contingent liabilities acquired in the business combination.

(c)Kedplasma

On 27 December 2016 Grifols entered into an agreement to acquire six new Plasma Donor Centers to the company Kedplasma, LLC, with a purchase price of US Dollar 47 million. Delivery of these centers has been made in February 2017.

Aggregate details of the combination cost, fair value of the net assets acquired and goodwill at the acquisition date (or surplus net assets acquired over the combination cost) are as follows:

	Thousands of Euros	Thousands of US Dollars
Cost of the business combination
Payment in cash	44,238	47,083
Total business combination cost	44,238	47,083
Fair value of net assets acquired	4,137	4,403
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	40,101	42,680

The fair value of net assets acquired includes property, plant and equipment amounting to Euros 3,698 thousand.

Goodwill is allocated to the Bioscience segment and includes plasma donor center base, FDA licenses and workforce retained.

At 31 December 2016, the group advanced the sum of US Dollar 15 million related to this acquisition.

2015

(d)VCN

On 14 February 2014 and 16 November 2015, the Group company Gri-Cel, S.A, subscribed both share capital increases in the capital of VCN Bioscience, S.L for Euros 700 thousand and Euros 2,549 thousand, respectively. After this capital increase, Grifols’ interest rises to 68.01% in 2015 and the company is fully consolidated at year end. Since 2016, the Group company Grifols Innovation and New Technologies Limited centralize the Group’s investments in R&D projects in fields of medicine other than its core business.

(4)Significant Accounting Policies

(a)Subsidiaries and associates

Subsidiaries are entities, including special purpose entities (SPE), over which the Group exercises control, either directly or indirectly, through subsidiaries. The Group controls a subsidiary when it has the substantive rights in force that provide the ability to manage relevant activities. The Group is exposed or has the right to variable returns for its involvement in the subsidiaries when the returns obtained vary depending on the economic performance of the subsidiaries.

F-21

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The income, expenses and cash flows of subsidiaries are included in the Consolidated Financial Statements from the date of acquisition, which is when the Group takes control. Subsidiaries are excluded from the consolidated Group from the date on which control is lost.

Transactions and balances with Group companies and unrealized gains or losses have been eliminated upon consolidation.

The accounting policies of subsidiaries have been adapted to those of the Group for transactions and other events in similar circumstances.

The financial statements of consolidated subsidiaries have been prepared as of the same date and for the same reporting period as the financial statements of the Company.

Associates are entities over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those entities. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Group or other entities, are considered when assessing whether an entity has significant influence.

Investments in associates are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases.

Investments in associates are initially recognized at acquisition cost, including any cost directly attributable to the acquisition and any consideration receivable or payable contingent on future events or on compliance with certain conditions.

The excess of the cost of the investment over the Group’s share of the fair values of the identifiable net assets is recognized as goodwill, which is included in the carrying amount of the investment. Any shortfall, once the cost of the investment and the identification and measurement of the associate’s net assets have been evaluated, is recognized as income when determining the investor’s share of the profit and loss of the associate for the year in which it was acquired.

The accounting policies of associates have been harmonized in terms of timing and measurement, applying the policies described for subsidiaries.

The Group’s share of the profit and loss of an associate from the date of acquisition is recognized as an increase or decrease in the value of the investments, with a credit or debit to share of the profit and loss for the year of “equity-accounted investees” in the consolidated statement of profit and loss (consolidated statement of comprehensive income). The Group’s share of other comprehensive income of associates from the date of acquisition is recognized as an increase or decrease in the investments in associates with a balancing entry recognized by type in other comprehensive income. The distribution of dividends is recognized as a decrease in the value of the investment. The Group’s share of profit and loss, including impairment losses recognized by the associates, is calculated based on income and expenses arising from application of the acquisition method.

The Group’s share of the profit and loss of an associate and changes in equity is calculated to the extent of the Group’s interest in the associate at year end and does not reflect the possible exercise or conversion of potential voting rights. However, the Group’s share is calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of associates.

Information on the subsidiaries and associates included in the consolidated Group is presented in Appendix I.

(b)Business combinations

On the date of transition to IFRS-EU, 1 January 2004, the Group applied the exception permitted under IFRS 1
“First-time adoption of International Financial Reporting Standards”, whereby only those business

F-22

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

combinations performed as from 1 January 2004 have been recognized using the acquisition method. Entities acquired prior to that date were recognized in accordance with accounting prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.

The Group applies the revised IFRS 3 “Business combinations” in transactions made subsequent to 1 January 2010.

The Group applies the acquisition method for business combinations.

The acquisition date is the date on which the Group obtains control of the acquiree.

Business combinations made subsequent to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, equity instruments issued and any additional consideration contingent on future events or the fulfilment of certain conditions, in exchange for control of the acquiree.

The consideration paid excludes all amounts that do not form part of the exchange for the acquired business. Acquisition-related costs are accounted for as expenses when incurred. Share increase costs are recognized as equity when the increase takes place and borrowing costs are deducted from the financial liability when it is recognized.

At the acquisition date the Group recognizes at fair value the assets acquired and liabilities assumed. Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured. The Group also recognizes indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.

This criterion does not include non-current assets or disposal groups of assets which are classified as held for sale, long-term defined benefit employee benefit liabilities, share-based payment transactions, deferred tax assets and liabilities and intangible assets arising from the acquisition of previously transferred rights.

Assumed assets and liabilities are classified and designated for subsequent measurement in accordance with the contractual terms, economic conditions, operating or accounting policies and other factors that exist at the acquisition date, except for leases and insurance contracts.

The excess between the consideration transferred and the value of net assets acquired and liabilities assumed, less the value assigned to non-controlling interests, is recognized as goodwill. Where applicable, any shortfall, after evaluating the consideration transferred, the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognized in profit and loss.

When a business combination has been provisionally determined, net identifiable assets have initially been recognized at their provisional value, and any adjustments made during the measurement period have been recorded as if they had been known at that date. Where applicable, comparative figures for the prior year have been restated. Adjustments to the provisional values only reflect information relating to events and circumstances existing at the acquisition date and which, had they been known, would have affected the amounts recognized at that date. Once this period has elapsed, adjustments are only made to initial values when errors must be corrected. Any potential benefits arising from tax losses and other deferred tax assets of the acquiree that have not been recorded as they did not qualify for recognition at the acquisition date, are accounted for as income tax revenue, provided the adjustments were not made during the measurement period.

The contingent consideration is classified in accordance with underlying contractual terms as a financial asset or financial liability, equity instrument or provision. Provided that subsequent changes to the fair value of a financial asset or financial liability do not relate to an adjustment of the measurement period, they are recognized in consolidated profit and loss. The contingent consideration classified, where applicable, as equity

F-23

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

is not subject to subsequent change, with settlement being recognized in equity. The contingent consideration classified, where applicable, as a provision is recognized subsequently in accordance with the relevant measurement standard.

Business combinations made prior to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Any additional consideration contingent on future events or the fulfilment of certain conditions is included in the cost of the combination provided that it is probable that an outflow of resources embodying economic benefits will be required and the amount of the obligation can be reliably estimated. Subsequent recognition of contingent considerations or subsequent variations to contingent considerations is recognized as a prospective adjustment to the cost of the business combination.

Where the cost of the business combination exceeds the Group’s interest in the fair value of the identifiable net assets of the entity acquired, the difference is recognized as goodwill, whilst the shortfall, once the costs of the business combination and the fair values of net assets acquired have been reconsidered, is recognized in profit and loss.

(c)Non-controlling interests

Non-controlling interests in subsidiaries acquired after 1 January 2004 are recognized at the acquisition date at the proportional part of the fair value of the identifiable net assets. Non-controlling interests in subsidiaries acquired prior to the transition date were recognized at the proportional part of the equity of the subsidiaries at the date of first consolidation.

Non-controlling interests are disclosed in the consolidated balance sheet under equity separately from equity attributable to the Parent. Non-controlling interests’ share in consolidated profit and loss for the year (and in consolidated comprehensive income for the year) is disclosed separately in the consolidated statement of profit and loss (consolidated statement of comprehensive income).

The consolidated profit and loss for the year, consolidated comprehensive income and changes in equity of the subsidiaries attributable to the Group and non-controlling interests after consolidation adjustments and eliminations, is determined in accordance with the percentage ownership at year end, without considering the possible exercise or conversion of potential voting rights. However, Group and non-controlling interests are calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of subsidiaries.

Profit and loss and each component of other comprehensive income are assigned to equity attributable to shareholders of the Parent and to non-controlling interests in proportion to their interest, although this implies a balance receivable from non-controlling interests. Agreements signed between the Group and the non-controlling interests are recognized as a separate transaction.

The increase and reduction of non-controlling interests in a subsidiary in which control is retained is recognized as an equity instrument transaction. Consequently, no new acquisition cost arises on increases, nor is a gain recorded on reductions; rather, the difference between the consideration transferred or received and the carrying amount of the non-controlling interests is recognized in the reserves of the investor, without prejudice to reclassifying consolidation reserves and reallocating other comprehensive income between the Group and the non-controlling interests. When a Group’s interest in a subsidiary diminishes, non-controlling interests are recognized at their share of the net consolidated assets, including goodwill.

F-24

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(d)Joint arrangements

Joint arrangements are those in which there is a contractual agreement to share the control over an economic activity, in such a way that the decisions over relevant activities require the unanimous consent of the Group and the remaining venturers.

Investments in joint arrangements are accounted for using the equity method.

The acquisition cost of investments in joint arrangements is determined consistently with that established for investments in associates.

(e)Foreign currency transactions and balances

(i)Functional and presentation currency

The Consolidated Financial Statements are presented in thousands of Euros, which is the functional and presentation currency of the Parent.

(ii)Foreign currency transactions, balances and cash flows

Foreign currency transactions are translated into the functional currency using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from applying the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies have been translated into thousands of Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into thousands of Euros at the exchange rate at the date that the fair value was determined.

In the consolidated statement of cash flows, cash flows from foreign currency transactions have been translated into thousands of Euros at the exchange rates prevailing at the dates the cash flows occur. The effect of exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies is recognized separately in the statement of cash flows as “Effect of exchange rate fluctuations on cash and cash equivalents”.

Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into thousands of Euros of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.

(iii)Translation of foreign operations

The translation into thousands of Euros of foreign operations for which the functional currency is not the currency of a hyperinflationary economy is based on the following criteria:

·Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, including comparative amounts, are translated at the closing rate at the reporting date;

·Income and expenses, including comparative amounts, are translated using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from using the exchange rate at the date of the transaction;

·Translation differences resulting from application of the above criteria are recognized in other comprehensive income.

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GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(f)Borrowing costs

In accordance with IAS 23 “Borrowing Costs”, since 1 January 2009 the Group recognizes borrowing costs directly attributable to the purchase, construction or production of qualifying assets as an increase in the value of these assets. Qualifying assets are those which require a substantial period of time before they can be used or sold. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs incurred, less any investment income on the temporary investment of those funds. Capitalized borrowing costs corresponding to general borrowing are calculated as the weighted average of the qualifying assets without considering specific funds. The amount of borrowing costs capitalized cannot exceed the amount of borrowing costs incurred during that period. The capitalized borrowing costs include adjustments to the carrying amount of financial liabilities arising from the effective portion of hedges entered into by the Group.

The Group begins capitalizing borrowing costs as part of the cost of a qualifying asset when it incurs expenditure for the asset, interest is accrued, and it undertakes activities that are necessary to prepare the asset for its intended use or sale, and ceases capitalizing borrowing costs when all or substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Nevertheless, capitalization of borrowing costs is suspended when active development is interrupted for extended periods.

(g)Property, plant and equipment

(i)Initial recognition

Property, plant and equipment are recognized at cost or deemed cost, less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets is determined using the same principles as for an acquired asset, while also considering the criteria applicable to production costs of inventories. Capitalized production costs are recognized by allocating the costs attributable to the asset to “Self-constructed non-current assets” in the consolidated statement of profit and loss.

At 1 January 2004 the Group opted to apply the exemption regarding fair value and revaluation as deemed cost as permitted by IFRS 1 First time Adoption of International Financial Reporting Standards.

(ii)Depreciation

Property, plant and equipment are depreciated by allocating the depreciable amount of an asset on a systematic basis over its useful life. The depreciable amount is the cost or deemed cost of an asset, less its residual value. The Group determines the depreciation charge separately for each item for a component of property, plant and equipment with a cost that is significant in relation to the total cost of the asset.

Property, plant and equipment are depreciated using the following criteria:

	Depreciation method	Rates
Buildings	Straight line	1% - 3%
Other property, technical equipment and machinery	Straight line	4%-10%
Other property, plant and equipment	Straight line	7% - 33%

The Group reviews residual values, useful lives and depreciation methods at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

F-26

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(iii)Subsequent recognition

Subsequent to initial recognition of the asset, only those costs incurred which will probably generate future profits and for which the amount may reliably be measured are capitalized. Costs of day-to-day servicing are recognized in profit and loss as incurred.

Replacements of property, plant and equipment which qualify for capitalization are recognized as a reduction in the carrying amount of the items replaced. Where the cost of the replaced items has not been depreciated independently and it is not possible to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction.

(iv)Impairment

The Group tests for impairment and reversals of impairment losses on property, plant and equipment based on the criteria set out in note 4(i) below.

(h)Intangible assets

(i)Goodwill

Goodwill is generated on the business combinations and is calculated using the criteria described in the section on business combinations.

Goodwill is not amortized, but is tested for impairment annually or more frequently whenever there is an indication that goodwill may be impaired. Goodwill acquired in business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 7 are applied. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

(ii)Internally generated intangible assets

Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.

Costs related with development activities are capitalized when:

·The Group has technical studies that demonstrate the feasibility of the production process;

·The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use;

·The asset will generate sufficient future economic benefits;

·The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects.

The cost of internally generated assets by the Group is calculated using the same criteria established for determining production costs of inventories. The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets in the consolidated statement of profit and loss.

Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.

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GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(iii)Other intangible assets

Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.

Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.

(iv)Intangible assets acquired in business combinations

The cost of identifiable intangible assets acquired in the business combination of Hologic includes the fair value of the R&D projects and the Intellectual Property-Patents.

The cost of identifiable intangible assets acquired in the business combination of Novartis includes the fair value of the existing royalty agreements.

The cost of identifiable intangible assets acquired in the business combination of the Progenika Group includes the fair value of the currently marketed products sold and which are classified under “Other intangible assets” and “Development costs”.

The cost of identifiable intangible assets acquired in the Talecris business combination includes the fair value of currently marketed products sold and which are classified under “Other intangible assets”.

(v)Useful life and amortization rates

The Group assesses whether the useful life of each intangible asset acquired is finite or indefinite. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.

Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:

	Amortisation method	Rates
Development expenses	Straight line	10%
Concessions, patents, licences, trademarks and similar	Straight line	7% - 20%
Computer software	Straight line	33%
Currently marketed products	Straight line	3% - 10%

The depreciable amount is the cost or deemed cost of an asset, less its residual value.

The Group does not consider the residual value of its intangible assets to be material. The Group reviews the residual value, useful life and amortization method for intangible assets at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

(i)Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization

The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortization or depreciation, to verify whether the carrying amount of these assets exceeds the recoverable amount.

The Group tests goodwill, intangible assets with indefinite useful lives and intangible assets with finite useful lives that are not available for use for potential impairment at least annually, irrespective of whether there is any indication that the assets may be impaired.

F-28

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The recoverable amount of the assets is the higher of their fair value less costs of disposal and their value in use. An asset’s value in use is calculated based on an estimate of the future cash flows expected to derive from the use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows deriving from the asset.

Negative differences arising from comparison of the carrying amounts of the assets with their recoverable amounts are recognized in the consolidated statement of profit and loss. Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.

Impairment losses recognized for cash-generating units are first allocated to reduce, where applicable, the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset. The carrying amount of each asset may not be reduced below the highest of its fair value less costs of disposal, its value in use and zero.

At the end of each reporting period the Group assesses whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. Impairment losses on goodwill are not reversible. Impairment losses on other assets are only reversed if there has been a change in the estimates used to calculate the recoverable amount of the asset.

A reversal of an impairment loss is recognized in consolidated profit and loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss may not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized.

A reversal of an impairment loss for a CGU is allocated to the assets of each unit, except goodwill, pro rata with the carrying amounts of those assets. The carrying amount of an asset may not be increased above the lower of its recoverable amount and the carrying amount that would have been disclosed, net of amortization or depreciation, had no impairment loss been recognized.

(j)Leases

(i)Lessee accounting records

The Group has rights to use certain assets through lease contracts.

Leases in which the Group assumes substantially all the risks and rewards incidental to ownership are classified as finance leases, otherwise they are classified as operating leases.

·Finance leases

At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Initial direct costs are added to the asset’s carrying amount. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are recognized as an expense in the years in which they are incurred.

·Operating leases

Lease payments under an operating lease (excluding incentives) are recognized as an expense on a straight-line basis unless another systematic basis is representative of the time pattern of the user’s benefit.

F-29

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(ii)Leasehold investments

Non-current investments in properties leased from third parties are recognized on the basis of the same criteria for property, plant and equipment. Investments are amortized over the lower of their useful lives and the term of the lease contract. The lease term is consistent with that established for recognition of the lease.

(iii)Sale and leaseback transactions

Any profit on sale and leaseback transactions that meet the conditions of a finance lease is deferred over the term of the lease.

When the leaseback is classified as an operating lease:

·If the transaction is established at fair value, any profit and loss on the sale is recognized immediately in the consolidated statement of profit and loss for the year;

·If the sale price is below fair value, any profit and loss is recognized immediately in the consolidated statement of profit and loss. However, if the loss is compensated for by future lease payments at below market price, it is deferred in proportion to the lease payments over the period for which the asset is to be used.

(k)Financial instruments

(i)Classification of financial instruments

Financial instruments are classified on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument set out in IAS 32, Financial Instruments: Presentation.

Financial instruments are classified into the following categories for valuation purposes: financial assets and financial liabilities at fair value through profit and loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets and financial liabilities. Financial instruments are classified into different categories based on the nature of the instruments and the Group’s intentions on initial recognition.

Regular way purchases and sales of financial assets are recognized using trade date accounting, i.e. when the Group commits itself to purchase or sell an asset.

a)Financial assets and liabilities at fair value through profit and loss

Financial assets and financial liabilities at fair value through profit and loss are those which are classified as held for trading or which the Group designated as such on initial recognition.

A financial asset or financial liability is classified as held for trading if:

·It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

·It forms part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking, or

·It is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

F-30

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Financial assets and financial liabilities at fair value through profit and loss are initially recognized at fair value. Transaction costs directly attributable to the acquisition or issue are recognized as an expense when incurred.

After initial recognition, they are recognized at fair value through profit and loss.

The Group does not reclassify any financial assets or liabilities from or to this category while they are recognized in the consolidated balance sheet.

b)Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified in other financial asset categories. These assets are recognized initially at fair value, including transaction costs, and subsequently measured at amortized cost using the effective interest method.

c)Financial assets and financial liabilities carried at cost

Investments in equity instruments whose fair value cannot be reliably measured and derivative instruments that are linked to these instruments and that must be settled by delivery of such unquoted equity instruments, are measured at cost. Nonetheless, if the financial assets or liabilities can be reliably measured subsequently on an ongoing basis, they are accounted for at fair value and any gain or loss is recognized in accordance with their classification.

(ii)Offsetting principles

A financial asset and a financial liability are offset only when the Group currently has the legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(iii)Fair value

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorized within different levels of a fair value hierarchy based on the inputs used in the valuation techniques as follows:

·Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

·Level 2: inputs other than prices included in Level 1 that are observable for the asset or liability, either directly (i.e. derived from prices) or indirectly.

·Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability are categorized within different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(iv)Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.

F-31

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(v)Impairment of financial assets carried at cost

The amount of the impairment loss on assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses cannot be reversed and are therefore recognized directly against the value of the asset and not as an allowance account.

(vi)Impairment of financial assets carried at amortized cost

In the case of financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. For variable income financial assets, the effective interest rate corresponding to the measurement date under the contractual conditions is used.

The Group recognizes impairment losses and unrecoverable loans and receivables and debt instruments by recognizing an allowance account for financial assets. When impairment and uncollectibility are considered irreversible, their carrying amount is eliminated against the allowance account.

The impairment loss is recognized in profit and loss and may be reversed in subsequent periods if the decrease can be objectively related to an event occurring after the impairment has been recognized. The loss can only be reversed to the limit of the amortized cost of the assets had the impairment loss not been recognized. The impairment loss is reversed against the allowance account.

(vii)Available for sale financial assets

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit and loss.

A financial asset that the Group pretends to held to maturity or that it is a loan or receivable can also be designated as available for sale in the initial recognition. This category usually includes all debt securities traded on active markets that have not been designated as held-to-maturity, as well as equity investments that have not been classified as fair value through profit and loss.

A gain or loss on an available for sale financial asset shall be recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized.

When a decline in the fair value of an available for sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit and loss as a reclassification adjustment even though the financial asset has not been derecognized.

(viii)Financial liabilities

Financial liabilities, including trade and other payables, which are not classified at fair value through profit and loss, are initially recognized at fair value less any transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, liabilities classified under this category are measured at amortized cost using the effective interest method.

(ix)Derecognition of financial assets

The Group applies the criteria for derecognition of financial assets to part of a financial asset or part of a group of similar financial assets or to a financial asset or group of similar financial assets.

F-32

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Where the Group retains the contractual rights to receive cash flows, it only derecognizes financial assets when it has assumed a contractual obligation to pay the cash flows to one or more recipients and if the following requirements are met:

·Payment of the cash flows is conditional on their prior collection;

·The Group is unable to sell or pledge the financial asset, and

·The cash flows collected on behalf of the eventual recipients are remitted without material delay and the Group is not entitled to reinvest the cash flows. This criterion is not applicable to investments in cash or cash equivalents made by the Group during the settlement period from the collection date to the date of required remittance to the eventual recipients, provided that interest earned on such investments is passed on to the eventual recipients.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it determines whether it has retained control of the financial asset. In this case:

·If the Group has not retained control, it derecognizes the financial asset and recognizes separately as assets or liabilities any rights and obligations created or retained in the transfer.

·If the Group has retained control, it continues to recognise the financial asset to the extent of its continuing involvement in the financial asset and recognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. The associated liability is measured in such a way that the carrying amount of the transferred asset and the associated liability is equal to the amortized cost of the rights and obligations retained by the Group, if the transferred asset is measured at amortized cost, or to the fair value of the rights and obligations retained by the Group, if the transferred asset is measured at fair value. The Group continues to recognise any income arising on the transferred asset to the extent of its continuing involvement and recognizes any expense incurred on the associated liability. Recognized changes in the fair value of the transferred asset and the associated liability are accounted for consistently with each other in profit and loss or equity, following the general recognition criteria described previously, and are not offset.

If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the consideration received is recognized in liabilities. Transaction costs are recognized in profit and loss using the effective interest method.

(x)Derecognition and modifications of financial liabilities

A financial liability, or part of it, is derecognized when the Group either discharges the liability by paying the creditor, or is legally released from primary responsibility for the liability either by process of law or by the creditor.

The exchange of debt instruments between the Group and the counterparty or substantial modifications of initially recognized liabilities are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability, providing the instruments have substantially different terms.

The Group considers the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability.

F-33

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

If the exchange is accounted for as an extinguishment of the financial liability, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability.

The difference between the carrying amount of a financial liability, or part of a financial liability, extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit and loss.

(l)Equity instruments

The Group’s acquisition of equity instruments of the Parent is recognized separately at cost of acquisition in the consolidated balance sheet as a reduction in equity, regardless of the motive of the purchase. Any gains or losses on transactions with treasury equity instruments are not recognized in consolidated profit and loss.

The subsequent redemption of Parent shares, where applicable, leads to a reduction in share capital in an amount equivalent to the par value of such shares. Any positive or negative difference between the cost of acquisition and the par value of the shares is debited or credited to reserves. Transaction costs related with treasury equity instruments, including issue costs related to a business combination, are accounted for as a reduction in equity, net of any tax effect.

(m)Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The costs of conversion of inventories include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. The allocation of fixed indirect overheads is based on the higher of normal production capacity or actual production.

The raw material used to produce haemoderivatives is human plasma, which is obtained from our donation centers using the plasmapheresis method. The cost of inventories includes the amount paid to plasma donors, or the amount billed by the seller when purchased from third parties, as well as the cost of products and devices used in the collection process, rental expenses and storage. This plasma has to be stored before use, which is an essential part of the production process. During the storage period, the plasma undergoes various virological tests and should be kept in quarantine in accordance with FDA and European Medicines Agency regulations, in order to guarantee that all the plasma is suitable for use in the production process.

To the extent that plasma storage costs are necessary to the production process, they are included as cost of inventories.

Indirect costs such as general management and administration costs are recognized as expenses in the period in which they are incurred.

The cost of raw materials and other supplies and the cost of merchandise are allocated to each inventory unit on a weighted average cost basis.

The transformation cost is allocated to each inventory unit on a FIFO (first-in, first-out) basis.

The Group uses the same cost model for all inventories of the same nature and with a similar use.

Volume discounts extended by suppliers are recognized as a reduction in the cost of inventories when it is probable that the conditions for discounts to be received will be met. Discounts for prompt payment are recognized as a reduction in the cost of the inventories acquired.

F-34

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

When the cost of inventories exceeds net realizable value, materials are written down to net realizable value, which is understood to be:

·For raw materials and other supplies, replacement cost. Nevertheless, raw materials and other supplies are not written down below cost if the finished goods into which they will be incorporated are expected to be sold at or above cost of production;

·Merchandise and finished goods, estimated selling price less costs to sell;

·Work in progress, the estimated selling price of related finished goods, less the estimated costs of completion and the estimated costs necessary to make the sale.

The previously recognized write-down is reversed against profit and loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances. The reversal of the write-down is limited to the lower of the cost and revised net realizable value of the inventories. Write-downs may be reversed with a credit to “Changes in inventories of finished goods and work in progress” and “Supplies”.

(n)Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand deposits in financial institutions. They also include other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as a cash equivalent when it has a maturity of less than three months from the date of acquisition.

The Group classifies cash flows relating to interest received and paid as operating activities, and dividends received and distributed are classified under investing and financing activities, respectively.

(o)Government grants

Government grants are recognized when there is reasonable assurance that they will be received and that the Group will comply with the conditions attached.

(i)Capital grants

Outright capital grants are initially recognized as deferred income in the consolidated balance sheet. Income from capital grants is recognized in the consolidated statement of profit and loss in line with the depreciation of the corresponding financed assets.

(ii)Operating grants

Operating grants received to offset expenses or losses already incurred, or to provide immediate financial support not related to future disbursements, are recognized in the consolidated statement of profit and loss.

(iii)Interest rate grants

Financial liabilities comprising implicit assistance in the form of below-market interest rates are initially recognized at fair value. The difference between this value, adjusted where necessary for the issue costs of the financial liability and the amount received, is recognized as a government grant based on the nature of the grant awarded.

F-35

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(p)Employee benefits

(i)Defined contribution plans

The Group recognizes the contributions payable to a defined contribution plan in exchange for a service in the period in which contributions are accrued. Accrued contributions are recognized as an employee benefit expense in the corresponding consolidated statement of profit and loss in the year that the contribution was made.

(ii)Termination benefits

Termination benefits are recognized at the earlier of the date when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that involves the payment of termination benefits.

For termination benefits payable as a result of an employee’s decision to accept an offer of benefits, the time when the Group can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and when a restriction on the Group’s ability to withdraw the offer takes effect.

For termination benefits payable as a result of the Group’s decision to make an employee redundant, the Group can no longer withdraw the offer when it has informed the affected employees or union representatives of the plan and the actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made. The plan must identify the number of employees to be made redundant, their job classifications or functions and their locations and the expected completion date. The plan must also establish the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.

If the Group expects to settle the termination benefits in full more than twelve months after year end, the liability is discounted using the market yield on high quality corporate bonds.

(iii)Short-term employee benefits

The Group recognizes the expected cost of short-term employee benefits in the form of accumulating compensated absences when the employees render service that increases their entitlement to future compensated absences. In the case of non-accumulating compensated absences, the expense is recognized when the absences occur.

The Group recognizes the expected cost of profit-sharing and bonus plans when it has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made.

(iv)Restricted Share Unit Retention Plan (RSU)

The Group gives share-based payments to certain employees who render services to the Company. The fair value of the services received is determined based on the estimated fair value of the shares given at the grant date. Because the equity instruments granted do not vest until the employees complete a specified period of service, those services are accounted for during the vesting period in the income statement as an expense for the year, with the corresponding increase in equity. The amount recognized corresponds to that settled once the agreed terms have been met and it will not be adjusted or revalued during the accrual period, as the commitment is settled in the form of shares.

F-36

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The total amount recognized is calculated based on the incentive payable in shares, increasing in line with percentages agreed by the Group. If an employee decides to leave his/her job prior to the end of the accrual period, he/she will only receive the agreed incentive in the form of shares and the Company will be able to choose whether to settle in cash or using equity instruments.

(q)Provisions

Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account all risks and uncertainties surrounding the amount to be recognized as a provision and, where the time value of money is material, the financial effect of discounting provided that the expenditure to be made each period can be reliably estimated. The discount rate is a pre-tax rate that reflects the time value of money and the specific risks for which future cash flows associated with the provision have not been adjusted at each reporting date.

If it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed against the consolidated statement of profit and loss item where the corresponding expense was recognized.

(r)Revenue recognition

Revenue from the sale of goods or services is measured at the fair value of the consideration received or receivable. Revenue is presented net of VAT and any other amounts or taxes which are effectively collected on the behalf of third parties. Volume or other types of discounts for prompt payment are recognized as a reduction in revenues if considered probable at the time of revenue recognition.

(i)Sale of goods

The Group recognizes revenue from the sale of goods when:

·It has transferred to the buyer the significant risks and rewards of ownership of the goods;

·It retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·The amount of revenue and the costs incurred or to be incurred can be measured reliably;

·It is probable that the economic benefits associated with the transaction will flow to the Group; and

·The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group participates in the government-managed Medicaid programs in the United States, accounting for Medicaid rebates by recognizing an accrual at the time a sale is recorded for an amount equal to the estimated claims for Medicaid rebates attributable to the sale. Medicaid rebates are estimated based on historical experience, legal interpretations of the applicable laws relating to the Medicaid program and any new information regarding changes in the program regulations and guidelines that would affect rebate amounts. Outstanding Medicaid claims, Medicaid payments and inventory levels are analyzed for each distribution channel and the accrual is adjusted periodically to reflect actual experience. While rebate payments are generally made in the following or subsequent quarter, any adjustments for actual experience have not been material.

As is common practice in the sector, the purchase contracts signed by some customers with the Group entitle these customers to price discounts for a minimum purchase volume, volume discounts or prompt

F-37

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

payment discounts. The Group recognizes these discounts as a reduction in sales and receivables in the same month that the corresponding sales are invoiced based on the customer’s actual purchase figures or on past experience when the customer’s actual purchases will not be known until a later date.

In the USA, the Group enters into agreements with certain customers to establish contract pricing for the products, which these entities purchase from the authorized wholesaler or distributor (collectively, wholesalers) of their choice. Consequently, when the products are purchased from wholesalers by these entities at the contract price which is less than the price charged by the Group to the wholesaler, the Group provides the wholesaler with a credit referred to as a chargeback. The Group records the chargeback accrual at the time of the sale. The allowance for chargebacks is based on Group’s estimate of the wholesaler inventory levels, and the expected sell-through of the products by the wholesalers at the contract price based on historical chargeback experience and other factors. The Group periodically monitors the factors that influence the provision for chargebacks, and makes adjustments when it considers that actual chargebacks may differ from established allowances. These adjustments occur in a relatively short period of time. As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

(ii)Services rendered

Revenues associated with the rendering of service transactions are recognized by reference to the stage of completion at the consolidated balance sheet date when the outcome of the transaction can be estimated reliably. The outcome of a transaction can be estimated reliably when revenues, the stage of completion, the costs incurred and the costs to complete the transaction can be estimated reliably and it is probable that the economic benefits derived from the transaction will flow to the Group.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of costs incurred that are recoverable.

(iii)Interest income

Until June 2012 the Group has been recognizing interest receivable from the different Social Security affiliated bodies in Spain, to which it provides goods or services, on an accrual basis, and only for those bodies to which historically claims have been made and from which interest has been collected. As a result of the terms imposed by the Spanish Government in 2012 regarding the waiver of late payment interest on overdue receivables, the Group modified its estimate regarding late payment interest. Since June 2012 the Group has only been recognizing late payment interest on receivables from Social Security affiliated bodies on the date on which delayed invoices are collected, as it is highly likely that they will be collected as of that date provided.

(s)Income taxes

The income tax expense or tax income for the year comprises current tax and deferred tax.

Current tax is the amount of income taxes payable or recoverable in respect of the consolidated taxable profit or consolidated tax loss for the year. Current tax assets or liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantially enacted at the reporting date.

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences, whereas deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base.

Current and deferred tax are recognized as income or an expense and included in profit and loss for the year, except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different year, directly in equity, or from a business combination.

F-38

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(i)Taxable temporary differences

Taxable temporary differences are recognized in all cases except where:

·   They arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

·   They are associated with investments in subsidiaries over which the Group is able to control the timing of the reversal of the temporary difference and it is not probable that the temporary difference will reverse in the foreseeable future.

(ii)Deductible temporary differences

Deductible temporary differences are recognized provided that:

·   It is probable that sufficient taxable income will be available against which the deductible temporary difference can be utilized, unless the differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

·   The temporary differences are associated with investments in subsidiaries to the extent that the difference will reverse in the foreseeable future and sufficient taxable income is expected to be generated against which the temporary difference can be offset.

Tax planning opportunities are only considered when assessing the recoverability of deferred tax assets and if the Group intends to use these opportunities or it is probable that they will be utilized.

(iii)Measurement

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the years when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted. The tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets or liabilities are also reflected in the measurement of deferred tax assets and liabilities.

At year end the Group reviews the fair value of deferred tax assets to write down the balance if it is not probable that sufficient taxable income will be available to apply the tax asset.

Deferred tax assets which do not meet the above conditions are not recognized in the consolidated balance sheet. At year end the Group assesses whether deferred tax assets which were previously not recognized now meet the conditions for recognition.

(iv)Offset and classification

The Group only offsets current tax assets and current tax liabilities if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Group only offsets deferred tax assets and liabilities where it has a legally enforceable right, where these relate to income taxes levied by the same taxation authority and where the taxation authority permits the entity to settle on a net basis, or to realize the asset and settle the liability simultaneously for each of the future years in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Deferred tax assets and liabilities are recognized in the consolidated balance sheet under non-current assets or liabilities, irrespective of the expected date of recovery or settlement.

F-39

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(t)Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment, assess its performance and, based on which, differentiated financial information is available.

(u)Classification of assets and liabilities as current and non-current

The Group classifies assets and liabilities in the consolidated balance sheet as current and non-current. Current assets and liabilities are determined as follows:

·   Assets are classified as current when they are expected to be realized or are intended for sale or consumption in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are expected to be realized within twelve months after the reporting date or are cash or a cash equivalent, unless the assets may not be exchanged or used to settle a liability for at least twelve months after the reporting date.

·   Liabilities are classified as current when they are expected to be settled in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are due to be settled within twelve months after the reporting date or the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

·   Financial liabilities are classified as current when they are due to be settled within twelve months after the reporting date, even if the original term was for a period longer than twelve months, and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date and before the Consolidated Financial Statements are authorized for issue.

(v)Environmental issues

The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Property, plant and equipment acquired by the Group for long-term use to minimize the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Group’s operations, are recognized as assets applying the measurement, presentation and disclosure criteria described in note 4(g).

(5)Financial Risk Management Policy

(a)General

The Group is exposed to the following risks associated with the use of financial instruments:

·Credit risk

·Liquidity risk

·Market risk: includes interest rate risk, currency risk and other price risks.

This note provides information on the Group’s exposure to each of these risks, the Group’s objectives and procedures to measure and mitigate this risk, and the Group’s capital management strategy. More exhaustive quantitative information is disclosed in note 30 to the Consolidated Financial Statements.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, define appropriate risk limits and controls and to control risks and comply with limits. Risk management policies and procedures are reviewed regularly so that they reflect changes in market conditions and the

F-40

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Group’s activities. The Group’s management procedures and rules are designed to create a strict and constructive control environment in which all employees understand their duties and obligations.

The Group’s Audit Committee supervises how management controls compliance with the Group’s risk management procedures and policies and reviews whether the risk management policy is suitable considering the risks to which the Group is exposed. This committee is assisted by Internal Audit which acts as supervisor. Internal Audit performs regular and ad hoc reviews of the risk management controls and procedures and reports its findings to the Audit Committee.

Credit risk

Credit risk is the risk to which the Group is exposed in the event that a customer or counterparty to a financial instrument fails to discharge a contractual obligation, and mainly results from trade receivables and the Group’s investments in financial assets.

Trade receivables

The Group does not predict any significant insolvency risks as a result of delays in receiving payment from some European countries due to their current economic situation. The main risk in these countries is that of late payments, which is mitigated through the possibility of claiming interest as foreseen by prevailing legislation. No significant bad debt or late payment issues have been detected for sales to private entities.

The Group recognizes impairment based on its best estimate of the losses incurred on trade and other receivables. The main impairment losses recognized are due to specific losses relating to individually identified risks. At year end, these impairment losses are immaterial.

Details of exposure to credit risk are disclosed in note 30.

Liquidity risk

Liquidity risk is the risk that the Group cannot meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure where possible, that it always has sufficient liquidity to settle its obligations at the maturity date, both in normal conditions and in times of tension, to avoid incurring unacceptable losses or tarnishing the Group’s reputation.

The Group manages liquidity risk on a prudent basis, based on availability of cash and sufficient committed unused long-term credit facilities, enabling the Group to implement its business plans and carry out operations using stable and secure sources of financing.

On 6 February 2017 the Group concluded the refinancing process of its senior debt. The total debt refinanced amounts to US Dollars 6,300 million (Euros 5,800 million), including the US Dollars 1,816 million loan obtained for the acquisition of Hologic’s transfusional diagnostics unit. Following the refinancing process, Grifols’ debt structure consists in a US Dollars 6,000 million long-term loan with institutional investors and banks segmented in two tranches (Term Loan A and Term Loan B), and a US Dollars 300 million undrawn revolving credit facility.

On 18 April 2017 the Group concluded the refinancing process of the Senior Unsecured Notes. The total bond issuance amounted to Euros 1,000 million.

On 5 December 2017 the Group has received an additional loan from the European Investment Bank of up to Euros 85 million at a fixed interest rate for a period of ten years with a grace period of two years. The loan will be used to support certain investments in R&D which are mainly focused on searching for new applications for plasmatic proteins. On 28 October 2015, the Group received its first loan with the same entity and conditions for a total amount of Euros 100 million. At 31 December 2017, the amount in books for the loan received in 2015 is Euros 85 million.

F-41

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

At 31 December 2017 the Group has total cash and cash equivalents of Euros 887 million (Euros 895 million at 31 December 2016). The Group also has approximately Euros 381 million in unused credit facilities, including Euros 250 million on the revolving credit facility.

As in previous years, the Group continues with its quarterly program for optimization of working capital, which is mainly based on contracts to sell receivables without recourse in those countries with long collection periods.

Market risk

Market risk comprises the risk of changes in market prices, for example, exchange rates, interest rates, or the prices of equity instruments affecting the Group’s revenues or the value of financial instruments it holds. The objective of managing market risk is to manage and control the Group’s exposure to this risk within reasonable parameters at the same time as optimising returns.

(i)Currency risk

The Group operates internationally and is therefore exposed to currency risk when operating with foreign currencies, especially with regard to the US Dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.

The Group holds significant investments in foreign operations, the net assets of which are exposed to currency risk. The conversion risk affecting net assets of the Group’s foreign operations in US Dollars is mitigated primarily through borrowings in this foreign currency.

The Group’s main exposure to currency risk is with regard to the US Dollar, which is used in a significant percentage of transactions in foreign functional currencies.

Details of the Group’s exposure to currency risk at 31 December 2017 and 2016 of the most significant financial instruments are shown in note 30.

(ii)Interest rate risk

The Group’s interest rate risks arise from current and non-current borrowings. Borrowings at variable interest rates expose the Group to cash flow interest rate risks. Fixed-rate borrowings expose the Group to fair value interest rate risk.

The objective of the management of interest rate risk is to achieve a balance in the structure of the debt, keeping part of the external resources issued at a fixed rate and covering part of the variable rate debt through hedges.

A significant part of the financing obtained accrues interest at fixed rates. This fixed interest debt (Senior Unsecured Notes) amounts to Euros 1,000 million, which represents approximately 56% of the Group’s total debt in Euros. The additional loans of Euros 170 million received from the European Investment Bank represent approximately 10% of the Group’s total debt in Euros.

Senior debt in Euros represents approximately 12% of the Group’s total Senior debt at 31 December 2017 and 31 December 2016.

Total fixed-interest debt represents a total of 19% of debt at 31 December 2017 (21% at 31 December 2016 considering total fixed-interest debt).

(iii)Market price risk

Price risk affecting raw materials is mitigated by the vertical integration of the haemoderivatives business in a highly-concentrated sector.

F-42

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Capital management

The directors’ policy is to maintain a solid capital base in order to ensure investor, creditor and market confidence and sustain future business development. The board of directors defines and proposes the level of dividends paid to shareholders.

The directors consider various arguments to calculate capital structure:

·The directors control capital performance using rates of returns on equity (ROE). In 2017, the ROE stood at 18% (15% in December 2016). The ROE is calculated by dividing profit attributable to the Parent by the equity attributable to the Parent.

	Thousand of Euros
	2016		2017
Profit attributable to the parent	545,456		662,700
Equity attributable to the parent	3,721,481		3,629,079
ROE	15	%	18	%

·In accordance with the senior secured debt contract, the Group is subject to compliance with some covenants. At 31 December 2017 and 2016, the Group complies with the covenants.

·Consideration of the Company’s credit rating (see note 20 (d)).

The Parent held Class A and B treasury stock equivalent to 0.6% of its capital at 31 December 2017 (0.7% at 31 December 2016). The Group does not have a formal plan for repurchasing shares.

(6)Segment Reporting

In accordance with IFRS 8 “Operating Segments”, financial information for operating segments is reported in the accompanying Appendix II, which forms an integral part of this note to the Consolidated Financial Statements.

Group companies are divided into four areas: companies from the industrial area, companies from the commercial area, companies from the services area and companies from the research area. Within each of these areas, activities are organized based on the nature of the products and services manufactured and marketed.

Assets, liabilities, income and expenses for segments include directly and reliably attributable items. Items which are not attributed to segments by the Group are:

·Balance sheet: cash and cash equivalents, current income tax assets and liabilities, deferred tax assets and liabilities and loans and borrowings.

·Statement of profit and loss: finance result and income tax.

(a)Operating segments

The operating segments defined by the steering committee are as follows:

·Bioscience: including all activities related with products derived from human plasma for therapeutic use.

F-43

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

·Hospital: comprising all non-biological pharmaceutical products and medical supplies manufactured by Group companies earmarked for hospital pharmacy. Products related with this business which the Group does not manufacture but markets as supplementary to its own products are also included.

·Diagnostic: including the marketing of diagnostic testing equipment, reagents and other equipment, manufactured by Group or other companies.

·Bio Supplies: since January 2017, the company is including all transactions related to biological products for non-therapeutic use in the new Bio Supplies Division resulting in a reclassification from Bioscience Division to Bio Supplies Division.

·Others: including the rendering of manufacturing services to third party companies.

As a result of the creation of the new Bio Supplies segment and Intersegments, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

Details of net sales by groups of products for 2017, 2016 and 2015 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Bioscience	3,429,785	3,228,275	3,032,111
Haemoderivatives
Diagnostic
Transfusional medicine	679,692	640,443	667,886
Other diagnostic	23,377	23,540	23,566
Hospital
Fluid therapy and nutrition	47,699	46,210	45,621
Hospital supplies	52,466	52,373	50,624
Bio supplies	66,791	24,387	24,466
Others	18,263	34,602	90,289
Total	4,318,073	4,049,830	3,934,563

The Group has concluded that the haemoderivative products are sufficiently alike to be considered as a whole for the following reasons:

·All these products are human plasma derivatives and are manufactured in a similar way.

·The customers and methods used to distribute these products are similar.

·All these products are subject to the same regulations regarding production and the same regulatory environment.

(b)Geographical information

Geographical information is grouped into four areas:

·United States of America and Canada

·Spain

·Rest of the European Union

·Rest of the world

The definition of these four segments is mainly due to the geographical level that the Group sets to manage its revenue as they respond to specific economic scenarios. The main framework of the Group is consistent with

F-44

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

this geographical segment grouping, including the monitoring of its commercial operations and its information systems.

The financial information reported for geographical areas is based on sales to third parties in these markets as well as the location of assets.

(c)Main customer

Revenues from a Bioscience segment customer represent approximately 11.0% of the Group’s total revenues (10.7% in 2016 and 10.1% in 2015).

(7)Goodwill

Details of and movement in this caption of the consolidated balance sheet at 31 December 2016 are as follows:

		Thousands of Euros
		Balance at	Translation		Balance at
	Segment	31/12/2015	differences		31/12/2016
Net value
Grifols UK.Ltd. (UK)	Bioscience	9,362	(1,337	)	8,025
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—		6,118
Biomat USA, Inc.(USA)	Bioscience	186,907	6,132		193,039
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	9,961	173		10,134
Grifols Therapeutics, Inc. (USA)	Bioscience	2,041,137	67,002		2,108,139
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—		40,516
Grifols Diagnostic (Novartis) (USA, Switzerland and Hong Kong)	Diagnostic	1,232,358	39,666		1,272,024
		3,532,359	111,636		3,643,995

F-45

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Details of and movement in this caption of the consolidated balance sheet at 31 December 2017 are as follows:

		Thousands of Euros
		Balance at	Business	Translation		Balance at
	Segment	31/12/2016	Combination	differences		31/12/2017
Net value
Grifols UK.Ltd. (UK)	Bioscience	8,025	—	(280	)	7,745
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—	—		6,118
Biomat USA, Inc.(USA)	Bioscience	193,039	40,101	(27,886	)	205,254
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	10,134	—	(591	)	9,543
Grifols Therapeutics, Inc. (USA)	Bioscience	2,108,139	—	(255,234	)	1,852,905
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—	—		40,516
Grifols Diagnostic (Novartis & Hologic) (USA, Spain and Hong Kong)	Diagnostic	1,272,024	1,466,420	(302,537	)	2,435,907
Kiro Grifols S.L. (Spain)	Hospital	—	26,510	—		26,510
		3,643,995	1,533,031	(586,528	)	4,590,498
			(See note 3)

Impairment testing:

As a result of the acquisition of Talecris in 2011, and for impairment testing purposes, the Group combines the CGUs allocated to the Bioscience segment, grouping them together at segment level, because substantial synergies were expected to arise on the acquisition of Talecris, and due to the vertical integration of the business and the lack of an independent organized market for the products. Because the synergies benefit the Bioscience segment globally they cannot be allocated to individual CGUs. The Bioscience segment represents the lowest level to which goodwill is allocated and is subject to control by Group management for internal control purposes.

Since the acquisition of Novartis’ Diagnostic business unit in 2014, the Group combines Araclon, Progenika, Australia and recently Hologic’s share of NAT donor screening unit acquisition into a single CGU for the Diagnostic business as the acquisition is supporting not only the vertically integration business but also cross-selling opportunities. In addition, for management purposes, the Group’s management is focused on the business more than geographical areas or individual companies.

Due to the acquisition of an additional 40% stake of Kiro Grifols S.L., the Group has decided to group Kiro Grifols S.L. and Laboratorios Grifols S.L. into a single CGU for the Hospital business since the acquisition is supporting cross-selling opportunities.

The CGUs established by Management are:

·Bioscience

·Diagnostic

·Hospital

The recoverable amount of the Bioscience CGU was calculated based on its value in use calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

The recoverable amount of the Diagnostic CGU was calculated based on its fair value less costs of disposal calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

The recoverable amount of the Hospital CGU was calculated based on its fair value less costs of disposal calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

F-46

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

This value in use and fair value less costs of disposal calculations use cash flow projections for five years based on the financial budgets approved by management. Cash flows estimated as of the year in which stable growth in the CGU has been reached are extrapolated using the estimated growth rates indicated below.

The key assumptions used in calculating impairment of the CGUs for 2016 were as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	8.60	%
Diagnostic	2	%	10.30	%

The key assumptions used in calculating impairment of the CGUs for 2017 have been as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	9.50	%
Diagnostic	2	%	10.60	%
Hospital	1.40	%	13.30	%

Management determined budgeted gross margins based on past experience, investments in progress which would imply significant growth in production capacity and its forecast international market development. Perpetual growth rates are coherent with the forecasts included in industry reports. The discount rate used reflects specific risks related to the CGU.

As the acquisition of Hologic’s NAT donor screening unit share and the acquisition for an additional stake of Kiro Grifols S.L. are recent transactions and as the recoverable amount of the Bioscience CGU is much higher than the carrying amount of the Bioscience segment’s net assets, specific information from the impairment test sensitivity analysis is not included.

At 31 December 2017 Grifols’ stock market capitalization totals Euros 15,379 million (Euros 12,020 million at 31 December 2016).

(8)Other Intangible Assets

Details of other intangible assets and movement during the years ended 31 December 2017 and 2016 are included in Appendix III, which forms an integral part of these notes to the Consolidated Financial Statements.

Intangible assets acquired from Talecris mainly include currently marketed products. Identifiable intangible assets correspond to Gamunex and have been recognized at fair value at the acquisition date of Talecris and classified as currently marketed products. Intangible assets recognized comprise the rights on the Gamunex product, its commercialization and distribution license, trademark, as well as relations with hospitals. Each of these components are closely linked and fully complementary, are subject to similar risks and have a similar regulatory approval process.

Intangible assets acquired from Progenika mainly include currently marketed products. Identifiable intangible assets correspond to blood, immunology and cardiovascular genotyping. These assets have been recognized at fair value at the acquisition date of Progenika and classified as currently marketed products.

F-47

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The cost and accumulated amortization of currently marketed products acquired from Talecris and Progenika at 31 December 2016 is as follows:

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2015		Additions		differences		31/12/2016
Cost of currently marketed products - Gamunex	1,102,232		—		36,180		1,138,412
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(168,397	)	(36,062	)	(7,412	)	(211,871	)
Accumulated amortisation of currently marketed products - Progenika	(6,738	)	(2,379	)	—		(9,117	)
Carrying amount of currently marketed products	950,889		(38,441	)	28,768		941,216

The cost and accumulated amortization of currently marketed products acquired from Talecris and Progenika at 31 December 2017 is as follows:

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2016		Additions		differences		31/12/2017
Cost of currently marketed products - Gamunex	1,138,412		—		(137,828	)	1,000,584
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(211,871	)	(35,837	)	28,136		(219,572	)
Accumulated amortisation of currently marketed products - Progenika	(9,117	)	(2,379	)	—		(11,496	)
Carrying amount of currently marketed products	941,216		(38,216	)	(109,692	)	793,308

The estimated useful life of the currently marketed products acquired from Talecris is considered limited, has been estimated at 30 years on the basis of the expected life cycle of the product (Gamunex) and is amortized on a straight-line basis.

At 31 December 2017 the residual useful life of currently marketed products is 23 years and 5 months (24 years and 5 months at 31 December 2016).

The estimated useful life of the currently marketed products acquired from Progenika is considered limited, has been estimated at 10 years on the basis of the expected life cycle of the product and is amortized on a straight-line basis.

At 31 December 2017 the residual useful life of currently marketed products acquired from Progenika is 5 years and 2 months (6 years and 2 months at 31 December 2016).

(a)Self — constructed intangible assets

At 31 December 2017 the Group has recognized Euros 49,782 thousand as self-constructed intangible assets (Euros 29,034 thousand at 31 December 2016).

(b)Purchase commitments

At 31 December 2017 the Group has intangible asset purchase commitments amounting to Euros 1,199 thousand (Euros 639 thousand at 31 December 2016).

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GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(c)Intangible assets with indefinite useful lives and other intangible in progress

At 31 December 2017 the Group has plasma center licenses with indefinite useful lives under intangible assets for a carrying amount of Euros 26,631 thousand (Euros 30,075 thousand at 31 December 2016).

The Group has also an amount of Euros 183,281 thousand as development costs in progress (Euros 52,272 thousand at 31 December 2016). The main variance corresponds to the assets acquired from Hologic’s business combination (see note 3(a)).

The Group has recognized an amount of Euros 4,235 thousand corresponding to payments relating to license rights due to the Aradigm acquisition (no amount was recognized at 31 December 2016).

(d)Result on disposal of intangible assets

Total losses incurred on disposals of intangible assets in 2017 amount to Euros 83 thousand (Euros 7,198 thousand of profit in 2016).

(e)Impairment testing

Indefinite-lived intangible assets have been allocated to the cash-generating unit (CGU) of the Bioscience segment. These assets have been tested for impairment together with goodwill (see note 7).

Impairment testing has been analyzed for each of the intangible assets in progress by calculating its recoverable amount based on their fair value.

As the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend the approval for LinahieTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the intangible assets referred to it have been totally impaired. As a consequence, the group has impaired a total amount of Euros 63,675 thousand related to this product. This amount has been recognized in the Profit and Loss Statement as a R&D expense. Even that, the company has impaired the investment in this company and the convertible bonds (see notes 10 and 11(a)).

(9)Property, Plant and Equipment

Details of property, plant and equipment and movement in the consolidated balance sheet at 31 December 2017 and 2016 are included in Appendix IV, which forms an integral part of this note to the Consolidated Financial Statements.

Property, plant and development under construction at 31 December 2017 and 2016 mainly comprise investments made to extend the companies’ equipment and to increase their productive capacity.

In 2017, the Group has capitalized interests for a total amount of Euros 8,839 thousand (Euros 13,019 thousand in 2016)

a)Insurance

Group policy is to contract sufficient insurance coverage for the risk of damage to property, plant and equipment. At 31 December 2017 the Group has a combined insurance policy for all Group companies, which more than adequately covers the carrying amount of all the Group’s assets.

b)Losses on disposal of property, plant and equipment

Total losses incurred on disposals of property, plant and equipment for 2017 amount to Euros 1,468 thousand (Euros 4,021 thousand in 2016).

F-49

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

c)Assets under finance lease

The Group contracted the following types of property, plant and equipment under finance leases at 31 December 2016:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,213	(1,421	)	792
Plant and machinery	13,336	(4,784	)	8,552
	15,549	(6,205	)	9,344

The Group has contracted the following types of property, plant and equipment under finance leases at 31 December 2017:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,545	(815	)	1,730
Plant and machinery	14,249	(6,564	)	7,685
	16,794	(7,379	)	9,415

Details of minimum lease payments and the present value of finance lease liabilities, disclosed by maturity date, are detailed in note 20 (c).

d)Self – constructed property, plant and equipment

At 31 December 2017 the Group has recognized Euros 52,218 thousand as self -constructed property, plant and equipment (Euros 68,529 thousand at 31 December 2016).

e)Purchase commitments

At 31 December 2017 the Group has property, plant and equipment purchase commitments amounting to Euros 39,675 thousand (Euros 39,773 thousand at 31 December 2016).

f)Impairment

A group of assets forming part of the Hospital segment has been tested for impairment due to the decrease in the results of the segment and no impairment has been observed. The recoverable amount of the aforementioned assets is calculated based on the fair value less cost of disposal, using cash flow projections based on five-year financial budgets approved by management. Cash flows estimated as of the year in which stable growth has been reached by the assets are extrapolated using a pre-tax discount rate of 12.2% and a perpetual growth rate of 2% (10.3% and 2% respectively in fiscal year 2016).

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GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(10)Equity Accounted Investees

Details of this caption in the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

			Thousands of Euros			Thousands of Euros
	% ownership		31/12/2017	% ownership		31/12/2016
Aradigm Corporation	35.13	%	—	35.13	%	9,291
Kiro Grifols, S.L (see note 3(b))	90.00	%	—	50.00	%	13,888
Alkahest, Inc.	47.58	%	30,559	47.58	%	35,955
Albajuna Therapeutics, S.L	30.00	%	1,956	30.00	%	3,177
Interstate Blood Bank, Inc.	49.19	%	27,936	49.19	%	31,090
Bio Blood Components Inc.	48.97	%	32,960	48.97	%	38,725
Plasma Biological Services, LLC	48.90	%	23,010	48.90	%	25,890
Singulex, Inc.	19.33	%	29,322	20.00	%	43,329
GigaGen, Inc	43.96	%	29,047	—		—
Access Biologicals LLC	49.00	%	44,219	—		—
Aigües de Vilajuïga S.A.	50.00	%	—	—		—
			219,009			201,345

Movement in the investments in equity-accounted investees for the years ended at 31 December 2017, 2016 and 2015 have been as follows:

	Thousands of Euros
	2017		2016		2015
Balance at 1 January	201,345		76,728		54,296
Acquisitions	80,685		136,072		33,039
Transfers	(16,000	)	(29,059	)	—
Share of profit / (losses)	(13,195	)	6,933		(8,280	)
Share of other comprehensive income / translation differences	(27,134	)	10,671		2,673
Losses for Impairment	(6,692	)	—		—
Collected dividends	—		—		(5,000	)
Balance at 31 December	219,009		201,345		76,728

GigaGen Inc.

On 5 July 2017, Grifols through its 100% subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), has acquired a 43.96% shareholding in GigaGen, Inc., a company based in San Francisco (USA) for the amount of US Dollars 35 million.

GIANT and GigaGen have also entered into a Research and Collaboration Agreement whereby in exchange of a collaboration fee of US Dollars 15 million in the aggregate, GigaGen will commit to carry out research activities to develop recombinant polyclonal immunoglobulin therapies derived from human B cells for the treatment of human diseases.

The summarized financial information of GigaGen, Inc. corresponding to the last available financial statements is included below with the carrying amount of the Group’s interest. Information regarding the income statement is included only from the date of acquisition of the participation.

F-51

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	404		484
Current assets	21,910		26,277
Current liabilities	(180	)	(216	)
Total net assets (100%)	22,134		26,545
Group’s share of net assets (43.96%)	9,730		11,669
Profit from continuing operations (100%)	(1,830	)	(2,183	)
Group’s share of total comprehensive income (43.96%)	(804	)	(960	)

A reconciliation of the summarized financial information with the carrying amount of the Group’s interest is as follows:

	Thousand of Euros
	31/12/2017
Group’s share of net assets	9,730
Goodwill of equity method investment	19,317
Equity method accounted investment	29,047

Movement in Gigagen’s equity-accounted investment for the year ended 31 December 2017 is as follows:

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	31,752
Share of profit / (losses)	(804	)
Share of other comprehensive income / translation differences	(1,595	)
Impairment Losses	(306	)
Balance at 31 December	29,047

F-52

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Access Biologicals LLC.

On 12 January 2017, the group has announced the acquisition of 49% of the voting rights in Access Biologicals LLC, a company based in San Diego, California, USA, for the amount of US Dollar 51 million. Grifols has entered into an option agreement to purchase the remaining 51% voting rights in five years, in 2022. Grifols has also signed a supply agreement to sell to Access Biologicals biological products not meant for therapeutic use.

The principal business activity of Access Biologicals is the collection and manufacturing of an extensive portfolio of biologicals products. Combined with closed-loop material sourcing, it provides critical support for various markets such as in-vitro diagnostic manufacturing, biopharmaceutical, cell culture and diagnostic research & development.

The summarized financial information of Access Biologicals LLC corresponding to the last available financial statements is included below with the carrying amount of the Group’s interest. Information regarding the income statement is included only from the date of acquisition of the participation.

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	1,221		1,464
Current assets	14,422		17,296
Non-current liabilities	(1,284	)	(1,540	)
Current liabilities	(3,023	)	(3,626	)
Total net assets (100%)	11,336		13,594
Group’s share of net assets (49%)	5,555		6,661
Profit from continuing operations (100%)	3,734		4,129
Group’s share of total comprehensive income (49%)	1,830		2,023

A reconciliation of the summarized financial information with the carrying amount of the Group’s interest is as follows:

	Thousand of Euros
	31/12/2017
Group’s share of net assets	5,555
Goodwill of equity method investment	38,664
Equity method accounted investment	44,219

Movement in Access Biological’s equity-accounted investment for the year ended 31 December 2017 is as follows:

F-53

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	48,383
Share of profit / (losses)	1,830
Share of other comprehensive income / translation differences	(5,994	)
Balance at 31 December	44,219

Aradigm

As the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend the approval for LinahiqTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the investment in Aradigm have been totally impaired.

Consequently, the investment in Aradigm has been fully impaired for an amount of Euros 5,836 thousand in the statement of profit and loss.

Movement in the investment in Aradigm for the year ended 31 December 2017 and 31 December 2016 is as follows:

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	9,291		19,799
Share of profit / (losses)	(4,324	)	(10,185	)
Share of other comprehensive income / translation differences	869		(323	)
Impairment losses	(5,836	)	—
Balance at 31 December	—		9,291

Singulex, Inc.

On 17 May 2016 Grifols subscribed and paid a capital increase for an amount of US Dollars 50 million (Euros 44,107 thousand) in the US company Singulex, Inc. (“Singulex”). As a result, Grifols held a 20% (19.33% at December 2017) common stock interest in Singulex on a fully diluted basis at a pre-money valuation of US Dollars 200 million. Grifols will be entitled to appoint a director to serve the board of directors of Singulex. As a result, Singulex granted Grifols an exclusive worldwide license for the use and sale of Singulex’s technology for the blood donor and plasma screening to further ensure the safety of blood and plasma products.

Movement in Singulex, Inc.’s equity-accounted investment for the years ended 31 December 2016 and December 2017 is as follows:

F-54

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	43,329		—
Acquisitions	—		44,107
Share of profit / (losses)	(9,335	)	(3,890	)
Share of other comprehensive income / translation differences	(4,672	)	3,112
Balance at 31 December	29,322		43,329

Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LIc.

On 11 May 2016 Grifols acquired a 49.19% stake in Interstate Blood Bank, Inc. (IBBI), 48.97% of Bio-Blood Components, Inc. (Bio-Blood) and 48.90% of Plasma Biological Services, LLC (PBS) (“IBBI Group”), a group based in Memphis, TN, USA, for the price of US Dollars 100 million (Euros 88,215 thousand). GWWO also entered into an option agreement to purchase the remaining stakes for a price of US Dollars 100 million for an option price of US Dollars 10 million (Euros 9,007 thousand) (see notes 11 and 30). The purchase price and the call right were paid upon signature of the contract. The principal business activity of IBBI and its affiliates is the collection of plasma for the plasma fractionation industry, with 23 plasma collection centers, 9 blood donation centers and one laboratory.

Movement in Interstate Blood Bank, Inc., Bio-blood Components, Inc. and Plasma Biological Services, LLC.’s equity-accounted investment for the years ended 31 December 2016 and 2017 is as follows:

	Thousands of Euros						Thousands of Euros
	31/12/2017						31/12/2016
	IBBI		Bio-Blood		PBS		IBBI	Bio-Blood		PBS
Balance at 1 January	31,090		38,725		25,890		—	—		—
Acquisitions	—		—		—		28,229	36,168		23,818
Share of profit / (losses)	635		(1,181	)	270		695	(166	)	260
Share of other comprehensive income / translation differences	(3,789	)	(4,584	)	(3,150	)	2,166	2,723		1,812
Balance at 31 December	27,936		32,960		23,010		31,090	38,725		25,890

Albajuna Therapeutics, S.L

In January 2016, Grifols acquired 30% of the equity of AlbaJuna Therapeutics, S.L. for Euros 3.75 million in the form of a cash payment to finance the development and production of therapeutic antibodies against HIV. The initial investment will be increased upon achievements of agreed development milestones through two payments for a total amount of Euros 7.25 million.

AlbaJuna Therapeutics is a spin-off from the AIDS Investigation Institute IrsiCaixa, jointly driven by Obra Social “la Caixa” and the Generalitat de Catalunya’s Department of Health. It was founded to promote the preclinical and clinical development of monoclonal antibodies that both neutralize the HIV action in the human body and increase the activity of natural killer cells, which are responsible for the destruction of infected cells.

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GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Kiro Grifols, S.L.

On 25 July 2017 the Group subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 12.8 million, which represents 40% of the voting and economic rights of Kiro Grifols. With this new operation, Grifols owns a total of 90% of the voting and economic rights of Kiro Grifols S.L., which is now considered part of the group, and starts using the global consolidation method instead of the equity method (see note 3(b)).

(11)Financial Assets

Details of non-current financial assets on the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Convertible Bond (a)	—	15,201
Non-current derivatives (b) (see note 30)	8,338	13,665
Non-current investment in quoted shares (see note 30)	38,708	29,998
Total Non-current financial assets measured at fair value	47,046	58,864
Convertible Bond (a)	—	25,000
Non-current guarantee deposits	4,820	4,603
Other non-current financial assets	1,346	1,078
Non-current loans to EEAA (c) (see note 31)	16,677	—
Total Non-current financial assets measured at amortized cost	22,843	30,681

Details of other current financial assets on the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Deposits and guarantees	702	957
Current loans to third parties	59	832
Current loans to associates (see note 31)	9,977	793
Total other current financial assets	10,738	2,582

(a)     Convertible Bond

On 22 April 2016, the Group’s subsidiary, Grifols Worldwide Operations Limited, subscribed convertible bonds for an amount of US Dollars 19,950 thousand (Euros 17,997 thousand) issued by Aradigm that bear at an interest rate of 9% and mature in 2021. The Group indirectly owns 35.13% of the common stock of Aradigm. Interest on the convertible bonds is payable on 1 May and 1 November of each year. At the date of these Consolidated Financial Statements Aradigm has paid the Group an amount of Euros 1,601 thousand on the convertible bonds (Euros 839 thousand at 31 December 2016). Upon the events described in the indenture governing the convertible bonds, the convertible bonds are convertible into common stock of Aradigm. At the date of these Consolidated Financial Statements, the conversion rate is 191.94 shares of Aradigm common stock per US Dollar 1,000 principal amount of convertible bonds.

As mentioned in note 8 (a), as the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend approval for LinahiqTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the Group has decided to impair all the financial

F-56

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

assets referred to it. As a consequence, the financial assets related to the convertible bond of Aradigm have been impaired for a total amount of Euros 14,477 thousand (see note 26). This amount has been recognized in the Profit or Loss Statement as a financial result.

On February 2, 2017 Grifols Worldwide Operations Limited sold to Nomura International PLC the convertible bonds issued by TiGenix that the Group subscribed on March 6, 2015. The settlement amount was Euros 20.5 million resulting in a loss of Euros 5.5 million.

(b)   Non-current derivatives

Non-current derivatives includes an amount of Euros 8,338 thousand in respect of the call right for the Interstate Blood Bank, Inc. shares, Bio-Blood Components, Inc. shares and Plasma Biological Services, LLC. units that are not owned by the Group. The call right can be exercised by the Group by delivering written notice of its intention at any time on or after February 1, 2019 and on or before April 30, 2019 (see note 11 (a)).

On December 31, 2017 the implicit derivative to the right of the convertible bond of Aradigm have been totally impaired due to the resolution of the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration. As a consequence, it has been recognized a financial impairment in the Profit and Loss Statement for a total amount of Euros 3,672 thousand.

(c)   Non-current loans to EEAA

On 2 October 2017 the Group’s subsidiary Grifols Diagnostic Solutions, Inc. subscribed notes for an amount of US Dollars 20,000 thousand (Euros 16,676 thousand) issued by Singulex, Inc., that bear at an interest rate of 5% and mature in September 19, 2019. The Group indirectly owns 19.33 % of the common stock of Singulex Inc.

(12)Inventories

Details of inventories at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Goods for resale	105,013	166,272
Raw materials and supplies	454,371	423,326
Work in progress and semi-finished goods	592,612	584,279
Finished goods	477,297	469,054
	1,629,293	1,642,931

Movement in the inventory provision was as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	33,069		22,614		15,888
Net charge for the year	8,232		8,878		6,099
Cancellations for the year	(357	)	(20	)	(195	)
Translation differences	(5,180	)	1,597		822
Balance at 31 December	35,764		33,069		22,614

(13)Trade and Other Receivables

Details at 31 December 2017 and 2016 are as follows:

F-57

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousands of Euros
	31/12/2017		31/12/2016
Trade receivables	302,685		431,510
Receivables from associates (note 31)	3,219		133
Bad debt provision (note 30)	(19,706	)	(17,987	)
Trade receivables	286,198		413,656
Other receivables (note 30)	7,485		13,705
Personnel	566		280
Advance payments (note 30)	11,181		6,775
Taxation authorities, VAT recoverable	20,105		17,768
Other public entities	1,344		3,771
Other receivables	40,681		42,299
Current income tax assets	59,531		77,713
	386,410		533,668

Other receivables

During 2017, 2016 and 2015 certain companies of the Grifols Group have sold receivables from several public entities, without recourse, to certain financial institutions. Under some of these contracts, the Group receives an initial payment which usually amounts to 90% of the nominal amount of the receivables sold less the associated sale and purchase costs. The deferred collection (equivalent to the rest of the nominal amount) will be made by the Group once the financial institution has collected the nominal amount of the receivables (or the interest, if the balances are received after more than 36 months, depending on the terms of each particular contract) and this amount is recognized in the consolidated balance sheet as a balance receivable from the financial institution. The deferred amount (equivalent to the continuing involvement) totals Euros 1,800 thousand at 31 December 2017 (Euros 2,560 thousand at 31 December 2016), which does not differ significantly from its fair value and coincides with the amount of maximum exposure to losses. The financial institution makes the initial payment when the sale is completed and therefore, the bad debt risk associated with this part of the nominal amount of the receivables is transferred. The Group has transferred the credit risk and control of the receivables to certain financial institutions and has therefore derecognized the asset transferred in the consolidated balance sheet, as the risks and rewards inherent to ownership have not been substantially retained.

Certain foreign Group companies have also entered into a contract to sell receivables without recourse to various financial institutions.

Total balances receivable without recourse sold to financial institutions through the aforementioned contracts in 2017 amount to Euros 912 million (Euros 870 million in 2016).

The finance cost of these operations for the Group totals approximately Euros 3,973 thousand which has been recognized under finance result in the consolidated statement of profit and loss for 2017 (Euros 4,885 thousand in 2016 and Euros 6,512 thousand in 2015) (see note 26).

Details of balances with related parties are shown in note 31.

(14)Cash and Cash Equivalents

Details of this caption of the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

F-58

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousands of Euros
	31/12/2017	31/12/2016
Current deposits	655,463	470,298
Cash in hand and at banks	231,058	424,711
Total cash and cash equivalents	886,521	895,009

(15)Equity

Details of consolidated equity and movement are shown in the consolidated statement of changes in equity.

(a)Share capital

At 31 December 2017 and 2016, the Company’s share capital amounts to Euros 119,603,705 and comprises:

·Class A shares: 426,129,798 ordinary shares of Euros 0.25 par value each, subscribed and fully paid and of the same class and series.

·Class B shares: 261,425,110 non-voting preference shares of 0.05 Euros par value each, of the same class and series, and with the preferential rights set forth in the Company’s by-laws.

On 4 January 2016 the Company’s new shares resulting from the share split ruling on 3 December 2015 by the Company’s board of directors started to be traded in accordance with the delegation of authorities by the shareholders at the general shareholders’ meeting held on 29 May 2015.

The main characteristics of the Class B shares are as follows:

·Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each year equal to Euros 0.01 per Class B share provided that the aggregate preferred dividend does not exceed the distributable profits of that year and a distribution of dividends has been approved by the Company’s shareholders. This preferred dividend is not cumulative if sufficient distributable profits are not obtained in the period.

·Each Class B share is entitled to receive, in addition to the above-mentioned preferred dividend, the same dividends and other distributions as for one Grifols ordinary share.

·Each Class B share entitles the holder to its redemption under certain circumstances, if a takeover bid for all or part of the shares in the Company has been made, except if holders of Class B shares have been entitled to participate in the bid on the same terms as holders of Class A shares. The redemption terms and conditions reflected in the Company’s by-laws limit the amount that may be redeemed, requiring that sufficient distributable reserves be available, and limit the percentage of shares to be redeemed in line with the ordinary shares to which the bid is addressed.

·In the event the Company were to be wound up and liquidated, each Class B share entitles the holder to receive, before any amounts are paid to holders of ordinary shares, an amount equal to the sum of (i) the par value of the Class B share, and (ii) the share premium paid for the Class B share when it was subscribed. In addition to the Class B liquidation preference amount, each holder is entitled to receive the same liquidation amount that is paid for each ordinary share.

These shares are freely transferable.

F-59

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Since 23 July 2012 the ADSs (American Depositary Shares) representing Grifols’ Class B shares (non-voting shares) have had an exchange ratio of 1:1 in relation to Class B shares, ie.1 ADS represents 1 Class B share. The previous rate was 2 ADS per 1 Class B share.

The Company’s knowledge of its shareholders is based on information provided voluntarily or in compliance with applicable legislation. According to the information available to the Company, there are no interests representing more than 10% of the Company’s total capital at 31 December 2017 and 2016.

At 31 December 2017 and 2016, the number of outstanding shares is equal to the total number of Company shares, less treasury stock.

Movement in outstanding shares during 2016 is as follows:

	Class A shares	Class B shares
Balance at 1 January 2016	426,129,798	257,386,540
(Acquisition) / disposal of treasury stock (note 15 (d))	—	(692,165	)
Balance at 31 December 2016	426,129,798	256,694,375

Movement in outstanding shares during 2017 is as follows:

	Class A shares	Class B shares
Balance at 1 January 2017	426,129,798	256,694,375
(Acquisition) / disposal of treasury stock (note 15 (d))	—	432,929
Balance at 31 December 2017	426,129,798	257,127,304

(b)Share premium

Movement in the share premium is described in the consolidated statement of changes in equity, which forms an integral part of this note to the Consolidated Financial Statements.

(c)Reserves

The drawdown of accumulated gains is subject to legislation applicable to each of the Group companies. At 31 December 2017, Euros 40,061 thousand equivalent to the carrying amount of development costs pending amortization of certain Spanish companies (Euros 50,680 thousand at 31 December 2016) (see note 8) are, in accordance with applicable legislation, restricted reserves which cannot be distributed until these development costs have been amortized.

In May 2015 the company sold 1,967,265 treasury stocks (Class A Shares), generating a profit of Euros 2 million, recognized in reserves.

In June 2015 Araclon Biotech, S.L. increased capital by an amount of Euros 6 million. As a result, the Group has increased its investment from 66.15% to 70.83%. The difference between the share capital increase carried out by the Group and the non-controlling interest had been recognized as a Euros 1.77 million decrease in reserves.

In July 2016 the Group acquired an additional 20% of the assets of Medion Diagnostics AG in exchange for 59,951 treasury stocks (Class B Shares) from its non-controlling interests. After these capital increases, Grifols’ interest rose to 100% in 2016. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 0.6 million decrease in reserves.

F-60

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

In August 2016 Araclon Biotech, S.L. increased capital by an amount of Euros 6.7 million. As a result, the Group increased its investment from 70.83% to 73.22%. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 1.7 million decrease in reserves.

On 12 December 2016, the Group subscribed a share capital increase in the capital of VCN Biosciences, S.L. of Euros 5 million. After this capital increase, Grifols interest rose to 81.34% in 2016. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 1 million decrease in reserves.

In October 2017, the Group acquired 12,020 Progenika Biopharma, S.A. shares As a result, the Group has increased its investment from 89.25% to 90.23%. The difference between the share capital increase carried out by the Group and the non-controlling interest has been recognized as a Euros 374 thousand decrease in reserves.

At 31 December 2017 and 2016 reserves include the IFRS-EU first-time adoption revaluation reserves and legal reserve of certain Group companies.

Legal reserve

Companies in Spain are obliged to transfer 10% of each year’s profits to a legal reserve until this reserve reaches an amount equal to 20% of share capital. This reserve is not distributable to shareholders and may only be used to offset losses if no other reserves are available. Under certain conditions it may be used to increase share capital provided that the balance left on the reserve is at least equal to 10% of the nominal value of the total share capital after the increase.

At 31 December 2017 and 2016 the legal reserve of the Company amounts to Euros 23,921 thousand.

Distribution of the legal reserves of Spanish companies is subject to the same restrictions as those of the Company and at 31 December 2017 the balance of the legal reserve of other Spanish companies amounts to Euros 2,416 thousand (Euros 1,485 thousand at 31 December 2016).

Other foreign Group companies have a legal reserve amounting to Euros 731 thousand at 31 December 2017 (Euros 650 thousand at 31 December 2016).

(d)Treasury stock

At 31 December 2017 and December 2016 the Company does not have any Class A treasury stock.

Movement in Class B treasury stock during 2016 is as follows:

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2016	4,038,570		58,575
Acquisition of Class B shares	1,628,893		23,720
Non Cash Disposal Class B shares	(936,728	)	(13,585	)
Balance at 31 December 2016	4,730,735		68,710

In July 2016 the Company delivered 59,951 treasury stocks (Class B Shares) to Medion’s non-controlling interests in exchange for the 20% acquired from them.

In March 2016 the Company delivered 876,777 treasury stocks (Class B Shares) to Progenika’s non-controlling interests in exchange for the 16.46% acquired from them (see note 2(b)).

F-61

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Class B share acquisitions included the purchase of the Class B shares from the vendor shareholders of Progenika for which Grifols exercised the cash option for an amount of Euros 11,035 thousand. This amount had been considered as cash used in investing activities in the statement of cash flows

Movement in Class B treasury stock during 2017 is as follows:

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2017	4,730,735		68,710
Disposal Class B shares	(432,929	)	(6,288	)
Balance at 31 December 2017	4,297,806		62,422

In March 2017 the company delivered 432,929 treasury stocks (Class B shares) to eligible employees as a compensation of the Restricted Share Unit Retention Plan (see note 29).

The Parent held Class B treasury stock equivalent to 0.6% of its capital at 31 December 2017 (0.7% at 31 December 2016).

(e)Distribution of profit

The profits of Grifols, S.A. and subsidiaries will be distributed as agreed by respective shareholders at their general meetings.

The proposed distribution of profit of the Parent Grifols, S.A. for the years ended 31 December 2017, and the distribution approved for 2016, presented at the general meeting held on 26 May 2017, is as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Legal Reserve	—	—
Voluntary reserve	76,247	103,611
Dividends	265,080	218,182
Profit of the Parent	341,327	321,793

The following dividends were paid in 2016:

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	53	%	0.13	56,493
Non-voting shares	265	%	0.13	34,136
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				93,243

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,205
Total interim dividends paid				122,908

F-62

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following dividends were paid in 2017:

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	54	%	0.14	57,790
Non-voting shares	271	%	0.14	34,870
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				95,274

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,283
Total interim dividends paid				122,986

At the meeting held on 27 October 2017, the Board of Directors of Grifols approved the distribution of interim dividend for 2017 of Euros 0.18 for each Class A and B share, recognizing a total of Euros 122,986 thousand as interim dividend.

At the meeting held on 28 October 2016, the Board of Directors of Grifols approved the distribution of interim dividend for 2016 of Euros 0.18 for each Class A and B share, recognizing a total of Euros 122,908 thousand as interim dividend.

These amounts to be distributed did not exceed the profits generated by the Company since the end of the last reporting period, less the estimated income tax payable on these profits, in accordance with article 277 of the Revised Spanish Companies Act.

The Statement of Liquidity for Distribution of Interim Dividend of Grifols, S.A. prepared in accordance with legal requirements and which shows the existence of sufficient liquidity to be able to distribute the aforementioned interim dividend is provided in Appendix V.

At a general meeting held on 26 May 2017 the shareholders approved the distribution of a preferred dividend of Euros 0.01 for every Class B non-voting share.

The distribution of the profit for the years ended 31 December 2016 and 2017 is presented in the consolidated statement of changes in equity.

(f)Restricted Share Unit Compensation

The Group has set up a Restricted Share Unit Retention Plan (hereinafter RSU Plan) for certain employees (see note 29). This commitment will be settled using equity instruments and the cumulative accrual amounts to Euros 13,871 thousand (Euros 7,946 thousand in 2016).

F-63

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(16)     Earnings Per Share

The calculation of basic earnings per share is based on the profit for the year attributable to the shareholders of the Parent divided by the weighted average number of ordinary shares in circulation throughout the year, excluding treasury stock.

Details of the calculation of basic earnings per share are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding	684,197,276	683,225,815	683,549,316
Basic earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average of the ordinary shares outstanding (basic) has been calculated taking into consideration the share split carried out on 4 January 2016 as follows:

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,516,338		683,610,378
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (basic) at 31 December	684,197,276	683,225,815		683,549,316

Diluted earnings per share are calculated by dividing profit for the year attributable to shareholders of the Parent by the weighted average number of ordinary shares in circulation considering the diluting effects of potential ordinary shares.

The RSU Plan granted by the Group and payable in shares, assumes the existence of dilutive potential shares. Diluted earnings per share have been calculated as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding (diluted)	684,243,891	684,170,887	683,924,426
Diluted earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average number of ordinary shares outstanding diluted has been calculated as follows:

F-64

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,988,460		683,610,378
Effect of RSU shares	46,615	472,950		375,110
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (diluted) at 31 December	684,243,891	684,170,887		683,924,426

(17)     Non-Controlling Interests

Details of non-controlling interests and movement at 31 December 2016 are as follows:

	Thousands of Euros
	Balance at 31/12/2015		Additions		Disposals		Capital increases	Translation differences		Balance at 31/12/2016
Grifols (Thailand) Pte Ltd	2,664		778		(215	)	—	127		3,354
Grifols Malaysia Sdn Bhd	1,040		144		—		—	(12	)	1,172
Araclon Biotech, S.A.	183		(1,819	)	—		1,776	—		140
Medion Grifols Diagnostic AG	(406	)	—		406		—	—		—
GRI-CEI S/A Productos para transfusao	1,146		—		(1,146	)	—	—		—
Progenika Biopharma, S.A.	1,093		165		—		—	(47	)	1,211
Brainco Biopharma, S.L.	(373	)	—		373		—	—		—
Abyntek Biopharma, S.L.	(93	)	20		—		—	—		(73	)
VCN Bioscience, S.L	(67	)	(201	)	—		961	—		693
	5,187		(913	)	(582	)	2,737	68		6,497
					(see note 2(b))

Details of non-controlling interests and movement at 31 December 2017 are as follows:

	Thousands of Euros
	Balance at 31/12/2016		Additions		Disposals		Business Combination / Additions to Consolidated Group	Translation differences		Balance at 31/12/2017
Grifols (Thailand) Pte Ltd	3,354		433		(77	)	—	(131	)	3,579
Grifols Malaysia Sdn Bhd	1,172		229		—		—	(29	)	1,372
Araclon Biotech, S.A.	140		(1,617	)	—		—	—		(1,477	)
Progenika Biopharma, S.A.	1,211		(60	)	(297	)	—	27		881
Abyntek Biopharma, S.L.	(73	)	45		28		—	—		—
VCN Bioscience, S.L	693		(272	)	—		—	—		421
Kiro Grifols , S.L.	—		(144	)	—		254	—		110
	6,497		(1,386	)	(346	)	254	(133	)	4,886

F-65

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(18)     Grants

Details are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Capital grants	11,010	11,311
Interest rate grants (preference loans) (See note 20 ( e))	812	885
	11,822	12,196

Interest-rate grants (preference loans) reflect the implicit interest on loans extended by the Spanish Ministry of Science and Technology as these are interest free.

Grants of Euros 323 thousand have been transferred to the consolidated statement of profit and loss during the year ended 31 December 2017 (Euros 1,154 thousand at 31 December 2016 and Euros 1,227 thousand at 31 December 2015).

(19)     Provisions

Details of provisions at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Non-current provisions (a)
Provisions for pensions and similar obligations	4,742	4,195
Other provisions	1,021	923
Non-current provisions	5,763	5,118

	Thousands of Euros
	31/12/2017	31/12/2016
Current provisions (b)
Trade provisions	106,995	89,588
Current provisions	106,995	89,588

(a)Non-current provisions

At 31 December 2017, 2016 and 2015 provisions for pensions and similar obligations mainly comprise a provision made by certain foreign subsidiaries in respect of labor commitments with certain employees.

Movement in provisions during 2015 is as follows:

	Thousand s of Euros
	Balance at 31/12/2014	Net Charge	Cancellations		Reclassifications		Translation differences		Balance at 31/12/2015
Non-current provisions	6,953	376	(1,598	)	(600	)	(151	)	4,980
	6,953	376	(1,598	)	(600	)	(151	)	4,980

Movement in provisions during 2016 is as follows:

F-66

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Reclassifications	Translation differences	Balance at 31/12/2016
Non-current provisions	4,980	(399	)	(281	)	814	4	5,118
	4,980	(399	)	(281	)	814	4	5,118

Movement in provisions during 2017 is as follows:

	Thousands of Euros
	Balance at 31/12/2016	Business Combination	Net Charge	Cancellations		Reclassifications	Translation differences		Balance at 31/12/2017
Non-current provisions	5,118	23	422	(23	)	290	(67	)	5,763
	5,118	23	422	(23	)	290	(67	)	5,763

(b)Current provisions

Movement in trade provisions during 2015 is as follows:

	Thousands of Euros
	Balance at 31/12/2014	Net Charge		Cancellations		Reclasifications	Translation differences	Balance at 31/12/2015
Trade provisions	115,985	(2,562	)	(6,123	)	492	15,257	123,049
	115,985	(2,562	)	(6,123	)	492	15,257	123,049

Movement in trade provisions during 2016 is as follows:

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Translation differences	Balance at 31/12/2016
Trade provisions	123,049	(28,481	)	(6,417	)	1,437	89,588
	123,049	(28,481	)	(6,417	)	1,437	89,588

Movement in trade provisions during 2017 is as follows:

	Thousands of Euros
	Balance at 31/12/2016	Business combination	Net Charge		Cancellations		Reclasifications		Translation differences		Balance at 31/12/2017
Trade provisions	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
		(See note 3(a))

F-67

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(20)     Financial Liabilities

This note provides information on the contractual conditions of the loans obtained by the Group, which are measured at amortized cost. For further information on exposure to interest rate risk, currency risk and liquidity risk and the fair values of financial liabilities, please refer to note 30.

Details at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
Financial liabilities	31/12/2017	31/12/2016
Non-current obligations (a)	853,667	831,417
Senior secured debt (b)	4,849,882	3,728,695
Other loans (b)	169,214	114,898
Finance lease liabilities (c)	5,415	6,086
Other non-current financial liabilities (e)	23,637	30,975
Total non-current financial liabilities	5,901,815	4,712,071
Current obligations (a)	95,538	95,524
Senior secured debt (b)	4,057	81,273
Other loans (b)	29,527	23,288
Finance lease liabilities (c)	3,945	3,859
Other current financial liabilities (e)	22,003	26,121
Total current financial liabilities	155,070	230,065

On 06 February 2017 the Group concluded the refinancing process of its senior debt. The total debt refinanced amounts to US Dollars 6,300 million (Euros 5,800 million), including the US Dollars 1,816 million loan obtained for the acquisition of Hologic’s transfusional diagnostics unit. Following the refinancing process, Grifols’ debt structure consists in a US Dollars 6,000 million long-term loan with institutional investors and banks segmented in two tranches (Term Loan A and Term Loan B), and a US Dollars 300 million undrawn revolving credit facility.

On 18 April 2017 the Group concluded the refinancing process of the Senior Unsecured Notes. The total bond issuance amounted to Euros 1,000 million.

On 5 December 2017 the Group has received an additional loan from the European Investment Bank of up to Euros 85 million at a fixed interest rate for a period of ten years with a grace period of two years. The loan will be used to support certain investments in R&D which are mainly focused on searching for new applications for plasmatic proteins. On 28 October 2015, the Group received its first loan with the same entity and conditions for a total amount of Euros 100 million.

(a)Senior Unsecured Notes

On 18 April 2017, Grifols, S.A., issued Euros 1,000 million Senior Unsecured Notes (the “Notes”) that will mature in 2025 and will bear annual interest at a rate of 3.20%. These notes replaced the 97.1% of the Senior Unsecured Notes issued in 2014 by Grifols Worldwide Operations Limited, a 100% subsidiary of Grifols S.A., amounting to US Dollars 1,000 million, with a maturity in 2022 and at interest rate of 5.25% that was owned by a financial institution. The remaining 2.9% of the existing notes was redeemed before the exchange by an amount of Euros 26,618 thousand. The corresponding deferred costs of the notes have been recognized in profit and loss. On 2 May 2017 the Notes have been admitted to listing in the Irish Stock Exchange.

The present value of discounted cash flows of the new Notes under the new agreement, including costs for fees paid and discounted using the original effective interest rate differs by less than 10% of the present value discounted cash flows remaining in the original debt, whereby the new agreement is not substantially different to the original agreement.

F-68

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The costs of refinancing Senior Unsecured Notes amounted to Euros 57.5 million, including the redemption costs. These costs were included as transaction costs together with other costs deriving from the debt issue and will be taken to profit and loss in accordance with the new effective interest rate. Based on the analysis of the quantitative and qualitative factors, the Group concluded that the renegotiation of conditions of the Senior Unsecured Notes does not trigger a derecognition of the liability. Unamortized financing costs from the Senior Unsecured Notes amount to Euros 146 million at 31 December 2017 (Euros 117 million at 31 December 2016).

Details of movement in the Senior Unsecured Notes at 31 December 2016 are as follows:

	Thousands of Euros
	Opening outstanding balance 01/01/16	Translation differences	Closing outstanding balance 31/12/16
Senior Unsecured Notes (nominal amount)	918,527	30,150	948,677
Total	918,527	30,150	948,677

Details of movement in the Senior Unsecured Notes at 31 December 2017 are as follows:

	Thousands of Euros
	Opening outstanding balance 01/01/17	Refinancing	Repayments		Translation differences		Closing outstanding balance 31/12/17
Senior Unsecured Notes (nominal amount)	948,677	108,597	(26,618	)	(30,656	)	1,000,000
Total	948,677	108,597	(26,618	)	(30,656	)	1,000,000

At 31 December 2017 and 2016 the current obligations caption includes the issue of bearer promissory notes to Group employees, as follows:

	31/12/2016
						Promissory
			Nominal			notes			Interest
			amount of			subscribed	Buy back		pending accrual
		Maturity	promissory	Interest		(Thousands of	(Thousands		(Thousands of
	Issue date	date	notes (Euros)	rate		Euros)	of Euros)		Euros)
Issue of bearer promissory notes	05/05/16	04/05/17	3,000	4.00	%	84,966	(789	)	(1,104	)

31/12/2017

Promissory

Nominal

notes

Interest

amount of

subscribed

Buy back

pending accrual

Maturity

promissory

Interest

(Thousands of

(Thousands

(Thousands of

Issue date

date

notes (Euros)

rate

Euros)

of Euros)

Euros)

Issue of bearer promissory notes

05/05/17

04/05/18

3,000

3.00

%

92,109

(906

)

(909

)

F-69

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Loans and borrowings

Details of loans and borrowings at 31 December 2017 and 2016 are as follows:

					Thousands of Euros
					31/12/2017			31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended	Carrying amount		Amount extended	Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	1,959,476	1,959,476		—	—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	607,000	607,000		—	—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	2,501,459	2,457,684		—	—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—	—		400,000	385,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—	—		664,074	527,108
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—	—		3,055,168	2,967,574
Total senior debt					5,067,935	5,024,160		4,119,242	3,879,682
EIB Loan	Euros	2.70%	20/11/2015	20/11/2025	100,000	74,375		100,000	100,000
EIB Loan	Euros	2.02%	22/12/2017	22/12/2027	85,000	85,000
Total EIB Loan					185,000	159,375		100,000	100,000
Revolving Credit	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	250,146	—		—	—
Revolving Credit	US Dollars	Libor + 2.5%	27/02/2014	27/02/2019	—	—		284,603	—
Total Revolving Credit					250,146	—		284,603	—
Other non-current loans	Euros	Euribor- Euribor+4%	19/03/2013	30/09/2024	33,180	9,839		33,000	14,898
Loan transaction costs					—	(174,278	)	—	(150,987	)
Non-current loans and borrowings					5,536,261	5,019,096		4,536,845	3,843,593

F-70

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

					Thousands of Euros
					31/12/2017				31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended		Carrying amount		Amount extended		Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	(*	)	25,015		—		—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—		—		(*	)	4,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—		—		(*	)	49,806
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—		—		(*	)	30,832
Total senior debt					—		25,015		—		84,638
BEI Loan	Euros	2.70%	20/11/2015	20/11/2025	(*	)	10,625		—		—
Total BEI Loan					—		10,625		—		—
Other current loans		0.1%-3.74%			131,700		18,902		208,105		23,288
Loan transaction costs					—		(20,958	)	—		(3,365	)
Current loans and borrowings					131,700		33,584		208,105		104,561

(*) See amount granted under non-current debt

F-71

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Current loans and borrowings include accrued interest amounting to Euros 1,713 thousand as at 31 December 2017 (Euros 596 thousand at 31 December 2016).

On 06 February 2017 the Group refinanced its Senior Secured Debt with the existing lenders and obtained the additional debt for the acquisition of Hologic by an amount of US Dollars 1,816 million The new senior debt consists of a Term Loan A (“TLA”), which amounts to US Dollars 2,350 million and Euros 607 million with a 1.75% margin overLibor and Euribor respectively and maturity in 2023 and quasi-bullet amortization structure, and a Term Loan B (“TLB”) that amounts to US Dollars 3,000 million with a 2.25% margin over Libor and maturity in 2025. The borrowers of the total debt are Grifols Worldwide Operations Limited and Grifols, S.A. for the Term Loan A and Grifols Worldwide Operations USA, Inc. for the Term Loan B.

The present value discounted from cash flows under the new agreement, including any fees paid and discounted using the original effective interest rate differs by less than 10% of the present value discounted from cash flows remaining in the original debt, whereby it is considered that the debt instrument has not been substantially modified.

The costs of refinancing the senior debt have amounted to Euros 84.8 million. Based on the analysis of the quantitative and qualitative factors, the Group has concluded that the renegotiation of conditions of the senior debt does not trigger a derecognition of the liability. Unamortized financing costs from the senior secured debt amount to Euros 195 million at 31 December 2017 (Euros 154 million at 31 December 2016).

The terms and conditions of the senior secured debt are as follows:

·Tranche A: six year loan divided into two tranches: US Tranche A and Tranche A in Euros.

·      US Tranche A :

·Original Principal Amount of US Dollars 2,350 million.

·Applicable margin of 175 basis points (bp) linked to US Libor.

·Quasi-bullet amortization structure.

·Maturity in 2023.

·      Tranche A in Euros :

·Original Principal Amount of Euros 607 million.

·Applicable margin of 175 basis ponts (bp) linked to Euribor.

·Quasi-bullet amortization structure.

·Maturity in 2023.

Details of Tranche A by maturity at 31 December 2017 are as follows:

	US Tranche A			Tranche A in Euros
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros	Currency	Principal in thousands of Euros
2019	US Dollars	117,500	97,974	Euros	30,350
2020	US Dollars	235,000	195,948	Euros	60,700
2021	US Dollars	235,000	195,948	Euros	60,700
2022	US Dollars	1,321,875	1,102,204	Euros	341,437
2023	US Dollars	440,625	367,402	Euros	113,813
Total	US Dollars	2,350,000	1,959,476	Euros	607,000

F-72

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

·Tranche B: Senior Debt Loan repayable in eight years.

·   US Tranche B :

·Original Principal Amount of US Dollars 3,000 million.

·Applicable margin of 225 basis points (bp) linked to US Libor.

·Quasi-bullet amortization structure.

·Maturity in 2025.

Details of Tranche B by maturity at 31 December 2017 are as follows:

	US Tranche B
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros
2018	US Dollars	30,000	25,015
2019	US Dollars	30,000	25,015
2020	US Dollars	30,000	25,015
2021	US Dollars	30,000	25,015
2022	US Dollars	30,000	25,015
2023	US Dollars	30,000	25,015
2024	US Dollars	30,000	25,015
2025	US Dollars	2,767,500	2,307,594
Total	US Dollars	2,977,500	2,482,699

·US Dollar 300 million committed credit revolving facility: Amount maturing on 2023 and applicable margin of 175 basis points (bp) linked to US Libor. At 31 December 2017 no amount has been drawn down on this facility.

The issue of senior unsecured notes and senior secured debt is subject to compliance with a leverage ratio covenant. At 31 December 2017 the Group complies with this covenant.

Both the Senior Term Loans and the Revolving Loans are guaranteed by Grifols, S.A. and certain significant subsidiaries of Grifols, S.A. that together with Grifols, S.A. represent, in the aggregate, at least 80% of the consolidated assets and consolidated EBITDA of Grifols, S.A. and its subsidiaries.

The Notes have been issued by Grifols S.A. and are guaranteed on a senior unsecured basis by subsidiaries of Grifols, S.A. that are guarantors and co-borrower under the New Credit Facilities. The guarantors are Grifols Worldwide Operations Limited, Biomat USA, Inc., Grifols Biologicals Inc., Grifols Shared Services North America, Inc., Grifols Diagnostic Solutions Inc., Grifols Therapeutics, Inc., Instituto Grifols, S.A., Grifols Worldwide Operations USA, Inc and Grifols USA, Llc.

F-73

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(c)   Finance lease liabilities

Details of minimum payments and the present value of finance lease liabilities, by maturity date, are as follows:

	Thousands of Euros
	31/12/2017			31/12/2016
	Minimum payments	Interest	Present Value	Minimum payments	Interest	Present Value
Maturity at:
Less than one year	4,305	360	3,945	4,267	408	3,859
Two years	2,636	179	2,457	3,636	263	3,373
Three years	1,461	88	1,373	1,792	88	1,704
Four years	814	60	754	672	16	656
Five years	369	42	327	306	5	301
More than five years	550	46	504	53	1	52
Total	10,135	775	9,360	10,726	781	9,945

(d)   Credit rating

In December 2017 and December 2016 Moody’s Investors Service has confirmed the ‘Ba3’ corporate family rating, ‘Ba2’ rating to the senior secured bank debt and ‘B2’ rating to the unsecured notes that were used to refinance the existing debt structure. The outlook is confirmed as stable.

In December 2017 and December 2016 Standard & Poor’s has confirmed its ‘BB’ rating on Grifols and has assigned ‘BB’ and ‘B+’ issue ratings to Grifols’ senior secured debt and senior unsecured notes that were used to refinance the existing debt structure. The outlook for the rating is stable.

(e)   Other financial liabilities

At 31 December 2017 “other financial liabilities” include interest-free loans extended by governmental institutions amounting to Euros 20,306 thousand (Euros 20,543 thousand at 31 December 2016). The portion of the loans considered a grant and still to be taken to profit and loss amounts to Euros 812 thousand (Euros 885 thousand at 31 December 2016) (see note 18).

At 31 December 2017, “other current financial liabilities” include an amount of Euros 5 million related to the remaining call option extended by the Group and the shareholders of Progenika with maturity on 2018.

At 31 December 2017 and 2016 “other current financial liabilities” also include approximately Euros 3,056 thousand and Euros 17,578 thousand, respectively, which have been collected directly from Spanish Social Security affiliated bodies and transferred to financial institutions (see note 13).

Details of the maturity of other financial liabilities are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Maturity at:
Up to one year	22,003	26,121
Two years	10,818	11,468
Three years	3,787	6,203
Four years	2,794	5,802
Five years	2,247	2,490
Over five years	3,991	5,012
	45,640	57,096

F-74

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(21)     Trade and Other Payables

Details are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Suppliers	423,096	461,073
VAT payable	8,827	10,048
Taxation authorities, withholdings payable	24,084	23,700
Social security payable	11,741	11,422
Other public entities	97,068	97,724
Other payables	141,720	142,894
Current income tax liabilities	6,709	7,957
	571,525	611,924

Suppliers

Details of balances with related parties are shown in note 31.

The Group’s exposure to currency risk and liquidity risk associated with trade and other payables is described in note 30.

(22)     Other Current Liabilities

Details at 31 December are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Salaries payable	129,519	132,755
Other payables	649	427
Deferred income	4,284	441
Advances received	9,945	6,563
Other current liabilities	144,397	140,186

(23)     Net Revenues

Net revenues are mainly generated from the sale of goods.

The distribution of net consolidated revenues for 2017, 2016 and 2015 by segment is as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Bioscience	3,429,785		3,195,424		3,032,111
Diagnostic	732,369		691,701		716,838
Hospital	105,649		102,251		96,245
Bio supplies	66,791		57,239		24,466
Others	18,263		34,601		90,289
Intersegments	(34,784	)	(31,386	)	(25,386	)
	4,318,073		4,049,830		3,934,563

F-75

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As a result of the creation of Bio Supplies segment and Intersegment, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

The geographical distribution of net consolidated revenues is as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
USA and Canada	2,896,505	2,707,579	2,604,315
Spain	242,894	225,273	216,548
European Union	444,089	426,223	456,919
Rest of the world	734,585	690,755	656,781
Consolidated	4,318,073	4,049,830	3,934,563

Details of discounts and other reductions in gross income are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Gross sales	5,322,618		4,882,615		4,579,759
Chargebacks	(826,775	)	(652,564	)	(488,072	)
Cash discounts	(57,512	)	(51,953	)	(46,150	)
Volume rebates	(43,274	)	(51,242	)	(49,458	)
Medicare and Medicaid	(41,722	)	(47,820	)	(25,710	)
Other discounts	(35,262	)	(29,206	)	(35,806	)
Net sales	4,318,073		4,049,830		3,934,563

Movement in discounts and other reductions in gross income during 2015 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2014	58,431		4,738		21,030		14,823		3,174		102,196
Current estimate related to sales made in current and prior year	488,072		46,150		49,458		25,710		35,806		645,196	(1)
(Actual returns or credits in current period related to sales made in current period)	(428,041	)	(44,867	)	(18,211	)	(18,402	)	(34,059	)	(543,580	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(246	)	(25,051	)	(11,257	)	(1,791	)	(38,345	)(3)
Translation differences	7,716		127		2,454		1,594		2,237		14,128
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595

F-76

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Movement in discounts and other reductions to gross income during 2016 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595
Current estimate related to sales made in current and prior year	652,564		51,953		51,242		47,820		29,206		832,785	(1)
(Actual returns or credits in current period related to sales made in current period)	(693,458	)	(51,733	)	(27,409	)	(24,988	)	(27,243	)	(824,831	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(248	)	(27,732	)	(14,401	)	(2,986	)	(45,367	)(3)
Translation differences	1,965		758		726		858		98		4,405
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587

Movement in discounts and other reductions to gross income during 2017 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587
Current estimate related to sales made in current and prior year	826,775		57,512		43,274		41,722		35,262		1,004,545
(Actual returns or credits in current period related to sales made in current period)	(795,449	)	(52,270	)	(28,976	)	(28,198	)	(26,072	)	(930,965	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	31		(6,024	)	(20,210	)	(16,659	)	(2,864	)	(45,726	)(3)
Translation differences	(12,716	)	(736	)	(2,604	)	(2,418	)	(625	)	(19,099	)
Balance at 31 December 2017	105,890		5,114		17,991		16,204		10,143		155,342

(1)   Net impact in income statement: estimate for the current year plus prior years’ adjustments. Adjustments made during the year corresponding to prior years’ estimates have not been significant.

(2)   Amounts credited and posted against provisions for current period

(3)   Amounts credited and posted against provisions for prior period

F-77

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(24)Personnel Expenses

Details of personnel expenses by function are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	731,192	635,577	592,037
Research and development	90,495	77,988	76,780
Selling general & administration expenses	323,880	314,348	269,718
	1,145,567	1,027,913	938,535

Details by nature are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Wages and salaries	917,810	822,384	756,570
Contributions to pension plans (see note 29)	20,347	18,486	14,587
Other social charges	27,679	25,074	22,071
Social Security	179,731	161,969	145,307
	1,145,567	1,027,913	938,535

(25)Expenses by Nature

(a)Amortization and depreciation

Expenses for the amortization and depreciation of intangible assets and property, plant and equipment, incurred during 2017, 2016 and 2015 classified by functions are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	135,186	126,998	110,898
Research and development	14,721	13,050	13,654
Selling, general & administration expenses	65,583	61,821	65,203
	215,490	201,869	189,755

(b)Other operating income and expenses

Other operating income and expenses incurred during 2017, 2016 and 2015 by function are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	416,020	454,097	426,531
Research and development	129,579	113,078	118,667
Selling, general & administration expenses	460,959	393,523	403,944
	1,006,558	960,698	949,142

F-78

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Details by nature are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016		31/12/2015
Changes in trade provisions	3,648	(22,069	)	(763	)
Professional services	211,579	190,003		173,990
Commissions	18,473	20,147		20,474
Supplies and auxiliary materials	131,932	119,014		115,471
Operating leases (note 28)	80,136	74,945		70,496
Freight	105,292	96,680		83,352
Repair and maintenance expenses	103,518	89,797		81,087
Advertising	49,893	51,233		47,860
Insurance	21,529	20,008		19,501
Royalties	11,241	9,217		9,386
Travel expenses	58,171	53,239		52,606
External services	82,699	43,231		56,743
R&D Expenses	89,977	78,379		81,319
Other	38,470	136,874		137,620
Other operating income&expenses	1,006,558	960,698		949,142

(26)     Finance Result

Details are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Finance income	9,678		9,934		5,841
Finance cost from Senior Unsecured Notes	(65,189	)	(73,491	)	(72,783	)
Finance cost from senior debt	(193,183	)	(168,332	)	(161,624	)
Finance cost from sale of receivables (note 13)	(3,973	)	(4,885	)	(6,512	)
Capitalized interest	8,839		13,019		9,795
Other finance costs	(9,838	)	(11,140	)	(9,211	)
Finance costs	(263,344	)	(244,829	)	(240,335	)
Change in fair value of financial derivatives (note 30)	(3,752	)	(7,610	)	(25,206	)
Impairment and gains / (losses) on disposal of financial instruments (note 11)	(18,844	)	—		—
Exchange differences	(11,472	)	8,916		(12,140	)
Finance result	(287,734	)	(233,589	)	(271,840	)

During 2017 the Group has capitalized interest at a rate of between 4.26% and 4.87% based on the financing received (between 4.8% and 5.2% during 2016) (see note 4 (f)).

F-79

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(27)Taxation

Grifols, S.A. is authorized to file consolidated tax returns in Spain with Diagnostic Grifols, S.A., Grifols Movaco, S.A., Laboratorios Grifols, S.A., Instituto Grifols, S.A., Grifols Worldwide Operations Spain, S.A. (formerly Logister, S.A), Biomat, S.A., Grifols Viajes, S.A., Grifols International, S.A., Grifols Engineering, S.A., Gri-Cel, S.A., Gripdan Invest, S.L. and VCN Biosciences, S.L. Grifols, S.A., in its capacity as Parent, is responsible for the filing and settlement of the consolidated tax return. Under prevailing tax law, Spanish companies pay 25% tax, which may be reduced by certain deductions.

The North American company Grifols Shared Services North America, Inc. is also authorized to file consolidated tax returns in the USA with Grifols Biologicals Inc., Grifols USA, LLC., Biomat USA, Inc., Grifols Therapeutics Inc. and Talecris Plasma Resources, Inc. The profits of the companies domiciled in the USA, determined in accordance with prevailing tax legislation, are subject to tax of approximately 36.5% of taxable income, which may be reduced by certain deductions.

(a)Reconciliation of accounting and taxable income

Details of the income tax expense and income tax related to profit for the year are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Profit before income tax from continuing operations	695,722		712,752		690,250
Tax at 25% (28% for 2015)	173,931		178,188		193,270
Permanent differences	17,163		8,019		(2,709	)
Effect of different tax rates	40,981		14,509		(24,524	)
Tax credits (deductions)	(16,092	)	(20,163	)	(19,487	)
Impact related to the US tax legistation modific	(171,169	)	—		—
Prior year income tax expense	(8,614	)	928		2,723
Other income tax expenses/(income)	(1,792	)	(13,272	)	9,536
Total income tax expense	34,408		168,209		158,809
Deferred tax	(149,443	)	(40,161	)	24,357
Current tax	183,851		208,370		134,452
Total income tax expense	34,408		168,209		158,809

The effect of the different tax rates is basically due to a change of country mix in profits

On December 22, 2017, a tax reform has been approved in the United States that will take effect on January 1, 2018.

The Group has carried out an exercise to identify changes in the tax reform affecting its subsidiaries in the USA and an assessment of the impact that these changes will have on the manner in which the deferred taxes will revert as of December 31, 2017. In the analysis performed, the main impact comes from the change in tax rates to be applied to deferred taxes as of December 31, 2017, which have gone from a rate of 35% to 21% for fiscal years beginning on or after January 1. of 2018. The impact registered in the “income tax expense” caption amounts to Euros 171 million in the year 2017. The remaining changes in the tax legislation that affect the subsidiaries in the USA have not had a material impact nor have they required relevant judgments and estimates that could lead to significant variations in the estimate made in the future. As a consequence, we consider the estimates made as definitive.

F-80

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Deferred tax assets and liabilities

Details of deferred tax assets and liabilities are as follows:

	Thousands of Euros
	Tax effect
	31/12/2017		31/12/2016		31/12/2015
Assets
Provisions	4,564		3,696		38,004
Inventories	35,619		39,297		37,141
Tax credits (deductions)	49,467		37,685		42,533
Tax loss carry forwards	6,179		10,717		30,668
Other	7,513		3,393		6,961
Subtotal, assets	103,342		94,788		155,307
Goodwill	(22,346	)	(19,136	)	(77,755	)
Fixed assets, amortisation and depreciation	(7,780	)	(7,062	)	(10,409	)
Intangible assets	(7,059	)	(1,371	)	(349	)
Subtotal, net liabilities	(37,185	)	(27,569	)	(88,513	)
Deferred assets, net	66,157		67,219		66,794
Liabilities
Goodwill	(105,963	)	(131,039	)	(35,877	)
Intangible assets	(201,921	)	(392,388	)	(404,617	)
Fixed assets	(95,029	)	(158,060	)	(119,858	)
Debt cancellation costs	(70,503	)	(64,762	)	(77,514	)
Inventories	5,063		(1,175	)	(32,351	)
Cash flow hedges	—		—		(982	)
Subtotal, liabilities	(468,353	)	(747,424	)	(671,199	)
Tax loss carry forwards	15,384		40,358		7,097
Provisions	47,404		61,252		22,085
Other	16,653		45,168		10,452
Subtotal, net assets	79,441		146,778		39,634
Net deferred Liabilities	(388,912	)	(600,646	)	(631,565	)

Movement in deferred tax assets and liabilities is as follows:

	Thousands of Euros
Deferred tax assets and liabilities	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	(533,427	)	(564,771	)	(456,341	)
Movements during the year	149,443		40,161		(24,357	)
Movements in equity during the year	—		—		(10,960	)
Business combination (note 3)	16,736		—		—
Translation differences	44,493		(8,817	)	(73,113	)
Balance at 31 December	(322,755	)	(533,427	)	(564,771	)

F-81

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Spanish companies have opted to apply accelerated depreciation to certain additions to property, plant and equipment, which has resulted in the corresponding deferred tax liability.

The remaining assets and liabilities recognized in 2017, 2016 and 2015 were recognized in the statement of profit and loss.

Estimated net deferred tax assets to be reversed in a period of less than 12 months amount to Euros 51,930 thousand at

31 December 2017 (Euros 99,897 thousand at 31 December 2016).

The majority of the tax deductions pending application from Spanish companies related mainly to research and development, mature in 18 years.

Tax credits derived from the US companies are available for 20 years from their date of origin whilst tax credits from Spanish companies registered in the Basque Country are available for 15 and other remaining Spanish companies have no maturity date.

The Group has not recognized as deferred tax assets the tax effect of the tax loss carryforwards of Group companies, which amount to Euros 51,169 thousand (Euros 67,044 thousand at 31 December 2016).

The commitments from Spanish companies from the reversal of deferred tax related to provisions of investments in subsidiaries are not significant.

(c)Years open to inspection

Under prevailing legislation, taxes cannot be considered to be definitively settled until the returns filed have been inspected by the taxation authorities, or the prescription period has elapsed.

The main tax audits currently open in the Group are as follows:

·Grifols Share Services North America, Inc: Income Tax Audit for the tax year ending, 2015 was initiated from July, 2017. During tax year 2017 these inspections had been closed without any significant adjustment.

·Grifols Shared Services North America, Inc. and subsidiaries: notification of an inspection of State Income tax in North Carolina and New York states (tax years 2012 to 2015).

·Grifols Diagnostic Solutions, Corp.: notification of an inspection of the “federal tax return” for the fiscal
year 2014. During tax year 2017 these inspections had been closed without any significant adjustment.

·Grifols, S.A., Instituto Grifols, S.A., Grifols Movaco, S.A. and Biomat, S.A.: Income Tax audit, Withholdings and VAT Audit for the tax years ended 2010, 2011 and 2012 that were initiated as of July 2014. During tax year 2016 these inspections had been closed without any significant adjustment.

Group management does not expect any significant liability to derive from these inspections.

(28)Operating Leases

(a)Operating leases (as lessee)

At 31 December 2017, 2016 and 2015 the Group leases buildings and warehouses from third parties under operating leases.

Operating lease instalments of Euros 80,136 thousand have been recognized as an expense for the year ended at

31 December 2017 (Euros 74,945 thousand at 31 December 2016 and Euros 70,496 thousand at 31 December 2015) and comprise minimum lease payments.

F-82

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Future minimum payments on non-cancellable operating leases at 31 December 2017, 2016 and 2015 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Maturity at:
Up to 1 year	46,541	56,869	77,951
Between 1 and 5 years	156,897	181,076	126,644
More than 5 years	58,905	112,986	101,319
Total future minimum payments	262,343	350,931	305,914

(b)Operating leases (as lessor)

At 31 December 2017, 2016 and 2015 the Group has no lease contracts as lessor.

(29)Other Commitments with Third Parties and Other Contingent Liabilities

(a)Guarantees

The Group has no significant guarantees extended to third parties.

(b)Guarantees committed with third parties

The Group has no significant guarantees extended to third parties, except for the ones included in note 20.

(c)Obligations with personnel

The Group’s annual contribution to defined contribution pension plans of Spanish Group companies for 2017 has amounted to Euros 725 thousand (Euros 674 thousand for 2016).

In successive years this contribution will be defined through labor negotiations.

In the event that control is taken of the Company, the Group has agreements with 73 employees/directors whereby they can unilaterally rescind their employment contracts with the Company and are entitled to termination benefits ranging from 2 to 5 years’ salary.

The Group has contracts with nine executives entitling them to termination benefits ranging from one to four years of their salary in different circumstances.

Restricted Share Unit Retention Plan

For the annual bonus, the Group established a Restricted Share Unit Retention Plan (RSU Plan), for eligible employees. Under this plan, employees can choose to receive up to 50% of their yearly bonus in non-voting Class B ordinary shares (Grifols Class B Shares) or Grifols American Depositary Shares (Grifols ADS), and the Group will match this with an additional 50% of the employee’s choice of RSUs.

Grifols Class B Shares and Grifols ADS are valued at grant date.

These RSUs will have a vesting period of 2 years and 1 day and, subsequently, the RSU’s will be exchanged for Grifols Class B Shares or Grifols ADS (American Depositary Share representing 1 Class B Share).

If an eligible employee leaves the Company or is terminated before the vesting period, he will not be entitled to the additional RSUs.

F-83

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

At 31 December 2017, the Group has settled the RSU plan of 2014 for an amount of Euros 7,303 thousand.

This commitment is treated as equity-settled and the amount totals Euros 13,871 thousand at 31 December 2017 (Euros 10,594 thousand at 31 December 2016).

Savings plan and profit-sharing plan

The Group has a defined contribution plan (savings plan), which qualifies as a deferred salary arrangement under Section

401 (k) of the Internal Revenue Code (IRC). Once eligible, employees may elect to contribute a portion of their salaries to the savings plan, subject to certain limitations. The Group matches 100% of the first 3% of employee contributions and 50% of the next 2%. Group and employee contributions are fully vested when contributed. The total cost of matching contributions to the savings plan was US Dollars 18.9 million for 2017 (US Dollars 17 million for 2016).

Other plans

The Group has a defined benefit pension plan for certain Talecris Biotherapeutics, GmbH employees in Germany as required by statutory law. The pension cost relating to this plan was not material for the periods presented.

(d)Purchase commitments

Details of the Group’s commitments at 31 December 2017 are as follows:

	Thousands of Euros
2018	83,782
2019	62,510
2020	56,183
2021	39,765
2022	9,249
2023	780
2024	780

(e)Judicial procedures and arbitration

Details of legal proceedings in which the Company or Group companies are involved are as follows:

·The Group carried out an internal investigation, already started prior to the acquisition of Talecris, in relation to possible breaches of the Foreign Corrupt Practices Act (FCPA) of which Talecris was aware in the context of a review unrelated to this matter. This FCPA investigation was carried out by an external legal advisor. In principle, the investigation was focused on sales to certain Central and Eastern European countries, specifically Belarus and Russia, although trading practices in Brazil, China, Georgia, Iran and Turkey are also being investigated, in addition to other countries considered necessary.

In July 2009, the Talecris Group voluntarily contacted the U.S. Department of Justice (DOJ) to inform them of an internal investigation that the Group was carrying out regarding possible breaches of the FCPA in certain sales to certain central and East European countries and to offer the Group’s collaboration in any investigation that the DOJ wanted to carry out. As a result of this investigation the Group suspended shipments to some of these countries. In certain cases, the Group had safeguards in place which led to terminating collaboration with consultants and suspending or terminating relations with distributors in those countries under investigation as circumstances warranted.

As a consequence of the investigation, the agreement with Talecris’ Turkish distributor was terminated and a settlement agreement was reached between the parties. In November 2012, the Group was notified by the DOJ

F-84

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

that the proceedings would be closed, without prejudice to the fact that they could be re-opened in the future should new information arise. The Group continues with the in-depth review of potential irregular practices.

Furthermore, an investigation was opened in Italy, in relation with the criminal prosecution in Naples against 5 employees of the Company, including the former General Manager.

From these 5 employees of the Company initially charged, the Naples Tribunal resolved discharging 3 of them, continuing the judicial process only against the remaining 2 employees. Additionally, the Company has finalized the internal investigation opened in Italy as a consequence of the indicated judicial proceedings, and in November 2015 a meeting took place with the DOJ to report on the conclusions derived from the investigation.

Additionally to the above and as part of the in-depth review of potential irregular practices that the Group is carrying out in relation to its recent acquisitions, the Company opened internal investigations in Mexico as well as in the Czech Republic to review the commercial practices in such countries. Both investigations have finalized, without having detected any significant practice that could imply a breach of the FCPA.

On September 2016, the United States Department of Justice (the “Department”) notified the Group that the Department has closed its inquiry into Grifols, concerning possible violations of the U.S. Foreign Corrupt Practices Act. In its notice of declination to prosecute, the Department acknowledged the full cooperation of Grifols in the investigation.

·As a result of the acquisition of the transfusional Diagnostic unit, the Group considers that there could have existed inadequate commercial and contractual practices which could originate in potential contingencies.

·bioMerieux, S.A., et ano. v. Hologic, Inc. et al., Case No. 1:17-cv-102 (M.D.N.C); Case No. 18-21-LPS-CJB (D. Del.): on February 3, 2017, bioMérieux, S.A and bioMérieux, Inc. filed suit against Hologic, Inc. (“Hologic”), Grifols, S.A. (“GSA”), and Grifols Diagnostic Solutions Inc. (“GDS”) in the U.S. District Court for the Middle District of North Carolina, alleging infringement of U.S. Patent Nos. 8,697,352 and 9,074,262 by virtue of defendants’ activities with respect to the Procleix HIV-1/HCV Assay®, Procleix Ultrio Assay®, and Procleix Ultrio Plus® products. Hologic and GDS filed a motion to dismiss for failure to state a claim on April 3, 2017. As a result of a claim of improper venue, the case was transferred to the U.S. District Court for the District of Delaware in early 2018. Hologic and GDS are pursuing defenses of failure to state a claim, non-infringement, invalidity, and that the infringement claims are contractually barred. Additionally, GSA intends to pursue dismissal for lack of personal jurisdiction.

·Enzo Life Sciences, Inc. v. Hologic, Inc. et al., Case No. 1:16-cv-00894-LPS (D. Del.): on October 4, 2016, Enzo Life Sciences, Inc. (“Enzo”) filed suit against Hologic in the U.S. District Court for the District of Delaware, alleging infringement of U.S. Patent No. 6,221,581 by virtue of Hologic’s activities with respect to Progensa®, Procleix®, and Aptima®products. On November 9, 2017, the Court granted Enzo’s motion to amend its complaint to add GSA and GDS as defendants with respect to the Procleix® products at issue. Hologic and GDS have answered the complaint, alleging non-infringement and invalidity among their defenses. GSA has moved to dismiss for lack of personal jurisdiction. The case schedule has been extended in light of the addition of Grifols-related entities as co-defendants, with Hologic and GDS currently engaged in fact discovery. Trial is scheduled for September 2019.

F-85

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(30)Financial Instruments

Classification

Disclosure of financial instruments by nature, category and fair value is as follows:

	Thousand of Euros
	31/12/2016
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	15,201	—	29,998	—		45,199		29,998		15,201		—	45,199
Financial derivatives	—	13,665	—	—		13,665		—		—		13,665	13,665
Financial assets measured at fair value	15,201	13,665	29,998	—		58,864
Non-current financial assets	30,681	—	—	—		30,681
Other current financial assets	2,582	—	—	—		2,582
Trade and other receivables	434,136	—	—	—		434,136
Cash and cash equivalents	895,009	—	—	—		895,009
Financial assets not measured at fair value	1,362,408	—	—	—		1,362,408
Senior Unsecured Notes	—	—	—	(843,868	)	(843,868	)	(904,377	)	—		—	(904,377	)
Promissory Notes	—	—	—	(83,073	)	(83,073	)
Senior secured debt	—	—	—	(3,809,968	)	(3,809,968	)	—		(3,811,970	)	—	(3,811,970	)
Other bank loans	—	—	—	(138,186	)	(138,186	)
Finance lease payables	—	—	—	(9,945	)	(9,945	)
Other financial liabilities	—	—	—	(57,096	)	(57,096	)
Trade and other payables	—	—	—	(461,073	)	(461,073	)
Other current liabilities	—	—	—	(7,431	)	(7,431	)
Financial liabilities not measured at fair value	—	—	—	(5,410,640	)	(5,410,640	)
	1,377,609	13,665	29,998	(5,410,640	)	(3,989,368	)

The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.

F-86

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Thousand of Euros
	31/12/2017
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	—	—	38,708	—		38,708		38,708		—		—	38,708
Financial derivatives	—	8,338	—	—		8,338		—		—		8,338	8,338
Financial assets measured at fair value	—	8,338	38,708	—		47,046
Non-current financial assets	22,843	—	—	—		22,843
Other current financial assets	10,738	—	—	—		10,738
Trade and other receivables	304,864	—	—	—		304,864
Cash and cash equivalents	886,521	—	—	—		886,521
Financial assets not measured at fair value	1,224,966	—	—	—		1,224,966
Senior Unsecured Notes	—	—	—	(858,911	)	(858,911	)	(1,018,130	)	—		—	(1,018,130	)
Promissory Notes	—	—	—	(90,294	)	(90,294	)
Senior secured debt	—	—	—	(4,853,939	)	(4,853,939	)	—		(5,063,769	)	—	(5,063,769	)
Other bank loans	—	—	—	(198,741	)	(198,741	)
Finance lease payables	—	—	—	(9,360	)	(9,360	)
Other financial liabilities	—	—	—	(45,640	)	(45,640	)
Trade and other payables	—	—	—	(423,096	)	(423,096	)
Other current liabilities	—	—	—	(14,879	)	(14,879	)
Financial liabilities not measured at fair value	—	—	—	(6,494,860	)	(6,494,860	)
	1,224,966	8,338	38,708	(6,494,860	)	(5,222,848	)

The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.

F-87

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Financial derivatives

At 31 December 2017 and 2016 the Group has recognized the following derivatives:

		Notional	Notional	Thousands of Euros
		amount at	amount at	Value at	Value at
Financial derivatives	Currency	31/12/2017	31/12/2016	31/12/17	31/12/16	Maturity
Call Option	US Dollar	N/A	N/A	8,338	9,487	30/04/2019
Embedded derivative	US Dollar	N/A	N/A	—	4,178	31/05/2021
Total				8,338	13,665
Total Assets (notes 10 and 11)				8,338	13,665

At 31 December 2017, the Group has totally impaired the amount of the embedded derivative related to the convertible bonds issued by Aradigm due to the no recommendation of approval of LinhaliqTM by the Food and Drug Administration (FDA) (see note 11).

On May 11, 2016 the Group has paid an aggregate amount equal to US Dollars 10 million (Euros 8,960 thousand) in respect of the call right for the Interstate Blood Bank, Inc. shares, Bio-Blood Components, Inc. shares and Plasma Biological Services, LLC. units that are not owned by the Group. The call right can be exercised by the Group by delivering written notice of its intention at any time on or after February 1, 2019 and on or before April 30, 2019 (see note 11).

Financial derivatives are measured based on observable market data (level 3 of fair value hierarchy). Regarding the valuation of derivative instruments, the selection of the appropriate data within the alternatives requires the use of judgement in qualitative factors such as, which methodology and valuation models are used, and in quantitative factors, data required to be included within the chosen models.

Derivative financial instruments that do not meet the hedge accounting requirements are classified and measured as financial assets or financial liabilities at fair value through profit and loss.

Credit risk

(a)Exposure to credit risk

The carrying amount of financial assets represents the maximum exposure to credit risk. At 31 December 2017 and 2016 the maximum level of exposure to credit risk is as follows:

		Thousands of Euros
Carrying amount	Note	31/12/2017	31/12/2016
Non-current financial assets	11	69,889	89,545
Other current financial assets	11	10,738	2,582
Trade receivables	13	286,198	413,656
Other receivables	13	18,666	20,480
Cash and cash equivalents	14	886,521	895,009
		1,272,012	1,421,272

F-88

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The maximum level of exposure to risk associated with receivables at 31 December 2017 and 2016, by geographical area, is as follows.

	Thousands of Euros
Carrying amount	31/12/2017	31/12/2016
Spain	63,505	56,104
EU countries	53,403	52,034
United States of America	65,068	196,885
Other European countries	5,761	13,428
Other regions	117,127	115,685
	304,864	434,136

Details of balances receivable by country such as Greece, Italy, Spain and Portugal at 31 December 2016 are as follows:

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		425	—	(137	)	288
Italy	7,188	2,077	—		12,196	7,375	(3,098	)	16,286
Spain	23,281	3,287	—		27,316	9,595	(249	)	50,348
Portugal	2,734	1,205	(356	)	129	78	(27	)	2,480
	33,203	6,569	(356	)	40,066	17,048	(3,511	)	69,402

Details of balances receivable by country such as Greece, Italy, Spain and Portugal at 31 December 2017 are as follows:

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		745	—	—		745
Italy	4,020	2,348	—		10,614	6,342	(4,016	)	10,618
Spain	33,702	7,785	—		23,444	8,926	(136	)	57,010
Portugal	1,078	490	(296	)	1,972	1,085	(126	)	2,628
	38,800	10,623	(296	)	36,775	16,353	(4,278	)	71,001

Provision has been made for balances receivable from Portuguese public entities on the basis of the best estimate of their expected collection in view of the current situation regarding negotiations. The Group does not currently have any reason to consider that the receivables from public entities in Spain will not be recoverable.

F-89

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Impairment losses

Details of the maturity of trade receivables, net of impairment provisions are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Not matured	249,652	360,018
Less than 1 month	24,302	24,650
1 to 4 months	18,717	29,318
4 months to 1 year	8,092	10,045
More than one year	4,101	10,105
	304,864	434,136

Unimpaired receivables that are past due mainly relate to public entities.

Movement in the bad debt provision was as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Opening balance	17,987		13,210		14,092
Net charges for the year	8,003		6,411		1,800
Net cancellations for the year	(4,732	)	(2,217	)	(2,984	)
Translation differences	(1,552	)	583		302
Closing balance	19,706		17,987		13,210

An analysis of the concentration of credit risk is provided in note 5 (a).

Liquidity risk

The management of the liquidity risk is explained in note 5.

Details of the contractual maturity dates of financial liabilities including committed interest calculated using interest rate forward curves are as follows:

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/16	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	3,948,154	4,669,325	134,918	119,476	192,059	4,183,259	39,613
Other financial liabilities	20	57,096	57,096	23,082	3,039	11,468	16,686	2,821
Bonds and other marketable securities	20	926,941	1,305,680	107,975	24,903	49,806	1,122,996	—
Finance lease payables	20	9,945	10,725	2,195	2,072	3,630	2,828	—
Payable to suppliers	21	461,073	461,073	461,029	44	—	—	—
Other current liabilities	22	7,431	7,431	7,118	313	—	—	—
Total		5,410,640	6,511,330	736,317	149,847	256,963	5,325,769	42,434

F-90

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/17	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	5,052,680	6,138,673	105,584	106,492	322,421	3,115,887	2,488,289
Other financial liabilities	20	45,640	45,642	19,393	2,610	10,758	10,497	2,384
Bonds and other marketable securities	20	949,205	1,331,203	107,203	16,000	32,000	128,000	1,048,000
Finance lease payables	20	9,360	10,136	2,192	2,113	2,602	2,790	439
Payable to suppliers	21	423,096	423,096	423,020	76	—	—	—
Other current liabilities	22	14,878	14,878	14,462	416	—	—	—
Total		6,494,859	7,963,628	671,854	127,707	367,781	3,257,174	3,539,112

Currency risk

The Group’s exposure to currency risk is as follows:

	Thousands of Euros
	31/12/2016
	Euros (*)		Dollars (**)
Trade receivables	5,576		7,520
Receivables from Group companies	33,792		37,740
Loans to Group companies	597,897		1,854
Cash and cash equivalents	32,255		21,254
Trade payables	(11,188	)	(5,062	)
Payables to Group companies	(42,395	)	(32,159	)
Loans from Group companies	(268,040	)	(4,295	)
Bank loans	(489,000	)	—
Balance sheet exposure	(141,103	)	26,852

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

	Thousands of Euros
	31/12/2017
	Euros (*)		Dollars (**)
Trade receivables	3,596		22,936
Receivables from Group companies	103,338		7,619
Loans to Group companies	34,140		91,566
Cash and cash equivalents	63,981		2,172
Trade payables	(14,213	)	(3,582	)
Payables to Group companies	(42,296	)	(11,241	)
Loans from Group companies	(22,913	)	(3,953	)
Bank loans	(85,000	)	—
Balance sheet exposure	40,633		105,517

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

The most significant exchange rates applied at 2017 and 2016 year ends are as follows:

F-91

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	Closing exchange rate
Euros	31/12/2017	31/12/2016
US Dollars	1.1993	1.0541

A sensitivity analysis for foreign exchange fluctuations is as follows:

Had the US Dollar strengthened by 10% against the Euro at 31 December 2017, equity would have increased by Euros 416,116 thousand (Euros 318,528 thousand at 31 December 2016) and profit due to foreign exchange differences would have increased by Euros 14,615 thousand (would have decreased by Euros 11,425 thousand at 31 December 2016). This analysis assumes that all other variables are held constant, especially that interest rates remain constant.

A 10% weakening of the US Dollar against the Euro at 31 December 2017 and 2016 would have had the opposite effect for the amounts shown above, all other variables being held constant.

Interest rate risk

(a)Interest-rate profile

To date, the profile of interest on interest-bearing financial instruments is as follows:

	Thousands of Euros
	31/12/2017		31/12/2016
Fixed-interest financial instruments
Financial liabilities	(1,170,000	)	(1,048,676	)
	(1,170,000	)	(1,048,676	)
Variable-interest financial instruments	(5,049,382	)	(3,964,320	)
Financial liabilities	(5,049,382	)	(3,964,320	)
	(6,219,382	)	(5,012,996	)

(b)Sensitivity analysis

If the interest rate had been 100 basis points higher during 2017, the interest expense would have increased by Euros 53 million. As the Group does not have any derivatives in place, the net effect on cash interest payments would have increased by the same amount.

If the interest rate had been 100 basis points higher during 2016, the interest expense would have increased by Euros 40.7 million, the finance cost due to changes in the value of derivatives would have been Euros 2.6 million lower. The impact on equity is not significant because of derivatives close to maturity on 31 March 2016 for Euro swaps and 30 June 2016 for US dollar swaps. Therefore, the net effect on cash interest payments should have been Euros 38.1 million.

F-92

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(31)Balances and Transactions with Related Parties

Details of balances with related parties are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016
Receivables from associates (note 13)	3,219		133
Trade payables associates	(4,583	)	(4,221	)
Loans to associates (note 11)	26,654		15,994
Debts with associates	—		—
Debts with key management personnel	(6,164	)	(6,662	)
Payables to members of the board of directors	(463	)	—
Payables to other related parties	(9,187	)	(8,473	)
	9,476		(3,229	)

Payables are included in suppliers and trade payables (see note 21).

(a)Group transactions with related parties

Group transactions with related parties during 2015 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	317		—		—		—
Other service expenses	(361	)	—		(6,938	)	(845	)
Operating lease expense	—		—		(4,900	)	—
Remuneration	—		(9,447	)	—		(3,443	)
R&D agreements	(18,400	)	—		—		—
Purchase of Fixed Assets	—		—		(276,457	)	—
Sale of Fixed Assets	—		—		12,000		—
Finance Income	1,916		—		—		—
	(16,528	)	(9,447	)	(276,295	)	(4,288	)

Group transactions with related parties during 2016 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	193		—		—		—
Purchases	(35,569	)	—		—		—
Other service expenses	(7,591	)	—		(5,325	)	(905	)
Operating lease expense	—		—		(5,281	)	—
Remuneration	—		(10,287	)	—		(3,668	)
R&D agreements	(10,188	)	—		—		—
Finance Income	1,946		—		—		—
	(51,209	)	(10,287	)	(10,606	)	(4,573	)

F-93

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Group transactions with related parties during 2017 are as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	3,009		—		—		—
Purchases	(68,335	)	—		—		—
Other service expenses	(11,798	)	—		(7,100	)	(939	)
Operating lease expense	—		—		(5,426	)	—
Remuneration	—		(13,672	)	—		(5,755	)
R&D agreements	(164	)	—		—		—
Finance Income	152		—		—		—
	(77,136	)	(13,672	)	(12,526	)	(6,694	)

Every year the Group contributes 0.7% of its profits before tax to a non-profit organization.

“Other service expenses” include contributions to non-profit organizations totaling Euros 7,100 thousand in 2017 (Euros 5,325 thousand in 2016 and Euros 5,224 thousand in 2015).

During 2011 one of the Company’s directors signed a three-year consulting services contract. The director will receive annual fees of US Dollars 1 million for these services and an additional bonus of US Dollars 2 million for complying with certain conditions. During 2014, this contract was renewed for an additional year for an amount of US Dollars 1 million. In 2015, this contract was extended for two years for an amount of US Dollars 1 million for each year.

Directors representing shareholders’ interests have received remuneration of Euros 1,881 thousand in 2017 (During 2016 the Group did not name any director representing shareholders’ interests and during 2015 the named directors representing shareholders’ interests received Euros 50 thousand).

The Group has not extended any advances or loans to the members of the board of directors or key management personnel nor has it assumed any guarantee commitments on their behalf. It has also not assumed any pension or life insurance obligations on behalf of former or current members of the board of directors or key management personnel. In addition, certain Company directors and key management personnel have termination benefit commitments (see note 29 (c)).

(b)Conflicts of interest concerning the directors

The Company’s directors and their related parties have not entered into any conflict of interest that should have been reported in accordance with article 229 of the revised Spanish Companies Act.

(32)     Events after the Reporting Period

·      Goetech, LLC. (“MedKeeper”) acquisition

On 26 January 2018 Grifols has acquired, through its subsidiary Grifols Shared Services North America, Inc., the U.S. company Goetech, LLC. based in Denver, Colorado, doing business as MedKeeper. This transaction for a total of US dollar 98 million included a 51% stake in the company and a call option for Grifols and put option for Medkeeper for the remaining 49% in the third anniversary of the deal. Grifols holds a majority position on the board of directors.

Medkeeper’s core business is the development and distribution of web and mobile-based platforms for hospital pharmacies that improve quality standards, productivity in the process, control systems and monitoring different preparations while increasing patient safety.

This investment will enhance the activity of the Grifols Hospital Division and it is part of the strategy to underpin this division into the U.S. market.

F-94

GRIFOLS, S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

·      Haema AG acquisition

On 20 March 2018 Grifols has entered into agreement with Aton GmbH for the purchase of 100% of the shares of German based pharmaceutical company Haema AG (“Haema), in exchange of a purchase price of Euros 220 million on a debt free basis. The closing of the transaction is subject to the fulfilment of certain conditions, among others, the authorization of the purchase by applicable antitrust authorities.

With this acquisition, and subject to the conditions being fulfilled, Grifols will acquire the businesses currently held by Haema, collection of plasma for fractionation, which includes 35 collection centers spread throughout the territory of Germany, and three more under construction. It’s headquarters are located in Leipzig with approximately 24,000m2 (which include administration, production, storage and power station buildings) and also had a central laboratory in Berlin.

Haema employs about 1,100 people and collected almost 800,000 litres of plasma in the preceding financial year, coming from approximately 1 million donations.

F-95

APPENDIX I

GRIFOLS, S.A. AND SUBSIDIARIES

Information on Group Companies, Associates and others for the years ended 31 December 2017, 2016 and 2015

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Diagnostic Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Development and manufacture of diagnostic equipment, instruments and reagents.	—		100.000	%	—		100.000	%	99.998	%	0.002	%
Instituto Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Plasma fractioning and the manufacture of haemoderivative pharmaceutical products.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Worldwide Operations Spain, S.A (formerly Logister, S.A.)	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Services	Manufacture, sale and purchase, commercialisation and distribution of all types of computer products and materials.	—		100.000	%	—		100.000	%	—		100.000	%
Laboratorios Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1989	Industrial	Production of glass- and plastic-packaged parenteral solutions, parenteral and enteral nutrition products and blood extraction equipment and bags.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Biomat, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1991	Industrial	Analysis and certification of the quality of plasma used by Instituto Grifols, S.A. It also provides transfusion centres with plasma virus inactivation services (I.P.T.H).	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Grifols Engineering, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	2000	Industrial	Design and development of the Group’s manufacturing installations and part of the equipment and machinery used at these premises. The company also renders engineering services to external companies.	99.950	%	0.050	%	99.950	%	0.050	%	99.950	%	0.050	%
Biomat USA, Inc.	2410 Lillyvale Avenue Los Angeles (California) United States	2002	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Biologicals LLC.	5555 Valley Boulevard Los Angeles (California) United States	2003	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Australia Pty Ltd.	Unit 5/80 Fairbank Clayton South Victoria 3149 Australia	2009	Industrial	Distribution of pharmaceutical products and the development and manufacture of reagents for diagnostics.	100.000	%	—		100.000	%	—		100.000	%	—
Medion Grifols Diagnostic AG	Bonnstrasse,9 3186 Dügingen Switzerland	2009	Industrial	Development and manufacturing activities in the area of biotechnology and diagnostics.	—		100.000	%	—		100.000	%	80.000	%	—
Grifols Therapeutics LLC.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Talecris Plasma Resources, Inc.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
GRI-CEI, S/A Produtos para transfusao (merged with Grifols Brasil, Lda. in 2016)	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	2012	Industrial	Production of bags for the extraction, separation, conservation and transfusion of blood components.	—		—		—		—		60.000	%	—
Grifols Worldwide Operations Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2012	Industrial	Packaging, labelling, storage, distribution, manufacture and development of pharmaceutical products and rendering of financial services to Group companies.	100.000	%	—		100.000	%	—		100.000	%	—
Progenika Biopharma, S.A.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		90.230	%	—		89.250	%	56.150	%	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-96

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Progenika Latina, S.A. de CV	Periferico Sur Nº 4118 Int 8 Col. Jardines del Pedregal CP 01900 Alvaro Obregon DF Mexico	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		—		—		89.250	%	—		56.150	%
Progenika Inc. (Merged with Grifols Diagnostic Solutions Inc. in 2017)	Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808 United States	2013	Industrial	Development, production and commercialisation of genetic tools, diagnostic equipment and therapeutic systems and products for personalised medicine and the highest quality healthcare in general.	—		—		—		89.250	%	—		56.150	%
Brainco Biopharma, S.L. (merged with Progenika Biopharma, S.A in 2016)	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development of products for the treatment and diagnosis of psychiatric illnesses	—		—		—		—		—		28.423	%
Abyntek Biopharma, S.L.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Research, development and transfer of biotechnological products and processes, as well as the commercialiation of products and services related to the biosciences.	—		—		—		80.370	%	—		45.129	%
Asociación I+D Progenika	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Coordination, representation, management and promotion of the common interests of associated companies, in addition to contributing to the development, growth and internationalisation of its associates and of the biosciences sector in the Basque Country.	—		90.230	%	—		89.250	%	—		55.336	%
Grifols Diagnostics Solutions Inc (formerly G-C Diagnostics Corp.)	4560 Horton Street 94608 Emeryville, California United States	2013	Industrial	Manufacture and sale of blood testing products	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Worldwide Operations USA Inc.	13111 Temple Avenue, City of Industry, California 91746-1510 Estados Unidos	2014	Industrial	The manufacture, warehousing, and logistical support for biological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Asia Pacific Pte, Ltd	501 Orchard Road nº20-01 238880 Wheelock Place, Singapore	2003	Commercial	Distribution and sale of medical and pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Movaco, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Commercial	Distribution and sale of reagents, chemical products and other pharmaceutical specialities, and of medical and surgical materials, equipment and instruments for use by laboratories and health centres.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda.	Rua de Sao Sebastiao,2 Zona Industrial Cabra Figa 2635-448 Rio de Mouro Portugal	1988	Commercial	Import, export and commercialisation of pharmaceutical and hospital equipment and products, particularly Grifols products.	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%
Grifols Chile, S.A.	Avda. Americo Vespucio, 2242 Comuna de Conchali Santiago de Chile Chile	1990	Commercial	Development of pharmaceutical businesses, which can involve the import, production, commercialisation and export of related products.	99.000	%	—		99.000	%	—		99.000	%	—
Grifols USA, LLC.	2410 Lillyvale Avenue Los Angeles (California) Estados Unidos	1990	Commercial	Distribution and marketing of company products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Argentina, S.A.	Bartolomé Mitre 3690/3790, CPB1605BUT Munro Partido de Vicente Lopez Argentina	1991	Commercial	Clinical and biological research. Preparation of reagents and therapeutic and diet products. Manufacture and commercialisation of other pharmaceutical specialities.	95.010	%	4.990	%	95.010	%	4.990	%	95.010	%	4.990	%
Grifols s.r.o.	Calle Zitna,2 Prague Czech Republic	1992	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products, including human plasma.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (Thailand) Ltd	191 Silom Complex Building, 21st Follor, Silom Road, Silom, Bangrak 10500 Bangkok Thailand	2003	Commercial	Import, export and distribution of pharmaceutical products.	—		48.000	%	—		48.000	%	—		48.000	%
Grifols Malaysia Sdn Bhd	Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia	2003	Commercial	Distribution and sale of pharmaceutical products.	—		30.000	%	—		30.000	%	—		30.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-97

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols International, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1997	Commercial	Coordination of the marketing, sales and logistics for all the Group’s subsidiaries operating in other countries.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Italia S.p.A	Via Carducci, 62d 56010 Ghezzano Pisa, Italy	1997	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols UK Ltd.	Gregory Rowcliffe & Milners, 1 Bedford Row, London WC1R 4BZ United Kingdom	1997	Commercial	Distribution and sale of therapeutic and other pharmaceutical products, especially haemoderivatives.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Brasil, Lda.	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	1998	Commercial	Import and export, preparation, distribution and sale of pharmaceutical and chemical products for laboratory and hospital use, and medical-surgical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols France, S.A.R.L.	Arteparc, Rue de la Belle du Canet, Bât. D, Route de la Côte d’Azur, 13590 Meyreuil France	1999	Commercial	Commercialisation of chemical and healthcare products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Polska Sp.z.o.o.	Grzybowska 87 street00-844 Warsaw, Poland	2003	Commercial	Distribution and sale of pharmaceutical, cosmetic and other products.	100.000	%	—		100.000	%	—		100.000	%	—
Logística Grifols, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	2008	Commercial	Manufacture and commercialisation of pharmaceutical products for human and veterinary use.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols México, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	1993	Commercial	Production, manufacture, adaptation, conditioning, sale and purchase, commissioning, representation and consignment of all kinds of pharmaceutical products and the acquisition of machinery, equipment, raw materials, tools, movable goods and property for the aforementioned purposes.	99.980	%	0.020	%	99.980	%	0.020	%	99.980	%	0.020	%
Medion Diagnostics GmbH	Lochamer Schlag, 12D 82166 Gräfelfing Germany	2009	Commercial	Distribution and sale of biotechnological and diagnostic products.	—		100.000	%	—		100.000	%	—		80.000	%
Grifols Nordic, AB	Sveavägen 166 11346 Stockholm Sweden	2010	Commercial	Research and development, production and marketing of pharmaceutical products, medical devices and any other asset deriving from the aforementioned activities.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Colombia, Ltda	Carrera 7 No. 71 52 Torre B piso 9 Bogotá. D.C. Colombia	2010	Commercial	Sale, commercialisation and distribution of medicines, pharmaceutical (including but not limited to haemoderivatives) and hospital products, medical devices, biomedical equipment, laboratory instruments and reagents for diagnosis and/or healthcare software.	99.000	%	1.000	%	99.000	%	1.000	%	99.000	%	1.000	%
Grifols Deutschland GmbH	Lyoner Strasse 15, D- 60528 Frankfurt am Main Germany	2011	Commercial	Procurement of the official permits and necessary approval for the production, commercialisation and distribution of products deriving from blood plasma, as well as the import, export, distribution and sale of reagents and chemical and pharmaceutical products, especially for laboratories and health centres and surgical and medical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Canada, Ltd.	5060 Spectrum Way, Suite 405 (Principal Address) Mississauga, Ontario L4W 5N5 Canada	2011	Commercial	Distribution and sale of biotechnological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Pharmaceutical Technology (Shanghai) Co., Ltd. (formerly Grifols Pharmaceutical Consulting (Shanghai) Co., Ltd.)	Unit 901-902, Tower 2, No. 1539, West Nanjing Rd., Jing’an District, Shanghai 200040 China	2013	Commercial	Pharmaceutical consultancy services (except for diagnosis), technical and logistical consultancy services, business management and marketing consultancy services.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Switzerland AG	Steinengraben, 5 40003 Basel Switzerland	2013	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (H.K.), Limited	Units 1505-7 Bershire House, 25 Westlands Road Hong Kong	2014	Commercial	Distribution and sale of diagnostic products.	—		100.000	%	—		100.000	%	—		100.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-98

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols Japan K.K.	Hilton Plaza West Office Tower, 19th floor. 2-2, Umeda 2-chome, Kita-ku Osaka-shi Japan	2014	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols India Healthcare Private Ltd	Regus Business Centre Pvt.Ltd.,Level15,Dev Corpora, Plot No.463,Nr. Khajana East.Exp.Highway,Thane (W), Mumbai - 400604, Maharashtra India	2014	Commercial	Distribution and sale of pharmaceutical products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Diagnostics Equipment Taiwan Limited	8F., No.367, Fuxing N. RD., Songshang Dist., Taipei City 10543, Taiwan	2016	Commercial	Distribution and sale of diagnostic products.	100.000	%	—		100.000	%	—		—		—
Grifols Viajes, S.A.	Can Guasch, 2 08150 Parets del Vallès Barcelona, Spain	1995	Services	Travel agency exclusively serving Group companies.	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Squadron Reinsurance Designated Activity Company (formerly Squadron Reinsurance Ltd.)	The Metropolitan Building, 3rd Fl. James Joyce Street, Dublin Ireland	2003	Services	Reinsurance of Group companies’ insurance policies.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Shared Services North America, Inc. (formerly Grifols Inc.)	2410 Lillivale Avenue 90032 Los Angeles, California United States	2011	Services	Support services for the collection, manufacture, sale and distribution of plasma derivatives and related products.	100.000	%	—		100.000	%	—		100.000	%	—
Gripdan Invest, S.L	Avenida Diagonal 477 Barcelona, Spain	2015	Services	Manufacturing buildings for rent	100.000	%	—		100.000	%	—		100.000	%	—
Gri-Cel, S.A.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2009	Research	Research and development in the field of regenerative medicine, awarding of research grants, subscription to collaboration agreements with entities and participation in projects in the area of regenerative medicine.	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%
Araclon Biotech, S.L.	Paseo de Sagasta, 17 2º izqda. Zaragoza, Spain	2012	Research	Creation and commercialisation of a blood diagnosis kit for the detection of Alzheimer’s and development of effective immunotherapy (vaccine) against this disease.	—		73.220	%	—		73.220	%	—		70.830	%
VCN Bioscience, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2012	Research	Research and development of therapeutic approaches for tumours for which there is currently no effective treatment.	—		81.340	%	—		81.340	%	—		68.010	%
Grifols Innovation and New Technologies Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2016	Research	Research and experimental development on biotechnology	—		100.000	%	—		100.000	%	—		—
PBS Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, New Castle County United States	2016	Services	Engage in any lawful act or activity for which corporations may be organized under the DGCL (Delaware Code)	—		100.000	%	—		100.000	%	—		—
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	90.000	%	—		—		—		—		—
Chiquito Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, County of New Castle, United States	2017	Corporate	Engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”).	—		100.000	%	—		—		—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-99

APPENDIX I

GRIFOLS, S.A. AND SUBSIDIARIES

Information on Group Companies, Associates and others for the years ended 31 December 2017, 2016 and 2015

		Acquisition /			31/12/2017			31/12/2016				31/12/2015
		Incorporation			% shares			% shares				% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct	Indirect		Direct		Indirect		Direct		Indirect
Equity Method consolidated companies and others
Nanotherapix, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2010	Research	Development, validation and production of the technology required to implement the use of genetic and cellular therapy for the treatment of human and animal pathologies.	—	—		—		—		—		51.000	%
Aradigm Corporation	3929 Point Eden Way Hayward, California United States	2013	Research	Development and commercialisation of drugs delivered by inhalation for the prevention and treatment of severe respiratory diseases.	—	35.130	%	—		35.130	%	35.000	%	—
TiGenix N.V.	Romeinse straat 12 bus 2, 3001 Leuven, Belgium	2013	Research	Research and development of therapies based on stem cells taken from adipose tissue.	—	14.180	%	—		16.130	%	—		19.280	%
Mecwins, S.L.	Avenida Fernandos Casas Novoa, 37 Santiago de Compostela Spain	2013	Research	Research and production of nanotechnological, biotechnological and chemical solutions.	—	8.420	%	—		8.420	%	—		8.420	%
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	—	—		50.000	%	—		50.000	%	—
Alkahest, Inc.	3500 South DuPont Hwy, Dover, County of Kent United States	2015	Research	Development novel plasma-based products for the treatment of cognitive decline in aging and disorders of the central nervous system (CNS).	—	47.580	%	—		47.580	%	—		47.580	%
Albajuna Therapeutics, S.L	Hospital Germans Trias i Pujol, carretera de Canyet, s/n, Badalona Spain	2016	Research	Development and manufacture of therapeutic antibodies against HIV.	—	30.000	%	—		30.000	%	—		—
Interstate Blood Bank, Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	49.190	%	—		49.190	%	—		—
Bio Blood Components Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.972	%	—		48.972	%	—		—
Plasma Biological Services, LLC	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.900	%	—		48.900	%	—		—
Singulex, Inc.	4041 Forest Park Avenue St. Louis, Missouri United States	2016	Research	Development of the Single Molecule Counting (SMC™) technology for clinical diagnostic and scientific discovery.	—	19.330	%	—		20.000	%	—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-100

		Acquisition /			31/12/2017				31/12/2016		31/12/2015
		Incorporation			% shares				% shares		% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct	Indirect	Direct	Indirect
Equity Method consolidated companies and others
Aigües Minerals de Vilajuiga, S.A.	Carrer Sant Sebastià, 2, 17493 Vilajuïga, Girona	2017	Industrial	Collection and use of mineral-medicinal waters and achievement of all necessary administrative concessions in order to facilitate their industrial extraction and find the best way to take advantage of them.	50.000	%	—		—	—	—	—
Access Biologicals, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Biologicals IC-DISC, Inc.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Cell Culture, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Manufacturing, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Plasma, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
GigaGen Inc.	407 Cabot Road South San Francisco, CA 94080, USA	2017	Industrial	Engage in any lawful act or activity for which corporations may be organized under General Corporation Law.	—		43.960	%	—	—	—	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

F-101

APPENDIX II

GRIFOLS, S.A. AND SUBSIDIARIES

Operating Segments for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	Bioscience					Hospital						Diagnostic					Bio Supplies			Others						Intersegments						Consolidated
	2017		2016		2015	2017		2016		2015		2017		2016		2015	2017	2016	2015	2017		2016		2015		2017		2016		2015		2017		2016		2015
Revenues from external customers	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Total operating income	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Profit/(Loss) for the segment	985,495		913,840		896,032	(9,766	)	(8,765	)	(4,299	)	248,080		97,320		96,268	35,598	33,794	3,660	(9,632	)	44,324		77,982		(12,305	)	(1,316	)	(305	)	1,237,470		1,079,197		1,069,338
Unallocated expenses																																(234,127	)	(139,789	)	(98,968	)
Operating profit																																1,003,343		939,408		970,370
Finance result																																(287,734	)	(233,589	)	(271,840	)
Share of profit/(loss) of equity accounted investee	(10,434	)	(9,396	)	—	2,112		(5,611	)	—		(9,335	)	—		—	1,830	—	—	(4,060	)	21,940		(8,280	)	—		—		—		(19,887	)	6,933		(8,280	)
Income tax expense																																(34,408	)	(168,209	)	(158,809	)
Profit for the year after tax																																661,314		544,543		531,441
Segment assets	6,007,153		6,524,922		6,085,211	145,477		86,590		91,877		3,356,185		1,909,447		1,794,389	7,409	8,378	1,321	60,449		40,160		106,374		(22,196	)	(11,964	)	(10,240	)	9,554,477		8,557,533		8,068,932
Equity accounted investments	83,905		104,996		—	—		13,888		—		29,322		43,330		—	44,220	—	—	61,562		39,131		76,728		—		—		—		219,009		201,345		76,728
Unallocated assets	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		1,146,778		1,370,894		1,456,055
Total assets																																10,920,264		10,129,772		9,601,715
Segment liabilities	423,415		411,604		387,086	13,560		8,415		3,159		192,720		186,389		192,730	—	—	—	26,903		1,843		209,405		—		—		—		656,598		608,251		792,380
Unallocated liabilities	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		6,629,701		5,793,543		5,507,946
Total liabilities																																7,286,299		6,401,794		6,300,326
Other information:
Amortisation and depreciation allocated	157,478		152,821		137,870	6,436		5,915		5,710		40,815		32,180		31,875	—	—	—	2,237		3,445		6,946		—		—		—		206,966		194,361		182,401
Amortisation and depreciation unallocated			—		—			—		—				—		—	—	—	—	—		—		—		—		—		—		8,524		7,508		7,354
Expenses that do not requirecash payments allocated	7,049		16,219		627	(514	)	306		108		(4,423	)	(2,001	)	4,630	—	—	—	—		(32,534	)	—		—		—		—		2,112		(18,010	)	5,365
Expenses that do not require cash payments unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		(58,752	)	4,608		4,794
Additions for the year of property, plant & equipment and intangible assets allocated	227,635		197,741		421,020	10,429		9,193		7,972		70,032		89,760		68,740	198	84	—	20,911		13,313		—		—		—		—		329,205		310,091		497,732
Additions for the year of property, plant & equipment and intangible assets unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		11,268		12,011		79,082

* As a result of the creation of Bio Supplies segment and intersegments, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

This appendix forms an integral part of note 6 to the consolidated financial statements

F-102

APPENDIX II

GRIFOLS, S.A.  AND SUBSIDIARIES

Reporting by geographical area

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	Spain			Rest of European Union			USA + Canada			Rest of World			Consolidated
	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net Revenue	242,894	225,273	216,548	444,089	426,223	456,919	2,896,505	2,707,579	2,604,315	734,585	690,755	656,781	4,318,073	4,049,830	3,934,563
Assets by geographical area	899,223	847,467	719,557	2,397,200	2,467,295	2,407,178	7,341,174	6,535,420	6,176,548	282,667	279,590	298,432	10,920,264	10,129,772	9,601,715
Other information:
Additions for the year of property, plant & equipment and intangible assets	62,271	73,365	113,652	80,910	39,603	51,943	188,557	190,358	400,065	8,735	18,776	11,154	340,473	322,102	576,814

This appendix forms an integral part of note 6 to the consolidated financial statements

F-103

APPENDIX III

GRIFOLS, S.A. AND SUBSIDIARIES

Changes in Other Intangible Assets

for the year ended

31 December 2017

(Expressed in thousands of Euros)

	Balances at				Business				Translation		Balances at
	31/12/2016		Additions		combinations *	Transfers	Disposals		differences		31/12/2017
Development costs	142,693		43,152		142,529	—	(81	)	(16,599	)	311,694
Concessions, patents, licenses brands & similar	60,471		—		142,174	—	—		(19,760	)	182,885
Computer software	168,623		19,626		26	529	(126	)	(13,733	)	174,945
Currently marketed products	1,162,204		—		—	—	—		(137,828	)	1,024,376
Other intangible assets	148,682		17,348		—	—	—		(18,723	)	147,307
Total cost of intangible assets	1,682,673		80,126		284,729	529	(207	)	(206,643	)	1,841,207
Accum. amort. of development costs	(72,073	)	(5,834	)	—	—	—		(1,442	)	(79,349	)
Accum. amort of concessions, patents, licenses, brands & similar	(24,994	)	(6,004	)	—	—	—		1,215		(29,783	)
Accum. amort. of computer software	(99,927	)	(13,549	)	—	—	111		7,046		(106,319	)
Accum. amort. of currently marketed products	(220,988	)	(38,216	)	—	—	—		28,136		(231,068	)
Accum. amort. of other intangible assets	(69,389	)	(865	)	—	—	—		8,288		(61,966	)
Total accum. amort intangible assets	(487,371	)	(64,468	)	—	—	111		43,243		(508,485	)
Impairment of other intangible assets	—		(64,734	)	—	—	—		1,354		(63,380	)
Carrying amount of intangible assets	1,195,302		(49,076	)	284,729	529	(96	)	(162,046	)	1,269,342

(See note 3)

This appendix forms an integral part of note 8 to the consolidated financial statements.

F-104

APPENDIX III

GRIFOLS, S.A. AND SUBSIDIARIES

Changes in Other Intangible Assets

for the year ended

31 December 2016

(Expressed in thousands of Euros)

	Balances at								Translation		Balances at
	31/12/2015		Additions		Transfers		Disposals		differences		31/12/2016
Development costs	112,688		29,126		—		(79	)	958		142,693
Concessions, patents, licenses brands & similar	59,249		—		—		—		1,222		60,471
Computer software	144,976		18,919		1,460		(420	)	3,688		168,623
Currently marketed products	1,126,024		—		—		—		36,180		1,162,204
Other intangible assets	134,068		10,469		—		(651	)	4,796		148,682
Total cost of intangible assets	1,577,005		58,514		1,460		(1,150	)	46,844		1,682,673
Accum. amort. of development costs	(67,551	)	(4,473	)	—		—		(49	)	(72,073	)
Accum. amort of concessions, patents, licenses, brands & similar	(23,957	)	(806	)	—		—		(231	)	(24,994	)
Accum. amort. of computer software	(83,197	)	(15,136	)	(99	)	419		(1,914	)	(99,927	)
Accum. amort. of currently marketed products	(175,135	)	(38,441	)	—		—		(7,412	)	(220,988	)
Accum. amort. of other intangible assets	(65,627	)	(2,117	)	—		544		(2,189	)	(69,389	)
Total accum. amort intangible assets	(415,467	)	(60,973	)	(99	)	963		(11,795	)	(487,371	)
Impairment of other intangible assets	34		—		—		(34	)	—		—
Carrying amount of intangible assets	1,161,572		(2,459	)	1,361		(221	)	35,049		1,195,302

This appendix forms an integral part of note 8 to the consolidated financial statements.

F-105

APPENDIX IV

GRIFOLS, S.A. AND SUBSIDIARIES

Movement in Property, Plant and Equipment

for the year ended

31 December 2017
(Expressed in thousands of Euros)

	Balances at 31/12/2016		Additions		Business combination	Transfers		Disposals		Translation differences		Balances at 31/12/2017
Cost:
Land and buildings	687,856		28,503		19,628	12,694		(823	)	(74,324	)	673,534
Plant and machinery	1,655,837		82,234		9,068	123,816		(10,098	)	(156,178	)	1,704,679
Fixed Assets under construction	275,003		149,610		555	(137,073	)	—		(25,976	)	262,119
	2,618,696		260,347		29,251	(563	)	(10,921	)	(256,478	)	2,640,332
Accumulated depreciation:
Buildings	(59,376	)	(14,708	)	—	—		710		6,609		(66,765	)
Plant and machinery	(746,268	)	(136,314	)	—	34		7,993		63,773		(810,782	)
	(805,644	)	(151,022	)	—	34		8,703		70,382		(877,547	)
Impairment of other property, plant and equipment	(3,200	)	258		—	—		—		210		(2,732	)
Carrying amount	1,809,852		109,583		29,251	(529	)	(2,218	)	(185,886	)	1,760,053
					(See note 3)

This appendix forms an integral part of note 9 to the consolidated financial statements.

F-106

APPENDIX IV
GRIFOLS, S.A. AND SUBSIDIARIES

Movement in Property, Plant and Equipment
for the year ended

31 December 2016
(Expressed in thousands of Euros)

	Balances at 31/12/2015		Additions		Transfers		Disposals		Translation differences		Balances at 31/12/2016
Cost:
Land and buildings	613,476		12,993		44,060		(780	)	18,107		687,856
Plant and machinery	1,431,030		87,536		116,724		(19,515	)	40,062		1,655,837
Fixed Assets under construction	263,610		163,059		(162,292	)	—		10,626		275,003
	2,308,116		263,588		(1,508	)	(20,295	)	68,795		2,618,696
Accumulated depreciation:
Buildings	(44,057	)	(13,777	)	(2	)	178		(1,718	)	(59,376	)
Plant and machinery	(616,369	)	(127,119	)	149		13,605		(16,534	)	(746,268	)
	(660,426	)	(140,896	)	147		13,783		(18,252	)	(805,644	)
Impairment of other property, plant and equipment	(3,288	)	147		—		—		(59	)	(3,200	)
Carrying amount	1,644,402		122,839		(1,361	)	(6,512	)	50,484		1,809,852

This appendix forms an integral part of note 9 to the consolidated financial statements.

F-107

APPENDIX V

GRIFOLS, S.A. AND SUBSIDIARIES

Statement of Liquidity for Distribution of Interim Dividend 2017

(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2017:
Projected profits net of taxes until 31/12/2017	273,472
Less, charge required to legal reserve	—
Estimated profits distributable for 2017	273,472
Interim dividend distributed	122,986
Forecast cash for the period 15 December 2017 to 15 December 2018:
Cash balances at 15 December 2017	—
Projected amounts collected	475,209
Projected payments, including interim dividend	468,117
Projected cash balances at 15 December 2018	7,092

This appendix forms an integral part of note 15 to the consolidated financial statements.

F-108

APPENDIX V
GRIFOLS, S.A. AND SUBSIDIARIES
Statement of Liquidity for Distribution of Interim Dividend 2016
(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2016:
Projected profits net of taxes until 31/12/2016	319,133
Less, charge required to legal reserve	—
Estimated profits distributable for 2016	319,133
Interim dividend distributed	122,908
Forecast cash for the period 07 December 2016 to 07 December 2017:
Cash balances at 07 December 2016	5,521
Projected amounts collected	497,058
Projected payments, including interim dividend	471,686
Projected cash balances at 07 December 2017	30,893

This appendix forms an integral part of note 15 to the consolidated financial statements.

F-109

EX-1.1

Exhibit 1.1

ARTICLES OF ASSOCIATION OF GRIFOLS, S.A.

ARTICLES OF ASSOCIATION

OF

GRIFOLS, S.A.

TITLE  I

CORPORATE NAME AND PURPOSE, REGISTERED OFFICE AND DURATION

Article 1.- Corporate name.- The company is named GRIFOLS, S.A. (the “Company”) and it is a public limited company (sociedad anónima) of Spanish nationality and corporate nature.

The Company shall be governed by its Corporate Governance System and, as to matters not contemplated or provided for herein, by the legal provisions regarding public limited companies and any other legal provisions applicable thereto.

The Company’s Corporate Governance System shall consist of the Articles of Association, the Regulation of the General Shareholders’ Meeting, the Regulation of the Board of Directors and the remaining Reports, Regulations and Internal Corporate Governance Regulations, passed by the competent bodies of the Company.

Article 2.- The corporate purpose of the Company is to provide administration, management and supervision services for companies and businesses, as well as investments in moveable and real estate assets.

Article 3.- Registered office.-  The Company has its registered office in Barcelona (08022), calle Jesús y María, number 6. The Board of Directors may resolve to relocate the registered office within the municipal area of Barcelona and to create branches, offices or agencies anywhere in Spain or abroad.

Article 4.- The Company has been established for an unlimited period of time, commencing its operations on the date of formalization of the notarial deed of incorporation.

Article 5.- The fiscal year will begin on the first day of January and end on December 31st of every year; with the exception of the year ending on December 31st, 1997, which began on August 1st, 1997.

TITLE II

SHARE CAPITAL AND SHARES

Article 6.- Share Capital.-

1.Shares. The share capital of the Company is 119,603,705 euros, represented by 687,554,908 shares, fully subscribed and paid-up, pertaining to two separate classes:

1

1.1.Class “A” comprises 426,129,798 shares with a nominal value of 0.25 euros each, all of which belong to the same class and series, and being the ordinary shares of the Company (the “Class A Shares”); and

1.2.Class “B” comprises 261,425,110 shares with a nominal value of 0.05 euros each, all of which belong to the same class and series and are non-voting shares of the Company with the preferential rights set forth in Article 6 Bis of these Articles of Association (the “Class B Shares” and, together with the Class A Shares, the “shares”).

2.Form of Representation. The shares are represented by means of book entries and are governed by the Securities Market Act (Ley del Mercado de Valores) and such other provisions as may be applicable. The book entries registry shall be managed by the company Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (Iberclear) and its participating entities.

Article 6 Bis.- Terms and conditions of the Class B Shares.-

1.General.-

Each Class B Share shall be treated in all respects, in spite of having a lower nominal value, as identical to one Class A Share, and Class B Shares shall not be subject to discriminatory treatment regarding Class A Shares, although, as an exception to the foregoing, the Class B Shares (i) are not entitled to voting rights; and (ii) they have the right to preferred dividend, preference liquidation share and the remaining rights set forth herein.

The right of each Class B Share to the dividends and other distributions other than the Preferred Dividend and the preferential subscription right (derecho de suscripción preferente) and the free allotment right (derecho de asignación gratuita de acciones) of each Class B Share, are the ones set forth in sections 3.1 and 6.1 of this Article 6 Bis and are equal to those of a Class A Share, in spite of the fact that the nominal value of a Class B Share is lower than that of a Class A Share, pursuant to the provisions of Articles 98 to 103 and 498 to 499 of the Companies Act (Ley de Sociedades de Capital).

2.Preferred Dividends.-

2.1.Calculation. Each Class B Share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits for each year at the end of which it is still in issue (the “Preferred Dividend” and, each fiscal year in respect of which the Preferred Dividend is calculated, a “Calculation Period”) equal to 0.01 euros per Class B Share.

2.2.Preference. The Company shall pay the Preferred Dividend on the Class B Shares for a Calculation Period before any dividend out of distributable profits obtained by the Company during such Calculation Period is paid on the Class A Shares.

2.3.Accrual. Payment. Non-cumulative nature.

2

(A)The Preferred Dividend corresponding to all Class B Shares that are issued at the end of a Calculation Period shall be paid by the Company to the holders of Class B Shares within the nine months following the end of such Calculation Period, in the aggregate amount that such Preferred Dividend does not exceed the amount of distributable profits obtained by the Company during such Calculation Period.

(B)If during a Calculation Period the Company has not obtained sufficient distributable profits to pay in full, out of the distributable profits obtained by the Company during such Calculation Period, the Preferred Dividend on all the Class B Shares that have been issued for such Calculation Period, the part of the aggregate amount of such Preferred Dividend for the Class B Shares that exceeds the distributable profits obtained by the Company during such Calculation Period shall not be paid nor accumulated as a dividend payable in the future.

2.4.Voting rights in case of non-payment of the Preferred Dividend. The lack of total or partial payment of the Preferred Dividend during a Calculation Period due to the Company not having obtained sufficient distributable profits to pay in full the Preferred Dividend for such Calculation Period, shall not entail for the Class B Shares the recovery of any voting rights.

3.Other Dividends.-

3.1.Each Class B Share entitles its holder to receive, in addition to the Preferred Dividend, the same dividends and other distributions (regardless of whether such dividends or distributions are satisfied in cash, in securities of the Company or any of its subsidiaries, or any other securities, assets or rights) as one Class A Share and, consequently, each Class B Share shall be treated as one Class A Share regarding any dividends and other distributions satisfied to the holders of Class A Shares, including what is related to the timing of the declaration and payment of any such dividends or distributions.

4.Redemption rights.-

4.1Redemption event. Each Class B Share entitles its holder to obtain its redemption as set forth in this section 4 in the event that (each offer that meets the following requirements, a “Redemption Event”) a tender acquisition offer over all or part of the shares in the Company is made and settled (in whole or in part), except if holders of Class B Shares have been entitled to participate in such offer and to their shares acquired in such offer equally and on the same terms as holders of Class A Shares (including, without limitation, for the same consideration).

4.2Maximum percentage of Class B Shares to be redeemed in a Redemption Event. Notwithstanding the foregoing, the Class B Shares redeemed as a result of a specific Redemption Event will not be allowed to represent, as regards the total Class B Shares in circulation at the time the tender acquisition offer that gives rise to the Redemption Event is made, a higher percentage that the sum of the Class A Shares (i) to which the

3

offer giving rise to this Redemption Event is addressed, (ii) held by the offerors of that offer; and (iii) held by the persons acting together with the offerors or by the persons that have reached some kind of an agreement regarding the offer related to all Class A Shares in circulation at the time the tender acquisition offer that gives rise to this Redemption Event is made.

In the event that as a result of the application of the limit referred to above not all Class B Shares regarding which the redemption right of this Redemption Event has been exercised may be redeemed, the Class B Shares to be redeemed from each holder of Class B Shares shall be reduced in proportion to the number of Class B Shares regarding which such holder has exercised the redemption right so that the above referred limit is not exceeded.

4.3Redemption process. In case a Redemption Event takes place,

(A)Notice: The Company shall, for informative purposes only and within 10 days of the date on which a Redemption Event takes place, publish in the Official Gazette of the Commercial Registry, the Spanish Stock Exchange Gazettes and in at least two of the newspapers with broadest circulation in Barcelona, a notice informing the holders of Class B Shares of the occurrence of a Redemption Event and of the process for the exercise of the redemption right in connection with such Redemption Event.

(B)Exercise by holders: Each holder of Class B Shares shall be entitled to exercise its redemption right during two months as from the first date of settlement of the offer causing the Redemption Event by means of notification to the Company. The Company shall ensure that the notification of the exercise of the redemption right may be carried out by means of the arrangements provided the company Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (Iberclear).

(C)Price: The redemption price to be paid by the Company for each Class B Share for which the redemption right has been exercised shall be the equivalent to the sum of (i) the amount in euros of the highest consideration paid in the offer causing the Redemption Event and (ii) the interests on the amount referred to in (i), as from the date the offer causing the Redemption Event is first settled and until the date of full payment of the redemption price, at a rate equal to one-year Euribor plus 300 basis points.

For the purposes of the previous paragraph, the amount in euros corresponding to any non-cash consideration paid in the offer causing the Redemption Event shall be the market value of such non-cash consideration as at the date the offer causing the Redemption Event is first settled. The computation of such market value shall be supported by at least two independent experts from auditing firms of international repute designated by the Company.

(D)Formalization of the Redemption. The Company shall, within 40 days as from the end of the period for the notification of the exercise of the redemption rights

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following a Redemption Event, carry out all the necessary actions in order to (a) pay the redemption price for the Class B Shares regarding which the redemption right has been exercised and to implement the capital reduction required for the redemption; and (b) to reflect the amendment of Article 6 of these Articles of Association arising from the redemption. In this connection, the directors of the Company are hereby authorized and obligated to adopt all such actions, including (a) carrying out and completing the capital reduction required for the redemption; (b) grant and registration with the Commercial Registry of the relevant public deeds in which the amendments of Article 6 of these Articles of Association deriving from the redemption of Class B Shares are reflected; (c) the formalization of the amendment of the book entries with the book entry registry; (d) the filing of the relevant applications and requests with any other persons, including the company Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (Iberclear), the Spanish Stock Exchanges, and the Spanish Securities Exchange Commission and the Commercial Registry.

4.4Effect on Dividends. After a Redemption Event takes place and until the redemption price for the Class B Shares in respect of which the redemption right has been exercised has been paid in full, the Company shall not be able to satisfy o pay any dividends nor any other distributions to its shareholders (regardless of whether such dividends or distributions are satisfied in cash, in securities of the Company or any of its subsidiaries, or any other securities, assets o rights).

5.Preferential liquidation rights.-

5.1.Each Class B Share entitles its holder to receive, upon the winding-up and liquidation of the Company, an amount (the “Liquidation Preference Share”) equal to the sum of (i) the nominal value of such Class B Share, and (ii) the share premium paid for the issuance of such Class B Share.

5.2.The Company shall pay the Liquidation Preference to the Class B Shares before any amount can be paid to holders of Class A Shares on account of liquidation.

5.3.Each Class B Shares entitles its holder to receive, in addition to the Liquidation Preference, the same amount on account of liquidation as the one to be paid to a Class A Share.

6.Other rights.-

6.1.Subscription rights. Each Class B Share entitles its holder to the same rights (including the preferential subscription right (derecho de suscripción preferente), and the free allotment right (derecho de asignación gratuita)) as one Class A Share in connection with any issuance, granting or sale of (i) any shares in the Company, (ii) any rights and other securities exercisable for or exchangeable or convertible into shares in the Company, or (iii) any options, warrants or other instruments giving the right to the holder thereof to purchase, convert, subscribe or otherwise receive any securities of the Company.

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As exception to the foregoing,

(A)the preferential subscription right and the free allotment right of the Class B Shares shall be only cover Class B Shares, and the preferential subscription right and the free allotment right of the Class A Shares shall be only cover Class A Shares in every capital increase which meets the following three requirements (i) that it entails the issuance of Class A Shares and Class B Shares in the same proportion that Class A Shares and Class B Shares represent over the share capital of the Company at the time the resolution regarding capital increase is passed; (ii) that it recognizes preferential subscription rights or free allotment rights, as applicable, to Class B Shares over the Class B Shares to be issued in that capital increase in the same terms as that which recognize preferential subscription rights or free allotment rights, as applicable, to Class A Shares over the Class A Shares to be issued in the capital increase; and (iii) that no other shares or securities are issued at the same; and

(B)likewise, the preferential subscription right and the free allotment right of the Class B Shares shall be only cover instruments that grant their owners with right to purchase, convert, subscribe or otherwise receive in any other form Class B Shares, and the preferential subscription right and the free allotment right of a Class A Shares shall be only cover instruments that grant their owners with right to purchase, convert, subscribe or otherwise receive in any other form Class A Shares in every issuance which meets the following three requirements (i) that it entail the issuance of instruments that grant their owners with right to purchase, convert, subscribe or otherwise receive in any other form Class A Shares and instruments that grant their owners with right to purchase, convert, subscribe or otherwise receive in any other form Class B Shares in the same proportion as Class A Shares and Class B Shares represent over the share capital of the Company at the time the resolution on the capital increase is passed; (ii) that it recognizes preferential subscription rights or free allotment rights, as applicable, to the Class B Shares over the instruments that grant their owners with right to purchase, convert, subscribe or otherwise receive Class B Shares to be issued in such issuance in the same terms as in those which recognize to the Class A Shares a preferential subscription rights or free allotment rights, as applicable, over the instruments granting their owner the right to purchase, convert, subscribe or otherwise receive Class A Shares to be issued in such issuance; and (iii) that no other shares or securities are issued at the same.

6.2.Separate vote at the General Shareholders’ Meeting regarding Extraordinary Matters. Without disregarding the provisions set forth in Article 103 of the Companies Act (Ley de Sociedades de Capital) and on an additional basis, but also in order to protect the rights of Class B Shares, the resolutions of the Company on the following matters (the “Extraordinary Matters”) will require, in addition to their approval pursuant to the provisions of Article 17 of these Articles of Association, the approval of the majority of the outstanding Class B Shares:

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(A)Any resolution (i) authorizing the Company or any of its subsidiaries to repurchase or acquire any Class A Shares of the Company, except for pro-rata repurchases made available to the holders of Class B Shares under the same terms and at the same price as that offered to holders of Class A Shares or (ii) approving the redemption of any shares in the Company and any share capital reductions (through repurchases, cancellation of shares or any other means) other than (a) those redemptions which are mandatory by law and (b) those redemptions which affect equally Class A Shares and Class B Shares and those in which each Class B is treated equally and is provided with the same terms as a Class A Share;

(B)Any resolution approving the issuance, granting or delivery (or authorising the Board of Directors of the Company to issue, grant or deliver) (i) any shares in the Company, (ii) any rights or other securities which give the right to acquire shares of the Company o that are exchangeable or convertible into shares in the Company or (iii) any options, warrants or other instruments giving the right to the holder to purchase, convert, subscribe or otherwise receive in any other form any securities in the Company, except for the foregoing events (i), (ii) and (iii), if (a) each Class B Share is treated equally as a Class A Share regarding the issuance, granting or delivery and, therefore, it has, in the event they exist, the same preferential rights (of subscription of preferential allotment or of any other kind)  in the relevant issuance, granting or delivery as a Class A Share, or (b) if the issuance is performed in accordance with the provisions of the foregoing section 6.1;

(C)Any resolution approving unconditionally or not (i) a transaction subject to Law 3/2009 (including, without limitation, a merger, split-off, cross-border redomiciliation or global assignment of assets and liabilities), except if in such transaction each Class B Share is treated, in all respects, in an equal manner as one Class A Share; or (ii) the dissolution or winding-up of the Company, except where the resolution is mandatory by law;

(D)Any resolution approving the delisting of any shares of the Company from any stock exchange or secondary market; and

(E)In general, any resolution and any amendment of the Articles of Association of the Company which directly or indirectly damages or adversely affects the rights, preferences or privileges of the Class B Shares (including any resolution that damages or adversely affects the Class B Shares in comparison with the Class A Shares or that benefits or positively affects the Class A Shares in comparison to the Class B Shares, or that affects the provisions in these Articles of Association regarding the Class B Shares).

The General Shareholders’ Meeting has the power to decide on all matters vested on it by Law or by these Articles of Association and, in particular, without limitation to the foregoing, it shall be the only corporate body or office entitled to decide on the matters considered “Extraordinary Matters” according to these Articles of Association

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6.3.Other rights. The Class B Shares shall have all remaining rights vested on them in Articles 100, 102 and 103 of the Companies Act (Ley de Sociedades de Capital) and, safe for the provisions set forth herein and in articles 100, 102 and 103 of the Companies Act (Ley de Sociedades de Capital), each Class B Share entitles its holder to the same rights as one Class A Share (including the right to attend all general shareholders’ meetings of the Company, the information right on the Company and the right to challenge resolutions of the Company).

Article 7.-  The shares are indivisible with regard to the Company and, therefore, only a single owner for each share will be recognized by the Company. Co-owners of shares must designate a single person to represent them before the Company and shall be jointly and severally liable to the Company for all obligations arising from their status as shareholders.

TITLE III

SHAREHOLDERS’ RIGHTS AND OBLIGATIONS

Article 8.-  The acquisition of one or more shares entails adherence and acceptance of these Articles of Association, and the status or condition of shareholder implies, without exception, not only the acceptance of these Articles of Association but also the adherence to the resolutions passed by the General Shareholders’ Meeting and to the decisions of the representative bodies of the Company, and the compliance of all such other obligations resulting from the deed of incorporation or the enforcement or interpretation of these Articles of Association, with the exception, nevertheless, of the rights and legal actions granted to the shareholders by the Law.

Article 9.-  Each Company’s share confers upon its rightful holder the status of shareholder and vests such holder with the rights and obligations established by Law and by the Company’s Corporate Governance System,  regardless of the class and series of the shares that may be created in each one of the classes.

Article 9 Bis.- Corporate web page.- The Company will keep a corporate web page to enable the exercise by the shareholders of their information right, and to divulge the relevant information required by the securities market legislation, which shall include all documents and information foreseen by the Law and the Corporate Governance System of the Company and all other information deemed appropriate to be made available to the shareholders and investors through this system.

Article 10.- Transfer of Shares.- Company shares shall be freely transferable by any means admitted by Law.

TITLE IV

ADMINISTRATION AND MANAGEMENT OF THE COMPANY

Article 11.-  The administration and management of the Company corresponds to:

a)The General Shareholders’ Meeting.

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b)The Board of Directors.

Notwithstanding this, other offices may be appointed pursuant to these Articles of Association or as required by Law.

CHAPTER ONE:  ON THE GENERAL SHAREHOLDERS’ MEETING

Article 12.-  The General Shareholders’ Meeting validly summoned represents all shareholders and its resolutions, passed in accordance with these Articles of Association, the Regulations of the General Shareholders’ Meeting and such other legal provisions in force, shall be binding on all shareholders, including dissenting shareholders and those who have not participated in the voting, preserving, nevertheless, those rights which are granted to shareholders by Law.

Article 13.-  The General Shareholders’ Meetings may be either ordinary or extraordinary. The ordinary General Shareholders’ Meeting must be held within the first six months of each fiscal year in order to approve, if applicable, the corporate management, the annual accounts for the previous fiscal year and the allocation of the results. Any other shareholders’ meeting will be deemed Extraordinary.

Extraordinary Meetings shall be held whenever the Board deems it convenient on its own initiative or upon the request of one or several shareholders holding at least 3% of the share capital, who must state in their request the matters to be addressed at the Meeting.

In such case, the Meeting shall be called to be held within the two months following the date on which a notarial demand requesting the Board to call the Meeting was served.

Article 14.- Calling of the General Shareholders’ Meeting.-

1.Both the Ordinary and the Extraordinary General Shareholders’ Meetings must be called according to the legal requirements in force at least one month in advance from the date set for the meeting, except in those cases where the Law might have foreseen other terms, by means of a notice published in, at least, the following media:

a)The Official Gazette of the Commercial Registry or one of the major newspapers in circulation in Spain.

b)The web page of the Spanish Securities Exchange Commission.

c)The Company’s web page.

Notwithstanding the foregoing, when the Company offers the shareholders the genuine possibility of voting by electronic means made available to all of them, the extraordinary General Meetings may be called with a minimum prior notice of fifteen (15) days. This reduction in the term to call the meeting will require an express resolution by the Ordinary General Meeting passed by, at least, two thirds (2/3) of the subscribed share capital with voting rights; the validity of this resolution must not exceed the date on which the next meeting is to be held.

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The notice published on the Company’s corporate web page will be kept available uninterruptedly at least until the General Shareholders’ meeting takes place.

2.The notice must state, in addition to the statements required by article 517 of the Companies Act, the name of the Company, the date and time of the meeting, the agenda, which shall include the matters to be addressed thereat, and the position held by the person or persons issuing the notice; the notice may also set forth the date on which the meeting shall be held, as the case may be, upon second call.

3.Shareholders representing at least three per cent (3%) of the share capital may request the publication of a supplement to the call of the Ordinary General Shareholders’ Meeting including one or more items in the agenda of the call and to file justified resolution proposals regarding matters already included or that should be included in the agenda, as long as these new proposals are accompanied by a justification or, if applicable, by a justified resolution proposal. This right must be exercised by means of a certified notification, which must be received at the Company’s registered office within five (5) days of the publication of the call to the meeting.

The supplement to the call to the meeting must be published at least fifteen (15) days prior to the date set for the meeting.

Article 15.- Quorums for holding of a General Shareholders’ Meeting.- Except for those cases for which the Law, the Company’s current Articles of Association or the General Shareholders’ Regulations provide a higher quorum, the General Shareholders’ meetings shall be validly summoned on first call when the shareholders who are present or represented hold, at least, 25% of the subscribed share capital with voting rights and, upon second call, the meeting shall be validly held regardless of the amount of the share capital present at the meeting.

Article 16.- Right to attend, proxy granting and representation at the General Shareholders’ Meeting.-

1.All Company shareholders shall be entitled to attend the general meeting as long as their shares appear registered under their name in the accounting registry at least five (5) days in advance from the date on which the meeting is to be held;

2.Notwithstanding the foregoing, all shareholders with right to attend the meeting, according to the provisions set forth herein, may do so by means of a proxy, even when such proxy is not a shareholder.

Proxy representation must be granted on a special basis for each meeting, either in writing or by distance communication systems, as long as the identity of the represented shareholder, the proxy-holder and the contents of the proxy itself are duly guaranteed.

In the event the representation is granted to a legal entity, such entity shall appoint an individual as its proxy representative, as established by the Law.

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Article 17.- System of majorities at the General Shareholders’ Meeting.-

The resolutions shall be passed by simple majority of votes among the shareholders present or represented by proxy, except in those cases for which the Law or the Articles of Association provide a higher quorum.

Article 17.bis.- Casting of votes through distance voting systems.-

1All shareholders who have right to attend the Meeting may cast their vote regarding the proposals included in the agenda through the following systems of communication:

(a)By postal correspondence, through the sending of the attendance, proxy representation and distance vote card, duly signed and with indication of the sense of their vote; or

(b)By electronic correspondence or any other distance voting systems in accordance with the instructions contained on the corporate web page of the Company, provided that the safety of the electronic communications is duly guaranteed and the electronic document through which the voting right is exercised includes a recognized electronic signature, according to the provisions of the Electronic Signature Act (Ley de Firma Electrónica) or that, without fulfilling the requirements for the electronic signature, such electronic signature is deemed to be valid by the Board of Directors for having the adequate guarantees as to the authenticity and identification of the shareholder who is exercising his voting right.

In order to be deemed valid, distance votes must be received by the Company at least five (5) days before the date set for the meeting.

2The notice of the General Shareholders’ Meeting shall state the deadlines, means and procedures for casting the vote through distance voting systems.

3The shareholders who cast their vote through distance voting systems pursuant to this article shall be deemed as present to the effects of convening the meeting. In consequence, the delegations issued previously shall be deemed revoked and those conferred afterwards shall be deemed as not effected.

4Notwithstanding the foregoing, a vote casted by distance voting systems shall be rendered void by the personal attendance of the shareholder casting the vote to the Meeting.

Article 18.-  The General Shareholders’ Meeting shall be held in any municipal area belonging to the province of Barcelona. The Meetings shall be chaired by the Chairperson of the Board of Directors or by the board member  validly substituting him and, failing that, by the attendee appointed by the shareholders. The Chairperson shall be assisted by a Secretary, who shall be in turn secretary to the Board. In the absence of the Secretary, the Vice secretary who is validly substituting him shall act as such and, failing that, any shareholder attending

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the Meeting appointed by the shareholders for this purpose. The Chairperson shall lead the debate and resolve any queries arising at the meeting. Before going over the items included in the agenda, an Attendance List shall be prepared, stating for each attendee the capacity in which he is attending and the number of shares that he owns or represents. The deliberations and resolutions passed at the meeting shall be recorded in the minutes, which will be incorporated to the corresponding Book, and shall be approved in the manner provided by law. The certificates of such minutes shall be issued by the Secretary of the Board of Directors and will have the countersignature of the Chairperson.

Article 19.-  The resolutions validly passed by the General Shareholders’ Meetings shall be legally binding as from their approval and mandatory for all shareholders, including those absent and dissenting, without the need for the Minutes to be approved at a later meeting, without prejudice to the challenge and, as the case may be, withdrawal rights legally vested on the shareholders.

CHAPTER TWO: ON CORPORATE MANAGEMENT

Article 20.- Structure of the Board of Directors and term of office as director.-  The management and legal representation of the Company will correspond to the Board of Directors, which shall be composed of a minimum of three and a maximum of fifteen directors.

Directors shall be appointed and dismissed by the General Shareholders’ Meeting and will serve in their positions for four years, albeit the possibility of their indefinite re-election for the same periods of time.

Article 20.bis.- Remuneration of the Board of Directors

The position of director shall be remunerated. The directors’ remuneration shall be a fixed amount. For such purpose, and at least every three years and valid for the three fiscal years following the year it is approved, the General Shareholders’ Meeting shall approve the remuneration of directors’ policy, which shall necessarily determine the maximum amount of the annual remuneration to be paid to all the directors. In addition, the Board of Directors shall distribute said remuneration among its members, by means of a board resolution, taking into account the duties and responsibilities of each director, the membership to board committees and other relevant objective circumstances.

Notwithstanding the foregoing, the directors will have the right to be refunded on the expenses incurred upon while holding their office, and to receive remuneration for performing their executive duties specified in the contracts approved in accordance with the Capital Company’s Act, as long as it adjusts to the directors remuneration policy approved by the General Shareholders’ Meeting pursuant to the Company’s Corporate Governance System and any applicable legal provision.

Article 21.- Regulations of the Board of Directors.- The Board of Directors shall pass the regulations governing its operation and internal regime, as well as those governing the different delegated committees that may be established within it. The Board of Directors shall inform the General Shareholders’ Meeting on the content of such regulations and on any

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amendment thereto immediately after a resolution to pass or amend such regulations has been passed.

Article 21.bis.- Corporate Governance Annual Report.- The Board of Directors shall annually pass a corporate governance report, whose content shall comply with the laws and regulations in force.

Article 21.ter.- Annual report on directors’ remuneration.- The Board of Directors shall annually pass a report on directors’ remuneration, whose content shall comply with the law and regulations in force.

Article 22.- Calling of the Board of Directors, quorum and majorities.-  The Board of Directors shall be called to a meeting by the Chairperson or the or by the person validly taking his place, by any mean that allows its receipt with at least ten (10) days prior to the date on which the meeting is to be held, except for urgent matters that justify a shorter term. The notice of the meeting of the Board shall state the place, date and time as well as the matters to be discussed thereat.

Notwithstanding the foregoing, the Board of Directors shall be considered validly held without having been called, if all the directors attending or represented by proxy unanimously accept the holding of the meeting, as well as the agenda to be discussed thereat.

The directors constituting at least one third (1/3) of the members of the Board of Directors may call a meeting, for it to be held at the locality of the registered office, indicating the proposed agenda if, prior request to the Chairperson, he fails to call the meeting without a reasonable cause within one month from said request.

The attendance of one half plus one of its members, being present or represented by proxy, is required for validly holding meetings of the Board of Directors.

Resolutions shall be passed by absolute majority of the members of the Board present at the meeting. In the event of a tie, the Chairperson shall have the casting vote.

Article 22.bis.- Meetings held through distance communication systems.- The Board of Directors, as well as the Committees established within it according to the provisions of the Articles of Association, may hold meetings by videoconference, conference calls or by any other distance communication systems as long as said communications take place in real time and, therefore, in one sole act, and both the identity of the participating or voting individual and the security of the electronic communications, are properly guaranteed. Additionally, any communication or information provided by the Board of Directors or any of the Committees therein shall be in writing, being the electronic means and other distance communication systems admissible. For such purposes, email addresses supplied by the Directors to the Secretary to the Board of Directors shall be deemed valid.

Article 23.-  The Board of Directors is vested with all the authorities that can be legally delegated by the General Shareholders’ Meeting in accordance with the provisions of the Companies Act (Ley de Sociedades de Capital).

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Article 24.- Delegation of authorities.- The Board of Directors can permanently delegate all or part of its authorities to one or more managing directors or to an executive committee, insofar as they can be delegated by law and in accordance with the Articles of Association.

Article 24.bis.- Delegated Committees.- The Board of Directors shall necessarily create the following committees, which shall be governed by these Articles of Association and the internal Regulations of the Board of Directors:

(a)An Audit Committee; and

(b)An Appointments and Remuneration Committee.

Article 24.ter.- Audit Committee.-

1.The Audit Committee shall be composed of a minimum of three (3) directors and a maximum of five (5), to be appointed by the Board of Directors taking into account their knowledge, competence and experience in accounting, audit and risk management and Committee duties. As a group, the members of the Committee shall have the pertinent technical knowledge in relation to the sector of activity of the Company. The Audit Committee shall be exclusively composed by non-executive directors of which at least the majority must be independent directors.

2.The Chairperson of the Committee, whose position shall be held by an independent director, will be appointed by the Board of Directors. The Chairperson shall be replaced every four (4) years, being eligible for re-election only after one (1) year has elapsed since his dismissal. The Board of Directors will appoint the Secretary of the Audit Committee, who may be (a) one of the members of the Audit Committee (being, in such case, Secretary member of the Audit Committee), (b) any other member of the Board of Directors of the Company who is not a member of the Audit Committee (being, in such case, Secretary non member of the Audit Committee), or (c) the Secretary or a Vice secretary of the Board of Directors of the Company (being, in such case, Secretary non member of the Audit Committee). The Secretary shall record in the minutes the resolutions passed at each Meeting of the Committee and report to the full Board of Directors through its Chairperson. The Audit Committee shall be deemed validly held when it is attended by half plus one of its members, either present or represented by proxy. Resolutions shall be passed by absolute majority of the members of the Board present at the meeting. In the event of a tie, the Chairperson shall have the casting vote.

3.Notwithstanding the provisions of the Law, of these Articles of Association or other commitments assigned to it by the Board of Directors, the Audit Committee shall have the following basic responsibilities:

(a)To inform the General Shareholders’ Meeting of any issues raised on matters for which the Committee is responsible and particularly with respect to the results of the audit of the annual accounts, explaining how it has contributed to the integrity of the financial information, and the role that the Committee has played in such process;

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(b)To supervise the efficiency of the Company’s internal control, internal audit and risk management systems, as well as discussing, with the auditor, any major flaws in the control system identified during the audit process without jeopardizing its independence. To such effects, the Committee may, if applicable, submit recommendations or proposals to the Board of Directors and the corresponding period of time for their monitoring;

(c)To monitor the preparation and presentation process of the perceptive financial information and present recommendations or proposals to the Board of Directors directed to safeguarding its integrity;

(d)To submit to the Board of Directors any proposals regarding the selection, appointment, reelection and substitution of the auditor, being responsible for the selection process in conformity with the applicable regulations, including the terms of his contract and requests for information on the audit strategy and execution, in addition to performing his duties independently;

(e)To establish the appropriate relationships with the external auditor to receive information about any issues that may entail a threat to his independence, and which the Audit Committee will examine, and any other issues regarding the development of the audit of accounts process, and, when applicable, the authorization of the services different from those prohibited in the terms established in the applicable regulations as regards independence as well as any notifications required in the audit of accounts legislation and in the audit regulations. In any case, annually receive from the external auditors a statement of their independence in relation to the entity, or any entities directly or indirectly related to it, as well as any detailed and individualized information on any kind of ancillary services provided and the corresponding fees paid by these entities to the external auditor or the persons or entities related to it in accordance with the regulations applicable to the audit of accounts activity;

(f)Prior to issuing the audit of accounts report, annually issue a written opinion on whether the independence of the auditors or audit firms has been compromised. This opinion must include, at the very least, a reasoned assessment of each and every one of the provided ancillary services mentioned above, which shall be individually and jointly assessed, different from the legal audit, and on the subject of the independence status or regulations applicable to the audit of accounts activity; and

(g)To inform the Board of Directors in advance about any issues set out in the Law, the Articles of Association and the Board’s Regulations, and specifically about:

1.any financial information that the company must make public from time to time;

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2.the creation or acquisition of shares in special purpose entities or in entities resident in countries or territories that are considered tax havens; and

3.transactions with related parties.

4.The Audit Committee shall meet as regularly as required to ensure the correct development of its duties.

5.Any member of the executive board or the staff of Company whose presence is required by the Chairperson is obliged to attend the meetings of the Committee and to provide the assistance and information requested. The Chairperson may also request the attendance of the auditors to the meetings;

6.The Audit Committee may seek the advice of external consultants in order to ensure a better performance of its functions.

Article 24.quater.- Appointments and Remuneration Committee.-

1.The Appointments and Remunerations Committee shall be formed by three (3) to five (5) Directors, appointed by the Board of Directors, taking into account their knowledge, competence and experience and of the Committee’s duties. The Appointments and Remunerations Committee shall be exclusively formed by non-executive directors, of which at least two (2) will be independent directors.

2.The Board of Directors shall appoint the Chairperson of the Appointments and Remuneration Committee. The position of Chairperson will necessarily be held by an independent director.

3.The Board of Directors shall appoint the Secretary of the Appointments and Remuneration Committee, who may be (a) one of the members of the Appointments and Remuneration Committee (who, in such case, will be Secretary member of the Appointments and Remuneration Committee), (b) any other member of the Board of Directors of the Company who is not a member of the Appointments and Remuneration Committee (who, in such case, will be Secretary non-member of the Appointments and Remuneration Committee, or (c) the Secretary or a Vice-Secretary of the Board of Directors of the Company (who, in such case, will be Secretary non-member of the Appointments and Remuneration Committee). The Secretary shall draft the minutes of the resolutions adopted at each Committee meeting and report to the Board of Directors via their Chairperson. The Appointments and Remuneration Committee shall be validly formed when half of its members plus one are present or represented and their resolutions are approved by absolute majority of the represented votes. If there is a tied vote, the vote of the Chairperson of the Committee is final

4.Without prejudice to other duties assigned by the Board, the Appointments and Remunerations Committee will have the following basic responsibilities:

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a)To review the competence, knowledge and experience necessary on the Board, specifying the essential duties and aptitudes that each candidate must possess to fill each position in addition to assessing the time and commitment needed to perform their duties efficiently;

b)To specify a representation target of the sex that is least represented in the Board of Directors and prepare guidelines to achieve said target;

c)To submit to the Board of Directors any proposals to appoint, re-elect and/or dismiss independent directors to be appointed by co-option powers or the approval of the General Shareholders’ Meeting, as well as any proposal for the re-election or dismissal of said directors by the General Shareholders’ Meeting;

d)To report the appointment proposals of the remaining directors to be appointed by co-option powers or the approval of the General Shareholders’ Meeting;

e)To report the appointment or dismissal proposals of senior executives and the basic terms of their contracts;

f)To examine and organize the succession of the Chairperson of the Board of Directors and the chief executive officer and, as the case may be, to make proposals to the Board so that said succession takes place in an orderly and well planned manner; and

g)To propose to the Board of Directors the remuneration policy of the directors and general managers or anyone performing top-level management duties under the direct supervision of the Board, executive committees or directors, as well as the individual remuneration and other contractual terms regarding the executive directors, ensuring its fulfilment.

5.Any member of the management team or personnel of the Company shall be obliged to attend the Committee meetings and provide their assistance and access to information they may have, when their presence is required by the Chairperson.

6.The Appointments and Remunerations Committee shall meet when the Company Board of Directors or the Chairperson requests a report or the adoption of a proposal and in any case, whenever it is deemed appropriate for the smooth running of its duties. In any case, it will meet once (1) a year to prepare information on remunerations to Directors which the Board of Directors must approve and include in the annual public documentation.

TITLE V

BALANCE SHEET, ANNUAL ACCOUNTS AND ALLOCATION OF RESULTS

Article 25.- Annual Accounts.-

1.Within the maximum term of three (3) months following the end of the fiscal year, the

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Board of Directors must prepare, in compliance with the requirements set by law, the annual accounts, as well as the management report and the proposed allocation of the result corresponding to such fiscal year.

2.The annual accounts and the management report shall be reviewed by the Company’s auditors and shall be submitted to the shareholders’ consideration and approval, if applicable, at least one month prior to the date of the General Shareholders’ Meeting.

Article 26.-  The Extraordinary General Shareholders’ Meeting called for such purpose may pass and implement reorganization, merger and split-up transactions, or any other structural modifications of its competence, following at all times the requirements and formalities set up by the Act on Companies’ Structural Modifications (Ley de Modificaciones Estructurales de las Sociedades Mercantiles) and these Articles of Association.

Article 27.-  The dissolution of the Company shall require a prior resolution of the General Shareholders’ Meeting and its dissolution can be based on any of the grounds set forth in Article 363 of the Companies Act (Ley de Sociedades de Capital).

Article 28.-  Once the dissolution has been passed, the liquidation shall be carried out according to the provisions of the Companies Act (Ley de Sociedades de Capital). Provided the lack of appointment of the liquidators by the General Shareholders’ Meeting that approved the dissolution of the Company, those who held the office of directors at the moment of dissolution of the Company will be turned into liquidators.

Article 29.-  Upon completion of the liquidation, the liquidators or the liquidation committee shall prepare a final balance sheet, a complete report on such liquidation and a project on the splitting of the remaining assets between the shareholders.

GENERAL PROVISIONS

Article 30.-  1. The shareholders are subject to the jurisdiction of the Court corresponding to the Company’s registered office.

2.  All corporate contentious matters that might arise between the Company and its directors or its shareholders, between the former and latter, or between the shareholders between them, shall be resolved by arbitration of the Arbitration Court of Barcelona (Tribunal Arbitral de Barcelona), of the Catalan Association for Arbitration (Asociación Catalana para el Arbitraje), which will be in charge of appointing one (1) arbitrator and of the administration of the arbitration in accordance with its Regulations. All such matters over which the parties have no free disposition are excepted.

3.  Any person subject to a legal incompatibility, especially those established in Law 5/2206, dated 10 April, shall not be entitled to hold offices in the Company.

*           *           *

THIS DOCUMENT CONSTITUTES A TRANSLATION INTO ENGLISH OF THE OFFICIAL SPANISH VERSION OF THE ARTICLES OF ASSOCIATION OF THE COMPANY.

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IN CASE OF DISCREPANCIES, THE OFFICIAL SPANISH VERSION SHALL PREVAIL.

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EX-2.4

Exhibit 2.4

EXECUTION VERSION

GRIFOLS, S.A.

€1,000,000,000 3.200% SENIOR NOTES DUE

2025 INDENTURE

Dated as of April 26, 2017

BNY Mellon Corporate Trustee Services Limited,
as Trustee

The Bank of New York Mellon SA/NV, as Registrar

TABLE OF CONTENTS

	ARTICLE 1
	DEFINITIONS AND INCORPORATION BY
	REFERENCE
Section 1.01.	Definitions	1
Section 1.02.	Other Definitions	30
Section 1.03.	Trust Indenture Act Not Applicable or Incorporated	30
Section 1.04.	Rules of Construction	31
	ARTICLE 2
	THE NOTES
Section 2.01.	Form and Dating	31
Section 2.02.	Execution and Authentication	33
Section 2.03.	Registrar and Paying Agent	33
Section 2.04.	Paying Agent to Hold Money in Trust	34
Section 2.05.	Holder Lists	34
Section 2.06.	Transfer and Exchange	34
Section 2.07.	Replacement Notes	45
Section 2.08.	Outstanding Notes	46
Section 2.09.	Treasury Notes	46
Section 2.10.	Temporary Notes	46
Section 2.11.	Cancellation	47
Section 2.12.	Defaulted Interest	47
Section 2.13.	ISIN or Common Code Numbers	47
	ARTICLE 3
	REDEMPTION AND PREPAYMENT
Section 3.01.	Notices to Trustee	47
Section 3.02.	Selection of Notes to Be Redeemed or Repurchased	48
Section 3.03.	Notice of Redemption	48
Section 3.04.	Effect of Notice of Redemption	49
Section 3.05.	Deposit of Redemption Price	49
Section 3.06.	Notes Redeemed in Part	49
Section 3.07.	Optional Redemption	50
Section 3.08.	Mandatory Redemption	51
Section 3.09.	Offer To Purchase by Application of Excess Proceeds	51
Section 3.10.	Redemption for Taxation Reasons	53

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	ARTICLE 4
	COVENANTS
Section 4.01.	Payment of Notes	54
Section 4.02.	Maintenance of Office or Agency	54
Section 4.03.	Reports	54
Section 4.04.	Compliance Certificate	55
Section 4.05.	Taxes	56
Section 4.06.	Stay, Extension and Usury Laws	56
Section 4.07.	Corporate Existence	56
Section 4.08.	Payments for Consent	57
Section 4.09.	Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock	57
Section 4.10.	Restricted Payments	61
Section 4.11.	Liens	65
Section 4.12.	Asset Sales	65
Section 4.13.	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	67
Section 4.14.	Transactions with Affiliates	69
Section 4.15.	Financial Calculations for Limited Condition Acquisitions	71
Section 4.16.	[Reserved]	71
Section 4.17.	Designation of Restricted and Unrestricted Subsidiaries	71
Section 4.18.	Repurchase at the Option of Holders Upon a Change of Control	71
Section 4.19.	Additional Guarantees	73
Section 4.20.	Covenant Suspension	74
Section 4.21.	Additional Amounts	74
Section 4.22.	Maintenance of Listing	77
	ARTICLE 5
	SUCCESSORS
Section 5.01.	Merger, Consolidation or Sale of Assets	78
Section 5.02.	Successor Company Substituted	79
	ARTICLE 6
	DEFAULTS AND REMEDIES
Section 6.01.	Events of Default	79
Section 6.02.	Acceleration	81
Section 6.03.	Other Remedies	81
Section 6.04.	Waiver of Past Defaults	82
Section 6.05.	Control by Majority	82
Section 6.06.	Limitation on Suits	82
Section 6.07.	Rights of Holders to Receive Payment	83

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Section 6.08.	Collection Suit by Trustee	83
Section 6.09.	Trustee May File Proofs of Claim	83
Section 6.10.	Priorities	84
Section 6.11.	Undertaking for Costs	84
	ARTICLE 7
	TRUSTEE
Section 7.01.	Duties of Trustee	84
Section 7.02.	Rights of Trustee	85
Section 7.03.	Individual Rights of Trustee	87
Section 7.04.	Trustee’s Disclaimer	87
Section 7.05.	Notice of Defaults	87
Section 7.06.	[Reserved]	87
Section 7.07.	Compensation and Indemnity	87
Section 7.08.	Replacement of Trustee	88
Section 7.09.	Successor Trustee by Merger, etc.	89
Section 7.10.	Eligibility; Disqualification	89
	ARTICLE 8
	LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01.	Option to Effect Legal Defeasance or Covenant Defeasance	90
Section 8.02.	Legal Defeasance and Discharge	90
Section 8.03.	Covenant Defeasance	90
Section 8.04.	Conditions to Legal or Covenant Defeasance	91
Section 8.05.	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions	92
Section 8.06.	[Reserved]	92
Section 8.07.	Reinstatement	93
	ARTICLE 9
	AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01.	Without Consent of Holders of Notes	93
Section 9.02.	With Consent of Holders of Notes	94
Section 9.03.	[Reserved]	96
Section 9.04.	Revocation and Effect of Consents	96
Section 9.05.	Notation on or Exchange of Notes	96
Section 9.06.	Trustee to Sign Amendments, etc.	96
Section 9.07.	Payments for Consent	96

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	ARTICLE 10
	GUARANTEES
Section 10.01.	Guarantee	97
Section 10.02.	Limitation on Guarantor Liability	98
Section 10.03.	Execution and Delivery of Guarantee	99
Section 10.04.	Guarantors May Consolidate, etc., on Certain Terms	99
Section 10.05.	Release of Guarantees	100
	ARTICLE 11
	SATISFACTION AND DISCHARGE
Section 11.01.	Satisfaction and Discharge	101
Section 11.02.	Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions	102
Section 11.03.	Repayment to the Issuer	102
	ARTICLE 12
	MISCELLANEOUS
Section 12.01.	Notices	102
Section 12.02.	[Reserved]	104
Section 12.03.	Certificate and Opinion as to Conditions Precedent	104
Section 12.04.	Statements Required in Certificate or Opinion	104
Section 12.05.	Rules by Trustee and Agents and No Personal Liability of Directors, Officers, Employees and Stockholders	105
Section 12.06.	Governing Law	105
Section 12.07.	No Adverse Interpretation of Other Agreements	105
Section 12.08.	Successors	105
Section 12.09.	Severability	105
Section 12.10.	Counterpart Originals	105
Section 12.11.	Table of Contents, Headings, etc.	106
Section 12.12.	Waiver of Jury Trial	106
Section 12.13.	Agent for Service; Submission to Jurisdiction; Waiver of Immunities	106
Section 12.14.	Judgment Currency	106
Section 12.15.	Acknowledgement and Consent to Bail-in of EEA Financial Institutions	107

Exhibit A — Form of Note

Exhibit B — Form of Certificate of Transfer

Exhibit C — Form of Certificate of Exchange

Exhibit D — Form of Notation of Guarantee

Exhibit E — [Reserved]

Exhibit F — Form of Supplemental Indenture to be Delivered by Subsequent Guarantors

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This INDENTURE dated as of April 26, 2017, is by and among Grifols, S.A. (the “Issuer”), a company organized under the laws of Spain, the Guarantors party hereto, BNY Mellon Corporate Trustee Services Limited, a limited company organized under the laws of England and Wales, as trustee (the “Trustee”) and The Bank of New York Mellon SA/NV, a credit institution organized and existing under the laws of Belgium, acting through its Luxembourg branch, as Registrar.

The Issuer and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 3.200% Senior Notes due 2025 (the “Notes”):

ARTICLE 1

DEFINITIONS AND INCORPORATION BY
REFERENCE

Section 1.01.         Definitions.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

“144A Global Note” means the Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of the Common Depositary and registered in the name of The Bank of New York Depository (Nominees) Limited as nominee for the Common Depositary for accounts of Euroclear and Clearstream that will be issued in an initial amount equal to the outstanding principal amount of Notes sold in reliance on Rule 144A.

“Acquired Debt” means, with respect to any specified Person:

(1)           Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

(2)           Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Acquisition” means the acquisition pursuant to the Acquisition Agreement.

“Acquisition Agreement” means the Asset Purchase Agreement, dated as of December 14, 2016, by and among the Issuer, Grifols Diagnostic Solutions Inc. and Hologic, Inc.

“Additional Notes” means any Notes (other than Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control”, as used with respect to any Person, means the

possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control.  For purposes of this definition, the terms “controlling”, “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.

“Applicable Premium” means, as determined by the Issuer, with respect to any Note on any redemption date, the greater of:

(1)           1.0% of the principal amount of such Note; and

(2)           the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such Note at May 1, 2020 (such redemption price being set forth in the table appearing under Section 3.07(a) hereof), plus (ii) all required interest payments due on such Note through May 1, 2020 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Bund Rate as of such redemption date (or, if greater than such Bund Rate, zero) plus 0.50%; over (b) the principal amount of such Note.

“Applicable Procedures” means, with respect to any transfer, redemption or exchange of or for Book-Entry Interests in any Global Note, the rules and procedures of Euroclear and/or Clearstream that apply to such transfer, redemption or exchange.

“Asset Sale” means the sale, lease (as lessor), conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as a whole or the Issuer and its Restricted Subsidiaries taken as a whole will be governed by Section 4.18 and/or Section 5.01 and not by Section 4.12.

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

(1)           any single transaction or series of related transactions that involves assets or rights having a fair market value of less than $70.0 million;

(2)           a transfer of assets or rights between or among the Issuer and its Restricted Subsidiaries or between or among the Restricted Subsidiaries;

(3)           the sale, lease, conveyance or other disposition of equipment, inventory (including, but not limited to, raw materials, work-in-progress and finished goods), or other assets or rights in the ordinary course of business, or if excess, obsolete, damaged, worn-out, scrap or surplus or no longer used or useful in the conduct of business as then being conducted;

(4)           a Restricted Payment that is permitted by Section 4.10, or a Permitted Investment;

(5)           the sale, lease, conveyance or other disposition of property or assets acquired within the twelve month period prior to such sale, lease, conveyance or disposition in preparation for a sale and leaseback transaction relating to such property or assets;

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(6)           an issuance of Equity Interests by a Restricted Subsidiary to the Issuer or another Restricted Subsidiary;

(7)           the sale or other disposition of cash or Cash Equivalents;

(8)           the license or sub-license of patents, trademarks, copyrights, know how, process technology or other intellectual property to third Persons by the Issuer or a Restricted Subsidiary, so long as the Issuer or such Restricted Subsidiary retain the right to use such licensed property;

(9)           the granting or assumption of a Lien permitted by Section 4.11, including a Permitted Lien;

(10)         any sale or disposition of Securitization Assets to a Securitization Subsidiary in connection with a Qualified Securitization Financing;

(11)         the sale or disposition of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business;

(12)         Project Dispositions;

(13)         the sale or disposition of real property and related assets in the ordinary course of business in connection with relocation activities for directors, officers, members of management, employees or consultants of the Issuer or any Restricted Subsidiary;

(14)         the unwinding of Hedging Obligations;

(15)         the disposition of Investments in joint ventures to the extent required by, or made pursuant to, buy/sell arrangements between joint venture parties set forth in joint venture agreements or similar binding agreements; provided that such disposition is at fair market value (as determined in good faith by the Issuer’s Board of Directors) and any cash or Cash Equivalents received in such disposition is applied in accordance with Section 4.12;

(16)         any disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a Person (other than the Issuer or a Restricted Subsidiary) from whom such Restricted Subsidiary was acquired or from whom such Restricted Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition; and

(17)         any sale or disposition of the Equity Interests in TiGenix NV and any Equity Interests in other joint ventures with respect to research and development companies in an aggregate amount for all such transactions not to exceed $100.0 million.

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended.  Such

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present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with IFRS.

“Bail-in Legislation” means in relation to a member state of the European Economic Area or the United Kingdom which has implemented, or which at any time implements, the BRRD, the relevant implementing law, regulation, rule or requirement as described in the EU Bail-in Legislation Schedule from time to time.

“Bail-in Powers” means any Write-down and Conversion Powers as defined in the EU Bail-in Legislation Schedule, in relation to the relevant Bail-in Legislation.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors.

“Board of Directors” means:

(1)           with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board of directors;

(2)           with respect to a partnership, the board of directors of the general partner of the partnership;

(3)           with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4)           with respect to any other Person, the board or committee of such Person serving a similar function.

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Book-Entry Interest” means a beneficial interest in a Global Note held by or through a Participant.

“BRRD” means Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms.

“BRRD Liability” means a liability, if any, in respect of which the relevant Write Down and Conversion Powers in the applicable Bail-in Legislation may be exercised.

“BRRD Party” means The Bank New York Mellon SA/NV, Luxembourg Branch solely and exclusively in its role as Registrar under this Indenture. For the avoidance of doubt, BNY Mellon Corporate Trustee Services Limited as Trustee and any other capacity under the Indenture is not a BRRD Party under this Indenture.

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“Bund Rate” means, as of any redemption date, the rate per annum equal to the equivalent yield to maturity as of such redemption date of the Comparable German Bund Issue, assuming a price for the Comparable German Bund Issue (expressed as a percentage of its principal amount) equal to the Comparable German Bund Price for such relevant date, where:

(1)           “Comparable German Bund Issue” means the German Bundesanleihe security selected by any Reference German Bund Dealer as having a fixed maturity most nearly equal to the period from such redemption date to May 1, 2020, and that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of Euro denominated corporate debt securities in a principal amount approximately equal to the then outstanding principal amount of the Notes and of a maturity most nearly equal to May 1, 2020; provided, however, that, if the period from such redemption date to May 1, 2020 is less than one year, a fixed maturity of one year shall be used;

(2)           “Comparable German Bund Price” means, with respect to any relevant date, the average of all Reference German Bund Dealer Quotations for such date (which, in any event, must include at least two such quotations), after excluding the highest and lowest such Reference German Bund Dealer Quotations, or if the Issuer obtains fewer than four such Reference German Bund Dealer Quotations, the average of all such quotations;

(3)           “Reference German Bund Dealer” means any dealer of German Bundesanleihe securities appointed by the Issuer in good faith; and

(4)           “Reference German Bund Dealer Quotations” means, with respect to each Reference German Bund Dealer and any relevant date, the average as determined by the Issuer of the bid and offered prices for the Comparable German Bund Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Issuer by such Reference German Bund Dealer at 3:30 p.m. Frankfurt am Main, Germany time on the third Business Day preceding the relevant date.

“Business Day” means any day other than a Saturday or Sunday, (i) which is not a day on which banking institutions in the City of New York or London are authorized or required by law, regulation or executive order to close and, (ii) in the event that any payment by the Issuer of the principal of, and premium, if any, and interest on, the Notes is to be made in Euro, on which the Trans-European Automated Real-Time Gross Settlement Express Transfer system (the TARGET2 system), or any successor thereto, is open.

“Capital Lease Obligation” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person in accordance with IFRS (or GAAP to the extent required by applicable law) and the amount of such obligations shall be the capitalized amount thereof required to be set forth on a balance sheet of such Person in accordance with IFRS (or GAAP to the extent required by applicable law).

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“Capital Stock” means:

(1)           in the case of a corporation, any and all shares, including common stock and preferred stock;

(2)           in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3)           in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4)           any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Cash Equivalents” means:

(1)           direct obligations (or certificates representing an interest in such obligations) issued, or unconditionally guaranteed by, the government of a member state of the European Union, the United Kingdom, the United States of America, Switzerland or Canada (including, in each case, any agency or instrumentality thereof), as the case may be, the payment of which is backed by the full faith and credit of the relevant member state of the European Union, the United Kingdom or the United States of America, Switzerland or Canada, as the case may be, and which are not callable or redeemable at the option of the Issuer or any of its Restricted Subsidiaries;

(2)           overnight bank deposits, time deposit accounts, certificates of deposit, banker’s  acceptances and money market deposits with maturities (and similar instruments) of 12 months or less from the date of acquisition issued by a bank or trust company which is organized under, or authorized to operate as a bank or trust company under, the laws of a member state of the European Union, the United Kingdom or of the United States of America or any state thereof, Switzerland or Canada; provided that such bank or trust company has capital, surplus and undivided profits aggregating in excess of $400.0 million (or the foreign currency equivalent thereof as of the date of such investment) and whose long-term debt is rated “A-1” or higher by Moody’s or A+ or higher by S&P or the equivalent rating category of another internationally recognized rating agency;

(3)           repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (1) and (2) above entered into with any financial institution meeting the qualifications specified in clause (2) above;

(4)           commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and

(5)           money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (4) of this definition.

“Change of Control” means the occurrence of any of the following:

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(1)           any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the property and assets of the Issuer and the Restricted Subsidiaries, taken as a whole, to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture), other than to the Issuer or one or more Guarantors;

(2)           the adoption of any plan or proposal for the liquidation or dissolution of the Issuer (whether or not otherwise in compliance with the provisions of this Indenture); or

(3)           (a) any Person or Group (other than a Permitted Holder Group) shall be or become the owner, directly or indirectly, beneficially or of record, of shares representing more than 35% of the aggregate ordinary voting power represented by the Issuer’s issued and outstanding Capital Stock or (b) the Permitted Holder Group becomes the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the Issuer’s issued and outstanding Capital Stock.

“Clearstream” means Clearstream Banking, société anonyme.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Depositary” means The Bank of New York Mellon, London Branch.

“Consolidated Cash Flow” means (a) Consolidated Net Income of the Issuer and its Subsidiaries, plus, to the extent deducted in determining Consolidated Net Income of the Issuer and its Subsidiaries the sum, without duplication, of amounts for  (i) all financial results including interest expense, amortization or write-off of debt discount, other deferred financing costs, other fees and charges associated with Indebtedness, (ii) any losses on ordinary course hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, (iii) any foreign currency translation, transaction or exchange losses (including currency remeasurements of Indebtedness  and any losses resulting from ordinary course hedging obligations or other derivative instruments for currency exchange risk), (iv) any loss of any equity-accounted investee in which the Issuer or any of its Subsidiaries has a joint or minority interest,   (v) expenses for taxes based on income or gain, (vi) depreciation, (vii) amortization, write-offs, write-downs, and other non-cash charges, losses and expenses, (viii) impairment of intangibles, including, without limitation, goodwill, (ix) non-recurring items (as determined in accordance with  IFRS) realized other than in the ordinary course of business, without duplication, resulting in a loss, (x)  fees and expenses incurred in connection with the Transactions or, to the extent permitted hereunder, any Investment, Asset Sale, or incurrence of Indebtedness, in each case, whether or not consummated, including such fees and expenses related to any offering of any Permitted Refinancing Indebtedness, (xi) extraordinary, unusual, or non-recurring charges and expenses including transition, restructuring and “carveout” expenses, (xii)  legal, accounting, consulting, and other costs and expenses relating to the Issuer’s potential or actual issuance of Equity Interests, including without limitation an initial public offering of common stock and (xiii) the amount of cost savings, adjustments, operating expense reductions, operating improvements and synergies, in each case on a “run rate” basis and in connection with acquisitions, investments, restructurings, business optimization projects and other operational

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changes and initiatives (“Run Rate Amounts”) that are identifiable and projected in good faith to result from actions that have been or are expected to be taken within twelve (12) months of such date of determination; provided, that (x) the Trustee shall have received a reasonably detailed statement or schedule of such Run Rate Amounts, (y) such amounts are reasonably identifiable, reasonably attributable to the actions specified and reasonably anticipated to result from such actions and (z) the benefits resulting therefrom are anticipated by the Issuer to be realized within twelve (12) months of the end of such date on which Consolidated Cash Flow is tested; provided further, that for any such period, the amount added back in calculating Consolidated Cash Flow pursuant to this clause (xiii) shall not, in the aggregate, exceed 10% of Consolidated Cash Flow for such period (determined prior to giving effect to such add-backs), minus (b) to the extent included in consolidated income from operations, (i) interest income, (ii) non-recurring gains (as determined in accordance with IFRS) realized other than in the ordinary course of business, (iii) income or gains on ordinary course hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, (iv)  foreign currency translation, transaction or exchange gains (including currency remeasurements of Indebtedness  and any gains resulting from ordinary course hedging obligations or other derivative instruments for currency exchange risk) and (v) any income of any equity-accounted investee in which the Issuer or any of its Subsidiaries has a joint or minority interest, except to the extent of the amount of dividends or other distributions actually paid to the Issuer or any Subsidiary by such Person during such period,  all calculated without duplication for the Issuer and its Subsidiaries on a consolidated basis.

For purposes of the maximum Leverage Ratio, the Secured Leverage Ratio and the Fixed Charge Coverage Ratio,  Consolidated Cash Flow shall be calculated pro forma for material acquisitions and disposals, such that Consolidated Cash Flow would be adjusted to (a) include net income before net interest expense, taxes, depreciation and amortization attributable to the acquired entity (or assets) prior to its becoming a Subsidiary of the Issuer during the relevant period, and (b) exclude net income before net interest expense, taxes, depreciation and amortization attributable to the disposed of entity (or assets) prior to its being disposed of by the Group during the relevant period.

“Consolidated Net Income” means, for any period (subject to the proviso to the definition of “Limited Condition Acquisition”), the total net income (or loss) attributable to the Issuer and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with IFRS (before any adjustment for profit and loss attributable to minority interests and capitalized interest) minus any after tax non-cash gains (or losses) attributable to Asset Sales or returned surplus assets of any Pension Plan.

“Consolidated Net Total Debt” means, as of any date of determination, the aggregate stated balance sheet amount of all funded Indebtedness (including Guarantees) of the Issuer and the Restricted Subsidiaries determined on a consolidated basis in accordance with IFRS (exclusive of (i) any Contingent Liability in respect of any letter of credit and (ii) obligations in respect of derivative transactions that have not been terminated) minus the amount of unrestricted cash and Cash Equivalents of the Issuer and the Restricted Subsidiaries determined on a consolidated basis in accordance with IFRS.

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“Consolidated Senior Secured Debt” means, as of any date of determination, Consolidated Net Total Debt minus unsecured Indebtedness of the Issuer and the Restricted Subsidiaries on a consolidated basis.

“Contingent Liability” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection). The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation with respect thereto) be deemed to be the outstanding principal amount of the Indebtedness guaranteed thereby.

“Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 12.01 hereof or such other address as to which the Trustee may give notice to the Issuer.

“Credit Agreement” means that certain credit and guaranty agreement of the Issuer and certain of its Subsidiaries with Bank of America, N.A., as administrative agent, and the other parties thereto, dated on or about January 31, 2017, including any related notes, Guarantees, instruments and agreements executed in connection therewith, and, in each case, as amended, modified, renewed, refunded, replaced (whether after or upon termination or otherwise), restructured, restated or refinanced (including any agreement to extend the maturity thereof and adding additional borrowers or guarantors and including by means of sales of debt securities) in whole or in part under such agreement or agreements or any successor agreement or agreements from time to time under the same or any other agent, lender or group of lenders and including increasing the amount of available borrowings thereunder; provided that such increase is permitted under Section 4.09.

“Credit Facilities” means one or more debt facilities or agreements (including, without limitation, the Credit Agreement) or commercial paper facilities or indentures, in each case with banks or other institutional lenders providing for, or acting as initial purchasers of, revolving credit loans, term loans, notes, debentures, securities, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether after or upon termination or otherwise), restructured, restated or refinanced (including any agreement to extend the maturity thereof and adding additional borrowers or guarantors and including by means of sales of debt securities to institutional investors) in whole or in part from time to time and including increasing the amount of available borrowings thereunder; provided that such increase is permitted by Section 4.09.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in substantially the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

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“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, Euroclear and Clearstream, including any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provisions of this Indenture.

“Description of Notes” means the section entitled “Description of Notes” in the Offering Memorandum.

“Designated Non-Cash Consideration” means the fair market value of non-cash consideration received by the Issuer or any Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-Cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale, redemption or payment of, on or with respect to, such Designated Non-Cash Consideration.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature.  Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Issuer or any of its Restricted Subsidiaries to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Issuer or such Restricted Subsidiary may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.10.  The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Issuer and the Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.

“Distribution Compliance Period” means the 40-day distribution compliance period as defined in Regulation S.

“Equity Interests” means Capital Stock and all warrants, options, restricted stock units, performance units or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, the regulations promulgated thereunder and any successor thereto.

“EU Bail-in Legislation Schedule” means the document described as such, then in effect, and published by the Loan Market Association (or any successor person) from time to time at http://www.lma.eu.com.

“Euroclear” means Euroclear Bank, S.A./N.V. and any successor thereto.

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Excluded Contribution” means net cash proceeds or property or assets received by the Issuer from (1) capital contributions to the equity of the Issuer (other than through the issuance of Disqualified Stock), and (2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock) of the Issuer, in each case designated as Excluded Contributions pursuant to an Officer’s Certificate of the Issuer delivered to the Trustee.

“Existing Indebtedness” means Indebtedness of the Issuer and its Restricted Subsidiaries (without duplication) in existence on the Issue Date (other than Indebtedness under the Credit Agreement or in respect of the Notes), until such amounts are repaid.

“Existing Notes” means Grifols Worldwide Operations Limited’s $1.0 billion aggregate principal amount of 5.25% senior notes due 2022.

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period.  In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom (including use on the Calculation Date) as if the same had occurred at the beginning of the applicable four-quarter reference period; provided, however, that the Fixed Charges of such Person attributable to interest on any Indebtedness under a revolving credit facility computed on a pro forma basis will be computed based on the average daily balance of such Indebtedness during the four-quarter reference period and using the interest rate in effect at the end of such period (taking into account any interest rate option, swap, cap or similar agreement applicable to such Indebtedness).

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1)           acquisitions that have been made or are, on the Calculation Date, being made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Restricted Subsidiaries acquired by (including acquisitions on the Calculation Date) the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including any increase in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for

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such reference period will be calculated without giving effect to the deduction set forth in the definition of “Consolidated Net Income”;

(2)           the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with IFRS and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded; and

(3)           the Fixed Charges attributable to discontinued operations, as determined in accordance with IFRS and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date;

provided that whenever pro forma effect is to be given to an acquisition or a disposition, the amount of income or earnings related thereto (including the incurrence of any Indebtedness and any pro forma expense and cost reductions that have occurred or are reasonably expected to occur, regardless of whether those expense and cost reductions could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any regulation or policy of the SEC related thereto) shall be reasonably determined in good faith by one of the Issuer’s responsible senior financial or accounting officers so long as such cost savings are actually expected to be achieved within 12 months of such acquisition or disposition; provided further that any Run Rate Amounts shall be determined in accordance with the determination set forth in the definition of “Consolidated Cash Flow”.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

(1)           the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates); plus

(2)           the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

(3)           any interest actually paid on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

(4)           the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than (i) dividends on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or one of its Restricted Subsidiaries and (ii) dividends on any series of preferred stock of such Person or any of its Restricted Subsidiaries where such dividends are also payable pro rata on common stock of such Person or any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is

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one minus the then current combined  federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with IFRS.

“GAAP” means generally accepted accounting principles in the United States or Spain, as applicable, which are in effect from time to time.

“Global Note Legend” means the legend set forth in Section 2.06(f)(ii), which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means the global Notes in the form of Exhibit A hereto issued in accordance with Article 2 hereof.

“Government Securities” means securities that are:

(1) direct obligations (or certificates representing an interest in such obligations) of the government of a member state of the European Union, the United Kingdom, the United States of America or Switzerland for the timely payment of which its full faith and credit is pledged; or

(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the government of such member state of the European Union, the United Kingdom, the United States of America or Switzerland and the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the government of a member state of the European Union, the United Kingdom, the United States of America or Switzerland, which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

“Guarantor” means each Person that Guarantees the Notes in accordance with this Indenture.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1)           interest rate swap agreements (whether from fixed to floating or floating to fixed), interest rate cap agreements and interest rate collar agreements;

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(2)           other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3)           foreign exchange contracts, currency swap agreements or other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holder” means each Person in whose name the Notes are registered on the Registrar’s books, which Holder shall initially be The Bank of New York Depository (Nominees) Limited, the nominee of the Common Depositary for Euroclear and Clearstream.

“IFRS” means the International Financial Reporting Standards, as promulgated by the International Accounting Standards Board (or any successor board or agency), as in effect on the Issue Date.

“Immaterial Subsidiary” means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $150.0 million and whose total revenues for the most recent 12-month period do not exceed $150.0 million; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of the Issuer or any of its other Restricted Subsidiaries.

“Indebtedness” means, with respect to any specified Person, any indebtedness (excluding accrued expenses or trade payables), of such Person, whether or not contingent:

(1)           in respect of borrowed money;

(2)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3)           in respect of banker’s acceptances;

(4)           representing Capital Lease Obligations;

(5)           representing the balance deferred and unpaid of the purchase price of any property due more than six months after such property is acquired, except any such balance that constitutes an accrued expense or trade payable; or

(6)           representing the net amount of any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with IFRS.  In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date will be (without duplication):

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(1)           the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

(2)           the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; and

(3)           in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

(a)           the fair market value of such assets that are subject to such Lien at the date of determination; and

(b)           the amount of the Indebtedness of the other Person secured by such assets.

“Indenture” means this instrument, as originally executed or as it may from time to time be supplemented or amended in accordance with Article 9 hereof.

“Indirect Participant” means a Person who holds a Book-Entry Interest in a Global Note through a Participant.

“Initial Notes” means up to €1,000,000,000 in aggregate principal amount of Notes issued under this Indenture on the date hereof.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with IFRS (or GAAP to the extent required by applicable law) (it being understood that capital expenditures shall not be deemed to be “Investments”).  If the Issuer or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Issuer such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Issuer, the Issuer will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.10.  The acquisition by the Issuer or any of its Restricted Subsidiaries of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Issuer or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.10.  Except as otherwise provided in this Indenture, the amount of an Investment will be determined at the time the Investment was made and without giving effect to subsequent changes in value.

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“Issue Date” means April 26, 2017.

“Leverage Ratio” means the ratio as of the last day of any fiscal quarter of (a) Consolidated Net Total Debt as of such day to (b) Consolidated Cash Flow of the Issuer and the Restricted Subsidiaries on a consolidated basis for the four-fiscal quarter period ending on such date.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Limited Condition Acquisition” means any acquisition, including by way of merger, amalgamation or consolidation, by the Issuer or one or more of its Restricted Subsidiaries whose consummation is not conditioned upon the availability of, or on obtaining, third party financing; provided that the Consolidated Net Income (and any other financial term derived therefrom), other than for purposes of calculating any ratios in connection with the Limited Condition Acquisition, shall not include any Consolidated Net Income of or attributable to the target company or assets associated with any such Limited Condition Acquisition unless and until the closing of such Limited Condition Acquisition shall have actually occurred.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer or any Restricted Subsidiary in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs directly attributable to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, (ii) taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale, (iv) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with IFRS (or GAAP to the extent required by applicable law) (unless such reserve is not used) against any liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations (whether fixed or contingent) associated with such Asset Sale.

“Non-Recourse Debt” means Indebtedness:

(1)           as to which neither the Issuer nor any of the Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or (b) is directly or indirectly liable as a Guarantor or otherwise;

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(2)           no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Issuer or any of the Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity; and

(3)           as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Issuer or any of the Restricted Subsidiaries.

“Non-U.S. Person” means a Person that is not a U.S. Person.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Memorandum” means that certain offering memorandum, dated as of April 12, 2017, relating to the offering and sale of the Notes by the Issuer.

“Officer” means the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, or any other officer authorized by actions of the Board of Directors of the Issuer, or, in the case of the Issuer, any duly elected director (including any alternate director) or other person authorized by actions of the Board of Directors of the Issuer.

“Officer’s Certificate” means a certificate, in form and substance reasonably satisfactory to the Trustee, signed by an Officer of the Issuer and delivered to the Trustee.  The Officer signing an Officer’s Certificate given pursuant to Section 4.04 shall be the principal executive officer, principal financial officer or the principal accounting officer of the Issuer.

“Opinion of Counsel” means a written opinion, in form and substance reasonably satisfactory to the Trustee, from legal counsel who is acceptable to the Trustee and which meets the requirements of Section 12.04 hereof.  The counsel may be an employee of or counsel to the Issuer.

“Participant” means, with respect to Euroclear or Clearstream, a Person who has an account with Euroclear or Clearstream, respectively.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 or Section 430 of the Internal Revenue Code or Section 302 or Section 303 of ERISA.

“Permitted Business” means healthcare products and services (including the lines of business conducted by the Issuer and the Restricted Subsidiaries on the date of the indenture) and any businesses ancillary, complementary or reasonably related thereto.

“Permitted Holder Group” means any group comprised solely of the Grifols family, holding directly or indirectly (the “Existing Holders”), or (ii) a person or group of related persons for purposes of Section 13(d) of the Exchange Act that includes the Existing Holders where the

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Existing Holders control (whether through exercise of voting rights, by contract or otherwise) the Issuer.

“Permitted Investments” means:

(1)           any Investment in the Issuer or in a Restricted Subsidiary;

(2)           any Investment in cash and Cash Equivalents and Investments that were Cash Equivalents when made;

(3)           loans and advances to employees, officers, consultants and directors of the Issuer or a Restricted Subsidiary in the ordinary course of business for bona fide business purposes not in excess of $30.0 million at any one time outstanding;

(4)           any Investment by the Issuer or a Restricted Subsidiary in a Person, if as a result of such Investment:

(a)           such Person becomes a Restricted Subsidiary; or

(b)           such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary;

(5)           any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.12;

(6)           any acquisition of assets or Capital Stock solely in exchange for the issuance of the Issuer’s Equity Interests (other than Disqualified Stock);

(7)           any Investments received (A) in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business of the Issuer or the Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency or other reorganization of any trade creditor or customer or (B) in resolution of litigation, arbitration or other disputes or (C) as a result of foreclosure, perfection or enforcement of any Lien;

(8)           Hedging Obligations;

(9)           any Investments in one or more Permitted Joint Ventures or Unrestricted Subsidiaries, in each case so long as the Leverage Ratio, at the time of each such Investment, after giving pro forma effect to such Investment, would not be greater than 4.00 to 1.00 plus an additional amount not to exceed $250.0 million (“Additional JV Investment Basket”), with respect to which the amount of such Investment shall be reduced by any amounts received in cash in respect of the sale, transfer or other disposition of Investments in Permitted Joint Ventures made pursuant to the Additional JV Investment Basket; provided, however, that if any Investment pursuant to this clause (9) is made in any Person that is not a Restricted Subsidiary at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1)

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above and shall cease to have been made pursuant to this clause (9) for so long as such Person continues to be a Restricted Subsidiary;

(10)         payroll, travel, moving and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

(11)         repurchases of the Notes;

(12)         notes, chattel paper and accounts receivable owing to the Issuer or the Restricted Subsidiaries created or acquired in the ordinary course of business (including concessionary trade terms the Issuer deems reasonable under the circumstances);

(13)         Investments in existence or made pursuant to legally binding written commitments in existence on the Issue Date, and any extension, modification, replacement, refunding, refinancing or renewal thereof in whole or in part;

(14)         Guarantees of Indebtedness issued in accordance with Section 4.09, and performance or completion Guarantees in the ordinary course of business;

(15)         Investments of a Restricted Subsidiary acquired after the Issue Date, or of an entity acquired by, merged into, amalgamated with, or consolidated with a Restricted Subsidiary in a transaction that is not prohibited by Article 5 of this Indenture after the Issue Date, to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation;

(16)         Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment, including pre-payments therefor;

(17)         deposits, prepayments and other credits to suppliers in the ordinary course of business consistent with past practice;

(18)         Investments representing amounts held for employees of the Issuer and the Restricted Subsidiaries under deferred compensation plans; provided that the amount of such Investments (excluding income earned thereon) shall not exceed the amount otherwise payable to such employees the payment of which was deferred under such plan and any amounts matched by the Issuer or the Restricted Subsidiaries under such plan;

(19)         Investments consisting of the licensing or contribution of intellectual property pursuant to development, marketing or manufacturing agreements or arrangements or similar agreements or arrangements with other Persons in the ordinary course of business;

(20)         any Investment in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Subsidiary of the Issuer or a Restricted Subsidiary or an employee stock ownership plan or similar trust) of the Issuer’s Capital Stock (other than Disqualified Stock); provided that the amount of any net cash proceeds that are utilized for such Investment will be excluded from clause(d)(c)(ii) of the first paragraph of Section 4.10;

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(21)         Investments consisting of advances or loans to Persons building, developing or overseeing the construction of plasma collection centers expected to supply principally the Issuer or the Restricted Subsidiaries in the ordinary course of business and consistent with past practice;

(22)         Investments relating to any Securitization Subsidiary of the Issuer or any Restricted Subsidiary organized in connection with a Qualified Securitization Financing that, in the good faith determination of the Board of Directors of the Issuer, are necessary or advisable to effect such Qualified Securitization Financing;

(23)         Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices; and

(24)         other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (24) that are at the time outstanding, not to exceed the greater of (i) $400 million and (ii) 3.2% of Total Assets.

“Permitted Joint Venture” means any joint venture that the Issuer or any Restricted Subsidiary is a party to that is engaged in a Permitted Business.

“Permitted Liens” means:

(1)           Liens to secure Obligations in respect of any Indebtedness incurred under Section 4.09(b)(i);

(2)           Liens securing Indebtedness incurred under Section 4.09(a); provided that at the time of incurrence and after giving pro forma effect to the incurrence of such Indebtedness and the application of the proceeds therefrom on such date, the Secured Leverage Ratio would not exceed 4.5 to 1.00;

(3)           Liens in favor of the Issuer or any Restricted Subsidiary;

(4)           Liens and deposits to secure the performance of bids, trade contracts, leases, statutory obligations, letters of credit or trade guarantees, surety or appeal bonds, performance bonds or other obligations of a like nature, in each case in the ordinary course of business;

(5)           Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of Section 4.09(b) covering only the assets acquired, or financed, with such Indebtedness;

(6)           Liens existing on the date of this Indenture and any extensions, renewals or replacements thereof;

(7)           Liens for Taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is

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required in conformity with IFRS (or GAAP to the extent required by applicable law), has been made therefor and Liens for Taxes assessed on real estate assets that are not delinquent;

(8)           Liens, pledges or deposits in the ordinary course of business to secure workers’ compensation claims, self-retention or self-insurance obligations, unemployment insurance, performance, bid, release, appeal, surety and similar bonds and related reimbursement obligations and completion guarantees provided or incurred by the Issuer and the Restricted Subsidiaries in the ordinary course of business, lease obligations or non-delinquent obligations under social security laws and obligations in connection with participation in government insurance, benefits, reimbursement or other programs or other similar requirements, return of money bonds and other similar obligations, including obligations to secure health and safety and environmental obligations (exclusive of obligations for the payment of borrowed money or Indebtedness);

(9)           Liens imposed by law, such as carrier’s, supplier’s, workmen’s, warehousemen’s, landlord’s, materialmen’s, repairmen’s and mechanic’s Liens and other similar Liens arising in the ordinary course of business or are being contested in good faith;

(10)         easements, rights-of-way, restrictions and encroachments and other minor defects or irregularities in title (including matters indicated on a survey of an affected property), in each case, which do not interfere in any material respect with the use of the affected property by the Issuer and its Restricted Subsidiaries and that do not secure any monetary obligations that are not otherwise Liens permitted hereunder;

(11)         Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under this Indenture, secured by the same property securing the Hedging Obligations;

(12)         Liens securing Permitted Refinancing Indebtedness, provided that such Liens do not extend to any property or assets other than the property or assets that secure the Indebtedness being refinanced;

(13)         Liens created for the benefit of or securing the Notes and the Guarantees;

(14)         Liens arising from judgments in circumstances not constituting an Event of Default as described in Article 6 hereof;

(15)         Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods in the ordinary course of business;

(16)         Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(17)         bankers’ Liens, rights of setoff or similar rights and remedies as to deposit accounts;

(18)         Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the

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account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(19)         Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings in the ordinary course of business;

(20)         Liens on accounts receivable and related assets of a Securitization Subsidiary incurred in connection with a Qualified Securitization Financing;

(21)         Liens on property (including Capital Stock) of a Person existing at the time such Person becomes a Restricted Subsidiary of the Issuer or is merged with or into or consolidated with the Issuer or any of its Restricted Subsidiaries; provided that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary of the Issuer or such merger or consolidation, were not incurred in contemplation thereof and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary of the Issuer or is merged with or into or consolidated with the Issuer or any of its Restricted Subsidiaries;

(22)         filing of Uniform Commercial Code financing statements under U.S. state law (or similar filings under applicable jurisdiction) in connection with operating leases in the ordinary course of business;

(23)         operating leases, licenses, subleases and sublicenses of assets (including real property and intellectual property rights), in each case entered into in the ordinary course of business;

(24)         Liens (including put and call arrangements) on Capital Stock or other securities of any Unrestricted Subsidiary that secure Indebtedness of such Unrestricted Subsidiary;

(25)         limited recourse Liens in respect of the ownership interests in, or assets owned by, any joint ventures which are not Restricted Subsidiaries securing obligations of such joint ventures;

(26)         Liens incurred by the Issuer or any Restricted Subsidiary with respect to obligations that do not exceed the greater of (i) $600 million and (ii) 5.0% of Total Assets at any one time outstanding;

(27)         Liens on the assets of any Restricted Subsidiary (other than the Issuer or any Guarantor) to secure Indebtedness of such Restricted Subsidiary;

(28)         Liens solely on cash earnest money deposits made by the Issuer or any Restricted Subsidiary in connection with any letter-of-intent or purchase agreement entered into in connection with any Investment permitted under this Indenture;

(29)         any interest of a lessor or sublessor under any lease of real estate permitted hereunder and covering only the assets so leased and any Liens encumbering such lessor’s or sublessor’s interest or title;

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(30)         any zoning or similar law or right reserved or vested in any governmental office or agency to control or regulate the use of any real property not inconsistent with the present use or operation of the real property; and

(31)         Liens incurred by the Issuer or any Restricted Subsidiary to secure Indebtedness or other obligations in an aggregate principal amount at the time of incurrence of such Indebtedness or other obligations not to exceed $10 million.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Issuer or any of the Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease, refund or discharge other Indebtedness of the Issuer or any of the Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1)           the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased, refunded or discharged (plus all accrued interest on the Indebtedness and the amount of all fees, expenses and premiums incurred in connection therewith);

(2)           such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased, refunded or discharged;

(3)           if the Indebtedness being extended, refinanced, renewed, replaced, defeased, refunded or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased, refunded or discharged; and

(4)           such Indebtedness is incurred either by the Issuer, a Guarantor or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased, refunded or discharged.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.06(f)(i) hereof to be placed on all Notes issued under this Indenture except as otherwise permitted by the provisions of this Indenture.

“Project Disposition” means any sale, assignment, conveyance, transfer or other disposition of facilities under construction of the Issuer and its Restricted Subsidiaries as of the Issue Date (including the real estate related thereto) which are intended by the Issuer upon completion of construction to be repurchased or leased by the Issuer or one of its Restricted

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Subsidiaries or any business related, ancillary or complementary thereto; provided, that the consideration received for such assets shall be cash in an amount at least equal to the book value.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Qualified Equity Offering” means any public or any private offering of the Issuer’s Capital Stock (excluding Disqualified Stock).

“Qualified Securitization Financing” means any transaction or series of transactions entered into by the Issuer or any of its Restricted Subsidiaries pursuant to which the Issuer or such Restricted Subsidiary sells, conveys, contributes, assigns, grants an interest in or otherwise transfers to a Securitization Subsidiary, Securitization Assets (and/or grants a security interest in such Securitization Assets transferred or purported to be transferred to such Securitization Subsidiary), and which Securitization Subsidiary funds the acquisition of such Securitization Assets (a) with cash, (b) through the issuance to the Issuer’s or such Seller’s Retained Interests or an increase in the Issuer’s or such Seller’s Retained Interests, and/or (c) with proceeds from the sale, pledge or collection of Securitization Assets.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Notes publicly available, an internationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means the Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of the Common Depositary and registered in the name of The Bank of New York Depository (Nominees) Limited as nominee for the Common Depositary for accounts of Euroclear and Clearstream that will be issued in an initial amount equal to the outstanding principal amount of Notes sold in reliance on Regulation S.

“Relevant Resolution Authority” means the resolution authority with the ability to exercise any Bail-in Powers in relation to the BRRD Party.

“Replacement Assets” means any properties or assets used or useful in a Permitted Business.

“Responsible Officer” when used with respect to the Trustee, means any officer within the Corporate Trust Department of the Trustee (or any successor group of the Trustee), including any vice president, assistant secretary, senior associate, associate, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or any officer of the Corporate Trust Department of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.

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“Restricted Definitive Note” means one or more Definitive Notes bearing the Private Placement Legend.

“Restricted Global Notes” means the 144A Global Note and the Regulation S Global Note.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means, at any time, each direct and indirect Subsidiary of the Issuer that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary”.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“S&P” means S&P Global Ratings, and any successor to its rating agency business.

“SEC” means the Securities and Exchange Commission.

“Secured Leverage Ratio” means the ratio as of the last day of any fiscal quarter of (a) Consolidated Senior Secured Debt as of such day to (b) Consolidated Cash Flow of the Issuer and the Restricted Subsidiaries on a consolidated basis for the four-fiscal quarter period ending on such date.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Securitization Assets” means any accounts receivable owed to the Issuer or any of its Subsidiaries (whether now existing or arising or acquired in the future) arising in the ordinary course of business from the sale of goods or services, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, all proceeds of such accounts receivable and other assets (including contract rights) which are of the type customarily transferred or in respect of which security interests are customarily granted in connection with securitizations of accounts receivable and which are sold, conveyed, contributed, assigned, pledged or otherwise transferred by the Issuer or any of its Subsidiaries to a Securitization Subsidiary.

“Securitization Repurchase Obligation” means any obligation of a seller of Securitization Assets in a Qualified Securitization Financing to repurchase Securitization Assets arising as a result of a breach of a representation, warranty or covenant with respect to such Securitization Assets, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off set, counterclaim or other dilution of any kind as a result of any action taken

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by, any failure to take action by or any other event relating to the seller, but in each case, not as a result of such receivable being or becoming uncollectible for credit reasons.

“Securitization Subsidiary” means a Restricted Subsidiary of the Issuer that engages in no activities other than in connection with the acquisition and/or financing of Securitization Assets, all proceeds thereof and all rights (contingent and other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Issuer (or a duly authorized committee thereof) or such other Person (as provided below) as a Securitization Subsidiary and (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Issuer or any of its Subsidiaries, other than another Securitization Subsidiary (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Issuer or any of its Subsidiaries, other than another Securitization Subsidiary, in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset (other than Securitization Assets) of the Issuer or any of its Subsidiaries, other than another Securitization Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which none of the Issuer nor any of its Subsidiaries, other than another Securitization Subsidiary, has any material contract, agreement, arrangement or understanding other than (i) the applicable receivables purchase agreements and related agreements, in each case, having reasonably customary terms, or (ii) on terms which the Issuer reasonably believes to be no less favorable to the Issuer or the applicable Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer or any of its Subsidiaries and (c) to which neither the Issuer nor any of its Subsidiaries other than another Securitization Subsidiary, has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.  Any such designation by the Board of Directors of the Issuer (or a duly authorized committee thereof) or such other Person shall be evidenced to the trustee by delivery to the trustee of a certified copy of the resolution of the Board of Directors of the Issuer or such other Person giving effect to such designation and a certificate executed by an authorized officer certifying that such designation complied with the foregoing conditions.

“Seller’s Retained Interests” means the Indebtedness or Equity Interests held by the Issuer or any of its Subsidiaries in a Securitization Subsidiary to which Securitization Assets have been transferred, including any such debt or equity received as consideration for or as a portion of the purchase price for the Securitization Assets transferred, or any other instrument through the Issuer or such Subsidiary has rights to or receives distributions in respect of any residual or excess interest in the Securitization Assets.

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as in effect on the Issue Date.

“Standard Securitization Undertakings” means representations, warranties, covenants, Securitization Repurchase Obligations and indemnities entered into by the Issuer or any of its Subsidiaries that are reasonably customary in accounts receivable securitization transactions.

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“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Indebtedness” means all Indebtedness (whether outstanding on the Issue Date or thereafter incurred) that is subordinated or junior in right of payment to the Notes pursuant to a written agreement, executed by the Person to whom such Indebtedness is owed, to that effect.

“Subsidiary” means with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which (x) any Person has the power to direct or cause the direction of the management or policies, or the dismissal or appointment of the management, of a Person, whether through the ability to exercise voting power, by contract or otherwise and the accounts of which are required to be consolidated with those of such Person in such Person’s consolidated financial statements in accordance with IFRS or (y) more than 50.0% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise specified herein, all references to any “Subsidiary” shall refer to a Subsidiary of the Issuer.

“Tax” means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other liabilities related thereto).

“Taxing Authority” means any government or political subdivision or territory or possession of any government or any authority or agency therein or thereof having power to impose or collect any Tax.

“Total Assets” means the total consolidated assets of the Issuer and the Restricted Subsidiaries, as shown on the most recent internal balance sheet of the Issuer prepared on a consolidated basis (excluding Unrestricted Subsidiaries) in accordance with IFRS.

“Transactions” means (i) the Acquisition, (ii) the entry into the Credit Agreement and the incurrence of loans thereunder and the repayment of certain of the Issuer’s and the Restricted Subsidiaries’ existing Indebtedness in connection therewith and (iii) the issuance and sale of the notes offered hereby, the repayment of the Existing Notes and the other transactions in connection therewith described under the section “Use of Proceeds” in the Offering Memorandum.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) under the Securities Act.

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“Unrestricted Definitive Notes” means one or more Definitive Notes that do not and are not required to bear the Private Placement Legend.

“Unrestricted Global Notes” means one or more Global Notes, in the form of Exhibit A attached hereto, that do not and are not required to bear the Private Placement Legend and are deposited with and registered in the name of the Depositary or its nominee.

“Unrestricted Subsidiary” means any Subsidiary (or any successor to any of them) that is designated by the Issuer’s Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

(1)           has no Indebtedness other than Non-Recourse Debt;

(2)           except as permitted pursuant to Section 4.14, is not party to any agreement, contract, arrangement or understanding with the Issuer or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Issuer or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Issuer and/or the Restricted Subsidiaries;

(3)           is a Person with respect to which neither the Issuer nor any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results;

(4)           has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Issuer or any Restricted Subsidiary; and

(5)           has at least one director on its Board of Directors that is not a director or executive officer of the Issuer or any Restricted Subsidiary and has at least one executive officer that is not a director or executive officer of the Issuer or any Restricted Subsidiary.

Any designation of a Subsidiary as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.10 hereof.  If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Issuer will be in Default of Section 4.09.  The Issuer’s Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; (2) no Default or Event of Default would be in existence following such designation; and (3) such Subsidiary executes and delivers to the Trustee a supplemental indenture providing for a Guarantee.

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“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1)           the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(2)           the then outstanding principal amount of such Indebtedness.

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Section 1.02.         Other Definitions.

Term	Defined in Section
“Additional Amounts”	4.21
“Additional JV Investment Basket”	1.01 (Permitted Investments)
“Affiliate Transaction”	4.14
“Alternate Offer”	4.18
“Asset Sale Offer”	3.09
“Authentication Order”	2.02
“Benefited Party”	10.01
“Change of Control Offer”	4.18
“Change of Control Payment”	4.18
“Covenant Defeasance”	8.03
“Covenant Suspension Event”	4.20
“Existing Holders”	1.01 (Permitted Holder Group)
“Event of Default”	6.01
“Excess Proceeds”	4.12
“incur”	4.09
“Legal Defeasance”	8.02
“losses”	7.07
“non-U.S. Guarantor”	4.21
“Notes”	Preamble
“Offer Amount”	3.09
“Offer Period”	3.09
“Paying Agent”	2.03
“Payment Default”	6.01
“Permitted Debt”	4.09
“Primary Lien”	4.11
“Purchase Date”	3.09
“Registrar”	2.03
“Restricted Payments”	4.10
“Reversion Date”	4.20
“Run Rate Amounts”	1.01 (Consolidated Cash Flow)
“Security Register”	9.02
“Suspended Covenant”	4.20
“Suspension Date”	4.20
“Taxing Jurisdiction”	4.21
“TIA”	1.03

Section 1.03.         Trust Indenture Act Not Applicable or Incorporated.

For the avoidance of doubt, this Indenture shall not be required to be qualified under the Trust Indenture Act of 1939, as amended (15 U.S.C. §§77aa-77bbbb) (the “TIA”), and no provisions of the TIA shall be incorporated herein by reference.

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Section 1.04.         Rules of Construction.

(a)           Unless the context otherwise requires:

(i)            a term has the meaning assigned to it;

(ii)           an accounting term not otherwise defined herein has the meaning assigned to it in accordance with IFRS (or GAAP to the extent required by applicable law);

(iii)          “or” is not exclusive;

(iv)          words in the singular include the plural, and in the plural include the singular;

(v)           all references in this instrument to designated “Articles”, “Sections” and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed;

(vi)          the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

(vii)         “including” means “including without limitation”;

(viii)        provisions apply to successive events and transactions; and

(ix)          references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time.

ARTICLE 2

THE NOTES

Section 2.01.         Form and Dating.

(a)           General.  The Notes are hereby authorized in an initial principal amount of €1,000,000,000.  The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto.  The Notes may have notations, legends or endorsements required by law, stock exchange rules or usage and as provided herein.  Each Note shall be dated the date of its authentication.  The Notes shall be in denominations of €100,000 and integral multiples of €1,000 in excess thereof.  The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.  However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

The terms and provision of the Guarantees will constitute, and shall expressly be made, a part of this Indenture and the Issuer and the Guarantors and the Trustee, by their execution and

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delivery of this Indenture, shall expressly agree to such terms and provisions and to be bound hereby.  Any reference to a Guarantor herein shall be deemed to be a reference thereto solely from and after the date of its execution and delivery of a supplemental indenture hereto in the form of Exhibit F hereto.

(b)           Global Notes.  Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto).  Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the Schedule of Exchanges of Interests in the Global Note attached thereto).  Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including members of, or Participants in, Euroclear and Clearstream and Persons that may hold interests through Participants, to take any action that a Holder is entitled to take under this Indenture or the Notes.

(c)           144A Global Notes and Regulation S Global Notes. Notes sold within the United States to QIBs pursuant to Rule 144A under the Securities Act shall be issued initially in the form of a 144A Global Note, which shall be deposited with the Common Depositary (or nominee thereof) for Euroclear and Clearstream, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the 144A Global Note may from time to time be increased or decreased by adjustments made on Schedule A to each such Global Note, as hereinafter provided.

Notes offered and sold in reliance on Regulation S shall be issued initially in the form of a Regulation S Global Note, which shall be deposited with the Common Depositary (or a nominee thereof) for Euroclear and Clearstream, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided.  The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on Schedule A to each such Global Note, as hereinafter provided.

(d)           Definitive Notes. Definitive Notes issued upon a transfer of a Book-Entry Interest or a Definitive Note, or in exchange for a Book-Entry Interest or a Definitive Note, shall be issued in accordance with this Indenture.

Notes issued in definitive form shall be substantially in the form of Exhibit A hereto (excluding the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” in the form of Schedule A attached thereto).

(e)           Book-Entry Provisions.  The Applicable Procedures shall be applicable to Book-Entry Interests in the Global Notes that are held by a Participant through Euroclear or Clearstream.

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Section 2.02.         Execution and Authentication.

(a)           One Officer of the Issuer shall sign the Notes by manual, facsimile or electronic (including “pdf”) signature.

(b)           If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

(c)           A Note shall not be valid until authenticated by the manual signature of the Trustee.  The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

(d)           The Trustee shall, upon a written order of the Issuer signed by one Officer (an “Authentication Order”), authenticate Notes for original issue.

(e)           The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes.  An authenticating agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuer.

(f)            The Issuer may issue Additional Notes from time to time after the offering of the Initial Notes.  The Initial Notes and any Additional Notes subsequently issued under this Indenture shall be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase; provided, however, that any Additional Notes may not have the same Common Code number as the Notes unless either (i) the Additional Notes are treated as part of the same issue for U.S. federal income tax purposes or (ii) both the Notes and the Additional Notes are issued with no (or less than a de minimis amount of) original issue discount for U.S. federal income tax purposes.

Section 2.03.         Registrar and Paying Agent.

(a)           The Issuer shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”).  The Registrar shall keep a register of the Notes and of their transfer and exchange.  The Issuer may appoint one or more co-registrars and one or more additional paying agents.  The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent.  The Issuer may change any Paying Agent or Registrar without prior notice to any Holder.  The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture.  If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such.  The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar.

(b)           The Issuer initially appoints Euroclear and Clearstream to act as Depositary with respect to the Global Notes.

(c)           The Issuer initially appoints The Bank of New York Mellon, London Branch to act as Paying Agent.

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(d)           The Issuer initially appoints The Bank of New York Mellon, SA/NV, Luxembourg Branch to act as the Registrar.

Section 2.04.         Paying Agent to Hold Money in Trust.

The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest, if any, on the Notes, and shall notify the Trustee of any default by the Issuer in making any such payment.  While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee.  The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary of the Issuer) shall have no further liability for the money.  If the Issuer or a Subsidiary the Issuer acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.  Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Notes.

Section 2.05.         Holder Lists.

The Registrar shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders.  If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date or such shorter time as the Trustee may allow, as the Trustee may reasonably require of the names and addresses of the Holders.

Section 2.06.         Transfer and Exchange.

(a)           Transfer and Exchange of Global Notes.  A Global Note may not be transferred as a whole except by the Depositary to the Common Depositary or a nominee of such Common Depositary, by the Common Depositary or a nominee of such Depositary to such Depositary or to another nominee or Common Depositary of such Depositary, or by such Common Depositary or Depositary or any such nominee to a successor Depositary or Common Depositary or a nominee thereof.  All Global Notes will be exchanged by the Issuer for Definitive Notes if (1) the Issuer delivers to the Trustee notice from Euroclear or Clearstream that it is unwilling or unable to continue to act as Depositary and a successor Depositary is not appointed by the Issuer within 90 days after the date of such notice from the Depositary, or (2) Euroclear or Clearstream requests such exchange in writing following an Event of Default under this Indenture.  Upon the occurrence of any of the preceding events in (1) or (2) above, Definitive Notes shall be issued in denominations of €100,000 or integral multiples of €1,000 in excess thereof and in such names as the relevant Depositary shall instruct the Trustee.  Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.  Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note.  A Global Note may not be exchanged for another

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Note other than as provided in this Section 2.06(a), however, Book-Entry Interests in a Global Note may be transferred and exchanged as provided in Section 2.06 (b) or (c) hereof.

(b)           Transfer and Exchange of Book-Entry Interests in the Global Notes.  The transfer and exchange of Book-Entry Interests in the Global Notes (other than transfers of Book-Entry Interests in connection with which the transferor takes delivery thereof in the form of a Book-Entry Interest in the same Global Note) shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures.  Book-Entry Interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act.  Transfers of Book-Entry Interests in the Global Notes also shall require compliance with either clause (i) or (ii) below, as applicable, as well as one or more of the other following clauses, as applicable:

(i)            Transfer of Book-Entry Interests in the Same Global Note.  Book-Entry Interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a Book-Entry Interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of Book-Entry Interests in the Regulation S Global Note shall be limited to Persons that have accounts with Euroclear or Clearstream or Persons who hold interests through Euroclear or Clearstream, and any sale or transfer of such interest to U.S. Persons shall not be permitted during the Distribution Compliance Period unless such resale or transfer is made pursuant to Rule 144A.  Book-Entry Interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a Book-Entry Interest in an Unrestricted Global Note.  No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).

(ii)           All Other Transfers and Exchanges of Book-Entry Interests in Global Notes.  In connection with all transfers and exchanges of Book-Entry Interests that are not subject to Section 2.06(b)(i) above, the transferor of such Book-Entry Interest must deliver to the Registrar either (A) both: (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a Book-Entry Interest in another Global Note in an amount equal to the Book-Entry Interest to be transferred or exchanged and (2) instructions given by the Depositary in accordance with the Applicable Procedures containing information regarding the Participant’s account to be credited with such increase; or (B) both: (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the Book-Entry Interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above, the principal amount of such securities and the ISIN, Common Code number or other similar number identifying the Notes.  Upon satisfaction of all of the requirements for transfer or exchange of Book-Entry Interests in Global Notes contained in this Indenture and the

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Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(g) hereof.

(iii)          Transfer of Book-Entry Interests in a Restricted Global Note to Another Restricted Global Note.  A Book-Entry Interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a Book-Entry Interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following:

(A)          if the transferee will take delivery in the form of a Book-Entry Interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

(B)          if the transferee will take delivery in the form of a Book-Entry Interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof;

(iv)          Transfer and Exchange of Book-Entry Interests in a Restricted Global Note for Book-Entry Interests in an Unrestricted Global Note.  A Book-Entry Interest in any Restricted Global Note may be exchanged by any holder thereof for a Book-Entry Interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a Book-Entry Interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and:

(A)          the Registrar receives the following:

(1)           if the holder of such Book-Entry Interest in a Restricted Global Note proposes to exchange such Book-Entry Interest for a Book-Entry Interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(2)           if the holder of such Book-Entry Interest in a Restricted Global Note proposes to transfer such Book-Entry Interest to a Person who shall take delivery thereof in the form of a Book-Entry Interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this clause (A), if the Registrar and the Issuer so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to clause (A) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an

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Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of Book-Entry Interests transferred pursuant to clause (A) above.

(v)           Transfer or Exchange of Book-Entry Interests in Unrestricted Global Notes for Book-Entry Interests in Restricted Global Notes Prohibited.  Book-Entry Interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a Book-Entry Interest in a Restricted Global Note.

(c)           Transfer or Exchange of Book-Entry Interests for Definitive Notes.

(i)            Book-Entry Interests in Restricted Global Notes to Restricted Definitive Notes.  If any holder of a Book-Entry Interest in a Restricted Global Note proposes to exchange such Book-Entry Interest for a Restricted Definitive Note or to transfer such Book-Entry Interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A)          if the holder of such Book-Entry Interest in a Restricted Global Note proposes to exchange such Book-Entry Interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B)          if such Book-Entry Interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C)          if such Book-Entry Interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; or

(D)          if such Book-Entry Interest is being transferred to the Issuer or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3) thereof;

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount.  Any Definitive Note issued in exchange for a Book-Entry Interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered by the Registrar in such name or names and in such authorized denomination or denominations as the holder of such Book-Entry Interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant.  The Trustee shall mail or deliver such Definitive Notes to the Persons in whose names such Notes are so registered.  Any Definitive Note issued in exchange for a Book-Entry Interest in a Restricted Global Note pursuant to this

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Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(ii)           Book-Entry Interests in Restricted Global Notes to Unrestricted Definitive Notes.  A holder of a Book-Entry Interest in a Restricted Global Note may exchange such Book-Entry Interest for an Unrestricted Definitive Note or may transfer such Book-Entry Interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

(A)          the Registrar receives the following:

(1)           if the holder of such Book-Entry Interest in a Restricted Global Note proposes to exchange such Book-Entry Interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(2)           if the holder of such Book-Entry Interest in a Restricted Global Note proposes to transfer such Book-Entry Interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this clause (A), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii)          Book-Entry Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.  If any holder of a Book-Entry Interest in an Unrestricted Global Note proposes to exchange such Book-Entry Interest for a Definitive Note or to transfer such Book-Entry Interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail or deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount.  Any Definitive Note issued in exchange for a Book-Entry Interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such Book-Entry Interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant.  The Trustee shall mail or deliver such Definitive Notes to the Persons in whose names such Notes are so registered.  Any Definitive Note issued in exchange for a Book-Entry Interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend.

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(d)           Transfer and Exchange of Definitive Notes for Book-Entry Interests.

(i)            Restricted Definitive Notes to Book-Entry Interests in Restricted Global Notes.  If any Holder of a Restricted Definitive Note proposes to exchange such Note for a Book-Entry Interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a Book-Entry Interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A)          if the Holder of such Restricted Definitive Note proposes to exchange such Note for a Book-Entry Interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B)          if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C)          if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; or

(D)          if such Restricted Definitive Note is being transferred to the Issuer or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3) thereof;

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note.

(ii)           Restricted Definitive Notes to Book-Entry Interests in Unrestricted Global Notes.  A Holder of a Restricted Definitive Note may exchange such Note for a Book-Entry Interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a Book-Entry Interest in an Unrestricted Global Note only if:

(A)          the Registrar receives the following:

(1)           if the Holder of such Definitive Notes proposes to exchange such Notes for a Book-Entry Interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(2)           if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a Book-Entry Interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

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and, in each such case set forth in this clause (A), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the clauses in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(iii)          Unrestricted Definitive Notes to Book-Entry Interests in Unrestricted Global Notes.  A Holder of an Unrestricted Definitive Note may exchange such Note for a Book-Entry Interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a Book-Entry Interest in an Unrestricted Global Note at any time.  Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

(iv)          Transfer or Exchange of Unrestricted Definitive Notes to Book-Entry Interests in Restricted Global Notes Prohibited.  An Unrestricted Definitive Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, Book-Entry Interests in a Restricted Global Note.

(v)           Issuance of Unrestricted Global Notes.  If any such exchange or transfer from a Definitive Note to a Book-Entry Interest is effected pursuant to clauses (ii)(A) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e)           Transfer and Exchange of Definitive Notes for Definitive Notes.  Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes.  Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing.  In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e):

(i)            Restricted Definitive Notes to Restricted Definitive Notes.  Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

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(A)          if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B)          if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C)          if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(ii)           Restricted Definitive Notes to Unrestricted Definitive Notes.  Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(A)          the Registrar receives the following:

(1)           if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(2)           if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this clause (A), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Issuer to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii)          Unrestricted Definitive Notes to Unrestricted Definitive Notes.  A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note.  Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f)            Legends.  The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(i)            Private Placement Legend.

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(A)          Except as permitted by clause (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT, AS AMENDED, (AN “ACCREDITED INVESTOR”), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, EXCEPT (A) TO GRIFOLS, S.A. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE AND THE ISSUER THE CERTIFICATE REQUIRED BY SECTION 2.06 OF THE INDENTURE, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER OR TRUSTEE SO REQUESTS), OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION”, “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.”

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(B)          Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to clauses (b)(iv), (c)(ii), (c) (iii), (d)(ii), (d)(iii), (e)(ii) or (e)(iii) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.

(ii)           Global Note Legend.  Each Global Note shall bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE NOMINEE OF THE COMMON DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE TRANSFERRED OR EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, AND (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE.”

(g)           Cancellation and/or Adjustment of Global Notes.  At such time as all Book-Entry Interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.  At any time prior to such cancellation, if any Book-Entry Interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a Book-Entry Interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Paying Agent or by the Common Depositary, at the direction of the Trustee, to reflect such reduction; and if the Book-Entry Interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a Book-Entry Interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Paying Agent or by the custodian of the Common Depositary at the direction of the Trustee to reflect such increase.

(h)           General Provisions Relating to Transfers and Exchanges.

(i)            To permit registrations of transfers and exchanges, the Issuer shall execute and, upon receipt of (a) an Authentication Order in accordance with Section 2.02 and (b) an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent and covenants provided for in this Indenture relating to authentication and delivery of the Notes have been complied with, and that such Notes will constitute valid and legally binding obligations of the Issuer, enforceable in accordance with their terms, the Trustee shall authenticate Global Notes and Definitive Notes upon the Issuer’s order or at the Registrar’s request.

(ii)           No service charge shall be made by the Issuer or the Registrar to a Holder of a Book-Entry Interest in a Global Note or to a Holder of a Definitive Note for any

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registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer Tax or similar governmental charge payable in connection therewith (other than any such transfer Taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.12, 4.18 and 9.05 hereof).

(iii)          All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(iv)          Neither the Registrar nor the Issuer shall be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(v)           Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuer may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary.

(vi)          The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(vii)         All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

(viii)        The Trustee is hereby authorized to enter into a letter of representation with the Depository in the form provided by the Issuer and to act in accordance with such letter.  Neither the Trustee nor any Agent of the Trustee shall have any responsibility for any actions taken or not taken by the Depositary.

(ix)          Each Holder of a Note agrees to indemnify the Issuer and Trustee against any liability that may result from the transfer, exchange or assignment of such Holder’s Note in violation of any provision of this Indenture and/or applicable United States federal or state securities laws.

(x)           None of the Issuer or the Trustee or any Agent of the Trustee shall have any responsibility or obligation to any Participant or Indirect Participant or any other Person with respect to the accuracy of the books or records, or the acts or omissions, of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any Participant or

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Indirect Participant or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes.  All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note).  The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the customary procedures of the Depositary.  The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its Participants or Indirect Participants.

(xi)          The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Participants or Indirect Participants in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(xii)         The Trustee shall not be responsible or liable for any actions taken or not taken by Euroclear or Clearstream.

(i)            Restrictions on Exchange of Regulation S Global Note.  Beneficial ownership interests in the Regulation S Global Notes shall not be exchangeable for interests in the Rule 144A Global Notes, Unrestricted Global Notes, Restricted Definitive Notes or Unrestricted Definitive Notes until the expiration of the Distribution Compliance Period and then only upon certification that beneficial ownership interests in such Regulation S Global Note are owned by or being transferred to either non U.S. Persons or U.S. Persons who purchased such interests in a transaction that did not require registration under the Securities Act.  The written certificate delivered pursuant to the applicable provisions in Section 2.06(b)-(e) in the form provided therein shall be deemed satisfactory for purposes of this clause with respect to the relevant exchange of interests.

Section 2.07.         Replacement Notes.

If any mutilated Note is surrendered to the Trustee or the Issuer and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Issuer shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee’s requirements are met.  If required by the Trustee or the Issuer, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced.  The Issuer may charge for its expenses in replacing a Note.

Every replacement Note is an additional obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

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Section 2.08.         Outstanding Notes.

(a)           The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding.  Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note; provided, however, that Notes held by the Issuer or its Subsidiaries shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.

(b)           If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.

(c)           If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

(d)           If the Paying Agent (other than the Issuer, a Subsidiary of the Issuer or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

Section 2.09.         Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded.  Notes so owned which have been pledged in good faith shall not be disregarded if the pledge establishes to the satisfaction of the Trustee the pledgee’s right to deliver any such direction, waive its consent with respect to the Notes and that the pledgee is not the Issuer or any obligor of the Notes or any Affiliate of the Issuer or of such other obligor.

Section 2.10.         Temporary Notes.

Until certificates representing Notes are ready for delivery, the Issuer may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes.  Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuer considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee.  Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes.

Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders, or beneficial holders, respectively, of the Notes under this Indenture.

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Section 2.11.         Cancellation.

The Issuer at any time may deliver Notes to the Trustee for cancellation.  The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment.  The Trustee upon direction by the Issuer and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirements of the Exchange Act).  Certification of the destruction of all cancelled Notes shall be delivered to the Issuer.  The Issuer may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

Section 2.12.         Defaulted Interest.

If the Issuer defaults in a payment of interest, if any, on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof.  The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment.  The Issuer shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest.  At least 15 days before the special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall send or cause to be sent to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

Section 2.13.         ISIN or Common Code Numbers.

The Issuer in issuing the Notes may use “ISIN”  or “Common Code” numbers (if then generally in use), and, if so, the Trustee shall use “ISIN” or “Common Code” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Issuer shall promptly notify the Trustee of any change in the “ISIN” or “Common Code” numbers.

ARTICLE 3

REDEMPTION AND PREPAYMENT

Section 3.01.         Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days (unless a shorter notice shall be agreed to by the Trustee) but not more than 60 days before a redemption date, an Officer’s Certificate complying with the applicable provisions of Section 12.04 setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price.

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Section 3.02.         Selection of Notes to Be Redeemed or Repurchased.

If less than all of the Notes are to be redeemed at any time, the Notes shall be selected to be redeemed or repurchased in compliance with the requirements of Euroclear and/or Clearstream, or if the Notes are not held through Euroclear and/or Clearstream or Euroclear and/or Clearstream prescribes no method of selection, on a pro rata basis or by lot.

The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed.  Notes and portions of Notes selected shall be in amounts of €100,000 or integral multiples of €1,000 in excess thereof; provided that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of €1,000, shall be redeemed.  Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

In connection with any redemption of Notes, any such redemption may, at the Issuer’s discretion, be subject to one or more conditions precedent.

Section 3.03.         Notice of Redemption.

Subject to Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Issuer shall send or cause to be sent a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of this Indenture.

The notice shall identify the Notes to be redeemed, the Common Code number, and shall state:

(a)           the redemption date;

(b)           the redemption price or if the redemption is made pursuant to Section 3.07(b) a calculation of the redemption price;

(c)           if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note;

(d)           the name and address of the Paying Agent;

(e)           that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(f)            that, unless the Issuer defaults in making such redemption payment and interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date;

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(g)           the paragraph of the Notes or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(h)           that no representation is made as to the correctness or accuracy of the Common Code number, if any, listed in such notice or printed on the Notes.

At the Issuer’s request, the Trustee shall give the notice of redemption in the Issuer’s name and at its expense; provided, however, that the Issuer shall have delivered to the Trustee, at least 45 days, or such shorter period allowed by the Trustee, prior to the redemption date, an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in this Section 3.03 (unless a shorter notice shall be agreed to by the Trustee).

Any inadvertent defect in the notice of redemption, including an inadvertent failure to give notice, to any Holder selected for redemption will not impair or affect the validity of the redemption of any other Note redeemed in accordance with the provisions of the Indenture.

Section 3.04.         Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price.  In connection with any redemption of Notes, any such redemption may, at the Issuer’s discretion, be subject to one or more conditions precedent.

Section 3.05.         Deposit of Redemption Price.

On or before 11:00 a.m. (New York City time) one Business Day prior to any redemption date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest, if any, on all Notes to be redeemed on that date.

If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption date, interest, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption.  If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date.  If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Issuer to comply with the preceding paragraph, interest, if any, shall be paid on the unpaid principal from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06.         Notes Redeemed in Part.

Upon surrender of a Note that is redeemed in part, the Issuer shall issue and, upon the Issuer’s written request, the Trustee shall authenticate for the Holder at the expense of the Issuer a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

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Section 3.07.         Optional Redemption.

(a)           Except as otherwise set forth in clause (b) and (c) of this Section 3.07, the Notes will not be redeemable at the option of the Issuer prior to May 1, 2020.  On or after May 1, 2020, the Issuer may redeem all or a part of the Notes upon no less than 30 nor more than 60 days’ prior notice. The Notes may be redeemed at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the Notes redeemed to the applicable redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on May 1 of the years indicated below:

Year	Percent
2020	101.600	%
2021	100.800	%
2022 and thereafter	100.000	%

(b)           On or prior to May 1, 2020, the Issuer may on one or more occasions redeem up to 40% of the aggregate principal amount of the Notes issued under this Indenture (including Additional Notes) at a redemption price equal to 103.200% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date) with the net cash proceeds of any Qualified Equity Offering; provided, however, that:

(1)           after giving effect to any such redemption, at least 60% of the aggregate principal amount of the Notes issued on the Issue Date (excluding Notes held by the Parent and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

(2)           any such redemption shall be made within 90 days of such Qualified Equity Offering upon not less than 30 nor more than 60 days’ prior notice.

(c)           On or prior to May 1, 2020, the Issuer may redeem all or a part of the Notes upon not less than 30 nor more than 60 days prior notice under this Indenture at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to but excluding the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date).

(d)           Any prepayment pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.  Unless the Issuer defaults in the payment of the applicable redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

In connection with any redemption under Section 3.07, the Issuer shall deliver to the Trustee an Officer’s Certificate stating that such redemption is permitted by and complies with Section 3.07.

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Section 3.08.         Mandatory Redemption.

(a)           The Issuer shall not be required to make sinking fund payments with respect to the Notes.  However, under certain circumstances, the Issuer may be required to offer to repurchase the Notes pursuant to Sections 3.09, 4.12 and 4.18.

(b)           In addition, the Issuer and its Subsidiaries may acquire Notes by means other than a redemption or required repurchase whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisition does not otherwise violate the terms of this Indenture.

Section 3.09.         Offer To Purchase by Application of Excess Proceeds.

(a)           In the event that, pursuant to Section 4.12 hereof, the Issuer shall be required to commence an offer to all Holders to purchase Notes (an “Asset Sale Offer”), it shall follow the procedures specified below.

(b)           The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “Offer Period”).  No later than five Business Days after the termination of the Offer Period (the “Purchase Date”), the Issuer shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.12 hereof (the “Offer Amount”) or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer.  Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

(c)           If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date.

(d)           Upon the commencement of the Asset Sale Offer, the Issuer shall send a notice to each of the Holders, with a copy to the Trustee.  The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer.  The Asset Sale Offer shall be made to all Holders.  The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(i)            that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.12 hereof and the length of time the Asset Sale Offer shall remain open;

(ii)           the Offer Amount, the purchase price and the Purchase Date;

(iii)          that any Note not tendered or accepted for payment shall continue to accrue interest;

(iv)          that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest, if any, after the Purchase Date;

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(v)           that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in denominations of €100,000 and integral multiples of €1,000 in excess thereof;

(vi)          that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuer, a depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

(vii)         that Holders shall be entitled to withdraw their election if the Issuer, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, written notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(viii)        that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of €100,000 and integral multiples of €1,000 in excess thereof shall be purchased); and

(ix)          that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

(e)           On or before the Purchase Date, the Issuer shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and (2) shall deliver to the Trustee an Officer’s Certificate stating that such Notes or portions thereof were accepted for payment by the Issuer in accordance with the terms of this Section 3.09.

(f)            The Issuer shall promptly (but in any case not later than five Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Issuer for purchase, and the Issuer shall promptly issue a new Note, and the Trustee, upon written request from the Issuer shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered.  Any Note not so accepted shall be promptly mailed or delivered by the Issuer to the Holder thereof.  The Issuer shall publicly announce the results of the Asset Sale Offer on the Purchase Date.

Other than as specifically provided in this Section 3.09 or Section 4.12 hereof, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof.

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Section 3.10.         Redemption for Taxation Reasons.

The Notes may be redeemed, at the option of the Issuer, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to Holders (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Issuer for redemption if, as a result of:

(1)           any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Taxing Jurisdiction affecting taxation; or

(2)           any change in, or amendment to, an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment  or order by a court of competent jurisdiction),

which change or amendment becomes effective on or after the date on which such jurisdiction becomes a Taxing Jurisdiction, and the Issuer or any Guarantor, as the case may be, is, or on the next interest payment date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the Issuer or any Guarantor, as the case may be, taking reasonable measures available to it; provided that for the avoidance of doubt, changing the jurisdiction of the Issuer or any Guarantor is not a reasonable measure for the purposes of this Section 3.10; provided, further, that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Issuer or any Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the transmission of any notice of redemption of the Notes pursuant to the foregoing, the Issuer will deliver to the Trustee:

(1)           an Officer’s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, and describing the facts related thereto and stating that such requirement cannot be avoided by the Issuer or Guarantor, as the case may be, taking reasonable measures available to it; and

(2)           an Opinion of Counsel of recognized international standing stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee will accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders.

Any Notes that are redeemed will be cancelled.

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ARTICLE 4

COVENANTS

Section 4.01.         Payment of Notes.

The Issuer shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes.  Principal, premium, if any, and interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Issuer or a Subsidiary thereof, holds as of 11:00 a.m. (New York City time) one Business Day prior to the due date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest, if any, then due.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful.

Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

Section 4.02.         Maintenance of Office or Agency.

(a)           The Issuer shall maintain an office or agency (which may be an office or drop facility of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be presented or surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served.

The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency.  If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints the Trustee as its Agent to receive all such presentations, surrenders, notices and demands.

(b)           The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations.  The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

(c)           The Issuer hereby designates the Corporate Trust Office of the Trustee, as one such office, drop facility or agency of the Issuer in accordance with Section 2.03.

Section 4.03.         Reports.

(a)           Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Issuer shall furnish to the Trustee and the Holders of the Notes:

(i)            within the time periods specified in the SEC’s rules and regulations, all annual financial information that would be required to be contained in a filing with the SEC on Form 20-F if the Issuer were required to file such Form pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto, including an “Operating

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and Financial Review and Prospects” and a report on the Issuer’s consolidated annual financial statements by the Issuer’s certified independent accountants; and

(ii)           within 45 days of the first three fiscal quarters of each fiscal year of the Issuer, quarterly financial information prepared on a substantially consistent basis as the audited financial information referred to in clause (i) above, together with a narrative report describing the operations of the Issuer and its Subsidiaries in the form prepared for presentation to senior management thereof for such fiscal quarter.

The Issuer shall be deemed to have furnished such reports to the Trustee and the Holders if the Issuer has filed such information or reports with the SEC via the EDGAR filing system and such information or reports are publicly available.

(b)           Delivery of such reports, information and documents to the Trustee shall be for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of the covenants contained in this Indenture (as to which the Trustee will be entitled to conclusively rely upon an Officer’s Certificate).

(c)           The Issuer and the Guarantors have agreed that, for so long as any Notes remain outstanding, if at any time the Issuer is not required to file with the SEC the information and reports required by clauses (i) and (ii) of Section 4.03(a), the Issuer shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(d)           Notwithstanding anything herein to the contrary, the Issuer will not be deemed to have failed to comply with this Section 4.03 for purposes of clause (iv) of Section 6.01 until 120 days after the date any information or report hereunder is required to be furnished to Holders of Notes or filed with the SEC pursuant to this Section 4.03.

Section 4.04.         Compliance Certificate.

(a)           The Issuer shall deliver to the Trustee, within 90 days after the end of each fiscal year ended December 31, an Officer’s Certificate stating that a review of the activities of the Issuer and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Issuer and its Subsidiaries have kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Issuer and its Subsidiaries have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Issuer is taking or

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proposes to take with respect thereto and, if there is an existing Event of Default, the status thereof.

(b)           The Issuer shall deliver to the Trustee, within 30 days after the occurrence thereof (or within five (5) Business Days of an executive officer becoming actually aware thereof), written notice in the form of an Officer’s Certificate of any event that with the giving of notice and the lapse of time would become a Default or an Event of Default, its status and what action the Issuer is taking or proposes to take with respect thereto.

Section 4.05.         Taxes.

The Issuer shall pay, and shall cause each of the Restricted Subsidiaries to pay, prior to delinquency, all material Taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes; provided that neither the Issuer nor any such Restricted Subsidiary shall be required to pay or discharge, or cause to be paid or discharged, any such Tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with IFRS (or GAAP to the extent required by applicable law).

Section 4.06.         Stay, Extension and Usury Laws.

The Issuer and the Restricted Subsidiaries covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer and the Restricted Subsidiaries (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07.         Corporate Existence.

Subject to Article 5 hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of the Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuer or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Issuer and the Restricted Subsidiaries; provided, however, that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of the Restricted Subsidiaries, if the Board of Directors of the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and the Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes.

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Section 4.08.         Payments for Consent.

The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Section 4.09.         Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

(a)           The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and the Issuer shall not issue any Disqualified Stock and shall not permit any of the Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred stock, and any of the Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred stock if the Fixed Charge Coverage Ratio for the Issuer and the Restricted Subsidiaries on a consolidated basis for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the Net Proceeds therefrom including to refinance other Indebtedness), as if the additional Indebtedness had been incurred or the preferred stock or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.

(b)           Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(i)            Indebtedness incurred by the Issuer and the Restricted Subsidiaries pursuant to Credit Facilities and any Qualified Securitization Financing, including the Credit Agreement, in an amount outstanding at any time not to exceed the sum of (x) $6,500.0 million plus (y) €640.0 million;

(ii)           the incurrence by the Issuer and the Restricted Subsidiaries of the Existing Indebtedness;

(iii)          the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes to be issued on the Issue Date and the Guarantees thereof;

(iv)          the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings, purchase money obligations, industrial development or similar bonds, or tax-advantaged governmental or quasi-governmental financing, including, without limitation, the sale and leaseback arrangements described under clause (5) under the exclusions set forth under the

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definition of “Asset Sale”, in each case incurred for the purpose of financing all or any part of the purchase price or cost of design, development, construction, installation or improvement (including at any point subsequent to the purchase) of real or personal property, plant or equipment used in the business of the Issuer or such Restricted Subsidiary (whether through the direct acquisition or otherwise of such assets or the acquisition of Equity Interests of any Person owning such assets), in an aggregate principal amount, including all Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv), not to exceed the greater of (x) $500.0 million and (y) 4.0% of Total Assets, at any time outstanding;

(v)           the incurrence by the Issuer or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the Net Proceeds of which are used to renew, refund, refinance, replace, defease or discharge Indebtedness (other than intercompany Indebtedness) that was incurred under clause (a) of this Section 4.09 or clauses (ii), (iii), (v) and (xv) of this Section 4.09(b);

(vi)          the incurrence by the Issuer or any Restricted Subsidiary of intercompany Indebtedness owed by the Issuer or any Restricted Subsidiary; provided, however, that to the extent the aggregate amount of Indebtedness incurred in reliance on this clause (vi) following the Issue Date exceeds $300.0 million:

(A)          if the Issuer is the obligor on any such Indebtedness owed to any Restricted Subsidiary, other than the Issuer, that is not a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes;

(B)          if a Guarantor is the obligor on any such Indebtedness owed to any Restricted Subsidiary that is not the Issuer or a Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to such Guarantor’s Guarantee; and

(C)          (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Issuer or a Restricted Subsidiary and (2) any sale or other transfer of any such Indebtedness (other than the creation of a Permitted Lien upon such intercompany Indebtedness to a Person that is not either the Issuer or a Restricted Subsidiary) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vi);

(vii)         the incurrence by the Issuer or any Restricted Subsidiary of Hedging Obligations or entry into derivative transactions, in each case, so long as such obligations and transactions are not entered into for speculative purposes;

(viii)        the incurrence of Guarantees by the Issuer or any of the Guarantors of the Indebtedness of the Issuer or any Restricted Subsidiary that was permitted to be incurred by another provision of this Section 4.09;

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(ix)          the incurrence of Guarantees by any Restricted Subsidiary that is not a Guarantor of Indebtedness of a Restricted Subsidiary that is not a Guarantor that was permitted to be incurred by another provision of this Section 4.09;

(x)           the incurrence by the Issuer and the Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-retention or self-insurance obligations, unemployment insurance, performance, bid, release, appeal, surety and similar bonds and related reimbursement obligations and completion guarantees and letters of credit supporting the foregoing, in each case, provided or incurred by the Issuer and the Restricted Subsidiaries in the ordinary course of business, guarantees and letters of credit supporting the foregoing, in each case, for the account of suppliers in the ordinary course of business, and obligations in connection with participation in government reimbursement or other programs or other similar requirements;

(xi)          the incurrence by the Issuer and the Restricted Subsidiaries of Indebtedness arising from the Issuer’s and the Restricted Subsidiaries’ agreements providing for indemnification, contribution, earn out, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the sale of goods or acquisition or disposition of any business, assets or Capital Stock of a Restricted Subsidiary; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Issuer and the Restricted Subsidiaries in connection with such acquisition or disposition;

(xii)         the incurrence by the Issuer and the Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;

(xiii)        the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness to the extent the net proceeds thereof are promptly deposited to defease the Notes pursuant to Article 8;

(xiv)        the incurrence of Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(xv)         the incurrence by the Issuer or any of its Restricted Subsidiaries of (1) Acquired Debt outstanding on the date on which such Person became a Restricted Subsidiary or was acquired by, or merged into, the Issuer or any Restricted Subsidiary or (2) Indebtedness to finance all or a portion of any such transaction; provided that to the extent the aggregate amount of Indebtedness incurred in reliance on this clause (xv) following the Issue Date exceeds $400.0 million, then on a pro forma basis, either (A) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof or (B) the Fixed Charge Coverage Ratio would not be less than immediately prior to such transactions;

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(xvi)        Indebtedness of the Issuer or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit or trade Guarantees issued in the ordinary course of business to the extent that such letters of credit or trade Guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the 30 days following receipt by the Issuer or such Restricted Subsidiary of a demand for reimbursement;

(xvii)       Guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of the Issuer or any Restricted Subsidiary;

(xviii)      to the extent constituting Indebtedness, (1) deferred compensation to employees of the Issuer and the Restricted Subsidiaries in the ordinary course of business, (2) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent that they are permitted to remain unfunded under applicable law, (3) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business, and (4) reserves established by the Issuer or any Restricted Subsidiary for litigation or tax contingencies;

(xix)        Indebtedness in an amount not to exceed $60.0 million issued in lieu of cash payments of Restricted Payments permitted by clause (5) of Section 4.10(e) hereof;

(xx)         unsecured Indebtedness of the Issuer or any of its Restricted Subsidiaries owed to the employees of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business in an aggregate principal amount since the Issue Date not to exceed $100.0 million; and

(xxi)        the incurrence by the Issuer or any Restricted Subsidiary of additional Indebtedness or the issuance by the Issuer of Disqualified Stock or preferred stock in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xxi), not to exceed the greater of (i) $600.0 million and (ii) 5.0% of Total Assets.

(c)           For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xxi) of Section 4.09(b) as of the date of incurrence thereof or is entitled to be incurred pursuant to Section 4.09(a), the Issuer shall, in its sole discretion, (x) at the time the proposed Indebtedness is incurred, classify all or a portion of that item of Indebtedness on the date of its incurrence under either Section 4.09(a) or under such category of Permitted Debt, as the case may be, (y) reclassify at a later date all or a portion of that or any other item of Indebtedness as being or having been incurred in any manner that complies with this Section 4.09 (so long as the Indebtedness being reclassified could have been incurred under Section 4.09(a) or under such category of Permitted Debt, in each case on the date of its incurrence) and (z) elect to comply with this Section 4.09 and the applicable definitions in any order.  The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting

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principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount of any such accrual, accretion or payment is included in the Issuer’s Fixed Charges as accrued.  Notwithstanding any other provision of this Section 4.09, the maximum amount of Indebtedness that the Issuer or the Restricted Subsidiaries may incur pursuant to this Section 4.09 shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

(d)           The Issuer shall not incur any Indebtedness that is contractually subordinate or junior in right of payment to any Indebtedness of the Issuer unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Guarantee on substantially identical terms; provided, however, that no Indebtedness of the Issuer will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured or secured by a junior Lien or by virtue of being structurally subordinated.  No Guarantor shall incur any Indebtedness that is subordinate or junior in right of payment to the Indebtedness of such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Guarantee on substantially identical terms; provided, however, that no Indebtedness of a Guarantor will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured or secured by a junior Lien.

The Issuer shall not permit any Unrestricted Subsidiary to incur any Indebtedness other than Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to be an incurrence of Indebtedness by the obligors of such Indebtedness.

Section 4.10.         Restricted Payments.

The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly:

(a)           declare or pay any dividend or make any other payment or distribution on account of the Issuer’s or any Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Issuer or any Restricted Subsidiary) or to the direct or indirect holders of the Issuer’s or any Restricted Subsidiaries’ Equity Interests in their capacity as such (in each case other than dividends or distributions payable in the Issuer’s Equity Interests (other than Disqualified Stock) or to the Issuer or any Restricted Subsidiary);

(b)           purchase, redeem, defease or otherwise acquire or retire for value any of the Issuer’s or the Restricted Subsidiaries’ Equity Interests (in each case other than any of the Restricted Subsidiaries’ Equity Interests owned by the Issuer or another Restricted Subsidiary or for consideration consisting solely of the Issuer’s Equity Interests other than Disqualified Stock);

(c)           make any payment on or with respect to, or purchase, redeem, repurchase, defease or otherwise acquire or retire for value any of the Issuer’s or the Restricted Subsidiaries’ Subordinated Indebtedness (other than Subordinated Indebtedness owed to the Issuer or any of

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the Restricted Subsidiaries), except (i) a payment of interest or principal at the Stated Maturity thereof, (ii) the purchase, repurchase or other acquisition of any such Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case, due within one year of the date of such purchase, repurchase or other acquisition, or (iii) for consideration consisting solely of the Issuer’s Equity Interests other than Disqualified Stock; or

(d)           make any Restricted Investment (all such payments and other actions set forth in these clauses (a) through (d) above being collectively referred to as “Restricted Payments”), unless, at the time of and after giving effect to such Restricted Payment:

(a)           no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(b)           the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and

(c)           such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and the Restricted Subsidiaries after the Issue Date (excluding Restricted Payments made pursuant to the next paragraph other than clauses (1), (7), (8), (12) and (13) of the next paragraph), is less than the sum, without duplication, of:

(i)            50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first full fiscal quarter of the Issuer commencing immediately prior to March 12, 2014 to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

(ii)           100% of the aggregate net cash proceeds or the fair value (as determined in good faith by the Issuer’s Board of Directors) of property or assets received by the Issuer or a Restricted Subsidiary after March 12, 2014 as a contribution to the common equity capital of the Issuer or from the issue or sale of Equity Interests of the Issuer (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Issuer that have been converted into or exchanged for such Equity Interests (other than Equity Interests or Disqualified Stock or debt securities sold to a Subsidiary of the Issuer), together with the aggregate net cash and Cash Equivalents received by the Issuer or any Restricted Subsidiaries at the time of such conversion or exchange; provided, however, that this clause shall not include the proceeds from Excluded Contributions, plus

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(iii)          to the extent that any Restricted Investment that was made after March 12, 2014 is sold for cash or otherwise liquidated or repaid for cash, the proceeds realized from the sale of such Restricted Investment and proceeds representing the return of the capital with respect to such Restricted Investment, in each case to the Issuer or any Restricted Subsidiary, less the cost of the disposition of such Restricted Investment, plus

(iv)          to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after March 12, 2014, the portion (proportionate to the Issuer’s interest in such Unrestricted Subsidiary) of the fair market value of the net assets of the Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; plus

(v)           50% of any dividends received by the Issuer or any Restricted Subsidiary from any Unrestricted Subsidiary to the extent the Issuer’s or such Restricted Subsidiary’s Investment in such Unrestricted Subsidiary was a Restricted Investment, and to the extent such dividends were not otherwise included in the Consolidated Net Income of the Issuer for such period.

(e)           The preceding provisions will not prohibit:

(1)           the payment of any dividend (or other distribution) or the consummation of any irrevocable redemption within 90 days after the date of declaration of the dividend (or other distribution) or giving of the redemption notice, as the case may be, if at the date of declaration or notice the dividend (or other distribution) payment or redemption would have complied with the provisions hereof;

(2)           the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to any Restricted Subsidiary) of, the Issuer’s Equity Interests (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Issuer; provided that the amount of any such net cash proceeds that are utilized to make any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph and shall not constitute Excluded Contributions;

(3)           the purchase, defeasance, redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary with (i) the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or (ii) in exchange for, or out of the proceeds of a substantially concurrent Qualified Equity Offering;

(4)           in the case of a Restricted Subsidiary, the payment of dividends (or in the case of any partnership or limited liability company, any similar distribution) to the holders of its Capital Stock on a pro rata basis;

(5)           repurchases of Equity Interests deemed to occur upon the exercise of stock options, warrants or other convertible securities if such Equity Interests

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represent a portion of the exercise price thereof and repurchases of Equity Interests deemed to occur upon the withholding of a portion of the Equity Interests granted or awarded to an employee to pay for the taxes payable by such employee upon such grant or award, or the vesting thereof;

(6)           cash payments, in lieu of issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests of the Issuer or a Restricted Subsidiary;

(7)           the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness following a Change of Control or Asset Sale, as applicable, after the Issuer shall have complied with Section 4.18 and Section 4.12, as applicable, including the payment of the applicable purchase price;

(8)           the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Issuer or any preferred stock of any Restricted Subsidiary of the Issuer issued on or after the Issue Date in accordance with the Fixed Charge Coverage Ratio test described in Section 4.09(a) hereof;

(9)           payments made as disclosed under the section “Use of Proceeds” in the Offering Memorandum;

(10)         the repurchase, redemption or other acquisition of the Equity Interests of the Issuer or any Restricted Subsidiary from Persons who are, or were formerly, employees, officers and directors of the Issuer and its Subsidiaries and their Affiliates, heirs and executors; provided that the aggregate amount of all such repurchases pursuant to this clause (10) shall not exceed $35.0 million in any twelve month period;

(11)         Restricted Payments that are made with Excluded Contributions;

(12)         any Restricted Payments so long as the Leverage Ratio, at the time of each such Restricted Payment, after giving pro forma effect to such Restricted Payment, is no greater than 3.50 to 1.00; provided, however, that at the time of each such Restricted Payment, no Default shall have occurred and be continuing (or result therefrom); and

(13)         so long as no Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount since the Issue Date not to exceed the greater of (i) $350.0 million and (ii) 2.8% of Total Assets.

The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s), property or securities proposed to be transferred or issued by the Issuer or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.  The fair market value of any assets or securities that are required to be

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valued by this Section 4.10 will be determined by the Issuer’s Board of Directors, whose resolutions with respect thereto will be delivered to the Trustee.

For purposes of determining compliance with this Section 4.10, in the event that a proposed Restricted Payment (or a portion thereof) meets the criteria of more than one of the categories of Restricted Payments described in clauses (1) through (13) of Section 4.10(e), or is entitled to be incurred pursuant to Section 4.10(d), the Issuer will be entitled to classify or re-classify (based on circumstances existing on the date of such reclassification) such Restricted Payment or a portion thereof in any manner that complies with this covenant and such Restricted Payment will be treated as having been made pursuant to only such clause or clauses or the first paragraph of this covenant.

Section 4.11.         Liens.

(a)           The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness, Attributable Debt or trade payables on any property, asset, or any proceeds therefrom (“Primary Lien”), now owned or hereafter acquired except Permitted Liens, unless:

(i)            in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property (including Capital Stock of a Restricted Subsidiary) or assets that are senior in priority to such Liens; and

(ii)           in the case of Liens securing Indebtedness, the Notes and related Guarantees are equally and ratably secured by a Lien on such property (including Capital Stock of a Restricted Subsidiary) or assets.

(b)           Any Lien created for the benefit of the Holders of the Notes pursuant to Section 4.11(a) shall automatically and unconditionally be released and discharged upon the release and discharge of the Primary Lien, without any further action on the part of any Person.

Section 4.12.         Asset Sales.

(a)           The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, make any Asset Sale unless:

(i)            the Issuer (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets sold, leased, transferred, conveyed or otherwise disposed of; and

(ii)           at least 75% of the consideration received in the Asset Sale by the Issuer or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Replacement Assets, or a combination thereof.

(b)           For purposes of this Section 4.12, each of the following will be deemed to be cash:

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(i)            any liabilities of the Issuer or any of the Restricted Subsidiaries, as shown on the Issuer’s or such Restricted Subsidiary’s most recent balance sheet (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee), that are assumed by the transferee of any such assets and with respect to which the Issuer or such Restricted Subsidiary is released from further liability;

(ii)           any securities, notes or other obligations received by the Issuer or any such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash within 365 days of the consummation of such Asset Sale (subject to ordinary settlement periods), to the extent of the cash received in that conversion;

(iii)          any Voting Stock or assets referred to in clauses (c)(ii) and (c)(iii) of this Section 4.12; and

(iv)          any Designated Non-Cash Consideration received by the Issuer or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value (as determined in good faith by the Issuer’s Board of Directors), taken together with all other Designated Non-Cash Consideration received pursuant to this clause (iv) that is at such time outstanding, not to exceed an amount equal to the greater of (x) $350.0 million and (y) 2.8% of Total Assets at the time of the receipt of such Designated Non-Cash Consideration, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value.

(c)           Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer or such Restricted Subsidiary may apply those Net Proceeds at its option:

(i)            to repay Indebtedness and other Obligations under any Credit Facility;

(ii)           to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business;

(iii)          to make any capital expenditures or to acquire other long-term assets that are used or useful in a Permitted Business; or

(iv)          any combination of the foregoing.

In the case of each of clauses (ii), (iii) and (iv) above, the entry into a definitive agreement to acquire such assets within 365 days after the receipt of any Net Proceeds from an Asset Sale shall be treated as a permitted application of the Net Proceeds from the date of such agreement so long as the Issuer or such Restricted Subsidiary enters into such agreement with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment within 180 days of such agreement and such Net Proceeds are actually so applied within such period.

Pending the final application of any Net Proceeds, the Issuer may temporarily reduce revolving credit borrowings under the Credit Agreement or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.

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(d)           Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.12(c) will constitute “Excess Proceeds”.  When the aggregate amount of Excess Proceeds exceeds $300.0 million, the Issuer shall make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness of the Issuer or any Restricted Subsidiary that is pari passu with the Notes containing provisions similar to those set forth herein with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds.  The offer price in any Asset Sale Offer will be equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture.  If the aggregate principal amount of Notes and other pari passu Indebtedness validly and properly tendered and not withdrawn into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee (or applicable depository) will select the Notes and the Issuer or the trustee, agent or other similar party with respect to such other pari passu Indebtedness will select such Indebtedness to be purchased as described in Article 3 hereof.  Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

Section 4.13.         Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(a)           pay dividends or make any other distributions on or in respect of its Capital Stock to the Issuer or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Issuer or any other Restricted Subsidiary;

(b)           make any loans or advances to the Issuer or any other Restricted Subsidiary;

(c)           transfer any of its properties or assets to the Issuer or any other Restricted Subsidiary; or

(d)           guarantee the Issuer’s or any Restricted Subsidiary’s Indebtedness.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(i)            any Credit Facility (including the Credit Agreement and any other agreements as in effect on the Issue Date or subsequent agreements relating to Indebtedness of the Issuer or any Restricted Subsidiary and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and

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other payment restrictions than those contained in those agreements on the Issue Date unless in the good faith determination of the Board of Directors, such restrictions are not likely to result in the Issuer being unable to make scheduled payments of principal and interest on the Notes as they come due;

(ii)           this Indenture, the Notes and the Guarantees;

(iii)          applicable law, rules, regulations and orders;

(iv)          any instrument governing Indebtedness or Capital Stock of a Person acquired by the Issuer or any Restricted Subsidiary as in effect at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;

(v)           customary non-assignment provisions in contracts, licenses and leases entered into in the ordinary course of business;

(vi)          purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (c) of this Section 4.13;

(vii)         any agreement for the sale or other disposition of a Restricted Subsidiary or of all or substantially all of its assets that restricts distributions of assets by, or Equity Interests of, that Restricted Subsidiary pending its sale or other disposition;

(viii)        Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(ix)          Liens permitted to be incurred under Section 4.11 that limit the right of the debtor to dispose of the assets subject to such Liens;

(x)           restrictions on cash or other deposits or net worth imposed by customers (including governmental entities) under contracts entered into in the ordinary course of business;

(xi)          provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale and leaseback transactions, stock sale agreements and other similar agreements entered into in the ordinary course of business or with the approval of the Issuer’s Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements;

(xii)         any encumbrance or restriction on the Issuer’s ability or the ability of any Restricted Subsidiary to transfer its interest in any Investment not prohibited by Section 4.10 hereof;

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(xiii)        customary restrictions imposed on the transfer of, or in licenses related to, copyrights, patents or other intellectual property and contained in agreements entered into in the ordinary course of business;

(xiv)        any other agreement governing Indebtedness or Disqualified Stock entered into after the Issue Date that contains encumbrances and restrictions that are not more restrictive than would be permitted by clause (i) of this paragraph;

(xv)         restrictions created in connection with any Qualified Securitization Financing that, in the good faith determination of the Board of Directors of the Issuer, are necessary or advisable to effect such Qualified Securitization Financing; and

(xvi)        agreements pursuant to any tax sharing arrangement between the Issuer and any one or more of its direct or indirect Subsidiaries.

Section 4.14.         Transactions with Affiliates.

The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of the Issuer’s or the Restricted Subsidiaries’ respective properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate involving aggregate payments of consideration in excess of $50.0 million (each, an “Affiliate Transaction”), unless:

(a)           the Affiliate Transaction is on terms that taken as a whole are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and

(b)           the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $100.0 million, a resolution of the Issuer’s Board of Directors set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this Section 4.14 and that such Affiliate Transaction has been approved by a majority of the Issuer’s Board of Directors (and, if any, a majority of the disinterested members of the Issuer’s Board of Directors with respect to such transaction).

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(A)          any customary consulting or employment agreement or arrangement, benefit arrangement or plan, incentive compensation plan, stock option or stock ownership plan, employee benefit plan, severance or termination arrangements, expense reimbursement arrangements, officer or director indemnification agreement or any similar arrangement entered into by the Issuer or any of the Restricted Subsidiaries for the benefit of the Issuer’s or such Restricted Subsidiary’s directors, officers, employees and consultants and payments and transactions pursuant thereto, in each case, in the ordinary course of business;

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(B)          transactions between or among the Issuer and/or the Restricted Subsidiaries;

(C)          payment of reasonable directors compensation and indemnification costs permitted by the Issuer’s and the Restricted Subsidiaries’ organizational documents for the benefit of directors, officers and employees, in each case, in the ordinary course of business;

(D)          Permitted Investments or Restricted Payments that are permitted by Section 4.10;

(E)           any agreement (including any certificate of designations relating to Capital Stock) as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date;

(F)           the granting or performance of customary registration rights in respect of restricted Equity Interests held or acquired by Affiliates;

(G)          loans and advances to employees in the ordinary course of business not to exceed $50.0 million in the aggregate amount at any one time outstanding;

(H)          the consummation of the Transactions and the payment of all fees, expenses and other amounts, and the performance of all obligations of the Issuer and the Restricted Subsidiaries, in connection therewith;

(I)            transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case, in the ordinary course of business and consistent with past practice and on terms that are not materially less favorable to the Issuer or such Restricted Subsidiary, as the case may be, determined in good faith by the Issuer, that those that could be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate of the Issuer;

(J)            the issuance or repurchase of Equity Interests (other than Disqualified Stock) of the Issuer to any Affiliate of the Issuer;

(K)          licenses of, or other grants of rights to use, intellectual property granted by the Issuer or any Restricted Subsidiary in the ordinary course of business; and

(L)           any transaction disclosed under the section “Certain Relationships and Related Party Transactions” in the Offering Memorandum.

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Section 4.15.         Financial Calculations for Limited Condition Acquisitions.

When calculating the availability under any basket or ratio under this Indenture, in each case in connection with a Limited Condition Acquisition, the date of determination of such basket or ratio and of any Default or Event of Default shall, at the option of the Issuer, be the date the definitive agreements for such Limited Condition Acquisition are entered into, and such baskets or ratios shall be calculated by the Issuer with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of “Fixed Charge Coverage Ratio” after giving effect to such Limited Condition Acquisition and the other transactions to be entered into in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) as if they occurred at the beginning of the applicable period for purposes of determining the ability to consummate any such Limited Condition Acquisition (and not for purposes of any subsequent availability of any basket or ratio), and, for the avoidance of doubt, (x) if any of such baskets or ratios are exceeded as a result of fluctuations in such basket or ratio (including due to fluctuations in Consolidated Cash Flow of the Issuer or the target company) subsequent to such date of determination and at or prior to the consummation of the relevant Limited Condition Acquisition, such baskets or ratios will not be deemed to have been exceeded as a result of such fluctuations solely for purposes of determining whether such Limited Condition Acquisition is permitted under this Indenture and (y) such baskets or ratios shall not be tested at the time of consummation of such Limited Condition Acquisition or related transactions; provided, however, that if the Issuer elects to have such determinations occur at the time of entry into such definitive agreement, any such transactions (including any incurrence of Indebtedness and the use of proceeds thereof) shall be deemed to have occurred on the date the definitive agreements are entered into and outstanding thereafter for purposes of calculating any baskets or ratios under this Indenture after the date of such agreement and before the consummation of such Limited Condition Acquisition.

Section 4.16.         [Reserved]

Section 4.17.         Designation of Restricted and Unrestricted Subsidiaries.

The Issuer’s Board of Directors may designate any Restricted Subsidiary (other than the Issuer) to be an Unrestricted Subsidiary if that designation would not cause a Default.  If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Issuer and the Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.10 or Permitted Investments, as determined by the Issuer.  That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.  The Issuer’s Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.

Section 4.18.         Repurchase at the Option of Holders Upon a Change of Control.

(a)           Upon the occurrence of a Change of Control, the Issuer shall make an offer to purchase (a “Change of Control Offer”) and each Holder shall have the right to require the Issuer to repurchase all or any part (equal to €100,000 or an integral multiple of €1,000) of such Holder’s Notes at a purchase price (the “Change of Control Payment”) in cash equal to 101% of

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the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date.  The Issuer shall purchase all Notes validly tendered pursuant to the Change of Control Offer and not withdrawn.

Subject to clause (c) below, within 30 days following any Change of Control or, at the Issuer’s option, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, the Issuer shall send a notice to the Trustee and each Holder describing the transaction or transactions that constitute or may constitute the Change of Control and offering to repurchase the Notes on the Change of Control Payment date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is sent, pursuant to the procedures under this Section 4.18 and described in such notice. The notice will, if mailed prior to the date of consummation of the Control of Control, state that the Change of Control Offer is conditioned on the Change of Control occurring on or prior to the applicable Change of Control Payment date specified in the notice.

The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control.  To the extent that the provisions of any securities laws or regulations conflict with this Section 4.18, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.18 by virtue of such compliance.

(b)           On the Change of Control Payment date, the Issuer shall, to the extent lawful:

(i)            accept for payment all Notes or portions of Notes validly and properly tendered and not withdrawn pursuant to the Change of Control Offer;

(ii)           deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes validly and properly tendered and not withdrawn; and

(iii)          deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

The Paying Agent shall promptly mail (or wire) to each Holder of Notes validly and properly tendered and not withdrawn the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of €100,000 or an integral multiple of €1,000 in excess thereof.

The Issuer shall publicly announce the results of a Change of Control Offer on or as soon as practicable after the Change of Control Payment date.

(c)           The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other

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provisions of this Indenture are applicable, except as provided under Article 8. Except as described above with respect to a Change of Control, this Indenture does not contain provisions that permit the Holders of the Notes to require that the Issuer repurchase or redeem the Notes in the event of a takeover, recapitalization, spin-off or similar transaction.

(d)           The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (i) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly and properly tendered and not withdrawn under the Change of Control Offer, (ii) notice of redemption of all of the Notes has been given pursuant to Section 3.03 and Section 3.04, unless and until there is a Default in payment of the applicable redemption price, or (iii) in connection with or in contemplation of any Change of Control for which a definitive agreement is in place, the Issuer or a third party has made an offer to purchase (an “Alternate Offer”) any and all Notes validly and properly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all Notes validly and properly tendered and not withdrawn in accordance with the terms of such Alternate Offer; provided that the terms of such Alternate Offer shall not require Holders to irrevocably tender Notes and such Alternate Offer shall not close unless and until the Change of Control is actually consummated.

(e)           The provisions of this Section 4.18 may, prior to the occurrence of a Change of Control, be waived or modified with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes.  Following the occurrence of a Change of Control, any change, amendment or modification in any material respect of the obligation of the Issuer to make and consummate a Change of Control Offer may only be effected with the consent of each holder affected thereby.

(f)            If Holders of not less than 90% in aggregate principal amount of the outstanding Notes validly tender and do not withdraw such Notes in response to a Change of Control Offer and the Issuer, or any third party making the Change of Control Offer in lieu of the Issuer as described above, purchases all of the Notes validly tendered and not withdrawn by such Holders, the Issuer or such third party will have the right, upon not less than 30 days no more than 60 days’ prior notice, given not more than 30 days following such purchase pursuant to the Change of Control Offer described above, to redeem all Notes that remain outstanding following such purchase at a price in cash equal to 101% of the principal amount thereof plus accrued but unpaid interest to but not including the date of redemption set forth in such notice.

Section 4.19.         Additional Guarantees.

If the Issuer or any Restricted Subsidiary acquires or creates another Restricted Subsidiary (other than an Immaterial Subsidiary) after the Issue Date that guarantees any Obligations under any Credit Facility, then that newly acquired or created Restricted Subsidiary shall execute and deliver to the Trustee a supplemental Indenture substantially in the form of Exhibit F hereto providing for a Guarantee and deliver an Opinion of Counsel satisfactory to the Trustee as to the due authorization, execution and delivery and the enforceability of such Guarantee within 45 Business Days of the date on which it was acquired or created.

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Section 4.20.         Covenant Suspension.

(a)           If on any date following the Issue Date (i) the Notes have an Investment Grade Rating from either Rating Agency, and (ii) no Default has occurred and is continuing under this Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event” and the date of such Covenant Suspension Event, as the “Suspension Date”), then the Issuer, the Issuer and the Restricted Subsidiaries will not be subject to Section 4.09, Section 4.10, Section 4.12, Section 4.13, Section 4.14, Section 4.17 and Section  5.01(iv) (collectively, the “Suspended Covenants”).

(b)           In the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants under this Indenture for any period of time as a result of clause (a) above, and on any subsequent date (the “Reversion Date”) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries shall thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events.

(c)           The period of time between the Suspension Date and the Reversion Date is referred to as the “Suspension Period”.  Additionally, upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be reset at zero.  In the event of any such reinstatement of the Suspended Covenants, no action taken or omitted to be taken by the Issuer or any of the Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under this Indenture; provided that (1) with respect to Restricted Payments made after any such reinstatement, the amount of Restricted Payments made will be calculated as though the covenant described under Section 4.10 had been in effect prior to, but not during the Suspension Period; provided that no Subsidiaries may be designated as Unrestricted Subsidiaries during the Suspension Period and (2) all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (ii) of Section 4.09(b).

(d)           The Issuer shall provide an Officer’s Certificate to the Trustee notifying the Trustee of a Covenant Suspension Event or a reversion thereof, including the relevant Suspension Date or Reversion Date, as applicable.

Section 4.21.         Additional Amounts.

(a)           All payments made by the Issuer or any Guarantor that is not formed or incorporated under the laws of the United States or any State of the United States or the District of Columbia (each such Guarantor, a “non-U.S. Guarantor”) under or with respect to the Notes or such non-U.S. Guarantor’s Guarantee will be made free and clear of and without withholding or deduction for or on account of any present or future Taxes imposed or levied by or on behalf of any Taxing Authority of or within Spain, Ireland or any other jurisdiction in which the Issuer or such non-U.S. Guarantor is organized, resident or doing business for tax purposes or within or through which payment is made or any political subdivision or Taxing Authority or agency thereof or therein (any of the aforementioned being a “Taxing Jurisdiction”), unless the Issuer or such non-U.S. Guarantor is required to withhold or deduct Taxes by law or by the interpretation or administration thereof.  If the Issuer or any non-U.S. Guarantor is required to withhold or

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deduct any amount for or on account of Taxes imposed by a Taxing Authority within Spain, Ireland, or any other Taxing Jurisdiction, from any payment made under or with respect to the Notes or the Guarantee of such non-U.S. Guarantor, the Issuer or such non-U.S. Guarantor will pay such additional amounts (“Additional Amounts”) as may be necessary so that the net amount received by each Holder of Notes after such withholding or deduction (including any withholding or deduction in respect of the payment of Additional Amounts) will equal the amount the Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts will be payable with respect to:

(1)           any Tax imposed by the United States or by any political subdivision or Taxing Authority thereof or therein;

(2)           any Taxes that would not have been so imposed, deducted or withheld but for the existence of any connection between the Holder or beneficial owner of a Note (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over, the Holder or beneficial owner of such Note, if the Holder or beneficial owner is an estate, nominee, trust, partnership or corporation) and the relevant Taxing Jurisdiction (other than the mere receipt of such payment or the ownership or holding of the execution, delivery, registration or enforcement of such note);

(3)           any estate, inheritance, gift, sales, excise, transfer or personal property Tax or similar Tax, assessment or governmental charge, subject to Section 4.21(d) below;

(4)           any Taxes payable other than by deduction or withholding from payments under or with respect to the Notes by the Issuer or under or with respect to the Guarantee by any non-U.S. Guarantor of such Note;

(5)           any Taxes that would not have been so imposed, deducted or withheld if the Holder or beneficial owner of a Note or beneficial owner of any payment on the Note or the Guarantee of such Note had (i) made a declaration of non-residence, or any other claim or filing for exemption, to which it is entitled or (ii) complied with any certification, identification, information, documentation or other reporting requirement, with which it is entitled to comply concerning the nationality, residence, identity or connection with the relevant Taxing Jurisdiction of such Holder or beneficial owner of such Note or any payment on such Note (provided that (x) such declaration of non-residence or other claim or filing for exemption or such compliance is required by the applicable law of the Taxing Jurisdiction as a precondition to exemption from, or reduction in the rate of the imposition, deduction or withholding of, such Taxes and (y) at least 30 days prior to the first payment date with respect to which such declaration of non-residence or other claim or filing for exemption or such compliance is required under the applicable law of the Taxing Jurisdiction, Holders at that time have been notified by the Issuer or such Guarantor or any other Person through whom payment may be made that a declaration of non-residence or other claim or filing for exemption or such compliance is required to be made);

(6)           any Taxes that would not have been so imposed, deducted or withheld if (i) the Notes had been regarded as listed debt securities issued under Law 10/2014 and

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had been initially registered with foreign clearing and settlement entities recognized by Spanish law or by the laws of any other country member of the Organisation for Economic Co-operation and Development; (ii) the Holder or beneficial owner of a Note or beneficial owner of any payment on the Note or the Guarantee of such Note had provided to the Issuer, the non-U.S. Guarantors or any agent acting on behalf of the Issuer or the non-U.S. Guarantors all the information required under Section 44 of Royal Decree 1065/2007, of July 27; or (iii) the Paying Agent acting on behalf of the Issuer or the non-U.S. Guarantors, had submitted in a timely manner, a statement to the Issuer or the non-U.S. Guarantors, the form of which complies with the Annex to Royal Decree 1065/2007, of July 27 or any implementing legislation or regulation, and containing all the information required by Section 44 of Royal Decree 1065/2007, or any implementing legislation or regulation;

(7)           any Taxes that would not have been so imposed, deducted or withheld if the Notes had complied with exemption requirements specified in the Ruling dated July 27, 2004 issued by the Spanish General Directorate of Taxes (Dirección General de Tributos);

(8)           any Taxes that would not have been so imposed, deducted or withheld if the beneficiary of the payment had presented the Note for payment within 30 days after the date on which such payment or such note became due and payable or the date on which payment thereof is duly provided for, whichever is later (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30-day period);

(9)           any payment under or with respect to a Note to any Holder that is a fiduciary or partnership or any Person other than the sole beneficial owner of such payment or Note, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such partnership or the beneficial owner of such payment or Note would not have been entitled to the Additional Amounts, or to a reduced amount of Additional Amounts, had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note;

(10)         any withholding or deduction in respect of any Tax, duty, assessment or other governmental charge where such withholding or deduction is imposed or levied on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directives; or

(11)         any combination of items (1) through (10) of this Section 4.21(a).

The foregoing provisions shall survive any termination or discharge of this Indenture and payment of the Notes and shall apply mutatis mutandis to any Taxing Jurisdiction with respect to any successor Person to the Issuer or a non-U.S. Guarantor.

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(b)           The Issuer and each applicable non-U.S. Guarantor will also make any applicable withholding or deduction and remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.  The Issuer and each applicable non-U.S. Guarantor will furnish to the Trustee, within 60 days after the date the payment of any Taxes deducted or withheld is due pursuant to applicable law, certified copies of tax receipts or, if such tax receipts are not reasonably available to the Issuer and such non-U.S.  Guarantor, such other documentation that provides reasonable evidence of such payment by the Issuer and such non-U.S. Guarantor.  Copies of such tax receipts or, if such tax receipts are not reasonably available, such other documentation will be made available to the Holders or the Paying Agent, as applicable, upon request.

(c)           At least 30 days prior to each date on which any payment under or with respect to the Notes or any Guarantee is due and payable, if the Issuer or any non-U.S. Guarantor will be obligated to pay Additional Amounts with respect to such payment, the Issuer or such non-U.S. Guarantor will deliver to the Trustee and the Paying Agent an Officer’s Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable such Trustee and Paying Agent to pay such Additional Amounts to Holders of such Notes on the payment date, unless such obligation to pay Additional Amounts arises after the 30th day prior to such date, in which case it shall be promptly paid thereafter.

Whenever in this Indenture there is mentioned, in any context, the payment of principal, premium, if any, interest or of any other amount payable under or with respect to any note, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

(d)           The Issuer and each non-U.S. Guarantor will pay any present or future stamp, court or documentary Taxes or any other excise or property Taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery, enforcement or registration of their respective Obligations and Guarantees of the Notes, this Indenture or any other document or instrument in relation thereto, excluding all such Taxes, charges or similar levies imposed by any jurisdiction outside the United States in which the Issuer or any non-U.S. Guarantor or any successor Person is organized or resident for tax purposes or any jurisdiction in which a paying agent is located, and the Issuer and each non-U.S. Guarantor will agree to indemnify the Holders of the Notes for any such non-excluded taxes paid by such Holders.

(e)           The foregoing provisions of this Section 4.21 shall survive any termination or discharge of this Indenture and payment of the Notes and shall apply mutatis mutandis to any Taxing Jurisdiction with respect to any successor Person to the Issuer or a non-U.S. Guarantor.

Section 4.22.         Maintenance of Listing.

The Issuer will use its commercially reasonable efforts to maintain the listing of the Notes on the official list of the Irish Stock Exchange and trading on its Global Exchange Market for so long as such Notes are outstanding; provided that if at any time the Issuer determines that it will not maintain such listing, it will obtain prior to the delisting of the Notes from the official list of the Irish Stock Exchange, and thereafter use its commercially reasonable efforts to

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maintain, a listing of such Notes on another recognized stock exchange or exchange regulated market in western Europe. The Issuer will notify the Trustee in writing of any delisting or change in listing.

ARTICLE 5

SUCCESSORS

Section 5.01.         Merger, Consolidation or Sale of Assets.

The Issuer shall not, directly or indirectly:  (1) consolidate or merge with or into another Person (whether or not the Issuer is the surviving entity) or (2) sell, assign, transfer, lease, convey (not including any conveyance, if any, resulting solely from the creation of any Lien, unless remedies are exercised in connection therewith) or otherwise dispose of all or substantially all of the properties and assets of the Issuer or its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person or Persons, unless:

(i)            either:  (x) the Issuer is the surviving entity; or (y) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is a corporation, limited partnership or limited liability company organized or existing under the laws of any member state of the European Union as in effect on December 31, 2003, the United Kingdom, Switzerland, Canada, any state of the United States or the District of Columbia;

(ii)           the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all obligations of the Issuer under the Notes and this Indenture pursuant to an agreement in a form reasonably satisfactory to the Trustee;

(iii)          immediately after such transaction, no Default or Event of Default exists; and

(iv)          the Issuer or the Person formed by or surviving any such consolidation or merger (if other than the Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, (i) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) or (ii) the Issuer’s Fixed Charge Coverage Ratio would not be less than the Issuer’s Fixed Charge Coverage Ratio immediately prior to such transaction or series of transactions.

In addition, the Issuer and its Restricted Subsidiaries may not, directly or indirectly, lease all or substantially all of the Issuer’s and its Restricted Subsidiaries’ properties and assets, in one or more related transactions, to any other Person.

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Clauses (ii) and (iii) of this Section 5.01 will not apply to:

(1)           a merger of the Issuer with an Affiliate solely for the purpose of reincorporating the Issuer in another jurisdiction; or

(2)           any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Issuer and its Restricted Subsidiaries.

Section 5.02.         Successor Company Substituted.

The Person formed by or surviving any consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of the Issuer under this Indenture; provided that, the Issuer shall not be released in the case of a lease of all or substantially all the Issuer’s assets.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01.         Events of Default.

Each of the following is an “Event of Default”:

(i)            default for 30 days in the payment when due of interest on the Notes;

(ii)           default in payment when due of the principal of or premium, if any, on the Notes;

(iii)          failure by the Issuer or any Restricted Subsidiary to comply with Section 5.01 or with Section 4.18;

(iv)          failure by the Issuer or any Restricted Subsidiary for 60 days after notice to comply with any other covenant or agreement in this Indenture or the Notes after written notice thereof is given to the Issuer by the Trustee or to the Issuer and the Restricted Subsidiaries and to the Trustee by Holders of at least 25% in aggregate principal amount of the then outstanding Notes voting as a single class;

(v)           default under any agreement, bond, mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuer or any Restricted Subsidiary) whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default:

(A)          is caused by a failure to pay any scheduled installment of principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or

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(B)          results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $350.0 million or more; provided, however, where (i) neither the Issuer nor any Restricted Subsidiary has general liability with respect to such Indebtedness, and (ii) the creditor has agreed in writing that such creditor’s recourse is solely to specified assets or Unrestricted Subsidiaries, the amount of such Indebtedness shall be deemed to be the lesser of (x) the principal amount of such Indebtedness, and (y) the fair market value of such specified assets to which the creditor has recourse;

(vi)          failure by the Issuer or any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $350.0 million (net of any amounts covered by insurance), which judgments are not paid, discharged or stayed for a period of 60 days;

(vii)         except as permitted by this Indenture, any Guarantee of a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or any Person acting on behalf of any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, shall deny or disaffirm in writing its obligations under its Guarantee; and

(viii)        the Issuer or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Law:

(A)          commences a voluntary case,

(B)          consents to the entry of an order for relief against it in an involuntary case,

(C)          consents to the appointment of a custodian of it or for all or substantially all of its property,

(D)          makes a general assignment for the benefit of its creditors, or

(E)           generally is not paying its debts as they become due; and

(ix)          a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

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(A)          is for relief against the Issuer or any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in an involuntary case;

(B)          appoints a custodian of the Issuer or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, for all or substantially all of the property of the Issuer or any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

(C)          orders the liquidation of the Issuer or any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; and

(D)          the order or decree remains unstayed and in effect for 60 consecutive days.

Section 6.02.         Acceleration.

If an Event of Default (other than an Event of Default specified in clauses (viii) or (ix) of Section 6.01 hereof, with respect to the Issuer), shall have occurred and be continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare to be immediately due and payable the principal amount of all the Notes then outstanding, plus accrued but unpaid interest, if any, to the date of acceleration.  In the case of an Event of Default specified in clauses (viii) or (ix) of Section 6.01 hereof, with respect to the Issuer shall occur, such amount with respect to all the Notes will become due and payable immediately without any declaration or other act on the part of the Trustee or the Holders.  Holders may not enforce this Indenture or the Notes except as provided in this Indenture.  Subject to the limitations described in this Article 6, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest, if any) if it determines that withholding notice is in their interest.

Section 6.03.         Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.  All remedies are cumulative to the extent permitted by law.

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Section 6.04.         Waiver of Past Defaults.

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes; provided, however, that after any acceleration, but before a judgment or decree based on acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the Notes then outstanding may rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal, premium or interest have been cured or waived as provided in this Indenture.  Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05.         Control by Majority.

Subject to Section 7.01, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity or security against any loss, liability or expense.  Subject to Section 7.07, the Holders of a majority in aggregate principal amount of the Notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes.

Section 6.06.         Limitation on Suits.

No Holder will have any right to institute any proceeding with respect to this Indenture, or for the appointment of a receiver or trustee, or for any remedy thereunder, unless:

(a)           such Holder has previously given the Trustee notice that an Event of Default is continuing;

(b)           Holders of at least 25% in aggregate principal amount of the then outstanding Notes have requested the Trustee to pursue the remedy;

(c)           such Holders have offered, and, if requested, have provided, the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;

(d)           the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and

(e)           Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

The preceding limitations do not apply to a suit instituted by a Holder for enforcement of payment of the principal of, and premium, if any, or interest on, a Note on or after the respective due dates expressed in such Note.

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A Holder may not use this Indenture to affect, disturb or prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.07.         Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium, if any, and interest, if any, on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08.         Collection Suit by Trustee.

If an Event of Default specified in clauses (i) or (ii) of Section 6.01 occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, and interest, if any, remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09.         Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof.  To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise.  Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

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Section 6.10.         Priorities.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

First:  to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

Second:  to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, if any, respectively; and

Third:  to the Issuer or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11.         Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

ARTICLE 7

TRUSTEE

Section 7.01.         Duties of Trustee.

(a)           If an Event of Default has occurred and is continuing, the Trustee shall exercise such rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)           Except during the continuance of an Event of Default:

(1)           the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(2)           in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, however, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein or otherwise verify the contents thereof).

(c)           The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1)           this paragraph does not limit the effect of paragraph (b) of this Section;

(2)           the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts;

(3)           the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof; and

(4)           no provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability and the Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

(d)           Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section.

(e)           The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02.         Rights of Trustee.

(a)           The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person.  The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(b)           Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of

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Counsel.  The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c)           The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d)           The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e)           Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by one Officer of the Issuer.

(f)            The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

(g)           The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has written notice of any event which is in fact such a Default or Event of Default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the specific Default or Event of Default, the Notes and this Indenture.

(h)           The Trustee shall not be required to give any bond or surety in respect of the performance of its power and duties hereunder.

(i)            The Trustee shall have no duty to inquire as to the performance of the Issuer’s covenants herein.

(j)            Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer request or Issuer order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution.

(k)           In no event shall the Trustee be responsible or liable for special, punitive, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l)            The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

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(m)          The Trustee may request that the Issuer deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

(n)           In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 7.03.         Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it were not Trustee.  However, in the event that the Trustee acquires any conflicting interest, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee or resign.  Any Agent may do the same with like rights and duties.  The Trustee is also subject to Section 7.10 hereof.

Section 7.04.         Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05.         Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if the Trustee receives written notice of such Default or Event of Default, the Trustee shall send to Holders a notice of the Default or Event of Default within 90 days after receipt of such notice of Default or Event of Default unless such Default or Event of Default has since been cured.  Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders.

Section 7.06.         [Reserved].

Section 7.07.         Compensation and Indemnity.

The Issuer and Guarantors, jointly and severally, shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as

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agreed to in writing.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Issuer and Guarantors, jointly and severally, shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services.  Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

The Issuer and Guarantors, jointly and severally, shall indemnify the Trustee or any predecessor Trustee against any and all losses, claims, damages, penalties, fines, liabilities or expenses, including incidental and out-of-pocket expenses and reasonable attorneys’ fees (“losses”) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Issuer (including this Section 7.07) and defending itself against any claim (whether asserted by the Issuer or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such losses may be attributable to its gross negligence or bad faith.  The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity.  Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder.  The Issuer shall defend the claim, and the Trustee shall cooperate in the defense.  The Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel.  The Issuer need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.  The Issuer need not reimburse any expense or indemnify against any loss liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, gross negligence or bad faith.

The obligations of the Issuer under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

To secure the Issuer’s payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee.  Such Lien shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in clauses (viii) or (ix) of Section 6.01 hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.08.         Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section.

The Trustee may resign in writing at any time upon 30 days prior notice to the Issuer and be discharged from the trust hereby created by so notifying the Issuer.  The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing 30 days prior to such removal’s effectiveness.  The Issuer may remove the Trustee if:

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(a)           the Trustee fails to comply with Section 7.10 hereof;

(b)           the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(c)           a custodian or public officer takes charge of the Trustee or its property; or

(d)           the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee.  Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.

If a successor Trustee does not take office within 30 days after the Trustee gives notice of resignation or receives notice of removal, the retiring Trustee, the Issuer, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer.  Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail a notice of its succession to Holders.  Subject to the Lien provided for in Section 7.07 hereof, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided, however, that all sums owing to the Trustee hereunder shall have been paid.  Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07  hereof shall continue for the benefit of the retiring Trustee.

Section 7.09.         Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

Section 7.10.         Eligibility; Disqualification.

There shall at all times be a Trustee hereunder that is a Person organized and doing business under the laws of (i) the United States of America or of any state thereof or (ii) England and Wales, that in each case, is authorized under such laws to exercise corporate trustee power, and that is subject to supervision or examination, in the case of (i), by federal or state authorities, or in the case of (ii), by authorities in England and Wales. Any successor trustee shall have a

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combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01.         Option to Effect Legal Defeasance or Covenant Defeasance.

The Issuer may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

Section 8.02.         Legal Defeasance and Discharge.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their respective obligations with respect to all outstanding Notes and Guarantees, on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”).  For this purpose, Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:  (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest, if any, on such Notes when such payments are due, (b) the Issuer’s obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer’s and the Guarantors’ obligations in connection therewith and (d) this Article 8. If the Issuer exercises under Section 8.01 hereof the option applicable to this Section 8.02, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, payment of the Notes may not be accelerated because of an Event of Default.  Subject to compliance with this Article 8, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03.         Covenant Defeasance.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their respective obligations under the covenants contained in Sections 4.03, 4.05, 4.06, 4.08 through 4.14, and 4.17 through 4.19 hereof, and the operation of Section 5.01(iv)  hereof, with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver,

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consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes).  For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.  If the Issuer exercises under Section 8.01 hereof the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, payment of the Notes may not be accelerated because of an Event of Default specified in clauses (iii), (iv) (with respect to the covenants contained in Sections 4.03, 4.05, 4.06, 4.08 through 4.14, and 4.17 through 4.19 hereof), (v), (vi), (vii), (viii) and (ix) (but in the case of clauses (viii) and (ix) of Section 6.01 hereof, with respect to Significant Subsidiaries only).

Section 8.04.         Conditions to Legal or Covenant Defeasance.

The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes.  The Legal Defeasance or Covenant Defeasance may be exercised only if:

(a)           the Issuer irrevocably deposits with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in Euros, non-callable Government Securities, or a combination of cash in Euros and non-callable Government Securities, in amounts as will be sufficient, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants as selected by the Issuer, to pay the principal of, or interest and premium, if any, on the outstanding Notes on the Stated Maturity or on the applicable redemption date, as the case may be, and the Issuer must specify whether the Notes are being defeased to maturity or to a particular redemption date;

(b)           in the case of Legal Defeasance, the Issuer delivers to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable U.S. federal income Tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income Tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(c)           in the case of Covenant Defeasance, the Issuer delivers to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income Tax on the same amounts,

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in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d)           no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

(e)           such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (including, without limitation, the Credit Agreement, but excluding this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;

(f)            the Issuer delivers to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders of Notes over the Issuer’s or any Restricted Subsidiary’s other creditors with the intent of defeating, hindering, delaying or defrauding the Issuer’s or any Restricted Subsidiary’s creditors or others; and

(g)           the Issuer delivers to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.05.         Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 11.03 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer or any Restricted Subsidiary acting as Paying Agent) as the Trustee may determine, to the Holders of all sums due and to become due thereon in respect of principal, premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law.

The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of an internationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee (which may be the certification delivered under Section 8.04(b) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06.         [Reserved].

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Section 8.07.         Reinstatement.

If the Trustee or Paying Agent is unable to apply any Euros or Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuer makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01.         Without Consent of Holders of Notes.

Notwithstanding Section 9.02 of this Indenture, the Issuer, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes or the Guarantees without the consent of any Holder to:

(a)           cure any ambiguity, mistake, defect or inconsistency;

(b)           provide for uncertificated Notes in addition to or in place of certificated Notes;

(c)           provide for the assumption by a successor corporation of the obligations of the Issuer or a Guarantor’s obligations under the Notes, this Indenture and/or a Guarantee in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s assets or such Guarantor’s assets;

(d)           make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder;

(e)           [Reserved];

(f)            add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;

(g)           add a Guarantor under this Indenture;

(h)           conform the text of this Indenture, the Guarantees or the Notes to any provision of the Description of Notes to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of this Indenture, the Guarantees or the Notes;

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(i)            provide for the issuance of Additional Notes in accordance with the limitations as set forth in this Indenture;

(j)            provide for a successor trustee in accordance with the terms of the Indenture or to otherwise comply with any requirement of the Indenture; or

(k)           comply with the rules of any applicable securities depositary.

Upon the request of the Issuer accompanied by a Board Resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Sections 7.02 and 9.06 hereof, the Trustee shall join with the Issuer in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

Section 9.02.         With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Issuer and the Trustee may amend or supplement this Indenture, the Notes or the Guarantees with the consent of the Holders of at least a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Notes or the Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes, including Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). For the avoidance of doubt, the determination of whether any amendment, supplement or waiver has been consented to shall, where applicable, include any Additional Notes that have been issued under this Indenture at any time prior to, concurrently or contemporaneously with the time that such amendment, supplement or waiver becomes operative.

Upon the request of the Issuer accompanied by a Board Resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto.  If a record

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date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental Indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect.

It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section becomes effective, the Issuer shall send to the Holders to such Holder’s address appearing in the securities register maintained in respect of the Notes by the Registrar (the “Security Register”)  a notice briefly describing the amendment, supplement or waiver.  Any failure of the Issuer to send such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver.  Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class may waive compliance in a particular instance by the Issuer with any provision of this Indenture or the Notes.

Without the consent of each Holder adversely affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(a)           reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(b)           reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than the provisions of Section 3.09, Section 4.12, Section 4.18 or the minimum notice provisions required with respect to the redemption of the Notes);

(c)           reduce the rate of or change the time for payment of interest on any Note;

(d)           waive a Default or Event of Default in the payment of principal of, or interest or premium, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the Payment Default that resulted from such acceleration);

(e)           make any Note payable in currency other than that stated in the Notes;

(f)            make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium, if any, on the Notes;

(g)           waive a redemption payment with respect to any Note (other than a payment required by one of the covenants under this Indenture);

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(h)           make any change in the preceding amendment and waiver provisions; or

(i)            release all or substantially all of the Guarantors from their Guarantees, in each case, except in accordance with the terms of this Indenture.

Section 9.03.         [Reserved].

Section 9.04.         Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion thereof that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note.  However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion thereof if the Trustee receives written notice of revocation before the Trustee receives an Officer’s Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and theretofore not revoked such consent) to the amendment, supplement or waiver.

Section 9.05.         Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated.  The Issuer in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06.         Trustee to Sign Amendments, etc.

The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  The Issuer may not sign an amendment or supplemental Indenture until its Board of Directors approves it.  In executing any amended or supplemental Indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture and that such amended or supplemental Indenture is the legal, valid and binding obligation of the Issuer enforceable against it in accordance with its terms, subject to customary exceptions and that such amended or supplemental Indenture complies with the provisions hereof.

Section 9.07.         Payments for Consent.

The Issuer will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all

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Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

ARTICLE 10

GUARANTEES

Section 10.01.          Guarantee.

Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:

(a)           the principal of premium, if any, and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(b)           in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration pursuant to Section 6.02 hereof or otherwise.  Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.  Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

Each Guarantor hereby agrees that its obligations with regard to this Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Issuer under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Issuer or any other obligor with respect to this Indenture, the Notes or the Obligations of the Issuer under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor.  Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to:  (a) any right to require any of the Trustee, the Holders or the Issuer (each a “Benefited Party”), as a condition of payment or performance by such Guarantor, to (1) proceed against the Issuer, any other guarantor (including any other Guarantor) of the Obligations under the Guarantees or any other Person, (2) proceed against or exhaust any security held from the Issuer, any such other guarantor or any other Person, (3) proceed against or have resort to any balance of any deposit account or credit on the books of any Benefited Party in favor of the Issuer or any other Person, or (4) pursue any other remedy in the power of any Benefited Party whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Issuer including any defense based on or arising out of the lack of validity or the unenforceability of the Obligations under the Guarantees

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or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Issuer from any cause other than payment in full of the Obligations under the Guarantees; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Benefited Party’s errors or omissions in the administration of the Obligations under the Guarantees, except behavior which amounts to bad faith; (e) (1) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of the Guarantees and any legal or equitable discharge of such Guarantor’s obligations hereunder, (2) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, (3) any rights to set-offs, recoupments and counterclaims and (4) promptness, diligence and any requirement that any Benefited Party protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentations, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of the Guarantees, notices of Default under the Notes or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Obligations under the Guarantees or any agreement related thereto, and notices of any extension of credit to the Issuer and any right to consent to any thereof; (g) to the extent permitted under applicable law, the benefits of any “One Action” rule; and (h) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of the Guarantees.  Each Guarantor hereby covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in its Guarantee and this Indenture.

If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.  Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby and (y) in the event of any declaration of acceleration of such obligations as provided in Section 6.02 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee.  The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee.

Section 10.02.          Limitation on Guarantor Liability.

Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent

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applicable to any Guarantee.  To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor under this Article 10 shall be limited to the maximum amount as shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, including, if applicable, its guarantee of all obligations under the Credit Agreement, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance.

Section 10.03.          Execution and Delivery of Guarantee.

To evidence its Guarantee set forth in Section 10.01 hereof, each Guarantor hereby agrees that a notation of such Guarantee in substantially the form included in Exhibit D shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee.

Each Guarantor hereby agrees that its Guarantee set forth in Section 10.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee.

If an Officer whose signature is on any supplemental indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors.

Section 10.04.          Guarantors May Consolidate, etc., on Certain Terms.

(a)           Except as otherwise provided in Section 10.05 hereof, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Issuer or another Guarantor, unless:

(i)            immediately after giving effect to such transaction, no Default or Event of Default exists; and

(ii)           either:

(A)          Subject to Section 10.05 hereof, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than a Guarantor) unconditionally assumes all the obligations of that Guarantor under this Indenture and its Guarantee on the terms set forth herein or therein, pursuant to a supplemental Indenture in form and substance reasonably satisfactory to the Trustee; or

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(B)          The Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation, Section 4.12 hereof.

(b)           In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental Indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.  Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee.  All the Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Guarantees had been issued at the date of the execution hereof.

(c)           Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a)(ii)(A) and (B) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Issuer or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Issuer or another Guarantor.

Section 10.05.          Release of Guarantees.

The Guarantee of a Guarantor shall be unconditionally released and discharged, and no further action by such Guarantor, the Issuer or the Trustee is required for the release of such Guarantor’s Guarantee, upon:

(1)           (a) in connection with (i) any sale or other disposition of all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Issuer’s, if the sale or other disposition comply with the provisions of Section 4.12 or (ii) any sale of all of the Capital Stock of a Guarantor to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Restricted Subsidiary of the Issuer, if the sale complies with the provisions of Section 4.12, in each case as provided in Section 4.12;

(b)           if the Issuer designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with Section 4.17;

(c)           upon Legal Defeasance or Covenant Defeasance pursuant to Article 8 and upon a discharge of this Indenture pursuant to Section 11.01; or

(d)           if such Guarantor shall not borrow or Guarantee any Indebtedness under any Credit Facility, as applicable (other than if such Guarantor no longer Guarantees any such Indebtedness as a result of payment, under any Guarantee or otherwise of any such Indebtedness by any Guarantor); provided that a Guarantor shall not be permitted to be released from its Guarantee pursuant to this clause (d) if it is an obligor with respect to such Indebtedness that

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would not, pursuant to Section 4.09, be permitted to be incurred by a Restricted Subsidiary that is not a Guarantor, unless such Guarantor is also designated as an Unrestricted Subsidiary at the time of such release.

(2)           such Guarantor delivering to the Trustee an Officer’s Certificate and Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transaction have been complied with.

ARTICLE 11

SATISFACTION AND DISCHARGE

Section 11.01.          Satisfaction and Discharge.

This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(a)           either:

(i)            all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(ii)           all Notes that have not been delivered to the Trustee for cancellation (A) have become due and payable by reason of the mailing of a notice of redemption or otherwise, (B) will become due and payable within one year, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in Euros, non-callable Government Securities, or (C) a combination of cash and non-callable Government Securities, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest, if any, to the date of maturity or redemption;

(b)           no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;

(c)           the Issuer or any Guarantor has paid or caused to be paid all sums payable by the Issuer under this Indenture; and

(d)           the Issuer has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money and/or non-callable Government Securities toward the payment of the Notes at maturity or the redemption date, as the case may be.

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The Issuer shall deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Section 11.02.          Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 11.03 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 11.02, the “Trustee”) pursuant to Section 11.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer or any Restricted Subsidiary acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law.

Section 11.03.          Repayment to the Issuer.

Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder shall thereafter look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.

ARTICLE 12

MISCELLANEOUS

Section 12.01.          Notices.

Any notice or communication by the Issuer or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next-day delivery, to the other’s address:

If to the Issuer:

Grifols, S.A.
Avinguda de la Generalitat, 152-158

Parc de Negocis Can Sant Joan

Sant Cugat del Vallès

102

08174 Barcelona

Spain
Attention:  Alfredo Arroyo

With a copy to:

Proskauer Rose LLP
110 Bishopsgate
London EC2N 4AY
Attention:  Max Kirchner
Telecopier No.:  44.20.7280.2001

If to the Trustee:

BNY Mellon Corporate Trustee Services Limited
One Canada Square

London E14 5AL

Attention: Trustee Administration Manager (Grifols)

Telecopier No.: 44.20.7964.2509

The Issuer or the Trustee, by notice to the others, may designate additional or different addresses, including if it is a different entity notices for each Agent, for subsequent notices or communications.

All notices and communications (other than those sent to Holders and the Trustee) shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telescoped; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next-day delivery.  All notices and communications to the Trustee shall be deemed duly given and effective only upon receipt.

Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next-day delivery to its address shown on the Security Register.  Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Notwithstanding anything to the contrary in this Section 12.01, any notice to a Holder of a Book-Entry Interest shall be made in accordance with applicable procedures of the Depositary.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Issuer mails a notice or communication to Holders or delivers a notice or communication to Holders of Book-Entry Interests, it shall mail a copy to the Trustee and, if it is a different Person, to each Agent at the same time.

In addition to the foregoing, the Trustee agrees to accept and act upon notice, instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other

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similar unsecured electronic methods.  If the party elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling.  The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction.  The party providing electronic instructions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.

Section 12.02.          [Reserved].

Section 12.03.          Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Issuer to the Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Trustee:

(a)           an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.04 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b)           an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.04 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.

Section 12.04.          Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(a)           a statement that the Person making such certificate or opinion has read such covenant or condition;

(b)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c)           a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d)           a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

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Section 12.05.          Rules by Trustee and Agents and No Personal Liability of Directors, Officers, Employees and Stockholders.

(a)           Rules by Trustee.  The Trustee may make reasonable rules for action by or at a meeting of Holders.  The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

(b)           No Personal Liability of Directors, Officers, Employees and Stockholders.  No past, present or future director, officer, employee, partner, manager, agent, member, incorporator (or Person forming any limited liability company) or stockholder of the Issuer or of any Guarantor, as such, shall have any liability for any obligations of the Issuer of any Guarantor under the Notes, this Indenture, any Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note and Guarantee waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the Notes and Guarantee.  Such waiver may not be effective to waive liabilities under the federal securities laws.

Section 12.06.          Governing Law.

THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

Section 12.07.          No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or its Subsidiaries or of any other Person.  Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 12.08.          Successors.

All covenants and agreements of the Issuer and the Restricted Subsidiaries in this Indenture and the Notes shall bind its successors.  All covenants and agreements of the Trustee in this Indenture shall bind its successors.

Section 12.09.          Severability.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 12.10.          Counterpart Originals.

The parties may sign any number of copies of this Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

105

Section 12.11.          Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings in this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

Section 12.12.          Waiver of Jury Trial.

EACH OF THE ISSUER, THE GUARANTORS, THE HOLDERS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES, THE GUARANTEES OR THE TRANSACTION CONTEMPLATED HEREBY.

Section 12.13.          Agent for Service; Submission to Jurisdiction; Waiver of Immunities.

Each of the parties hereto irrevocably agrees that any suit, action or proceeding arising out of, related to, or in connection with this Indenture, the Notes, the Guarantees and any supplemental indenture or the transactions contemplated hereby, and any action arising under U.S. federal or state securities laws, may be instituted in any U.S. federal or state court located in the State and City of New York, Borough of Manhattan; irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such proceeding; and irrevocably submits to the jurisdiction of such courts in any such suit, action or proceeding.  The Issuer and each of the Guarantors has appointed Grifols Shared Services North America, Inc., with the address 2410 Lillyvale Ave., Los Angeles, CA 90032-3514 as its authorized agent upon whom process may be served in any such suit, action or proceeding which may be instituted in any federal or state court located in the State of New York, Borough of Manhattan arising out of or based upon this Indenture, the Notes or the transactions contemplated hereby or thereby, and any action brought under U.S. federal or state securities laws (the “Authorized Agent”).  The Issuer and each of the Guarantors expressly consents to the jurisdiction of any such court in respect of any such action and waives any other requirements of or objections to personal jurisdiction with respect thereto and waives any right to trial by jury.  Such appointment shall be irrevocable unless and until replaced by an agent reasonably acceptable to the Trustee.  The Issuer and each of the Guarantors represents and warrants that the Authorized Agent has agreed to act as said agent for service of process, and the Issuer agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid.  Service of process upon the Authorized Agent and written notice of such service to the Issuer shall be deemed, in every respect, effective service of process upon the Issuer and any Guarantor.

Section 12.14.      Judgment Currency.

Euro is the sole currency of account and payment for all sums payable by the Issuer or any Guarantor under the Notes, any Guarantee thereof and this Indenture. Any payment on account of an amount that is payable in Euro, in respect of the Notes, which is made to or for the account of any Holder or the Trustee in lawful currency of any other jurisdiction (the “Judgment Currency”), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Issuer or any Guarantor, shall constitute a discharge of the Issuer or the

106

Guarantor’s obligation under this Indenture and the Notes or Guarantee and/or any supplemental indenture, as the case may be, only to the extent of the amount of Euro which such Holder or the Trustee, as the case may be, could purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first Business Day following receipt of the payment in the Judgment Currency. If the amount of Euro that could be so purchased is less than the amount of Euro originally due to such Holder or the Trustee, as the case may be, the Issuer and the Guarantors shall indemnify and hold harmless the Holder or the Trustee, as the case may be, from and against all loss or damage arising out of, or as a result of, such deficiency. The indemnity shall constitute an obligation separate and independent from the other obligations contained in this Indenture or the Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.

Section 12.15.      Acknowledgement and Consent to Bail-in of EEA Financial Institutions.

Notwithstanding and to the exclusion of any other term of this Indenture or any other agreements, arrangements, or understanding between the BRRD Party and the Issuer, the Issuer acknowledges and accepts that a BRRD Liability arising under this Indenture may be subject to the exercise of Bail-in Powers by the Relevant Resolution Authority, and acknowledges, accepts, and agrees to be bound by:

(a)           the effect of the exercise of Bail-in Powers by the Relevant Resolution Authority in relation to any BRRD Liability of the BRRD Party to the Issuer under this Indenture, that (without limitation) may include and result in any of the following, or some combination thereof:

(i)            the reduction of all, or a portion, of the BRRD Liability or outstanding amounts due thereon;

(ii)           the conversion of all, or a portion, of the BRRD Liability into shares, other securities or other obligations of the BRRD Party or another person, and the issue to or conferral on the Issuer of such shares, securities or obligations;

(iii)          the amendment or alteration of any interest, if applicable, thereon, the maturity or the dates on which any payments are due including by suspending payment for a temporary period; or

(iv)          the cancellation of the BRRD Liability

(b)           the variation of the terms of this Indenture, as deemed necessary by the Relevant Resolution Authority, to give effect to the exercise of Bail-in Powers by the Relevant Resolution Authority.

[Signatures on following page]

107

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and attested, as of the date and year first above written.

ISSUER
GRIFOLS, S.A.
By:	/s/ Raimon Grifols Roura
	Name: Raimon Grifols Roura
	Title: Co-Chief Executive Officer
By:	/s/ Victor Grifols Deu
	Name: Victor Grifols Deu
	Title: Co-Chief Executive Officer
TRUSTEE
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED, AS TRUSTEE
By:	/s/ Trevor Blewer
	Name: Trevor Blewer
	Title:  Vice President
GUARANTORS
GRIFOLS WORLDWIDE OPERATIONS LIMITED
By:	/s/ Alfredo Arroyo
	Name: Alfredo Arroyo
	Title: Authorized Signatory
BIOMAT USA, INC.
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory

Signature Page to Indenture

GRIFOLS BIOLOGICALS INC.
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory
GRIFOLS SHARED SERVICES NORTH AMERICA, INC.
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory
GRIFOLS THERAPEUTICS INC
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory
INSTITUTO GRIFOLS, S.A.
By:	/s/ Alfredo Arroyo
	Name: Alfredo Arroyo
	Title: Authorized Signatory
GRIFOLS WORLDWIDE OPERATIONS USA, INC.
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory
GRIFOLS USA, LLC
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory

Signature Page to Indenture

GRIFOLS DIAGNOSTIC SOLUTIONS INC.
By:	/s/ David I. Bell
	Name: David I. Bell
	Title: Authorized Signatory
REGISTRAR
THE BANK OF NEW YORK MELLON SA/NV
By:	/s/ Trevor Blewer
	Name: Trevor Blewer
	Title:  Vice President

Signature Page to Indenture

EXHIBIT A

(face of Note)

[RULE 144A][REGULATION S] [GLOBAL] NOTE

3.200% Senior Notes due 2025

	ISIN [   ]
	Common Code [   ]
No.[   ]	€[     ]

Grifols, S.A.

promises to pay to THE BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED or registered assigns, the principal amount of €[   ] on May 1, 2025.

Interest Payment Dates: May 1 and November 1, commencing November 1, 2017.  Record Dates: April 15 and October 15.

A-1

IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officers.

ISSUER:
Grifols, S.A.
By:
	Name:
	Title:
By:
	Name:
	Title:

This is one of the Global Notes referred to in the within-mentioned Indenture:

BNY Mellon Corporate Trustee Services Limited,
as Trustee
By:
	Authorized Signatory
	Dated

A-2

(Back of Note)
3.200% Senior Notes due 2025

[Insert the following Global Note Legend, if applicable pursuant to the terms of the Indenture]

[THIS GLOBAL NOTE IS HELD BY THE NOMINEE OF THE COMMON DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE TRANSFERRED OR EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, AND (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE.]

[Insert the following Private Placement Legend, if applicable pursuant to the terms of the Indenture]

[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT, AS AMENDED, (AN “ACCREDITED INVESTOR”), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, EXCEPT (A) TO GRIFOLS, S.A. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE AND THE ISSUER THE CERTIFICATE REQUIRED BY SECTION 2.06 OF THE INDENTURE, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER OR TRUSTEE SO REQUESTS), OR (G) PURSUANT TO AN

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EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION”, “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.]

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Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1.Interest.  The Issuer promises to pay interest on the principal amount of this Note at 3.200% per annum until maturity.  The Issuer shall pay interest semi-annually on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “interest payment date”).  Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided, however, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such next succeeding interest payment date; provided, further, that the first interest payment date shall be November 1, 2017.  The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

2.Method of Payment.  The Issuer shall pay interest on the Notes (except defaulted interest) to the Persons who are Holders at the close of business on the April 15 or October 15 next preceding the interest payment date, even if such Notes are cancelled after such record date and on or before such interest payment date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest.  The Notes shall be payable as to principal, premium, if any, and interest, if any, at the office or agency of the Issuer maintained for such purpose, or, at the option of the Issuer, payment of interest, if any, may be made by check mailed to the Holders at their addresses set forth in the Security Register; provided, however, that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, if any, and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer or the Paying Agent.  Such payment shall be in such coin or currency of the European Union as at the time of payment is legal tender for payment of public and private debts.

3.Paying Agent and Registrar.  Initially, The Bank of New York Mellon, London Branch will act as Paying Agent and The Bank of New York Mellon, SA/NV, Luxembourg Branch will act as Registrar.  The Issuer may change any Paying Agent or Registrar without notice to any Holder.  The Issuer or any of Subsidiary may act in any such capacity.

4.Indenture.  The Issuer issued the Notes under an Indenture dated as of April 26, 2017 (“Indenture”) among the Issuer, the Guarantors party thereto, the Trustee and the Registrar.  The terms of the Notes include those stated in the Indenture.  The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of such terms.  To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.  The Notes are unsecured obligations of the Issuer.  The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

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5.Optional Redemption.

(a)Except as set forth in clauses (b) and (c) of this Paragraph 5, the Notes will not be redeemable at the option of the Issuer prior to May 1, 2020.  On or after May 1, 2020, the Issuer may redeem all or any portion of the Notes, at once or over time, upon no less than 30 nor more than 60 days’ prior notice.  The Notes may be redeemed at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:

Year	Percent
2020	101.600	%
2021	100.800	%
2022 and thereafter	100.000	%

(b)On or prior to May 1, 2020, the Issuer may on one or more occasions redeem up to 40% of the aggregate principal amount of the Notes issued under this Indenture (including Additional Notes) at a redemption price equal to 103.200% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date) with the net cash proceeds of any Qualified Equity Offering; provided, however, that:

(1)after giving effect to any such redemption, at least 60% of the aggregate principal amount of the Notes issued on the Issue Date (excluding Notes held by the Parent and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

(2)any such redemption shall be made within 90 days of such Qualified Equity Offering upon not less than 30 nor more than 60 days’ prior notice.

(c)On or prior to May 1, 2020, the Issuer may redeem all or a part of the Notes upon not less than 30 nor more than 60 days prior notice under this Indenture at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to but excluding the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date).

(d)Any prepayment pursuant to this Paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.  Unless the Issuer defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

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6.Redemption for Taxation Reasons.  The Notes may be redeemed, at the option of the Issuer, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to Holders (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Issuer for redemption if, as a result of:

(1)any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Taxing Jurisdiction affecting taxation; or

(2)any change in, or amendment to, an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment  or order by a court of competent jurisdiction),

which change or amendment becomes effective on or after the date on which such jurisdiction becomes a Taxing Jurisdiction, and the Issuer or any Guarantor, as the case may be, is, or on the next interest payment date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the Issuer or any Guarantor, as the case may be, taking reasonable measures available to it; provided that for the avoidance of doubt, changing the jurisdiction of the Issuer or any Guarantor is not a reasonable measure for the purposes of Section 3.10 of the Indenture; provided, further, that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Issuer or any Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the transmission of any notice of redemption of the Notes pursuant to the foregoing, the Issuer will deliver to the Trustee:

(1)an Officer’s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, and describing the facts related thereto and stating that such requirement cannot be avoided by the Issuer or Guarantor, as the case may be, taking reasonable measures available to it; and

(2)an Opinion of Counsel of recognized international standing stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee will accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders.

Any Notes that are redeemed will be cancelled.

7.Mandatory Redemption.

(a)The Issuer shall not be required to make sinking fund payments with respect to the Notes.  However, under certain circumstances, the Issuer may be required to offer to repurchase the Notes pursuant to Sections 3.09, 4.12 and 4.18 of the Indenture.

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(b)In addition, the Issuer and its Subsidiaries may acquire Notes by means other than a redemption or required repurchase whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisition does not otherwise violate the terms of the Indenture.

8.Repurchase at the Option of Holder.

(a)Upon the occurrence of a Change of Control, the Issuer shall make an offer to purchase (a “Change of Control Offer”) and each Holder shall have the right to require the Issuer to repurchase all or any part (equal to €100,000 or an integral multiple of €1,000) of such Holder’s Notes at a purchase price (the “Change of Control Payment”) in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date.  The Issuer shall purchase all Notes validly tendered pursuant to the Change of Control Offer and not withdrawn.

(b)If the Issuer or one of the Restricted Subsidiaries consummates any Asset Sale, when the aggregate amount of Excess Proceeds exceeds $300.0 million, the Issuer shall make an offer (“Asset Sale Offer”) to all Holders of Notes and all holders of other Indebtedness of the Issuer or any Restricted Subsidiary that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds.  The offer price in any Asset Sale Offer will be equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, pursuant to Section 3.09 of the Indenture, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.  If the aggregate principal amount of Notes and other pari passu Indebtedness validly and properly tendered and not withdrawn into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee (or applicable depository) will select the Notes and the Issuer or the trustee, agent or other similar party with respect to such other pari passu Indebtedness will select such Indebtedness to be purchased as described in Article 3 in the Indenture.  Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuer prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

9.Notice of Redemption.  The Issuer shall mail or cause to be mailed notice of redemption by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture.  Notes in denominations larger than €100,000 may be redeemed in part but only in whole multiples of €1,000 in excess thereof, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date,  interest ceases to accrue on Notes or portions thereof called for redemption.

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10.Denominations, Transfer, Exchange.  The Notes are in registered form without coupons in denominations of €100,000 and integral multiples of €1,000 in excess thereof.  The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture.  The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.  Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding interest payment date.

11.Persons Deemed Owners.  The registered holder of a Note may be treated as its owner for all purposes.

12.Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture or the Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of the Indenture, the Notes or the Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).  Without the consent of any Holder, the Indenture, the Notes or the Guarantees may be amended or supplemented to:  (1) cure any ambiguity, mistake, defect or inconsistency, (2) provide for uncertificated Notes in addition to or in place of certificated Notes, (3) provide for the assumption by a successor corporation of the obligations of the Issuer or Guarantors under the Notes, the Indenture and/or a Guarantee in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s assets or such Guarantor’s assets, (4) make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, (5) [Reserved], (6) add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantors, (7) add a Guarantor under the Indenture, (8) conform the text of the Indenture, the Guarantees or the Notes to any provision of the “Description of Notes” to the extent that such provision in the “Description of Notes” was intended to be a verbatim recitation of a provision of the Indenture, the Guarantees or the Notes, (9) provide for the issuance of Additional Notes in accordance with the limitations as set forth in the Indenture, (10) provide for a successor trustee in accordance with the terms of the Indenture or to otherwise comply with any requirement of the Indenture, or (11) to comply with the rules of any applicable securities depositary.

13.Defaults and Remedies.  Each of the following is an Event of Default under the Indenture:  (1) default for 30 days in the payment when due of interest on the Notes; (2) default in payment when due of principal of or premium, if any, on the Notes; (3) failure by the Issuer or

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any Restricted Subsidiary to comply with Section 5.01 or with Section 4.18 of the Indenture; (4) failure by the Issuer or any Restricted Subsidiary for 60 days after notice to comply with any other covenant or agreement in this Indenture or the Notes after written notice thereof is given to the Issuer by the Trustee or to the Issuer and the Restricted Subsidiaries and to the Trustee by Holders of at least 25% in aggregate principal amount of the then outstanding Notes voting as a single class; (5) default under any agreement, bond, mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuer or any Restricted Subsidiary) whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default (A) is caused by a failure to pay any scheduled installment of principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $350.0 million or more; provided, however, where (i) neither the Issuer nor any Restricted Subsidiary has general liability with respect to such Indebtedness, and (ii) the creditor has agreed in writing that such creditor’s recourse is solely to specified assets or Unrestricted Subsidiaries, the amount of such Indebtedness shall be deemed to be the lesser of (x) the principal amount of such Indebtedness, and (y) the fair market value of such specified assets to which the creditor has recourse; (6) failure by the Issuer or any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $350.0 million (net of any amounts covered by insurance), which judgments are not paid, discharged or stayed for a period of 60 days; (7) except as permitted by the Indenture, any Guarantee of a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or any Person acting on behalf of any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, shall deny or disaffirm in writing its obligations under its Guarantee; or (8) certain events of bankruptcy or insolvency described in the Indenture with respect to the Issuer or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.  If any Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be due and payable.  Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest, if any) if it determines that withholding notice is in their interest.  The Holders of a majority in aggregate principal amount of the Notes then

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outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of principal, premium, if any, or interest, if any, on the Notes.  The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

14.          Trustee Dealings with the Issuer.  The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuer or its Affiliates, and may otherwise deal with the Issuer or its Affiliates, as if it were not the Trustee.  However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee or resign.  Any Agent may do the same with like rights and duties.  The Trustee is also subject to Section 7.10 of the Indenture.

15.          No Recourse Against Others.  No past, present or future director, officer, employee, partner, manager, agent, member, incorporator (or Person forming any limited liability company) or stockholder of the Issuer or of any Guarantor, as such, shall have any liability for any obligations of the Issuer or any Guarantor under the Indenture, the Notes, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note and the guarantee waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes and guarantee.  Such waiver may not be effective to waive liabilities under the federal securities laws.

16.          Authentication.  This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

17.          Abbreviations.  Customary abbreviations may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

18.          ISIN and Common Code Numbers.  The Issuer has caused Common Code numbers to be printed on the Notes and the Trustee may use Common Code numbers in notices of redemption as a convenience to Holders.  In addition, the Issuer has caused ISIN numbers to be printed on the Notes and the Trustee may use ISIN numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy of any such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

19.          Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes.  In addition to the rights provided to Holders of Notes under the Indenture, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, among the

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Issuer and the other parties thereto, relating to rights given by the Issuer to the purchasers of any Additional Notes.

20.          Governing Law.  The internal law of the State of New York shall govern and be used to construe the Indenture, this Note and the Guarantees without giving effect to applicable principals of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

The Issuer shall furnish to any Holder upon written request and without charge a copy of the Indenture.  Requests may be made to:

Grifols, S.A.
Avinguda de la Generalitat, 152-158

Parc de Negocis Can Sant Joan

Sant Cugat del Vallès

08174 Barcelona

Spain

Attention:  Alfredo Arroyo

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ASSIGNMENT FORM

To assign this Note, fill in the form below:  (I) or (we) assign and transfer this Note to

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)
	Signature
	Guarantee:

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of
Exchange Amount of
decrease in
Principal Amount
of this Global
Note Amount of
increase in
Principal Amount
of this Global
Note Principal Amount
of this Global
Note following
decrease (or
increase) Signature of
authorized
signatory of
Trustee or
Note
Custodian

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased in its entirety by the Issuer pursuant to Section 4.12 or 4.18 of the Indenture, check the applicable box:

Section 4.12 o

Section 4.18 o

If you want to elect to have only a part of the principal amount of this Note purchased by the Issuer pursuant to Section 4.12 or 4.18 of the Indenture, state the portion of such amount:  €      .

Dated:	Your Signature:
	(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:

(Signature must be guaranteed by a financial institution that is a member of the Securities Transfer Agent Medallion Program (“STAMP”), the Stock Exchange Medallion Program (“SEMP”), the New York Stock Exchange, Inc.  Medallion Signature Program (“MSP”) or such other signature guarantee program as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, SEMP or MSP, all in accordance with the Securities Exchange Act of 1934, as amended.)

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EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

Grifols, S.A.
Avinguda de la Generalitat, 152-158

Parc de Negocis Can Sant Joan

Sant Cugat del Vallès

08174 Barcelona

Spain
Attention:  Alfredo Arroyo

BNY Mellon Corporate Trustee Services Limited, as Trustee
One Canada Square

London E14 5AL

Telecopier No.: 44.20.7964.2509

Attention: Trustee Administration Manager (Grifols)

Re:  3.200% Senior Notes due 2025

Reference is hereby made to the Indenture, dated as of April 26, 2017 (the “Indenture”), by and among, inter alia, Grifols, S.A., as issuer (the “Issuer”), the Guarantors party thereto and BNY Mellon Corporate Trustee Services Limited, as Trustee.  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

[         ] (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of €[ ] in such Note[s] or interests (the “Transfer”), to [       ] (the “Transferee”), as further specified in Annex A hereto.  In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1.o Check if Transferee will take delivery of a Book-Entry Interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A.  The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the Book-Entry Interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the Book-Entry Interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Note will be subject

B-1

to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

2.o Check if Transferee will take delivery of a Book-Entry Interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S.  The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

3.o Check and complete if Transferee will take delivery of a Book-Entry Interest in the Restricted Global Note or a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S.  The Transfer is being effected in compliance with the transfer restrictions applicable to Book-Entry Interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check):

o such Transfer is being effected to the Issuer or a subsidiary thereof.

4.o Check if Transferee will take delivery of a Book-Entry Interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a)o Check if Transfer is pursuant to Rule 144.  (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

B-2

(b)o Check if Transfer is Pursuant to Regulation S.  (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c)o Check if Transfer is Pursuant to Other Exemption.  (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred Book-Entry Interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.

[Insert Name of Transferor]
By:
	Name:
	Title:
	Dated:

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

1.The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (A) OR (B)]

(a)o a Book-Entry Interest in the:

(i)o 144A Global Note (Common Code 159875857), or

(ii)o Regulation S Global Note (Common Code 159875776), or

(b)o a Restricted Definitive Note.

2.After the Transfer the Transferee will hold:

[CHECK ONE]

(a)o a Book-Entry Interest in the:

(i)o 144A Global Note (Common Code 159875857), or

(ii)o Regulation S Global Note (Common Code 159875776), or

(iii)o Unrestricted Global Note (Common Code            ); or

(b)o a Restricted Definitive Note; or

(c)o an Unrestricted Definitive Note, in accordance with the terms of the Indenture.

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

Grifols, S.A.
Avinguda de la Generalitat, 152-158

Parc de Negocis Can Sant Joan

Sant Cugat del Vallès

08174 Barcelona

Spain
Attention:  Alfredo Arroyo

BNY Mellon Corporate Trustee Services Limited, as Trustee
One Canada Square

London E14 5AL

Telecopier No.: 44.20.7964.2509

Attention: Trustee Administration Manager (Grifols)

Re:  3.200% Senior Notes due 2025

(Common Code         )

Reference is hereby made to the Indenture, dated as of April 26, 2017 (the “Indenture”), by and among, inter alia, Grifols, S.A., as issuer (the “Issuer”), the Guarantors party thereto and BNY Mellon Corporate Trustee Services Limited, as Trustee.  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

[          ] (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of €[     ] in such Note[s] or interests (the “Exchange”).  In connection with the Exchange, the Owner hereby certifies that:

1.Exchange of Restricted Definitive Notes or Book-Entry Interests in a Restricted Global Note for Unrestricted Definitive Notes or Book-Entry Interests in an Unrestricted Global Note

(a)o Check if Exchange is from Book-Entry Interest in a Restricted Global Note to Book-Entry Interest in an Unrestricted Global Note.  In connection with the Exchange of the Owner’s Book-Entry Interest in a Restricted Global Note for a Book-Entry Interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the Book-Entry Interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Book-Entry Interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

C-1

(b)o Check if Exchange is from Book-Entry Interest in a Restricted Global Note to Unrestricted Definitive Note.  In connection with the Exchange of the Owner’s Book-Entry Interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(c)o Check if Exchange is from Restricted Definitive Note to Book-Entry Interest in an Unrestricted Global Note.  In connection with the Owners Exchange of a Restricted Definitive Note for a Book-Entry Interest in an Unrestricted Global Note, the Owner hereby certifies (i) the Book-Entry Interest is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Book-Entry Interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

(d)o Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note.  In connection with the Owners Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2.Exchange of Restricted Definitive Notes or Book-Entry Interests in Restricted Global Notes for Restricted Definitive Notes or Book-Entry Interests in Restricted Global Notes

(a)o Check if Exchange is from Book-Entry Interest in a Restricted Global Note to Restricted Definitive Note.  In connection with the Exchange of the Owners Book-Entry Interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owners own account without transfer.  Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

C-2

(b)o Check if Exchange is from Restricted Definitive Note to Book-Entry Interest in a Restricted Global Note.  In connection with the Exchange of the Owners Restricted Definitive Note for a Book-Entry Interest in the [CHECK ONE] o 144A Global Note, o Regulation S Global Note with an equal principal amount, the owner hereby certifies (i) the Book-Entry Interest is being acquired for the Owners own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States.  Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Book-Entry Interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.

[Insert Name of Transferor]
By:
	Name:
	Title:
	Dated:

C-3

EXHIBIT D

FORM OF NOTATION OF GUARANTEE

For value received, each Guarantor (which term includes any successor Person under the Indenture), jointly and severally, unconditionally guarantees, to the extent set forth in the Indenture and subject to the provisions in the Indenture, dated as of April 26, 2017 (the “Indenture”), by and among, inter alia, Grifols, S.A., as issuer (the “Issuer”), the Guarantors party thereto and BNY Mellon Corporate Trustee Services Limited, as trustee (the “Trustee”), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, if any, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Issuer to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.  The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.  This Guarantee is subject to release as and to the extent set forth in Sections 10.04 and 10.05 of the Indenture.  Each Holder of a Note, by accepting the same agrees to and shall be bound by such provisions.  Capitalized terms used herein and not defined are used herein as so defined in the Indenture.

GUARANTORS:
[ADD GUARANTORS]
By:
	Name:
	Title:

D-1

EXHIBIT E

[Reserved]

E-1

EXHIBIT F

FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS

SUPPLEMENTAL INDENTURE (“this Supplemental Indenture”) dated as of [ ], among [GUARANTOR] (“the Guaranteeing Subsidiary”), Grifols, S.A. (the “Issuer”), and BNY Mellon Corporate Trustee Services Limited, as trustee under the indenture referred to below (the “Trustee”).

W I T N E S S E T H:

WHEREAS, the Issuer and the Trustee have heretofore executed an indenture, dated April 26, 2017, providing for the initial issuance of €1,000,000,000 aggregate principal amount of 3.200% Senior Notes due 2025 (the “Notes”) on the terms and subject to the conditions set forth in the Indenture;

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuer’s obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

(1)“Capitalized Terms”.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

(2)“Agreement to Guarantee”.  The Guaranteeing Subsidiary hereby agrees as follows:

(a)The Guaranteeing Subsidiary hereby becomes a party to the Indenture as a Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture.  The Guaranteeing Subsidiary agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

(b)The Guaranteeing Subsidiary agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Obligations pursuant to Article 10 of the Indenture on a senior basis.

F-1

(3)Execution and Delivery.  The Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.

(4)Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

(5)Counterparts.  The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

(6)Effect of Headings.  The Section headings herein are for convenience only and shall not affect the construction hereof.

(7)The Trustee.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary.

F-2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

		[GUARANTEEING SUBSIDIARY], as Guarantor
		By:
			Name:
			Title:
		BNY Mellon Corporate Trustee Services Limited, as Trustee
		By:
			Name:
			Title:
Acknowledged by:
Grifols, S.A., as Issuer
By:
	Name:
	Title:

F-3

EX-4.4

Exhibit 4.4

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

by and among

HOLOGIC, INC.,

GRIFOLS DIAGNOSTIC SOLUTIONS INC.

and

GRIFOLS, S.A.

Dated as of December 14, 2016

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		1
Section 1.1	Certain Defined Terms	1
Section 1.2	Table of Definitions	11
ARTICLE II PURCHASE AND SALE		13
Section 2.1	Purchase and Sale of the Transferred Assets; Excluded Assets	13
Section 2.2	Assumed Liabilities; Excluded Liabilities	16
Section 2.3	Payment of Purchase Price; Estimated Closing Statement and Purchase Price Adjustment	18
Section 2.4	Closing	20
Section 2.5	Consents to Certain Assignments	21
Section 2.6	Purchase Price Allocation	21
Section 2.7	Adjustments for Tax Purposes	22
Section 2.8	Withholding	22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER		23
Section 3.1	Organization and Qualification	23
Section 3.2	Authority	23
Section 3.3	No Conflict; Required Filings and Consents	24
Section 3.4	Transferred Assets	24
Section 3.5	Financial Statements; No Undisclosed Liabilities; Books and Records	25
Section 3.6	Absence of Certain Changes or Events	25
Section 3.7	Compliance with Law; Permits; Certain Payments	25
Section 3.8	Anti-Corruption Laws	26
Section 3.9	Litigation; Governmental Orders	26
Section 3.10	Employee Benefit Plans	27
Section 3.11	Labor and Employment Matters	28
Section 3.12	Suppliers	29
Section 3.13	Insurance	29
Section 3.14	Real Property; Assets; Sufficiency of Assets	29
Section 3.15	Intellectual Property	30
Section 3.16	Taxes	32
Section 3.17	Environmental Matters	33
Section 3.18	Material Contracts	35
Section 3.19	Healthcare Regulatory Matters	36
Section 3.20	Brokers	37
Section 3.21	Product Liability and Recalls	37
Section 3.22	Key Agreement Amendment	38

i

TABLE OF CONTENTS
(Continued)

		Page
Section 3.23	Exclusivity of Representations and Warranties	38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER		38
Section 4.1	Organization	38
Section 4.2	Authority	38
Section 4.3	No Conflict; Required Filings and Consents	39
Section 4.4	Financing	39
Section 4.5	Brokers	40
Section 4.6	The Buyer’s Investigation and Reliance; Exclusivity of Representations and Warranties	41
ARTICLE V COVENANTS		41
Section 5.1	Conduct of Business Prior to the Closing	41
Section 5.2	Covenants Regarding Information	43
Section 5.3	No Solicitation of Other Bids	44
Section 5.4	Notification of Certain Matters	45
Section 5.5	Certain Arrangements; Existing Collaboration Agreement	45
Section 5.6	Confidentiality	46
Section 5.7	Non-Solicitation; Non-Competition	47
Section 5.8	Consents and Filings; Further Assurances	48
Section 5.9	Public Announcements	49
Section 5.10	Use of Names	49
Section 5.11	Employee Matters	50
Section 5.12	Regulatory Transfers	53
Section 5.13	Tax Matters; Real Property Expenses	54
Section 5.14	Insurance; Risk of Loss	55
Section 5.15	Further Assurances; Wrong Pockets	56
Section 5.16	Grifols Guarantee	57
Section 5.17	Cooperation with Financing	57
Section 5.18	Post-Closing Financing Cooperation	58
Section 5.19	Title Insurance	59
Section 5.20	Material Permits	59
Section 5.21	Ancillary Agreements; Transition Services Agreement	59
ARTICLE VI CONDITIONS TO CLOSING		59
Section 6.1	General Conditions	59
Section 6.2	Conditions to Obligations of the Seller	60
Section 6.3	Conditions to Obligations of the Buyer	60

ii

TABLE OF CONTENTS
(Continued)

		Page
ARTICLE VII INDEMNIFICATION		61
Section 7.1	Survival of Representations, Warranties and Covenants	61
Section 7.2	Indemnification by the Seller	62
Section 7.3	Indemnification by the Buyer	62
Section 7.4	Procedures	62
Section 7.5	Limits on Indemnification	64
Section 7.6	No Right of Set-Off	66
Section 7.7	Payments	66
Section 7.8	Materiality	66
Section 7.9	Exclusivity and Nature of Payment	66
ARTICLE VIII TERMINATION		67
Section 8.1	Termination	67
Section 8.2	Effect of Termination	67
ARTICLE IX GENERAL PROVISIONS		68
Section 9.1	Fees and Expenses	68
Section 9.2	Amendment and Modification	68
Section 9.3	Waiver	68
Section 9.4	Notices	68
Section 9.5	Interpretation	70
Section 9.6	Entire Agreement	70
Section 9.7	Third-Party Beneficiaries	70
Section 9.8	Governing Law	70
Section 9.9	Submission to Jurisdiction	71
Section 9.10	Disclosure Generally	71
Section 9.11	Personal Liability	72
Section 9.12	Assignment; Successors	72
Section 9.13	Enforcement	72
Section 9.14	Currency	72
Section 9.15	Severability	73
Section 9.16	Waiver of Jury Trial	73
Section 9.17	Counterparts	73
Section 9.18	Facsimile or .pdf Signature	73
Section 9.19	Time of Essence	73
Section 9.20	No Presumption Against Drafting Party	73
Section 9.21	Legal Representation	73

Exhibit A	-	Collaboration Agreement
Exhibit B	-	Grant Deed

iii

TABLE OF CONTENTS
(Continued)

			Page
Exhibit C	-	Intellectual Property License
Exhibit D	-	Supply Agreement
Exhibit E	-	Transition Services Agreement

iv

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of December 14, 2016 (this “Agreement”), by and among Hologic, Inc., a Delaware corporation (the “Seller”), Grifols Diagnostic Solutions Inc., a Delaware corporation (the “Buyer”), and solely for the purposes of Section 5.16, Grifols, S.A., a company (sociedad anónima) organized under the laws of Spain (“Grifols”).

RECITALS

WHEREAS, certain Affiliates of the Seller and the Buyer have entered into that certain Restated Agreement, dated as of July 24, 2009, by and between Gen-Probe Incorporated and Grifols Diagnostic Solutions Inc. (as assignee of Novartis Vaccines and Diagnostics, Inc.) (as amended, the “Existing Collaboration Agreement”), pursuant to which the parties are jointly engaged in the development, manufacture, commercialization, marketing and sale of certain blood screening products;

WHEREAS, the Seller is engaged in the business of the development, manufacture and, pursuant to the Existing Collaboration Agreement, sale to the Buyer of Products in connection with nucleic acid probe-based testing in human blood, plasma, other blood products, human cells, organs or tissue intended for or associated with transfusion or transplantation (the “Business”);

WHEREAS, the parties wish to terminate the Existing Collaboration Agreement and the Buyer wishes to purchase substantially all of the assets of the Business and assume substantially all of the Liabilities of the Business from the Seller in order to permit it to, from and after the Closing, continue the Business; and

WHEREAS, the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller the Transferred Assets, and in connection therewith the Buyer is willing to assume the Assumed Liabilities of the Seller relating thereto, all upon the terms and subject to the conditions set forth herein.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged and agreed, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1            Certain Defined Terms.  For purposes of this Agreement:

“Accounting Principles” means the accounting principles, methods and practices set forth on Schedule 1.1(d).

“Action” means any claim, action, suit, audit, substantive inquiry, investigation, examination, notice of violation, arbitration or proceeding, in each case by or before any Governmental Authority and whether at Law or in equity.

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.  For purposes of this definition, “Control,” including the terms “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise.

“Affiliated Group” means any affiliated, consolidated, or unitary group within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or non-U.S. Law.

“Ancillary Agreements” means the Assumption Agreement, the Bill of Sale, the Intellectual Property License, the Transition Services Agreement, the Grant Deed, the Collaboration Agreement and the Supply Agreement.

“Anti-Corruption Laws” means (i) the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any successor Law, and the regulations and rules issued pursuant thereto (the “FCPA”), (ii) Laws of any country implementing the Organisation for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions or Laws of similar effect, and (iii) anti-money laundering Laws.

“Assumption Agreement” means an instrument of assignment and assumption in form reasonably satisfactory to the Buyer and the Seller pursuant to which the Seller shall assign to the Buyer and the Buyer shall assume the Assumed Liabilities.

“Bill of Sale” means a bill of sale in form reasonably satisfactory to the Buyer and the Seller transferring to the Buyer all of the tangible personal property owned or held by the Seller as of the Closing Date that is included in the Transferred Assets.

“Books and Records” means books and records, including, to the extent applicable, books of account, ledgers and general, financial and accounting records, machinery and equipment maintenance files, price lists, distribution lists, supplier lists, Regulatory Materials, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data, sales material and records, strategic plans, internal financial statements, marketing and promotional surveys and material and research, and intellectual property files relating to Intellectual Property within Seller’s possession or control.

“Business Books and Records” means any Books and Records of the Seller or its Affiliates that relate exclusively or primarily to the Business (and, in the case of Books and Records that relate to a business other than the Business, only the portion of such Books and Records that relates exclusively or primarily to the Business).

2

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of New York or Barcelona, Spain.

“Business Employees” means the employees of the Seller or any of its Affiliates, in each case as set forth in Schedule 1.1(a).

“Buyer Material Adverse Effect” means any Effect that would prevent, materially delay or materially impede the performance by the Buyer of its obligations under this Agreement or the Ancillary Agreements to which it will be a party or the consummation of the transactions contemplated hereby or thereby.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, Section 4980B of the Code or Part 6 of Title I of ERISA, or any similar state law.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collaboration Agreement” means the Collaboration Agreement to be entered into by the Seller and Grifols in substantially the form attached hereto as Exhibit A.

“Controlled” means, with respect to any Intellectual Property, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to convey ownership of, grant a license, sublicense or covenant-not-to-sue, as applicable, under such Intellectual Property, as provided for herein or in the Intellectual Property License, without violating the terms of any Contract or other arrangement with any third party.

“Contracts” means all legally binding contracts, leases, deeds, mortgages, licenses (including with respect to Intellectual Property), instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and other arrangements, whether written or oral.

“Copyrights” means original works of authorship in any medium of expression, whether or not published or copyrightable, all copyrights (whether registered, unregistered or arising by Law), including computer software and algorithms (including source code), programs and databases in any form, and all documentation and program architecture associated therewith, all registrations and applications therefor and all issuances, extensions and renewals of such registrations and applications throughout the world.

“Domain Names” means internet domain names, including all associated web addresses and URLs, in each case whether or not Marks, registered by any private registrar or Governmental Authority.

“Employee Plan” means each pension, welfare, retirement, disability, salary continuation, compensation, profit-sharing, deferred compensation, incentive, performance award, equity, phantom equity, individual employment, consulting, health, medical, dental, hospitalization, life insurance, bonus, commission, excess benefit, relocation, change in control, retention, mass layoff benefits, plant closing benefits, severance, termination, post-retirement compensation or benefit, vacation, paid time off, tuition assistance, scholarship, fringe-benefit,

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tax equalization or other benefit plan, agreement, policy, program, trust, fund or arrangement, in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, which the Seller or any of its Affiliates or ERISA Affiliates maintained, sponsored, contributed to, or was required to be contributed to or has or may have any Liability (i) on behalf of for the benefit of any Business Employee or any spouse or dependent of such individual or (ii) with respect to which Buyer or any of its Affiliates would reasonably be expected to have any Liability as a result of the transactions contemplated by this Agreement.

“Encumbrance” means any charge, claim, mortgage, lien, option, pledge, security interest, encroachment, conditional sale agreement, right of first refusal, right of first offer or other restriction of any kind, including any agreement to give any of the foregoing (other than those created under applicable securities laws or non-exclusive licenses outside of the Licensed Donor Screening Field).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“ERISA Affiliate” means any Person that is or would be deemed a “single employer” with the Seller under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.

“Excluded Taxes” means (i) all Liabilities of the Seller or any Affiliate of the Seller in respect of any Tax for any Tax period, (ii) all Liabilities for Taxes for any Pre-Closing Tax Period arising out of or relating to the Transferred Assets, the Assumed Liabilities or the operation or conduct of the Business (including any such Tax that is not due or assessed until after the Closing Date), (iii) any Liabilities of the Seller for the unpaid Taxes of any Person for any Pre-Closing Tax Period under Treasury regulations section 1.1502-6 (or any similar provision of state, local, or non-U.S. Law), as a transferee or successor, by contract, or otherwise, in each case, other than any Liabilities for Taxes that are assumed by the Buyer pursuant to Section 5.14, and (iv) any Liability for Taxes assumed by the Seller in Section 5.14.

“Extended Closing Date” means January 31, 2017.

“FDA” means the United States Food and Drug Administration and any successor agency thereto.

“Financing Sources” means the Persons that have committed to provide or otherwise entered into agreements in connection with the Financing with respect to the transactions contemplated hereby.

“GAAP” means United States generally accepted accounting principles as in effect on the date hereof.

“Governmental Authority” means any United States or non-United States federal, state, local or other governmental or quasi-governmental, regulatory, self-regulatory or administrative authority, agency or commission or any judicial or arbitral body.

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“Governmental Order” means any order, writ, judgment, injunction, determination ruling, edict, arbitration or other award or decree of or by or with, or any settlement under the jurisdiction of, any Governmental Authority of competent jurisdiction.

“Grant Deed” means that certain deed of transfer evidencing the conveyance to the Buyer of the Transferred Real Property in substantially the form attached hereto as Exhibit B.

“Healthcare Laws” means any Law relating to patient care or human health and safety, including, as amended from time to time, any such Law pertaining to:  (i) the research, development, testing, production, manufacture, transfer, distribution, approval, labeling, marketing, pricing, third party reimbursement or sale of drugs, biological products and medical devices, including the United States Food, Drug, and Cosmetic Act and the United States Public Health Service Act; (ii) any federal health care program (as such term is defined in 42 U.S.C.     § 1320a-7b(f)), including those pertaining to providers of goods or services that are paid for by any federal health care program (as such term is defined in 42 U.S.C. § 1320a-7b(f)), including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code, Medicare (Title XVIII of the Social Security Act) and Medicaid (Title XIX of the Social Security Act); (iii) transparency reports and reporting of certain financial relationships with health care providers, including the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h); (iv) any federal health care offenses (as such term is defined in 18 U.S.C. § 24(a)), and violations of, or conspiracies to violate 18 U.S.C.      §§ 287, 371, 664, 666, 669, 1001, 1027, 1035, 1341, 1347, 1343, 1518 and 1954; (v) the privacy and security of patient-identifying health care information, including the Health Insurance Portability and Accountability Act (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act; and (vi) all related rules and regulations of each of (i) through (v), and equivalent applicable Laws of other Governmental Authorities.

“Healthcare Regulatory Authority” means the FDA and any other federal, national, foreign or multinational governmental health regulatory agency or authority with jurisdiction over (i) the development, marketing, labeling, sale, distribution, use, handling and control, safety, efficacy, reliability, manufacturing, approval or licensing of any biologic, drug or medical device intended for human use, (ii) federal healthcare programs under which such products are purchased or (iii) the protection of personal health information.

“In-Bound Intellectual Property Licenses” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, waivers, releases, permissions and other Contracts by or through which other Persons, including the Seller or any Affiliate of the Seller, grant the Seller or its Affiliates exclusive or non-exclusive rights or interests in or to any Licensed Intellectual Property (excluding any license to the Seller or its Affiliate of commercially available off-the-shelf software).

“Indebtedness” means, with respect to any Person, (i) all indebtedness for borrowed money, including for the payment of principal, interest, penalties, fees or other liabilities, or for the deferred purchase price of assets or services, (ii) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (iii) all obligations under capital

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lease obligations with respect to Excluded Assets, (iv) all Liabilities secured by any Encumbrance on any property or asset, to the extent not an Assumed Liability, (v) all obligations in respect of letters of credit, bonds, debentures or promissory notes related to the Retained Business, (vi) net obligations under interest rate or currency hedge, swap or similar agreements with respect to Excluded Assets and (vii) all Indebtedness of others secured by a Encumbrance on any Excluded Asset.

“Independent Accountants” means the office of an impartial internationally recognized accounting firm other than Seller’s accountants or Buyer’s accountants at the time, as may be mutually agreed by the Buyer and the Seller.

“Intellectual Property” means all intellectual property rights, all of the following and similar intangible property and related proprietary rights, interests and protections however arising, pursuant to the laws of the United States or any other jurisdiction in the world with respect to the following:  (i) Marks; (ii) Patents; (iii) Copyrights; (iv) Trade Secrets; (v) Domain Names, websites and web pages, and all content and data thereon or relating thereto, whether or not Copyrights; (vi) the right to prosecute, enforce, obtain damages relating to, settle or release any past, present or future infringement; and (vii) any similar or equivalent rights to any of the foregoing throughout the world.

“Intellectual Property License” means the intellectual property license to be entered into as of the Closing Date by and between the Seller and/or one or more of its Affiliates and the Buyer and/or one or more of its Affiliates in substantially the form attached hereto as Exhibit C, pursuant to which the Licensed Intellectual Property is licensed to the Buyer.

“Intellectual Property Registrations” means all Patents, Copyrights, Marks and Domain Names that are subject to any issuance, registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registrations and pending applications for any of the foregoing.

“Inventory” means all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories.

“Inventory Target” means $21,000,000.

“IRS” means the United States Internal Revenue Service or any successor thereto.

“Key Agreement Amendment” means the agreement set forth on Schedule 1.1(b).

“Knowledge of the Seller” means the actual knowledge of the persons listed in Schedule 1.1(c) after reasonable inquiry.

“Law” means any statute, law, ordinance, treaty, regulation, rule, code, injunction, judgment, decree, Governmental Order or applicable other requirement or rule of law issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority.

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“Liabilities” means any indebtedness, obligation, liability, claim, suit, judgment, demand, loss, damage, deficiency, cost, expense, fee, fine, penalty, responsibility or obligation of any kind or nature, whether known or unknown, express or implied, primary or secondary, direct or indirect, absolute, accrued, contingent or otherwise and whether due or to become due.

“Licensed Donor Screening Field” means the field of nucleic acid probe-based testing in human blood, plasma, other blood products or components, cells or other biological material intended for direct transfusion or other administration to humans, or for further manufacture.

“Licensed Intellectual Property” has the meaning set forth in the Intellectual Property License; provided, however, that the Secondary Patents (as defined in the Intellectual Property License) shall be deemed to be excluded from Licensed Intellectual Property for the purposes of the representations and warranties set forth in Article III.

“Licensed Transplantation Field” has the meaning set forth in the Intellectual Property License.

“Marks” means trademarks, service marks, trade names, certification marks, corporate names, brand names, logos, slogans, designs, and trade dress and any other indicia of goods and services, whether registered, unregistered or arising by Law, together with the goodwill connected with the use of or symbolized by, and all registrations, and applications to register any of the foregoing, including intent-to-use applications, and all issuances, extensions and renewals of such registrations and applications throughout the world.

“Material Adverse Effect” means any state of facts, circumstance, condition, development, result, event, change, occurrence or effect (each, an “Effect”) that, individually or in combination with any other Effect, would or would reasonably be expected to (i) prevent, materially delay or impede the performance by the Seller of its obligations under this Agreement or the consummation of the transactions contemplated hereby; or (ii) have a material adverse effect on the business, condition (financial or otherwise, but excluding prospects of the Business), assets or results of operations of the Business, taken as a whole, other than any event, change, occurrence or effect arising out of or resulting from (A) general changes or developments in any of the industries in which the Business operates, (B) changes in global, national or regional political conditions (including any outbreak or escalation of hostilities or any acts of war or terrorism) or in general economic, business, regulatory, political or market conditions or in national or global financial markets, (C) natural disasters or calamities, (D) changes after the date hereof in any applicable Law, (E) any failure by the Business to meet its internal or published projections or forecasts of its revenues, earnings or other financial performance or results of operations (but not the underlying causes of such failure unless such underlying causes would otherwise be excepted from this definition), (F) the announcement, pendency or consummation of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including any termination of, reduction in or other negative impact on relationships or dealings, contractual or otherwise, with any suppliers, distributors, partners or employees of the Business, (G) any action taken by the Seller that is expressly required by this Agreement or the Ancillary Agreements, or (H) any action taken (or omitted to be taken) at the written request of the Buyer; provided, however, that any Effect arising out of or

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resulting from any change or event referred to in clause (A), (B), (C) or (D) may constitute, and be taken into account in determining the occurrence of, a Material Adverse Effect if such Effect has a disproportionate impact on the Business compared to any other companies that operate in the industries in which the Business operates.

“Molecular Detection Field” means nucleic acid probe-based testing for the detection, identification, quantification and/or monitoring of infectious agents or genetic material in humans, excluding the Licensed Donor Screening Field and the Licensed Transplantation Field.

“Out-Bound Intellectual Property Licenses” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, waivers, releases, permissions and other Contracts by or through which Seller or its Affiliates grants to other Persons, including Seller or any Affiliates of Seller, exclusive or non-exclusive rights or interests in or to any Licensed Intellectual Property.

“Patents” means (i) patents and patent applications (provisional and non-provisional) anywhere in the world, (ii) all divisionals, continuations, continuations in-part thereof, or any other patent application claiming priority, or entitled to claim priority, directly or indirectly to (a) any such patents or patent applications or (b) any patent or patent application from which such patents or patent applications claim, or is entitled to claim, direct or indirect priority, and (iii) all patents issuing on any of the foregoing anywhere in the world, together with all registrations, reissues, re-examinations, patents of addition, renewals, supplemental protection certificates or extensions of any of the foregoing anywhere in the world.

“Permits” means permits, licenses, franchises, approvals, certificates, consents, waivers, clearances, concessions, exemptions, orders, registrations, notices or other authorizations of, or similar rights issued by or obtained from or of, any Governmental Authority necessary for or used by the Seller and its Affiliates to operate the Business or for the ownership or use of the Transferred Assets (including Environmental Permits and Transferred Product Registrations).

“Permitted Encumbrance” means (i) statutory liens for current Taxes not yet delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings, (ii) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of the Seller for a period greater than 60 days, or the validity or amount of which is being contested in good faith by appropriate proceedings, or pledges, deposits or other liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation), and in each case, that are not, individually or in the aggregate, material to the Business, (iii) zoning, entitlement, conservation restriction and other land use and environmental regulations promulgated by Governmental Authorities (including the California Subdivision Map Act, to the extent the conveyance of Transferred Real Property shall be done in compliance therewith) that are not, individually or in the aggregate, material to the Business, that do not prohibit or interfere with the present use and operation of the Transferred Real Property, and (iv) all exceptions, restrictions, easements, imperfections of title, charges, rights-of-way and

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other Encumbrances that are not, individually or in the aggregate, material to the Business, that do not prohibit or interfere with the current operation of the Transferred Real Property or that do not render title to the Transferred Real Property unmarketable.

“Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.

“Post-Closing Tax Period” means any Tax period ending after the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period beginning immediately after the Closing Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on the Closing Date.

“Products” means products used in connection with nucleic acid probe-based testing in human blood, plasma or other blood products intended for direct transfusion or other administration to humans.

“Regulatory Materials” means, with respect to a Product: regulatory applications and submissions (and any supplements or amendments thereto) under applicable Healthcare Laws; any notifications, communications, correspondence, registrations, master files and/or other filings made to, received from or otherwise conducted with a Governmental Authority under applicable Healthcare Laws; records and other materials maintained to comply with applicable Healthcare Laws (e.g., regarding current good manufacturing practices and quality system regulations); and records that are necessary or advisable in order to obtain Transferred Product Registrations or other approvals from Governmental Authorities under applicable Healthcare Laws for research, development, testing, production, manufacturing, approval, labeling, marketing, transfer, distribution, pricing, third party reimbursement and sale of drugs, biological products or devices.

“Representatives” means, with respect to any Person, the officers, directors, principals, employees, agents, auditors, advisors, bankers and other representatives of such Person.

“Restricted Period” means the period commencing on the Closing Date and terminating on the third anniversary of the Closing Date.

“Retained Business” means all businesses and operations of the Seller and its Affiliates other than the Business; provided, notwithstanding anything to the contrary herein, the Retained Business shall also include the Seller’s business relating to the Licensed Transplantation Field.

“Return” means any return, declaration, report, statement, information statement and other document filed or required to be filed with respect to Taxes, including any related or

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supporting information filed or required to be filed with respect to the foregoing (such as any schedule or attachment thereto), and including any amendments thereof.

“Seller Partner” means any counterparty to a development, contract research, commercialization, manufacturing, distribution, sales, marketing, supply, consulting or other collaboration Contract with Seller or any Affiliate of the Seller.

“Straddle Period” means any Tax period beginning on or prior to and ending after the Closing Date.

“Subject Period” means the period commencing on the Closing Date and terminating on the fifth anniversary of the Closing Date.

“Supply Agreement” means the Supply Agreement to be entered into by the Seller and Grifols in substantially the form attached hereto as Exhibit D.

“Taxes” means any and all taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority.

“Territory” means any country in the world.

“Title Company” means First American Title Insurance Company, or such other title insurance company reasonably acceptable to the Seller and the Buyer.

“Title Policy” means the ALTA owner’s policy of title insurance to be issued by Title Company in favor of the Buyer or its designee, insuring Buyer’s or its designee’s fee interest in each Transferred Real Property as of the Closing Date and/or any subsequent transfers in accordance with Section 5.19.

“Trade Secrets” means know-how, trade secret rights, inventions, discoveries, methods, processes, technical data, specifications, research and development information, technology, data bases, techniques, concepts, ideas, formulas, patterns, compilations, compositions, manufacturing and production processes, programs, devices, technology, methods, technical data, procedures, designs, recordings, graphs, drawings, reports, analyses, customer lists, supplier lists, pricing and cost information, business and marketing plans and proposals and other proprietary or confidential information and all rights therein throughout the world.

“Transaction Expenses” means the aggregate amount of any and all fees and expenses, incurred by or on behalf of, or to be paid or reimbursed by, the Seller in connection with the negotiation, preparation or execution of this Agreement or the Ancillary Agreements or the performance or consummation of the transactions contemplated hereby or thereby, including (i) all fees and expenses of counsel, advisors, consultants, investment bankers, accountants, auditors and any other experts in connection with the transactions contemplated hereby and (ii) any payments related to any transaction bonus, discretionary bonus, change-of-control payment, success fee, retention payment, single-trigger severance payment, sale bonus, “stay-put” or other compensatory payments made or payable to any current or former employee, director or independent contractor of the Seller or any of its Affiliates pursuant to any Employee

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Plan, other employee benefit plan of the Seller or any of its Affiliates or any agreement between the Seller or of its Affiliates and such Person, whether provided pursuant to an employment agreement or otherwise, as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby, including any withholding and employment Taxes associated therewith, and including any such payments that are due after the Closing (excluding, for the avoidance of doubt, any amounts payable in connection with arrangements entered into by the Buyer or any of its Affiliates).

“Transition Services Agreement” means the transition and reverse transition services agreement to be entered into as of the Closing Date by and between the Seller and/or one or more of its Affiliates and the Buyer and/or one or more of its Affiliates in substantially the form attached hereto as Exhibit E.

“WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state and local Laws related to plant closings, relocations, mass layoffs and employment losses, in each case as amended from time to time.

Section 1.2            Table of Definitions.  The following terms have the meanings set forth in the Sections referenced below:

Definition	Location
Acquisition Proposal	5.3(a)
Agreement	Preamble
Applicable Period	3.18(a)(i)
Assumed Liabilities	2.2(a)
Balance Sheet	3.5(a)
Balance Sheet Date	3.5(a)
Bankruptcy Exception	3.2
Basket Amount	7.5(b)(ii)
Business	Recitals
Buyer	Preamble
Buyer Indemnified Parties	7.2
Buyer Obligations	5.16(a)
Cap	7.5(b)(i)
Closing	2.4
Closing Date	2.4
Confidentiality Agreement	5.6(a)
Debt Commitment Letter	4.4(a)
Debt Financing	4.4(a)
Debt Financing Commitments	4.4(a)
Disclosure Schedules	Article III
Dispute Notice	2.3(b)(iii)
Effect	1.1
Environmental Laws	3.17(e)(i)
Environmental Permits	3.17(e)(ii)
Estimated Closing Statement	2.3(b)(i)

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Definition	Location
Excluded Assets	2.1(b)
Excluded Liabilities	2.2(b)
Excluded Willow Court Assets	2.1(b)(iv)
Existing Collaboration Agreement	Recitals
Existing Grifols Liabilities	2.2
FCPA	1.1
Fee Letter	4.4(b)
Final Allocation Schedule	2.6(a)
Final Closing Statement	2.3(b)(v)
Financial Statements	3.5(a)
Financing	5.17
Fundamental Representations	7.1
Gibson Dunn	9.21
Grifols	Preamble
Hazardous Substances	3.17(e)(iii)
HSR Act	3.3(b)
Indemnified Party	7.4(a)
Indemnifying Party	7.4(a)
Initial Allocation Schedule	2.6(a)
Insurance Policies	3.13
Lenders	4.4(a)
Losses	7.2
Material Contracts	3.18(a)
Material Suppliers	3.12
Objection Period	2.6(b)
Post-Closing Claims	5.14(b)
Proposed Final Closing Statement	2.3(b)(ii)
Purchase Price	2.3(a)
Resolution Period	2.3(b)(iv)
Seller	Preamble
Seller Indemnified Parties	7.3
Shared Liabilities	2.2(c)(i)
Termination Date	8.1(c)
Third Party Claim	7.4(a)
Transferred Assets	2.1(a)
Transferred Contracts	2.1(a)(iii)
Transferred Employees	5.11(a)
Transferred Product Registrations	2.1(a)(vii)
Transferred Real Property	2.1(a)(iv)
Withholding Agent	2.8

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ARTICLE II
PURCHASE AND SALE

Section 2.1            Purchase and Sale of the Transferred Assets; Excluded Assets.  Upon the terms and subject to the conditions of this Agreement, at the Closing:

(a)           The Seller shall, or shall cause its applicable Affiliates to, sell, assign, transfer, convey and deliver to the Buyer, and the Buyer shall purchase, acquire, accept and pay for, free and clear of any Encumbrances (other than Permitted Encumbrances), all of the Seller’s and its Affiliates’ right, title and interest in, to and under the Transferred Assets.  The “Transferred Assets” consist of, in each case except as limited in the specific categories below and other than any such assets, properties and rights expressly identified as an Excluded Asset pursuant to Section 2.1(b) (including any Intellectual Property and any real property interests owned by the Seller or its Affiliates other than the Transferred Real Property), all assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired, that are used or held for use in connection with, the Business, which shall include, without limitation, the following:

(i)            all production lines, equipment, machinery, furniture, furnishings, leasehold improvements, parts, spare parts, vehicles and other tangible personal property owned by the Seller or its Affiliates physically located at or on the Transferred Real Property (whether or not exclusively or primarily related to the Business) as of the Closing Date, other than the Excluded Willow Court Assets;

(ii)           the production lines, equipment, machinery, furniture, furnishings, leasehold improvements, parts, spare parts, vehicles, computing hardware (including personal computers, file servers, printers and networking equipment) and other tangible personal property owned by the Seller or its Affiliates physically located at or on real property owned by the Seller or its Affiliates other than the Transferred Real Property, as set forth on Schedule 2.1(a)(ii);

(iii)          all Contracts, purchase orders, proposals or bids exclusively or primarily related to the Business, including those listed in Schedule 2.1(a)(iii) (the “Transferred Contracts”), and all rights (including rights of recovery and rights of set-off), privileges, claims, causes of action and demands under any of the Transferred Contracts;

(iv)          all real property, leaseholds and other interests in real property listed on Schedule 2.1(a)(iv), together in each case with the Seller’s (or its applicable Affiliate’s) right, title and interest in and to all structures, facilities or improvements located thereon and all easements, licenses, rights and appurtenances relating to the foregoing (the “Transferred Real Property”);

(v)           all raw materials, work-in-progress, finished goods, supplies, packaging materials and other Inventories or consumables owned by the Seller allocated for use in the Business in the Seller’s financial statements and included in the calculation of Inventory in accordance with Section 2.3, which allocation shall be made in a manner consistent with the

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methodologies historically used by the Seller in the preparation of its financial statements for October 2016 and November 2016;

(vi)          all Permits, franchises, orders, variances and Tax abatements used exclusively or primarily in the Business, but only to the extent they may be transferred under applicable Law;

(vii)         the approvals, marketing authorizations, licenses, and registrations of any Governmental Authority necessary to commercially manufacture, distribute or sell any Products and used exclusively or primarily in the Business as set forth on Schedule 2.1(a)(vii) (the “Transferred Product Registrations”);

(viii)        all goodwill and going concern value and other intangible assets relating to the Business;

(ix)          all Business Books and Records (including, with prior written consent of the applicable Transferred Employee, any personnel files and employee records related to such Transferred Employee);

(x)           all credits, prepaid expenses, customer deposits and security deposits allocated to the Business in the Seller’s financial statements, which allocation shall be made in a manner consistent with the methodologies historically used by the Seller in the preparation of its financial statements for October 2016 and November 2016;

(xi)          all rights to causes of action, lawsuits, judgments, claims and demands of any nature in favor of the Seller or its Affiliates, including all rights under all guarantees, warranties, indemnities and similar rights in favor of the Seller or its Affiliates, in each case, to the extent relating exclusively or primarily to the Business or the Transferred Assets;

(xii)         all rights to recovery under the insurance policies with respect to or relating to the Assumed Liabilities (but not, for the avoidance of doubt, the insurance policies themselves) as and to the extent provided in Section 5.14(b);

(xiii)        all computing hardware, including personal computers, file servers, printers and networking equipment located at the Transferred Real Property;

(xiv)        all rights, claims and benefits in, to or under, any and all confidentiality, non-disclosure, inventions or secrecy agreements with any Transferred Employee;

(xv)         the equipment, molds and related assets of the Business used or held for use pursuant to the Supply Agreement, dated as of July 28, 2014, by and between the Seller and Tech Group North America, Inc.;

(xvi)        the assets used in the Business set forth in Schedule 2.1(a)(xvi); and

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(xvii)       any other asset to the extent related exclusively or primarily to, used exclusively or primarily in or held for use exclusively or primarily in the Business.

If any assets or rights of the Business (other than Excluded Assets) within the descriptions of clauses (i) through (xvii) above are owned by any Affiliate of the Seller, and such items are included within the term “Transferred Assets,” then Seller shall cause each such Affiliate, at the Closing, to convey such Transferred Assets to Buyer, in accordance with the provisions hereof.

(b)           Notwithstanding anything to the contrary set forth herein, the Seller shall not transfer, and the Buyer is not purchasing hereunder any assets of the Seller and its Affiliates other than the Transferred Assets, including any Excluded Assets.  “Excluded Assets” means all assets of the Seller and its Affiliates, including:

(i)            all cash, cash equivalents and marketable securities;

(ii)           any and all equity interests in any Person;

(iii)          all accounts receivable, notes receivable and other receivables due to the Seller or any of its Affiliates, including such assets that arise out of the operation of the Business, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto;

(iv)          the personal property located at or on the Transferred Real Property set forth on Schedule 2.1(b)(iv) (the “Excluded Willow Court Assets”);

(v)           the assets relating to or used in the Business and set forth on Schedule 2.1(b)(v);

(vi)          corporate books and records of internal corporate proceedings, Tax records, accounting records, work papers, internal reports and books, other than the Business Books and Records;

(vii)         other than as expressly provided for in Section 2.1(a)(xii), insurance policies and rights, claims or causes of action under such policies;

(viii)        any interest in or right to any refund of Taxes relating to the Business, the Transferred Assets or the Assumed Liabilities for, or applicable to, any taxable period (or portion thereof) ending on or prior to the Closing Date;

(ix)          all claims, deposits, pre-payments, refunds, causes of action, choses in action, rights of recovery, rights of set-off and rights of recoupment relating to any Excluded Taxes;

(x)           all Intellectual Property;

(xi)          any real property interests that are owned by the Seller or its Affiliates other than the Transferred Real Property;

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(xii)         all assets related to, used or held for use in the Retained Business that are not (A) Transferred Assets or (B) tangible personal property located at the Transferred Real Property as of the Closing Date;

(xiii)        all rights, claims and causes of action relating to any Excluded Asset or Excluded Liability; and

(xiv)        all rights of the Seller under this Agreement (including any amounts due to the Seller and its Affiliates pursuant to the Existing Collaboration Agreement as set forth in Section 5.5(b) hereof) and the Ancillary Agreements.

Section 2.2            Assumed Liabilities; Excluded Liabilities.  Upon the terms and subject to the conditions of this Agreement, at the Closing:

(a)           The Buyer shall assume and pay, discharge, perform or otherwise satisfy the Assumed Liabilities.  “Assumed Liabilities” means all Liabilities and obligations of any kind and nature, whether known or unknown, express or implied, primarily or secondarily, direct or indirect, absolute, accrued, contingent or otherwise and whether due or to become due, whether arising prior to or following the Closing Date, of the Seller and its Affiliates relating to the Business or the Transferred Assets, other than the Excluded Liabilities, including:

(i)            all Liabilities under the Transferred Contracts, including all warranty, customer or other claims;

(ii)           all Existing Grifols Liabilities;

(iii)          all Liabilities in connection with, arising out of or relating to the conduct or operation of the Business or the ownership or use of the Transferred Assets, except to the extent the Seller has indemnification obligations under this Agreement or the Ancillary Agreements;

(iv)          all Taxes allocated to the Buyer pursuant to Section 5.13;

(v)           all Taxes (other than any Taxes allocated to the Seller pursuant to Section 5.13) attributable to the operation of the Business or the ownership or use of the Transferred Assets with respect to or attributable to any Post-Closing Tax Period, as well as any such sales and use Taxes attributable to the operation of the Business or the ownership or use of the Transferred Assets with respect to or attributable to any Post-Closing Tax Period;

(vi)          all Liabilities arising in connection with the Business or the Transferred Assets arising from facts, circumstances or events after the Closing Date;

(vii)         the Liabilities set forth in Schedule 2.2(a)(vii); and

(viii)        all Liabilities of the Buyer and its Affiliates under this Agreement and the Ancillary Agreements.

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The Buyer shall, and shall cause each applicable Affiliate to, pay and satisfy in due course all Liabilities of the Buyer or its Affiliates (including the Assumed Liabilities) and shall indemnify, subject to and in accordance with Article VII hereof, the Seller and its Affiliates against any Losses arising from all Liabilities of the Buyer or any of its Affiliates (including the Assumed Liabilities).

(b)           Notwithstanding anything to the contrary set forth herein, the Seller shall not transfer, and the Buyer is not assuming hereunder, any Liabilities of the Seller or its Affiliates other than the Assumed Liabilities, including any Excluded Liabilities.  The Seller shall, and shall cause each applicable Affiliate to, pay and satisfy in due course all Liabilities of the Seller or its Affiliates (including the Excluded Liabilities) and shall indemnify, subject to and in accordance with Article VII hereof, the Buyer and its Affiliates against any Losses arising from all Liabilities of the Seller or any of its Affiliates (including the Excluded Liabilities).  “Excluded Liabilities” means all Liabilities of the Seller and its Affiliates other than those specifically listed or described in Section 2.2(a), including the following:

(i)            all Indebtedness;

(ii)           all accounts payable, notes payable and accrued expenses, including such Liabilities that arise out of the operation of the Business, together with any interest or fees thereon or other amounts due with respect thereto;

(iii)          except as otherwise agreed in this Agreement, all Liabilities with respect to compensation, employee benefits, any Employee Plan or other employee benefit plan of the Seller or any of its Affiliates (including the operation or administration thereof) or any other Liability owed to, or in respect of, any current or former employees, directors, agents, independent contractors or other service providers of the Seller or any of its Affiliates or ERISA Affiliates (or the beneficiaries or dependents thereof), whether or not Transferred Employees, that arise out of or relate to the employment or service provider relationship between the Seller or its Affiliates or ERISA Affiliates; but in each case excluding Liabilities relating to services performed after the Closing Date by Transferred Employees (or the beneficiaries or dependents thereof) or by directors, agents, independent contractors or other service providers, engaged by the Buyer or any of its Affiliates, which shall, for the avoidance of doubt, be Assumed Liabilities;

(iv)          all Liabilities arising out of or relating to the conduct or operation of the Retained Business or the ownership or use of the Excluded Assets;

(v)           any Liability relating to Transaction Expenses;

(vi)          all Liabilities related to, based on or arising from any of the matters set forth in Schedule 2.2(b)(vi);

(vii)         any Excluded Taxes; and

(viii)        all Liabilities of the Seller and its Affiliates under this Agreement and the Ancillary Agreements.

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Notwithstanding anything contained in this Section 2.2 to the contrary, (A) the responsibility for Liabilities that (1) are, but for this sentence, Excluded Liabilities, (2) arose primarily from facts, circumstances or events prior to or on the Closing Date, and (3) are expressly subject to the Existing Collaboration Agreement shall be allocated among, and assumed by, the parties in the same manner as such Liabilities are currently allocated under the Existing Collaboration Agreement (any such Excluded Liabilities allocated to the Buyer, the “Existing Grifols Liabilities”), and (B) all other Liabilities relating to the Business arising primarily from facts, circumstances or events after the Closing Date shall be the sole responsibility of the Buyer.

(c)           Notwithstanding anything contained in this Section 2.2 or elsewhere in this Agreement to the contrary (other than, for the avoidance doubt, with respect to the Liabilities described in Section 2.2(b)(vi), which shall be Excluded Liabilities):

(i)            with respect to Liabilities that are, but for this Section 2.2(c), deemed to be both (A) Assumed Liabilities pursuant to Section 2.2(a) hereof and (B) Excluded Liabilities pursuant to Section 2.2(b) hereof (such Liabilities, the “Shared Liabilities”), the parties shall seek any applicable recoveries under all insurance policies covering any such Shared Liabilities, and apply such recovery (net of expenses, deductibles, self-retention or other amounts), prior to seeking payment directly from the other party;

(ii)           to the extent the proceeds of the insurance policies described in Section 2.2(c)(i) are insufficient to fully satisfy a Shared Liability, the responsibility for the remaining portion of such Shared Liability shall be allocated among, and assumed by, the parties in good faith, on an equitable basis, based upon and to the extent that the underlying assets to which such Liabilities relate or arise from are Transferred Assets or Excluded Assets; and

(iii)          with respect to the Liabilities reflected on Schedule 2.2(c), the responsibility for such Shared Liability shall be allocated as set forth in Schedule 2.2(c).

For the avoidance of doubt, the matters for which indemnification is available pursuant to Sections 7.2(a), 7.2(b), 7.2(c), 7.3(a), 7.3(b) and 7.3(c) shall not constitute Shared Liabilities.

Section 2.3            Payment of Purchase Price; Estimated Closing Statement and Purchase Price Adjustment.

(a)           Payment of Purchase Price.  In consideration for the sale, assignment, transfer, conveyance and delivery of the Transferred Assets to the Buyer, at the Closing, the Buyer shall (a) pay to the Seller, by wire transfer to a bank account designated in writing by the Seller to the Buyer at least two Business Days prior to the Closing Date, an amount equal to (i) $1,850,000,000 (the “Purchase Price”) in cash in immediately available funds in United States dollars plus (ii) the amount, if any, by which the Inventory set forth in the Estimated Closing Statement exceeds the Inventory Target, or less (iii) the absolute value of the amount, if any, by which the Inventory set forth in the Estimated Closing Statement is less than the Inventory Target (using the estimates and calculations set forth in the Estimated Closing Statement), and (b) assume the Assumed Liabilities.  In addition, on the Closing Date the Buyer shall pay to the Seller the balance of any accounts receivable or other amounts payable by Grifols or its Affiliates pursuant to Section 5.5(b).

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(b)           Estimated Closing Statement; Purchase Price Adjustment.

(i)            Estimated Closing Statement.  No later than three Business Days prior to the anticipated Closing Date, the Seller will prepare in good faith and provide to the Buyer a written statement setting forth in reasonable detail its good faith estimate of the Inventory (the “Estimated Closing Statement”) and reasonably detailed supporting documentation.  The calculations and estimates set forth in the Estimated Closing Statement will be prepared in accordance with the Accounting Principles.  After delivery of the Estimated Closing Statement, the Seller will afford the Buyer and its Representatives with reasonable access on reasonable advance notice and during normal business hours to the Business Books and Records related to the preparation of the Estimated Closing Statement, provided that such actions do not unreasonably interfere with the operations of the Business or the Seller’s Retained Business.

(ii)           Proposed Final Closing Statement.  No later than 90 calendar days after the Closing Date, the Buyer will prepare or cause to be prepared, and will provide to the Seller, a written statement setting forth in reasonable detail its proposed final determination of the Inventory (the “Proposed Final Closing Statement”) and reasonably detailed supporting documentation.  The Proposed Final Closing Statement will be prepared in accordance with the Accounting Principles.  After delivery of the Proposed Final Closing Statement, the Buyer will afford the Seller and its Representatives with reasonable access on reasonable advance notice and during normal business hours to the Business Books and Records related to the preparation of the Proposed Final Closing Statement, provided that such actions do not unreasonably interfere with the operations of the Business.

(iii)          Dispute Notice.  The Proposed Final Closing Statement (and the proposed final determination of the Inventory reflected thereon) will be final, conclusive and binding on the parties unless the Seller provides a written notice (a “Dispute Notice”) to the Buyer no later than the 30th Business Day after the delivery to the Seller of the Proposed Final Closing Statement.  Any Dispute Notice shall set forth in reasonable detail (i) any item on the Proposed Final Closing Statement which the Seller believes has not been prepared in accordance with this Agreement and the Seller’s proposed changes to the amount of such item and (ii) the Seller’s alternative calculation of the disputed item, and in each case, with reasonably detailed supporting documentation.  Any item or amount to which no dispute is raised in the Dispute Notice or of which the Seller has accepted in writing to the Buyer will be final, conclusive and binding on the parties on such 30th Business Day.

(iv)          Resolution of Disputes.  If a Dispute Notice is timely delivered to the Buyer, then the Buyer and the Seller will, during the 30 calendar days immediately following receipt of the Dispute Notice by the Buyer (the “Resolution Period”), attempt to promptly resolve the matters raised in any Dispute Notice in good faith.  Any resolution by the Seller and the Buyer during the Resolution Period as to any disputed amounts will be final, binding and conclusive.  If the Seller and the Buyer do not resolve all disputed items on the Proposed Final Closing Statement by the end of the Resolution Period, the parties will submit the disputed items to the Independent Accountants.  The Independent Accountants will promptly review only those unresolved items set forth and objected to in the Dispute Notice, provided that each party will be

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afforded an opportunity to submit a written statement in favor of its position and to advocate for its position orally before the Independent Accountants.

(v)           The Independent Accountants will have no authority to make any adjustments to any amounts other than unresolved items and amounts specifically set forth and objected to in the Dispute Notice.  In addition, in resolving any such disputed item, the Independent Accountants (i) shall be bound by the provisions of this Section 2.3(b), (ii) may not assign a value to any item greater than the highest value claimed for such item or less than the lowest value for such item claimed by either the Buyer or the Seller, (iii) may consider only the written and oral presentations of the Buyer and the Seller in resolving any matter which is in dispute and (iv) shall render its decision in writing setting forth in reasonable detail the basis upon which its decision was made within 30 days after the disputed items have been submitted to it.  The Independent Accountants’ decision shall be conclusive and binding upon each of the parties, and the Proposed Final Closing Statement shall be modified to reflect such resolution.  As used herein, the Proposed Final Closing Statement, as adjusted to reflect any changes agreed to by the parties and the decision of the Independent Accountants is referred to herein as the “Final Closing Statement.”  Each of the parties agrees to cooperate with the Independent Accountants (including by executing a customary engagement letter reasonably acceptable to it) and to direct the Independent Accountants to resolve any such dispute as soon as practicable after the commencement of the engagement of the Independent Accountants.

(vi)          The Independent Accountants shall allocate its fees, costs and expenses between Buyer, on the one hand, and Seller, on the other hand, in inverse proportion as they may prevail on the merits (i.e., based upon the percentage which the portion of the contested amount not awarded to each such party bears to the amount actually contested by such party).

(vii)         Purchase Price Adjustment.  If the Inventory (as finally determined pursuant to this Section 2.3(b) and as set forth in the Final Closing Statement) is (i) greater than the Inventory as set forth in the Estimated Closing Statement, the Buyer shall pay, or cause to be paid, to the Seller the difference between such amounts, or (ii) less than the Inventory as set forth in the Estimated Closing Statement, the Seller shall pay, or cause to be paid, to the Buyer the difference between such amounts.

Section 2.4            Closing.  The sale and purchase of the Transferred Assets, and the assumption of the Assumed Liabilities, shall take place at a closing (the “Closing”) to be held at the offices of Proskauer Rose LLP, Eleven Times Square, New York, New York, at 10:00 a.m., Eastern time, on the second Business Day following the satisfaction or, to the extent permitted by applicable Law, waiver of all conditions to the obligations of the parties set forth in Article VI (other than such conditions as may, by their nature, only be satisfied at the Closing or on the Closing Date), or at such other place or at such other time or on such other date as the Seller and the Buyer mutually may agree in writing; provided that (i) unless otherwise agreed by the Buyer, the Closing shall occur no earlier than the Extended Closing Date, and (ii) if the Closing is delayed pursuant to clause (i), then from and after the second Business Day following the satisfaction or waiver of the conditions set forth in Article VI (other than such conditions as may, by their nature, only be satisfied at the Closing or on the Closing Date), the Buyer shall no longer have the right to assert the failure of any conditions set forth in Article VI as a basis not to

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consummate the Closing and all such conditions shall be deemed to be irrevocably satisfied.  The day on which the Closing actually takes place is referred to as the “Closing Date.”

Section 2.5            Consents to Certain Assignments.

(a)           Notwithstanding anything in this Agreement or any Ancillary Agreement to the contrary, this Agreement and the Ancillary Agreements shall not constitute an agreement to transfer or assign any asset, contract, permit, claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent or waiver, or the taking of a similar action, of a third party, would constitute a breach or other contravention under any agreement or Law to which the Seller is a party or by which it is bound, or in any way adversely affect the rights of the Seller or, upon transfer, the Buyer under such asset, contract, permit, claim or right.  The Seller shall use its commercially reasonable efforts to obtain any consents or waivers required to assign to the Buyer any Transferred Assets that require the consent of a third party, without any conditions to such transfer or changes or modifications of terms thereunder.

(b)           If any such consent or waiver is not obtained prior to Closing and as a result thereof the Buyer shall be prevented by such third party from receiving the rights and benefits with respect to such Transferred Asset intended to be transferred hereunder, or if any attempted assignment would adversely affect the rights of the Seller or the Buyer thereunder, then (i) for a period of 12 months following the Closing, the Seller shall use its commercially reasonable efforts to obtain any such required consent(s) or waiver(s), or to take such actions, as applicable, as promptly as reasonably possible, and (ii) the Seller and the Buyer shall cooperate in any lawful and commercially reasonable arrangement, as the Seller and the Buyer shall agree, under which the Buyer would, to the extent practicable, obtain the economic claims, rights and benefits under such asset and assume the economic burdens and obligations with respect thereto in accordance with this Agreement, including by subcontracting, sublicensing or subleasing to the Buyer; provided, that all reasonable out-of-pocket expenses of such cooperation and related actions shall be paid by the Buyer.  The Seller shall promptly pay to the Buyer when received all monies received by the Seller under such Transferred Asset or any claim or right or any benefit arising thereunder and the Buyer shall indemnify and promptly pay the Seller for all Liabilities of the Seller associated with such Transferred Asset.  The Seller shall not be required to expend any material amounts or pay any consent or similar fees in connection with its efforts hereunder.

Section 2.6            Purchase Price Allocation.

(a)             The Seller and the Buyer agree that the Purchase Price (and any adjustments thereto) and the Assumed Liabilities shall be allocated for tax purposes among the Transferred Assets.  Within 90 calendar days after the Closing Date, the Buyer shall prepare and deliver to the Seller a schedule (the “Initial Allocation Schedule”) allocating the sum of the Purchase Price (and any adjustments thereto) and any Assumed Liabilities among the Transferred Assets, in such amounts reasonably determined by the Buyer.  The Initial Allocation Schedule shall be prepared in accordance with the principles of Section 1060 of the Code and the Treasury regulations pursuant thereto or any successor provision.  Except as provided in Section 2.6(b) or Section 2.6(c) below, at the close of business on the 60th calendar day after the delivery of the Initial Allocation Schedule, the Initial Allocation Schedule shall become binding upon

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each of the Buyer (and its Affiliates) and the Seller (and its Affiliates) and shall be the final allocation schedule (the “Final Allocation Schedule”).

(b)           The Seller shall have a period of 30 calendar days (the “Objection Period”) from the date of delivery of the Initial Allocation Schedule to present in writing to the Buyer, notice of any objections the Seller may have to the allocations set forth therein.  If the Seller raises any objections within the Objection Period to the Initial Allocation Schedule, the Buyer and the Seller shall negotiate in good faith to resolve any differences with respect to the Initial Allocation Schedule within 30 calendar days after the Seller provides written notice of such objections.  If the Buyer and the Seller reach written agreement amending the Initial Allocation Schedule within such 30-day period, the Initial Allocation Schedule, as so amended, shall become binding upon the Buyer (and its Affiliates) and the Seller (and its Affiliates) and shall be the Final Allocation Schedule.

(c)           If the parties fail to agree within 30 calendar days after the delivery of the Seller’s notice of any objections, then (i) the Buyer may use one purchase price allocation and the Seller may use a different purchase price allocation, (ii) the Buyer and the Seller shall each use (and cause their Affiliates to use) their purchase price allocation in connection with the preparation and filing of all Tax Returns, and (iii) the Buyer shall have no liability to the Seller, and the Seller shall have no liability to the Buyer, for any additional Taxes that may be imposed by any Taxing authority to the extent that such Tax arises solely as a result of the inconsistencies between their respective purchase price allocations.

(d)           If the Buyer and the Seller have agreed to a Final Allocation Schedule, each party agrees to file all Returns (including IRS Form 8594 and any claims for refund) and information reports in a manner consistent with the Final Allocation Schedule and will take no position inconsistent with the Final Allocation Schedule unless requested to do so in any proceeding before any Governmental Authority, in each case, unless otherwise required by applicable Law.  In the event any Governmental Authority disputes the Final Allocation Schedule, the party receiving notice of the dispute shall promptly notify the other party hereto, and both the Buyer and the Seller agree to use their commercially reasonable efforts to defend the Final Allocation Schedule in any audit or similar proceeding.  Any adjustments to the Purchase Price pursuant to Section 2.7 will be allocated in a manner consistent with the Final Allocation Schedule.

Section 2.7            Adjustments for Tax Purposes.  Any payments made pursuant to Article II (other than payment of the Purchase Price at Closing pursuant to Section 2.3(a)) will be treated as an adjustment to the Purchase Price by the parties for all Tax purposes, except as otherwise required by Law.

Section 2.8            Withholding.  Notwithstanding anything in this Agreement to the contrary, after reasonable consultation with the Person with respect to whom any withholding or deduction may be made, each Person who is entitled or required to make any payment pursuant to this Agreement or any Ancillary Agreement (each, a “Withholding Agent”) shall be entitled to deduct and withhold from such payment such amounts as such Withholding Agent is required to deduct and withhold in respect of such payment under the Code or any other provision of applicable U.S. Law.  To the extent that amounts are so withheld and paid over to the appropriate

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Governmental Authority by the Withholding Agent under the Code or any other provision of applicable U.S. Law and original receipts or certified copies thereof showing remittance of such Taxes are provided to the Person in respect of whom such withholding or deduction was made, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Person.  If the Buyer or any of its designated Affiliates or permitted assigns pursuant to Section 9.12 (and their respective agents) is required to withhold or deduct any amount in respect of any payment made to the Seller pursuant to this Agreement or any Ancillary Agreement under any provision of applicable non-U.S. Law, the Buyer and its Affiliates shall make additional payments to the Seller such that, after the imposition of such withholding or deduction, the Seller receives an amount equal to the amount it would have received if such withholding or deduction had not been imposed; provided, however, that no such additional payments shall be required if the Seller is entitled to an exemption from or reduction of non-U.S. withholding Tax but fails to deliver to the Buyer or its Affiliates or permitted assigns (and their respective agents) such properly completed and executed documentation reasonably requested by the Buyer or its Affiliates or permitted assigns (and their respective agents) as will permit such payments to be made without or at a reduced rate of withholding.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER

Except as set forth in the Disclosure Schedules delivered by the Seller to the Buyer contemporaneously herewith (collectively, the “Disclosure Schedules”), the Seller hereby represents and warrants to the Buyer as follows, in each case as it relates to the Business or in connection with the transactions contemplated hereby:

Section 3.1Organization and Qualification.

(a)The Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all necessary corporate power and authority to own, lease and operate the Transferred Assets and to carry on the Business as it is now being conducted.

(b)The Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Transferred Assets or the operation of the Business makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect.

Section 3.2Authority.  The Seller has the corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by the Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action.  This Agreement has been, and upon its execution each of

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the Ancillary Agreements to which the Seller will be a party will have been, duly executed and delivered by the Seller and, assuming due execution and delivery by each of the other parties hereto and thereto, this Agreement constitutes, and upon its execution each of the Ancillary Agreements to which the Seller will be a party will constitute, the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally (the “Bankruptcy Exception”) and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Section 3.3No Conflict; Required Filings and Consents.

(a)Except as set forth in Schedule 3.3(a), the execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which the Seller will be a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or violate the certificate of incorporation or bylaws of the Seller, (ii) conflict with or violate any Law applicable to the Seller or by which the Business is bound or affected, (iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, require any consent of or notice to any Person pursuant to, or give to others any rights of termination, acceleration or cancellation of, any Material Contract or material Permit to which the Business is bound or to which any of the Transferred Assets are subject, or (iv) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any of the Transferred Assets, except, in the case of clauses (ii), (iii) or (iv), for any such conflicts, violations, breaches, defaults or other occurrences as would not, individually or in the aggregate, reasonably be expected to be material to the Business, taken as a whole, or that arise as a result of any facts or circumstances relating to the Buyer or any of its Affiliates.

(b)The Seller is not required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which it will be a party or the consummation of the transactions contemplated hereby or thereby, except (i) for any filings required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (ii) filings or notices required to be made under the rules and regulations of the FDA or any other Healthcare Regulatory Authority, in each case that are required to be made only following the Closing (and not prior to the Closing), (iii) for such filings as may be required by any applicable federal or state securities or “blue sky” laws, (iv) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not, materially impair or materially delay the ability of the Seller to perform its obligations under the Agreement and the Ancillary Agreements, or (v) as may be necessary as a result of any facts or circumstances relating to the Buyer or any of its Affiliates.

Section 3.4Transferred Assets.  This Agreement and the instruments and documents to be delivered by the Seller to the Buyer at or following the Closing shall be adequate and sufficient to transfer to the Buyer the Seller’s entire right, title and interest in and to the Transferred Assets free and clear of all Encumbrances (other than Permitted Encumbrances or any Encumbrances created by or as a result of facts related to the Buyer and its Affiliates).

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Section 3.5Financial Statements; No Undisclosed Liabilities; Books and Records.

(a)Copies of the unaudited balance sheet of the Business as at September 24, 2016 (the “Balance Sheet” and such date, the “Balance Sheet Date”), and a statement of revenue, cost of revenue, gross profit and direct operating costs for the fiscal year then-ended (together with the Balance Sheet, the “Financial Statements”), are attached hereto in Schedule 3.5.  The Financial Statements have been prepared in accordance with the Accounting Principles, are based on the Business Books and Records and fairly present, in all material respects and subject to the judgments, policies and principles utilized by the Seller in the ordinary course of business, consistent with past practice, in preparing its internal financial statements, the financial position and results of operations of the Business as a business unit of the Seller, including the corporate and other allocations related thereto, as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein.

(b)There are no Liabilities, whether accrued or fixed, absolute or contingent, or matured or unmatured, with respect to the Business or the Transferred Assets of a nature required to be reflected on a balance sheet prepared in accordance with GAAP, other than any such Liabilities (i) reflected or reserved against on the Financial Statements, (ii) incurred since the Balance Sheet Date in the ordinary course of business, (iii) under executory Contracts that are either listed on Schedule 3.18(a) or are not required to be listed thereon, excluding Liabilities for any breach of any executory Contract, or (iv) that would not, individually or in the aggregate, be material to the Business (taken as a whole).

(c)The Business Books and Records are complete and correct in all material respects and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls.

Section 3.6Absence of Certain Changes or Events.  Since the Balance Sheet Date through the date of this Agreement, the Business has been conducted, in all material respects, in the ordinary course of business consistent with past practice and would have been in compliance in all material respects with Sections 5.1(a), (e), (h), (i), (j), (k) and (l) had such sections been in effect.  Since the Balance Sheet Date there has not occurred any Effect that has had, or would reasonably be expected to have, individually or together with other Effects, a Material Adverse Effect.

Section 3.7Compliance with Law; Permits; Certain Payments.

(a)The Seller and its Affiliates have complied in all material respects since January 1, 2014, and are in compliance in all material respects with all Laws (including privacy, security, data protection, direct marketing and consumer protection) applicable to and in respect of the conduct of the Business as currently conducted or with respect to the ownership and use of the Transferred Assets.  The Seller and its Affiliates have not received any written notice since January 1, 2014 asserting that they are not in compliance in any material respect with any such Laws applicable to and in respect of the conduct of the Business as currently conducted or with respect to the ownership and use of the Transferred Assets.

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(b)The Seller or its applicable Affiliate have obtained all material Permits required for the Seller or its Affiliates to conduct the Business as currently conducted or for the ownership and use of the Transferred Assets, and all such Permits are valid and in full force and effect.  To the Knowledge of the Seller, as of the date hereof, all material fees and charges that are currently due with respect to such Permits as of the date hereof have been paid in full.  The Seller and its Affiliates are in compliance, and have complied since January 1, 2014, in all material respects, with each material Permit.

(c)No representation or warranty is made under this Section 3.7 with respect to ERISA, Taxes or environmental matters, which are covered exclusively by Sections 3.10, 3.16 and 3.17, respectively, except to the extent expressly provided in Section 3.7(b).

Section 3.8Anti-Corruption Laws.  Neither the Seller nor any Affiliate of the Seller nor, to the Knowledge of the Seller, any of their respective officers, directors or employees has, directly or indirectly, violated or is in violation of any provision of any applicable Anti-Corruption Law in connection with the operation of the Business, including (i) making use of the mails or any means or instrumentality of interstate commerce illegally in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA or other anti-bribery law, (ii) using any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (iii) maintaining any fund of corporate monies or other properties for the purpose of supplying funds for any of the unlawful purposes described in the foregoing clauses, or (iv) making any bribe, unlawful rebate, payoff, influence payment, kickback or other similar unlawful payment of any nature.  Neither the Seller nor any Affiliate of the Seller, nor, to the Knowledge of the Seller, any of their respective officers, directors, or employees (i) is currently the subject of, nor has it been since January 1, 2014, the subject of, any Action alleging a violation, or possible violation, of any Anti-Corruption Laws, or since January 1, 2014, the recipient of a subpoena, letter of investigation or other document alleging a violation, or possible violation, of any Anti-Corruption Law, or (ii) has, since January 1, 2014, improperly or inaccurately recorded in any Business Books and Records (A) any payments, cash, contributions, gifts, hospitalities or entertainment to a foreign or domestic government official, employee of an enterprise owned or controlled in whole or in part by any foreign government, official of a foreign or domestic political party or campaign, or a foreign or domestic candidate for political office; or (B) other expenses related to political activity or lobbying, in each case, in violation of applicable Law.

Section 3.9Litigation; Governmental Orders.

(a)Except as set forth in Schedule 3.9(a), there is no material Action pending, or to the Knowledge of the Seller, threatened since January 1, 2014 by or against the Seller or any of its Affiliates (a) relating to or affecting the Business, the Transferred Assets or the Assumed Liabilities; or (b) that would affect the legality, validity or enforceability of this Agreement or any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

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(b)There are no outstanding Governmental Orders or unsatisfied judgments, penalties or awards against, relating to or affecting the Business, the Transferred Assets or the Assumed Liabilities.

Section 3.10Employee Benefit Plans.

(a)Schedule 3.10(a) sets forth all material Employee Plans.  The Seller has delivered or made available to the Buyer true, complete and correct copies of the documents comprising each material Employee Plan, including all amendments thereto.  There are no promises or commitments to create or amend any material Employee Plan or other employee benefit plan of the Seller or any of its Affiliates with respect to which the Buyer or any of its Affiliates would reasonably be expected to have any material additional Liability.

(b)The Buyer and its Affiliates will not as a result of the transactions contemplated by this Agreement have any Liability related to, any employee pension plan under Section 3(2) of ERISA that is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA.

(c)Each material Employee Plan has been established, administered and maintained in accordance with its terms and in compliance with all applicable Laws in all material respects.  With respect to each of the material Employee Plans:  (i) each Employee Plan intended to qualify under Section 401(a) of the Code is so qualified and has received a favorable determination or opinion letter from the IRS upon which it may rely regarding its qualified status under the Code and, to the Knowledge of the Seller, nothing has occurred that would reasonably cause the loss of such qualification; (ii) all material payments required by each material Employee Plan, any collective bargaining agreement or other agreement, or by Law with respect to all prior periods have been made or provided for by the Seller or its Affiliates in accordance with the provisions of each of the material Employee Plans and applicable Law; and (iii) no non-exempt “prohibited transaction,” within the meaning of Section 4975 of the Code and Section 406 of ERISA, has occurred or is reasonably expected to occur with respect to the Employee Plans or other employee benefit plan of the Seller or any of its Affiliates that would result in any Liability for the Buyer or any of its Affiliates.

(d)The consummation of the transactions contemplated by this Agreement alone, or in combination with any other event, including a termination of any employee or service provider, will not give rise to any material Liability under any Employee Plan, or accelerate the time of payment or vesting or increase the amount of compensation or benefits due to any employee, officer, director, stockholder or other service provider of the Seller or its Affiliates.  No amount that could be received, as a result of the consummation of the transactions contemplated by this Agreement, by any employee, officer, director or other service provider of the Seller or its Affiliates under any Employee Plan or otherwise would not be deductible by reason of Section 280G of the Code or would be subject to an excise tax under Section 4999 of the Code.  Neither the Seller nor any of its Affiliates has, and none of the Assumed Liabilities includes, any indemnity obligation on or after the date of this Agreement for any Taxes imposed under Section 4999 or 409A of the Code.

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(e)Except as would not reasonably be expected, individually or in the aggregate, to result in any material Liability on the Buyer and its Affiliates, (i) any individual who performs services for the Seller or any of its Affiliates and who is not treated as an employee for federal income tax purposes by the Seller or its Affiliates is not an employee under applicable Law or for any purpose including for Tax withholding purposes or Employee Plan purposes; (ii) the Seller and its Affiliates have no Liability by reason of an individual who performs or performed services for the Seller or its Affiliates in any capacity being improperly excluded from participating in an Employee Plan; and (iii) each Business Employee has been properly classified as “exempt” or “non-exempt” under applicable Law.

(f)No Employee Plan is mandated by a government other than the United States or subject to the Laws of a jurisdiction outside of the United States.

Section 3.11Labor and Employment Matters.

(a)With respect to each Business Employee, the Seller has made available to the Buyer the following: (i) name; (ii) location, title and position (including whether full or part time); (iii) hire date and service recognized by the Seller for purposes of the Employee Plans (including service with predecessor employers, if applicable, and any prior unabridged service with the Seller); and (iv) current leave status (indicating whether such individual is on a leave of absence and specifying type of leave and expected end date of leave, as applicable).  The Business Employees included on Schedule 1.1(a) are the employees necessary to conduct the Business as currently conducted in all material respects, other than with respect to services provided to the Buyer and its Affiliates pursuant to the Transition Services Agreement, subject to position vacancies that currently exist or may arise in the ordinary course of business.  As of the date hereof, to the extent required by Law, all compensation, including wages, commissions and bonuses due and payable to employees, independent contractors, consultants or other service providers of the Seller or any of its Affiliates for services performed for or in connection with the Business on or prior to the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of the Seller or any of its Affiliates with respect to any compensation, commissions or bonuses.  The Seller has provided or otherwise made available to the Buyer a schedule of the current annual base salary or annual/weekly/hourly rate of compensation, target incentive opportunity for 2017 (if any), actual incentive compensation for 2016 (if any) and a description of fringe benefits provided to each such individual as of the date hereof.

(b)Neither the Seller nor any of its Affiliates is, or was within the past three years, a party to or bound by any labor or collective bargaining contract that pertains to any Business Employees.  To the Knowledge of the Seller, in the past three years, (a) there have been no organizing activities or collective bargaining arrangements that would affect the Business pending or under discussion with any labor organization or group of Business Employees and no such activities are anticipated, (b) there have been no lockouts, strikes, slowdowns or work stoppages pending or threatened by or with respect to any Business Employees except as would not reasonably be expected, individually or in the aggregate, to result in any material Liability to the Buyer and its Affiliates and (c) with respect to the Business, neither the Seller nor any of its Affiliates has engaged in any unfair labor practices within the meaning of the National Labor

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Relations Act except as would not reasonably be expected, individually or in the aggregate, to result in any material Liability to the Buyer and its Affiliates.

Section 3.12Suppliers.  Schedule 3.12 sets forth with respect to the Business each supplier to whom the Seller and its Affiliates has paid consideration for goods or services rendered in an amount greater than or equal to $1,000,000 for any of the two most recent fiscal years (collectively, the “Material Suppliers”).  Neither the Seller nor its Affiliates has received any notice since January 1, 2016 that any of the Material Suppliers has ceased or, to the Knowledge of the Seller, is reasonably likely to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce its relationship with the Business.

Section 3.13Insurance.  Schedule 3.13 sets forth a true and complete list of all material insurance policies in force with respect to the Business and the Transferred Assets or otherwise relating to the Assumed Liabilities (collectively, the “Insurance Policies”), copies of which have been provided or otherwise made available to the Buyer.  To the Knowledge of the Seller, there are no material claims related to the Transferred Assets or the Assumed Liabilities pending under any such Insurance Policies.

Section 3.14Real Property; Assets; Sufficiency of Assets.

(a)Schedule 3.14(a) lists the street address, assessor’s parcel number and legal descriptions for each parcel of real property comprising the Transferred Real Property.  The Seller has good and marketable fee title to all Transferred Real Property, free and clear of all Encumbrances, other than Permitted Encumbrances.  With respect to the Transferred Real Property:

(i)there are no unrecorded outstanding options, rights of first offer or rights of first refusal to lease or purchase such Transferred Real Property or any portion thereof or interest therein;

(ii)to the Knowledge of the Seller, no party to any reciprocal easement agreement affecting or relating to any of the Transferred Real Property is in material default under any of the terms or conditions thereof;

(iii)to the Knowledge of the Seller, the improvements comprising the Transferred Real Property are in compliance in all material respects with all building codes, zoning ordinances and Laws affecting the Transferred Real Property; and

(iv)the Seller has not received any written notice of any violation of zoning or building code or other moratorium proceedings, which would reasonably be expected to adversely affect the ability to operate the Transferred Real Property.

(b)The Seller and its Affiliates do not lease any real property used or held for use exclusively in the Business.

(c)The Seller or its Affiliates have good and valid title to or a valid leasehold interest in all Transferred Assets, including all of the assets reflected on the Balance Sheet or acquired in the ordinary course of business since the date of the Balance Sheet, except those sold

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or otherwise disposed of for fair value since the date of the Balance Sheet in the ordinary course of business consistent with past practice, and except as set forth in Schedule 3.14(c), such Transferred Assets (including leasehold interests) are free and clear of any Encumbrances except for Permitted Encumbrances.

(d)The Transferred Assets have been maintained in accordance with normal industry practice and are in all material respects structurally sound, are in good operating condition and repair, ordinary wear and tear excepted, and, to the Knowledge of the Seller, are adequate for the uses to which they are being put, and none of the Transferred Assets is in need of maintenance or repairs except for ordinary, routine maintenance and repairs.  Except as set forth in Schedule 3.14(d), the Transferred Assets, together with all rights, services and assets that will be made available to the Buyer and its Affiliates pursuant to the Ancillary Agreements, are sufficient in all material respects for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the material rights, property and assets necessary to conduct the Business as currently conducted.

Section 3.15Intellectual Property.

(a)There are no Intellectual Property Registrations used or held for use exclusively in connection with the Business.  There is no Intellectual Property used in the Business that is not Controlled by the Seller or its Affiliates.

(b)Schedule 3.15(b)(i) is a true, complete and correct list of (i) all Intellectual Property Registrations which form a part of the Licensed Intellectual Property (setting forth, for each Intellectual Property Registration, the title, mark or design, applicable jurisdiction, owner, application or registration number, as applicable), and (ii) all Licensed Intellectual Property (other than Trade Secrets) that is not registered but is material to the operation of the Business as currently conducted or proposed to be conducted (setting forth a brief description).

(c)All Licensed Intellectual Property is valid, subsisting and, to the Knowledge of the Seller, enforceable.  Since January 1, 2014, no Licensed Intellectual Property has been abandoned, canceled or adjudicated invalid, or is subject to any outstanding order, writ, injunction, judgment, stipulation or decree restricting its use or adversely affecting or reflecting the Seller’s rights thereto.

(d)Except as set forth on Schedule 3.15(d)(1), the Seller or one of its Affiliates exclusively owns all right, title and interest in, or has the valid and binding right to use all of the Licensed Intellectual Property used or held for use in connection with the Business, free and clear of Encumbrances (except Permitted Encumbrances).  Except as set forth on Schedule 3.15(d)(2), the Seller or one of its Affiliates has the right to grant the licenses to the Buyer set forth in the Intellectual Property License.  The Seller and its Affiliates are and have been in compliance in all material respects with all Laws and legal requirements applicable to Licensed Intellectual Property and the ownership, rights and use thereof by the Seller and its Affiliates.  The consummation of the transactions contemplated under this Agreement will not result in the loss or impairment of or payment of additional amounts with respect to, nor require the consent of any other Person in respect of, the Buyer’s right to own, use or hold for use any Licensed Intellectual Property.

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(e)Except as set forth in Schedule 3.15(e), no legal or governmental Action, including interference, re-examination, reissue, opposition, nullity or cancellation proceedings are pending or have been decided, threatened or asserted, in writing, concerning or relating to the Licensed Intellectual Property, including any Action concerning a claim or position that the Licensed Intellectual Property has been violated or is invalid, unenforceable, not patentable, not registerable or cancellable.  Neither the Seller nor any Affiliate of the Seller is subject to any Governmental Order that does or would restrict or impair the use of any Licensed Intellectual Property.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) all Intellectual Property Registrations that form a part of the Licensed Intellectual Property are in good standing and in full force and effect, and all registration, application and other fees necessary to maintain such Intellectual Property Registrations have been duly paid and (ii) all relevant prior art applicable to the Licensed Intellectual Property has been identified or otherwise disclosed to the United States Patent & Trademark Office in accordance with the duty of candor and disclosure and all other obligations and duties to the United States Patent & Trademark Office.

(f)Except as set forth on Schedule 3.15(f), none of the operation of the Business as has been and as currently conducted, nor the products or services distributed, sold or offered for sale by the Business, nor any technology or materials used in connection therewith infringes upon or misappropriates any Intellectual Property of any Person.  Except as set forth on Schedule 3.15(f), neither the Seller nor any of its Affiliates has received since January 1, 2014 any written notice asserting that any such infringement or misappropriation has occurred.  To the Knowledge of the Seller, except as set forth on Schedule 3.15(f), no Person has since January 1, 2014 or is misappropriating or infringing any Licensed Intellectual Property.

(g)The Seller and each Affiliate of the Seller have taken, and takes, commercially reasonable measures in accordance with normal industry practice to protect the proprietary nature of, and maintain in confidence, all Trade Secrets included within the Licensed Intellectual Property.  To the Knowledge of the Seller, neither the Seller nor any of its Affiliates has made any of its Trade Secrets that it intended to maintain as confidential available to any other Person, except pursuant to commercially reasonable written confidentiality agreements.

(h)Other than as set forth on Schedule 3.15(h), none of the Seller or any of its Affiliates have transferred ownership of or granted an exclusive license or exclusive sublicense to any other Person with respect to any Intellectual Property which, in the absence of such transaction, would have been Licensed Intellectual Property.  All personnel, including employees, agents, consultants and contractors, who have contributed to or participated in the conception and development of any material Intellectual Property on behalf of the Seller or its Affiliate have executed valid and binding instruments of assignment that have conveyed to the Seller or its Affiliate exclusive ownership of all the rights in all such Intellectual Property which were not otherwise owned by the Seller or its Affiliate as a matter of Law.  No current or former employee, agent, consultant or contractor of the Seller or its Affiliate has any interest in any Intellectual Property developed on behalf of the Seller or its Affiliates which would otherwise constitute Licensed Intellectual Property in any material respect.  No claim asserting an interest in any Licensed Intellectual Property has been made or, to the Knowledge of the Seller,

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threatened, whether orally or in writing, by any Person (including any current or former employee, agent, consultant, or contractor of the Seller or its Affiliate) against the Seller or its Affiliates.

(i)Schedule 3.15(i) is a true, complete and correct list of all material computer programs and software used in the Business as currently conducted, excluding any commercially available off-the-shelf software products.

(j)The Seller and each Affiliate of the Seller have taken, and take, commercially reasonable efforts in accordance with normal industry practice to maintain and protect the integrity, security and operation of the computer software and algorithms (including source code), programs, hardware, networks, databases, systems, telecommunications equipment and websites used in connection with the Business (and all information transmitted thereby or stored therein), and, in the 24 month period immediately preceding the date of this Agreement, there have been no material security breaches, breakdowns, malfunctions, data loss, failures or other defects in relation to the same that have not been remedied in all material respects.

(k)The Seller and its Affiliates are and have been in compliance in all material respects since January 1, 2014 with any privacy policies or related policies, programs or other notices that concern the Seller’s and its Affiliates’ collection or use of personal information in the conduct of their respective businesses.  Since January 1, 2014, no Person has claimed in writing to the Seller or its Affiliates any compensation from, and no Governmental Authority has made any written allegation against, the Seller or its Affiliates for the loss of or unauthorized disclosure or transfer of personal data or information.

(l)To the Knowledge of the Seller, except as set forth on Schedule 3.15(l), there is no prohibition or restriction by any Governmental Authority on the use of any Licensed Intellectual Property owned or purported to be owned by Seller or any Affiliate of the Seller in any jurisdiction in which the Seller or any Affiliate of Seller, as applicable, currently conducts or has conducted business.  Except as set forth on Schedule 3.15(l), no funding, facilities or personnel of any educational institution or Governmental Authority are used, directly or indirectly, to develop or create, in whole or in part, any Licensed Intellectual Property.

(m)The Intellectual Property Registrations set forth on Schedule 3.15(b) include all Intellectual Property Registrations used in the operation of the Business as currently conducted.  The Licensed Intellectual Property, together with all Intellectual Property provided to the Buyer and its Affiliates pursuant to the Ancillary Agreements, includes all of the Intellectual Property used in or necessary for the operation of the Business, both currently and for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing.

Section 3.16Taxes.

(a)With respect to any Taxes for which the Buyer or any of its Affiliates may become liable as a result of the transactions contemplated by this Agreement (i) the Seller and each of its Affiliates has timely filed all Returns required to be filed with respect to the Business,

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the Transferred Assets and the Assumed Liabilities, (ii) each such Return is true, correct and complete in all material respects, and (iii) all Taxes due and payable by the Seller or its Affiliates with respect to or attributable to the Business, the Transferred Assets and the Assumed Liabilities have been or will be prior to Closing paid in full.

(b)           Solely with respect to the Business, the Transferred Assets and the Assumed Liabilities and Taxes of the Seller or its Affiliates for which the Buyer or any of its Affiliates may become liable as a result of the transactions contemplated by this Agreement, neither the Seller nor its Affiliates (i) is currently the subject of an audit or other examination, nor has received written notice threatening any such audit or other examination, of its Taxes by any Governmental Authority or other Action in respect of Taxes, and no such audit, examination or Action in respect of Taxes is pending to the knowledge of the Seller; (ii) knows of any issues related to Taxes that were raised by any relevant Governmental Authority during any pending or completed audit, examination, or Action that would reasonably be expected to recur in a later taxable period; nor (iii) has granted or agreed to an extension or waiver of the statute of limitations for any Return in respect of the Business, the Transferred Assets and the Assumed Liabilities; and (iv) has received any written notice from any Governmental Authority in a jurisdiction in which neither the Seller nor any of its Affiliates has filed a Return that the Seller or any of its Affiliates is or may be subject to Tax by that jurisdiction for Taxes that would have been covered by or the subject of such Return which claim has not been fully paid or settled.

(c)           There are no Encumbrances for Taxes on any Transferred Asset that arose in connection with any failure (or alleged failure) to pay any Tax, other than Permitted Encumbrances for Taxes.

(d)           There are no Tax rulings, requests for rulings, or other similar agreements or requests in effect or filed with any Governmental Authority relating to the Business, the Transferred Assets or the Assumed Liabilities that could be reasonably expected to be binding on the Buyer or any of its Affiliates after the Closing Date.

(e)           The Seller (i) has not been a member of an Affiliated Group filing a consolidated federal income Return (other than a group the common parent of which was the Seller), and (ii) has no Liability for Taxes of any Person under Treasury regulations section 1.1502-6 (or any similar provision of state, local, or non-U.S. law), as a transferee or successor, by contract, or otherwise.

Section 3.17          Environmental Matters.

(a)           Except as set forth in Schedule 3.17(a) and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Seller is in compliance with all applicable Environmental Laws and has obtained and is in compliance with all Environmental Permits in connection with the conduct or operation of the Business and the ownership or use of the Transferred Assets and (ii) there are no outstanding claims pursuant to any Environmental Law pending or threatened against the Seller or its Affiliates in connection with the conduct or operation of the Business or the ownership or use of the Transferred Assets.

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(b)           Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no Hazardous Substances are or have been present, and there is and has been no release or threatened release of Hazardous Substances or any investigation, clean-up, remediation or corrective action of any kind relating thereto, (i) on, at, under or from any of the Transferred Real Property (including any buildings, structures, improvements, soils and subsurface strata, surface water bodies, including drainage ways, and ground waters thereof), (ii) at any location to which the Business has sent any Hazardous Substances or waste for storage, handling, disposal or treatment, or (iii) at any other location with respect to which the Business may be liable under Environmental Law.  No underground improvement, including any treatment or storage tank or water, gas or oil well, is or has been located on any property described in the foregoing sentence.  The Business is not actually, contingently or allegedly liable for any release of, threatened release of or contamination by Hazardous Substances in connection with the Business or the Transferred Assets or otherwise under any Environmental Law and there is no pending or, to the Knowledge of the Seller, threatened investigation by any Governmental Authority, nor any pending or, to the Knowledge of the Seller, threatened Action or Governmental Order with respect to the Business or the Seller in connection with the Business relating to Hazardous Substances or otherwise under any Environmental Law.

(c)           Neither the Seller nor any of its Affiliates has retained or assumed by contract (other than pursuant to Contracts entered into in the ordinary course of business) or operation of Law, any Liability of any third party under any Environmental Law or with respect to Hazardous Substances relating to the Business or any of the Transferred Assets.  The Seller has provided to the Buyer any and all material environmental reports, studies, audits, final sampling data, site assessments, correspondence with any Governmental Authority and similar materials with respect to the Business or the Transferred Assets that are in the possession, custody or control of the Seller or any of its Affiliates related to compliance with Environmental Law or the release of or exposure to Hazardous Substances.

(d)           The representations and warranties contained in this Section 3.17 are the only representations and warranties being made with respect to compliance with or liability under Environmental Laws or with respect to any environmental, health or safety matter (as it relates to exposure to Hazardous Substances), including natural resources, related to the Business, the Transferred Assets or the Seller’s ownership or operation thereof.

(e)           For purposes of this Agreement:

(i)            “Environmental Laws” means any Laws of any Governmental Authority relating to injury to, pollution of or protection of the environment or human health and safety (as it relates to exposure to Hazardous Substances).

(ii)           “Environmental Permits” means all Permits under any Environmental Law.

(iii)          “Hazardous Substances” means:  (A) those substances defined in or regulated under the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act,

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the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act, and their state counterparts, as each may be amended from time to time, and all regulations thereunder; (B) petroleum and petroleum products, including crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) lead, polychlorinated biphenyls, asbestos, radon, medical waste or radioactive materials or waste; (E) any other pollutant or contaminant; and (F) any substance, material or waste regulated by any Governmental Authority pursuant to any Environmental Law.

Section 3.18          Material Contracts.

(a)           Schedule 3.18(a) contains a list, as of the date hereof, of each of the following Contracts to which the Seller or any of its Affiliates is a party and that relate exclusively or primarily to the Business or by which any of the Transferred Assets are bound:

(i)            Contracts involving an aggregate consideration for the twelve month period ended on September 24, 2016 (the “Applicable Period”) of more than $1,000,000 and that, in each case, cannot be cancelled without penalty or on less than 60 days’ notice;

(ii)           Contracts involving aggregate consideration in the Applicable Period in excess of $1,000,000 that either (A) provide for the assumption by the Business of any Tax, environmental or other Liability of any Person or (B) are Transferred Contracts that provide for the indemnification of any Person, other than ordinary course commercial Contracts with customary indemnification provisions;

(iii)          Contracts that relate to the acquisition or disposition of any material business or a material amount of stock or assets of any other Person;

(iv)          broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts involving an aggregate consideration in the Applicable Period in excess of $1,000,000;

(v)           Contracts with any Governmental Authority involving an annual aggregate consideration in the Applicable Period in excess of $1,000,000, or any Contracts related to any clinical trials or other tests or investigations in respect of the Products or assays used in the Business;

(vi)          all (A) In-Bound Intellectual Property Licenses and (B) Out-Bound Intellectual Property Licenses to the extent related to the Licensed Fields (as defined in the Intellectual Property License);

(vii)         Contracts (other than licenses) that (A) limit or purport to limit the ability of the Business to compete or perform services in any line of business or with any Person or in any geographic area or during any period of time, and (B) grant the other party or any third party “most favored nation” status, most favored customer pricing, exclusive sales, distribution, marketing or other exclusive rights, or rights of first refusal or rights of first negotiation;

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(viii)        (A) Contracts for the employment of any Business Employee providing for fixed compensation in excess of $100,000 per annum, and (B) Contracts with independent contractors or consultants (or similar arrangements including third party providers) providing for the Business, in each case involving an aggregate consideration in excess of $1,000,000 annually and that are not cancellable without material penalty or without more than 90 days’ notice;

(ix)          all joint venture, partnership or similar Contracts;

(x)           Contracts for the sale of any Transferred Assets involving consideration in excess of $1,000,000 or for the grant to any Person of any option, right of first refusal or preferential or similar right to purchase any of the Transferred Assets involving consideration in excess of $1,000,000;

(xi)          collective bargaining agreements or similar Contracts with any union, works council or other labor organization; and

(xii)         all other Contracts that are material to the Transferred Assets or the operation of the Business, involving annual consideration in the Applicable Period in excess of $1,000,000 and not previously disclosed pursuant to this Section 3.18.

(the Contracts set forth in clauses (i) to (xii) above are collectively referred to as “Material Contracts”).

(b)           Each Material Contract is valid and binding on the Seller or its applicable Affiliate and, to the Knowledge of the Seller, the counterparties thereto, and is in full force and effect.  Neither the Seller nor its applicable Affiliate, nor, to the Knowledge of the Seller, any of the other parties thereto, is in material breach of, or material default under (or has since January 1, 2014, received notice alleging it to be in material breach of or default under), or has, since January 1, 2014, provided or received any notice of its intention to terminate, any Material Contract, except as would not reasonably be expected to be material to the Business, taken as a whole.  To the Knowledge of the Seller, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration of any material obligation, or other material changes to any material right or obligation or the loss of any material benefit thereunder.  True, complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been provided or otherwise made available to the Buyer.  There are no material disputes pending or, to the Knowledge of the Seller, threatened, under any Material Contract.

Section 3.19          Healthcare Regulatory Matters.

(a)           The Seller and its Affiliates are, and since January 1, 2014 have been, conducting the Business in compliance in all material respects with all applicable Healthcare Laws.  To the Knowledge of the Seller, the Products have been researched, developed and manufactured on behalf of the Seller and its Affiliates in compliance in all material respects with applicable Healthcare Laws.  With respect to the Business, neither the Seller nor any of its Affiliates is a party to, and the Business is not subject to, any corporate integrity agreements,

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monitoring agreements, consent decrees, deferred prosecution agreements, settlement orders or similar Contracts with or imposed by any Governmental Authority related to any Healthcare Law, and no such Contract is currently pending or, to the Knowledge of the Seller, threatened.

(b)           All material reports, documents, claims, permits, adverse event reports, recalls, removals and corrections, notices, registrations and applications relating to the Products that are required to be filed, maintained or furnished to a Governmental Authority by the Seller have been so filed, maintained, or furnished.

(c)           With respect to the Business, neither the Seller nor any of its Affiliates has received from the FDA or any other Governmental Authority since January 1, 2014, any inspection reports, notices of adverse findings, warning or untitled letters, or other correspondence concerning the Products or Business in which any Governmental Authority alleges or asserts a failure to comply with applicable Healthcare Laws, or that Products may not be safe, effective or approvable other than in either case any reports, notices, warnings, letters or other correspondence that would not reasonably be expected to result in material Liabilities or material damages to the Business.

(d)           With respect to the Business, neither the Seller nor any of its Affiliates, or to the Knowledge of the Seller, any Seller Partner, has made an untrue statement of a material fact or a fraudulent statement to the FDA or any Governmental Authority responsible for enforcement or oversight with respect to Healthcare Laws, or failed to disclose a material fact required to be disclosed to the FDA or other such Governmental Authority, or committed an act, made a statement, or failed to make a statement, in each such case, related to the Products, that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991), or for any other Governmental Authority to invoke a similar policy.

(e)           Neither the Seller, its Affiliates, their respective employees and agents, nor, to the Knowledge of the Seller, any Seller Partner, has, under any Healthcare Law, been debarred, excluded, suspended or otherwise determined to be ineligible to participate in any health care programs of any Governmental Authority, or convicted of any crime, or, to the Knowledge of the Seller, engaged in any conduct that has resulted, or would reasonably be expected to result, in any such debarment, exclusion, suspension, ineligibility or conviction in a manner that would reasonably be expected to adversely affect the Business.

Section 3.20          Brokers.  Except for Morgan Stanley & Co. LLC, the fees, commissions and expenses of which will be paid by the Seller, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement and the Ancillary Agreements based upon arrangements made by or on behalf of the Seller or any of its Affiliates.

Section 3.21          Product Liability and Recalls.  To the Knowledge of the Seller, the Products manufactured, sold and delivered since January 1, 2014, in connection with the Business conform in all material respects with all applicable contractual commitments and Laws.  There are no material defects in the design or technology embodied in any Products that impair

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or are reasonably likely to impair, in any material respect, the safe and effective performance of any such Product for its intended use.  Since January 1, 2014, none of the Products manufactured, sold or delivered by the Seller or any of its Affiliates with respect to the Business has been the subject of any material products liability or warranty Action against the Seller or any Affiliate of the Seller.  There is no Governmental Order outstanding, or to the Knowledge of the Seller, threatened, against the Seller or any Affiliate of the Seller relating to product liability claims with respect to the Business.  Since January 1, 2014, there have been no recalls or material safety alerts of the Products.

Section 3.22          Key Agreement Amendment.  The Key Agreement Amendment is valid and binding on each party thereto in accordance with its terms and is in full force and effect, except as enforcement may be limited by the Bankruptcy Exception.  A true, complete and correct copy of the Key Agreement Amendment has been provided or otherwise made available to the Buyer.  There are no disputes pending or, to the Knowledge of the Seller, threatened, under or with respect to the Key Agreement Amendment.  Neither the Seller nor its applicable Affiliate that is a party to, and, to the Knowledge of the Seller, no other party to, the Key Agreement Amendment is in breach in any significant manner of or default in any significant manner under (or has received notice alleging it to be in breach in any significant manner of or default in any significant manner under), or has provided or received any notice of any intention to terminate, the Key Agreement Amendment.

Section 3.23          Exclusivity of Representations and Warranties.  Neither the Buyer nor any of its Affiliates or Representatives is making any representation or warranty of any kind or nature whatsoever, oral or written, express or implied, with respect to the Buyer or Grifols, including or with respect to any other information provided to the Seller, its Affiliates or their respective Representatives in connection with the transactions contemplated hereby, except as otherwise expressly set forth in Article IV, and the Buyer hereby disclaims any such other representations or warranties.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

The Buyer hereby represents and warrants to the Seller as follows:

Section 4.1            Organization.  The Buyer is a corporation duly organized, validly existing and in good standing under the Laws of Delaware and has all necessary power and authority to own, lease and operate its properties and to carry on its business as currently conducted.  Grifols is a company (sociedad anónima) duly organized, validly existing and, to the extent legally applicable, in good standing under the Laws of Spain.

Section 4.2            Authority.  Each of the Buyer and Grifols has the corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by the Buyer or Grifols, as applicable, of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action.  This

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Agreement has been, and upon their execution each of the Ancillary Agreements to which the Buyer or Grifols will be a party will have been, duly executed and delivered by the Buyer or Grifols, as applicable, and, assuming due execution and delivery by each of the other parties hereto and thereto, this Agreement constitutes, and upon their execution each of the Ancillary Agreements to which the Buyer or Grifols will be a party will constitute, the legal, valid and binding obligations of the Buyer or Grifols, as applicable, enforceable against the Buyer and Grifols in accordance with their respective terms, except as enforcement may be limited by the Bankruptcy Exception and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Section 4.3            No Conflict; Required Filings and Consents.

(a)           The execution, delivery and performance by the Buyer or Grifols, as applicable, of this Agreement and each of the Ancillary Agreements to which it will be a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not, (i) conflict with or violate the certificate of incorporation or bylaws of the Buyer or Grifols, as applicable, (ii) conflict with or violate any Law applicable to the Buyer or Grifols, as applicable, or by which any property or asset of the Buyer or Grifols, as applicable, is bound or affected, or (iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, become or would constitute a default) under, require any consent of or notice to any Person pursuant to, or result in or create in any party any rights of termination, acceleration or cancellation of, any material contract or agreement or any material Permit to which the Buyer or Grifols, as applicable, is a party, or by which the Buyer or Grifols, as applicable, is bound, except, in the case of clause (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.

(b)           Neither the Buyer nor Grifols is required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Buyer or Grifols, as applicable, of this Agreement and each of the Ancillary Agreements to which it will be party or the consummation of the transactions contemplated hereby or thereby, except (i) for any filings required to be made under the HSR Act, or (ii) where failure to file, seek or obtain such notice, authorization, approval, order, permit or consent, would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.

Section 4.4            Financing.

(a)           The Buyer has received and accepted an executed commitment letter dated as of the date hereof (including the exhibits, annexes and schedules thereto, the “Debt Commitment Letter”) from the lenders party thereto (collectively, the “Lenders”) pursuant to which the Lenders have agreed, subject to the terms and conditions thereof, to lend amounts set forth therein (the “Debt Financing Commitments”).  The Debt Financing Commitments pursuant to the Debt Commitment Letter are collectively referred to in this Agreement as the “Debt Financing.”

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(b)           The Buyer has delivered to the Seller true, complete and correct copies of the executed Debt Commitment Letter and the fee letter (redacted to remove fees and other economic terms) referenced in the Debt Commitment Letter (the “Fee Letter”).  As of the date hereof, there are no agreements, side letters or arrangements, other than the Debt Commitment Letter and the Fee Letter, to which the Buyer or its Affiliates is a party relating to any of the Debt Financing Commitments that could adversely affect the availability of the Debt Financing.

(c)           Except as expressly set forth in the Debt Commitment Letter and the Fee Letter, there are no conditions precedent to the obligations of the Lenders to provide the Debt Financing or any contingencies that would permit the Lenders to reduce the total amount of the Debt Financing.  Assuming the satisfaction of the conditions set forth in Section 6.1 and Section 6.3, as of the date hereof, the Buyer does not have any reason to believe that any of the conditions to the Debt Financing Commitments will not be satisfied or that the Debt Financing will not be available to the Buyer on the Closing Date.

(d)           The Debt Financing, when funded in accordance with the Debt Commitment Letter, together with the cash of the Buyer, will provide the Buyer with cash proceeds on the Closing Date sufficient for the satisfaction of the Buyer’s obligations to pay (i) the amount to be paid to the Seller under Section 2.3, and (ii) any fees and expenses of or payable by the Buyer in connection with the Debt Financing.

(e)           As of the date hereof, the Debt Commitment Letter is (i) a valid and binding obligation of the Buyer and, to the knowledge of the Buyer, of each of the other parties thereto and (ii) in full force and effect (in each case, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law)).  As of the date hereof, to the knowledge of the Buyer, no event has occurred that, with or without notice, lapse of time, or both, would reasonably be expected to constitute a material default or material breach or a failure to satisfy a condition precedent on the part of the Buyer under the terms and conditions of the Debt Commitment Letter.  The Buyer has paid in full any and all commitment fees or other fees required to be paid pursuant to the terms of the Debt Commitment Letter on or before the date of this Agreement and will pay in full any such amounts due on or before the Closing Date.  The Debt Commitment Letter has not been modified, amended or altered as of the date hereof, and, as of the date hereof, none of the commitments under the Debt Commitment Letter have been withdrawn or rescinded in any respect.

(f)            In no event shall the receipt or availability of any funds or financing (including, for the avoidance of doubt, the Debt Financing) by or to the Buyer or any of its Affiliates or any other financing transaction be a condition to any of the Buyer’s obligations hereunder.

Section 4.5            Brokers.  Except for Nomura Securities International, Inc., the fees, commissions and expenses of which will be paid by the Buyer or Grifols, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement and the Ancillary Agreements based upon arrangements made by or on behalf of the Buyer or Grifols or any of its Affiliates.

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Section 4.6            The Buyer’s Investigation and Reliance; Exclusivity of Representations and Warranties.  Without in any manner limiting any of the provisions of this Agreement, any Ancillary Agreement and any certificate delivered pursuant to Section 6.3(c), the Buyer is a sophisticated purchaser and has made its own independent investigation, review and analysis regarding the Business, the Transferred Assets, the Assumed Liabilities and the transactions contemplated by this Agreement and the Ancillary Agreements.  Except as expressly set forth in this Agreement, any Ancillary Agreement and any certificates delivered pursuant to Section 6.3(c), neither the Seller nor any of its Affiliates or Representatives has made any representation or warranty, express or implied, as to the accuracy or completeness of any information concerning the Business, the Transferred Assets or the Assumed Liabilities contained herein or made available in connection with the Buyer’s investigation of the foregoing or otherwise relating to the Business or the Transferred Assets (including, but not limited to, any financial condition or results of operations of the Business or maintenance, repair, condition, design, performance, value, merchantability or fitness for any particular purpose of the Transferred Assets), and the Seller and its Affiliates and Representatives expressly disclaim any and all liability that may be based on such information or errors therein or omissions therefrom.  The Buyer has not relied and is not relying on any statement, representation or warranty, oral or written, express or implied, made by the Seller or any of its Affiliates or Representatives, except as expressly set forth in this Agreement, any Ancillary Agreement and any certificates delivered pursuant to Section 6.3(c).  Neither the Seller nor any of its Affiliates or Representatives shall have any liability to the Buyer or any of its Affiliates or Representatives resulting from the use of any information, documents or materials made available to the Buyer, whether orally or in writing, in any confidential information memoranda, “data rooms,” management presentations, due diligence discussions or in any other form in expectation of the transactions contemplated by this Agreement.  Neither the Seller nor any of its Affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving the Business or the Transferred Assets.  Nothing in this Section 4.6 is intended to modify or limit any of the representations or warranties of the Seller set forth in this Agreement, any Ancillary Agreement and any certificate delivered pursuant to Section 6.3(c).

ARTICLE V
COVENANTS

Section 5.1            Conduct of Business Prior to the Closing.  Except as otherwise contemplated by this Agreement or as set forth in Schedule 5.1, between the date of this Agreement and the Closing Date, unless the Buyer shall otherwise provide its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), the Seller shall, and shall cause its Affiliates to, conduct the Business only in the ordinary course of business consistent with past practice in all material respects, and the Seller shall, and shall cause its Affiliates to, use commercially reasonable efforts to (A) preserve in all material respects (i) the present commercial relationships of Persons having relationships with the Business, (ii) intact their current Business organization and operations, and (iii) the properties and assets included in the Transferred Assets, and (B) comply in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Transferred Assets.  Except as otherwise contemplated by this Agreement or as set forth in Schedule 5.1, between the date of this Agreement and the Closing Date, without the prior consent of the Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), the Seller shall not, and

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shall cause its Affiliates not to, in connection with the Business (provided that nothing herein shall be deemed to limit or restrict in any manner the Seller’s ability to conduct the Retained Business so long as such action or inaction would not affect the Transferred Assets, the Assumed Liabilities or the Business):

(a)           fail to pay when due any payment obligations of the Business, other than in the ordinary course of the business consistent with past practice or if disputed in good faith;

(b)           purchase, lease or otherwise acquire any property or assets that would constitute Transferred Assets for an amount in excess of $250,000 individually or $1,000,000 in the aggregate, except for purchases of Inventory in the ordinary course of business consistent with past practice;

(c)           authorize, or make any commitment with respect to, any single capital expenditure that is in excess of $1,000,000 or capital expenditures that are, in the aggregate, in excess of $1,000,000 that will bind the Business, other than capital expenditures included in the capital expenditure budget (a copy of which has been provided or otherwise made available to the Buyer prior to the date hereof);

(d)           other than in the ordinary course of business consistent with past practice, enter into, renew, terminate or amend in any material respect any Material Contract, material lease or Contract which if entered into prior to the date hereof would be a Material Contract;

(e)           waive, cancel, compromise or release or assign any rights of material value or settle or compromise any Action, in each case, arising from or related to the Business, the Transferred Assets or the Assumed Liabilities;

(f)            revalue any of the Transferred Assets other than in the ordinary course of business consistent with past practice, in a manner that would create a Liability for the Buyer;

(g)           in any respect (except for any Transaction Expenses, as required by Law or any Employee Plan or contractual obligations in effect prior to the date hereof or as expressly set forth in this Agreement, as required by Section 5.11, or, with respect to increases in base salary that are provided to the same extent provided to similarly situated employees of the Seller), (i) grant any increase, or announce any increase, in the (A) wages, salaries or compensation, (B) bonuses or incentives (provided that bonuses or incentives in respect of periods completed prior to the Closing Date that are accrued and reflected in Balance Sheet may be paid in the ordinary course of business) or (C) pension or other benefits, in each case payable to any Business Employee or consultant of the Business; (ii) establish, adopt, enter into, terminate or amend any material Employee Plan or any pension plan (or any Contract or other arrangement that would be a material Employee Plan or a pension plan if established, adopted or entered into prior to the date of this Agreement), except for amendments in the ordinary course of business consistent with past practice that would not reasonably be expected to result in material additional Liabilities of the Buyer and its Affiliates; or (iii) hire, promote or terminate without cause any supervisory or management level Business Employee;

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(h)           make any change in any method of (including for Tax purposes) accounting or accounting practice or policy applicable to the Business, the Transferred Assets or the Assumed Liabilities, except as required by applicable Law or GAAP;

(i)            to the extent related solely to the Business, the Transferred Assets, or the Assumed Liabilities, (i) make, change or rescind any election relating to Taxes, (ii) change any annual Tax accounting period, (iii) file any amended Return or fail to prepare Tax Returns on a consistent basis with past practices, (iv) surrender any right to claim a Tax refund, offset, or other reduction in Tax Liability, (v) settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit, or controversy relating to Taxes, (vi) consent to any extension or waiver of the statute of limitations period applicable to any Taxes, (vii) make a request for a written ruling with respect to Taxes of a Governmental Authority, or (viii) enter into a written and legally binding agreement with respect to Taxes with a Governmental Authority, in each case, except (x) in the ordinary course of business consistent with past practice, (y) as otherwise required by applicable Law, or (z) to the extent such action could not be reasonably expected (as determined by the Seller after reasonable consultation with the Buyer) to materially impact the Buyer or any of its Affiliates’ Liability for Taxes after the Closing;

(j)            (i) sell, lease, pledge, abandon, assign, subject to any Encumbrance (other than Permitted Encumbrances) or otherwise dispose of any of the Transferred Assets, except for dispositions of immaterial or obsolete assets, and sales of assets in the ordinary course of business consistent with past practice, or (i) enter into any capital leases, hedging arrangements, letters of credit or similar financial obligations that would constitute Assumed Liabilities;

(k)           disclose any Trade Secrets within the Licensed Intellectual Property outside of a commercially reasonable, written and enforceable confidentiality agreement;

(l)            take any action related to the Business or fail to take any such action that is reasonably likely to result in the termination, revocation, suspension, lapse, modification or non-renewal of any material Permit, Transferred Contract, or any Intellectual Property Registration within the Licensed Intellectual Property;

(m)          grant any rights with respect to any Licensed Intellectual Property or enter into any Contract the effect of which would be to grant a third party following the Closing any license to any Licensed Intellectual Property, other than the granting of such rights or entry into such Contracts or commitments, in each case outside of the Licensed Fields (as defined in the Intellectual Property License) and in the ordinary course of business consistent with past practice; or

(n)           authorize, agree, commit or otherwise become obligated to do any of the foregoing clauses (a) through (m).

Section 5.2            Covenants Regarding Information.

(a)           From the date hereof until the Closing Date, upon reasonable notice, the Seller shall afford the Buyer and its Representatives reasonable access to the properties, offices, plants and other facilities, Business Books and Records (including in respect of Taxes), and to

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furnish the Buyer and its Representatives with such financial, operating and other data and information as they may reasonably request, including financial, operating and other data and information related to the Business; provided, however, that any such access or furnishing of information shall be conducted at the Buyer’s expense, during normal business hours, under the supervision of the Seller’s personnel and in such a manner as not unreasonably to interfere with the normal operations of the Business.  Notwithstanding anything to the contrary in this Agreement, the Seller shall not be required to disclose any information to the Buyer or its Representatives if such disclosure would, in the Seller’s good faith determination, (i) jeopardize any attorney-client or other legal privilege, (ii) contravene any applicable Laws, fiduciary duty or binding agreement entered into prior to the date hereof or (iii) require disclosure of any information related to any consolidated, combined or unitary Return filed by the Seller or any of its Affiliates thereof or any of their respective predecessor entities or any other financial information unrelated to the Business; provided, that with respect to any information that is subject to applicable privileges or contractual confidentiality obligations, the Seller shall have used its commercially reasonable efforts to disclose such information in a way that would not waive such privilege or breach any such obligation; provided, further, that in the event that the Seller does not provide access or information in reliance on the preceding clauses, the Seller shall use its commercially reasonable efforts to communicate, to the extent feasible, the applicable information in a way that would not violate any such privilege or obligation or risk waiver of such privilege.

(b)           In order to facilitate the resolution of any claims made against or incurred by the Seller (as such claims relate to the Business), for a period of seven years after the Closing, the Buyer shall (i) retain the Business Books and Records relating to periods prior to the Closing and (ii) afford the Representatives of the Seller reasonable access (including the right to make, at the Seller’s expense, photocopies), during normal business hours, to such Business Books and Records; provided, however, that the Buyer shall notify the Seller in writing at least 30 days in advance of destroying any such books and records prior to the seventh anniversary of the Closing Date in order to provide the Seller the opportunity to copy such books and records in accordance with this Section 5.2(b).

(c)           In order to facilitate the resolution of any claims made against or incurred by the Buyer (as such claims relate to the Business), for a period of seven years after the Closing, the Seller shall (i) retain the Business Books and Records relating to periods prior to the Closing that shall not otherwise have been transferred to the Buyer at the Closing and (ii) upon reasonable notice, afford the Representatives of the Buyer reasonable access (including the right to make, at the Buyer’s expense, photocopies), during normal business hours, to such books and records; provided, however, that the Seller shall notify the Buyer in writing at least 30 days in advance of destroying any such books and records prior to the seventh anniversary of the Closing Date in order to provide the Buyer the opportunity to copy such books and records in accordance with this Section 5.2(c).

Section 5.3            No Solicitation of Other Bids.

(a)           From the date of this Agreement until the earlier of (x) the Closing and (y) the termination of this Agreement pursuant to Section 8.1, the Seller shall not, and shall not authorize or permit any of its Affiliates or any of its or their Representatives to, directly or

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indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any Contracts (whether or not binding) regarding an Acquisition Proposal.  The Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates and all of its and their Representatives to immediately cease and cause to be terminated, all existing solicitations, discussions or negotiations with any Persons conducted heretofore with respect to, or that would lead to, an Acquisition Proposal.  For purposes hereof, “Acquisition Proposal” means any inquiry, proposal or offer (whether binding or non-binding) from any Person (other than the Buyer or any of its Affiliates) relating to the direct or indirect disposition, whether by sale, merger, business combination, reorganization or otherwise, of all or a material portion of the Business or the Transferred Assets.  The Seller shall promptly inform its Representatives and Affiliates of their obligations under this Section 5.3.  If any Representatives or Affiliates of the Seller takes any action that the Seller is obligated by this Section 5.3 to cause such Representative or Affiliate not to take, the Seller shall be deemed to have breached this Section 5.3.

(b)           The Seller agrees that the rights and remedies for noncompliance with this Section 5.3 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to the Buyer.

Section 5.4            Notification of Certain Matters.  Until the Closing, each party hereto shall promptly notify the other party in writing of:

(a)           any fact, change, condition, circumstance or occurrence or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in any of the conditions set forth in Article VI of this Agreement becoming incapable of being satisfied;

(b)           any notice or written communication received by such party or its Affiliates (i) from any Person alleging that the consent of such Person is required in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, or (ii) from any Governmental Authority in connection with the transactions contemplated by this Agreement or the Ancillary Agreements; or

(c)           the commencement, to the Knowledge of such party, of any Actions that would reasonably be expected to impair, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements.

Section 5.5            Certain Arrangements; Existing Collaboration Agreement.

(a)           Except as set forth in Schedule 5.5(a) and except for this Agreement and the Ancillary Agreements, and the agreements specifically referred to therein as remaining outstanding after the Closing, all agreements and Contracts between the Buyer and any of its Affiliates, on the one hand, and the Seller and its Affiliates, on the other hand, shall be terminated effective as of the Closing, without any consideration or further liability to any party and without the need for any further documentation.

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(b)           Effective as of the Closing, except as set forth in this Section 5.5(b), the Seller and the Buyer hereby agree to terminate, and shall cause their Affiliates to execute or acknowledge any required documentation to effectuate the termination of, all rights and obligations of each party under the Existing Collaboration Agreement without any requirement for further notices or consents, or Liability on the part of any party thereto.  On the Closing Date, the Buyer shall pay any and all amounts (including any outstanding accounts receivable) due to the Seller or any of its Affiliates under the Existing Collaboration Agreement as of the Closing Date under Section 6.1 thereof or otherwise.  Until the termination of all obligations under the Existing Collaboration Agreement, the Seller and the Buyer shall cause their respective Affiliates to comply with their obligations thereunder in good faith in accordance with past practice.  Each of the Seller and the Buyer agree and will cause their Affiliates, prior to the Closing, to continue to operate in the ordinary course under the Existing Collaboration Agreement, including with respect to quantities of blood screening products purchased and delivered in accordance with previously delivered forecasts, and related payments for such products, in each case consistent with past practice.

Section 5.6            Confidentiality.

(a)           Each of the parties shall hold, and shall cause its Representatives to hold, in confidence all documents and information furnished to it by or on behalf of the other parties in connection with the transactions contemplated by this Agreement or by the Ancillary Agreements pursuant to the terms of the confidential disclosure agreement, dated October 17, 2016, between the Buyer and the Seller (the “Confidentiality Agreement”), which shall continue in full force and effect until the Closing Date; provided, however, that after the Closing Date, the Confidentiality Agreement shall terminate.  If for any reason this Agreement is terminated prior to the Closing Date, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms.

(b)           From and after the Closing for a period of three years, the Seller shall, and shall cause its Affiliates and its and their respective Representatives to, hold in confidence any and all confidential and proprietary information, whether written or oral, concerning the Business, except to the extent that the Seller can show that such information (i) is generally available to the public through no breach of this Agreement by the Seller; or (ii) is lawfully acquired by the Seller, any of its Affiliates or its or their respective Representatives from and after the Closing from sources that are not known by the Seller to be prohibited from disclosing such information by a legal, contractual or fiduciary obligation.  If the Seller or any of its Affiliates or its or their respective Representatives is compelled to disclose any information by judicial or administrative process or by other requirements of Law or it becomes necessary for the Seller or any of its Affiliates to disclose such information in connection with any legal or administrative proceeding, the Seller shall use commercially reasonable efforts to promptly notify the Buyer in writing and shall disclose only that portion of such information as is necessary, provided that Seller shall reasonably cooperate with the Buyer, at the Buyer’s expense, if the Buyer seeks to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

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Section 5.7            Non-Solicitation; Non-Competition.

(a)           During the Restricted Period, the Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any person who is offered employment by the Buyer or its Affiliates pursuant to Section 5.11 or any employee of the Buyer or its Affiliates whose total annual compensation is in excess of $100,000, or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation that is not directed specifically to any such employee; provided that nothing in this Section 5.7(a) shall prevent the Seller or any of its Affiliates from (i) hiring or soliciting any employee whose employment with the Buyer or any of its Affiliates was terminated by the Buyer or its Affiliates or (ii) hiring or soliciting any employee whose employment with the Buyer or any of its Affiliates has been terminated by the employee, after 180 days from the date of termination of such employment.

(b)           During the Restricted Period, the Buyer shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any employee of the Seller or its Affiliates whose total annual compensation is in excess of $100,000, or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation that is not directed specifically to any such employee; provided that nothing in this Section 5.7(b) shall prevent the Buyer or any of its Affiliates from (i) hiring or soliciting any employee whose employment with the Seller or any of its Affiliates was terminated by the Seller or its Affiliates or (ii) hiring or soliciting any employee whose employment with the Seller or any of its Affiliates has been terminated by the employee, after 180 days from the date of termination of such employment.

(c)           During the Subject Period, the Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, engage in or do any of the following in the Territory:  (i) manage, control, render services to or have any direct or indirect ownership interest in, any business or Person (except the Buyer or its Affiliates) in connection with the design, development, manufacture, license, distribution, marketing or sale of any product relating to the Licensed Donor Screening Field; or (ii) design, develop, manufacture, license, distribute, market, or sell any product relating to the Licensed Donor Screening Field; provided, however, that this Section 5.7(c) shall not prevent the Seller or its Affiliates from (A) engaging in the Retained Business (including the Licensed Transplantation Field), or (B) holding or making investments not in excess of 5% of the outstanding securities of any publicly-traded entity.

(d)           During the Subject Period, the Buyer shall not, and shall not permit any of its Affiliates to, directly or indirectly, engage in or do any of the following in the Territory:  (i) manage, control, render services to or have any direct or indirect ownership interest in, any business or Person (except the Seller or its Affiliates) in connection with the design, development, manufacture, license, distribution, marketing or sale in the Molecular Detection Field; or (ii) design, develop, manufacture, license, distribute, market, or sell any product using the Licensed Intellectual Property in the Molecular Detection Field; provided, however, that this Section 5.7(d) shall not prevent the Buyer or its Affiliates from (A) engaging in the Licensed Transplantation Field, or (B) holding or making investments not in excess of 5% of the outstanding securities of any publicly-traded entity, or taking any actions with respect to products in the Molecular Detection Field that do not use the Licensed Intellectual Property.

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(e)           Each party acknowledges that a breach or threatened breach of this Section 5.7 would give rise to irreparable harm to the other party or its Affiliates, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any of its obligations, the other party or its Affiliates may, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

(f)            Each party acknowledges that the restrictions contained in this Section 5.7 are reasonable and necessary to protect the legitimate interests of the other party and its Affiliates and constitute a material inducement to the other party to enter into this Agreement and the Ancillary Agreements and consummate the transactions contemplated by this Agreement and the Ancillary Agreements.  In the event that any covenant contained in this Section 5.7 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable Law.  The covenants contained in this Section 5.7 and each provision hereof are severable and distinct covenants and provisions.  The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

Section 5.8            Consents and Filings; Further Assurances.

(a)           Each of the parties shall use commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as promptly as practicable, including to (i) obtain from Governmental Authorities and other Persons all consents, approvals, authorizations, qualifications and orders as are necessary for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements and (ii) promptly (and in no event later than five Business Days after the date hereof) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the HSR Act or any other applicable Law.  The Buyer shall pay all filing fees and other charges for the filing under the HSR Act for both parties.

(b)           Each of the parties shall promptly notify the other party of any communication it or any of its Affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement and permit the other party to review in advance any proposed communication by such party to any Governmental Authority.  Neither party to this Agreement shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry unless it consults with the other party in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend and participate at such meeting.  Subject to the Confidentiality Agreement, the parties will coordinate and cooperate fully with each other in exchanging such information

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and providing such assistance as the other party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods including under the HSR Act.  Subject to the Confidentiality Agreement, the parties will provide each other with copies of all correspondence, filings or communications between them or any of their Representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the transactions contemplated hereby.

(c)           Certain consents and waivers with respect to the transactions contemplated by this Agreement identified in Schedule 3.3(a) or non-Material Contracts may be required from parties to contracts to which the Seller is a party and have not been and may not be obtained.  Neither the Seller nor any of its Affiliates shall have any liability to the Buyer arising out of or relating to the failure to obtain such consents or waivers that may be required in connection with the transactions contemplated by this Agreement or because of the termination of any such contract as a result thereof, and no such failure or termination shall result in the failure of any condition set forth in Article VI.

Section 5.9            Public Announcements.  On and after the date hereof and through the Closing Date, the parties shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, and neither party shall issue any press release or make any public statement prior to obtaining the other party’s written approval, which approval shall not be unreasonably withheld, conditioned or delayed, except that no such approval shall be necessary to the extent disclosure may be required by applicable Law, any listing agreement of any party hereto or to the extent reasonably necessary for either party to enforce its rights under this Agreement or any Ancillary Agreement.

Section 5.10          Use of Names.

(a)           Except as otherwise expressly provided herein and in the Ancillary Agreements, the Seller is not conveying ownership rights or granting the Buyer or any Affiliate of the Buyer a license to use any of the Marks of the Seller or any of its Affiliates (including the name “Hologic” or any trade name, trademark, service mark, logo or domain name incorporating the name “Hologic”) and, after the Closing, the Buyer shall not knowingly use, or permit any Affiliate of the Buyer to use, in any manner the Marks of the Seller or any Affiliate of the Seller or any word that is confusingly similar in sound or appearance to such Marks except as expressly set forth in Section 5.10(b).

(b)           For a period of 180 days following the Closing Date, the Buyer and its Affiliates may use, solely in connection with the operation of the Business as operated immediately prior to the Closing, the Business’s existing marketing, promotional and sales materials, stationary, letterhead, business cards, signs, billboards, advertisements, vehicle and equipment markings, invoices, purchase orders, forms, remaining inventory and other media, including respective online material and substantially similar reproductions thereof made in the ordinary course of business, in each case containing the name “Hologic” or any Mark incorporating the name “Hologic,” after which period the Buyer shall cause the Business to remove or obliterate all such Marks from such materials or cease using such materials.

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(c)           The Buyer shall ensure that all use of the Marks by the Buyer and the Business as provided in this Section 5.10 shall be only with respect to products and services of a level of quality equal to or greater than the quality of products and services with respect to which the Business used such Marks prior to the Closing.  Any and all goodwill generated by the use of such Marks under this Section 5.10 shall inure solely to the benefit of the Seller.  In any event, the Buyer shall not, and shall cause the Business not to, use such Marks in any manner that might damage or tarnish the reputation of the Seller or the goodwill associated with such Marks.

Section 5.11          Employee Matters.

(a)           No later than ten Business Days prior to the Closing Date, the Seller shall provide or cause to be provided to the Buyer an updated Schedule 1.1(a) (list of Business Employees) (provided that any additions or deletions thereto shall be mutually agreed upon by the Buyer and the Seller).  As of the Closing Date, the Buyer shall, or shall cause its Affiliates to, make offers of employment to each Business Employee who is actively employed on the Closing Date and, for Business Employees on an approved leave of absence who are expected to return to active employment within six months, the Buyer shall or shall cause its Affiliates to, make offers of employment to each Business Employee effective as of his or her return to active employment, provided that such Business Employee returns to active employment with the Buyer or its Affiliates within six months of the Closing Date.  All Business Employees to whom the Buyer (or an Affiliate of the Buyer) offers employment and who accept such offers of employment and become employed by the Buyer (or an Affiliate of the Buyer), are herein referred to herein as the “Transferred Employees” and each Transferred Employee shall cease to be an employee of the Seller or its Affiliate, as applicable, as of the Closing Date (or, with respect to any Transferred Employee who is not actively at work on the Closing Date, upon such individual’s return to active employment with the Buyer or its Affiliates).

(b)           The Buyer shall provide, or cause to be provided, to each Transferred Employee, for a period of 12 months following the Closing: (i) a base salary and annual cash incentive opportunities that each are substantially comparable to those being provided to such Transferred Employee by the Seller immediately prior to the Closing and (ii) employee benefits that are substantially comparable in the aggregate to those provided by the Seller immediately prior to the Closing, provided that for purposes of the covenants of this Section 5.11(b), defined benefit pension plans, retiree welfare benefits, long term incentive compensation and equity compensation shall be disregarded.  For a period of 12 months following the Closing Date, the Buyer and its Affiliates shall provide to any Transferred Employee who is not party to an employment agreement, who is terminated by the Buyer and its Affiliates without “cause” (within the meaning of the severance arrangements of the Buyer as in effect from time to time) and who timely executes and delivers (without revocation) a release of claims against the Buyer and its Affiliates (to the extent required by the Buyer) severance benefits in amounts and on terms and conditions substantially comparable to the severance benefits that would have been provided by the Seller and its Affiliates to such Transferred Employee immediately prior to the Closing Date.

(c)           The Seller shall reasonably cooperate with the Buyer to provide information about the Employee Plans necessary to assist the Buyer in complying with this Section 5.11.  Following the date hereof, the Seller shall also provide the Buyer with any

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additional compensation-related information concerning Business Employees (and the compensation and benefits payable thereto), including, without limitation, annual incentive and long term incentives previously earned, to the extent (i) such information is reasonably requested by the Buyer and relevant to any determination to be made by the Buyer with respect to the compensation of any Business Employees under this Agreement and (ii) such information is provided in accordance with any material consent and local Law requirements applicable thereto, and the Seller shall use its reasonable best efforts to obtain any such consents.

(d)           With respect to any welfare plan maintained by the Buyer or its Affiliates in which Transferred Employees are eligible to participate after the Closing Date, the Buyer shall, use commercially reasonable efforts to (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Transferred Employees and their respective covered dependents under such plan to the extent that such conditions, exclusions or waiting periods were satisfied or did not apply under the Employee Plans in which such Transferred Employees were participating immediately prior to the Closing and (ii) provide each Transferred Employee and his or her covered dependents with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements to the extent applicable under any such plan in the year in which the Closing occurs, to the extent credited under the Employee Plans in which such Transferred Employee participated immediately prior to the Closing.

(e)           The Buyer shall provide each Transferred Employee with credit for all service with the Seller, or any former entity for which the Seller has previously credited each Transferred Employee, under each employee benefit plan, policy, program or arrangement of the Buyer and its Affiliates in which such Transferred Employee is eligible to participate, for purposes of eligibility and vesting and, solely for purposes of vacation and severance entitlements, accrual of benefits, solely to the extent such past service was recognized for such Transferred Employees under the comparable Employee Plans in which the Transferred Employee participated immediately prior to the Closing and to the same extent past service is credited under such plans or arrangements for similarly situated employees of the Buyer and its Affiliates.  Notwithstanding the foregoing, nothing in this Section 5.11(e) shall be construed to require crediting of service for purposes of the calculation of benefits or that would result in (i) duplication of benefits, (ii) service credit for any purposes under any plans for which participation, service and/or benefit accrual is frozen or any defined benefit pension plan or any post-employment health or post-employment welfare plan, or (iii) service credit under a newly established plan for which prior service is not taken into account for employees of the Buyer and its Affiliates generally.

(f)            Effective as of the Closing, the Transferred Employees and their eligible dependents shall be treated as having terminated employment under the terms of the Employee Plans, subject to the terms and conditions of the Transition Services Agreement.  On or as soon as practicable following the Closing Date, the Seller shall pay (to the extent not previously paid) to the Transferred Employees who are eligible to receive annual incentive compensation payments from the Seller or its Affiliates pursuant to the Seller’s annual bonus programs: (i) the annual bonuses earned by such Transferred Employees for fiscal year 2016 under such plans, to

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the extent unpaid; and (ii) a pro rata portion, at target level, of annual bonuses accrued in respect of fiscal year 2017 through the Closing Date.

(g)           On or prior to the Closing Date, the Seller shall take all necessary action to cause the account balances and/or accrued benefits to the Transferred Employees under the Seller’s 401(k) plans and the Seller’s non-qualified defined contribution savings plans maintained for the benefit of any of the Transferred Employees to be fully vested and non-forfeitable as of the Closing Date, and the Seller and its Affiliates shall contribute to such 401(k) plans and defined contribution savings plan(s) the matching contributions relating to periods prior to the Closing Date based on the amount of percentage that the Seller is required to contribute to such plan on behalf of the Transferred Employees through the Closing Date as if such employees had satisfied all prerequisites for receiving such contributions as of the Closing Date.  To the extent permitted under Section 401(k) of the Code and regulations issued thereunder, Transferred Employees who participate in the Seller’s 401(k) plans shall be eligible to receive, at their election, a distribution of their account balance from the Seller’s 401(k) plan after the Closing Date.  The Buyer shall use commercially reasonable efforts to cause a 401(k) plan of the Buyer or one of its Affiliates to accept eligible rollovers of such distributions.  Rollovers relating to any Transferred Employee may include participant loans, provided that it is permitted by the applicable 401(k) plan accepting such rollover (it being expressly understood that the Buyer is not obligated to establish or amend any 401(k) plan to accept such rollovers).

(h)           The Seller shall be responsible for (i) the payment of any earned but unpaid salaries, bonus, incentive pay, vacation pay, sick pay, holiday pay, other paid time off, severance pay and other like obligations and payments to the Business Employees, for all periods of employment by the Seller that are due on or prior to the Closing Date, to the same extent such amounts are paid to terminating employees generally, (ii) the payment of any amounts due to the Transferred Employees pursuant to the Employee Plans or other employee benefit plans of the Seller or its Affiliates as a result of its employment of the Business Employees through and including the Closing Date and (iii) the payment of salaries and provision of benefits to the extent provided under the Transition Services Agreement.

(i)            Effective as of immediately prior to the Closing Date, the Seller shall, and hereby does, release all Transferred Employees from any confidentiality obligations to the extent (and only to the extent) necessary for such Transferred Employees to provide services to the Buyer in respect of the Business, and the Seller shall not, and shall cause its Affiliates not to, directly or indirectly, enforce any non-competition, non-solicitation, no-hire or similar covenant with respect to any Transferred Employee or take any other action that would reasonably restrict or limit any Transferred Employee from providing employment or other services to the Buyer and its Affiliates.

(j)            The Seller shall be responsible for complying with the requirements of COBRA for its employees (including the Transferred Employees) and their “qualified beneficiaries” whose “qualifying event” (as such terms are defined in Section 4980B of the Code) occurs on or prior to the Closing Date and, if applicable, upon any loss of coverage provided pursuant to the Transition Services Agreement.  The Buyer shall have no liability under COBRA relating to any Business Employees for events occurring on or prior to the Closing Date

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and, if applicable, upon any loss of coverage provided pursuant to the Transition Services Agreement.

(k)The Seller agrees to provide, and shall cause its Affiliates to provide, any required notice under and to otherwise comply with, and to retain all Liabilities relating to, the WARN Act with respect to any event affecting the employees of the Business prior to the Closing Date.  The Buyer agrees to provide any required notice under and to otherwise comply with, and to assume all Liabilities relating to, such Laws with respect to any event affecting Transferred Employees on or after the Closing Date.  On or as soon as practicable following the Closing Date, the Seller shall deliver to the Buyer a true, complete and correct list of all persons who suffered an “employment loss” (as defined in the WARN Act) during the 90-day period prior to the Closing Date.  In no event shall the Buyer or any of its Affiliates involuntarily terminate the employment of any Transferred Employee within the 90-day period following the Closing Date that would result in material WARN Act liabilities for the Seller or its Affiliates.  In no event shall the Seller or any of its Affiliates involuntarily terminate the employment of any employee of the Seller of any of its Affiliates within the 90-day period following the Closing Date that would result in material WARN Act liabilities for the Buyer or its Affiliates.

(l)Nothing contained in this Agreement shall (i) restrict the ability of the Buyer to terminate the employment of any Transferred Employee for any reason at any time after the effective date of his or her employment with the Buyer, (ii) be treated as an amendment of any Employee Plan or any employee benefit plan of the Buyer or any of its Affiliates, (iii) give any third party any right to enforce the provisions of this Section 5.11, (iv) obligate the Buyer or any of its Affiliates to adopt or maintain any particular benefit plan, program, policy or practice on or following the Closing Date, or (v) confer upon any current or former employee of the Business, or upon any representative of such person, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 5.12Regulatory Transfers.

(a)The Buyer shall file, at its own expense, as soon as possible after the Closing, requests for the re-issuance or transfer of the Transferred Product Registrations to show the Buyer or its Affiliates as the holder of the Transferred Product Registrations.  The Buyer shall be solely responsible for the prosecution of such filings and for securing any such further approvals from any relevant Governmental Authority as may be required for the transactions contemplated by this Agreement or the operation of the Business following the Closing.  The Buyer shall take all necessary steps to obtain the re-issuance or transfer of the Transferred Product Registrations described in this Section 5.12 as promptly and diligently as possible.  The Buyer shall notify the Seller of the decision of any relevant Governmental Authority with respect to such re-issuance or transfer within three Business Days after such decision.  The Seller shall provide all reasonable assistance with the re-issuance or transfer of the Transferred Product Registrations as may be necessary or appropriate for the Buyer to effect such re-issuance or transfer in accordance with this Section 5.12.

(b)The Buyer is hereby granted permission to conduct the Business for its own account during the period from the Closing Date until the date on which all Transferred

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Product Registrations have been transferred to or obtained by the Buyer or its Affiliates under the Transferred Product Registrations held by the Seller or its Affiliates as of the Closing Date.

Section 5.13Tax Matters; Real Property Expenses.

(a)The Seller and the Buyer shall each be responsible for, and shall each indemnify the other for, one-half of any and all sales, use, value added, transfer, stamp, registration, documentary, excise, real property transfer or gains, mortgage, recordation or similar Taxes and all recording or filing fees, notarial fees and other similar costs (including all interest, penalties and additions imposed with respect to such amounts) incurred by the Seller or the Buyer as a result of the transactions contemplated by this Agreement.  The party that has the primary obligation to do so under applicable Law shall file any Returns due with respect to Taxes described in this Section 5.13(a) and shall prepare and timely file, or cause to be prepared and timely filed, any such Returns.  Within 10 days of the due date (including any applicable extensions) of any such Return filed by a party, the non-filing party shall provide any amounts that are the obligation of such non-filing party to the filing party.

(b)All real property Taxes, personal property Taxes, or ad valorem obligations and similar recurring Taxes and fees (other than any income Taxes, any Taxes based on income or receipts, or any Taxes described in Section 5.13(a)) on or with respect to the Business and the Transferred Assets shall be allocated to the Seller, on the one hand, for any Pre-Closing Tax Period, and to the Buyer, on the other hand for any Post-Closing Tax Period.  Any such Taxes for the Pre-Closing Tax Period shall be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period.  Any such Taxes for the Post-Closing Tax Period shall be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Post-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period.

(c)To the extent relevant to the determination of Transferred Assets, Excluded Assets, Assumed Liabilities or Excluded Liabilities, all other Taxes shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period as if such taxable period ends as of the close of business on the Closing Date.

(d)The party that has the primary obligation to do so under applicable Law shall file any Return that is required to be filed in respect of Taxes described in this Section 5.13(d), and that filing party shall pay the Taxes shown on such Return.  Such party shall provide the other party with copies of all Returns relating to any Straddle Period as soon as practicable after the preparation, but prior to the filing, thereof, for the other party’s review.  If the Buyer or the Seller remits (or has previously remitted) to the appropriate Governmental Authority payment for Taxes which are subject to proration under this Section 5.13(b) and such payment includes (or included) some or all of the other party’s prorated share of such Taxes, such other party shall be liable for the prompt reimbursement of the paying party for such other party’s share of such Taxes.

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(e)Subject to Section 5.2, the Seller and the Buyer shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives reasonably to cooperate, in preparing and filing their respective Returns and in connection with any audit with respect to any Taxes, including maintaining and making available to each other all records necessary in connection with Taxes; provided, however, that such access and assistance do not unreasonably disrupt the normal operations of the Buyer or the Seller; and provided, further, that in no event will the Buyer or the Seller be required to disclose any Returns that are Returns of an Affiliated Group of which the Buyer or the Seller or any of their respective Affiliates, as applicable, is or was a member or any Buyer Returns for a Post-Closing Tax Period.  Any documents requested by the Buyer or the Seller shall be limited to those documents that reasonably relate to the Returns (including any workpapers connected thereto), disputes and other matters relating to Taxes in respect of the Business and the Transferred Assets.  Nothing in this Section 5.13 shall be interpreted as requiring either party to disclose to the other party confidential information that does not relate to the Returns (including any workpapers connected thereto), disputes and other matters relating to Taxes in respect of the Business and the Transferred Assets, and either party may make appropriate redactions to documents provided to protect such confidential information.

(f)The Buyer shall reimburse the Seller for the post-Closing portion of any prepaid expenses associated with the Transferred Real Property, including a prorated portion of the cost of any utilities (i.e., sewage, water, etc.).

Section 5.14Insurance; Risk of Loss.

(a)From and after the Closing Date, the Business shall cease to be insured by the Seller’s or any of its Affiliates’ insurance policies or by any of their self-insurance programs.  For the avoidance of doubt, the Seller shall retain all rights to control its insurance policies and self-insurance programs, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any of its insurance policies and self-insurance programs and the Seller shall retain any premiums or other retentions paid by the Business prior to the Closing Date in respect of any insurance coverage.

(b)In the event the Buyer provides written notice to the Seller of a claim asserted in connection with the Business after the Closing arising out of an occurrence taking place prior to the Closing (“Post-Closing Claims”), the Seller shall use commercially reasonable efforts to obtain recoveries under any applicable occurrence-based insurance policies maintained by the Seller that covered the Business to the extent such insurance coverage exists and provides coverage and shall pay to the Buyer any net proceeds recovered thereunder; provided, that the Buyer shall (i) be responsible for the satisfaction or payment of any and any associated self-retentions, deductibles, costs and expenses with respect to any Post-Closing Claim and shall reimburse the Seller for its reasonable out-of-pocket costs and expenses incurred in connection with collecting insurance proceeds in respect of such claims and (ii) the Buyer shall reasonably cooperate with the Seller with respect to the tendering of any such claims including providing notices, information and backup materials as may be necessary in connection therewith.

(c)The Seller agrees that with respect to any act, omission, event or occurrence that results in a material Loss relating to any Transferred Asset that first occurs, and

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that the Seller first becomes aware of, during the period beginning on the date hereof and ending as of the Closing that is covered by insurance policies under which the applicable Transferred Asset is insured prior to the Closing, (i) the Seller shall use commercially reasonable efforts to promptly notify the Buyer of the occurrence of such event, and (ii) the Seller shall promptly make claims under such policies in respect of such act, omission, event, occurrence or Loss, subject to the terms and conditions of such policies, and, to the extent any insurance proceeds are received by the Seller in respect of such claims, then the Seller shall (but conditioned upon the occurrence of the Closing), promptly after the Seller’s receipt thereof, remit to the Buyer the amount of such proceeds (net of any deductibles or expenses), less any amounts thereof actually paid to third parties who perform repairs or other similar work in connection with restoring the applicable Transferred Asset to its prior condition.  For the avoidance of doubt, to the extent the Seller pays any insurance proceeds to the Buyer or uses such insurance proceeds for repair or restoration of any Transferred Asset that suffers a casualty loss, the Buyer shall be deemed to have waived any other rights or remedies with respect to such matter, including any rights to indemnification or the ability to assert the failure of a closing condition in respect thereof.

Section 5.15Further Assurances; Wrong Pockets.

(a)The Seller and the Buyer shall, and shall cause their respective Affiliates to, execute and deliver such further instruments of conveyance and transfer and take such additional action as may be reasonably necessary to effect, consummate, confirm or evidence the sale and transfer to the Buyer of the Transferred Assets, the assumption of the Assumed Liabilities, and the consummation of the other transactions contemplated by this Agreement and the Ancillary Agreements.

(b)Without limiting the generality of the foregoing, if at any time following the Closing it becomes apparent that any asset (including any Contract) that should have been transferred to the Buyer, either directly or indirectly pursuant to this Agreement was not so transferred, or any asset (including any Contract), including those related to the Retained Business, was inadvertently transferred to the Buyer, the Seller shall, and shall cause its applicable Affiliates to, or the Buyer shall, and shall cause its applicable Affiliates to, as applicable, in each case as promptly as practicable: (i) transfer all rights, title and interest in such asset to the Buyer or as the Buyer may direct, or to the Seller or as the Seller may direct, as applicable, in each case for no additional consideration; and (ii) hold its right, title and interest in and to such asset in trust for the applicable transferee until such time as such transfer is completed.

(c)From and after the Closing, if the Seller or any of its Affiliates receives or collects any funds relating to any Transferred Asset (other than any accounts receivable which constitute Excluded Assets), the Seller or its Affiliate shall remit such funds to the Buyer within five Business Days after its receipt thereof.  From and after the Closing, if the Buyer or its Affiliate receives or collects any funds relating to any Excluded Asset, the Buyer or its Affiliate shall remit any such funds to the Seller within five Business Days after its receipt thereof.

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Section 5.16Grifols Guarantee.

(a)In consideration of the Seller’s execution and delivery of this Agreement, Grifols hereby unconditionally and irrevocably guarantees to the Seller (A) the due and punctual payment and performance of each of the obligations owing by Buyer under this Agreement and the Ancillary Agreements if, as and when such obligations become due and (B) the due and punctual payment of all Losses incurred by the Seller resulting from the breach or default by the Buyer of any of the provisions of this Agreement or the Ancillary Agreements, including, for the avoidance of doubt, all Losses covered by the indemnity provided under Section 7.3 (collectively, the “Buyer Obligations”).

(b)In connection with a termination (in whole or in part) of this Agreement pursuant to Section 8.1, Grifols’s obligations under this Section 5.16 shall terminate with respect to those Buyer Obligations that have been relieved in accordance with the applicable provisions of Section 8.2.  For the avoidance of doubt, the guaranty under this Section 5.16 and the rights of the Seller under this Section 5.16 shall continue to apply to all those Buyer Obligations surviving a termination (in whole or in part) of this Agreement pursuant to Section 8.1.

(c)Grifols hereby agrees that its obligations under this Section 5.16 shall be unconditional, irrespective of (A) the absence of any action to enforce the Buyer Obligations against Buyer, (B) any amendment, waiver or consent by the Buyer or the holder of a Buyer Obligation with respect to any provision thereof, (C) the liquidation, dissolution or winding up of Buyer, or (D) any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.  Grifols hereby waives promptness, diligence, presentment, demand of payment, filings of claims with any court, any right to require a proceeding first against Buyer, protest or notice with respect to the applicable Buyer Obligation and all demands whatsoever, and covenants that Grifols’s obligations under this Section 5.16 will not be discharged except by complete performance of the applicable Buyer Obligations and the obligations under this Section 5.16 in accordance with the terms thereof and hereof, respectively.

(d)Grifols shall be subrogated to all rights against the Buyer in respect of any amounts paid by Grifols pursuant to the provisions of this Section 5.16.

(e)The obligations of Grifols under this Section 5.16 constitute a guarantee of payment and performance when due and not of collection.  The Buyer Obligations of Grifols under this Section 5.16 shall continue to be effective, or to be reinstated, as the case may be, in respect of any Buyer Obligations if at any time payment, or any part thereof, of said Buyer Obligations is rescinded or must otherwise be restored or returned by the Buyer, all as though such payments had not been made.

(f)For the avoidance of doubt, the term “Buyer” as used in this Section 5.16 includes any successor or assign of the Buyer or any other Person that acquires Transferred Assets hereunder pursuant to the definition of “Buyer” or Section 9.12.

Section 5.17Cooperation with Financing.  The Seller shall, and shall cause its Affiliates to, at the Buyer’s cost, use commercially reasonable efforts to provide such

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cooperation (including to use commercially reasonable efforts to cause its Representatives to provide such cooperation) as may be reasonably requested by the Buyer or Buyer’s prospective financing sources in connection with the arrangement of the financing for the consummation of the transactions contemplated hereby (the “Financing”), including: (i) upon reasonable prior notice, making senior employees of the Seller available to (A) participate in, and assist the Buyer in the Buyer’s preparation of customary marketing materials (including providing customary authorization letters authorizing the distribution of information to prospective lenders and identifying any portion of such information that constitutes material, non-public information regarding the Seller or its subsidiaries or their respective securities) for meetings with prospective financing sources and (B) participate in and assist the Buyer in the Buyer’s preparation of customary materials for meetings with rating agencies; (ii) providing the Buyer with such information as is reasonably available and as the Buyer’s prospective financing sources may reasonably request of Buyer in connection with the Financing, except as required by Law or to preserve any privilege from disclosure; (iii) providing customary assistance to the Buyer in the Buyer’s preparation or filing of security and collateral documents necessary in connection with such Financing; (iv) requesting releases of Encumbrances and pay-off letters in accordance with the terms hereof; and (v) furnishing the Buyer and its financing sources promptly with all documentation and other information required by Governmental Authorities in connection with the Financing under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, and in each case requested by Buyer in writing no later than ten calendar days prior to the Closing Date, provided, however, that with respect to clauses (i) through (v) above, the Seller will not be required to (a) obtain corporate approval for, execute or become bound by any agreement or document, (b) deliver any certificate or legal opinion (other than delivery of customary authorization letters and representations letters in connection with the Financing), (c) provide or do anything that would result in any material disruption to the operations or management of the Business, (d) incur any expense for which Seller is not reimbursed by Buyer or (e) take any action that conflicts with or results in any violation or breach of, or default under any applicable laws or contracts binding on the Seller or the Business.

Section 5.18Post-Closing Financing Cooperation.  After the Closing, the Seller shall use commercially reasonable efforts to, and shall cause its Affiliates to use commercially reasonable efforts to, cooperate with the Buyer and its Affiliates and each of their respective Representatives in a timely manner as reasonably requested by the Buyer in connection with (a) the Buyer or its Affiliates’ preparation of historical financial statements and pro forma financial information with respect to the Business pursuant to Regulation S-X under the Securities Act, the Spanish Securities Market Act (Ley 24/1998, de 28 de Julio, del Mercado de Valores) and (b) the timely filing by the Buyer or its Affiliates of any other financial statements and pro forma financial information with the SEC under the Securities Act or the Exchange Act or with Spanish CNMV under the Spanish Securities Market Act (Ley 24/1998, de 28 de Julio, del Mercado de Valores) and for any securities offerings by the Buyer or its Affiliates for which such financial information is reasonably necessary or advisable, in each case including (i) permitting the Buyer and its Affiliates to use any audited or unaudited financial statements of the Business as are in existence, (ii) permitting the Buyer, its Affiliates, and their Representatives, to have reasonable access to the support documentation prepared by the Seller, its Affiliates, and their Representatives in relation to the carve out of the Business and receive from the Seller, its Affiliates, and their Representatives reasonably detailed explanations regarding any assumptions

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underlying and any changes made to such financial information, and (iii) reasonably assisting the Buyer and its independent public accountants in the preparation of such financial statements.  The Buyer, for itself and on behalf of its Affiliates, shall indemnify Seller and its Affiliates and promptly pay all reasonable out-of-pocket expenses incurred by the Seller or its Affiliates in connection with the Seller’s or its Affiliates’ compliance with Section 5.17 and this Section 5.18, including any professional and accounting fees.  It is understood and agreed that Seller and its Affiliates’ sole obligation under Section 5.17 and this Section 5.18 is to use commercially reasonable efforts to cooperate with the Buyer and its Affiliates and each of their respective Representatives as set forth above and that the indemnification provision in Section 7.2 shall not apply to any breach or alleged breach of the covenants or agreements by Seller or its Affiliates set forth in this Section 5.18.

Section 5.19Title Insurance.

(a)The Seller has previously delivered to the Buyer a current preliminary title report for each parcel of the Transferred Real Property issued by the Title Company.

(b)The Seller acknowledges that the Buyer may request the Title Company to provide to the Buyer, at the Buyer’s sole cost and expense, a Title Policy and such endorsements as the Buyer may request at the Closing, provided that (i) such Title Policy and endorsements shall be at no cost or additional liability to the Seller (whether potential or otherwise), (ii) the Buyer’s obligations under this Agreement shall not be conditioned upon Buyer’s ability to obtain such Title Policy or endorsements and, if the Buyer is unable to obtain such Title Policy or endorsements, the Buyer shall nevertheless be obligated to proceed to close the transaction contemplated hereby without reduction of or set off against the Purchase Price, and (iii) the Closing shall in no event be delayed as a result of the Buyer’s request.  The Seller shall use commercially reasonable efforts to provide such documents reasonably required by the Title Company in order for Title Company to issue the Buyer such Title Policy and endorsements; provided, that such documents shall be at no cost or additional liability to the Seller (whether potential or otherwise).

Section 5.20Material Permits.  Within 30 days of the date hereof, the Seller shall cause to be delivered to the Buyer a list of all material Permits (including Environmental Permits and Transferred Product Registrations) required to conduct the Business as currently conducted or for the ownership and use of the Transferred Assets.

Section 5.21Ancillary Agreements; Transition Services Agreement.  The parties shall negotiate in good faith and finalize the schedules to the Transition Services Agreement no later than two weeks prior to the anticipated Closing Date.  At or prior to the Closing, each of the Buyer and the Seller shall execute and deliver the Ancillary Agreements to which it is a party.

ARTICLE VI
CONDITIONS TO CLOSING

Section 6.1General Conditions.  The respective obligations of the Buyer and the Seller to consummate the transactions contemplated by this Agreement shall be subject to the

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fulfillment, at or prior to the Closing, of each of the following conditions, any of which may, to the extent permitted by applicable Law, be waived in writing by any party in its sole discretion (provided, that such waiver shall only be effective as to the obligations of such party):

(a)No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is then in effect and that enjoins, restrains, makes illegal or otherwise prohibits the consummation of the transactions contemplated by this Agreement.

(b)Any waiting period (and any extension thereof) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or shall have been terminated.

Section 6.2Conditions to Obligations of the Seller.  The obligations of the Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Seller in its sole discretion:

(a)The representations and warranties of the Buyer contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct as of such specified date, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Buyer Material Adverse Effect” set forth herein) would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.

(b)The Buyer shall have performed in all material respects its obligations and agreements and complied with its covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

(c)The Seller shall have received from the Buyer a certificate to the effect set forth in Sections 6.2(a) and 6.2(b), signed by a duly authorized officer thereof.

(d)The Seller shall have received an executed counterpart of each of the Ancillary Agreements to which the Buyer or an Affiliate of the Buyer is a party, signed by each party other than the Seller or any of its Affiliates.

Section 6.3Conditions to Obligations of the Buyer.  The obligations of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Buyer in its sole discretion:

(a)Other than the representations and warranties of the Seller contained in Section 3.2, Section 3.4, the last sentence of Section 3.6, the last sentence of Section 3.14(d) and Section 3.20, the representations and warranties of the Seller contained in Article III shall be true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”), or “Material Adverse Effect” set forth herein) as of the date hereof and as

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of the Closing Date with the same effect as though made at and as of such dates, (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The representation and warranty of the Seller contained in the last sentence of Section 3.14(d) shall be true and correct in all material respects as of the date hereof and as of the Closing Date.  The representations and warranties of the Seller contained in Section 3.2, Section 3.4, the last sentence of Section 3.6 and Section 3.20 shall be true and correct in all respects (except for any failure to be so true and correct that is de minimis in nature) as of the date of this Agreement and as of the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date).

(b)The Seller shall have performed in all material respects its obligations and agreements and complied with its covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

(c)The Buyer shall have received from the Seller a certificate to the effect set forth in Sections 6.3(a) and 6.3(b), signed by a duly authorized officer thereof.

(d)The Key Agreement Amendment shall be in full force and effect at and as of the Closing.

(e)The Buyer shall have received an executed counterpart of each of the Ancillary Agreements to which the Seller or an Affiliate of the Seller is a party, signed by each party other than the Buyer or any of the Buyer’s Affiliates.

(f)The Buyer shall have received from the Seller a certificate pursuant to Section 1445(b)(2) of the United States Internal Revenue Code of 1986 providing that the Seller is not a foreign person, in form and substance reasonably satisfactory to the Buyer.

ARTICLE VII
INDEMNIFICATION

Section 7.1Survival of Representations, Warranties and Covenants.  The representations and warranties of the Seller and the Buyer contained in this Agreement shall survive the Closing for a period of 18 months after the Closing Date; provided that (a) the representations and warranties set forth in Sections 3.2 and 4.2 (relating to authority), Section 3.4 (relating to title to assets), Section 3.16 (relating to taxes), and Sections 3.20 and 4.5 (relating to broker’s fees and finder’s fees) (collectively, the “Fundamental Representations”) shall survive the Closing for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof), plus 60 days and (b) the representations and warranties set forth in Section 3.15 (relating to intellectual property) shall survive the Closing for a period of three years after the Closing Date.  The covenants and agreements of the Seller and the Buyer contained in this Agreement shall not survive the Closing Date, except for those covenants and agreements that by their terms contemplate performance in whole or in part after the Closing, which shall remain in full force and effect in accordance with their terms.  The survival periods

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set forth herein are in lieu of, and the parties expressly waive, any otherwise applicable statute of limitations.

Section 7.2Indemnification by the Seller.  The Seller shall save, defend, indemnify and hold harmless the Buyer and its Affiliates and its and their respective Representatives, successors and assigns (collectively, the “Buyer Indemnified Parties”) from and against any and all losses, damages, Liabilities, Taxes, deficiencies, claims, interest, awards, judgments, penalties, fines, costs and expenses (including reasonable attorneys’ fees, costs and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) (hereinafter collectively, “Losses”) to the extent based upon, resulting from, with respect to or by reason of:

(a)any breach of any representation or warranty made by the Seller contained in this Agreement;

(b)any breach of any representation or warranty made by the Seller contained in the Intellectual Property License;

(c)any breach of any covenant or agreement of the Seller contained in this Agreement or in the Intellectual Property License; and

(d)any Excluded Liability.

Section 7.3Indemnification by the Buyer.  The Buyer shall save, defend, indemnify and hold harmless the Seller and its Affiliates and its and their respective Representatives, successors and assigns (collectively, the “Seller Indemnified Parties”) from and against any and all Losses to the extent based upon, resulting from, with respect to or by reason of:

(a)any breach of any representation or warranty made by the Buyer or Grifols contained in this Agreement;

(b)any breach of any representation or warranty made by the Buyer contained in the Intellectual Property License;

(c)any breach of any covenant or agreement of the Buyer or Grifols contained in this Agreement or in the Intellectual Property License; and

(d)any Assumed Liability.

Section 7.4Procedures.

(a)In order for a Buyer Indemnified Party or Seller Indemnified Party (the “Indemnified Party”) to be entitled to any indemnification provided for under this Agreement as a result of a Loss or a claim or demand made by any Person against the Indemnified Party (a “Third Party Claim”), such Indemnified Party shall deliver notice thereof to the party against whom indemnity is sought (the “Indemnifying Party”) promptly after receipt by such Indemnified Party of written notice of the Third Party Claim, describing in reasonable detail the

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facts giving rise to any claim for indemnification hereunder and the amount or method of computation of the amount of such claim (if known).  In connection with the delivery of such notice, the Indemnified Party shall use commercially reasonable efforts to provide to the Indemnifying Party such other necessary information with respect thereto as the Indemnifying Party may reasonably request.  The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VII, except to the extent that the Indemnifying Party is materially prejudiced by such failure.

(b)The Indemnifying Party shall have the right, upon written notice to the Indemnified Party, to assume the defense of any Third Party Claim at the expense of the Indemnifying Party with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided, that the Indemnifying Party shall not have the right to defend or direct the defense of any Third Party Claim (i) that is asserted directly by or on behalf of a Person that is a material supplier or material customer of the Indemnified Party or (ii) that seeks an injunction or other equitable relief against the Indemnified Party, in which case the Indemnified Party may defend such Third Party Claim and the Indemnified Party will consult with the Indemnifying Party regarding any such defense.  If the Indemnifying Party elects not to defend such Third Party Claim, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines counsel is required; provided, however, that the Indemnifying Party shall have the right to participate in the defense of any such Third Party Claim at its own expense and the Indemnified Party will consult with the Indemnifying Party regarding any such defense.

(c)If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party; provided, that if in the reasonable opinion of counsel for the Indemnified Party, there is a conflict of interest between the Indemnified Party and the Indemnifying Party, the Indemnifying Party shall be responsible for the reasonable fees and expenses of one counsel to such Indemnified Party in connection with such defense.  The Seller and the Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of this Section 7.4) records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.

(d)Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle, or make any admission of liability, agreement or compromise in respect of, any Third Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 7.4(d).  If a firm offer is made to settle, or make any admission of liability, agreement or compromise in respect of, a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all Liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party.  If the Indemnified Party gives written notice to the Indemnifying

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Party within 10 days after its receipt of such notice that it does not consent to such settlement, admission, agreement or compromise, the Indemnified Party may continue to contest or defend such Third Party Claim at its own expense, and in such event the maximum liability of the Indemnifying Party as to such Third Party Claim and any related claims that such proposed settlement, admission, agreement or compromise would settle or otherwise preclude shall not exceed the amount of such offer.  If the Indemnified Party fails to give written notice to the Indemnifying Party that it does not consent to such settlement, admission, agreement or compromise within such 10-day period, the Indemnifying Party may settle, or make any admission of liability, agreement or compromise in respect of, the Third Party Claim upon the terms set forth in such firm offer in respect of such Third Party Claim.  If the Indemnified Party has assumed the defense pursuant to this Section 7.4, it shall not agree to any settlement, admission, agreement or compromise without the written consent of the Indemnifying Party (such consent not to be unreasonably withheld, conditioned or delayed).

(e)In the event any Indemnified Party should have a claim against any Indemnifying Party hereunder that does not involve or result from a Third Party Claim being asserted against or sought to be collected from such Indemnified Party, the Indemnified Party shall deliver notice of such claim promptly to the Indemnifying Party, describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and the amount or method of computation of the amount of such claim (if known).  In connection with the delivery of such notice, the Indemnified Party shall use commercially reasonable efforts to provide to the Indemnifying Party such other necessary information with respect thereto as the Indemnifying Party may reasonably request.  The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VII, except to the extent that the Indemnifying Party is prejudiced by such failure.  The Indemnifying Party shall use commercially reasonable efforts to respond in writing within 30 days of receipt of such notice. The Indemnified Party shall reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters.  Such assistance and cooperation shall include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.  If the Indemnifying Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

Section 7.5Limits on Indemnification.

(a)No claim may be asserted against any party for breach of any representation, warranty or covenant contained herein, unless written notice of such claim is received by such party, describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim (to the extent known) on or prior to the date on which the representation, warranty or covenant on which such claim is based ceases to survive as set forth in Section 7.1, in which case such representation, warranty or covenant shall survive as to such claim until such claim has been finally resolved.

(b)Notwithstanding anything to the contrary contained in this Agreement:

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(i)the maximum aggregate amount of indemnifiable Losses that may be recovered from the Seller by the Buyer Indemnified Parties pursuant to Section 7.2(a), or from the Buyer by the Seller Indemnified Parties pursuant to Section 7.3(a), shall be $185,000,000 (the “Cap”); provided that the Cap shall not be applicable in respect of any breach of a Fundamental Representation; provided, further, that the maximum aggregate amount of indemnifiable Losses that may be recovered from the Seller by the Buyer Indemnified Parties pursuant to Section 7.2(a) in respect of any breach of the representations and warranties set forth in the last sentence of Section 3.14(d) and Section 3.15 (together with all other recoveries for breaches of representations and warranties subject to the Cap) shall be $277,500,000;

(ii)the Seller shall not be liable to any Buyer Indemnified Party pursuant to Section 7.2(a), and the Buyer shall not be liable to any Seller Indemnified Party pursuant to Section 7.3(a), for any claim for indemnification (x) unless and until the aggregate amount of indemnifiable Losses that may be recovered from the Seller or the Buyer, as applicable, equals or exceeds $18,500,000 (the “Basket Amount”), in which case the Seller or the Buyer, as applicable, shall be liable only for the Losses in excess of the Basket Amount or (y) in respect of any claim that results in Losses of less than $50,000; provided that the foregoing limitations in clauses (x) and (y) shall not be applicable in respect of any breach of a Fundamental Representation or any breach of the representations and warranties set forth in the last sentence of Section 3.14(d); and provided, further, that in no event shall there be duplication of payments with respect to items considered as part of any Inventory adjustment under Section 2.3 and amounts paid with respect to indemnification claims under this Article VII;

(iii)no party hereto shall have any liability under any provision of this Agreement for any punitive, incidental, consequential, exemplary, special or indirect damages, including business interruption, diminution of value, loss of future revenue, profits or income, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement (except (i) to the extent actually awarded to a Governmental Authority or other third party or (ii) with respect to breaches of (x) the representations and warranties set forth in Section 3.15 (related to intellectual property) or (y) any covenant or agreement contained in the Intellectual Property License, with respect to which consequential damages that are reasonably foreseeable shall be available to a party in seeking a remedy hereunder); and

(iv)in no event shall the Seller be liable to any Buyer Indemnified Party pursuant to Section 7.2 or otherwise for any claim for indemnification for or other Liability in respect of Taxes attributable to the operation or conduct of the Business or the Transferred Assets for any Post-Closing Tax Period.

(c)The amount of any and all Losses under this Article VII shall be determined net of (i) any Tax benefit actually realized by the applicable Indemnified Party or its Affiliates arising in connection with the accrual, incurrence or payment of any such Losses, and (ii) any insurance proceeds payable recoveries to the Indemnified Party or its Affiliates in connection with the facts giving rise to the right of indemnification (less any related costs and expenses, including the aggregate cost of pursuing any related insurance claims and any related increases in insurance premiums or other chargebacks).  Each party hereby waives, to the extent permitted under its applicable insurance policies, any subrogation rights that its insurer may have with respect to any indemnifiable Losses.  For this purpose, (i) the applicable Indemnified Party

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or its Affiliate shall be deemed to recognize all other items of loss, deduction or credit before recognizing any deduction or loss arising from the incurrence or payment of any indemnified Loss for which indemnification is provided under this Article VII, and (ii) the applicable Indemnified Party or its Affiliate shall be deemed to have “actually realized” a net Tax benefit if (A) realized in the year of the indemnified Loss, and (B) to the extent that, with respect to any taxable period of such Indemnified Party or such Affiliate ending on or before two years from the Closing Date, the amount of Taxes payable by such Indemnified Party or such Affiliate is reduced below the amount of Taxes that such Indemnified Party or such Affiliate would have been required to pay but for the incurrence or payment of such Losses for which indemnification is provided under this Article VII.

(d)The Buyer and the Seller shall cooperate with each other with respect to resolving any claim, liability or Loss for which indemnification may be required hereunder.  The Buyer and the Seller shall cause the applicable Indemnified Party to use commercially reasonable efforts to seek full recovery under all insurance policies covering any Loss to the same extent as they would if such Loss were not subject to indemnification hereunder.

Section 7.6No Right of Set-Off.  Each of the Buyer and the Seller, for itself and for its Affiliates, successors and assigns hereby unconditionally and irrevocably waives any rights of set-off, netting, offset, recoupment, or similar rights that the Buyer or the Seller (or any of their respective Affiliates, successors and assigns) has or may have with respect to the payments under the Ancillary Agreements, any other payments to be made pursuant to this Agreement or any other document or instrument delivered in connection herewith or otherwise.

Section 7.7Payments.  Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable by a final non-appealable order, subject to the terms of this Article VII, the Indemnifying Party shall satisfy its payment obligations under this Article VII within 10 Business Days after such agreement or final, non-appealable adjudication by wire transfer of immediately available funds.

Section 7.8Materiality.  For purposes of determining the amount of Losses in respect of indemnification under this Article VII, but not for purposes of determining whether a breach of the terms of this Agreement has occurred, the representations and warranties contained in this Agreement shall be deemed to have been made without any qualifications as to materiality, Material Adverse Effect or similar qualifications other than with respect to the last sentence of Section 3.6, pursuant to which such qualifications shall be included for all purposes hereunder.

Section 7.9Exclusivity and Nature of Payment.  Except as specifically set forth in this Agreement or any Ancillary Agreement, effective as of the Closing, the Buyer, on behalf of itself and the other Buyer Indemnified Parties, and the Seller, on behalf of the other Seller Indemnified Parties, waive any rights and claims any Buyer Indemnified Party or Seller Indemnified Party, as applicable, may have against the Seller or the Buyer, as applicable, regardless of the Law or legal theory under which such liability or obligation may be sought to be imposed, whether at law, in equity, contract, tort or otherwise, relating to the Transferred Assets, the Business and/or the transactions contemplated by this Agreement and the Ancillary Agreements.  After the Closing, other than any claims arising from fraud in this Agreement or

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criminal activity on the part of a party hereto in connection with the transactions contemplated by this Agreement, this Article VII will provide the exclusive remedy against the Seller or the Buyer, as applicable, for any breach of any representation, warranty, covenant or other claim arising out of or relating to this Agreement and/or the transactions contemplated hereby.  Any indemnity or other payments made under this Agreement shall be treated as an adjustment to the Purchase Price for all Tax purposes to the extent permitted by applicable Law.

ARTICLE VIII
TERMINATION

Section 8.1Termination.  This Agreement may be terminated at any time prior to the Closing:

(a)by mutual written consent of the Buyer and the Seller;

(b)(i) by the Seller, if the Buyer breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.2, (B) cannot be or has not been cured by the earlier to occur of (i) the Termination Date and (ii) 30 days following delivery of written notice of such breach or failure to perform (provided, that such cure period shall not apply to any breach or failure to perform by the Buyer of the Buyer’s obligation to pay the Purchase Price) and (C) has not been waived by the Seller; or (ii) by the Buyer, if the Seller breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.3, (B) cannot be or has not been cured by the earlier to occur of (i) the Termination Date and (ii) 30 days following delivery of written notice of such breach or failure to perform and (C) has not been waived by the Buyer;

(c)by either the Seller or the Buyer if the Closing shall not have occurred by June 30, 2017 (the “Termination Date”), unless such failure shall be due to the failure of the party so requesting termination to perform or comply with any of its covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

(d)by either the Seller or the Buyer in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided, that the party so requesting termination shall have complied with Section 5.6.

The party seeking to terminate this Agreement pursuant to this Section 8.1 (other than Section 8.1(a)) shall give prompt written notice of such termination to the other party.

Section 8.2Effect of Termination.  In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party except (a) for the provisions of Sections 3.20 and 4.5 relating to broker’s fees and finder’s fees, Section 5.6(a) relating to confidentiality, Section 5.9 relating to public announcements, Section 9.1 relating to fees and expenses, Section 9.4 relating to notices, Section 9.7 relating to third-party beneficiaries, Section 9.8 relating to governing law,

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Section 9.9 relating to submission to jurisdiction and this Section 8.2 (and any related definitions insofar as they affect such Sections) and (b) that nothing in this Section 8.2 shall relieve any party from liability for any willful breach of any provision hereof prior to the termination of this Agreement.

ARTICLE IX
GENERAL PROVISIONS

Section 9.1Fees and Expenses.  Except as otherwise provided herein, all fees and expenses incurred in connection with or related to this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such fees or expenses, whether or not such transactions are consummated.

Section 9.2Amendment and Modification.  This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party; provided, however, that this Section 9.2 and Sections 9.7, 9.8, 9.9 and 9.16 (and any related definitions insofar as they affect such Sections) may not be amended, supplemented, waived or otherwise modified in a manner adverse to the Financing Sources in any material respect, in each case, without the prior written consent of the Financing Sources.

Section 9.3Waiver.  No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power.  Any agreement on the part of any party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.

Section 9.4Notices.  All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt by e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier, (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.  All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

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(i)	if to the Seller, to:
	Hologic, Inc.
	10210 Genetic Center Drive
	San Diego, CA 92121
	Attention: Legal Department
	E-mail: dru.greenhalgh@hologic.com
	with a copy (which shall not constitute notice) to:
	Gibson, Dunn & Crutcher LLP
	200 Park Avenue
	New York, NY 10166-0193
	Attention: Barbara Becker
	E-mail: bbecker@gibsondunn.com
(ii)	if to the Buyer or Grifols, to:
	Grifols, S.A.
	Avinguda de la Generalitat, 152-158
	Parc de Negocis Can Sant Joan
	Sant Cugat del Valles 08174
	Barcelona, Spain
	Facsimile: +34 93 571 0267 (fax)
	Attention: Alfredo Arroyo
	Email: Alfredo.arroyo@grifols.com
	with a copy (which shall not constitute notice) to:
	Osborne Clarke S.L.P.
	Avenida Diagonal, 477
	Planta 20
	08036 Barcelona Spain
	Facsimile: +34.93.410.2513
	Attention: Tomás Dagá
	Email:	Tomas.Daga@osborneclarke.com
	with a copy (which shall not constitute notice) to:
	Proskauer Rose LLP
	Eleven Times Square
	New York, New York 10036
	Facsimile: +1 (212) 969-2900
	Attention:		Peter G. Samuels
			Daniel I. Ganitsky
	Email:	PSamuels@proskauer.com
		DGanitsky@proskauer.com

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Section 9.5Interpretation.  When a reference is made in this Agreement to a Section, Article, Exhibit or Schedule such reference shall be to a Section, Article, Exhibit or Schedule of this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement or in any Exhibit or Schedule are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.  Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein.  The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement.  The term “or” is not exclusive.  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  References to days mean calendar days unless otherwise specified.

Section 9.6Entire Agreement.  This Agreement (including the Exhibits and Schedules hereto), the Ancillary Agreements and the Confidentiality Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings between the parties with respect to the subject matter hereof and thereof.

Section 9.7Third-Party Beneficiaries.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except (i) with respect to the provisions of Article VII, which shall inure to the benefit of the Persons benefiting therefrom who are intended to be third-party beneficiaries thereof and (ii) that the provisions of this Section 9.7 and Sections 9.2, 9.8, 9.9 and 9.16 shall be enforceable by each Financing Source.

Section 9.8Governing Law.  This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York.  Notwithstanding anything herein to the contrary, the Buyer (on behalf of itself, its subsidiaries and the equityholders, directors, officers, employees, consultants, financial advisors, accountants, legal counsel, investment bankers, and other agents, advisors and representatives of each of them) and each of the other parties hereto agrees that any claim, controversy or dispute of any kind or nature (whether based upon contract, tort or otherwise) against a Financing Source that is in any way related to this Agreement or any of the transactions contemplated hereby, including any dispute arising out of or relating in any way to any Financing, shall be governed by, and construed in accordance with, the laws of the State of New York without regard to conflict of law principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law); provided that (1) the interpretation of the

70

definition of Material Adverse Effect and whether or not a Material Adverse Effect has occurred, (2) the determination of the accuracy of any representations made in this Agreement and whether as a result of any inaccuracy thereof any of the Buyer or its affiliates has the right to terminate its obligations under this Agreement, or to decline to consummate the transactions contemplated hereby pursuant to this Agreement and (3) the determination of whether the transactions contemplated hereby have been consummated in accordance with the terms of this Agreement, in each case, shall be governed by, and construed and interpreted solely in accordance with, the laws of the State of New York without giving effect to conflicts of laws principles that would result in the application of the laws of any other state.

Section 9.9Submission to Jurisdiction.  Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the federal and state courts located within the Borough of Manhattan in New York, New York, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby.  Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.  Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.  Notwithstanding anything herein to the contrary, the Buyer (on behalf of itself, its subsidiaries and the equityholders, directors, officers, employees, consultants, financial advisors, accountants, legal counsel, investment bankers, and other agents, advisors and representatives of each of them) and each of the other parties hereto agrees that it will not bring or support any action, cause of action, claim, cross-claim or third-party claim of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against the Financing Sources in any way relating to this Agreement or any of the transactions contemplated hereby, including any dispute arising out of or relating in any way to any Financing or the performance thereof or the transactions contemplated thereby, in any forum other than exclusively in the Supreme Court of the State of New York, County of New York, or, if under applicable Law exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof).

Section 9.10Disclosure Generally.  Notwithstanding anything to the contrary contained in the Disclosure Schedules or in this Agreement, the information and disclosures 

71

contained in any Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other Disclosure Schedule as though fully set forth in such Disclosure Schedule for which applicability of such information and disclosure is reasonably apparent on its face.  The fact that any item of information is disclosed in any Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by this Agreement.  Such information and the dollar thresholds set forth herein shall not be used as a basis for interpreting the terms “material” or “Material Adverse Effect” or other similar terms in this Agreement.

Section 9.11Personal Liability.  This Agreement shall not create or be deemed to create or permit any personal liability or obligation on the part of any direct or indirect equityholder of the Seller or the Buyer or any officer, director, employee, Representative or investor of any party.

Section 9.12Assignment; Successors.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided, however, that (1) the Seller shall be permitted to make any pledge or collateral assignment of this Agreement or any of its rights hereunder to any of its collateral agents, administrative agents and/or lenders; and (2) prior to the Closing Date, the Buyer may, without the prior written consent of the Seller, assign all or any portion of its rights (including the right to acquire all or part of the Transferred Assets) under this Agreement to one or more of its Affiliates (including direct or indirect subsidiaries), in which case all references herein to “Buyer” will be deemed to refer to such Affiliates (or such entity), as applicable; provided that no assignment shall relieve the Seller, the Buyer or Grifols of its obligations hereunder.  After the Closing Date, Buyer may freely assign any or all of its rights or obligations under this Agreement, in whole or in part, to any Affiliate without obtaining the consent of any Person; provided that no assignment shall relieve Buyer or Grifols of its obligations hereunder.  Subject to this Section 9.12, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

Section 9.13Enforcement.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, each of the parties shall be entitled to seek specific performance of the terms hereof, including seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the federal and state courts located within the Borough of Manhattan in New York, New York, this being in addition to any other remedy to which such party is entitled at law or in equity.  Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

Section 9.14Currency.  All references to “dollars” or “$” or “US$” in this Agreement or any Ancillary Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement and any Ancillary Agreement.

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Section 9.15Severability.  Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

Section 9.16Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY ACTION INVOLVING THE FINANCING).

Section 9.17Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

Section 9.18Facsimile or .pdf Signature.  This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

Section 9.19Time of Essence.  Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.

Section 9.20No Presumption Against Drafting Party.  Each party acknowledges that each party to this Agreement has been represented by legal counsel in connection with this Agreement and the transactions contemplated by this Agreement.  Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

Section 9.21Legal Representation.  It is acknowledged by each of the parties that the Seller has retained Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) to act as its counsel in connection with the transactions contemplated hereby and that Gibson Dunn has not acted as counsel for any other Person in connection with the transactions contemplated hereby and that no other party or Person has the status of a client of Gibson Dunn for conflict of interest or any other purposes as a result thereof.  The Buyer hereby agrees on behalf of itself and its Affiliates that, in the event that a dispute arises between the Buyer or any of its Affiliates (including in respect of the Business or the Transferred Assets) and the Seller or any of its Affiliates under or in connection with this Agreement, Gibson Dunn may represent the Seller or any such Affiliate in such dispute even though the interests of the Seller or such Affiliate may be directly adverse to the Buyer or any of its Affiliates, and the Buyer hereby waives, on behalf of itself and each of its Affiliates, any conflict of interest in connection with representation by Gibson Dunn of the Seller regarding a dispute arising under or in connection with this Agreement.  The Buyer further agrees that, as to all communications, whether written or electronic, among Gibson Dunn and the

73

Seller, and all files, attorney notes, drafts or other documents, to the extent related to the negotiation, execution or consummation of the transactions contemplated by this Agreement, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to the Seller and may not be controlled by the Buyer and shall not pass to or be claimed by the Buyer following the Closing.

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first written above by their respective officers thereunto duly authorized.

	HOLOGIC, INC.
	By:	/s/ Stephen P. MacMillan
		Name: Stephen P. MacMillan
		Title: Chairman, President and Chief Executive Officer
	GRIFOLS DIAGNOSTIC SOLUTIONS INC.
	By:	/s/ Carsten Schroeder
		Name: Carsten Schroeder
		Title: President
Solely for the purposes of	GRIFOLS, S.A.
Section 5.16
	By:	/s/ Ramon Grifols Roura
		Name: Ramon Grifols Roura
		Title: Authorized Representative
	By:	/s/ Victor Grifols Deu
		Name: Victor Grifols Deu
		Title: Authorized Representative

[Signature Page to Asset Purchase Agreement]

EX-12.1

Exhibit 12.1

Section 302 Certification

I, Víctor Grifols Deu, certify that:

1.I have reviewed this annual report on Form 20-F of Grifols, S.A.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  April 6, 2018

/s/ Víctor Grifols Deu
Name:	Víctor Grifols Deu
Title:	Director and Co-Chief Executive Officer

Section 302 Certification

I, Raimon Grifols Roura, certify that:

1.I have reviewed this annual report on Form 20-F of Grifols, S.A.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  April 6, 2018

/s/ Raimon Grifols Roura
Name:	Raimon Grifols Roura
Title:	Director and Co-Chief Executive Officer

EX-12.2

Exhibit 12.2

Section 302 Certification

I, Alfredo Arroyo Guerra, certify that:

1.I have reviewed this annual report on Form 20-F of Grifols, S.A.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  April 6, 2018

/s/ Alfredo Arroyo Guerra
Name:	Alfredo Arroyo Guerra
Title:	Vice President and Chief Financial Officer

EX-13.1

Exhibit 13.1

Section 906 Certification

The certification set forth below is being submitted in connection with the Annual Report on Form 20-F for the year ended December 31, 2017 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Víctor Grifols Deu and Raimon Grifols Roura, Directors and Co-Chief Executive Officers and Alfredo Arroyo Guerra, the Chief Financial Officer of Grifols, S.A., each certifies that, to the best of his knowledge:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Grifols, S.A.

Date:  April 6, 2018

/s/ Víctor Grifols Deu
Name:	Víctor Grifols Deu
Title:	Director and Co- Chief Executive Officer
/s/ Raimon Grifols Roura
Name:	Raimon Grifols Roura
Title:	Director and Co- Chief Executive Officer
/a/ Alfredo Arroyo Guerra
Name:	Alfredo Arroyo Guerra
Title:	Chief Financial Officer

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Entity Registrant Name	Grifols SA
Entity Central Index Key	0001438569
Document Type	20-F
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Class A, Ordinary shares
Entity Common Stock, Shares Outstanding	426,129,798
Class B, Preference shares
Entity Common Stock, Shares Outstanding	261,425,110

XML

Consolidated Balance Sheets - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Non-current assets
Goodwill	€ 4,590,498	€ 3,643,995
Other intangible assets	1,269,342	1,195,302
Property, plant and equipment	1,760,053	1,809,852
Investments in equity-accounted investees	219,009	201,345
Non-current financial assets
Non-current financial assets measured at fair value	47,046	58,864
Non-current financial assets not measured at fair value	22,843	30,681
Total non-current financial assets	69,889	89,545
Deferred tax assets	66,157	67,219
Total non-current assets	7,974,948	7,007,258
Current assets
Inventories	1,629,293	1,642,931
Trade and other receivables
Trade receivables	286,198	413,656
Other receivables	40,681	42,299
Current income tax assets	59,531	77,713
Total trade and other receivables	386,410	533,668
Other current financial assets	10,738	2,582
Other current assets	32,354	48,324
Cash and cash equivalents	886,521	895,009
Total current assets	2,945,316	3,122,514
Total assets	10,920,264	10,129,772
Equity and liabilities
Share capital	119,604	119,604
Share premium	910,728	910,728
Reserves	2,027,648	1,694,245
Treasury stock	(62,422)	(68,710)
Interim dividend	(122,986)	(122,908)
Profit for the year attributable to the Parent	662,700	545,456
Total equity	3,535,272	3,078,415
Available for sale financial assets	4,926	(5,219)
Other comprehensive Income	(656)	(642)
Translation differences	89,537	648,927
Other comprehensive expenses	93,807	643,066
Equity attributable to the Parent	3,629,079	3,721,481
Non-controlling interests	4,886	6,497
Total equity	3,633,965	3,727,978
Non-current liabilities
Grants	11,822	12,196
Provisions	5,763	5,118
Non-current financial liabilities	5,901,815	4,712,071
Deferred tax liabilities	388,912	600,646
Total non-current liabilities	6,308,312	5,330,031
Current liabilities
Provisions	106,995	89,588
Current financial liabilities	155,070	230,065
Trade and Other Payables
Suppliers	423,096	461,073
Other payables	141,720	142,894
Current income tax liabilities	6,709	7,957
Total trade and other payables	571,525	611,924
Other current liabilities	144,397	140,186
Total current liabilities	977,987	1,071,763
Total liabilities	7,286,299	6,401,794
Total equity and liabilities	€ 10,920,264	€ 10,129,772

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Consolidated Statements of Profit and Loss - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Continuing Operations
Net revenue	€ 4,318,073	€ 4,049,830	€ 3,934,563
Cost of sales	(2,166,062)	(2,137,539)	(2,003,565)
Gross profit	2,152,011	1,912,291	1,930,998
Research and Development	(288,320)	(197,617)	(224,193)
Selling, General and Administration expenses	(860,348)	(775,266)	(736,435)
Operating Expenses	(1,148,668)	(972,883)	(960,628)
Operating Result	1,003,343	939,408	970,370
Finance income	9,678	9,934	5,841
Finance costs	(263,344)	(244,829)	(240,335)
Change in fair value of financial instruments	(3,752)	(7,610)	(25,206)
Impairment and gains / (losses) on disposal of financial instruments	(18,844)
Exchange differences	(11,472)	8,916	(12,140)
Finance result	(287,734)	(233,589)	(271,840)
Share of losses of equity accounted investees	(19,887)	6,933	(8,280)
Profit before income tax from continuing operations	695,722	712,752	690,250
Income tax expense	(34,408)	(168,209)	(158,809)
Profit after income tax from continuing operations	661,314	544,543	531,441
Consolidated profit for the year	661,314	544,543	531,441
Profit attributable to the Parent	662,700	545,456	532,145
Loss attributable to non-controlling interest	€ (1,386)	€ (913)	€ (704)
Basic earnings per share (Euros)	€ 0.97	€ 0.80	€ 0.78
Diluted earnings per share (Euros)	€ 0.97	€ 0.80	€ 0.78

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Consolidated Statements of Comprehensive Income - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Comprehensive Income
Consolidated profit for the year	€ 661,314	€ 544,543	€ 531,441
Items for reclassification to profit or loss
Translation differences	(532,389)	103,833	290,635
Translation differences / Cash Flow Hedge		(6,809)
Available for sale financial Assets	10,145	(5,219)
Equity accounted investees / Translation differences	(27,134)	10,671	2,673
Cash flow hedges - effective part of changes in fair value		14,501	55,305
Cash flow hedges - amounts taken to profit or loss		(7,426)	(25,206)
Other comprehensive income	(14)	(4,810)	4,575
Tax effect		(2,462)	(12,093)
Other comprehensive income / (expense) for the year	(549,392)	102,279	315,889
Total comprehensive income for the year	111,922	646,822	847,330
Total comprehensive income attributable to the Parent	113,441	647,667	848,603
Total comprehensive expense attributable to the non-controlling interests	€ (1,519)	€ (845)	€ (1,273)

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Consolidated Statements of Cash Flows - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Profit before tax	€ 695,722	€ 712,752	€ 690,250
Adjustments for:	556,792	391,986	460,564
Amortization and depreciation	215,490	201,869	189,755
Other adjustments:	341,302	190,117	270,809
(Profit) / losses on equity accounted investments	19,888	(6,933)	8,280
Impairment of assets and net provision charges	66,047	(23,079)	(564)
(Profit) / losses on disposal of fixed assets	1,551	(2,987)	6,721
Government grants taken to income	(286)	(1,681)	(1,854)
Finance cost / (income)	263,657	236,034	256,129
Other adjustments	(9,555)	(11,237)	2,097
Change in operating assets and liabilities	(65,800)	(164,319)	(77,058)
Change in inventories	(165,508)	(173,003)	(120,641)
Change in trade and other receivables	80,112	(25,180)	144,405
Change in current financial assets and other current assets	(2,691)	(2,610)	(5,565)
Change in current trade and other payables	22,287	36,474	(95,257)
Other cash flows used in operating activities	(344,968)	(387,141)	(330,978)
Interest paid	(207,079)	(180,497)	(171,380)
Interest received	9,492	8,685	4,316
Income tax (paid) / received	(147,015)	(215,329)	(163,914)
Other recovered (paid)	(366)
Net cash from operating activities	841,746	553,278	742,778
Cash flows from investing activities
Payments for investments	(2,209,667)	(509,078)	(647,417)
Group companies, associates and business units (notes 3, 2 (b) and 10)	(1,857,210)	(202,727)	(58,609)
Property, plant and equipment and intangibles	(322,973)	(292,690)	(567,020)
Property, plant and equipment	(251,507)	(249,416)	(522,587)
Intangible assets	(71,466)	(43,274)	(44,433)
Other financial assets	(29,484)	(13,661)	(21,788)
Proceeds from sale of investments	23,787	2,426	14,307
Property, plant and equipment	762	2,426	14,307
Other financial assets	23,025
Net cash used in investing activities	(2,185,880)	(506,652)	(633,110)
Cash flows from financing activities
Proceeds from and payments for equity instruments		(11,766)	12,695
Payments for treasury stock		(12,686)	(58,457)
Sales of treasury stock		920	71,152
Proceeds from and payments for financial liability instruments	1,808,771	(80,149)	28,953
Issue	1,912,615	81,513	178,686
Redemption and repayment	(103,844)	(161,662)	(149,733)
Dividends and interest on other equity instruments	(218,260)	(216,151)	(216,772)
Dividends paid	(218,260)	(216,151)	(221,772)
Dividends received			5,000
Other cash flows from / (used in) financing activities	(156,446)	(21,492)	17,086
Financing costs included on the amortised costs of the debt	(142,288)
Other amounts from / (used in) financing activities	(14,158)	(21,492)	17,086
Net cash from/(used in) financing activities	1,434,065	(329,558)	(158,038)
Effect of exchange rate fluctuations on cash	(98,419)	35,441	111,724
Net increase in cash and cash equivalents	(8,488)	(247,491)	63,354
Cash and cash equivalents at beginning of the year	895,009	1,142,500	1,079,146
Cash and cash equivalents at year end	€ 886,521	€ 895,009	€ 1,142,500

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Statement of Changes in Consolidated Equity - EUR (€) € in Thousands	Equity attributable to parent	Share capital	Share premium	Reserves	Profit attributable to parent	Interim dividend	Treasury stock	Translation differences	Available for sale financial assets	Other comprehensive income	Cash flow hedges	Non-controlling interests	Total
Balance at beginning of the year at Dec. 31, 2014	€ 2,658,123	€ 119,604	€ 910,728	€ 1,088,337	€ 470,253	€ (85,944)	€ (69,252)	€ 240,614		€ (406)	€ (15,811)	€ 4,765	€ 2,662,888
Translation differences	293,877							293,877				(569)	293,308
Cash flow hedges	19,140										19,140		19,140
Other comprehensive income	3,441									3,441			3,441
Other comprehensive income / (expense) for the year	316,458							293,877		3,441	19,140	(569)	315,889
Profit/(loss) for the year	532,145				532,145							(704)	531,441
Total comprehensive income for the year	848,603				532,145			293,877		3,441	19,140	(1,273)	847,330
Net change in treasury stock	12,695			2,018			10,677						12,695
Acquisition of non-controlling interests	(1,770)			(1,770)								1,767	(3)
Other changes	324			324								(72)	252
Interim dividend	(119,615)					(119,615)							(119,615)
Distribution of prior year profit, reserves				368,096	(368,096)
Distribution of prior year profit, dividends	(102,157)				(102,157)								(102,157)
Distribution of prior year profit, interim dividend				(85,944)		85,944
Operations with shareholders or owners	(210,523)			282,724	(470,253)	(33,671)	10,677					1,695	(208,828)
Balance at end of the year at Dec. 31, 2015	3,296,203	119,604	910,728	1,371,061	532,145	(119,615)	(58,575)	534,491		3,035	3,329	5,187	3,301,390
Translation differences	114,436							114,436				68	114,504
Available for sale financial assets	(5,219)								€ (5,219)				(5,219)
Cash flow hedges	(3,329)										(3,329)		(3,329)
Other comprehensive income	(3,677)									(3,677)			(3,677)
Other comprehensive income / (expense) for the year	102,211							114,436	(5,219)	(3,677)	(3,329)	68	102,279
Profit/(loss) for the year	545,456				545,456							(913)	544,543
Total comprehensive income for the year	647,667				545,456			114,436	(5,219)	(3,677)	€ (3,329)	(845)	646,822
Net change in treasury stock	(10,317)			(182)			(10,135)						(10,317)
Acquisition of non-controlling interests	(2,737)			(2,737)								2,737
Other changes	6,816			6,816								(582)	6,234
Interim dividend	(122,908)					(122,908)							(122,908)
Distribution of prior year profit, reserves				319,287	(319,287)
Distribution of prior year profit, dividends	(93,243)				(93,243)								(93,243)
Distribution of prior year profit, interim dividend					(119,615)	119,615
Operations with shareholders or owners	(222,389)			323,184	(532,145)	(3,293)	(10,135)					2,155	(220,234)
Balance at end of the year at Dec. 31, 2016	3,721,481	119,604	910,728	1,694,245	545,456	(122,908)	(68,710)	648,927	(5,219)	(642)		6,497	3,727,978
Translation differences	(559,390)							(559,390)				(133)	(559,523)
Available for sale financial assets	10,145								10,145				10,145
Other comprehensive income	(14)									(14)			(14)
Other comprehensive income / (expense) for the year	(549,259)							(559,390)	10,145	(14)		(133)	(549,392)
Profit/(loss) for the year	662,700				662,700							(1,386)	661,314
Total comprehensive income for the year	113,441				662,700			(559,390)	10,145	(14)		(1,519)	111,922
Net change in treasury stock	6,288						6,288						6,288
Acquisition of non-controlling interests	(346)			(346)								(43)	(389)
Other changes	6,475			6,475								(49)	6,426
Interim dividend	(122,986)					(122,986)							(122,986)
Distribution of prior year profit, reserves				422,548	(422,548)
Distribution of prior year profit, dividends	(95,274)			(95,274)									(95,274)
Distribution of prior year profit, interim dividend					(122,908)	122,908
Operations with shareholders or owners	(205,843)			333,403	(545,456)	(78)	6,288					(92)	(205,935)
Balance at end of the year at Dec. 31, 2017	€ 3,629,079	€ 119,604	€ 910,728	€ 2,027,648	€ 662,700	€ (122,986)	€ (62,422)	€ 89,537	€ 4,926	€ (656)		€ 4,886	€ 3,633,965

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Nature, Principal Activities and Subsidiaries

12 Months Ended

Dec. 31, 2017

Nature, Principal Activities and Subsidiaries

Nature, Principal Activities and Subsidiaries

(1)Nature, Principal Activities and Subsidiaries

Grifols, S.A. (hereinafter the Company) was incorporated with limited liability under Spanish law on 22 June 1987. Its registered and tax offices are in Barcelona. The Company’s statutory activity consists of providing corporate and business administrative, management and control services, as well as investing in assets and property. Its principal activity involves rendering administrative, management and control services to its subsidiaries.

On 17 May 2006 the Company completed its flotation on the Spanish securities market, which was conducted through the public offering of 71,000,000 ordinary shares of Euros 0.50 par value each and a share premium of Euros 3.90 per share. The total capital increase (including the share premium) amounted to Euros 312.4 million, equivalent to a price of Euros 4.40 per share.

The Company’s shares were floated on the Spanish stock exchange IBEX-35 index on 2 January 2008.

All of the Company’s shares are listed on the Barcelona, Madrid, Valencia and Bilbao securities markets and on the Spanish Automated Quotation System (SIBE/Continuous Market). On 2 June 2011, Class B non-voting shares were listed on the NASDAQ (USA) and on the Spanish Automated Quotation System (SIBE/Continuous Market).

Grifols, S.A. is the Parent of the subsidiaries listed in Appendix I of this note to the Consolidated Financial Statements.

Grifols, S.A. and subsidiaries (hereinafter the Group) act on an integrated basis and under common management and their principal activity is the procurement, manufacture, preparation and sale of therapeutic products, especially haemoderivatives.

The main factory locations of the Group’s Spanish companies are in Parets del Vallés (Barcelona) and Torres de Cotilla (Murcia), while the US companies are located in Los Angeles (California), Clayton (North Carolina), Emeryville (California), and San Diego (California).

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Basis of Presentation

12 Months Ended

Dec. 31, 2017

Basis of Presentation

Basis of Presentation

(2)Basis of Presentation

The Consolidated Financial Statements have been prepared on the basis of the accounting records of Grifols, S.A. and of the Group companies. The Consolidated Financial Statements for 2017 have been prepared under International Financial Reporting Standard as issued by International Accounting Standard Board (IFRS-IASB) which for Grifols Group purposes, are identical to the standards as endorsed by the International Financial Reporting Standards as adopted by the European Union (IFRS-EU) to present fairly the consolidated equity and consolidated financial position of Grifols, S.A. and subsidiaries at 31 December 2017, as well as the consolidated results from their operations, consolidated cash flows and consolidated changes in equity for the year then ended.

The Group adopted IFRS-EU for the first time on 1 January 2004 and has been preparing its annual accounts under International Financial Reporting Standards, as adopted by the European Union (IFRS-EU) as required by capital market regulations governing the presentation of financial statements by companies whose debt or own equity instruments are listed on a regulated market.

The Board of Directors of Grifols, S.A. considers that these Consolidated Financial Statements authorized for issue at their meeting held on 3 April 2018.

In accordance with the provision of section 357 of the Irish Companies Act 2014, the Company has irrevocably guaranteed all liabilities of an Irish subsidiary undertaking, Grifols Worldwide Operations Limited (Ireland) (see Appendix I), for the financial year ended 31 December 2017 as referred to in subsection 1(b) of that Act, for the purposes of enabling Grifols Worldwide Operations Limited to claim exemption from the requirement to file their own financial statements in Ireland.

(a)Relevant accounting estimates, assumptions and judgments used when applying accounting principles

The preparation of the Consolidated Financial Statements in conformity with IFRS-EU requires management to make judgments, estimates and assumptions that affect the application of Group accounting policies. The following notes include a summary of the relevant accounting estimates and judgments used to apply accounting policies which have the most significant effect on the amounts recognized in the Consolidated Financial Statements.

· Assumptions used to test non-current assets and goodwill for impairment. Relevant cash generating units are tested annually for impairment. These are based on risk-adjusted future cash flows discounted using appropriate interest rates. The key assumptions used are specified in note 7. Assumptions relating to risk-adjusted future cash flows and discount rates are based on business forecasts and are therefore inherently subjective. Future events could cause a change in business forecasts, with a consequent adverse effect on the future results of the Group. To the extent considered a reasonably possible change in key assumptions could result in an impairment of goodwill, a sensitivity analysis has been disclosed to show the effect of changes to these assumptions and the effect of the cash generating unit (CGU) on the recoverable amount.

· Determination of the fair value of assets, liabilities and contingent liabilities related to business combinations. Details of the fair value methods used by the Group are provided in note 3.

· Evaluation of the capitalization of development costs (see note 4(h)). The key assumption is related to the estimation of sufficient future economic benefits of the projects.

· Evaluation of provisions and contingencies. Key assumptions relate to the evaluation of the likelihood of an outflow of resources due to a past event, as well as to the evaluation of the best estimate of the likely outcome. These estimates take into account the specific circumstances of each dispute and relevant external advice and therefore are inherently subjective and could change substantially over time as new facts arise and each dispute progresses. Details of the status of various uncertainties involved in significant unresolved disputes are set out in note 29.

· Evaluation of the recoverability of tax credits, including tax loss carryforwards and rights for deductions. Deferred tax assets are recognized to the extent that future taxable profits will be available against which the temporary differences can be utilized, based on management’s assumptions relating to the amount and timing of future taxable profits (see notes 4(t) and 27).

· Analysis that the refinancing of debt and bonds does not result in a new financial liability.

No changes have been made to prior year judgments relating to existing uncertainties.

The Group is also exposed to interest rate and currency risks. Refer to sensitivity analysis in note 30.

(b)Basis of consolidation

Appendix I shows details of the percentages of direct or indirect ownership of subsidiaries by the Company at 31 December 2017, 2016 and 2015, as well as the consolidation method used in each case for preparation of the accompanying Consolidated Financial Statements.

Subsidiaries in which the Company directly or indirectly owns the majority of equity or voting rights have been fully consolidated. Associates in which the Company owns between 20% and 50% of share capital and over which it has no control but does have significant influence, have been accounted for under the equity method.

Although the Group holds 30% of the shares with voting rights of Grifols Malaysia Sdn Bhd, it controls the majority of the economic and voting rights of Grifols Malaysia Sdn Bhd through a contract with the other shareholder and a pledge on its shares. As a consequence it has been fully consolidated.

Grifols (Thailand) Ltd. has two classes of shares and it grants the majority of voting rights to the class of shares held by the Group. As a consequence it has been fully consolidated.

Changes in associates are detailed in note 10.

Changes in subsidiaries

In 2017:

· On 4 December 2017, Progenika Biopharma, S.A., transferred the total shares of Abyntek Biopharma, S.L. to a third party. No profit or loss has been recognized on this transaction.

· On 11 October 2017, Grifols Diagnostic Solutions, Inc. acquired an additional 0.98% interest in Progenika Biopharma, S.A. from its non-controlling interests for a total amount of Euros 644 thousand in the form of a cash payment. As a result, Grifols owns 90.23% of Progenika’s share capital at 31 December 2017.

· On 24 July 2017, Grifols has acquired an additional 40% interest in Kiro Grifols, S.L. for a purchase price of Euros 12.8 million. With this new acquisition, Grifols has reached a 90% interest in equity of Kiro Grifols S.L. (see note 3(b)).

· On 13 March 2017, Progenika Latina, S.A. de C.V., was wound up. The assets and liabilities of Progenika Latina. S.A. de C.V. have been integrated into Progenika Biopharma, S.A.

· On 31 January 2017, Grifols closed the transaction for the asset purchase agreement to acquire Hologic’s business of NAT (Nucleic Acid Testing) donor screening unit, previously agreed on 14 December 2016, for a total amount of US Dollar 1,865 million (see note 3(a)).

· On 5 January 2017, the Group incorporated a new company called Chiquito Acquisition Corp.

· With effect as of 1 January 2017, Grifols Diagnostic Solutions, Inc. and Progenika, Inc. entered into a merger agreement. The surviving company was Grifols Diagnostic Solutions, Inc.

In 2016 Grifols incorporated the following companies:

· PBS Acquisition Corp. (USA)

· Grifols Diagnostics Equipment Taiwan Limited (Taiwan)

· Grifols Innovation and New Technologies Limited (Ireland)

· On 12 December 2016, the Group company Grifols Innovation and New Technologies Limited subscribed to an increase in the share capital of VCN Biosciences, S.L. amounting to Euros 5 million. Following this capital increase, Grifols’ interest rose to 81.34%. Grifols subscribed to another capital increase on 16 November 2015 through the Group company Gri-Cel, S.A. for an amount of Euros 2,549 thousand (see note 3(d)).

· With effect as of 1 November 2016, Grifols Brasil, Lda. and Gri-Cei, S.A Produtos para Trasfusao entered into a merger agreement. The surviving company was Grifols Brasil, Lda.

· In August 2016 and July 2015 Araclon Biotech , S.L carried out two share capital increases of Euros 6.7 million and Euros 6 million, respectively. After the latter capital increase Grifols’ interest rose to 73.22% (see note 15 (c)).

· In July 2016 the Group acquired an additional 20% of the assets of Medion Diagnostics AG in exchange for 59,951 treasury stocks (Class B Shares) from its non-controlling interests. After this acquisition, Grifols’ interest rose to 100%.

· On 3 March, 2016 the Group executed the call option on 32.93% of the shares in Progenika Biopharma, S.A. for Euros 25 million following the exercise of call and put options agreed in February 2013. Grifols paid 50% of this investment in Grifols B shares (876,777 shares) and the remaining 50% in cash (see note 15(d)). The Group guaranteed the selling shareholders the option to repurchase the Class B shares during the first five days following the sale date. As a result, Grifols owns 89.25% of Progenika’s share capital at 31 December 2016.

· With effect as of 1 January 2016, Progenika Biopharma, S.A and Brainco Biopharma, S.L entered into a merger agreement. The surviving company was Progenika Biopharma, S.A.

In 2015:

· On 9 February 2015 the Group acquired 100% of the assets of Gripdan Invest, S.L. for Euros 46 million in the form of a cash payment.

· Effective as of 1 January 2015, Plasmacare, Inc and Biomat USA, Inc. entered into a merger agreement, the surviving company being Biomat USA, Inc.

· Effective as of 1 January 2015, Proteomika, S.L.U. and Progenika Biopharma, S.A entered into a merger agreement, the surviving company being Progenika Biopharma, S.A.

· Effective as of 1 January 2015, Arrahona Optimus, S.L and Grifols, S.A entered into a merger agreement, the surviving company being Grifols, S.A.

Changes in associates and joint control

Changes in associates and joint control are detailed in note 10.

(c) Amendments to IFRS in 2017, 2016 and 2015

In accordance with IFRS, the following should be noted in connection with the scope of application of IFRS and the preparation of these Consolidated Financial Statements of the Group.

Effective date in 2015

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 19	Defined Benefit Plans: employee contributions (amendments to IAS 19)	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2010-2012 cycle	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2011-2013 cycle	1 July 2014	1 January 2015 (*)

(*) early adopted

Effective date in 2016

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 16 IAS 38	Clarification of Acceptable Methods of Depreciation and Amortisation (issued on 12 May 2014)	1 January 2016	1 January 2016
IFRS 11	Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014)	1 January 2016	1 January 2016
IAS 27	Equity Method in Separate Financial Statements (issued on 12 August 2014)	1 January 2016	1 January 2016
Various	Annual Improvements to IFRSs 2012-2014 cycle (issued on 25 September 2014)	1 January 2016	1 January 2016
IAS 1	Disclosure Initiative (issued on 18 December 2014)	1 January 2016	1 January 2016

Effective date in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 12	Recognition of Deferred Tax Assets for Unrealized Losses (issued on 19 January 2016)	1 January 2017	1 January 2017
IAS 7	Disclosure Initiative (issued on 29 January 2016)	1 January 2017	1 January 2017
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016) - IFRS 12	1 January 2017	Pending

The modification to IFRS 12 issued by IASB is pending approval by the EU. Consequently, the Group confirms that despite the existing divergence between IFRS-IASB and IFRS-EU at 31 December 2017, it is a minor difference that requires additional information.

The application of these standards and interpretations has had no material impact on these Consolidated Financial Statements.

Standards issued but not effective in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IFRS 15	Revenue from contracts with Customers (issued on 28 May 2014)	1 January 2018	1 January 2018
IFRS 15	Clarification to IFRS15 Revenue from Contracts with Customers (issued on 12 April 2016)	1 January 2018	1 January 2018
IFRS 9	Financial instruments (issued on 24 July 2014)	1 January 2018	1 January 2018
IFRS 2	Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)	1 January 2018	pending
IFRS 4 IFRS 9	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)	1 January 2018	1 January 2018
IFRIC 22	IFRIC 22 Interpretation: Foreign currency translations and Advance Consideration	1 January 2018	pending
IAS 40	Amendments to IAS 40: Transfers of Investment Property	1 January 2018	pending
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016)	1 January 2018	pending
IFRS 16	Leases (Issued on 13 January 2016)	1 January 2019	1 January 2019
IFRIC 23	Uncertainty over Income Tax Treatments (issued on 7 June 2017)	1 January 2019	pending
IFRS 9	Prepayment Features with Negative Compensation (issued on 12 October 2017)	1 January 2019	pending
IAS 28	Long-term interests in Associates and Joint Ventures (issued on 12 October 2017)	1 January 2019	pending
Various	Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)	1 January 2019	pending
IFRS 17	Insurance Contracts (issued on 18 May 2017)	1 January 2021	pending
IAS 19	Amendment to IAS19: Plan Amendment, Curtailment or Settlemet (issued on 77 February 2018)	1 January 2019	pending

At the date of issue of these Consolidated Financial Statements, the Group is analyzing the impact of the application of the above standards or interpretations published by the International Accounting Standards Board (IASB).

IFRS 9 Financial Instruments

Based on the analysis at the date these Consolidated Financial Statements were authorized for issue, the expected impacts of adopting IFRS 9 Financial Instruments are summarized below:

· Classification and measurement of financial assets:

In general terms, based on the analysis of the new classification vis-à-vis the business model, no significant impacts are foreseen and the majority of financial assets are expected to continue to be measured at amortized cost, the main exception being equity instruments, which will be measured at fair value.

· Impairment of financial assets:

For trade receivables the Group will use the simplified approach, estimating lifetime expected credit losses, while for all other financial assets the Group will use the general approach for calculating expected credit losses. In both cases, due to the customers’ credit rating, as well as the internal classification systems currently in place for new customers, and considering that collection periods are mostly under 30 days, the adoption of IFRS 9 will not have a significant impact.

· Modification or exchanges of financial liabilities that do not result in derecognition of liabilities

According to the IASB’s interpretation published in October 2017, when a financial liability measured at amortized cost is modified or exchanged and does not result in the derecognition of the financial liability, a gain or loss should be recognized in profit or loss, calculated as the difference between the original contractual cash flows from the liability and the modified cash flows, discounted at the original effective interest rate of the liability.

IFRS 9 must be applied retrospectively as of 1 January 2018, therefore any gains or losses from the modification of financial liabilities that arise from applying the new standard in years prior to 1 January 2018 will be recognized in reserves at that date. Grifols has retrospectively calculated the impact of adopting IFRS 9 on the refinancing of its senior debt and unsecured senior corporate bonds in 2014 and 2017. As a result of these new calculations, the 2014 refinancing of both debts did not cause the derecognition of the respective liabilities, therefore generating an adjustment to profit and loss in that year. Considering the retroactive adjustment generated in 2014, the 2017 refinancing of senior debt did not result in the derecognition of the financial liability either. However the unsecured senior corporate bonds refinancing did cause the derecognition of the liability as it did not pass the new quantitative test. The adoption of IFRS 9 entails a positive impact on reserves of Euros 24,636 thousand.

Detail of the impact in reserves due to IFRS 9 aplication, were as follows:

	Thousand of Euros
			Impact
Senior Unsecured Noted	IAS 39	IFRS 9	01/01/2018
Total Debt	853,667	1,000,000	146,334
Deferred Expenses			(41,036	)
Negative Impact in reserves			105,298

	Thousand of Euros
			Impact
Senior Secured Debt	IAS 39	IFRS 9	01/01/2018
Total Debt	3,375,157	3,226,244	(148,913	)
Deferred Expenses			18,979
Positive impact in reserves			(129,934	)

	Thousand of Euros
			Impact
Total Impact	IAS 39	IFRS 9	01/01/2018
Total Debt	4,228,823	4,226,244	(2,579	)
Deferred Expenses			(22,056	)
Positive impact in reserves			(24,636	)

IFRS 15 Revenue from Contracts with Customers.

IFRS 15 provides a framework that replaces the previous guides on revenue recognition. According to the new criteria, a five-step model should be used to determine the timing and amounts of revenue recognition:

Step 1: Identify the contract.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue.

This new model specifies that revenue should be recognized when (or as) control of the goods or services is transferred from an entity to customers, for the amount the entity expects to be entitled to receive. Depending on whether certain criteria are met, revenue is recognized over time, reflecting that the entity has satisfied the performance obligation, or at a point in time, when control of the goods or services is transferred to customers.

Based on the analysis at the date of preparing these Consolidated Financial Statements, there has been no impact from adopting IFRS 15 Revenue from Contracts with Customers.

Under IFRS 15, entities may adopt the new standard retrospectively or through an adjustment for the accumulated effect at the start of the first year it is applicable. Grifols has opted for the accumulated effect approach as it deems the impact to be immaterial to the financial statements taken as a whole.

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Business Combinations

12 Months Ended

Dec. 31, 2017

Business combinations

Business combinations

(3)Business Combinations

2017

(a)Hologic Acquisition

On 14 December 2016 Grifols entered into an asset purchase agreement to acquire assets corresponding to Hologic’s NAT (Nucleic Acid Testing) business donor screening unit for US Dollars 1,865 million. The transaction was closed on 31 January 2017. The agreement encompasses the acquisition of the Hologic business engaged in research, development and manufacture of assays and instruments based on NAT technology for transfusion and transplantation screening. In addition, it was agreed to cancel the existing joint-collaboration agreement for the commercialization of NAT donor screening products by Grifols. NAT technology makes it possible to detect the presence of infectious agents in blood and plasma donations, contributing to greater transfusion safety.

The transaction is structured through the purchase of assets by Grifols Diagnostic Solutions, Inc., a U.S. incorporated and wholly-owned subsidiary of Grifols, S.A.

The assets acquired comprise a plant in San Diego, California (United States) as well as development rights, licenses to patents and access to product manufacturers.

Grifols consolidates itself as one of the only vertically integrated providers capable of offering comprehensive solutions to blood and plasma donation centers.

This acquisition strengthens cash flows and positively impacts the Group’s margins. The sales revenues of the Diagnostic Division will not change as a result of the acquisition due to the existing joint-business between Grifols and Hologic in place since 2014, under which Grifols already owns customer facing activities and records all revenues.

It is expected that this acquisition will strengthen the position of the Grifols Diagnostic Division in transfusion medicine and will increase significantly the profitability of Grifols Diagnostic Division having a direct impact on the Group’s EBITDA margin. By streamlining and integrating the NAT business, operational efficiency will be in terms of production, R&D, overheads and administrative expenses.

Details of the aggregate business combination cost, the fair value of the net assets acquired and goodwill at the acquisition date are provided below:

Cost of the business combination	Thousands of Euros	Thousands of US Dollars
Payment in cash	1,734,077	1,865,000
Result of the cancellation of the existing contract	41,894	45,057
Total business combination cost	1,775,971	1,910,057
Fair value of net assets acquired	309,551	332,923
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	1,466,420	1,577,134

As part of the purchase price allocation, the Company determined that the identifiable intangible assets were developed technology and IPR&D. The fair value of the intangible assets was estimated using the income approach. The cash flows were based on estimates used to price the transaction and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology assets are comprised of know-how, patents and technologies embedded in revenue. The Company applied the Relief-from-Royalty Method to determine its fair value.

IPR&D projects relate to in-process projects that have not reached technological feasibility as of the acquisition date. All of the IPR&D assets were valued using the Multiple-Period Excess Earnings Method approach.

The excess of the purchase price over the estimated fair value of the net assets acquired was recorded to goodwill. The factors contributing to the recognition of the amount of goodwill were the assembled workforce, cost savings and benefits arising from the vertical integration of the business that will lead to efficiencies of R&D, commercial and manufacturing activities.

The expenses incurred in this transaction in 2017 amount to approximately Euros 13 million (Euros 5.1 million in 2016).

The resulting Goodwill has been allocated to the Diagnostic segment.

The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities were as follows:

	Fair Value
	Thousands of Euros	Thousands of US Dollars
R&D in progress	137,756	148,157
Other Intangible assets	142,174	152,908
Property, plant and equipment	24,569	26,424
Deferred Tax Assets (note 27)	16,736	18,000
Inventories	30,157	32,434
Total Assets	351,392	377,923
Current Provisions (note 19 (b))	41,841	45,000
Total liabilities and contingent liabilities	41,841	45,000
Total net assets acquired	309,551	332,923

(b)Kiro Grifols, S.L.

On 25 July 2017 the Group subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 12.8 million, which represents 40% of the voting and economic rights of Kiro Grifols. In September 2014 the Group had already subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 21 million, by virtue of which Grifols acquired 50% of Kiro Grifols economic and voting rights. The capital increase was paid by means of a monetary contribution.

As a result, Grifols owns a total of 90% of the voting and economic rights of Kiro Grifols. The remaining 10% will continue to be held by Socios Fundadores Kiro, S.L. a company wholly owned by cooperatives of the Mondragon Corporation.

Grifols also entered into a joint venture & shareholders’ agreement (the “Joint Venture Agreement”) with Kiro Grifols’ partners: Mondragon Innovacion S.P.E, S.A.; Mondragon Assembly, S.Coop. and Agrupación de Fundición y Utillaje, S.Coop.. This agreement governs, among other matters, the capital increase subscribed by Grifols and the managing and governing bodies of Kiro Grifols, whether these are the Board of Directors or any other internal managing and governing bodies.

At the date of issue of these Consolidated Financial Statements, the Group is working to determine the definitive fair value of intangible assets, liabilities and contingent liabilities acquired in the business combination.

(c)Kedplasma

On 27 December 2016 Grifols entered into an agreement to acquire six new Plasma Donor Centers to the company Kedplasma, LLC, with a purchase price of US Dollar 47 million. Delivery of these centers has been made in February 2017.

Aggregate details of the combination cost, fair value of the net assets acquired and goodwill at the acquisition date (or surplus net assets acquired over the combination cost) are as follows:

	Thousands of Euros	Thousands of US Dollars
Cost of the business combination
Payment in cash	44,238	47,083
Total business combination cost	44,238	47,083
Fair value of net assets acquired	4,137	4,403
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	40,101	42,680

The fair value of net assets acquired includes property, plant and equipment amounting to Euros 3,698 thousand.

Goodwill is allocated to the Bioscience segment and includes plasma donor center base, FDA licenses and workforce retained.

At 31 December 2016, the group advanced the sum of US Dollar 15 million related to this acquisition.

2015

(d)VCN

On 14 February 2014 and 16 November 2015, the Group company Gri-Cel, S.A, subscribed both share capital increases in the capital of VCN Bioscience, S.L for Euros 700 thousand and Euros 2,549 thousand, respectively. After this capital increase, Grifols’ interest rises to 68.01% in 2015 and the company is fully consolidated at year end. Since 2016, the Group company Grifols Innovation and New Technologies Limited centralize the Group’s investments in R&D projects in fields of medicine other than its core business.

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Significant Accounting Policies

Significant Accounting Policies

(4)Significant Accounting Policies

(a)Subsidiaries and associates

Subsidiaries are entities, including special purpose entities (SPE), over which the Group exercises control, either directly or indirectly, through subsidiaries. The Group controls a subsidiary when it has the substantive rights in force that provide the ability to manage relevant activities. The Group is exposed or has the right to variable returns for its involvement in the subsidiaries when the returns obtained vary depending on the economic performance of the subsidiaries.

The income, expenses and cash flows of subsidiaries are included in the Consolidated Financial Statements from the date of acquisition, which is when the Group takes control. Subsidiaries are excluded from the consolidated Group from the date on which control is lost.

Transactions and balances with Group companies and unrealized gains or losses have been eliminated upon consolidation.

The accounting policies of subsidiaries have been adapted to those of the Group for transactions and other events in similar circumstances.

The financial statements of consolidated subsidiaries have been prepared as of the same date and for the same reporting period as the financial statements of the Company.

Associates are entities over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those entities. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Group or other entities, are considered when assessing whether an entity has significant influence.

Investments in associates are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases.

Investments in associates are initially recognized at acquisition cost, including any cost directly attributable to the acquisition and any consideration receivable or payable contingent on future events or on compliance with certain conditions.

The excess of the cost of the investment over the Group’s share of the fair values of the identifiable net assets is recognized as goodwill, which is included in the carrying amount of the investment. Any shortfall, once the cost of the investment and the identification and measurement of the associate’s net assets have been evaluated, is recognized as income when determining the investor’s share of the profit and loss of the associate for the year in which it was acquired.

The accounting policies of associates have been harmonized in terms of timing and measurement, applying the policies described for subsidiaries.

The Group’s share of the profit and loss of an associate from the date of acquisition is recognized as an increase or decrease in the value of the investments, with a credit or debit to share of the profit and loss for the year of “equity-accounted investees” in the consolidated statement of profit and loss (consolidated statement of comprehensive income). The Group’s share of other comprehensive income of associates from the date of acquisition is recognized as an increase or decrease in the investments in associates with a balancing entry recognized by type in other comprehensive income. The distribution of dividends is recognized as a decrease in the value of the investment. The Group’s share of profit and loss, including impairment losses recognized by the associates, is calculated based on income and expenses arising from application of the acquisition method.

The Group’s share of the profit and loss of an associate and changes in equity is calculated to the extent of the Group’s interest in the associate at year end and does not reflect the possible exercise or conversion of potential voting rights. However, the Group’s share is calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of associates.

Information on the subsidiaries and associates included in the consolidated Group is presented in Appendix I.

(b)Business combinations

On the date of transition to IFRS-EU, 1 January 2004, the Group applied the exception permitted under IFRS 1
“First-time adoption of International Financial Reporting Standards”, whereby only those business combinations performed as from 1 January 2004 have been recognized using the acquisition method. Entities acquired prior to that date were recognized in accordance with accounting prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.

The Group applies the revised IFRS 3 “Business combinations” in transactions made subsequent to 1 January 2010.

The Group applies the acquisition method for business combinations.

The acquisition date is the date on which the Group obtains control of the acquiree.

Business combinations made subsequent to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, equity instruments issued and any additional consideration contingent on future events or the fulfilment of certain conditions, in exchange for control of the acquiree.

The consideration paid excludes all amounts that do not form part of the exchange for the acquired business. Acquisition-related costs are accounted for as expenses when incurred. Share increase costs are recognized as equity when the increase takes place and borrowing costs are deducted from the financial liability when it is recognized.

At the acquisition date the Group recognizes at fair value the assets acquired and liabilities assumed. Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured. The Group also recognizes indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.

This criterion does not include non-current assets or disposal groups of assets which are classified as held for sale, long-term defined benefit employee benefit liabilities, share-based payment transactions, deferred tax assets and liabilities and intangible assets arising from the acquisition of previously transferred rights.

Assumed assets and liabilities are classified and designated for subsequent measurement in accordance with the contractual terms, economic conditions, operating or accounting policies and other factors that exist at the acquisition date, except for leases and insurance contracts.

The excess between the consideration transferred and the value of net assets acquired and liabilities assumed, less the value assigned to non-controlling interests, is recognized as goodwill. Where applicable, any shortfall, after evaluating the consideration transferred, the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognized in profit and loss.

When a business combination has been provisionally determined, net identifiable assets have initially been recognized at their provisional value, and any adjustments made during the measurement period have been recorded as if they had been known at that date. Where applicable, comparative figures for the prior year have been restated. Adjustments to the provisional values only reflect information relating to events and circumstances existing at the acquisition date and which, had they been known, would have affected the amounts recognized at that date. Once this period has elapsed, adjustments are only made to initial values when errors must be corrected. Any potential benefits arising from tax losses and other deferred tax assets of the acquiree that have not been recorded as they did not qualify for recognition at the acquisition date, are accounted for as income tax revenue, provided the adjustments were not made during the measurement period.

The contingent consideration is classified in accordance with underlying contractual terms as a financial asset or financial liability, equity instrument or provision. Provided that subsequent changes to the fair value of a financial asset or financial liability do not relate to an adjustment of the measurement period, they are recognized in consolidated profit and loss. The contingent consideration classified, where applicable, as equity is not subject to subsequent change, with settlement being recognized in equity. The contingent consideration classified, where applicable, as a provision is recognized subsequently in accordance with the relevant measurement standard.

Business combinations made prior to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Any additional consideration contingent on future events or the fulfilment of certain conditions is included in the cost of the combination provided that it is probable that an outflow of resources embodying economic benefits will be required and the amount of the obligation can be reliably estimated. Subsequent recognition of contingent considerations or subsequent variations to contingent considerations is recognized as a prospective adjustment to the cost of the business combination.

Where the cost of the business combination exceeds the Group’s interest in the fair value of the identifiable net assets of the entity acquired, the difference is recognized as goodwill, whilst the shortfall, once the costs of the business combination and the fair values of net assets acquired have been reconsidered, is recognized in profit and loss.

(c)Non-controlling interests

Non-controlling interests in subsidiaries acquired after 1 January 2004 are recognized at the acquisition date at the proportional part of the fair value of the identifiable net assets. Non-controlling interests in subsidiaries acquired prior to the transition date were recognized at the proportional part of the equity of the subsidiaries at the date of first consolidation.

Non-controlling interests are disclosed in the consolidated balance sheet under equity separately from equity attributable to the Parent. Non-controlling interests’ share in consolidated profit and loss for the year (and in consolidated comprehensive income for the year) is disclosed separately in the consolidated statement of profit and loss (consolidated statement of comprehensive income).

The consolidated profit and loss for the year, consolidated comprehensive income and changes in equity of the subsidiaries attributable to the Group and non-controlling interests after consolidation adjustments and eliminations, is determined in accordance with the percentage ownership at year end, without considering the possible exercise or conversion of potential voting rights. However, Group and non-controlling interests are calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of subsidiaries.

Profit and loss and each component of other comprehensive income are assigned to equity attributable to shareholders of the Parent and to non-controlling interests in proportion to their interest, although this implies a balance receivable from non-controlling interests. Agreements signed between the Group and the non-controlling interests are recognized as a separate transaction.

The increase and reduction of non-controlling interests in a subsidiary in which control is retained is recognized as an equity instrument transaction. Consequently, no new acquisition cost arises on increases, nor is a gain recorded on reductions; rather, the difference between the consideration transferred or received and the carrying amount of the non-controlling interests is recognized in the reserves of the investor, without prejudice to reclassifying consolidation reserves and reallocating other comprehensive income between the Group and the non-controlling interests. When a Group’s interest in a subsidiary diminishes, non-controlling interests are recognized at their share of the net consolidated assets, including goodwill.

(d)Joint arrangements

Joint arrangements are those in which there is a contractual agreement to share the control over an economic activity, in such a way that the decisions over relevant activities require the unanimous consent of the Group and the remaining venturers.

Investments in joint arrangements are accounted for using the equity method.

The acquisition cost of investments in joint arrangements is determined consistently with that established for investments in associates.

(e)Foreign currency transactions and balances

(i)Functional and presentation currency

The Consolidated Financial Statements are presented in thousands of Euros, which is the functional and presentation currency of the Parent.

(ii)Foreign currency transactions, balances and cash flows

Foreign currency transactions are translated into the functional currency using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from applying the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies have been translated into thousands of Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into thousands of Euros at the exchange rate at the date that the fair value was determined.

In the consolidated statement of cash flows, cash flows from foreign currency transactions have been translated into thousands of Euros at the exchange rates prevailing at the dates the cash flows occur. The effect of exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies is recognized separately in the statement of cash flows as “Effect of exchange rate fluctuations on cash and cash equivalents”.

Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into thousands of Euros of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.

(iii)Translation of foreign operations

The translation into thousands of Euros of foreign operations for which the functional currency is not the currency of a hyperinflationary economy is based on the following criteria:

· Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, including comparative amounts, are translated at the closing rate at the reporting date;

· Income and expenses, including comparative amounts, are translated using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from using the exchange rate at the date of the transaction;

· Translation differences resulting from application of the above criteria are recognized in other comprehensive income.

(f)Borrowing costs

In accordance with IAS 23 “Borrowing Costs”, since 1 January 2009 the Group recognizes borrowing costs directly attributable to the purchase, construction or production of qualifying assets as an increase in the value of these assets. Qualifying assets are those which require a substantial period of time before they can be used or sold. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs incurred, less any investment income on the temporary investment of those funds. Capitalized borrowing costs corresponding to general borrowing are calculated as the weighted average of the qualifying assets without considering specific funds. The amount of borrowing costs capitalized cannot exceed the amount of borrowing costs incurred during that period. The capitalized borrowing costs include adjustments to the carrying amount of financial liabilities arising from the effective portion of hedges entered into by the Group.

The Group begins capitalizing borrowing costs as part of the cost of a qualifying asset when it incurs expenditure for the asset, interest is accrued, and it undertakes activities that are necessary to prepare the asset for its intended use or sale, and ceases capitalizing borrowing costs when all or substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Nevertheless, capitalization of borrowing costs is suspended when active development is interrupted for extended periods.

(g)Property, plant and equipment

(i)Initial recognition

Property, plant and equipment are recognized at cost or deemed cost, less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets is determined using the same principles as for an acquired asset, while also considering the criteria applicable to production costs of inventories. Capitalized production costs are recognized by allocating the costs attributable to the asset to “Self-constructed non-current assets” in the consolidated statement of profit and loss.

At 1 January 2004 the Group opted to apply the exemption regarding fair value and revaluation as deemed cost as permitted by IFRS 1 First time Adoption of International Financial Reporting Standards.

(ii)Depreciation

Property, plant and equipment are depreciated by allocating the depreciable amount of an asset on a systematic basis over its useful life. The depreciable amount is the cost or deemed cost of an asset, less its residual value. The Group determines the depreciation charge separately for each item for a component of property, plant and equipment with a cost that is significant in relation to the total cost of the asset.

Property, plant and equipment are depreciated using the following criteria:

	Depreciation method	Rates
Buildings	Straight line	1% - 3%
Other property, technical equipment and machinery	Straight line	4%-10%
Other property, plant and equipment	Straight line	7% - 33%

The Group reviews residual values, useful lives and depreciation methods at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

(iii)Subsequent recognition

Subsequent to initial recognition of the asset, only those costs incurred which will probably generate future profits and for which the amount may reliably be measured are capitalized. Costs of day-to-day servicing are recognized in profit and loss as incurred.

Replacements of property, plant and equipment which qualify for capitalization are recognized as a reduction in the carrying amount of the items replaced. Where the cost of the replaced items has not been depreciated independently and it is not possible to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction.

(iv)Impairment

The Group tests for impairment and reversals of impairment losses on property, plant and equipment based on the criteria set out in note 4(i) below.

(h)Intangible assets

(i)Goodwill

Goodwill is generated on the business combinations and is calculated using the criteria described in the section on business combinations.

Goodwill is not amortized, but is tested for impairment annually or more frequently whenever there is an indication that goodwill may be impaired. Goodwill acquired in business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 7 are applied. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

(ii)Internally generated intangible assets

Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.

Costs related with development activities are capitalized when:

· The Group has technical studies that demonstrate the feasibility of the production process;

· The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use;

· The asset will generate sufficient future economic benefits;

· The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects.

The cost of internally generated assets by the Group is calculated using the same criteria established for determining production costs of inventories. The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets in the consolidated statement of profit and loss.

Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.

(iii)Other intangible assets

Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.

Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.

(iv)Intangible assets acquired in business combinations

The cost of identifiable intangible assets acquired in the business combination of Hologic includes the fair value of the R&Dprojects and the Intellectual Property-Patents.

The cost of identifiable intangible assets acquired in the business combination of Novartis includes the fair value of the existing royalty agreements.

The cost of identifiable intangible assets acquired in the business combination of the Progenika Group includes the fair value of the currently marketed products sold and which are classified under “Other intangible assets” and “Development costs”.

The cost of identifiable intangible assets acquired in the Talecris business combination includes the fair value of currently marketed products sold and which are classified under “Other intangible assets”.

(v)Useful life and amortization rates

The Group assesses whether the useful life of each intangible asset acquired is finite or indefinite. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.

Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:

	Amortisation method	Rates
Development expenses	Straight line	10%
Concessions, patents, licences, trademarks and similar	Straight line	7% - 20%
Computer software	Straight line	33%
Currently marketed products	Straight line	3% - 10%

The depreciable amount is the cost or deemed cost of an asset, less its residual value.

The Group does not consider the residual value of its intangible assets to be material. The Group reviews the residual value, useful life and amortization method for intangible assets at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

(i)Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization

The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortization or depreciation, to verify whether the carrying amount of these assets exceeds the recoverable amount.

The Group tests goodwill, intangible assets with indefinite useful lives and intangible assets with finite useful lives that are not available for use for potential impairment at least annually, irrespective of whether there is any indication that the assets may be impaired.

The recoverable amount of the assets is the higher of their fair value less costs of disposal and their value in use. An asset’s value in use is calculated based on an estimate of the future cash flows expected to derive from the use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows deriving from the asset.

Negative differences arising from comparison of the carrying amounts of the assets with their recoverable amounts are recognized in the consolidated statement of profit and loss. Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.

Impairment losses recognized for cash-generating units are first allocated to reduce, where applicable, the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset. The carrying amount of each asset may not be reduced below the highest of its fair value less costs of disposal, its value in use and zero.

At the end of each reporting period the Group assesses whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. Impairment losses on goodwill are not reversible. Impairment losses on other assets are only reversed if there has been a change in the estimates used to calculate the recoverable amount of the asset.

A reversal of an impairment loss is recognized in consolidated profit and loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss may not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized.

A reversal of an impairment loss for a CGU is allocated to the assets of each unit, except goodwill, pro rata with the carrying amounts of those assets. The carrying amount of an asset may not be increased above the lower of its recoverable amount and the carrying amount that would have been disclosed, net of amortization or depreciation, had no impairment loss been recognized.

(j)Leases

(i)Lessee accounting records

The Group has rights to use certain assets through lease contracts.

Leases in which the Group assumes substantially all the risks and rewards incidental to ownership are classified as finance leases, otherwise they are classified as operating leases.

Finance leases

At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Initial direct costs are added to the asset’s carrying amount. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are recognized as an expense in the years in which they are incurred.

Operating leases

Lease payments under an operating lease (excluding incentives) are recognized as an expense on a straight-line basis unless another systematic basis is representative of the time pattern of the user’s benefit.

(ii)Leasehold investments

Non-current investments in properties leased from third parties are recognized on the basis of the same criteria for property, plant and equipment. Investments are amortized over the lower of their useful lives and the term of the lease contract. The lease term is consistent with that established for recognition of the lease.

(iii)Sale and leaseback transactions

Any profit on sale and leaseback transactions that meet the conditions of a finance lease is deferred over the term of the lease.

When the leaseback is classified as an operating lease:

If the transaction is established at fair value, any profit and loss on the sale is recognized immediately in the consolidated statement of profit and loss for the year;

If the sale price is below fair value, any profit and loss is recognized immediately in the consolidated statement of profit and loss. However, if the loss is compensated for by future lease payments at below market price, it is deferred in proportion to the lease payments over the period for which the asset is to be used.

(k)Financial instruments

(i)Classification of financial instruments

Financial instruments are classified on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument set out in IAS 32, Financial Instruments: Presentation.

Financial instruments are classified into the following categories for valuation purposes: financial assets and financial liabilities at fair value through profit and loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets and financial liabilities. Financial instruments are classified into different categories based on the nature of the instruments and the Group’s intentions on initial recognition.

Regular way purchases and sales of financial assets are recognized using trade date accounting, i.e. when the Group commits itself to purchase or sell an asset.

a)Financial assets and liabilities at fair value through profit and loss

Financial assets and financial liabilities at fair value through profit and loss are those which are classified as held for trading or which the Group designated as such on initial recognition.

A financial asset or financial liability is classified as held for trading if:

· It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

· It forms part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking, or

· It is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

Financial assets and financial liabilities at fair value through profit and loss are initially recognized at fair value. Transaction costs directly attributable to the acquisition or issue are recognized as an expense when incurred.

After initial recognition, they are recognized at fair value through profit and loss.

The Group does not reclassify any financial assets or liabilities from or to this category while they are recognized in the consolidated balance sheet.

b)Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified in other financial asset categories. These assets are recognized initially at fair value, including transaction costs, and subsequently measured at amortized cost using the effective interest method.

c)Financial assets and financial liabilities carried at cost

Investments in equity instruments whose fair value cannot be reliably measured and derivative instruments that are linked to these instruments and that must be settled by delivery of such unquoted equity instruments, are measured at cost. Nonetheless, if the financial assets or liabilities can be reliably measured subsequently on an ongoing basis, they are accounted for at fair value and any gain or loss is recognized in accordance with their classification.

(ii)Offsetting principles

A financial asset and a financial liability are offset only when the Group currently has the legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(iii)Fair value

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorized within different levels of a fair value hierarchy based on the inputs used in the valuation techniques as follows:

· Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

· Level 2: inputs other than prices included in Level 1 that are observable for the asset or liability, either directly (i.e. derived from prices) or indirectly.

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability are categorized within different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(iv)Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.

(v)Impairment of financial assets carried at cost

The amount of the impairment loss on assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses cannot be reversed and are therefore recognized directly against the value of the asset and not as an allowance account.

(vi)Impairment of financial assets carried at amortized cost

In the case of financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. For variable income financial assets, the effective interest rate corresponding to the measurement date under the contractual conditions is used.

The Group recognizes impairment losses and unrecoverable loans and receivables and debt instruments by recognizing an allowance account for financial assets. When impairment and uncollectibility are considered irreversible, their carrying amount is eliminated against the allowance account.

The impairment loss is recognized in profit and loss and may be reversed in subsequent periods if the decrease can be objectively related to an event occurring after the impairment has been recognized. The loss can only be reversed to the limit of the amortized cost of the assets had the impairment loss not been recognized. The impairment loss is reversed against the allowance account.

(vii)Available for sale financial assets

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit and loss.

A financial asset that the Group pretends to held to maturity or that it is a loan or receivable can also be designated as available for sale in the initial recognition. This category usually includes all debt securities traded on active markets that have not been designated as held-to-maturity, as well as equity investments that have not been classified as fair value through profit and loss.

A gain or loss on an available for sale financial asset shall be recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized.

When a decline in the fair value of an available for sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit and loss as a reclassification adjustment even though the financial asset has not been derecognized.

(viii) Financial liabilities

Financial liabilities, including trade and other payables, which are not classified at fair value through profit and loss, are initially recognized at fair value less any transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, liabilities classified under this category are measured at amortized cost using the effective interest method.

(ix)Derecognition of financial assets

The Group applies the criteria for derecognition of financial assets to part of a financial asset or part of a group of similar financial assets or to a financial asset or group of similar financial assets.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Where the Group retains the contractual rights to receive cash flows, it only derecognizes financial assets when it has assumed a contractual obligation to pay the cash flows to one or more recipients and if the following requirements are met:

· Payment of the cash flows is conditional on their prior collection;

· The Group is unable to sell or pledge the financial asset, and

· The cash flows collected on behalf of the eventual recipients are remitted without material delay and the Group is not entitled to reinvest the cash flows. This criterion is not applicable to investments in cash or cash equivalents made by the Group during the settlement period from the collection date to the date of required remittance to the eventual recipients, provided that interest earned on such investments is passed on to the eventual recipients.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it determines whether it has retained control of the financial asset. In this case:

· If the Group has not retained control, it derecognizes the financial asset and recognizes separately as assets or liabilities any rights and obligations created or retained in the transfer.

· If the Group has retained control, it continues to recognise the financial asset to the extent of its continuing involvement in the financial asset and recognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. The associated liability is measured in such a way that the carrying amount of the transferred asset and the associated liability is equal to the amortized cost of the rights and obligations retained by the Group, if the transferred asset is measured at amortized cost, or to the fair value of the rights and obligations retained by the Group, if the transferred asset is measured at fair value. The Group continues to recognise any income arising on the transferred asset to the extent of its continuing involvement and recognizes any expense incurred on the associated liability. Recognized changes in the fair value of the transferred asset and the associated liability are accounted for consistently with each other in profit and loss or equity, following the general recognition criteria described previously, and are not offset.

If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the consideration received is recognized in liabilities. Transaction costs are recognized in profit and loss using the effective interest method.

(x)Derecognition and modifications of financial liabilities

A financial liability, or part of it, is derecognized when the Group either discharges the liability by paying the creditor, or is legally released from primary responsibility for the liability either by process of law or by the creditor.

The exchange of debt instruments between the Group and the counterparty or substantial modifications of initially recognized liabilities are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability, providing the instruments have substantially different terms.

The Group considers the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability.

If the exchange is accounted for as an extinguishment of the financial liability, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability.

The difference between the carrying amount of a financial liability, or part of a financial liability, extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit and loss.

(l)Equity instruments

The Group’s acquisition of equity instruments of the Parent is recognized separately at cost of acquisition in the consolidated balance sheet as a reduction in equity, regardless of the motive of the purchase. Any gains or losses on transactions with treasury equity instruments are not recognized in consolidated profit and loss.

The subsequent redemption of Parent shares, where applicable, leads to a reduction in share capital in an amount equivalent to the par value of such shares. Any positive or negative difference between the cost of acquisition and the par value of the shares is debited or credited to reserves. Transaction costs related with treasury equity instruments, including issue costs related to a business combination, are accounted for as a reduction in equity, net of any tax effect.

(m)Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The costs of conversion of inventories include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. The allocation of fixed indirect overheads is based on the higher of normal production capacity or actual production.

The raw material used to produce haemoderivatives is human plasma, which is obtained from our donation centers using the plasmapheresis method. The cost of inventories includes the amount paid to plasma donors, or the amount billed by the seller when purchased from third parties, as well as the cost of products and devices used in the collection process, rental expenses and storage. This plasma has to be stored before use, which is an essential part of the production process. During the storage period, the plasma undergoes various virological tests and should be kept in quarantine in accordance with FDA and European Medicines Agency regulations, in order to guarantee that all the plasma is suitable for use in the production process.

To the extent that plasma storage costs are necessary to the production process, they are included as cost of inventories.

Indirect costs such as general management and administration costs are recognized as expenses in the period in which they are incurred.

The cost of raw materials and other supplies and the cost of merchandise are allocated to each inventory unit on a weighted average cost basis.

The transformation cost is allocated to each inventory unit on a FIFO (first-in, first-out) basis.

The Group uses the same cost model for all inventories of the same nature and with a similar use.

Volume discounts extended by suppliers are recognized as a reduction in the cost of inventories when it is probable that the conditions for discounts to be received will be met. Discounts for prompt payment are recognized as a reduction in the cost of the inventories acquired.

When the cost of inventories exceeds net realizable value, materials are written down to net realizable value, which is understood to be:

· For raw materials and other supplies, replacement cost. Nevertheless, raw materials and other supplies are not written down below cost if the finished goods into which they will be incorporated are expected to be sold at or above cost of production;

· Merchandise and finished goods, estimated selling price less costs to sell;

· Work in progress, the estimated selling price of related finished goods, less the estimated costs of completion and the estimated costs necessary to make the sale.

The previously recognized write-down is reversed against profit and loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances. The reversal of the write-down is limited to the lower of the cost and revised net realizable value of the inventories. Write-downs may be reversed with a credit to “Changes in inventories of finished goods and work in progress” and “Supplies”.

(n)Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand deposits in financial institutions. They also include other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as a cash equivalent when it has a maturity of less than three months from the date of acquisition.

The Group classifies cash flows relating to interest received and paid as operating activities, and dividends received and distributed are classified under investing and financing activities, respectively.

(o)Government grants

Government grants are recognized when there is reasonable assurance that they will be received and that the Group will comply with the conditions attached.

(i)Capital grants

Outright capital grants are initially recognized as deferred income in the consolidated balance sheet. Income from capital grants is recognized in the consolidated statement of profit and loss in line with the depreciation of the corresponding financed assets.

(ii)Operating grants

Operating grants received to offset expenses or losses already incurred, or to provide immediate financial support not related to future disbursements, are recognized in the consolidated statement of profit and loss.

(iii)Interest rate grants

Financial liabilities comprising implicit assistance in the form of below-market interest rates are initially recognized at fair value. The difference between this value, adjusted where necessary for the issue costs of the financial liability and the amount received, is recognized as a government grant based on the nature of the grant awarded.

(p)Employee benefits

(i)Defined contribution plans

The Group recognizes the contributions payable to a defined contribution plan in exchange for a service in the period in which contributions are accrued. Accrued contributions are recognized as an employee benefit expense in the corresponding consolidated statement of profit and loss in the year that the contribution was made.

(ii)Termination benefits

Termination benefits are recognized at the earlier of the date when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that involves the payment of termination benefits.

For termination benefits payable as a result of an employee’s decision to accept an offer of benefits, the time when the Group can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and when a restriction on the Group’s ability to withdraw the offer takes effect.

For termination benefits payable as a result of the Group’s decision to make an employee redundant, the Group can no longer withdraw the offer when it has informed the affected employees or union representatives of the plan and the actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made. The plan must identify the number of employees to be made redundant, their job classifications or functions and their locations and the expected completion date. The plan must also establish the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.

If the Group expects to settle the termination benefits in full more than twelve months after year end, the liability is discounted using the market yield on high quality corporate bonds.

(iii)Short-term employee benefits

The Group recognizes the expected cost of short-term employee benefits in the form of accumulating compensated absences when the employees render service that increases their entitlement to future compensated absences. In the case of non-accumulating compensated absences, the expense is recognized when the absences occur.

The Group recognizes the expected cost of profit-sharing and bonus plans when it has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made.

(iv)Restricted Share Unit Retention Plan (RSU)

The Group gives share-based payments to certain employees who render services to the Company. The fair value of the services received is determined based on the estimated fair value of the shares given at the grant date. Because the equity instruments granted do not vest until the employees complete a specified period of service, those services are accounted for during the vesting period in the income statement as an expense for the year, with the corresponding increase in equity. The amount recognized corresponds to that settled once the agreed terms have been met and it will not be adjusted or revalued during the accrual period, as the commitment is settled in the form of shares.

The total amount recognized is calculated based on the incentive payable in shares, increasing in line with percentages agreed by the Group. If an employee decides to leave his/her job prior to the end of the accrual period, he/she will only receive the agreed incentive in the form of shares and the Company will be able to choose whether to settle in cash or using equity instruments.

(q)Provisions

Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account all risks and uncertainties surrounding the amount to be recognized as a provision and, where the time value of money is material, the financial effect of discounting provided that the expenditure to be made each period can be reliably estimated. The discount rate is a pre-tax rate that reflects the time value of money and the specific risks for which future cash flows associated with the provision have not been adjusted at each reporting date.

If it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed against the consolidated statement of profit and loss item where the corresponding expense was recognized.

(r)Revenue recognition

Revenue from the sale of goods or services is measured at the fair value of the consideration received or receivable. Revenue is presented net of VAT and any other amounts or taxes which are effectively collected on the behalf of third parties. Volume or other types of discounts for prompt payment are recognized as a reduction in revenues if considered probable at the time of revenue recognition.

(i)Sale of goods

The Group recognizes revenue from the sale of goods when:

· It has transferred to the buyer the significant risks and rewards of ownership of the goods;

· It retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· The amount of revenue and the costs incurred or to be incurred can be measured reliably;

· It is probable that the economic benefits associated with the transaction will flow to the Group; and

· The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group participates in the government-managed Medicaid programs in the United States, accounting for Medicaid rebates by recognizing an accrual at the time a sale is recorded for an amount equal to the estimated claims for Medicaid rebates attributable to the sale. Medicaid rebates are estimated based on historical experience, legal interpretations of the applicable laws relating to the Medicaid program and any new information regarding changes in the program regulations and guidelines that would affect rebate amounts. Outstanding Medicaid claims, Medicaid payments and inventory levels are analyzed for each distribution channel and the accrual is adjusted periodically to reflect actual experience. While rebate payments are generally made in the following or subsequent quarter, any adjustments for actual experience have not been material.

As is common practice in the sector, the purchase contracts signed by some customers with the Group entitle these customers to price discounts for a minimum purchase volume, volume discounts or prompt payment discounts. The Group recognizes these discounts as a reduction in sales and receivables in the same month that the corresponding sales are invoiced based on the customer’s actual purchase figures or on past experience when the customer’s actual purchases will not be known until a later date.

In the USA, the Group enters into agreements with certain customers to establish contract pricing for the products, which these entities purchase from the authorized wholesaler or distributor (collectively, wholesalers) of their choice. Consequently, when the products are purchased from wholesalers by these entities at the contract price which is less than the price charged by the Group to the wholesaler, the Group provides the wholesaler with a credit referred to as a chargeback. The Group records the chargeback accrual at the time of the sale. The allowance for chargebacks is based on Group’s estimate of the wholesaler inventory levels, and the expected sell-through of the products by the wholesalers at the contract price based on historical chargeback experience and other factors. The Group periodically monitors the factors that influence the provision for chargebacks, and makes adjustments when it considers that actual chargebacks may differ from established allowances. These adjustments occur in a relatively short period of time. As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

(ii)Services rendered

Revenues associated with the rendering of service transactions are recognized by reference to the stage of completion at the consolidated balance sheet date when the outcome of the transaction can be estimated reliably. The outcome of a transaction can be estimated reliably when revenues, the stage of completion, the costs incurred and the costs to complete the transaction can be estimated reliably and it is probable that the economic benefits derived from the transaction will flow to the Group.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of costs incurred that are recoverable.

(iii)Interest income

Until June 2012 the Group has been recognizing interest receivable from the different Social Security affiliated bodies in Spain, to which it provides goods or services, on an accrual basis, and only for those bodies to which historically claims have been made and from which interest has been collected. As a result of the terms imposed by the Spanish Government in 2012 regarding the waiver of late payment interest on overdue receivables, the Group modified its estimate regarding late payment interest. Since June 2012 the Group has only been recognizing late payment interest on receivables from Social Security affiliated bodies on the date on which delayed invoices are collected, as it is highly likely that they will be collected as of that date provided.

(s)Income taxes

The income tax expense or tax income for the year comprises current tax and deferred tax.

Current tax is the amount of income taxes payable or recoverable in respect of the consolidated taxable profit or consolidated tax loss for the year. Current tax assets or liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantially enacted at the reporting date.

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences, whereas deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base.

Current and deferred tax are recognized as income or an expense and included in profit and loss for the year, except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different year, directly in equity, or from a business combination.

(i)Taxable temporary differences

Taxable temporary differences are recognized in all cases except where:

   They arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

   They are associated with investments in subsidiaries over which the Group is able to control the timing of the reversal of the temporary difference and it is not probable that the temporary difference will reverse in the foreseeable future.

(ii)Deductible temporary differences

Deductible temporary differences are recognized provided that:

   It is probable that sufficient taxable income will be available against which the deductible temporary difference can be utilized, unless the differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

   The temporary differences are associated with investments in subsidiaries to the extent that the difference will reverse in the foreseeable future and sufficient taxable income is expected to be generated against which the temporary difference can be offset.

Tax planning opportunities are only considered when assessing the recoverability of deferred tax assets and if the Group intends to use these opportunities or it is probable that they will be utilized.

(iii)Measurement

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the years when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted. The tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets or liabilities are also reflected in the measurement of deferred tax assets and liabilities.

At year end the Group reviews the fair value of deferred tax assets to write down the balance if it is not probable that sufficient taxable income will be available to apply the tax asset.

Deferred tax assets which do not meet the above conditions are not recognized in the consolidated balance sheet. At year end the Group assesses whether deferred tax assets which were previously not recognized now meet the conditions for recognition.

(iv)Offset and classification

The Group only offsets current tax assets and current tax liabilities if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Group only offsets deferred tax assets and liabilities where it has a legally enforceable right, where these relate to income taxes levied by the same taxation authority and where the taxation authority permits the entity to settle on a net basis, or to realize the asset and settle the liability simultaneously for each of the future years in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Deferred tax assets and liabilities are recognized in the consolidated balance sheet under non-current assets or liabilities, irrespective of the expected date of recovery or settlement.

(t)Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment, assess its performance and, based on which, differentiated financial information is available.

(u)Classification of assets and liabilities as current and non-current

The Group classifies assets and liabilities in the consolidated balance sheet as current and non-current. Current assets and liabilities are determined as follows:

· Assets are classified as current when they are expected to be realized or are intended for sale or consumption in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are expected to be realized within twelve months after the reporting date or are cash or a cash equivalent, unless the assets may not be exchanged or used to settle a liability for at least twelve months after the reporting date.

· Liabilities are classified as current when they are expected to be settled in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are due to be settled within twelve months after the reporting date or the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

· Financial liabilities are classified as current when they are due to be settled within twelve months after the reporting date, even if the original term was for a period longer than twelve months, and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date and before the Consolidated Financial Statements are authorized for issue.

(v)Environmental issues

The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Property, plant and equipment acquired by the Group for long-term use to minimize the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Group’s operations, are recognized as assets applying the measurement, presentation and disclosure criteria described in note 4(g).

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Financial Risk Management Policy

12 Months Ended

Dec. 31, 2017

Financial Risk Management Policy

Financial Risk Management Policy

(5)Financial Risk Management Policy

(a)General

The Group is exposed to the following risks associated with the use of financial instruments:

· Credit risk

· Liquidity risk

· Market risk: includes interest rate risk, currency risk and other price risks.

This note provides information on the Group’s exposure to each of these risks, the Group’s objectives and procedures to measure and mitigate this risk, and the Group’s capital management strategy. More exhaustive quantitative information is disclosed in note 30 to the Consolidated Financial Statements.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, define appropriate risk limits and controls and to control risks and comply with limits. Risk management policies and procedures are reviewed regularly so that they reflect changes in market conditions and the Group’s activities. The Group’s management procedures and rules are designed to create a strict and constructive control environment in which all employees understand their duties and obligations.

The Group’s Audit Committee supervises how management controls compliance with the Group’s risk management procedures and policies and reviews whether the risk management policy is suitable considering the risks to which the Group is exposed. This committee is assisted by Internal Audit which acts as supervisor. Internal Audit performs regular and ad hoc reviews of the risk management controls and procedures and reports its findings to the Audit Committee.

Credit risk

Credit risk is the risk to which the Group is exposed in the event that a customer or counterparty to a financial instrument fails to discharge a contractual obligation, and mainly results from trade receivables and the Group’s investments in financial assets.

Trade receivables

The Group does not predict any significant insolvency risks as a result of delays in receiving payment from some European countries due to their current economic situation. The main risk in these countries is that of late payments, which is mitigated through the possibility of claiming interest as foreseen by prevailing legislation. No significant bad debt or late payment issues have been detected for sales to private entities.

The Group recognizes impairment based on its best estimate of the losses incurred on trade and other receivables. The main impairment losses recognized are due to specific losses relating to individually identified risks. At year end, these impairment losses are immaterial.

Details of exposure to credit risk are disclosed in note 30.

Liquidity risk

Liquidity risk is the risk that the Group cannot meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure where possible, that it always has sufficient liquidity to settle its obligations at the maturity date, both in normal conditions and in times of tension, to avoid incurring unacceptable losses or tarnishing the Group’s reputation.

The Group manages liquidity risk on a prudent basis, based on availability of cash and sufficient committed unused long-term credit facilities, enabling the Group to implement its business plans and carry out operations using stable and secure sources of financing.

On 6 February 2017 the Group concluded the refinancing process of its senior debt. The total debt refinanced amounts to US Dollars 6,300 million (Euros 5,800 million), including the US Dollars 1,816 million loan obtained for the acquisition of Hologic’s transfusional diagnostics unit. Following the refinancing process, Grifols’ debt structure consists in a US Dollars 6,000 million long-term loan with institutional investors and banks segmented in two tranches (Term Loan A and Term Loan B),and a US Dollars 300 million undrawn revolving credit facility.

On 18 April 2017 the Group concluded the refinancing process of the Senior Unsecured Notes. The total bond issuance amounted to Euros 1,000 million.

On 5 December 2017 the Group has received an additional loan from the European Investment Bank of up to Euros 85 million at a fixed interest rate for a period of ten years with a grace period of two years. The loan will be used to support certain investments in R&D which are mainly focused on searching for new applications for plasmatic proteins. On 28 October 2015, the Group received its first loan with the same entity and conditions for a total amount of Euros 100 million. At 31 December 2017, the amount in books for the loan received in 2015 is Euros 85 million.

At 31 December 2017 the Group has total cash and cash equivalents of Euros 887 million (Euros 895 million at 31 December 2016). The Group also has approximately Euros 381 million in unused credit facilities, including Euros 250 million on the revolving credit facility.

As in previous years, the Group continues with its quarterly program for optimization of working capital, which is mainly based on contracts to sell receivables without recourse in those countries with long collection periods.

Market risk

Market risk comprises the risk of changes in market prices, for example, exchange rates, interest rates, or the prices of equity instruments affecting the Group’s revenues or the value of financial instruments it holds. The objective of managing market risk is to manage and control the Group’s exposure to this risk within reasonable parameters at the same time as optimising returns.

(i)Currency risk

The Group operates internationally and is therefore exposed to currency risk when operating with foreign currencies, especially with regard to the US Dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.

The Group holds significant investments in foreign operations, the net assets of which are exposed to currency risk. The conversion risk affecting net assets of the Group’s foreign operations in US Dollars is mitigated primarily through borrowings in this foreign currency.

The Group’s main exposure to currency risk is with regard to the US Dollar, which is used in a significant percentage of transactions in foreign functional currencies.

Details of the Group’s exposure to currency risk at 31 December 2017 and 2016 of the most significant financial instruments are shown in note 30.

(ii)Interest rate risk

The Group’s interest rate risks arise from current and non-current borrowings. Borrowings at variable interest rates expose the Group to cash flow interest rate risks. Fixed-rate borrowings expose the Group to fair value interest rate risk.

The objective of the management of interest rate risk is to achieve a balance in the structure of the debt, keeping part of the external resources issued at a fixed rate and covering part of the variable rate debt through hedges.

A significant part of the financing obtained accrues interest at fixed rates. This fixed interest debt (Senior Unsecured Notes) amounts to Euros 1,000 million, which represents approximately 56% of the Group’s total debt in Euros. The additional loans of Euros 170 million received from the European Investment Bank represent approximately 10% of the Group’s total debt in Euros.

Senior debt in Euros represents approximately 12% of the Group’s total Senior debt at 31 December 2017 and 31 December 2016.

Total fixed-interest debt represents a total of 19% of debt at 31 December 2017 (21% at 31 December 2016 considering total fixed-interest debt).

(iii)Market price risk

Price risk affecting raw materials is mitigated by the vertical integration of the haemoderivatives business in a highly-concentrated sector.

(b)Capital management

The directors’ policy is to maintain a solid capital base in order to ensure investor, creditor and market confidence and sustain future business development. The board of directors defines and proposes the level of dividends paid to shareholders.

The directors consider various arguments to calculate capital structure:

The directors control capital performance using rates of returns on equity (ROE). In 2017, the ROE stood at 18% (15% in December 2016). The ROE is calculated by dividing profit attributable to the Parent by the equity attributable to the Parent.

	Thousand of Euros
	2016		2017
Profit attributable to the parent	545,456		662,700
Equity attributable to the parent	3,721,481		3,629,079
ROE	15	%	18	%

· In accordance with the senior secured debt contract, the Group is subject to compliance with some covenants. At 31 December 2017 and 2016, the Group complies with the covenants.

· Consideration of the Company’s credit rating (see note 20 (d)).

The Parent held Class A and B treasury stock equivalent to 0.6% of its capital at 31 December 2017 (0.7% at 31 December 2016). The Group does not have a formal plan for repurchasing shares.

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Segment Reporting

12 Months Ended

Dec. 31, 2017

Segment Reporting

Segment Reporting

(6)Segment Reporting

In accordance with IFRS 8 “Operating Segments”, financial information for operating segments is reported in the accompanying Appendix II, which forms an integral part of this note to the Consolidated Financial Statements.

Group companies are divided into four areas: companies from the industrial area, companies from the commercial area, companies from the services area and companies from the research area. Within each of these areas, activities are organized based on the nature of the products and services manufactured and marketed.

Assets, liabilities, income and expenses for segments include directly and reliably attributable items. Items which are not attributed to segments by the Group are:

· Balance sheet: cash and cash equivalents, current income tax assets and liabilities, deferred tax assets and liabilities and loans and borrowings.

· Statement of profit and loss: finance result and income tax.

(a)Operating segments

The operating segments defined by the steering committee are as follows:

· Bioscience: including all activities related with products derived from human plasma for therapeutic use.

· Hospital: comprising all non-biological pharmaceutical products and medical supplies manufactured by Group companies earmarked for hospital pharmacy. Products related with this business which the Group does not manufacture but markets as supplementary to its own products are also included.

· Diagnostic: including the marketing of diagnostic testing equipment, reagents and other equipment, manufactured by Group or other companies.

· Bio Supplies: since January 2017, the company is including all transactions related to biological products for non-therapeutic use in the new Bio Supplies Division resulting in a reclassification from Bioscience Division to Bio Supplies Division.

· Others: including the rendering of manufacturing services to third party companies.

As a result of the creation of the new Bio Supplies segment and Intersegments, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

Details of net sales by groups of products for 2017, 2016 and 2015 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Bioscience	3,429,785	3,228,275	3,032,111
Haemoderivatives
Diagnostic
Transfusional medicine	679,692	640,443	667,886
Other diagnostic	23,377	23,540	23,566
Hospital
Fluid therapy and nutrition	47,699	46,210	45,621
Hospital supplies	52,466	52,373	50,624
Bio supplies	66,791	24,387	24,466
Others	18,263	34,602	90,289
Total	4,318,073	4,049,830	3,934,563

The Group has concluded that the haemoderivative products are sufficiently alike to be considered as a whole for the following reasons:

· All these products are human plasma derivatives and are manufactured in a similar way.

· The customers and methods used to distribute these products are similar.

· All these products are subject to the same regulations regarding production and the same regulatory environment.

(b)Geographical information

Geographical information is grouped into four areas:

· United States of America and Canada

· Spain

· Rest of the European Union

· Rest of the world

The definition of these four segments is mainly due to the geographical level that the Group sets to manage its revenue as they respond to specific economic scenarios. The main framework of the Group is consistent with this geographical segment grouping, including the monitoring of its commercial operations and its information systems.

The financial information reported for geographical areas is based on sales to third parties in these markets as well as the location of assets.

(c)Main customer

Revenues from a Bioscience segment customer represent approximately 11.0% of the Group’s total revenues (10.7% in 2016 and 10.1% in 2015).

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Goodwill

12 Months Ended

Dec. 31, 2017

Goodwill

Goodwill

(7)Goodwill

Details of and movement in this caption of the consolidated balance sheet at 31 December 2016 are as follows:

		Thousands of Euros
		Balance at	Translation		Balance at
	Segment	31/12/2015	differences		31/12/2016
Net value
Grifols UK.Ltd. (UK)	Bioscience	9,362	(1,337	)	8,025
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—		6,118
Biomat USA, Inc.(USA)	Bioscience	186,907	6,132		193,039
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	9,961	173		10,134
Grifols Therapeutics, Inc. (USA)	Bioscience	2,041,137	67,002		2,108,139
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—		40,516
Grifols Diagnostic (Novartis) (USA, Switzerland and Hong Kong)	Diagnostic	1,232,358	39,666		1,272,024
		3,532,359	111,636		3,643,995

Details of and movement in this caption of the consolidated balance sheet at 31 December 2017 are as follows:

		Thousands of Euros
		Balance at	Business	Translation		Balance at
	Segment	31/12/2016	Combination	differences		31/12/2017
Net value
Grifols UK.Ltd. (UK)	Bioscience	8,025	—	(280	)	7,745
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—	—		6,118
Biomat USA, Inc.(USA)	Bioscience	193,039	40,101	(27,886	)	205,254
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	10,134	—	(591	)	9,543
Grifols Therapeutics, Inc. (USA)	Bioscience	2,108,139	—	(255,234	)	1,852,905
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—	—		40,516
Grifols Diagnostic (Novartis & Hologic) (USA, Spain and Hong Kong)	Diagnostic	1,272,024	1,466,420	(302,537	)	2,435,907
Kiro Grifols S.L. (Spain)	Hospital	—	26,510	—		26,510
		3,643,995	1,533,031	(586,528	)	4,590,498
			(See note 3)

Impairment testing:

As a result of the acquisition of Talecris in 2011, and for impairment testing purposes, the Group combines the CGUs allocated to the Bioscience segment, grouping them together at segment level, because substantial synergies were expected to arise on the acquisition of Talecris, and due to the vertical integration of the business and the lack of an independent organized market for the products. Because the synergies benefit the Bioscience segment globally they cannot be allocated to individual CGUs. The Bioscience segment represents the lowest level to which goodwill is allocated and is subject to control by Group management for internal control purposes.

Since the acquisition of Novartis’ Diagnostic business unit in 2014, the Group combines Araclon, Progenika, Australia and recently Hologic’s share of NAT donor screening unit acquisition into a single CGU for the Diagnostic business as the acquisition is supporting not only the vertically integration business but also cross-selling opportunities. In addition, for management purposes, the Group’s management is focused on the business more than geographical areas or individual companies.

Due to the acquisition of an additional 40% stake of Kiro Grifols S.L., the Group has decided to group Kiro Grifols S.L. and Laboratorios Grifols S.L. into a single CGU for the Hospital business since the acquisition is supporting cross-selling opportunities.

The CGUs established by Management are:

· Bioscience

· Diagnostic

· Hospital

The recoverable amount of the Bioscience CGU was calculated based on its value in use calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

The recoverable amount of the Diagnostic CGU was calculated based on its fair value less costs of disposal calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

The recoverable amount of the Hospital CGU was calculated based on its fair value less costs of disposal calculated as the present value of the future cash flows discounted at a discount rate considering the related inherent risk.

This value in use and fair value less costs of disposal calculations use cash flow projections for five years based on the financial budgets approved by management. Cash flows estimated as of the year in which stable growth in the CGU has been reached are extrapolated using the estimated growth rates indicated below.

The key assumptions used in calculating impairment of the CGUs for 2016 were as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	8.60	%
Diagnostic	2	%	10.30	%

The key assumptions used in calculating impairment of the CGUs for 2017 have been as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	9.50	%
Diagnostic	2	%	10.60	%
Hospital	1.40	%	13.30	%

Management determined budgeted gross margins based on past experience, investments in progress which would imply significant growth in production capacity and its forecast international market development. Perpetual growth rates are coherent with the forecasts included in industry reports. The discount rate used reflects specific risks related to the CGU.

As the acquisition of Hologic’s NAT donor screening unit share and the acquisition for an additional stake of Kiro Grifols S.L. are recent transactions and as the recoverable amount of the Bioscience CGU is much higher than the carrying amount of the Bioscience segment’s net assets, specific information from the impairment test sensitivity analysis is not included.

At 31 December 2017 Grifols’ stock market capitalization totals Euros 15,379 million (Euros 12,020 million at 31 December 2016).

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Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Other Intangible Assets

Other Intangible Assets

(8)Other Intangible Assets

Details of other intangible assets and movement during the years ended 31 December 2017 and 2016 are included in Appendix III, which forms an integral part of these notes to the Consolidated Financial Statements.

Intangible assets acquired from Talecris mainly include currently marketed products. Identifiable intangible assets correspond to Gamunex and have been recognized at fair value at the acquisition date of Talecris and classified as currently marketed products. Intangible assets recognized comprise the rights on the Gamunex product, its commercialization and distribution license, trademark, as well as relations with hospitals. Each of these components are closely linked and fully complementary, are subject to similar risks and have a similar regulatory approval process.

Intangible assets acquired from Progenika mainly include currently marketed products. Identifiable intangible assets correspond to blood, immunology and cardiovascular genotyping. These assets have been recognized at fair value at the acquisition date of Progenika and classified as currently marketed products.

The cost and accumulated amortization of currently marketed products acquired from Talecris and Progenika at 31 December 2016 is as follows:

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2015		Additions		differences		31/12/2016
Cost of currently marketed products - Gamunex	1,102,232		—		36,180		1,138,412
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(168,397	)	(36,062	)	(7,412	)	(211,871	)
Accumulated amortisation of currently marketed products - Progenika	(6,738	)	(2,379	)	—		(9,117	)
Carrying amount of currently marketed products	950,889		(38,441	)	28,768		941,216

The cost and accumulated amortization of currently marketed products acquired from Talecris and Progenika at 31 December 2017 is as follows:

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2016		Additions		differences		31/12/2017
Cost of currently marketed products - Gamunex	1,138,412		—		(137,828	)	1,000,584
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(211,871	)	(35,837	)	28,136		(219,572	)
Accumulated amortisation of currently marketed products - Progenika	(9,117	)	(2,379	)	—		(11,496	)
Carrying amount of currently marketed products	941,216		(38,216	)	(109,692	)	793,308

The estimated useful life of the currently marketed products acquired from Talecris is considered limited, has been estimated at 30 years on the basis of the expected life cycle of the product (Gamunex) and is amortized on a straight-line basis.

At 31 December 2017 the residual useful life of currently marketed products is 23 years and 5 months (24 years and 5 months at 31 December 2016).

The estimated useful life of the currently marketed products acquired from Progenika is considered limited, has been estimated at 10 years on the basis of the expected life cycle of the product and is amortized on a straight-line basis.

At 31 December 2017 the residual useful life of currently marketed products acquired from Progenika is 5 years and 2 months (6 years and 2 months at 31 December 2016).

(a)Self — constructed intangible assets

At 31 December 2017 the Group has recognized Euros 49,782 thousand as self-constructed intangible assets (Euros 29,034 thousand at 31 December 2016).

(b)Purchase commitments

At 31 December 2017 the Group has intangible asset purchase commitments amounting to Euros 1,199 thousand (Euros 639 thousand at 31 December 2016).

(c)Intangible assets with indefinite useful lives and other intangible in progress

At 31 December 2017 the Group has plasma center licenses with indefinite useful lives under intangible assets for a carrying amount of Euros 26,631 thousand (Euros 30,075 thousand at 31 December 2016).

The Group has also an amount of Euros 183,281 thousand as development costs in progress (Euros 52,272 thousand at 31 December 2016). The main variance corresponds to the assets acquired from Hologic’s business combination (see note 3(a)).

The Group has recognized an amount of Euros 4,235 thousand corresponding to payments relating to license rights due to the Aradigm acquisition (no amount was recognized at 31 December 2016).

(d)Result on disposal of intangible assets

Total losses incurred on disposals of intangible assets in 2017 amount to Euros 83 thousand (Euros 7,198 thousand of profit in 2016).

(e)Impairment testing

Indefinite-lived intangible assets have been allocated to the cash-generating unit (CGU) of the Bioscience segment. These assets have been tested for impairment together with goodwill (see note 7).

Impairment testing has been analyzed for each of the intangible assets in progress by calculating its recoverable amount based on their fair value.

As the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend the approval for LinahieTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the intangible assets referred to it have been totally impaired. As a consequence, the group has impaired a total amount of Euros 63,675 thousand related to this product. This amount has been recognized in the Profit and Loss Statement as a R&D expense. Even that, the company has impaired the investment in this company and the convertible bonds (see notes 10 and 11(a)).

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment

Property, Plant and Equipment

(9)Property, Plant and Equipment

Details of property, plant and equipment and movement in the consolidated balance sheet at 31 December 2017 and 2016 are included in Appendix IV, which forms an integral part of this note to the Consolidated Financial Statements.

Property, plant and development under construction at 31 December 2017 and 2016 mainly comprise investments made to extend the companies’ equipment and to increase their productive capacity.

In 2017, the Group has capitalized interests for a total amount of Euros 8,839 thousand (Euros 13,019 thousand in 2016)

a)Insurance

Group policy is to contract sufficient insurance coverage for the risk of damage to property, plant and equipment. At 31 December 2017 the Group has a combined insurance policy for all Group companies, which more than adequately covers the carrying amount of all the Group’s assets.

b)Losses on disposal of property, plant and equipment

Total losses incurred on disposals of property, plant and equipment for 2017 amount to Euros 1,468 thousand (Euros 4,021 thousand in 2016).

c)Assets under finance lease

The Group contracted the following types of property, plant and equipment under finance leases at 31 December 2016:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,213	(1,421	)	792
Plant and machinery	13,336	(4,784	)	8,552
	15,549	(6,205	)	9,344

The Group has contracted the following types of property, plant and equipment under finance leases at 31 December 2017:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,545	(815	)	1,730
Plant and machinery	14,249	(6,564	)	7,685
	16,794	(7,379	)	9,415

Details of minimum lease payments and the present value of finance lease liabilities, disclosed by maturity date, are detailed in note 20 (c).

d)Self – constructed property, plant and equipment

At 31 December 2017 the Group has recognized Euros 52,218 thousand as self -constructed property, plant and equipment (Euros 68,529 thousand at 31 December 2016).

e)Purchase commitments

At 31 December 2017 the Group has property, plant and equipment purchase commitments amounting to Euros 39,675 thousand (Euros 39,773 thousand at 31 December 2016).

f)Impairment

A group of assets forming part of the Hospital segment has been tested for impairment due to the decrease in the results of the segment and no impairment has been observed. The recoverable amount of the aforementioned assets is calculated based on the fair value less cost of disposal, using cash flow projections based on five-year financial budgets approved by management. Cash flows estimated as of the year in which stable growth has been reached by the assets are extrapolated using a pre-tax discount rate of 12.2% and a perpetual growth rate of 2% (10.3% and 2% respectively in fiscal year 2016).

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Equity Accounted Investees

12 Months Ended

Dec. 31, 2017

Equity Accounted Investees

Equity Accounted Investees

(10)Equity Accounted Investees

Details of this caption in the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

			Thousands of Euros			Thousands of Euros
	% ownership		31/12/2017	% ownership		31/12/2016
Aradigm Corporation	35.13	%	—	35.13	%	9,291
Kiro Grifols, S.L (see note 3(b))	90.00	%	—	50.00	%	13,888
Alkahest, Inc.	47.58	%	30,559	47.58	%	35,955
Albajuna Therapeutics, S.L	30.00	%	1,956	30.00	%	3,177
Interstate Blood Bank, Inc.	49.19	%	27,936	49.19	%	31,090
Bio Blood Components Inc.	48.97	%	32,960	48.97	%	38,725
Plasma Biological Services, LLC	48.90	%	23,010	48.90	%	25,890
Singulex, Inc.	19.33	%	29,322	20.00	%	43,329
GigaGen, Inc	43.96	%	29,047	—		—
Access Biologicals LLC	49.00	%	44,219	—		—
Aigües de Vilajuïga S.A.	50.00	%	—	—		—
			219,009			201,345

Movement in the investments in equity-accounted investees for the years ended at 31 December 2017, 2016 and 2015 have been as follows:

	Thousands of Euros
	2017		2016		2015
Balance at 1 January	201,345		76,728		54,296
Acquisitions	80,685		136,072		33,039
Transfers	(16,000	)	(29,059	)	—
Share of profit / (losses)	(13,195	)	6,933		(8,280	)
Share of other comprehensive income / translation differences	(27,134	)	10,671		2,673
Losses for Impairment	(6,692	)	—		—
Collected dividends	—		—		(5,000	)
Balance at 31 December	219,009		201,345		76,728

GigaGen Inc.

On 5 July 2017, Grifols through its 100% subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), has acquired a 43.96% shareholding in GigaGen, Inc., a company based in San Francisco (USA) for the amount of US Dollars 35 million.

GIANT and GigaGen have also entered into a Research and Collaboration Agreement whereby in exchange of a collaboration fee of US Dollars 15 million in the aggregate, GigaGen will commit to carry out research activities to develop recombinant polyclonal immunoglobulin therapies derived from human B cells for the treatment of human diseases.

The summarized financial information of GigaGen, Inc. corresponding to the last available financial statements is included below with the carrying amount of the Group’s interest. Information regarding the income statement is included only from the date of acquisition of the participation.

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	404		484
Current assets	21,910		26,277
Current liabilities	(180	)	(216	)
Total net assets (100%)	22,134		26,545
Group’s share of net assets (43.96%)	9,730		11,669
Profit from continuing operations (100%)	(1,830	)	(2,183	)
Group’s share of total comprehensive income (43.96%)	(804	)	(960	)

A reconciliation of the summarized financial information with the carrying amount of the Group’s interest is as follows:

	Thousand of Euros
	31/12/2017
Group’s share of net assets	9,730
Goodwill of equity method investment	19,317
Equity method accounted investment	29,047

Movement in Gigagen’s equity-accounted investment for the year ended 31 December 2017 is as follows:

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	31,752
Share of profit / (losses)	(804	)
Share of other comprehensive income / translation differences	(1,595	)
Impairment Losses	(306	)
Balance at 31 December	29,047

Access Biologicals LLC.

On 12 January 2017, the group has announced the acquisition of 49% of the voting rights in Access Biologicals LLC, a company based in San Diego, California, USA, for the amount of US Dollar 51 million. Grifols has entered into an option agreement to purchase the remaining 51% voting rights in five years, in 2022. Grifols has also signed a supply agreement to sell to Access Biologicals biological products not meant for therapeutic use.

The principal business activity of Access Biologicals is the collection and manufacturing of an extensive portfolio of biologicals products. Combined with closed-loop material sourcing, it provides critical support for various markets such as in-vitro diagnostic manufacturing, biopharmaceutical, cell culture and diagnostic research & development.

The summarized financial information of Access Biologicals LLC corresponding to the last available financial statements is included below with the carrying amount of the Group’s interest. Information regarding the income statement is included only from the date of acquisition of the participation.

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	1,221		1,464
Current assets	14,422		17,296
Non-current liabilities	(1,284	)	(1,540	)
Current liabilities	(3,023	)	(3,626	)
Total net assets (100%)	11,336		13,594
Group’s share of net assets (49%)	5,555		6,661
Profit from continuing operations (100%)	3,734		4,129
Group’s share of total comprehensive income (49%)	1,830		2,023

A  reconciliation of the summarized financial information with the carrying amount of the Group’s interest is as follows:

	Thousand of Euros
	31/12/2017
Group’s share of net assets	5,555
Goodwill of equity method investment	38,664
Equity method accounted investment	44,219

Movement in Access Biological’s equity-accounted investment for the year ended 31 December 2017 is as follows:

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	48,383
Share of profit / (losses)	1,830
Share of other comprehensive income / translation differences	(5,994	)
Balance at 31 December	44,219

Aradigm

As the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend the approval for LinahiqTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the investment in Aradigm have been totally impaired.

Consequently, the investment in Aradigm has been fully impaired for an amount of Euros 5,836 thousand in the statement of profit and loss.

Movement in the investment in Aradigm for the year ended 31 December 2017 and 31 December 2016 is as follows:

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	9,291		19,799
Share of profit / (losses)	(4,324	)	(10,185	)
Share of other comprehensive income / translation differences	869		(323	)
Impairment losses	(5,836	)	—
Balance at 31 December	—		9,291

Singulex, Inc.

On 17 May 2016 Grifols subscribed and paid a capital increase for an amount of US Dollars 50 million (Euros 44,107 thousand) in the US company Singulex, Inc. (“Singulex”). As a result, Grifols held a 20% (19.33% at December 2017) common stock interest in Singulex on a fully diluted basis at a pre-money valuation of US Dollars 200 million. Grifols will be entitled to appoint a director to serve the board of directors of Singulex. As a result, Singulex granted Grifols an exclusive worldwide license for the use and sale of Singulex’s technology for the blood donor and plasma screening to further ensure the safety of blood and plasma products.

Movement in Singulex, Inc.’s equity-accounted investment for the years ended 31 December 2016 and December 2017 is as follows:

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	43,329		—
Acquisitions	—		44,107
Share of profit / (losses)	(9,335	)	(3,890	)
Share of other comprehensive income / translation differences	(4,672	)	3,112
Balance at 31 December	29,322		43,329

Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LIc.

On 11 May 2016 Grifols acquired a 49.19% stake in Interstate Blood Bank, Inc. (IBBI), 48.97% of Bio-Blood Components, Inc. (Bio-Blood) and 48.90% of Plasma Biological Services, LLC (PBS) (“IBBI Group”), a group based in Memphis, TN, USA, for the price of US Dollars 100 million (Euros 88,215 thousand). GWWO also entered into an option agreement to purchase the remaining stakes for a price of US Dollars 100 million for an option price of US Dollars 10 million (Euros 9,007 thousand) (see notes 11 and 30). The purchase price and the call right were paid upon signature of the contract. The principal business activity of IBBI and its affiliates is the collection of plasma for the plasma fractionation industry, with 23 plasma collection centers, 9 blood donation centers and one laboratory.

Movement in Interstate Blood Bank, Inc., Bio-blood Components, Inc. and Plasma Biological Services, LLC.’s equity-accounted investment for the years ended 31 December 2016 and 2017 is as follows:

	Thousands of Euros						Thousands of Euros
	31/12/2017						31/12/2016
	IBBI		Bio-Blood		PBS		IBBI	Bio-Blood		PBS
Balance at 1 January	31,090		38,725		25,890		—	—		—
Acquisitions	—		—		—		28,229	36,168		23,818
Share of profit / (losses)	635		(1,181	)	270		695	(166	)	260
Share of other comprehensive income / translation differences	(3,789	)	(4,584	)	(3,150	)	2,166	2,723		1,812
Balance at 31 December	27,936		32,960		23,010		31,090	38,725		25,890

Albajuna Therapeutics, S.L

In January 2016, Grifols acquired 30% of the equity of AlbaJuna Therapeutics, S.L. for Euros 3.75 million in the form of a cash payment to finance the development and production of therapeutic antibodies against HIV. The initial investment will be increased upon achievements of agreed development milestones through two payments for a total amount of Euros 7.25 million.

AlbaJuna Therapeutics is a spin-off from the AIDS Investigation Institute IrsiCaixa, jointly driven by Obra Social “la Caixa” and the Generalitat de Catalunya’s Department of Health. It was founded to promote the preclinical and clinical development of monoclonal antibodies that both neutralize the HIV action in the human body and increase the activity of natural killer cells, which are responsible for the destruction of infected cells.

Kiro Grifols, S.L.

On 25 July 2017 the Group subscribed a capital increase in Kiro Grifols, S.L (formerly Kiro Robotics, S.L.) for an amount of Euros 12.8 million, which represents 40% of the voting and economic rights of Kiro Grifols. With this new operation, Grifols owns a total of 90% of the voting and economic rights of Kiro Grifols S.L., which is now considered part of the group, and starts using the global consolidation method instead of the equity method (see note 3(b)).

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Financial Assets

12 Months Ended

Dec. 31, 2017

Financial Assets

Financial Assets

(11)Financial Assets

Details of non-current financial assets on the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Convertible Bond (a)	—	15,201
Non-current derivatives (b) (see note 30)	8,338	13,665
Non-current investment in quoted shares (see note 30)	38,708	29,998
Total Non-current financial assets measured at fair value	47,046	58,864
Convertible Bond (a)	—	25,000
Non-current guarantee deposits	4,820	4,603
Other non-current financial assets	1,346	1,078
Non-current loans to EEAA (c) (see note 31)	16,677	—
Total Non-current financial assets measured at amortized cost	22,843	30,681

Details of other current financial assets on the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Deposits and guarantees	702	957
Current loans to third parties	59	832
Current loans to associates (see note 31)	9,977	793
Total other current financial assets	10,738	2,582

(a)Convertible Bond

On 22 April 2016, the Group’s subsidiary, Grifols Worldwide Operations Limited, subscribed convertible bonds for an amount of US Dollars 19,950 thousand (Euros 17,997 thousand) issued by Aradigm that bear at an interest rate of 9% and mature in 2021. The Group indirectly owns 35.13% of the common stock of Aradigm. Interest on the convertible bonds is payable on 1 May and 1 November of each year. At the date of these Consolidated Financial Statements Aradigm has paid the Group an amount of Euros 1,601 thousand on the convertible bonds (Euros 839 thousand at 31 December 2016). Upon the events described in the indenture governing the convertible bonds, the convertible bonds are convertible into common stock of Aradigm. At the date of these Consolidated Financial Statements, the conversion rate is 191.94 shares of Aradigm common stock per US Dollar 1,000 principal amount of convertible bonds.

As mentioned in note 8 (a), as the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration did not recommend approval for LinahiqTM as a treatment for non-cystic fibrosis bronchiectasis patients with chronic lung Pseudomonas aeruginosa infections, the Group has decided to impair all the financial assets referred to it. As a consequence, the financial assets related to the convertible bond of Aradigm have been impaired for a total amount of Euros 14,477 thousand (see note 26). This amount has been recognized in the Profit or Loss Statement as a financial result.

On February 2, 2017 Grifols Worldwide Operations Limited sold to Nomura International PLC the convertible bonds issued by TiGenix that the Group subscribed on March 6, 2015. The settlement amount was Euros 20.5 million resulting in a loss of Euros 5.5 million.

(b)Non-current derivatives

Non-current derivatives includes an amount of Euros 8,338 thousand in respect of the call right for the Interstate Blood Bank, Inc. shares, Bio-Blood Components, Inc. shares and Plasma Biological Services, LLC. units that are not owned by the Group. The call right can be exercised by the Group by delivering written notice of its intention at any time on or after February 1, 2019 and on or before April 30, 2019 (see note 11 (a)).

On December 31, 2017 the implicit derivative to the right of the convertible bond of Aradigm have been totally impaired due to the resolution of the Antimicrobial Drugs Advisory Committee of the US Food and Drug Administration. As a consequence, it has been recognized a financial impairment in the Profit and Loss Statement for a total amount of Euros 3,672 thousand.

(c)Non-current loans to EEAA

On 2 October 2017 the Group’s subsidiary Grifols Diagnostic Solutions, Inc. subscribed notes for an amount of US Dollars 20,000 thousand (Euros 16,676 thousand) issued by Singulex, Inc., that bear at an interest rate of 5% and mature in September 19, 2019. The Group indirectly owns 19.33 % of the common stock of Singulex Inc.

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Inventories

12 Months Ended

Dec. 31, 2017

Inventories

Inventories

(12)Inventories

Details of inventories at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Goods for resale	105,013	166,272
Raw materials and supplies	454,371	423,326
Work in progress and semi-finished goods	592,612	584,279
Finished goods	477,297	469,054
	1,629,293	1,642,931

Movement in the inventory provision was as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	33,069		22,614		15,888
Net charge for the year	8,232		8,878		6,099
Cancellations for the year	(357	)	(20	)	(195	)
Translation differences	(5,180	)	1,597		822
Balance at 31 December	35,764		33,069		22,614

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Trade and Other Receivables

12 Months Ended

Dec. 31, 2017

Trade and Other Receivables

Trade and Other Receivables

(13)Trade and Other Receivables

Details at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016
Trade receivables	302,685		431,510
Receivables from associates (note 31)	3,219		133
Bad debt provision (note 30)	(19,706	)	(17,987	)
Trade receivables	286,198		413,656
Other receivables (note 30)	7,485		13,705
Personnel	566		280
Advance payments (note 30)	11,181		6,775
Taxation authorities, VAT recoverable	20,105		17,768
Other public entities	1,344		3,771
Other receivables	40,681		42,299
Current income tax assets	59,531		77,713
	386,410		533,668

Other receivables

During 2017, 2016 and 2015 certain companies of the Grifols Group have sold receivables from several public entities, without recourse, to certain financial institutions. Under some of these contracts, the Group receives an initial payment which usually amounts to 90% of the nominal amount of the receivables sold less the associated sale and purchase costs. The deferred collection (equivalent to the rest of the nominal amount) will be made by the Group once the financial institution has collected the nominal amount of the receivables (or the interest, if the balances are received after more than 36 months, depending on the terms of each particular contract) and this amount is recognized in the consolidated balance sheet as a balance receivable from the financial institution. The deferred amount (equivalent to the continuing involvement) totals Euros 1,800 thousand at 31 December 2017 (Euros 2,560 thousand at 31 December 2016), which does not differ significantly from its fair value and coincides with the amount of maximum exposure to losses. The financial institution makes the initial payment when the sale is completed and therefore, the bad debt risk associated with this part of the nominal amount of the receivables is transferred. The Group has transferred the credit risk and control of the receivables to certain financial institutions and has therefore derecognized the asset transferred in the consolidated balance sheet, as the risks and rewards inherent to ownership have not been substantially retained.

Certain foreign Group companies have also entered into a contract to sell receivables without recourse to various financial institutions.

Total balances receivable without recourse sold to financial institutions through the aforementioned contracts in 2017 amount to Euros 912 million (Euros 870 million in 2016).

The finance cost of these operations for the Group totals approximately Euros 3,973 thousand which has been recognized under finance result in the consolidated statement of profit and loss for 2017 (Euros 4,885 thousand in 2016 and Euros 6,512 thousand in 2015) (see note 26).

Details of balances with related parties are shown in note 31.

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Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2017

Cash and Cash Equivalents

Cash and Cash Equivalents

(14)Cash and Cash Equivalents

Details of this caption of the consolidated balance sheet at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Current deposits	655,463	470,298
Cash in hand and at banks	231,058	424,711
Total cash and cash equivalents	886,521	895,009

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Equity

12 Months Ended

Dec. 31, 2017

Equity

Equity

(15)Equity

Details of consolidated equity and movement are shown in the consolidated statement of changes in equity.

(a)Share capital

At 31 December 2017 and 2016, the Company’s share capital amounts to Euros 119,603,705 and comprises:

· Class A shares: 426,129,798 ordinary shares of Euros 0.25 par value each, subscribed and fully paid and of the same class and series.

· Class B shares: 261,425,110 non-voting preference shares of 0.05 Euros par value each, of the same class and series, and with the preferential rights set forth in the Company’s by-laws.

On 4 January 2016 the Company’s new shares resulting from the share split ruling on 3 December 2015 by the Company’s board of directors started to be traded in accordance with the delegation of authorities by the shareholders at the general shareholders’ meeting held on 29 May 2015.

The main characteristics of the Class B shares are as follows:

· Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each year equal to Euros 0.01 per Class B share provided that the aggregate preferred dividend does not exceed the distributable profits of that year and a distribution of dividends has been approved by the Company’s shareholders. This preferred dividend is not cumulative if sufficient distributable profits are not obtained in the period.

· Each Class B share is entitled to receive, in addition to the above-mentioned preferred dividend, the same dividends and other distributions as for one Grifols ordinary share.

· Each Class B share entitles the holder to its redemption under certain circumstances, if a takeover bid for all or part of the shares in the Company has been made, except if holders of Class B shares have been entitled to participate in the bid on the same terms as holders of Class A shares. The redemption terms and conditions reflected in the Company’s by-laws limit the amount that may be redeemed, requiring that sufficient distributable reserves be available, and limit the percentage of shares to be redeemed in line with the ordinary shares to which the bid is addressed.

· In the event the Company were to be wound up and liquidated, each Class B share entitles the holder to receive, before any amounts are paid to holders of ordinary shares, an amount equal to the sum of (i) the par value of the Class B share, and (ii) the share premium paid for the Class B share when it was subscribed. In addition to the Class B liquidation preference amount, each holder is entitled to receive the same liquidation amount that is paid for each ordinary share.

These shares are freely transferable.

Since 23 July 2012 the ADSs (American Depositary Shares) representing Grifols’ Class B shares (non-voting shares) have had an exchange ratio of 1:1 in relation to Class B shares, ie.1 ADS represents 1 Class B share. The previous rate was 2 ADS per 1 Class B share.

The Company’s knowledge of its shareholders is based on information provided voluntarily or in compliance with applicable legislation. According to the information available to the Company, there are no interests representing more than 10% of the Company’s total capital at 31 December 2017 and 2016.

At 31 December 2017 and 2016, the number of outstanding shares is equal to the total number of Company shares, less treasury stock.

Movement in outstanding shares during 2016 is as follows:

	Class A shares	Class B shares
Balance at 1 January 2016	426,129,798	257,386,540
(Acquisition) / disposal of treasury stock (note 15 (d))	—	(692,165	)
Balance at 31 December 2016	426,129,798	256,694,375

Movement in outstanding shares during 2017 is as follows:

	Class A shares	Class B shares
Balance at 1 January 2017	426,129,798	256,694,375
(Acquisition) / disposal of treasury stock (note 15 (d))	—	432,929
Balance at 31 December 2017	426,129,798	257,127,304

(b)Share premium

Movement in the share premium is described in the consolidated statement of changes in equity, which forms an integral part of this note to the Consolidated Financial Statements.

(c)Reserves

The drawdown of accumulated gains is subject to legislation applicable to each of the Group companies. At 31 December 2017, Euros 40,061 thousand equivalent to the carrying amount of development costs pending amortization of certain Spanish companies (Euros 50,680 thousand at 31 December 2016) (see note 8) are, in accordance with applicable legislation, restricted reserves which cannot be distributed until these development costs have been amortized.

In May 2015 the company sold 1,967,265 treasury stocks (Class A Shares), generating a profit of Euros 2 million, recognized in reserves.

In June 2015 Araclon Biotech, S.L. increased capital by an amount of Euros 6 million. As a result, the Group has increased its investment from 66.15% to 70.83%. The difference between the share capital increase carried out by the Group and the non-controlling interest had been recognized as a Euros 1.77 million decrease in reserves.

In July 2016 the Group acquired an additional 20% of the assets of Medion Diagnostics AG in exchange for 59,951 treasury stocks (Class B Shares) from its non-controlling interests. After these capital increases, Grifols’ interest rose to 100% in 2016. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 0.6 million decrease in reserves.

In August 2016 Araclon Biotech, S.L. increased capital by an amount of Euros 6.7 million. As a result, the Group increased its investment from 70.83% to 73.22%. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 1.7 million decrease in reserves.

On 12 December 2016, the Group subscribed a share capital increase in the capital of VCN Biosciences, S.L. of Euros 5 million. After this capital increase, Grifols interest rose to 81.34% in 2016. The difference between the share capital increase carried out by the Group and the non-controlling interest was recognized as a Euros 1 million decrease in reserves.

In October 2017, the Group acquired 12,020 Progenika Biopharma, S.A. shares As a result, the Group has increased its investment from 89.25% to 90.23%. The difference between the share capital increase carried out by the Group and the non-controlling interest has been recognized as a Euros 374 thousand decrease in reserves.

At 31 December 2017 and 2016 reserves include the IFRS-EU first-time adoption revaluation reserves and legal reserve of certain Group companies.

Legal reserve

Companies in Spain are obliged to transfer 10% of each year’s profits to a legal reserve until this reserve reaches an amount equal to 20% of share capital. This reserve is not distributable to shareholders and may only be used to offset losses if no other reserves are available. Under certain conditions it may be used to increase share capital provided that the balance left on the reserve is at least equal to 10% of the nominal value of the total share capital after the increase.

At 31 December 2017 and 2016 the legal reserve of the Company amounts to Euros 23,921 thousand.

Distribution of the legal reserves of Spanish companies is subject to the same restrictions as those of the Company and at 31 December 2017 the balance of the legal reserve of other Spanish companies amounts to Euros 2,416 thousand (Euros 1,485 thousand at 31 December 2016).

Other foreign Group companies have a legal reserve amounting to Euros 731 thousand at 31 December 2017 (Euros 650 thousand at 31 December 2016).

(d)Treasury stock

At 31 December 2017 and December 2016 the Company does not have any Class A treasury stock.

Movement in Class B treasury stock during 2016 is as follows:

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2016	4,038,570		58,575
Acquisition of Class B shares	1,628,893		23,720
Non Cash Disposal Class B shares	(936,728	)	(13,585	)
Balance at 31 December 2016	4,730,735		68,710

In July 2016 the Company delivered 59,951 treasury stocks (Class B Shares) to Medion’s non-controlling interests in exchange for the 20% acquired from them.

In March 2016 the Company delivered 876,777 treasury stocks (Class B Shares) to Progenika’s non-controlling interests in exchange for the 16.46% acquired from them (see note 2(b)).

Class B share acquisitions included the purchase of the Class B shares from the vendor shareholders of Progenika for which Grifols exercised the cash option for an amount of Euros 11,035 thousand. This amount had been considered as cash used in investing activities in the statement of cash flows

Movement in Class B treasury stock during 2017 is as follows:

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2017	4,730,735		68,710
Disposal Class B shares	(432,929	)	(6,288	)
Balance at 31 December 2017	4,297,806		62,422

In March 2017 the company delivered 432,929 treasury stocks (Class B shares) to eligible employees as a compensation of the Restricted Share Unit Retention Plan (see note 29).

The Parent held Class B treasury stock equivalent to 0.6% of its capital at 31 December 2017 (0.7% at 31 December 2016).

(e)Distribution of profit

The profits of Grifols, S.A. and subsidiaries will be distributed as agreed by respective shareholders at their general meetings.

The proposed distribution of profit of the Parent Grifols, S.A. for the years ended 31 December 2017, and the distribution approved for 2016, presented at the general meeting held on 26 May 2017, is as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Legal Reserve	—	—
Voluntary reserve	76,247	103,611
Dividends	265,080	218,182
Profit of the Parent	341,327	321,793

The following dividends were paid in 2016:

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	53	%	0.13	56,493
Non-voting shares	265	%	0.13	34,136
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				93,243

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,205
Total interim dividends paid				122,908

The following dividends were paid in 2017:

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	54	%	0.14	57,790
Non-voting shares	271	%	0.14	34,870
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				95,274

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,283
Total interim dividends paid				122,986

At the meeting held on 27 October 2017, the Board of Directors of Grifols approved the distribution of interim dividend for 2017 of Euros 0.18 for each Class A and B share, recognizing a total of Euros 122,986 thousand as interim dividend.

At the meeting held on 28 October 2016, the Board of Directors of Grifols approved the distribution of interim dividend for 2016 of Euros 0.18 for each Class A and B share, recognizing a total of Euros 122,908 thousand as interim dividend.

These amounts to be distributed did not exceed the profits generated by the Company since the end of the last reporting period, less the estimated income tax payable on these profits, in accordance with article 277 of the Revised Spanish Companies Act.

The Statement of Liquidity for Distribution of Interim Dividend of Grifols, S.A. prepared in accordance with legal requirements and which shows the existence of sufficient liquidity to be able to distribute the aforementioned interim dividend is provided in Appendix V.

At a general meeting held on 26 May 2017 the shareholders approved the distribution of a preferred dividend of Euros 0.01 for every Class B non-voting share.

The distribution of the profit for the years ended 31 December 2016 and 2017 is presented in the consolidated statement of changes in equity.

(f)Restricted Share Unit Compensation

The Group has set up a Restricted Share Unit Retention Plan (hereinafter RSU Plan) for certain employees (see note 29). This commitment will be settled using equity instruments and the cumulative accrual amounts to Euros 13,871 thousand (Euros 7,946 thousand in 2016).

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Earnings Per Share

12 Months Ended

Dec. 31, 2017

Earnings Per Share

Earnings Per Share

(16)Earnings Per Share

The calculation of basic earnings per share is based on the profit for the year attributable to the shareholders of the Parent divided by the weighted average number of ordinary shares in circulation throughout the year, excluding treasury stock.

Details of the calculation of basic earnings per share are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding	684,197,276	683,225,815	683,549,316
Basic earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average of the ordinary shares outstanding (basic) has been calculated taking into consideration the share split carried out on 4 January 2016 as follows:

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,516,338		683,610,378
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (basic) at 31 December	684,197,276	683,225,815		683,549,316

Diluted earnings per share are calculated by dividing profit for the year attributable to shareholders of the Parent by the weighted average number of ordinary shares in circulation considering the diluting effects of potential ordinary shares.

The RSU Plan granted by the Group and payable in shares, assumes the existence of dilutive potential shares. Diluted earnings per share have been calculated as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding (diluted)	684,243,891	684,170,887	683,924,426
Diluted earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average number of ordinary shares outstanding diluted has been calculated as follows:

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,988,460		683,610,378
Effect of RSU shares	46,615	472,950		375,110
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (diluted) at 31 December	684,243,891	684,170,887		683,924,426

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Non-Controlling Interests

12 Months Ended

Dec. 31, 2017

Non-Controlling Interests

Non-Controlling Interests

(17)Non-Controlling Interests

Details of non-controlling interests and movement at 31 December 2016 are as follows:

	Thousands of Euros
	Balance at 31/12/2015		Additions		Disposals		Capital increases	Translation differences		Balance at 31/12/2016
Grifols (Thailand) Pte Ltd	2,664		778		(215	)	—	127		3,354
Grifols Malaysia Sdn Bhd	1,040		144		—		—	(12	)	1,172
Araclon Biotech, S.A.	183		(1,819	)	—		1,776	—		140
Medion Grifols Diagnostic AG	(406	)	—		406		—	—		—
GRI-CEI S/A Productos para transfusao	1,146		—		(1,146	)	—	—		—
Progenika Biopharma, S.A.	1,093		165		—		—	(47	)	1,211
Brainco Biopharma, S.L.	(373	)	—		373		—	—		—
Abyntek Biopharma, S.L.	(93	)	20		—		—	—		(73	)
VCN Bioscience, S.L	(67	)	(201	)	—		961	—		693
	5,187		(913	)	(582	)	2,737	68		6,497
					(see note 2(b))

Details of non-controlling interests and movement at 31 December 2017 are as follows:

	Thousands of Euros
	Balance at 31/12/2016		Additions		Disposals		Business Combination / Additions to Consolidated Group	Translation differences		Balance at 31/12/2017
Grifols (Thailand) Pte Ltd	3,354		433		(77	)	—	(131	)	3,579
Grifols Malaysia Sdn Bhd	1,172		229		—		—	(29	)	1,372
Araclon Biotech, S.A.	140		(1,617	)	—		—	—		(1,477	)
Progenika Biopharma, S.A.	1,211		(60	)	(297	)	—	27		881
Abyntek Biopharma, S.L.	(73	)	45		28		—	—		—
VCN Bioscience, S.L	693		(272	)	—		—	—		421
Kiro Grifols , S.L.	—		(144	)	—		254	—		110
	6,497		(1,386	)	(346	)	254	(133	)	4,886

XML

Grants

12 Months Ended

Dec. 31, 2017

Grants

Grants

(18)Grants

Details are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Capital grants	11,010	11,311
Interest rate grants (preference loans) (See note 20 ( e))	812	885
	11,822	12,196

Interest-rate grants (preference loans) reflect the implicit interest on loans extended by the Spanish Ministry of Science and Technology as these are interest free.

Grants of Euros 323 thousand have been transferred to the consolidated statement of profit and loss during the year ended 31 December 2017 (Euros 1,154 thousand at 31 December 2016 and Euros 1,227 thousand at 31 December 2015).

XML

Provisions

12 Months Ended

Dec. 31, 2017

Provisions

Provisions

(19)Provisions

Details of provisions at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Non-current provisions (a)
Provisions for pensions and similar obligations	4,742	4,195
Other provisions	1,021	923
Non-current provisions	5,763	5,118

	Thousands of Euros
	31/12/2017	31/12/2016
Current provisions (b)
Trade provisions	106,995	89,588
Current provisions	106,995	89,588

(a)Non-current provisions

At 31 December 2017, 2016 and 2015 provisions for pensions and similar obligations mainly comprise a provision made by certain foreign subsidiaries in respect of labor commitments with certain employees.

Movement in provisions during 2015 is as follows:

	Thousand s of Euros
	Balance at 31/12/2014	Net Charge	Cancellations		Reclassifications		Translation differences		Balance at 31/12/2015
Non-current provisions	6,953	376	(1,598	)	(600	)	(151	)	4,980
	6,953	376	(1,598	)	(600	)	(151	)	4,980

Movement in provisions during 2016 is as follows:

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Reclassifications	Translation differences	Balance at 31/12/2016
Non-current provisions	4,980	(399	)	(281	)	814	4	5,118
	4,980	(399	)	(281	)	814	4	5,118

Movement in provisions during 2017 is as follows:

	Thousands of Euros
	Balance at 31/12/2016	Business Combination	Net Charge	Cancellations		Reclassifications	Translation differences		Balance at 31/12/2017
Non-current provisions	5,118	23	422	(23	)	290	(67	)	5,763
	5,118	23	422	(23	)	290	(67	)	5,763

(b)Current provisions

Movement in trade provisions during 2015 is as follows:

	Thousands of Euros
	Balance at 31/12/2014	Net Charge		Cancellations		Reclasifications	Translation differences	Balance at 31/12/2015
Trade provisions	115,985	(2,562	)	(6,123	)	492	15,257	123,049
	115,985	(2,562	)	(6,123	)	492	15,257	123,049

Movement in trade provisions during 2016 is as follows:

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Translation differences	Balance at 31/12/2016
Trade provisions	123,049	(28,481	)	(6,417	)	1,437	89,588
	123,049	(28,481	)	(6,417	)	1,437	89,588

Movement in trade provisions during 2017 is as follows:

	Thousands of Euros
	Balance at 31/12/2016	Business combination	Net Charge		Cancellations		Reclasifications		Translation differences		Balance at 31/12/2017
Trade provisions	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
		(See note 3(a))

XML

Financial Liabilities

12 Months Ended

Dec. 31, 2017

Financial Liabilities

Financial Liabilities

(20)Financial Liabilities

This note provides information on the contractual conditions of the loans obtained by the Group, which are measured at amortized cost. For further information on exposure to interest rate risk, currency risk and liquidity risk and the fair values of financial liabilities, please refer to note 30.

Details at 31 December 2017 and 2016 are as follows:

	Thousands of Euros
Financial liabilities	31/12/2017	31/12/2016
Non-current obligations (a)	853,667	831,417
Senior secured debt (b)	4,849,882	3,728,695
Other loans (b)	169,214	114,898
Finance lease liabilities (c)	5,415	6,086
Other non-current financial liabilities (e)	23,637	30,975
Total non-current financial liabilities	5,901,815	4,712,071
Current obligations (a)	95,538	95,524
Senior secured debt (b)	4,057	81,273
Other loans (b)	29,527	23,288
Finance lease liabilities (c)	3,945	3,859
Other current financial liabilities (e)	22,003	26,121
Total current financial liabilities	155,070	230,065

On 06 February 2017 the Group concluded the refinancing process of its senior debt. The total debt refinanced amounts to US Dollars 6,300 million (Euros 5,800 million), including the US Dollars 1,816 million loan obtained for the acquisition of Hologic’s transfusional diagnostics unit. Following the refinancing process, Grifols’ debt structure consists in a US Dollars 6,000 million long-term loan with institutional investors and banks segmented in two tranches (Term Loan A and Term Loan B), and a US Dollars 300 million undrawn revolving credit facility.

On 18 April 2017 the Group concluded the refinancing process of the Senior Unsecured Notes. The total bond issuance amounted to Euros 1,000 million.

On 5 December 2017 the Group has received an additional loan from the European Investment Bank of up to Euros 85 million at a fixed interest rate for a period of ten years with a grace period of two years. The loan will be used to support certain investments in R&D which are mainly focused on searching for new applications for plasmatic proteins. On 28 October 2015, the Group received its first loan with the same entity and conditions for a total amount of Euros 100 million.

(a)Senior Unsecured Notes

On 18 April 2017, Grifols, S.A., issued Euros 1,000 million Senior Unsecured Notes (the “Notes”) that will mature in 2025 and will bear annual interest at a rate of 3.20%. These notes replaced the 97.1% of the Senior Unsecured Notes issued in 2014 by Grifols Worldwide Operations Limited, a 100% subsidiary of Grifols S.A., amounting to US Dollars 1,000 million, with a maturity in 2022 and at interest rate of 5.25% that was owned by a financial institution. The remaining 2.9% of the existing notes was redeemed before the exchange by an amount of Euros 26,618 thousand. The corresponding deferred costs of the notes have been recognized in profit and loss. On 2 May 2017 the Notes have been admitted to listing in the Irish Stock Exchange.

The present value of discounted cash flows of the new Notes under the new agreement, including costs for fees paid and discounted using the original effective interest rate differs by less than 10% of the present value discounted cash flows remaining in the original debt, whereby the new agreement is not substantially different to the original agreement.

The costs of refinancing Senior Unsecured Notes amounted to Euros 57.5 million, including the redemption costs. These costs were included as transaction costs together with other costs deriving from the debt issue and will be taken to profit and loss in accordance with the new effective interest rate. Based on the analysis of the quantitative and qualitative factors, the Group concluded that the renegotiation of conditions of the Senior Unsecured Notes does not trigger a derecognition of the liability. Unamortized financing costs from the Senior Unsecured Notes amount to Euros 146 million at 31 December 2017 (Euros 117 million at 31 December 2016).

Details of movement in the Senior Unsecured Notes at 31 December 2016 are as follows:

	Thousands of Euros
	Opening outstanding balance 01/01/16	Translation differences	Closing outstanding balance 31/12/16
Senior Unsecured Notes (nominal amount)	918,527	30,150	948,677
Total	918,527	30,150	948,677

Details of movement in the Senior Unsecured Notes at 31 December 2017 are as follows:

	Thousands of Euros
	Opening outstanding balance 01/01/17	Refinancing	Repayments		Translation differences		Closing outstanding balance 31/12/17
Senior Unsecured Notes (nominal amount)	948,677	108,597	(26,618	)	(30,656	)	1,000,000
Total	948,677	108,597	(26,618	)	(30,656	)	1,000,000

At 31 December 2017 and 2016 the current obligations caption includes the issue of bearer promissory notes to Group employees, as follows:

	31/12/2016
						Promissory
			Nominal			notes			Interest
			amount of			subscribed	Buy back		pending accrual
		Maturity	promissory	Interest		(Thousands of	(Thousands		(Thousands of
	Issue date	date	notes (Euros)	rate		Euros)	of Euros)		Euros)
Issue of bearer promissory notes	05/05/16	04/05/17	3,000	4.00	%	84,966	(789	)	(1,104	)

31/12/2017

Promissory

Nominal

notes

Interest

amount of

subscribed

Buy back

pending accrual

Maturity

promissory

Interest

(Thousands of

(Thousands

(Thousands of

Issue date

date

notes (Euros)

rate

Euros)

of Euros)

Euros)

Issue of bearer promissory notes

05/05/17

04/05/18

3,000

3.00

%

92,109

(906

)

(909

)

(b)Loans and borrowings

Details of loans and borrowings at 31 December 2017 and 2016 are as follows:

					Thousands of Euros
					31/12/2017			31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended	Carrying amount		Amount extended	Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	1,959,476	1,959,476		—	—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	607,000	607,000		—	—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	2,501,459	2,457,684		—	—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—	—		400,000	385,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—	—		664,074	527,108
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—	—		3,055,168	2,967,574
Total senior debt					5,067,935	5,024,160		4,119,242	3,879,682
EIB Loan	Euros	2.70%	20/11/2015	20/11/2025	100,000	74,375		100,000	100,000
EIB Loan	Euros	2.02%	22/12/2017	22/12/2027	85,000	85,000
Total EIB Loan					185,000	159,375		100,000	100,000
Revolving Credit	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	250,146	—		—	—
Revolving Credit	US Dollars	Libor + 2.5%	27/02/2014	27/02/2019	—	—		284,603	—
Total Revolving Credit					250,146	—		284,603	—
Other non-current loans	Euros	Euribor- Euribor+4%	19/03/2013	30/09/2024	33,180	9,839		33,000	14,898
Loan transaction costs					—	(174,278	)	—	(150,987	)
Non-current loans and borrowings					5,536,261	5,019,096		4,536,845	3,843,593

					Thousands of Euros
					31/12/2017				31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended		Carrying amount		Amount extended		Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	(*	)	25,015		—		—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—		—		(*	)	4,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—		—		(*	)	49,806
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—		—		(*	)	30,832
Total senior debt					—		25,015		—		84,638
BEI Loan	Euros	2.70%	20/11/2015	20/11/2025	(*	)	10,625		—		—
Total BEI Loan					—		10,625		—		—
Other current loans		0.1%-3.74%			131,700		18,902		208,105		23,288
Loan transaction costs					—		(20,958	)	—		(3,365	)
Current loans and borrowings					131,700		33,584		208,105		104,561

(*) See amount granted under non-current debt

Current loans and borrowings include accrued interest amounting to Euros 1,713 thousand as at 31 December 2017 (Euros 596 thousand at 31 December 2016).

On 06 February 2017 the Group refinanced its Senior Secured Debt with the existing lenders and obtained the additional debt for the acquisition of Hologic by an amount of US Dollars 1,816 million The new senior debt consists of a Term Loan A (“TLA”), which amounts to US Dollars 2,350 million and Euros 607 million with a 1.75% margin overLibor and Euribor respectively and maturity in 2023 and quasi-bullet amortization structure, and a Term Loan B (“TLB”) that amounts to US Dollars 3,000 million with a 2.25% margin over Libor and maturity in 2025. The borrowers of the total debt are Grifols Worldwide Operations Limited and Grifols, S.A. for the Term Loan A and Grifols Worldwide Operations USA, Inc. for the Term Loan B.

The present value discounted from cash flows under the new agreement, including any fees paid and discounted using the original effective interest rate differs by less than 10% of the present value discounted from cash flows remaining in the original debt, whereby it is considered that the debt instrument has not been substantially modified.

The costs of refinancing the senior debt have amounted to Euros 84.8 million. Based on the analysis of the quantitative and qualitative factors, the Group has concluded that the renegotiation of conditions of the senior debt does not trigger a derecognition of the liability. Unamortized financing costs from the senior secured debt amount to Euros 195 million at 31 December 2017 (Euros 154 million at 31 December 2016).

The terms and conditions of the senior secured debt are as follows:

· Tranche A: six year loan divided into two tranches: US Tranche A and Tranche A in Euros.

· US Tranche A :

· Original Principal Amount of US Dollars 2,350 million.

· Applicable margin of 175 basis points (bp) linked to US Libor.

· Quasi-bullet amortization structure.

· Maturity in 2023.

· Tranche A in Euros :

· Original Principal Amount of Euros 607 million.

· Applicable margin of 175 basis ponts (bp) linked to Euribor.

· Quasi-bullet amortization structure.

· Maturity in 2023.

Details of Tranche A by maturity at 31 December 2017 are as follows:

	US Tranche A			Tranche A in Euros
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros	Currency	Principal in thousands of Euros
2019	US Dollars	117,500	97,974	Euros	30,350
2020	US Dollars	235,000	195,948	Euros	60,700
2021	US Dollars	235,000	195,948	Euros	60,700
2022	US Dollars	1,321,875	1,102,204	Euros	341,437
2023	US Dollars	440,625	367,402	Euros	113,813
Total	US Dollars	2,350,000	1,959,476	Euros	607,000

· Tranche B: Senior Debt Loan repayable in eight years.

· US Tranche B :

· Original Principal Amount of US Dollars 3,000 million.

· Applicable margin of 225 basis points (bp) linked to US Libor.

· Quasi-bullet amortization structure.

· Maturity in 2025.

Details of Tranche B by maturity at 31 December 2017 are as follows:

	US Tranche B
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros
2018	US Dollars	30,000	25,015
2019	US Dollars	30,000	25,015
2020	US Dollars	30,000	25,015
2021	US Dollars	30,000	25,015
2022	US Dollars	30,000	25,015
2023	US Dollars	30,000	25,015
2024	US Dollars	30,000	25,015
2025	US Dollars	2,767,500	2,307,594
Total	US Dollars	2,977,500	2,482,699

US Dollar 300 million committed credit revolving facility: Amount maturing on 2023 and applicable margin of 175 basis points (bp) linked to US Libor. At 31 December 2017 no amount has been drawn down on this facility.

The issue of senior unsecured notes and senior secured debt is subject to compliance with a leverage ratio covenant. At 31 December 2017 the Group complies with this covenant.

Both the Senior Term Loans and the Revolving Loans are guaranteed by Grifols, S.A. and certain significant subsidiaries of Grifols, S.A. that together with Grifols, S.A. represent, in the aggregate, at least 80% of the consolidated assets and consolidated EBITDA of Grifols, S.A. and its subsidiaries.

The Notes have been issued by Grifols S.A. and are guaranteed on a senior unsecured basis by subsidiaries of Grifols, S.A. that are guarantors and co-borrower under the New Credit Facilities. The guarantors are Grifols Worldwide Operations Limited, Biomat USA, Inc., Grifols Biologicals Inc., Grifols Shared Services North America, Inc., Grifols Diagnostic Solutions Inc., Grifols Therapeutics, Inc., Instituto Grifols, S.A., Grifols Worldwide Operations USA, Inc and Grifols USA, Llc.

(c)Finance lease liabilities

Details of minimum payments and the present value of finance lease liabilities, by maturity date, are as follows:

	Thousands of Euros
	31/12/2017			31/12/2016
	Minimum payments	Interest	Present Value	Minimum payments	Interest	Present Value
Maturity at:
Less than one year	4,305	360	3,945	4,267	408	3,859
Two years	2,636	179	2,457	3,636	263	3,373
Three years	1,461	88	1,373	1,792	88	1,704
Four years	814	60	754	672	16	656
Five years	369	42	327	306	5	301
More than five years	550	46	504	53	1	52
Total	10,135	775	9,360	10,726	781	9,945

(d)Credit rating

In December 2017 and December 2016 Moody’s Investors Service has confirmed the ‘Ba3’ corporate family rating, ‘Ba2’ rating to the senior secured bank debt and ‘B2’ rating to the unsecured notes that were used to refinance the existing debt structure. The outlook is confirmed as stable.

In December 2017 and December 2016 Standard & Poor’s has confirmed its ‘BB’ rating on Grifols and has assigned ‘BB’ and ‘B+’ issue ratings to Grifols’ senior secured debt and senior unsecured notes that were used to refinance the existing debt structure. The outlook for the rating is stable.

(e)Other financial liabilities

At 31 December 2017 “other financial liabilities” include interest-free loans extended by governmental institutions amounting to Euros 20,306 thousand (Euros 20,543 thousand at 31 December 2016). The portion of the loans considered a grant and still to be taken to profit and loss amounts to Euros 812 thousand (Euros 885 thousand at 31 December 2016) (see note 18).

At 31 December 2017, “other current financial liabilities” include an amount of Euros 5 million related to the remaining call option extended by the Group and the shareholders of Progenika with maturity on 2018.

At 31 December 2017 and 2016 “other current financial liabilities” also include approximately Euros 3,056 thousand and Euros 17,578 thousand, respectively, which have been collected directly from Spanish Social Security affiliated bodies and transferred to financial institutions (see note 13).

Details of the maturity of other financial liabilities are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Maturity at:
Up to one year	22,003	26,121
Two years	10,818	11,468
Three years	3,787	6,203
Four years	2,794	5,802
Five years	2,247	2,490
Over five years	3,991	5,012
	45,640	57,096

XML

Trade and Other Payables

12 Months Ended

Dec. 31, 2017

Trade and Other Payables

Trade and Other Payables

(21)Trade and Other Payables

Details are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Suppliers	423,096	461,073
VAT payable	8,827	10,048
Taxation authorities, withholdings payable	24,084	23,700
Social security payable	11,741	11,422
Other public entities	97,068	97,724
Other payables	141,720	142,894
Current income tax liabilities	6,709	7,957
	571,525	611,924

Suppliers

Details of balances with related parties are shown in note 31.

The Group’s exposure to currency risk and liquidity risk associated with trade and other payables is described in note 30.

XML

Other Current Liabilities

12 Months Ended

Dec. 31, 2017

Other Current Liabilities

Other Current Liabilities

(22)Other Current Liabilities

Details at 31 December are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Salaries payable	129,519	132,755
Other payables	649	427
Deferred income	4,284	441
Advances received	9,945	6,563
Other current liabilities	144,397	140,186

XML

Net Revenues

12 Months Ended

Dec. 31, 2017

Net Revenues

Net Revenues

(23)Net Revenues

Net revenues are mainly generated from the sale of goods.

The distribution of net consolidated revenues for 2017, 2016 and 2015 by segment is as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Bioscience	3,429,785		3,195,424		3,032,111
Diagnostic	732,369		691,701		716,838
Hospital	105,649		102,251		96,245
Bio supplies	66,791		57,239		24,466
Others	18,263		34,601		90,289
Intersegments	(34,784	)	(31,386	)	(25,386	)
	4,318,073		4,049,830		3,934,563

As a result of the creation of Bio Supplies segment and Intersegment, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

The geographical distribution of net consolidated revenues is as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
USA and Canada	2,896,505	2,707,579	2,604,315
Spain	242,894	225,273	216,548
European Union	444,089	426,223	456,919
Rest of the world	734,585	690,755	656,781
Consolidated	4,318,073	4,049,830	3,934,563

Details of discounts and other reductions in gross income are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Gross sales	5,322,618		4,882,615		4,579,759
Chargebacks	(826,775	)	(652,564	)	(488,072	)
Cash discounts	(57,512	)	(51,953	)	(46,150	)
Volume rebates	(43,274	)	(51,242	)	(49,458	)
Medicare and Medicaid	(41,722	)	(47,820	)	(25,710	)
Other discounts	(35,262	)	(29,206	)	(35,806	)
Net sales	4,318,073		4,049,830		3,934,563

Movement in discounts and other reductions in gross income during 2015 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2014	58,431		4,738		21,030		14,823		3,174		102,196
Current estimate related to sales made in current and prior year	488,072		46,150		49,458		25,710		35,806		645,196	(1)
(Actual returns or credits in current period related to sales made in current period)	(428,041	)	(44,867	)	(18,211	)	(18,402	)	(34,059	)	(543,580	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(246	)	(25,051	)	(11,257	)	(1,791	)	(38,345	)(3)
Translation differences	7,716		127		2,454		1,594		2,237		14,128
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595

Movement in discounts and other reductions to gross income during 2016 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595
Current estimate related to sales made in current and prior year	652,564		51,953		51,242		47,820		29,206		832,785	(1)
(Actual returns or credits in current period related to sales made in current period)	(693,458	)	(51,733	)	(27,409	)	(24,988	)	(27,243	)	(824,831	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(248	)	(27,732	)	(14,401	)	(2,986	)	(45,367	)(3)
Translation differences	1,965		758		726		858		98		4,405
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587

Movement in discounts and other reductions to gross income during 2017 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587
Current estimate related to sales made in current and prior year	826,775		57,512		43,274		41,722		35,262		1,004,545
(Actual returns or credits in current period related to sales made in current period)	(795,449	)	(52,270	)	(28,976	)	(28,198	)	(26,072	)	(930,965	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	31		(6,024	)	(20,210	)	(16,659	)	(2,864	)	(45,726	)(3)
Translation differences	(12,716	)	(736	)	(2,604	)	(2,418	)	(625	)	(19,099	)
Balance at 31 December 2017	105,890		5,114		17,991		16,204		10,143		155,342

(1) Net impact in income statement: estimate for the current year plus prior years’ adjustments. Adjustments made during the year corresponding to prior years’ estimates have not been significant.

(2) Amounts credited and posted against provisions for current period

(3) Amounts credited and posted against provisions for prior period

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Personnel Expenses

12 Months Ended

Dec. 31, 2017

Personnel Expenses

Personnel Expenses

(24)Personnel Expenses

Details of personnel expenses by function are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	731,192	635,577	592,037
Research and development	90,495	77,988	76,780
Selling general & administration expenses	323,880	314,348	269,718
	1,145,567	1,027,913	938,535

Details by nature are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Wages and salaries	917,810	822,384	756,570
Contributions to pension plans (see note 29)	20,347	18,486	14,587
Other social charges	27,679	25,074	22,071
Social Security	179,731	161,969	145,307
	1,145,567	1,027,913	938,535

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Expenses by Nature

12 Months Ended

Dec. 31, 2017

Expenses by Nature

Expenses by Nature

(25)Expenses by Nature

(a)Amortization and depreciation

Expenses for the amortization and depreciation of intangible assets and property, plant and equipment, incurred during 2017, 2016 and 2015 classified by functions are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	135,186	126,998	110,898
Research and development	14,721	13,050	13,654
Selling, general & administration expenses	65,583	61,821	65,203
	215,490	201,869	189,755

(b)Other operating income and expenses

Other operating income and expenses incurred during 2017, 2016 and 2015 by function are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	416,020	454,097	426,531
Research and development	129,579	113,078	118,667
Selling, general & administration expenses	460,959	393,523	403,944
	1,006,558	960,698	949,142

Details by nature are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016		31/12/2015
Changes in trade provisions	3,648	(22,069	)	(763	)
Professional services	211,579	190,003		173,990
Commissions	18,473	20,147		20,474
Supplies and auxiliary materials	131,932	119,014		115,471
Operating leases (note 28)	80,136	74,945		70,496
Freight	105,292	96,680		83,352
Repair and maintenance expenses	103,518	89,797		81,087
Advertising	49,893	51,233		47,860
Insurance	21,529	20,008		19,501
Royalties	11,241	9,217		9,386
Travel expenses	58,171	53,239		52,606
External services	82,699	43,231		56,743
R&D Expenses	89,977	78,379		81,319
Other	38,470	136,874		137,620
Other operating income&expenses	1,006,558	960,698		949,142

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Finance Result

12 Months Ended

Dec. 31, 2017

Finance Result

Finance Result

(26)   Finance Result

Details are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Finance income	9,678		9,934		5,841
Finance cost from Senior Unsecured Notes	(65,189	)	(73,491	)	(72,783	)
Finance cost from senior debt	(193,183	)	(168,332	)	(161,624	)
Finance cost from sale of receivables (note 13)	(3,973	)	(4,885	)	(6,512	)
Capitalized interest	8,839		13,019		9,795
Other finance costs	(9,838	)	(11,140	)	(9,211	)
Finance costs	(263,344	)	(244,829	)	(240,335	)
Change in fair value of financial derivatives (note 30)	(3,752	)	(7,610	)	(25,206	)
Impairment and gains / (losses) on disposal of financial instruments (note 11)	(18,844	)	—		—
Exchange differences	(11,472	)	8,916		(12,140	)
Finance result	(287,734	)	(233,589	)	(271,840	)

During 2017 the Group has capitalized interest at a rate of between 4.26% and 4.87% based on the financing received (between 4.8% and 5.2% during 2016) (see note 4 (f)).

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Taxation

12 Months Ended

Dec. 31, 2017

Taxation

Taxation

(27)Taxation

Grifols, S.A. is authorized to file consolidated tax returns in Spain with Diagnostic Grifols, S.A., Grifols Movaco, S.A., Laboratorios Grifols, S.A., Instituto Grifols, S.A., Grifols Worldwide Operations Spain, S.A. (formerly Logister, S.A), Biomat, S.A., Grifols Viajes, S.A., Grifols International, S.A., Grifols Engineering, S.A., Gri-Cel, S.A., Gripdan Invest, S.L. and VCN Biosciences, S.L. Grifols, S.A., in its capacity as Parent, is responsible for the filing and settlement of the consolidated tax return. Under prevailing tax law, Spanish companies pay 25% tax, which may be reduced by certain deductions.

The North American company Grifols Shared Services North America, Inc. is also authorized to file consolidated tax returns in the USA with Grifols Biologicals Inc., Grifols USA, LLC., Biomat USA, Inc., Grifols Therapeutics Inc. and Talecris Plasma Resources, Inc. The profits of the companies domiciled in the USA, determined in accordance with prevailing tax legislation, are subject to tax of approximately 36.5% of taxable income, which may be reduced by certain deductions.

(a)Reconciliation of accounting and taxable income

Details of the income tax expense and income tax related to profit for the year are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Profit before income tax from continuing operations	695,722		712,752		690,250
Tax at 25% (28% for 2015)	173,931		178,188		193,270
Permanent differences	17,163		8,019		(2,709	)
Effect of different tax rates	40,981		14,509		(24,524	)
Tax credits (deductions)	(16,092	)	(20,163	)	(19,487	)
Impact related to the US tax legistation modific	(171,169	)	—		—
Prior year income tax expense	(8,614	)	928		2,723
Other income tax expenses/(income)	(1,792	)	(13,272	)	9,536
Total income tax expense	34,408		168,209		158,809
Deferred tax	(149,443	)	(40,161	)	24,357
Current tax	183,851		208,370		134,452
Total income tax expense	34,408		168,209		158,809

The effect of the different tax rates is basically due to a change of country mix in profits

On December 22, 2017, a tax reform has been approved in the United States that will take effect on January 1, 2018.

The Group has carried out an exercise to identify changes in the tax reform affecting its subsidiaries in the USA and an assessment of the impact that these changes will have on the manner in which the deferred taxes will revert as of December 31, 2017. In the analysis performed, the main impact comes from the change in tax rates to be applied to deferred taxes as of December 31, 2017, which have gone from a rate of 35% to 21% for fiscal years beginning on or after January 1. of 2018. The impact registered in the “income tax expense” caption amounts to Euros 171 million in the year 2017. The remaining changes in the tax legislation that affect the subsidiaries in the USA have not had a material impact nor have they required relevant judgments and estimates that could lead to significant variations in the estimate made in the future. As a consequence, we consider the estimates made as definitive.

(b)Deferred tax assets and liabilities

Details of deferred tax assets and liabilities are as follows:

	Thousands of Euros
	Tax effect
	31/12/2017		31/12/2016		31/12/2015
Assets
Provisions	4,564		3,696		38,004
Inventories	35,619		39,297		37,141
Tax credits (deductions)	49,467		37,685		42,533
Tax loss carry forwards	6,179		10,717		30,668
Other	7,513		3,393		6,961
Subtotal, assets	103,342		94,788		155,307
Goodwill	(22,346	)	(19,136	)	(77,755	)
Fixed assets, amortisation and depreciation	(7,780	)	(7,062	)	(10,409	)
Intangible assets	(7,059	)	(1,371	)	(349	)
Subtotal, net liabilities	(37,185	)	(27,569	)	(88,513	)
Deferred assets, net	66,157		67,219		66,794
Liabilities
Goodwill	(105,963	)	(131,039	)	(35,877	)
Intangible assets	(201,921	)	(392,388	)	(404,617	)
Fixed assets	(95,029	)	(158,060	)	(119,858	)
Debt cancellation costs	(70,503	)	(64,762	)	(77,514	)
Inventories	5,063		(1,175	)	(32,351	)
Cash flow hedges	—		—		(982	)
Subtotal, liabilities	(468,353	)	(747,424	)	(671,199	)
Tax loss carry forwards	15,384		40,358		7,097
Provisions	47,404		61,252		22,085
Other	16,653		45,168		10,452
Subtotal, net assets	79,441		146,778		39,634
Net deferred Liabilities	(388,912	)	(600,646	)	(631,565	)

Movement in deferred tax assets and liabilities is as follows:

	Thousands of Euros
Deferred tax assets and liabilities	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	(533,427	)	(564,771	)	(456,341	)
Movements during the year	149,443		40,161		(24,357	)
Movements in equity during the year	—		—		(10,960	)
Business combination (note 3)	16,736		—		—
Translation differences	44,493		(8,817	)	(73,113	)
Balance at 31 December	(322,755	)	(533,427	)	(564,771	)

The Spanish companies have opted to apply accelerated depreciation to certain additions to property, plant and equipment, which has resulted in the corresponding deferred tax liability.

The remaining assets and liabilities recognized in 2017, 2016 and 2015 were recognized in the statement of profit and loss.

Estimated net deferred tax assets to be reversed in a period of less than 12 months amount to Euros 51,930 thousand at

31 December 2017 (Euros 99,897 thousand at 31 December 2016).

The majority of the tax deductions pending application from Spanish companies related mainly to research and development, mature in 18 years.

Tax credits derived from the US companies are available for 20 years from their date of origin whilst tax credits from Spanish companies registered in the Basque Country are available for 15 and other remaining Spanish companies have no maturity date.

The Group has not recognized as deferred tax assets the tax effect of the tax loss carryforwards of Group companies, which amount to Euros 51,169 thousand (Euros 67,044 thousand at 31 December 2016).

The commitments from Spanish companies from the reversal of deferred tax related to provisions of investments in subsidiaries are not significant.

(c)Years open to inspection

Under prevailing legislation, taxes cannot be considered to be definitively settled until the returns filed have been inspected by the taxation authorities, or the prescription period has elapsed.

The main tax audits currently open in the Group are as follows:

· Grifols Share Services North America, Inc: Income Tax Audit for the tax year ending, 2015 was initiated from July, 2017. During tax year 2017 these inspections had been closed without any significant adjustment.

· Grifols Shared Services North America, Inc. and subsidiaries: notification of an inspection of State Income tax in North Carolina and New York states (tax years 2012 to 2015).

· Grifols Diagnostic Solutions, Corp.: notification of an inspection of the “federal tax return” for the fiscal

year 2014. During tax year 2017 these inspections had been closed without any significant adjustment.

· Grifols, S.A., Instituto Grifols, S.A., Grifols Movaco, S.A. and Biomat, S.A.: Income Tax audit, Withholdings and VAT Audit for the tax years ended 2010, 2011 and 2012 that were initiated as of July 2014. During tax year 2016 these inspections had been closed without any significant adjustment.

Group management does not expect any significant liability to derive from these inspections.

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Operating Leases

12 Months Ended

Dec. 31, 2017

Operating Leases

Operating Leases

(28)Operating Leases

(a)Operating leases (as lessee)

At 31 December 2017, 2016 and 2015 the Group leases buildings and warehouses from third parties under operating leases.

Operating lease instalments of Euros 80,136 thousand have been recognized as an expense for the year ended at

31 December 2017 (Euros 74,945 thousand at 31 December 2016 and Euros 70,496 thousand at 31 December 2015) and comprise minimum lease payments.

Future minimum payments on non-cancellable operating leases at 31 December 2017, 2016 and 2015 are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Maturity at:
Up to 1 year	46,541	56,869	77,951
Between 1 and 5 years	156,897	181,076	126,644
More than 5 years	58,905	112,986	101,319
Total future minimum payments	262,343	350,931	305,914

(b)Operating leases (as lessor)

At 31 December 2017, 2016 and 2015 the Group has no lease contracts as lessor.

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Other Commitments with Third Parties and Other Contingent Liabilities

12 Months Ended

Dec. 31, 2017

Other Commitments with Third Parties and Other Contingent Liabilities

Other Commitments with Third Parties and Other Contingent Liabilities

(29)Other Commitments with Third Parties and Other Contingent Liabilities

(a)Guarantees

The Group has no significant guarantees extended to third parties.

(b)Guarantees committed with third parties

The Group has no significant guarantees extended to third parties, except for the ones included in note 20.

(c)Obligations with personnel

The Group’s annual contribution to defined contribution pension plans of Spanish Group companies for 2017 has amounted to Euros 725 thousand (Euros 674 thousand for 2016).

In successive years this contribution will be defined through labor negotiations.

In the event that control is taken of the Company, the Group has agreements with 73 employees/directors whereby they can unilaterally rescind their employment contracts with the Company and are entitled to termination benefits ranging from 2 to 5 years’ salary.

The Group has contracts with nine executives entitling them to termination benefits ranging from one to four years of their salary in different circumstances.

Restricted Share Unit Retention Plan

For the annual bonus, the Group established a Restricted Share Unit Retention Plan (RSU Plan), for eligible employees. Under this plan, employees can choose to receive up to 50% of their yearly bonus in non-voting Class B ordinary shares (Grifols Class B Shares) or Grifols American Depositary Shares (Grifols ADS), and the Group will match this with an additional 50% of the employee’s choice of RSUs.

Grifols Class B Shares and Grifols ADS are valued at grant date.

These RSUs will have a vesting period of 2 years and 1 day and, subsequently, the RSU’s will be exchanged for Grifols Class B Shares or Grifols ADS (American Depositary Share representing 1 Class B Share).

If an eligible employee leaves the Company or is terminated before the vesting period, he will not be entitled to the additional RSUs.

At 31 December 2017, the Group has settled the RSU plan of 2014 for an amount of Euros 7,303 thousand.

This commitment is treated as equity-settled and the amount totals Euros 13,871 thousand at 31 December 2017 (Euros 10,594 thousand at 31 December 2016).

Savings plan and profit-sharing plan

The Group has a defined contribution plan (savings plan), which qualifies as a deferred salary arrangement under Section

401 (k) of the Internal Revenue Code (IRC). Once eligible, employees may elect to contribute a portion of their salaries to the savings plan, subject to certain limitations. The Group matches 100% of the first 3% of employee contributions and 50% of the next 2%. Group and employee contributions are fully vested when contributed. The total cost of matching contributions to the savings plan was US Dollars 18.9 million for 2017 (US Dollars 17 million for 2016).

Other plans

The Group has a defined benefit pension plan for certain Talecris Biotherapeutics, GmbH employees in Germany as required by statutory law. The pension cost relating to this plan was not material for the periods presented.

(d)Purchase commitments

Details of the Group’s commitments at 31 December 2017 are as follows:

	Thousands of Euros
2018	83,782
2019	62,510
2020	56,183
2021	39,765
2022	9,249
2023	780
2024	780

(e)Judicial procedures and arbitration

Details of legal proceedings in which the Company or Group companies are involved are as follows:

The Group carried out an internal investigation, already started prior to the acquisition of Talecris, in relation to possible breaches of the Foreign Corrupt Practices Act (FCPA) of which Talecris was aware in the context of a review unrelated to this matter. This FCPA investigation was carried out by an external legal advisor. In principle, the investigation was focused on sales to certain Central and Eastern European countries, specifically Belarus and Russia, although trading practices in Brazil, China, Georgia, Iran and Turkey are also being investigated, in addition to other countries considered necessary.

In July 2009, the Talecris Group voluntarily contacted the U.S. Department of Justice (DOJ) to inform them of an internal investigation that the Group was carrying out regarding possible breaches of the FCPA in certain sales to certain central and East European countries and to offer the Group’s collaboration in any investigation that the DOJ wanted to carry out. As a result of this investigation the Group suspended shipments to some of these countries. In certain cases, the Group had safeguards in place which led to terminating collaboration with consultants and suspending or terminating relations with distributors in those countries under investigation as circumstances warranted.

As a consequence of the investigation, the agreement with Talecris’ Turkish distributor was terminated and a settlement agreement was reached between the parties. In November 2012, the Group was notified by the DOJ that the proceedings would be closed, without prejudice to the fact that they could be re-opened in the future should new information arise. The Group continues with the in-depth review of potential irregular practices.

Furthermore, an investigation was opened in Italy, in relation with the criminal prosecution in Naples against 5 employees of the Company, including the former General Manager.

From these 5 employees of the Company initially charged, the Naples Tribunal resolved discharging 3 of them, continuing the judicial process only against the remaining 2 employees. Additionally, the Company has finalized the internal investigation opened in Italy as a consequence of the indicated judicial proceedings, and in November 2015 a meeting took place with the DOJ to report on the conclusions derived from the investigation.

Additionally to the above and as part of the in-depth review of potential irregular practices that the Group is carrying out in relation to its recent acquisitions, the Company opened internal investigations in Mexico as well as in the Czech Republic to review the commercial practices in such countries. Both investigations have finalized, without having detected any significant practice that could imply a breach of the FCPA.

On September 2016, the United States Department of Justice (the “Department”) notified the Group that the Department has closed its inquiry into Grifols, concerning possible violations of the U.S. Foreign Corrupt Practices Act. In its notice of declination to prosecute, the Department acknowledged the full cooperation of Grifols in the investigation.

· As a result of the acquisition of the transfusional Diagnostic unit, the Group considers that there could have existed inadequate commercial and contractual practices which could originate in potential contingencies.

· bioMerieux, S.A., et ano. v. Hologic, Inc. et al., Case No. 1:17-cv-102 (M.D.N.C); Case No. 18-21-LPS-CJB (D. Del.): on February 3, 2017, bioMérieux, S.A and bioMérieux, Inc. filed suit against Hologic, Inc. (“Hologic”), Grifols, S.A. (“GSA”), and Grifols Diagnostic Solutions Inc. (“GDS”) in the U.S. District Court for the Middle District of North Carolina, alleging infringement of U.S. Patent Nos. 8,697,352 and 9,074,262 by virtue of defendants’ activities with respect to the Procleix HIV-1/HCV Assay®, Procleix Ultrio Assay®, and Procleix Ultrio Plus® products. Hologic and GDS filed a motion to dismiss for failure to state a claim on April 3, 2017. As a result of a claim of improper venue, the case was transferred to the U.S. District Court for the District of Delaware in early 2018. Hologic and GDS are pursuing defenses of failure to state a claim, non-infringement, invalidity, and that the infringement claims are contractually barred. Additionally, GSA intends to pursue dismissal for lack of personal jurisdiction.

· Enzo Life Sciences, Inc. v. Hologic, Inc. et al., Case No. 1:16-cv-00894-LPS (D. Del.): on October 4, 2016, Enzo Life Sciences, Inc. (“Enzo”) filed suit against Hologic in the U.S. District Court for the District of Delaware, alleging infringement of U.S. Patent No. 6,221,581 by virtue of Hologic’s activities with respect to Progensa®, Procleix®, and Aptima®products. On November 9, 2017, the Court granted Enzo’s motion to amend its complaint to add GSA and GDS as defendants with respect to the Procleix® products at issue. Hologic and GDS have answered the complaint, alleging non-infringement and invalidity among their defenses. GSA has moved to dismiss for lack of personal jurisdiction. The case schedule has been extended in light of the addition of Grifols-related entities as co-defendants, with Hologic and GDS currently engaged in fact discovery. Trial is scheduled for September 2019.

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Financial Instruments

12 Months Ended

Dec. 31, 2017

Financial Instruments

Financial Instruments

(30)Financial Instruments

Classification

Disclosure of financial instruments by nature, category and fair value is as follows:

	Thousand of Euros
	31/12/2016
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	15,201	—	29,998	—		45,199		29,998		15,201		—	45,199
Financial derivatives	—	13,665	—	—		13,665		—		—		13,665	13,665
Financial assets measured at fair value	15,201	13,665	29,998	—		58,864
Non-current financial assets	30,681	—	—	—		30,681
Other current financial assets	2,582	—	—	—		2,582
Trade and other receivables	434,136	—	—	—		434,136
Cash and cash equivalents	895,009	—	—	—		895,009
Financial assets not measured at fair value	1,362,408	—	—	—		1,362,408
Senior Unsecured Notes	—	—	—	(843,868	)	(843,868	)	(904,377	)	—		—	(904,377	)
Promissory Notes	—	—	—	(83,073	)	(83,073	)
Senior secured debt	—	—	—	(3,809,968	)	(3,809,968	)	—		(3,811,970	)	—	(3,811,970	)
Other bank loans	—	—	—	(138,186	)	(138,186	)
Finance lease payables	—	—	—	(9,945	)	(9,945	)
Other financial liabilities	—	—	—	(57,096	)	(57,096	)
Trade and other payables	—	—	—	(461,073	)	(461,073	)
Other current liabilities	—	—	—	(7,431	)	(7,431	)
Financial liabilities not measured at fair value	—	—	—	(5,410,640	)	(5,410,640	)
	1,377,609	13,665	29,998	(5,410,640	)	(3,989,368	)

The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.

	Thousand of Euros
	31/12/2017
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	—	—	38,708	—		38,708		38,708		—		—	38,708
Financial derivatives	—	8,338	—	—		8,338		—		—		8,338	8,338
Financial assets measured at fair value	—	8,338	38,708	—		47,046
Non-current financial assets	22,843	—	—	—		22,843
Other current financial assets	10,738	—	—	—		10,738
Trade and other receivables	304,864	—	—	—		304,864
Cash and cash equivalents	886,521	—	—	—		886,521
Financial assets not measured at fair value	1,224,966	—	—	—		1,224,966
Senior Unsecured Notes	—	—	—	(858,911	)	(858,911	)	(1,018,130	)	—		—	(1,018,130	)
Promissory Notes	—	—	—	(90,294	)	(90,294	)
Senior secured debt	—	—	—	(4,853,939	)	(4,853,939	)	—		(5,063,769	)	—	(5,063,769	)
Other bank loans	—	—	—	(198,741	)	(198,741	)
Finance lease payables	—	—	—	(9,360	)	(9,360	)
Other financial liabilities	—	—	—	(45,640	)	(45,640	)
Trade and other payables	—	—	—	(423,096	)	(423,096	)
Other current liabilities	—	—	—	(14,879	)	(14,879	)
Financial liabilities not measured at fair value	—	—	—	(6,494,860	)	(6,494,860	)
	1,224,966	8,338	38,708	(6,494,860	)	(5,222,848	)

The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.

Financial derivatives

At 31 December 2017 and 2016 the Group has recognized the following derivatives:

		Notional	Notional	Thousands of Euros
		amount at	amount at	Value at	Value at
Financial derivatives	Currency	31/12/2017	31/12/2016	31/12/17	31/12/16	Maturity
Call Option	US Dollar	N/A	N/A	8,338	9,487	30/04/2019
Embedded derivative	US Dollar	N/A	N/A	—	4,178	31/05/2021
Total				8,338	13,665
Total Assets (notes 10 and 11)				8,338	13,665

At 31 December 2017, the Group has totally impaired the amount of the embedded derivative related to the convertible bonds issued by Aradigm due to the no recommendation of approval of LinhaliqTM by the Food and Drug Administration (FDA) (see note 11).

On May 11, 2016 the Group has paid an aggregate amount equal to US Dollars 10 million (Euros 8,960 thousand) in respect of the call right for the Interstate Blood Bank, Inc. shares, Bio-Blood Components, Inc. shares and Plasma Biological Services, LLC. units that are not owned by the Group. The call right can be exercised by the Group by delivering written notice of its intention at any time on or after February 1, 2019 and on or before April 30, 2019 (see note 11).

Financial derivatives are measured based on observable market data (level 3 of fair value hierarchy). Regarding the valuation of derivative instruments, the selection of the appropriate data within the alternatives requires the use of judgement in qualitative factors such as, which methodology and valuation models are used, and in quantitative factors, data required to be included within the chosen models.

Derivative financial instruments that do not meet the hedge accounting requirements are classified and measured as financial assets or financial liabilities at fair value through profit and loss.

Credit risk

(a)Exposure to credit risk

The carrying amount of financial assets represents the maximum exposure to credit risk. At 31 December 2017 and 2016 the maximum level of exposure to credit risk is as follows:

		Thousands of Euros
Carrying amount	Note	31/12/2017	31/12/2016
Non-current financial assets	11	69,889	89,545
Other current financial assets	11	10,738	2,582
Trade receivables	13	286,198	413,656
Other receivables	13	18,666	20,480
Cash and cash equivalents	14	886,521	895,009
		1,272,012	1,421,272

The maximum level of exposure to risk associated with receivables at 31 December 2017 and 2016, by geographical area, is as follows.

	Thousands of Euros
Carrying amount	31/12/2017	31/12/2016
Spain	63,505	56,104
EU countries	53,403	52,034
United States of America	65,068	196,885
Other European countries	5,761	13,428
Other regions	117,127	115,685
	304,864	434,136

Details of balances receivable by country such as Greece, Italy, Spain and Portugal at 31 December 2016 are as follows:

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		425	—	(137	)	288
Italy	7,188	2,077	—		12,196	7,375	(3,098	)	16,286
Spain	23,281	3,287	—		27,316	9,595	(249	)	50,348
Portugal	2,734	1,205	(356	)	129	78	(27	)	2,480
	33,203	6,569	(356	)	40,066	17,048	(3,511	)	69,402

Details of balances receivable by country such as Greece, Italy, Spain and Portugal at 31 December 2017 are as follows:

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		745	—	—		745
Italy	4,020	2,348	—		10,614	6,342	(4,016	)	10,618
Spain	33,702	7,785	—		23,444	8,926	(136	)	57,010
Portugal	1,078	490	(296	)	1,972	1,085	(126	)	2,628
	38,800	10,623	(296	)	36,775	16,353	(4,278	)	71,001

Provision has been made for balances receivable from Portuguese public entities on the basis of the best estimate of their expected collection in view of the current situation regarding negotiations. The Group does not currently have any reason to consider that the receivables from public entities in Spain will not be recoverable.

(b)Impairment losses

Details of the maturity of trade receivables, net of impairment provisions are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016
Not matured	249,652	360,018
Less than 1 month	24,302	24,650
1 to 4 months	18,717	29,318
4 months to 1 year	8,092	10,045
More than one year	4,101	10,105
	304,864	434,136

Unimpaired receivables that are past due mainly relate to public entities.

Movement in the bad debt provision was as follows:

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Opening balance	17,987		13,210		14,092
Net charges for the year	8,003		6,411		1,800
Net cancellations for the year	(4,732	)	(2,217	)	(2,984	)
Translation differences	(1,552	)	583		302
Closing balance	19,706		17,987		13,210

An analysis of the concentration of credit risk is provided in note 5 (a).

Liquidity risk

The management of the liquidity risk is explained in note 5.

Details of the contractual maturity dates of financial liabilities including committed interest calculated using interest rate forward curves are as follows:

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/16	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	3,948,154	4,669,325	134,918	119,476	192,059	4,183,259	39,613
Other financial liabilities	20	57,096	57,096	23,082	3,039	11,468	16,686	2,821
Bonds and other marketable securities	20	926,941	1,305,680	107,975	24,903	49,806	1,122,996	—
Finance lease payables	20	9,945	10,725	2,195	2,072	3,630	2,828	—
Payable to suppliers	21	461,073	461,073	461,029	44	—	—	—
Other current liabilities	22	7,431	7,431	7,118	313	—	—	—
Total		5,410,640	6,511,330	736,317	149,847	256,963	5,325,769	42,434

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/17	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	5,052,680	6,138,673	105,584	106,492	322,421	3,115,887	2,488,289
Other financial liabilities	20	45,640	45,642	19,393	2,610	10,758	10,497	2,384
Bonds and other marketable securities	20	949,205	1,331,203	107,203	16,000	32,000	128,000	1,048,000
Finance lease payables	20	9,360	10,136	2,192	2,113	2,602	2,790	439
Payable to suppliers	21	423,096	423,096	423,020	76	—	—	—
Other current liabilities	22	14,878	14,878	14,462	416	—	—	—
Total		6,494,859	7,963,628	671,854	127,707	367,781	3,257,174	3,539,112

Currency risk

The Group’s exposure to currency risk is as follows:

	Thousands of Euros
	31/12/2016
	Euros (*)		Dollars (**)
Trade receivables	5,576		7,520
Receivables from Group companies	33,792		37,740
Loans to Group companies	597,897		1,854
Cash and cash equivalents	32,255		21,254
Trade payables	(11,188	)	(5,062	)
Payables to Group companies	(42,395	)	(32,159	)
Loans from Group companies	(268,040	)	(4,295	)
Bank loans	(489,000	)	—
Balance sheet exposure	(141,103	)	26,852

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

	Thousands of Euros
	31/12/2017
	Euros (*)		Dollars (**)
Trade receivables	3,596		22,936
Receivables from Group companies	103,338		7,619
Loans to Group companies	34,140		91,566
Cash and cash equivalents	63,981		2,172
Trade payables	(14,213	)	(3,582	)
Payables to Group companies	(42,296	)	(11,241	)
Loans from Group companies	(22,913	)	(3,953	)
Bank loans	(85,000	)	—
Balance sheet exposure	40,633		105,517

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

The most significant exchange rates applied at 2017 and 2016 year ends are as follows:

	Closing exchange rate
Euros	31/12/2017	31/12/2016
US Dollars	1.1993	1.0541

A sensitivity analysis for foreign exchange fluctuations is as follows:

Had the US Dollar strengthened by 10% against the Euro at 31 December 2017, equity would have increased by Euros 416,116 thousand (Euros 318,528 thousand at 31 December 2016) and profit due to foreign exchange differences would have increased by Euros 14,615 thousand (would have decreased by Euros 11,425 thousand at 31 December 2016). This analysis assumes that all other variables are held constant, especially that interest rates remain constant.

A 10% weakening of the US Dollar against the Euro at 31 December 2017 and 2016 would have had the opposite effect for the amounts shown above, all other variables being held constant.

Interest rate risk

(a)Interest-rate profile

To date, the profile of interest on interest-bearing financial instruments is as follows:

	Thousands of Euros
	31/12/2017		31/12/2016
Fixed-interest financial instruments
Financial liabilities	(1,170,000	)	(1,048,676	)
	(1,170,000	)	(1,048,676	)
Variable-interest financial instruments	(5,049,382	)	(3,964,320	)
Financial liabilities	(5,049,382	)	(3,964,320	)
	(6,219,382	)	(5,012,996	)

(b)Sensitivity analysis

If the interest rate had been 100 basis points higher during 2017, the interest expense would have increased by Euros 53 million. As the Group does not have any derivatives in place, the net effect on cash interest payments would have increased by the same amount.

If the interest rate had been 100 basis points higher during 2016, the interest expense would have increased by Euros 40.7 million, the finance cost due to changes in the value of derivatives would have been Euros 2.6 million lower. The impact on equity is not significant because of derivatives close to maturity on 31 March 2016 for Euro swaps and 30 June 2016 for US dollar swaps. Therefore, the net effect on cash interest payments should have been Euros 38.1 million.

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Balances and Transactions with Related Parties

12 Months Ended

Dec. 31, 2017

Balances and Transactions with Related Parties

Balances and Transactions with Related Parties

(31)Balances and Transactions with Related Parties

Details of balances with related parties are as follows:

	Thousands of Euros
	31/12/2017		31/12/2016
Receivables from associates (note 13)	3,219		133
Trade payables associates	(4,583	)	(4,221	)
Loans to associates (note 11)	26,654		15,994
Debts with associates	—		—
Debts with key management personnel	(6,164	)	(6,662	)
Payables to members of the board of directors	(463	)	—
Payables to other related parties	(9,187	)	(8,473	)
	9,476		(3,229	)

Payables are included in suppliers and trade payables (see note 21).

(a)Group transactions with related parties

Group transactions with related parties during 2015 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	317		—		—		—
Other service expenses	(361	)	—		(6,938	)	(845	)
Operating lease expense	—		—		(4,900	)	—
Remuneration	—		(9,447	)	—		(3,443	)
R&D agreements	(18,400	)	—		—		—
Purchase of Fixed Assets	—		—		(276,457	)	—
Sale of Fixed Assets	—		—		12,000		—
Finance Income	1,916		—		—		—
	(16,528	)	(9,447	)	(276,295	)	(4,288	)

Group transactions with related parties during 2016 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	193		—		—		—
Purchases	(35,569	)	—		—		—
Other service expenses	(7,591	)	—		(5,325	)	(905	)
Operating lease expense	—		—		(5,281	)	—
Remuneration	—		(10,287	)	—		(3,668	)
R&D agreements	(10,188	)	—		—		—
Finance Income	1,946		—		—		—
	(51,209	)	(10,287	)	(10,606	)	(4,573	)

Group transactions with related parties during 2017 are as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	3,009		—		—		—
Purchases	(68,335	)	—		—		—
Other service expenses	(11,798	)	—		(7,100	)	(939	)
Operating lease expense	—		—		(5,426	)	—
Remuneration	—		(13,672	)	—		(5,755	)
R&D agreements	(164	)	—		—		—
Finance Income	152		—		—		—
	(77,136	)	(13,672	)	(12,526	)	(6,694	)

Every year the Group contributes 0.7% of its profits before tax to a non-profit organization.

“Other service expenses” include contributions to non-profit organizations totaling Euros 7,100 thousand in 2017 (Euros 5,325 thousand in 2016 and Euros 5,224 thousand in 2015).

During 2011 one of the Company’s directors signed a three-year consulting services contract. The director will receive annual fees of US Dollars 1 million for these services and an additional bonus of US Dollars 2 million for complying with certain conditions. During 2014, this contract was renewed for an additional year for an amount of US Dollars 1 million. In 2015, this contract was extended for two years for an amount of US Dollars 1 million for each year.

Directors representing shareholders’ interests have received remuneration of Euros 1,881 thousand in 2017 (During 2016 the Group did not name any director representing shareholders’ interests and during 2015 the named directors representing shareholders’ interests received Euros 50 thousand).

The Group has not extended any advances or loans to the members of the board of directors or key management personnel nor has it assumed any guarantee commitments on their behalf. It has also not assumed any pension or life insurance obligations on behalf of former or current members of the board of directors or key management personnel. In addition, certain Company directors and key management personnel have termination benefit commitments (see note 29 (c)).

(b)Conflicts of interest concerning the directors

The Company’s directors and their related parties have not entered into any conflict of interest that should have been reported in accordance with article 229 of the revised Spanish Companies Act.

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Events after the Reporting Period

12 Months Ended

Dec. 31, 2017

Events after the Reporting Period

Events after the Reporting Period

(32)Events after the Reporting Period

Goetech, LLC. (“MedKeeper”) acquisition

On 26 January 2018 Grifols has acquired, through its subsidiary Grifols Shared Services North America, Inc., the U.S. company Goetech, LLC. based in Denver, Colorado, doing business as MedKeeper. This transaction for a total of US dollar 98 million included a 51% stake in the company and a call option for Grifols and put option for Medkeeper for the remaining 49% in the third anniversary of the deal. Grifols holds a majority position on the board of directors.

Medkeeper’s core business is the development and distribution of web and mobile-based platforms for hospital pharmacies that improve quality standards, productivity in the process, control systems and monitoring different preparations while increasing patient safety.

This investment will enhance the activity of the Grifols Hospital Division and it is part of the strategy to underpin this division into the U.S. market.

Haema AG acquisition

On 20 March 2018 Grifols has entered into agreement with Aton GmbH for the purchase of 100% of the shares of German based pharmaceutical company Haema AG (“Haema), in exchange of a purchase price of Euros 220 million on a debt free basis. The closing of the transaction is subject to the fulfilment of certain conditions, among others, the authorization of the purchase by applicable antitrust authorities.

With this acquisition, and subject to the conditions being fulfilled, Grifols will acquire the businesses currently held by Haema, collection of plasma for fractionation, which includes 35 collection centers spread throughout the territory of Germany, and three more under construction. It’s headquarters are located in Leipzig with approximately 24,000m2 (which include administration, production, storage and power station buildings) and also had a central laboratory in Berlin.

Haema employs about 1,100 people and collected almost 800,000 litres of plasma in the preceding financial year, coming from approximately 1 million donations.

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Appendix I

12 Months Ended

Dec. 31, 2017

Appendix I

Appendix I

APPENDIX I

GRIFOLS, S.A. AND SUBSIDIARIES

Information on Group Companies, Associates and others for the years ended 31 December 2017, 2016 and 2015

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Diagnostic Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Development and manufacture of diagnostic equipment, instruments and reagents.	—		100.000	%	—		100.000	%	99.998	%	0.002	%
Instituto Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Plasma fractioning and the manufacture of haemoderivative pharmaceutical products.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Worldwide Operations Spain, S.A (formerly Logister, S.A.)	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Services	Manufacture, sale and purchase, commercialisation and distribution of all types of computer products and materials.	—		100.000	%	—		100.000	%	—		100.000	%
Laboratorios Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1989	Industrial	Production of glass- and plastic-packaged parenteral solutions, parenteral and enteral nutrition products and blood extraction equipment and bags.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Biomat, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1991	Industrial	Analysis and certification of the quality of plasma used by Instituto Grifols, S.A. It also provides transfusion centres with plasma virus inactivation services (I.P.T.H).	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Grifols Engineering, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	2000	Industrial	Design and development of the Group’s manufacturing installations and part of the equipment and machinery used at these premises. The company also renders engineering services to external companies.	99.950	%	0.050	%	99.950	%	0.050	%	99.950	%	0.050	%
Biomat USA, Inc.	2410 Lillyvale Avenue Los Angeles (California) United States	2002	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Biologicals LLC.	5555 Valley Boulevard Los Angeles (California) United States	2003	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Australia Pty Ltd.	Unit 5/80 Fairbank Clayton South Victoria 3149 Australia	2009	Industrial	Distribution of pharmaceutical products and the development and manufacture of reagents for diagnostics.	100.000	%	—		100.000	%	—		100.000	%	—
Medion Grifols Diagnostic AG	Bonnstrasse,9 3186 Dügingen Switzerland	2009	Industrial	Development and manufacturing activities in the area of biotechnology and diagnostics.	—		100.000	%	—		100.000	%	80.000	%	—
Grifols Therapeutics LLC.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Talecris Plasma Resources, Inc.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
GRI-CEI, S/A Produtos para transfusao (merged with Grifols Brasil, Lda. in 2016)	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	2012	Industrial	Production of bags for the extraction, separation, conservation and transfusion of blood components.	—		—		—		—		60.000	%	—
Grifols Worldwide Operations Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2012	Industrial	Packaging, labelling, storage, distribution, manufacture and development of pharmaceutical products and rendering of financial services to Group companies.	100.000	%	—		100.000	%	—		100.000	%	—
Progenika Biopharma, S.A.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		90.230	%	—		89.250	%	56.150	%	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Progenika Latina, S.A. de CV	Periferico Sur Nº 4118 Int 8 Col. Jardines del Pedregal CP 01900 Alvaro Obregon DF Mexico	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		—		—		89.250	%	—		56.150	%
Progenika Inc. (Merged with Grifols Diagnostic Solutions Inc. in 2017)	Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808 United States	2013	Industrial	Development, production and commercialisation of genetic tools, diagnostic equipment and therapeutic systems and products for personalised medicine and the highest quality healthcare in general.	—		—		—		89.250	%	—		56.150	%
Brainco Biopharma, S.L. (merged with Progenika Biopharma, S.A in 2016)	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development of products for the treatment and diagnosis of psychiatric illnesses	—		—		—		—		—		28.423	%
Abyntek Biopharma, S.L.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Research, development and transfer of biotechnological products and processes, as well as the commercialiation of products and services related to the biosciences.	—		—		—		80.370	%	—		45.129	%
Asociación I+D Progenika	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Coordination, representation, management and promotion of the common interests of associated companies, in addition to contributing to the development, growth and internationalisation of its associates and of the biosciences sector in the Basque Country.	—		90.230	%	—		89.250	%	—		55.336	%
Grifols Diagnostics Solutions Inc (formerly G-C Diagnostics Corp.)	4560 Horton Street 94608 Emeryville, California United States	2013	Industrial	Manufacture and sale of blood testing products	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Worldwide Operations USA Inc.	13111 Temple Avenue, City of Industry, California 91746-1510 Estados Unidos	2014	Industrial	The manufacture, warehousing, and logistical support for biological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Asia Pacific Pte, Ltd	501 Orchard Road nº20-01 238880 Wheelock Place, Singapore	2003	Commercial	Distribution and sale of medical and pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Movaco, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Commercial	Distribution and sale of reagents, chemical products and other pharmaceutical specialities, and of medical and surgical materials, equipment and instruments for use by laboratories and health centres.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda.	Rua de Sao Sebastiao,2 Zona Industrial Cabra Figa 2635-448 Rio de Mouro Portugal	1988	Commercial	Import, export and commercialisation of pharmaceutical and hospital equipment and products, particularly Grifols products.	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%
Grifols Chile, S.A.	Avda. Americo Vespucio, 2242 Comuna de Conchali Santiago de Chile Chile	1990	Commercial	Development of pharmaceutical businesses, which can involve the import, production, commercialisation and export of related products.	99.000	%	—		99.000	%	—		99.000	%	—
Grifols USA, LLC.	2410 Lillyvale Avenue Los Angeles (California) Estados Unidos	1990	Commercial	Distribution and marketing of company products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Argentina, S.A.	Bartolomé Mitre 3690/3790, CPB1605BUT Munro Partido de Vicente Lopez Argentina	1991	Commercial	Clinical and biological research. Preparation of reagents and therapeutic and diet products. Manufacture and commercialisation of other pharmaceutical specialities.	95.010	%	4.990	%	95.010	%	4.990	%	95.010	%	4.990	%
Grifols s.r.o.	Calle Zitna,2 Prague Czech Republic	1992	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products, including human plasma.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (Thailand) Ltd	191 Silom Complex Building, 21st Follor, Silom Road, Silom, Bangrak 10500 Bangkok Thailand	2003	Commercial	Import, export and distribution of pharmaceutical products.	—		48.000	%	—		48.000	%	—		48.000	%
Grifols Malaysia Sdn Bhd	Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia	2003	Commercial	Distribution and sale of pharmaceutical products.	—		30.000	%	—		30.000	%	—		30.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols International, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1997	Commercial	Coordination of the marketing, sales and logistics for all the Group’s subsidiaries operating in other countries.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Italia S.p.A	Via Carducci, 62d 56010 Ghezzano Pisa, Italy	1997	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols UK Ltd.	Gregory Rowcliffe & Milners, 1 Bedford Row, London WC1R 4BZ United Kingdom	1997	Commercial	Distribution and sale of therapeutic and other pharmaceutical products, especially haemoderivatives.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Brasil, Lda.	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	1998	Commercial	Import and export, preparation, distribution and sale of pharmaceutical and chemical products for laboratory and hospital use, and medical-surgical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols France, S.A.R.L.	Arteparc, Rue de la Belle du Canet, Bât. D, Route de la Côte d’Azur, 13590 Meyreuil France	1999	Commercial	Commercialisation of chemical and healthcare products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Polska Sp.z.o.o.	Grzybowska 87 street00-844 Warsaw, Poland	2003	Commercial	Distribution and sale of pharmaceutical, cosmetic and other products.	100.000	%	—		100.000	%	—		100.000	%	—
Logística Grifols, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	2008	Commercial	Manufacture and commercialisation of pharmaceutical products for human and veterinary use.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols México, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	1993	Commercial	Production, manufacture, adaptation, conditioning, sale and purchase, commissioning, representation and consignment of all kinds of pharmaceutical products and the acquisition of machinery, equipment, raw materials, tools, movable goods and property for the aforementioned purposes.	99.980	%	0.020	%	99.980	%	0.020	%	99.980	%	0.020	%
Medion Diagnostics GmbH	Lochamer Schlag, 12D 82166 Gräfelfing Germany	2009	Commercial	Distribution and sale of biotechnological and diagnostic products.	—		100.000	%	—		100.000	%	—		80.000	%
Grifols Nordic, AB	Sveavägen 166 11346 Stockholm Sweden	2010	Commercial	Research and development, production and marketing of pharmaceutical products, medical devices and any other asset deriving from the aforementioned activities.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Colombia, Ltda	Carrera 7 No. 71 52 Torre B piso 9 Bogotá. D.C. Colombia	2010	Commercial	Sale, commercialisation and distribution of medicines, pharmaceutical (including but not limited to haemoderivatives) and hospital products, medical devices, biomedical equipment, laboratory instruments and reagents for diagnosis and/or healthcare software.	99.000	%	1.000	%	99.000	%	1.000	%	99.000	%	1.000	%
Grifols Deutschland GmbH	Lyoner Strasse 15, D- 60528 Frankfurt am Main Germany	2011	Commercial	Procurement of the official permits and necessary approval for the production, commercialisation and distribution of products deriving from blood plasma, as well as the import, export, distribution and sale of reagents and chemical and pharmaceutical products, especially for laboratories and health centres and surgical and medical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Canada, Ltd.	5060 Spectrum Way, Suite 405 (Principal Address) Mississauga, Ontario L4W 5N5 Canada	2011	Commercial	Distribution and sale of biotechnological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Pharmaceutical Technology (Shanghai) Co., Ltd. (formerly Grifols Pharmaceutical Consulting (Shanghai) Co., Ltd.)	Unit 901-902, Tower 2, No. 1539, West Nanjing Rd., Jing’an District, Shanghai 200040 China	2013	Commercial	Pharmaceutical consultancy services (except for diagnosis), technical and logistical consultancy services, business management and marketing consultancy services.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Switzerland AG	Steinengraben, 5 40003 Basel Switzerland	2013	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (H.K.), Limited	Units 1505-7 Bershire House, 25 Westlands Road Hong Kong	2014	Commercial	Distribution and sale of diagnostic products.	—		100.000	%	—		100.000	%	—		100.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols Japan K.K.	Hilton Plaza West Office Tower, 19th floor. 2-2, Umeda 2-chome, Kita-ku Osaka-shi Japan	2014	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols India Healthcare Private Ltd	Regus Business Centre Pvt.Ltd.,Level15,Dev Corpora, Plot No.463,Nr. Khajana East.Exp.Highway,Thane (W), Mumbai - 400604, Maharashtra India	2014	Commercial	Distribution and sale of pharmaceutical products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Diagnostics Equipment Taiwan Limited	8F., No.367, Fuxing N. RD., Songshang Dist., Taipei City 10543, Taiwan	2016	Commercial	Distribution and sale of diagnostic products.	100.000	%	—		100.000	%	—		—		—
Grifols Viajes, S.A.	Can Guasch, 2 08150 Parets del Vallès Barcelona, Spain	1995	Services	Travel agency exclusively serving Group companies.	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Squadron Reinsurance Designated Activity Company (formerly Squadron Reinsurance Ltd.)	The Metropolitan Building, 3rd Fl. James Joyce Street, Dublin Ireland	2003	Services	Reinsurance of Group companies’ insurance policies.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Shared Services North America, Inc. (formerly Grifols Inc.)	2410 Lillivale Avenue 90032 Los Angeles, California United States	2011	Services	Support services for the collection, manufacture, sale and distribution of plasma derivatives and related products.	100.000	%	—		100.000	%	—		100.000	%	—
Gripdan Invest, S.L	Avenida Diagonal 477 Barcelona, Spain	2015	Services	Manufacturing buildings for rent	100.000	%	—		100.000	%	—		100.000	%	—
Gri-Cel, S.A.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2009	Research	Research and development in the field of regenerative medicine, awarding of research grants, subscription to collaboration agreements with entities and participation in projects in the area of regenerative medicine.	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%
Araclon Biotech, S.L.	Paseo de Sagasta, 17 2º izqda. Zaragoza, Spain	2012	Research	Creation and commercialisation of a blood diagnosis kit for the detection of Alzheimer’s and development of effective immunotherapy (vaccine) against this disease.	—		73.220	%	—		73.220	%	—		70.830	%
VCN Bioscience, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2012	Research	Research and development of therapeutic approaches for tumours for which there is currently no effective treatment.	—		81.340	%	—		81.340	%	—		68.010	%
Grifols Innovation and New Technologies Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2016	Research	Research and experimental development on biotechnology	—		100.000	%	—		100.000	%	—		—
PBS Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, New Castle County United States	2016	Services	Engage in any lawful act or activity for which corporations may be organized under the DGCL (Delaware Code)	—		100.000	%	—		100.000	%	—		—
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	90.000	%	—		—		—		—		—
Chiquito Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, County of New Castle, United States	2017	Corporate	Engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”).	—		100.000	%	—		—		—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

APPENDIX I

GRIFOLS, S.A. AND SUBSIDIARIES

Information on Group Companies, Associates and others for the years ended 31 December 2017, 2016 and 2015

		Acquisition /			31/12/2017			31/12/2016				31/12/2015
		Incorporation			% shares			% shares				% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct	Indirect		Direct		Indirect		Direct		Indirect
Equity Method consolidated companies and others
Nanotherapix, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2010	Research	Development, validation and production of the technology required to implement the use of genetic and cellular therapy for the treatment of human and animal pathologies.	—	—		—		—		—		51.000	%
Aradigm Corporation	3929 Point Eden Way Hayward, California United States	2013	Research	Development and commercialisation of drugs delivered by inhalation for the prevention and treatment of severe respiratory diseases.	—	35.130	%	—		35.130	%	35.000	%	—
TiGenix N.V.	Romeinse straat 12 bus 2, 3001 Leuven, Belgium	2013	Research	Research and development of therapies based on stem cells taken from adipose tissue.	—	14.180	%	—		16.130	%	—		19.280	%
Mecwins, S.L.	Avenida Fernandos Casas Novoa, 37 Santiago de Compostela Spain	2013	Research	Research and production of nanotechnological, biotechnological and chemical solutions.	—	8.420	%	—		8.420	%	—		8.420	%
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	—	—		50.000	%	—		50.000	%	—
Alkahest, Inc.	3500 South DuPont Hwy, Dover, County of Kent United States	2015	Research	Development novel plasma-based products for the treatment of cognitive decline in aging and disorders of the central nervous system (CNS).	—	47.580	%	—		47.580	%	—		47.580	%
Albajuna Therapeutics, S.L	Hospital Germans Trias i Pujol, carretera de Canyet, s/n, Badalona Spain	2016	Research	Development and manufacture of therapeutic antibodies against HIV.	—	30.000	%	—		30.000	%	—		—
Interstate Blood Bank, Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	49.190	%	—		49.190	%	—		—
Bio Blood Components Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.972	%	—		48.972	%	—		—
Plasma Biological Services, LLC	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.900	%	—		48.900	%	—		—
Singulex, Inc.	4041 Forest Park Avenue St. Louis, Missouri United States	2016	Research	Development of the Single Molecule Counting (SMC™) technology for clinical diagnostic and scientific discovery.	—	19.330	%	—		20.000	%	—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016		31/12/2015
		Incorporation			% shares				% shares		% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct	Indirect	Direct	Indirect
Equity Method consolidated companies and others
Aigües Minerals de Vilajuiga, S.A.	Carrer Sant Sebastià, 2, 17493 Vilajuïga, Girona	2017	Industrial	Collection and use of mineral-medicinal waters and achievement of all necessary administrative concessions in order to facilitate their industrial extraction and find the best way to take advantage of them.	50.000	%	—		—	—	—	—
Access Biologicals, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Biologicals IC-DISC, Inc.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Cell Culture, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Manufacturing, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Plasma, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
GigaGen Inc.	407 Cabot Road South San Francisco, CA 94080, USA	2017	Industrial	Engage in any lawful act or activity for which corporations may be organized under General Corporation Law.	—		43.960	%	—	—	—	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

XML

Appendix II

12 Months Ended

Dec. 31, 2017

Appendix II

Appendix II

APPENDIX II

GRIFOLS, S.A. AND SUBSIDIARIES

Operating Segments for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	Bioscience					Hospital						Diagnostic					Bio Supplies			Others						Intersegments						Consolidated
	2017		2016		2015	2017		2016		2015		2017		2016		2015	2017	2016	2015	2017		2016		2015		2017		2016		2015		2017		2016		2015
Revenues from external customers	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Total operating income	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Profit/(Loss) for the segment	985,495		913,840		896,032	(9,766	)	(8,765	)	(4,299	)	248,080		97,320		96,268	35,598	33,794	3,660	(9,632	)	44,324		77,982		(12,305	)	(1,316	)	(305	)	1,237,470		1,079,197		1,069,338
Unallocated expenses																																(234,127	)	(139,789	)	(98,968	)
Operating profit																																1,003,343		939,408		970,370
Finance result																																(287,734	)	(233,589	)	(271,840	)
Share of profit/(loss) of equity accounted investee	(10,434	)	(9,396	)	—	2,112		(5,611	)	—		(9,335	)	—		—	1,830	—	—	(4,060	)	21,940		(8,280	)	—		—		—		(19,887	)	6,933		(8,280	)
Income tax expense																																(34,408	)	(168,209	)	(158,809	)
Profit for the year after tax																																661,314		544,543		531,441
Segment assets	6,007,153		6,524,922		6,085,211	145,477		86,590		91,877		3,356,185		1,909,447		1,794,389	7,409	8,378	1,321	60,449		40,160		106,374		(22,196	)	(11,964	)	(10,240	)	9,554,477		8,557,533		8,068,932
Equity accounted investments	83,905		104,996		—	—		13,888		—		29,322		43,330		—	44,220	—	—	61,562		39,131		76,728		—		—		—		219,009		201,345		76,728
Unallocated assets	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		1,146,778		1,370,894		1,456,055
Total assets																																10,920,264		10,129,772		9,601,715
Segment liabilities	423,415		411,604		387,086	13,560		8,415		3,159		192,720		186,389		192,730	—	—	—	26,903		1,843		209,405		—		—		—		656,598		608,251		792,380
Unallocated liabilities	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		6,629,701		5,793,543		5,507,946
Total liabilities																																7,286,299		6,401,794		6,300,326
Other information:
Amortisation and depreciation allocated	157,478		152,821		137,870	6,436		5,915		5,710		40,815		32,180		31,875	—	—	—	2,237		3,445		6,946		—		—		—		206,966		194,361		182,401
Amortisation and depreciation unallocated			—		—			—		—				—		—	—	—	—	—		—		—		—		—		—		8,524		7,508		7,354
Expenses that do not requirecash payments allocated	7,049		16,219		627	(514	)	306		108		(4,423	)	(2,001	)	4,630	—	—	—	—		(32,534	)	—		—		—		—		2,112		(18,010	)	5,365
Expenses that do not require cash payments unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		(58,752	)	4,608		4,794
Additions for the year of property, plant & equipment and intangible assets allocated	227,635		197,741		421,020	10,429		9,193		7,972		70,032		89,760		68,740	198	84	—	20,911		13,313		—		—		—		—		329,205		310,091		497,732
Additions for the year of property, plant & equipment and intangible assets unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		11,268		12,011		79,082

* As a result of the creation of Bio Supplies segment and intersegments, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

This appendix forms an integral part of note 6 to the consolidated financial statements

APPENDIX II

GRIFOLS, S.A.  AND SUBSIDIARIES

Reporting by geographical area

for the years ended 31 December 2017, 2016 and 2015

(Expressed in thousands of Euros)

	Spain			Rest of European Union			USA + Canada			Rest of World			Consolidated
	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net Revenue	242,894	225,273	216,548	444,089	426,223	456,919	2,896,505	2,707,579	2,604,315	734,585	690,755	656,781	4,318,073	4,049,830	3,934,563
Assets by geographical area	899,223	847,467	719,557	2,397,200	2,467,295	2,407,178	7,341,174	6,535,420	6,176,548	282,667	279,590	298,432	10,920,264	10,129,772	9,601,715
Other information:
Additions for the year of property, plant & equipment and intangible assets	62,271	73,365	113,652	80,910	39,603	51,943	188,557	190,358	400,065	8,735	18,776	11,154	340,473	322,102	576,814

This appendix forms an integral part of note 6 to the consolidated financial statements

XML

Appendix III

12 Months Ended

Dec. 31, 2017

Appendix III

Appendix III

APPENDIX III

GRIFOLS, S.A. AND SUBSIDIARIES

Changes in Other Intangible Assets

for the year ended

31 December 2017

(Expressed in thousands of Euros)

	Balances at				Business				Translation		Balances at
	31/12/2016		Additions		combinations *	Transfers	Disposals		differences		31/12/2017
Development costs	142,693		43,152		142,529	—	(81	)	(16,599	)	311,694
Concessions, patents, licenses brands & similar	60,471		—		142,174	—	—		(19,760	)	182,885
Computer software	168,623		19,626		26	529	(126	)	(13,733	)	174,945
Currently marketed products	1,162,204		—		—	—	—		(137,828	)	1,024,376
Other intangible assets	148,682		17,348		—	—	—		(18,723	)	147,307
Total cost of intangible assets	1,682,673		80,126		284,729	529	(207	)	(206,643	)	1,841,207
Accum. amort. of development costs	(72,073	)	(5,834	)	—	—	—		(1,442	)	(79,349	)
Accum. amort of concessions, patents, licenses, brands & similar	(24,994	)	(6,004	)	—	—	—		1,215		(29,783	)
Accum. amort. of computer software	(99,927	)	(13,549	)	—	—	111		7,046		(106,319	)
Accum. amort. of currently marketed products	(220,988	)	(38,216	)	—	—	—		28,136		(231,068	)
Accum. amort. of other intangible assets	(69,389	)	(865	)	—	—	—		8,288		(61,966	)
Total accum. amort intangible assets	(487,371	)	(64,468	)	—	—	111		43,243		(508,485	)
Impairment of other intangible assets	—		(64,734	)	—	—	—		1,354		(63,380	)
Carrying amount of intangible assets	1,195,302		(49,076	)	284,729	529	(96	)	(162,046	)	1,269,342

(See note 3)

This appendix forms an integral part of note 8 to the consolidated financial statements.

APPENDIX III

GRIFOLS, S.A. AND SUBSIDIARIES

Changes in Other Intangible Assets

for the year ended

31 December 2016

(Expressed in thousands of Euros)

	Balances at								Translation		Balances at
	31/12/2015		Additions		Transfers		Disposals		differences		31/12/2016
Development costs	112,688		29,126		—		(79	)	958		142,693
Concessions, patents, licenses brands & similar	59,249		—		—		—		1,222		60,471
Computer software	144,976		18,919		1,460		(420	)	3,688		168,623
Currently marketed products	1,126,024		—		—		—		36,180		1,162,204
Other intangible assets	134,068		10,469		—		(651	)	4,796		148,682
Total cost of intangible assets	1,577,005		58,514		1,460		(1,150	)	46,844		1,682,673
Accum. amort. of development costs	(67,551	)	(4,473	)	—		—		(49	)	(72,073	)
Accum. amort of concessions, patents, licenses, brands & similar	(23,957	)	(806	)	—		—		(231	)	(24,994	)
Accum. amort. of computer software	(83,197	)	(15,136	)	(99	)	419		(1,914	)	(99,927	)
Accum. amort. of currently marketed products	(175,135	)	(38,441	)	—		—		(7,412	)	(220,988	)
Accum. amort. of other intangible assets	(65,627	)	(2,117	)	—		544		(2,189	)	(69,389	)
Total accum. amort intangible assets	(415,467	)	(60,973	)	(99	)	963		(11,795	)	(487,371	)
Impairment of other intangible assets	34		—		—		(34	)	—		—
Carrying amount of intangible assets	1,161,572		(2,459	)	1,361		(221	)	35,049		1,195,302

This appendix forms an integral part of note 8 to the consolidated financial statements.

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Appendix IV

12 Months Ended

Dec. 31, 2017

Appendix IV

Appendix IV

APPENDIX IV

GRIFOLS, S.A. AND SUBSIDIARIES

Movement in Property, Plant and Equipment

for the year ended

31 December 2017
(Expressed in thousands of Euros)

	Balances at 31/12/2016		Additions		Business combination	Transfers		Disposals		Translation differences		Balances at 31/12/2017
Cost:
Land and buildings	687,856		28,503		19,628	12,694		(823	)	(74,324	)	673,534
Plant and machinery	1,655,837		82,234		9,068	123,816		(10,098	)	(156,178	)	1,704,679
Fixed Assets under construction	275,003		149,610		555	(137,073	)	—		(25,976	)	262,119
	2,618,696		260,347		29,251	(563	)	(10,921	)	(256,478	)	2,640,332
Accumulated depreciation:
Buildings	(59,376	)	(14,708	)	—	—		710		6,609		(66,765	)
Plant and machinery	(746,268	)	(136,314	)	—	34		7,993		63,773		(810,782	)
	(805,644	)	(151,022	)	—	34		8,703		70,382		(877,547	)
Impairment of other property, plant and equipment	(3,200	)	258		—	—		—		210		(2,732	)
Carrying amount	1,809,852		109,583		29,251	(529	)	(2,218	)	(185,886	)	1,760,053
					(See note 3)

This appendix forms an integral part of note 9 to the consolidated financial statements.

APPENDIX IV
GRIFOLS, S.A. AND SUBSIDIARIES

Movement in Property, Plant and Equipment
for the year ended

31 December 2016
(Expressed in thousands of Euros)

	Balances at 31/12/2015		Additions		Transfers		Disposals		Translation differences		Balances at 31/12/2016
Cost:
Land and buildings	613,476		12,993		44,060		(780	)	18,107		687,856
Plant and machinery	1,431,030		87,536		116,724		(19,515	)	40,062		1,655,837
Fixed Assets under construction	263,610		163,059		(162,292	)	—		10,626		275,003
	2,308,116		263,588		(1,508	)	(20,295	)	68,795		2,618,696
Accumulated depreciation:
Buildings	(44,057	)	(13,777	)	(2	)	178		(1,718	)	(59,376	)
Plant and machinery	(616,369	)	(127,119	)	149		13,605		(16,534	)	(746,268	)
	(660,426	)	(140,896	)	147		13,783		(18,252	)	(805,644	)
Impairment of other property, plant and equipment	(3,288	)	147		—		—		(59	)	(3,200	)
Carrying amount	1,644,402		122,839		(1,361	)	(6,512	)	50,484		1,809,852

This appendix forms an integral part of note 9 to the consolidated financial statements.

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Appendix V

12 Months Ended

Dec. 31, 2017

Appendix V

Appendix V

APPENDIX V

GRIFOLS, S.A. AND SUBSIDIARIES

Statement of Liquidity for Distribution of Interim Dividend 2017

(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2017:
Projected profits net of taxes until 31/12/2017	273,472
Less, charge required to legal reserve	—
Estimated profits distributable for 2017	273,472
Interim dividend distributed	122,986
Forecast cash for the period 15 December 2017 to 15 December 2018:
Cash balances at 15 December 2017	—
Projected amounts collected	475,209
Projected payments, including interim dividend	468,117
Projected cash balances at 15 December 2018	7,092

This appendix forms an integral part of note 15 to the consolidated financial statements.

APPENDIX V
GRIFOLS, S.A. AND SUBSIDIARIES
Statement of Liquidity for Distribution of Interim Dividend 2016
(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2016:
Projected profits net of taxes until 31/12/2016	319,133
Less, charge required to legal reserve	—
Estimated profits distributable for 2016	319,133
Interim dividend distributed	122,908
Forecast cash for the period 07 December 2016 to 07 December 2017:
Cash balances at 07 December 2016	5,521
Projected amounts collected	497,058
Projected payments, including interim dividend	471,686
Projected cash balances at 07 December 2017	30,893

This appendix forms an integral part of note 15 to the consolidated financial statements.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Significant Accounting Policies

Subsidiaries and associates

(a)Subsidiaries and associates

Subsidiaries are entities, including special purpose entities (SPE), over which the Group exercises control, either directly or indirectly, through subsidiaries. The Group controls a subsidiary when it has the substantive rights in force that provide the ability to manage relevant activities. The Group is exposed or has the right to variable returns for its involvement in the subsidiaries when the returns obtained vary depending on the economic performance of the subsidiaries.

The income, expenses and cash flows of subsidiaries are included in the Consolidated Financial Statements from the date of acquisition, which is when the Group takes control. Subsidiaries are excluded from the consolidated Group from the date on which control is lost.

Transactions and balances with Group companies and unrealized gains or losses have been eliminated upon consolidation.

The accounting policies of subsidiaries have been adapted to those of the Group for transactions and other events in similar circumstances.

The financial statements of consolidated subsidiaries have been prepared as of the same date and for the same reporting period as the financial statements of the Company.

Associates are entities over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those entities. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Group or other entities, are considered when assessing whether an entity has significant influence.

Investments in associates are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases.

Investments in associates are initially recognized at acquisition cost, including any cost directly attributable to the acquisition and any consideration receivable or payable contingent on future events or on compliance with certain conditions.

The excess of the cost of the investment over the Group’s share of the fair values of the identifiable net assets is recognized as goodwill, which is included in the carrying amount of the investment. Any shortfall, once the cost of the investment and the identification and measurement of the associate’s net assets have been evaluated, is recognized as income when determining the investor’s share of the profit and loss of the associate for the year in which it was acquired.

The accounting policies of associates have been harmonized in terms of timing and measurement, applying the policies described for subsidiaries.

The Group’s share of the profit and loss of an associate from the date of acquisition is recognized as an increase or decrease in the value of the investments, with a credit or debit to share of the profit and loss for the year of “equity-accounted investees” in the consolidated statement of profit and loss (consolidated statement of comprehensive income). The Group’s share of other comprehensive income of associates from the date of acquisition is recognized as an increase or decrease in the investments in associates with a balancing entry recognized by type in other comprehensive income. The distribution of dividends is recognized as a decrease in the value of the investment. The Group’s share of profit and loss, including impairment losses recognized by the associates, is calculated based on income and expenses arising from application of the acquisition method.

The Group’s share of the profit and loss of an associate and changes in equity is calculated to the extent of the Group’s interest in the associate at year end and does not reflect the possible exercise or conversion of potential voting rights. However, the Group’s share is calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of associates.

Information on the subsidiaries and associates included in the consolidated Group is presented in Appendix I.

Business combinations

(b)Business combinations

On the date of transition to IFRS-EU, 1 January 2004, the Group applied the exception permitted under IFRS 1
“First-time adoption of International Financial Reporting Standards”, whereby only those business combinations performed as from 1 January 2004 have been recognized using the acquisition method. Entities acquired prior to that date were recognized in accordance with accounting prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.

The Group applies the revised IFRS 3 “Business combinations” in transactions made subsequent to 1 January 2010.

The Group applies the acquisition method for business combinations.

The acquisition date is the date on which the Group obtains control of the acquiree.

Business combinations made subsequent to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, equity instruments issued and any additional consideration contingent on future events or the fulfilment of certain conditions, in exchange for control of the acquiree.

The consideration paid excludes all amounts that do not form part of the exchange for the acquired business. Acquisition-related costs are accounted for as expenses when incurred. Share increase costs are recognized as equity when the increase takes place and borrowing costs are deducted from the financial liability when it is recognized.

At the acquisition date the Group recognizes at fair value the assets acquired and liabilities assumed. Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured. The Group also recognizes indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.

This criterion does not include non-current assets or disposal groups of assets which are classified as held for sale, long-term defined benefit employee benefit liabilities, share-based payment transactions, deferred tax assets and liabilities and intangible assets arising from the acquisition of previously transferred rights.

Assumed assets and liabilities are classified and designated for subsequent measurement in accordance with the contractual terms, economic conditions, operating or accounting policies and other factors that exist at the acquisition date, except for leases and insurance contracts.

The excess between the consideration transferred and the value of net assets acquired and liabilities assumed, less the value assigned to non-controlling interests, is recognized as goodwill. Where applicable, any shortfall, after evaluating the consideration transferred, the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognized in profit and loss.

When a business combination has been provisionally determined, net identifiable assets have initially been recognized at their provisional value, and any adjustments made during the measurement period have been recorded as if they had been known at that date. Where applicable, comparative figures for the prior year have been restated. Adjustments to the provisional values only reflect information relating to events and circumstances existing at the acquisition date and which, had they been known, would have affected the amounts recognized at that date. Once this period has elapsed, adjustments are only made to initial values when errors must be corrected. Any potential benefits arising from tax losses and other deferred tax assets of the acquiree that have not been recorded as they did not qualify for recognition at the acquisition date, are accounted for as income tax revenue, provided the adjustments were not made during the measurement period.

The contingent consideration is classified in accordance with underlying contractual terms as a financial asset or financial liability, equity instrument or provision. Provided that subsequent changes to the fair value of a financial asset or financial liability do not relate to an adjustment of the measurement period, they are recognized in consolidated profit and loss. The contingent consideration classified, where applicable, as equity is not subject to subsequent change, with settlement being recognized in equity. The contingent consideration classified, where applicable, as a provision is recognized subsequently in accordance with the relevant measurement standard.

Business combinations made prior to 1 January 2010

The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Any additional consideration contingent on future events or the fulfilment of certain conditions is included in the cost of the combination provided that it is probable that an outflow of resources embodying economic benefits will be required and the amount of the obligation can be reliably estimated. Subsequent recognition of contingent considerations or subsequent variations to contingent considerations is recognized as a prospective adjustment to the cost of the business combination.

Where the cost of the business combination exceeds the Group’s interest in the fair value of the identifiable net assets of the entity acquired, the difference is recognized as goodwill, whilst the shortfall, once the costs of the business combination and the fair values of net assets acquired have been reconsidered, is recognized in profit and loss.

Non-controlling interest

(c)Non-controlling interests

Non-controlling interests in subsidiaries acquired after 1 January 2004 are recognized at the acquisition date at the proportional part of the fair value of the identifiable net assets. Non-controlling interests in subsidiaries acquired prior to the transition date were recognized at the proportional part of the equity of the subsidiaries at the date of first consolidation.

Non-controlling interests are disclosed in the consolidated balance sheet under equity separately from equity attributable to the Parent. Non-controlling interests’ share in consolidated profit and loss for the year (and in consolidated comprehensive income for the year) is disclosed separately in the consolidated statement of profit and loss (consolidated statement of comprehensive income).

The consolidated profit and loss for the year, consolidated comprehensive income and changes in equity of the subsidiaries attributable to the Group and non-controlling interests after consolidation adjustments and eliminations, is determined in accordance with the percentage ownership at year end, without considering the possible exercise or conversion of potential voting rights. However, Group and non-controlling interests are calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of subsidiaries.

Profit and loss and each component of other comprehensive income are assigned to equity attributable to shareholders of the Parent and to non-controlling interests in proportion to their interest, although this implies a balance receivable from non-controlling interests. Agreements signed between the Group and the non-controlling interests are recognized as a separate transaction.

The increase and reduction of non-controlling interests in a subsidiary in which control is retained is recognized as an equity instrument transaction. Consequently, no new acquisition cost arises on increases, nor is a gain recorded on reductions; rather, the difference between the consideration transferred or received and the carrying amount of the non-controlling interests is recognized in the reserves of the investor, without prejudice to reclassifying consolidation reserves and reallocating other comprehensive income between the Group and the non-controlling interests. When a Group’s interest in a subsidiary diminishes, non-controlling interests are recognized at their share of the net consolidated assets, including goodwill.

Joint arrangements

(d)Joint arrangements

Joint arrangements are those in which there is a contractual agreement to share the control over an economic activity, in such a way that the decisions over relevant activities require the unanimous consent of the Group and the remaining venturers.

Investments in joint arrangements are accounted for using the equity method.

The acquisition cost of investments in joint arrangements is determined consistently with that established for investments in associates.

Foreign currency transactions and balances

(e)Foreign currency transactions and balances

(i)Functional and presentation currency

The Consolidated Financial Statements are presented in thousands of Euros, which is the functional and presentation currency of the Parent.

(ii)Foreign currency transactions, balances and cash flows

Foreign currency transactions are translated into the functional currency using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from applying the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies have been translated into thousands of Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into thousands of Euros at the exchange rate at the date that the fair value was determined.

In the consolidated statement of cash flows, cash flows from foreign currency transactions have been translated into thousands of Euros at the exchange rates prevailing at the dates the cash flows occur. The effect of exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies is recognized separately in the statement of cash flows as “Effect of exchange rate fluctuations on cash and cash equivalents”.

Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into thousands of Euros of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.

(iii)Translation of foreign operations

The translation into thousands of Euros of foreign operations for which the functional currency is not the currency of a hyperinflationary economy is based on the following criteria:

· Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, including comparative amounts, are translated at the closing rate at the reporting date;

· Income and expenses, including comparative amounts, are translated using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from using the exchange rate at the date of the transaction;

· Translation differences resulting from application of the above criteria are recognized in other comprehensive income.

Borrowing costs

(f)Borrowing costs

In accordance with IAS 23 “Borrowing Costs”, since 1 January 2009 the Group recognizes borrowing costs directly attributable to the purchase, construction or production of qualifying assets as an increase in the value of these assets. Qualifying assets are those which require a substantial period of time before they can be used or sold. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs incurred, less any investment income on the temporary investment of those funds. Capitalized borrowing costs corresponding to general borrowing are calculated as the weighted average of the qualifying assets without considering specific funds. The amount of borrowing costs capitalized cannot exceed the amount of borrowing costs incurred during that period. The capitalized borrowing costs include adjustments to the carrying amount of financial liabilities arising from the effective portion of hedges entered into by the Group.

The Group begins capitalizing borrowing costs as part of the cost of a qualifying asset when it incurs expenditure for the asset, interest is accrued, and it undertakes activities that are necessary to prepare the asset for its intended use or sale, and ceases capitalizing borrowing costs when all or substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Nevertheless, capitalization of borrowing costs is suspended when active development is interrupted for extended periods.

Property, plant and equipment

(g)Property, plant and equipment

(i)Initial recognition

Property, plant and equipment are recognized at cost or deemed cost, less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets is determined using the same principles as for an acquired asset, while also considering the criteria applicable to production costs of inventories. Capitalized production costs are recognized by allocating the costs attributable to the asset to “Self-constructed non-current assets” in the consolidated statement of profit and loss.

At 1 January 2004 the Group opted to apply the exemption regarding fair value and revaluation as deemed cost as permitted by IFRS 1 First time Adoption of International Financial Reporting Standards.

(ii)Depreciation

Property, plant and equipment are depreciated by allocating the depreciable amount of an asset on a systematic basis over its useful life. The depreciable amount is the cost or deemed cost of an asset, less its residual value. The Group determines the depreciation charge separately for each item for a component of property, plant and equipment with a cost that is significant in relation to the total cost of the asset.

Property, plant and equipment are depreciated using the following criteria:

	Depreciation method	Rates
Buildings	Straight line	1% - 3%
Other property, technical equipment and machinery	Straight line	4%-10%
Other property, plant and equipment	Straight line	7% - 33%

The Group reviews residual values, useful lives and depreciation methods at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

(iii)Subsequent recognition

Subsequent to initial recognition of the asset, only those costs incurred which will probably generate future profits and for which the amount may reliably be measured are capitalized. Costs of day-to-day servicing are recognized in profit and loss as incurred.

Replacements of property, plant and equipment which qualify for capitalization are recognized as a reduction in the carrying amount of the items replaced. Where the cost of the replaced items has not been depreciated independently and it is not possible to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction.

(iv)Impairment

The Group tests for impairment and reversals of impairment losses on property, plant and equipment based on the criteria set out in note 4(i) below.

Intangible assets

(h)Intangible assets

(i)Goodwill

Goodwill is generated on the business combinations and is calculated using the criteria described in the section on business combinations.

Goodwill is not amortized, but is tested for impairment annually or more frequently whenever there is an indication that goodwill may be impaired. Goodwill acquired in business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 7 are applied. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

(ii)Internally generated intangible assets

Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.

Costs related with development activities are capitalized when:

· The Group has technical studies that demonstrate the feasibility of the production process;

· The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use;

· The asset will generate sufficient future economic benefits;

· The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects.

The cost of internally generated assets by the Group is calculated using the same criteria established for determining production costs of inventories. The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets in the consolidated statement of profit and loss.

Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.

(iii)Other intangible assets

Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.

Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.

(iv)Intangible assets acquired in business combinations

The cost of identifiable intangible assets acquired in the business combination of Hologic includes the fair value of the R&Dprojects and the Intellectual Property-Patents.

The cost of identifiable intangible assets acquired in the business combination of Novartis includes the fair value of the existing royalty agreements.

The cost of identifiable intangible assets acquired in the business combination of the Progenika Group includes the fair value of the currently marketed products sold and which are classified under “Other intangible assets” and “Development costs”.

The cost of identifiable intangible assets acquired in the Talecris business combination includes the fair value of currently marketed products sold and which are classified under “Other intangible assets”.

(v)Useful life and amortization rates

The Group assesses whether the useful life of each intangible asset acquired is finite or indefinite. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.

Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:

	Amortisation method	Rates
Development expenses	Straight line	10%
Concessions, patents, licences, trademarks and similar	Straight line	7% - 20%
Computer software	Straight line	33%
Currently marketed products	Straight line	3% - 10%

The depreciable amount is the cost or deemed cost of an asset, less its residual value.

The Group does not consider the residual value of its intangible assets to be material. The Group reviews the residual value, useful life and amortization method for intangible assets at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.

Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization

(i)Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization

The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortization or depreciation, to verify whether the carrying amount of these assets exceeds the recoverable amount.

The Group tests goodwill, intangible assets with indefinite useful lives and intangible assets with finite useful lives that are not available for use for potential impairment at least annually, irrespective of whether there is any indication that the assets may be impaired.

The recoverable amount of the assets is the higher of their fair value less costs of disposal and their value in use. An asset’s value in use is calculated based on an estimate of the future cash flows expected to derive from the use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows deriving from the asset.

Negative differences arising from comparison of the carrying amounts of the assets with their recoverable amounts are recognized in the consolidated statement of profit and loss. Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.

Impairment losses recognized for cash-generating units are first allocated to reduce, where applicable, the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset. The carrying amount of each asset may not be reduced below the highest of its fair value less costs of disposal, its value in use and zero.

At the end of each reporting period the Group assesses whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. Impairment losses on goodwill are not reversible. Impairment losses on other assets are only reversed if there has been a change in the estimates used to calculate the recoverable amount of the asset.

A reversal of an impairment loss is recognized in consolidated profit and loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss may not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized.

A reversal of an impairment loss for a CGU is allocated to the assets of each unit, except goodwill, pro rata with the carrying amounts of those assets. The carrying amount of an asset may not be increased above the lower of its recoverable amount and the carrying amount that would have been disclosed, net of amortization or depreciation, had no impairment loss been recognized.

Leases

(j)Leases

(i)Lessee accounting records

The Group has rights to use certain assets through lease contracts.

Leases in which the Group assumes substantially all the risks and rewards incidental to ownership are classified as finance leases, otherwise they are classified as operating leases.

Finance leases

At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Initial direct costs are added to the asset’s carrying amount. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are recognized as an expense in the years in which they are incurred.

Operating leases

Lease payments under an operating lease (excluding incentives) are recognized as an expense on a straight-line basis unless another systematic basis is representative of the time pattern of the user’s benefit.

(ii)Leasehold investments

Non-current investments in properties leased from third parties are recognized on the basis of the same criteria for property, plant and equipment. Investments are amortized over the lower of their useful lives and the term of the lease contract. The lease term is consistent with that established for recognition of the lease.

(iii)Sale and leaseback transactions

Any profit on sale and leaseback transactions that meet the conditions of a finance lease is deferred over the term of the lease.

When the leaseback is classified as an operating lease:

If the transaction is established at fair value, any profit and loss on the sale is recognized immediately in the consolidated statement of profit and loss for the year;

If the sale price is below fair value, any profit and loss is recognized immediately in the consolidated statement of profit and loss. However, if the loss is compensated for by future lease payments at below market price, it is deferred in proportion to the lease payments over the period for which the asset is to be used.

Financial instruments

(k)Financial instruments

(i)Classification of financial instruments

Financial instruments are classified on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument set out in IAS 32, Financial Instruments: Presentation.

Financial instruments are classified into the following categories for valuation purposes: financial assets and financial liabilities at fair value through profit and loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets and financial liabilities. Financial instruments are classified into different categories based on the nature of the instruments and the Group’s intentions on initial recognition.

Regular way purchases and sales of financial assets are recognized using trade date accounting, i.e. when the Group commits itself to purchase or sell an asset.

a)Financial assets and liabilities at fair value through profit and loss

Financial assets and financial liabilities at fair value through profit and loss are those which are classified as held for trading or which the Group designated as such on initial recognition.

A financial asset or financial liability is classified as held for trading if:

· It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

· It forms part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking, or

· It is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

Financial assets and financial liabilities at fair value through profit and loss are initially recognized at fair value. Transaction costs directly attributable to the acquisition or issue are recognized as an expense when incurred.

After initial recognition, they are recognized at fair value through profit and loss.

The Group does not reclassify any financial assets or liabilities from or to this category while they are recognized in the consolidated balance sheet.

b)Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified in other financial asset categories. These assets are recognized initially at fair value, including transaction costs, and subsequently measured at amortized cost using the effective interest method.

c)Financial assets and financial liabilities carried at cost

Investments in equity instruments whose fair value cannot be reliably measured and derivative instruments that are linked to these instruments and that must be settled by delivery of such unquoted equity instruments, are measured at cost. Nonetheless, if the financial assets or liabilities can be reliably measured subsequently on an ongoing basis, they are accounted for at fair value and any gain or loss is recognized in accordance with their classification.

(ii)Offsetting principles

A financial asset and a financial liability are offset only when the Group currently has the legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(iii)Fair value

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorized within different levels of a fair value hierarchy based on the inputs used in the valuation techniques as follows:

· Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

· Level 2: inputs other than prices included in Level 1 that are observable for the asset or liability, either directly (i.e. derived from prices) or indirectly.

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability are categorized within different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(iv)Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.

(v)Impairment of financial assets carried at cost

The amount of the impairment loss on assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses cannot be reversed and are therefore recognized directly against the value of the asset and not as an allowance account.

(vi)Impairment of financial assets carried at amortized cost

In the case of financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. For variable income financial assets, the effective interest rate corresponding to the measurement date under the contractual conditions is used.

The Group recognizes impairment losses and unrecoverable loans and receivables and debt instruments by recognizing an allowance account for financial assets. When impairment and uncollectibility are considered irreversible, their carrying amount is eliminated against the allowance account.

The impairment loss is recognized in profit and loss and may be reversed in subsequent periods if the decrease can be objectively related to an event occurring after the impairment has been recognized. The loss can only be reversed to the limit of the amortized cost of the assets had the impairment loss not been recognized. The impairment loss is reversed against the allowance account.

(vii)Available for sale financial assets

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit and loss.

A financial asset that the Group pretends to held to maturity or that it is a loan or receivable can also be designated as available for sale in the initial recognition. This category usually includes all debt securities traded on active markets that have not been designated as held-to-maturity, as well as equity investments that have not been classified as fair value through profit and loss.

A gain or loss on an available for sale financial asset shall be recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized.

When a decline in the fair value of an available for sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit and loss as a reclassification adjustment even though the financial asset has not been derecognized.

(viii)Financial liabilities

Financial liabilities, including trade and other payables, which are not classified at fair value through profit and loss, are initially recognized at fair value less any transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, liabilities classified under this category are measured at amortized cost using the effective interest method.

(ix)Derecognition of financial assets

The Group applies the criteria for derecognition of financial assets to part of a financial asset or part of a group of similar financial assets or to a financial asset or group of similar financial assets.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Where the Group retains the contractual rights to receive cash flows, it only derecognizes financial assets when it has assumed a contractual obligation to pay the cash flows to one or more recipients and if the following requirements are met:

· Payment of the cash flows is conditional on their prior collection;

· The Group is unable to sell or pledge the financial asset, and

· The cash flows collected on behalf of the eventual recipients are remitted without material delay and the Group is not entitled to reinvest the cash flows. This criterion is not applicable to investments in cash or cash equivalents made by the Group during the settlement period from the collection date to the date of required remittance to the eventual recipients, provided that interest earned on such investments is passed on to the eventual recipients.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it determines whether it has retained control of the financial asset. In this case:

· If the Group has not retained control, it derecognizes the financial asset and recognizes separately as assets or liabilities any rights and obligations created or retained in the transfer.

· If the Group has retained control, it continues to recognise the financial asset to the extent of its continuing involvement in the financial asset and recognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. The associated liability is measured in such a way that the carrying amount of the transferred asset and the associated liability is equal to the amortized cost of the rights and obligations retained by the Group, if the transferred asset is measured at amortized cost, or to the fair value of the rights and obligations retained by the Group, if the transferred asset is measured at fair value. The Group continues to recognise any income arising on the transferred asset to the extent of its continuing involvement and recognizes any expense incurred on the associated liability. Recognized changes in the fair value of the transferred asset and the associated liability are accounted for consistently with each other in profit and loss or equity, following the general recognition criteria described previously, and are not offset.

If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the consideration received is recognized in liabilities. Transaction costs are recognized in profit and loss using the effective interest method.

(x)Derecognition and modifications of financial liabilities

A financial liability, or part of it, is derecognized when the Group either discharges the liability by paying the creditor, or is legally released from primary responsibility for the liability either by process of law or by the creditor.

The exchange of debt instruments between the Group and the counterparty or substantial modifications of initially recognized liabilities are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability, providing the instruments have substantially different terms.

The Group considers the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability.

If the exchange is accounted for as an extinguishment of the financial liability, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability.

The difference between the carrying amount of a financial liability, or part of a financial liability, extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit and loss.

Equity instruments

(l)Equity instruments

The Group’s acquisition of equity instruments of the Parent is recognized separately at cost of acquisition in the consolidated balance sheet as a reduction in equity, regardless of the motive of the purchase. Any gains or losses on transactions with treasury equity instruments are not recognized in consolidated profit and loss.

The subsequent redemption of Parent shares, where applicable, leads to a reduction in share capital in an amount equivalent to the par value of such shares. Any positive or negative difference between the cost of acquisition and the par value of the shares is debited or credited to reserves. Transaction costs related with treasury equity instruments, including issue costs related to a business combination, are accounted for as a reduction in equity, net of any tax effect.

Inventories

(m)Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The costs of conversion of inventories include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. The allocation of fixed indirect overheads is based on the higher of normal production capacity or actual production.

The raw material used to produce haemoderivatives is human plasma, which is obtained from our donation centers using the plasmapheresis method. The cost of inventories includes the amount paid to plasma donors, or the amount billed by the seller when purchased from third parties, as well as the cost of products and devices used in the collection process, rental expenses and storage. This plasma has to be stored before use, which is an essential part of the production process. During the storage period, the plasma undergoes various virological tests and should be kept in quarantine in accordance with FDA and European Medicines Agency regulations, in order to guarantee that all the plasma is suitable for use in the production process.

To the extent that plasma storage costs are necessary to the production process, they are included as cost of inventories.

Indirect costs such as general management and administration costs are recognized as expenses in the period in which they are incurred.

The cost of raw materials and other supplies and the cost of merchandise are allocated to each inventory unit on a weighted average cost basis.

The transformation cost is allocated to each inventory unit on a FIFO (first-in, first-out) basis.

The Group uses the same cost model for all inventories of the same nature and with a similar use.

Volume discounts extended by suppliers are recognized as a reduction in the cost of inventories when it is probable that the conditions for discounts to be received will be met. Discounts for prompt payment are recognized as a reduction in the cost of the inventories acquired.

When the cost of inventories exceeds net realizable value, materials are written down to net realizable value, which is understood to be:

· For raw materials and other supplies, replacement cost. Nevertheless, raw materials and other supplies are not written down below cost if the finished goods into which they will be incorporated are expected to be sold at or above cost of production;

· Merchandise and finished goods, estimated selling price less costs to sell;

· Work in progress, the estimated selling price of related finished goods, less the estimated costs of completion and the estimated costs necessary to make the sale.

The previously recognized write-down is reversed against profit and loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances. The reversal of the write-down is limited to the lower of the cost and revised net realizable value of the inventories. Write-downs may be reversed with a credit to “Changes in inventories of finished goods and work in progress” and “Supplies”.

Cash and cash equivalents

(n)Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand deposits in financial institutions. They also include other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as a cash equivalent when it has a maturity of less than three months from the date of acquisition.

The Group classifies cash flows relating to interest received and paid as operating activities, and dividends received and distributed are classified under investing and financing activities, respectively.

Government grants

(o)Government grants

Government grants are recognized when there is reasonable assurance that they will be received and that the Group will comply with the conditions attached.

(i)Capital grants

Outright capital grants are initially recognized as deferred income in the consolidated balance sheet. Income from capital grants is recognized in the consolidated statement of profit and loss in line with the depreciation of the corresponding financed assets.

(ii)Operating grants

Operating grants received to offset expenses or losses already incurred, or to provide immediate financial support not related to future disbursements, are recognized in the consolidated statement of profit and loss.

(iii)Interest rate grants

Financial liabilities comprising implicit assistance in the form of below-market interest rates are initially recognized at fair value. The difference between this value, adjusted where necessary for the issue costs of the financial liability and the amount received, is recognized as a government grant based on the nature of the grant awarded.

Employee benefits

(p)Employee benefits

(i)Defined contribution plans

The Group recognizes the contributions payable to a defined contribution plan in exchange for a service in the period in which contributions are accrued. Accrued contributions are recognized as an employee benefit expense in the corresponding consolidated statement of profit and loss in the year that the contribution was made.

(ii)Termination benefits

Termination benefits are recognized at the earlier of the date when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that involves the payment of termination benefits.

For termination benefits payable as a result of an employee’s decision to accept an offer of benefits, the time when the Group can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and when a restriction on the Group’s ability to withdraw the offer takes effect.

For termination benefits payable as a result of the Group’s decision to make an employee redundant, the Group can no longer withdraw the offer when it has informed the affected employees or union representatives of the plan and the actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made. The plan must identify the number of employees to be made redundant, their job classifications or functions and their locations and the expected completion date. The plan must also establish the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.

If the Group expects to settle the termination benefits in full more than twelve months after year end, the liability is discounted using the market yield on high quality corporate bonds.

(iii)Short-term employee benefits

The Group recognizes the expected cost of short-term employee benefits in the form of accumulating compensated absences when the employees render service that increases their entitlement to future compensated absences. In the case of non-accumulating compensated absences, the expense is recognized when the absences occur.

The Group recognizes the expected cost of profit-sharing and bonus plans when it has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made.

(iv)Restricted Share Unit Retention Plan (RSU)

The Group gives share-based payments to certain employees who render services to the Company. The fair value of the services received is determined based on the estimated fair value of the shares given at the grant date. Because the equity instruments granted do not vest until the employees complete a specified period of service, those services are accounted for during the vesting period in the income statement as an expense for the year, with the corresponding increase in equity. The amount recognized corresponds to that settled once the agreed terms have been met and it will not be adjusted or revalued during the accrual period, as the commitment is settled in the form of shares.

The total amount recognized is calculated based on the incentive payable in shares, increasing in line with percentages agreed by the Group. If an employee decides to leave his/her job prior to the end of the accrual period, he/she will only receive the agreed incentive in the form of shares and the Company will be able to choose whether to settle in cash or using equity instruments.

Provisions

(q)Provisions

Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account all risks and uncertainties surrounding the amount to be recognized as a provision and, where the time value of money is material, the financial effect of discounting provided that the expenditure to be made each period can be reliably estimated. The discount rate is a pre-tax rate that reflects the time value of money and the specific risks for which future cash flows associated with the provision have not been adjusted at each reporting date.

If it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed against the consolidated statement of profit and loss item where the corresponding expense was recognized.

Revenue recognition

(r)Revenue recognition

Revenue from the sale of goods or services is measured at the fair value of the consideration received or receivable. Revenue is presented net of VAT and any other amounts or taxes which are effectively collected on the behalf of third parties. Volume or other types of discounts for prompt payment are recognized as a reduction in revenues if considered probable at the time of revenue recognition.

(i)Sale of goods

The Group recognizes revenue from the sale of goods when:

· It has transferred to the buyer the significant risks and rewards of ownership of the goods;

· It retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· The amount of revenue and the costs incurred or to be incurred can be measured reliably;

· It is probable that the economic benefits associated with the transaction will flow to the Group; and

· The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group participates in the government-managed Medicaid programs in the United States, accounting for Medicaid rebates by recognizing an accrual at the time a sale is recorded for an amount equal to the estimated claims for Medicaid rebates attributable to the sale. Medicaid rebates are estimated based on historical experience, legal interpretations of the applicable laws relating to the Medicaid program and any new information regarding changes in the program regulations and guidelines that would affect rebate amounts. Outstanding Medicaid claims, Medicaid payments and inventory levels are analyzed for each distribution channel and the accrual is adjusted periodically to reflect actual experience. While rebate payments are generally made in the following or subsequent quarter, any adjustments for actual experience have not been material.

As is common practice in the sector, the purchase contracts signed by some customers with the Group entitle these customers to price discounts for a minimum purchase volume, volume discounts or prompt payment discounts. The Group recognizes these discounts as a reduction in sales and receivables in the same month that the corresponding sales are invoiced based on the customer’s actual purchase figures or on past experience when the customer’s actual purchases will not be known until a later date.

In the USA, the Group enters into agreements with certain customers to establish contract pricing for the products, which these entities purchase from the authorized wholesaler or distributor (collectively, wholesalers) of their choice. Consequently, when the products are purchased from wholesalers by these entities at the contract price which is less than the price charged by the Group to the wholesaler, the Group provides the wholesaler with a credit referred to as a chargeback. The Group records the chargeback accrual at the time of the sale. The allowance for chargebacks is based on Group’s estimate of the wholesaler inventory levels, and the expected sell-through of the products by the wholesalers at the contract price based on historical chargeback experience and other factors. The Group periodically monitors the factors that influence the provision for chargebacks, and makes adjustments when it considers that actual chargebacks may differ from established allowances. These adjustments occur in a relatively short period of time. As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

(ii)Services rendered

Revenues associated with the rendering of service transactions are recognized by reference to the stage of completion at the consolidated balance sheet date when the outcome of the transaction can be estimated reliably. The outcome of a transaction can be estimated reliably when revenues, the stage of completion, the costs incurred and the costs to complete the transaction can be estimated reliably and it is probable that the economic benefits derived from the transaction will flow to the Group.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of costs incurred that are recoverable.

(iii)Interest income

Until June 2012 the Group has been recognizing interest receivable from the different Social Security affiliated bodies in Spain, to which it provides goods or services, on an accrual basis, and only for those bodies to which historically claims have been made and from which interest has been collected. As a result of the terms imposed by the Spanish Government in 2012 regarding the waiver of late payment interest on overdue receivables, the Group modified its estimate regarding late payment interest. Since June 2012 the Group has only been recognizing late payment interest on receivables from Social Security affiliated bodies on the date on which delayed invoices are collected, as it is highly likely that they will be collected as of that date provided.

Income taxes

(s)Income taxes

The income tax expense or tax income for the year comprises current tax and deferred tax.

Current tax is the amount of income taxes payable or recoverable in respect of the consolidated taxable profit or consolidated tax loss for the year. Current tax assets or liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantially enacted at the reporting date.

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences, whereas deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base.

Current and deferred tax are recognized as income or an expense and included in profit and loss for the year, except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different year, directly in equity, or from a business combination.

(i)Taxable temporary differences

Taxable temporary differences are recognized in all cases except where:

   They arise from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

   They are associated with investments in subsidiaries over which the Group is able to control the timing of the reversal of the temporary difference and it is not probable that the temporary difference will reverse in the foreseeable future.

(ii)Deductible temporary differences

Deductible temporary differences are recognized provided that:

   It is probable that sufficient taxable income will be available against which the deductible temporary difference can be utilized, unless the differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income;

   The temporary differences are associated with investments in subsidiaries to the extent that the difference will reverse in the foreseeable future and sufficient taxable income is expected to be generated against which the temporary difference can be offset.

Tax planning opportunities are only considered when assessing the recoverability of deferred tax assets and if the Group intends to use these opportunities or it is probable that they will be utilized.

(iii)Measurement

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the years when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted. The tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets or liabilities are also reflected in the measurement of deferred tax assets and liabilities.

At year end the Group reviews the fair value of deferred tax assets to write down the balance if it is not probable that sufficient taxable income will be available to apply the tax asset.

Deferred tax assets which do not meet the above conditions are not recognized in the consolidated balance sheet. At year end the Group assesses whether deferred tax assets which were previously not recognized now meet the conditions for recognition.

(iv)Offset and classification

The Group only offsets current tax assets and current tax liabilities if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Group only offsets deferred tax assets and liabilities where it has a legally enforceable right, where these relate to income taxes levied by the same taxation authority and where the taxation authority permits the entity to settle on a net basis, or to realize the asset and settle the liability simultaneously for each of the future years in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Deferred tax assets and liabilities are recognized in the consolidated balance sheet under non-current assets or liabilities, irrespective of the expected date of recovery or settlement.

Segment reporting

(t)Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment, assess its performance and, based on which, differentiated financial information is available.

Classification of assets and liabilities as current and non-current

(u)Classification of assets and liabilities as current and non-current

The Group classifies assets and liabilities in the consolidated balance sheet as current and non-current. Current assets and liabilities are determined as follows:

· Assets are classified as current when they are expected to be realized or are intended for sale or consumption in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are expected to be realized within twelve months after the reporting date or are cash or a cash equivalent, unless the assets may not be exchanged or used to settle a liability for at least twelve months after the reporting date.

· Liabilities are classified as current when they are expected to be settled in the Group’s normal operating cycle, they are held primarily for the purpose of trading, they are due to be settled within twelve months after the reporting date or the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

· Financial liabilities are classified as current when they are due to be settled within twelve months after the reporting date, even if the original term was for a period longer than twelve months, and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date and before the Consolidated Financial Statements are authorized for issue.

Environmental issues

(v)Environmental issues

The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Property, plant and equipment acquired by the Group for long-term use to minimize the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Group’s operations, are recognized as assets applying the measurement, presentation and disclosure criteria described in note 4(g).

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Basis of Presentation (Tables)

12 Months Ended

Dec. 31, 2017

Basis of Presentation

Schedule of amendments to IFRS

Effective date in 2015

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 19	Defined Benefit Plans: employee contributions (amendments to IAS 19)	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2010-2012 cycle	1 July 2014	1 February 2015 (*)
Various	Annual improvements to IFRSs 2011-2013 cycle	1 July 2014	1 January 2015 (*)

(*) early adopted

Effective date in 2016

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 16 IAS 38	Clarification of Acceptable Methods of Depreciation and Amortisation (issued on 12 May 2014)	1 January 2016	1 January 2016
IFRS 11	Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014)	1 January 2016	1 January 2016
IAS 27	Equity Method in Separate Financial Statements (issued on 12 August 2014)	1 January 2016	1 January 2016
Various	Annual Improvements to IFRSs 2012-2014 cycle (issued on 25 September 2014)	1 January 2016	1 January 2016
IAS 1	Disclosure Initiative (issued on 18 December 2014)	1 January 2016	1 January 2016

Effective date in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IAS 12	Recognition of Deferred Tax Assets for Unrealized Losses (issued on 19 January 2016)	1 January 2017	1 January 2017
IAS 7	Disclosure Initiative (issued on 29 January 2016)	1 January 2017	1 January 2017
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016) - IFRS 12	1 January 2017	Pending

Standards issued but not effective in 2017

		Mandatory application for annual periods beginning
		on or after:
Standards		IASB effective date	EU effective date
IFRS 15	Revenue from contracts with Customers (issued on 28 May 2014)	1 January 2018	1 January 2018
IFRS 15	Clarification to IFRS15 Revenue from Contracts with Customers (issued on 12 April 2016)	1 January 2018	1 January 2018
IFRS 9	Financial instruments (issued on 24 July 2014)	1 January 2018	1 January 2018
IFRS 2	Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)	1 January 2018	pending
IFRS 4 IFRS 9	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)	1 January 2018	1 January 2018
IFRIC 22	IFRIC 22 Interpretation: Foreign currency translations and Advance Consideration	1 January 2018	pending
IAS 40	Amendments to IAS 40: Transfers of Investment Property	1 January 2018	pending
Various	Annual improvements to IFRSs 2014 - 2016 cycle (issued on 8 December 2016)	1 January 2018	pending
IFRS 16	Leases (Issued on 13 January 2016)	1 January 2019	1 January 2019
IFRIC 23	Uncertainty over Income Tax Treatments (issued on 7 June 2017)	1 January 2019	pending
IFRS 9	Prepayment Features with Negative Compensation (issued on 12 October 2017)	1 January 2019	pending
IAS 28	Long-term interests in Associates and Joint Ventures (issued on 12 October 2017)	1 January 2019	pending
Various	Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)	1 January 2019	pending
IFRS 17	Insurance Contracts (issued on 18 May 2017)	1 January 2021	pending
IAS 19	Amendment to IAS19: Plan Amendment, Curtailment or Settlemet (issued on 77 February 2018)	1 January 2019	pending

Summary of impact in reserves due to IFRS 9

	Thousand of Euros
			Impact
Senior Unsecured Noted	IAS 39	IFRS 9	01/01/2018
Total Debt	853,667	1,000,000	146,334
Deferred Expenses			(41,036	)
Negative Impact in reserves			105,298

	Thousand of Euros
			Impact
Senior Secured Debt	IAS 39	IFRS 9	01/01/2018
Total Debt	3,375,157	3,226,244	(148,913	)
Deferred Expenses			18,979
Positive impact in reserves			(129,934	)

	Thousand of Euros
			Impact
Total Impact	IAS 39	IFRS 9	01/01/2018
Total Debt	4,228,823	4,226,244	(2,579	)
Deferred Expenses			(22,056	)
Positive impact in reserves			(24,636	)

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Business Combinations (Tables)

12 Months Ended

Dec. 31, 2017

Hologic acquisition

Business Combinations

Disclosure of detailed information about business combination

Cost of the business combination	Thousands of Euros	Thousands of US Dollars
Payment in cash	1,734,077	1,865,000
Result of the cancellation of the existing contract	41,894	45,057
Total business combination cost	1,775,971	1,910,057
Fair value of net assets acquired	309,551	332,923
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	1,466,420	1,577,134

Schedule of fair value assets, liabilities and contingent liabilities recognised on acquisition date

	Fair Value
	Thousands of Euros	Thousands of US Dollars
R&D in progress	137,756	148,157
Other Intangible assets	142,174	152,908
Property, plant and equipment	24,569	26,424
Deferred Tax Assets (note 27)	16,736	18,000
Inventories	30,157	32,434
Total Assets	351,392	377,923
Current Provisions (note 19 (b))	41,841	45,000
Total liabilities and contingent liabilities	41,841	45,000
Total net assets acquired	309,551	332,923

Kedplamsa acquisition

Business Combinations

Disclosure of detailed information about business combination

	Thousands of Euros	Thousands of US Dollars
Cost of the business combination
Payment in cash	44,238	47,083
Total business combination cost	44,238	47,083
Fair value of net assets acquired	4,137	4,403
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)	40,101	42,680

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Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Significant Accounting Policies

Schedule of property, plant and equipment depreciation rates.

	Depreciation method	Rates
Buildings	Straight line	1% - 3%
Other property, technical equipment and machinery	Straight line	4%-10%
Other property, plant and equipment	Straight line	7% - 33%

Schedule of intangible assets amortization rates

	Amortisation method	Rates
Development expenses	Straight line	10%
Concessions, patents, licences, trademarks and similar	Straight line	7% - 20%
Computer software	Straight line	33%
Currently marketed products	Straight line	3% - 10%

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Financial Risk Management Policy (Tables)

12 Months Ended

Dec. 31, 2017

Financial Risk Management Policy

Return on equity

	Thousand of Euros
	2016		2017
Profit attributable to the parent	545,456		662,700
Equity attributable to the parent	3,721,481		3,629,079
ROE	15	%	18	%

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Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting

Schedule of details of net sales by groups of products

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Bioscience	3,429,785	3,228,275	3,032,111
Haemoderivatives
Diagnostic
Transfusional medicine	679,692	640,443	667,886
Other diagnostic	23,377	23,540	23,566
Hospital
Fluid therapy and nutrition	47,699	46,210	45,621
Hospital supplies	52,466	52,373	50,624
Bio supplies	66,791	24,387	24,466
Others	18,263	34,602	90,289
Total	4,318,073	4,049,830	3,934,563

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill

Schedule of details of and movement in goodwill

		Thousands of Euros
		Balance at	Translation		Balance at
	Segment	31/12/2015	differences		31/12/2016
Net value
Grifols UK.Ltd. (UK)	Bioscience	9,362	(1,337	)	8,025
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—		6,118
Biomat USA, Inc.(USA)	Bioscience	186,907	6,132		193,039
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	9,961	173		10,134
Grifols Therapeutics, Inc. (USA)	Bioscience	2,041,137	67,002		2,108,139
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—		40,516
Grifols Diagnostic (Novartis) (USA, Switzerland and Hong Kong)	Diagnostic	1,232,358	39,666		1,272,024
		3,532,359	111,636		3,643,995

		Thousands of Euros
		Balance at	Business	Translation		Balance at
	Segment	31/12/2016	Combination	differences		31/12/2017
Net value
Grifols UK.Ltd. (UK)	Bioscience	8,025	—	(280	)	7,745
Grifols Italia.S.p.A. (Italy)	Bioscience	6,118	—	—		6,118
Biomat USA, Inc.(USA)	Bioscience	193,039	40,101	(27,886	)	205,254
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)	Diagnostic	10,134	—	(591	)	9,543
Grifols Therapeutics, Inc. (USA)	Bioscience	2,108,139	—	(255,234	)	1,852,905
Araclon Biotech, S.L. (Spain)	Diagnostic	6,000	—	—		6,000
Progenika Biopharma, S.A. (Spain)	Diagnostic	40,516	—	—		40,516
Grifols Diagnostic (Novartis & Hologic) (USA, Spain and Hong Kong)	Diagnostic	1,272,024	1,466,420	(302,537	)	2,435,907
Kiro Grifols S.L. (Spain)	Hospital	—	26,510	—		26,510
		3,643,995	1,533,031	(586,528	)	4,590,498
			(See note 3)

Schedule of key assumptions used in calculating impairment of CGUs

The key assumptions used in calculating impairment of the CGUs for 2016 were as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	8.60	%
Diagnostic	2	%	10.30	%

The key assumptions used in calculating impairment of the CGUs for 2017 have been as follows:

	Perpetual Growth rate		Pre-tax discount rate
Bioscience	2	%	9.50	%
Diagnostic	2	%	10.60	%
Hospital	1.40	%	13.30	%

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Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Other Intangible Assets

Schedule of cost and accumulated amortization of currently marketed products

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2015		Additions		differences		31/12/2016
Cost of currently marketed products - Gamunex	1,102,232		—		36,180		1,138,412
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(168,397	)	(36,062	)	(7,412	)	(211,871	)
Accumulated amortisation of currently marketed products - Progenika	(6,738	)	(2,379	)	—		(9,117	)
Carrying amount of currently marketed products	950,889		(38,441	)	28,768		941,216

	Thousands of Euros
	Balance at				Translation		Balance at
	31/12/2016		Additions		differences		31/12/2017
Cost of currently marketed products - Gamunex	1,138,412		—		(137,828	)	1,000,584
Cost of currently marketed products - Progenika	23,792		—		—		23,792
Accumulated amortisation of currently marketed products - Gamunex	(211,871	)	(35,837	)	28,136		(219,572	)
Accumulated amortisation of currently marketed products - Progenika	(9,117	)	(2,379	)	—		(11,496	)
Carrying amount of currently marketed products	941,216		(38,216	)	(109,692	)	793,308

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Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment

Schedule of assets under finance lease

The Group contracted the following types of property, plant and equipment under finance leases at 31 December 2016:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,213	(1,421	)	792
Plant and machinery	13,336	(4,784	)	8,552
	15,549	(6,205	)	9,344

The Group has contracted the following types of property, plant and equipment under finance leases at 31 December 2017:

	Thousands of Euros
	Cost	Accumulated depreciation		Carrying amount
Land and buildings	2,545	(815	)	1,730
Plant and machinery	14,249	(6,564	)	7,685
	16,794	(7,379	)	9,415

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Equity Accounted Investees (Tables)

12 Months Ended

Dec. 31, 2017

Equity Accounted Investees

Schedule of details of equity accounted investees

			Thousands of Euros			Thousands of Euros
	% ownership		31/12/2017	% ownership		31/12/2016
Aradigm Corporation	35.13	%	—	35.13	%	9,291
Kiro Grifols, S.L (see note 3(b))	90.00	%	—	50.00	%	13,888
Alkahest, Inc.	47.58	%	30,559	47.58	%	35,955
Albajuna Therapeutics, S.L	30.00	%	1,956	30.00	%	3,177
Interstate Blood Bank, Inc.	49.19	%	27,936	49.19	%	31,090
Bio Blood Components Inc.	48.97	%	32,960	48.97	%	38,725
Plasma Biological Services, LLC	48.90	%	23,010	48.90	%	25,890
Singulex, Inc.	19.33	%	29,322	20.00	%	43,329
GigaGen, Inc	43.96	%	29,047	—		—
Access Biologicals LLC	49.00	%	44,219	—		—
Aigües de Vilajuïga S.A.	50.00	%	—	—		—
			219,009			201,345

Schedule of movement in investments in equity-accounted investees

	Thousands of Euros
	2017		2016		2015
Balance at 1 January	201,345		76,728		54,296
Acquisitions	80,685		136,072		33,039
Transfers	(16,000	)	(29,059	)	—
Share of profit / (losses)	(13,195	)	6,933		(8,280	)
Share of other comprehensive income / translation differences	(27,134	)	10,671		2,673
Losses for Impairment	(6,692	)	—		—
Collected dividends	—		—		(5,000	)
Balance at 31 December	219,009		201,345		76,728

GigaGen, Inc

Equity Accounted Investees

Schedule of movement in investments in equity-accounted investees

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	31,752
Share of profit / (losses)	(804	)
Share of other comprehensive income / translation differences	(1,595	)
Impairment Losses	(306	)
Balance at 31 December	29,047

Schedule of summarized financial information of investments in equity-accounted investees

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	404		484
Current assets	21,910		26,277
Current liabilities	(180	)	(216	)
Total net assets (100%)	22,134		26,545
Group’s share of net assets (43.96%)	9,730		11,669
Profit from continuing operations (100%)	(1,830	)	(2,183	)
Group’s share of total comprehensive income (43.96%)	(804	)	(960	)

Reconciliation of summarized financial information with carrying amount of equity-accounted investees

	Thousand of Euros
	31/12/2017
Group’s share of net assets	9,730
Goodwill of equity method investment	19,317
Equity method accounted investment	29,047

Access Biologic Acquisition

Equity Accounted Investees

Schedule of movement in investments in equity-accounted investees

	Thousand of Euros
	31/12/2017
Balance at 1 January	—
Acquisitions	48,383
Share of profit / (losses)	1,830
Share of other comprehensive income / translation differences	(5,994	)
Balance at 31 December	44,219

Schedule of summarized financial information of investments in equity-accounted investees

	Thousand of Euros		Thousand of USD
	31/12/2017		31/12/2017
Non-current assets	1,221		1,464
Current assets	14,422		17,296
Non-current liabilities	(1,284	)	(1,540	)
Current liabilities	(3,023	)	(3,626	)
Total net assets (100%)	11,336		13,594
Group’s share of net assets (49%)	5,555		6,661
Profit from continuing operations (100%)	3,734		4,129
Group’s share of total comprehensive income (49%)	1,830		2,023

Reconciliation of summarized financial information with carrying amount of equity-accounted investees

	Thousand of Euros
	31/12/2017
Group’s share of net assets	5,555
Goodwill of equity method investment	38,664
Equity method accounted investment	44,219

Aradigm

Equity Accounted Investees

Schedule of movement in investments in equity-accounted investees

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	9,291		19,799
Share of profit / (losses)	(4,324	)	(10,185	)
Share of other comprehensive income / translation differences	869		(323	)
Impairment losses	(5,836	)	—
Balance at 31 December	—		9,291

Singulex, Inc.

Equity Accounted Investees

Schedule of movement in investments in equity-accounted investees

	Thousand of Euros
	31/12/2017		31/12/2016
Balance at 1 January	43,329		—
Acquisitions	—		44,107
Share of profit / (losses)	(9,335	)	(3,890	)
Share of other comprehensive income / translation differences	(4,672	)	3,112
Balance at 31 December	29,322		43,329

Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LLC

Equity Accounted Investees

Schedule of movement in investments in equity-accounted investees

	Thousands of Euros						Thousands of Euros
	31/12/2017						31/12/2016
	IBBI		Bio-Blood		PBS		IBBI	Bio-Blood		PBS
Balance at 1 January	31,090		38,725		25,890		—	—		—
Acquisitions	—		—		—		28,229	36,168		23,818
Share of profit / (losses)	635		(1,181	)	270		695	(166	)	260
Share of other comprehensive income / translation differences	(3,789	)	(4,584	)	(3,150	)	2,166	2,723		1,812
Balance at 31 December	27,936		32,960		23,010		31,090	38,725		25,890

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Financial Assets (Tables)

12 Months Ended

Dec. 31, 2017

Financial Assets

Schedule of non-current financial assets

	Thousands of Euros
	31/12/2017	31/12/2016
Convertible Bond (a)	—	15,201
Non-current derivatives (b) (see note 30)	8,338	13,665
Non-current investment in quoted shares (see note 30)	38,708	29,998
Total Non-current financial assets measured at fair value	47,046	58,864
Convertible Bond (a)	—	25,000
Non-current guarantee deposits	4,820	4,603
Other non-current financial assets	1,346	1,078
Non-current loans to EEAA (c) (see note 31)	16,677	—
Total Non-current financial assets measured at amortized cost	22,843	30,681

Schedule of other current financial assets

	Thousands of Euros
	31/12/2017	31/12/2016
Deposits and guarantees	702	957
Current loans to third parties	59	832
Current loans to associates (see note 31)	9,977	793
Total other current financial assets	10,738	2,582

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Inventories (Tables)

12 Months Ended

Dec. 31, 2017

Inventories

Schedule of inventories

	Thousands of Euros
	31/12/2017	31/12/2016
Goods for resale	105,013	166,272
Raw materials and supplies	454,371	423,326
Work in progress and semi-finished goods	592,612	584,279
Finished goods	477,297	469,054
	1,629,293	1,642,931

Schedule of movement in inventory provision

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	33,069		22,614		15,888
Net charge for the year	8,232		8,878		6,099
Cancellations for the year	(357	)	(20	)	(195	)
Translation differences	(5,180	)	1,597		822
Balance at 31 December	35,764		33,069		22,614

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Trade and Other Receivables (Tables)

12 Months Ended

Dec. 31, 2017

Trade and Other Receivables

Schedule of trade and other receivables

	Thousands of Euros
	31/12/2017		31/12/2016
Trade receivables	302,685		431,510
Receivables from associates (note 31)	3,219		133
Bad debt provision (note 30)	(19,706	)	(17,987	)
Trade receivables	286,198		413,656
Other receivables (note 30)	7,485		13,705
Personnel	566		280
Advance payments (note 30)	11,181		6,775
Taxation authorities, VAT recoverable	20,105		17,768
Other public entities	1,344		3,771
Other receivables	40,681		42,299
Current income tax assets	59,531		77,713
	386,410		533,668

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Cash and Cash Equivalents (Tables)

12 Months Ended

Dec. 31, 2017

Cash and Cash Equivalents

Schedule of cash and cash equivalents

	Thousands of Euros
	31/12/2017	31/12/2016
Current deposits	655,463	470,298
Cash in hand and at banks	231,058	424,711
Total cash and cash equivalents	886,521	895,009

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Equity (Tables)

12 Months Ended

Dec. 31, 2017

Equity

Distribution of profit

	Thousands of Euros
	31/12/2017	31/12/2016
Legal Reserve	—	—
Voluntary reserve	76,247	103,611
Dividends	265,080	218,182
Profit of the Parent	341,327	321,793

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	53	%	0.13	56,493
Non-voting shares	265	%	0.13	34,136
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				93,243

	31/12/2016
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,205
Total interim dividends paid				122,908

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares	54	%	0.14	57,790
Non-voting shares	271	%	0.14	34,870
Non-voting shares (preferred dividend)	20	%	0.01	2,614
Total dividends paid				95,274

	31/12/2017
	% of par value		Euros per share	Thousands of Euros
Ordinary shares (interim dividend)	72	%	0.18	76,703
Non-voting shares (interim dividend)	360	%	0.18	46,283
Total interim dividends paid				122,986

Share capital

Equity

Movement in outstanding shares

	Class A shares	Class B shares
Balance at 1 January 2016	426,129,798	257,386,540
(Acquisition) / disposal of treasury stock (note 15 (d))	—	(692,165	)
Balance at 31 December 2016	426,129,798	256,694,375

	Class A shares	Class B shares
Balance at 1 January 2017	426,129,798	256,694,375
(Acquisition) / disposal of treasury stock (note 15 (d))	—	432,929
Balance at 31 December 2017	426,129,798	257,127,304

Treasury stock

Equity

Movement in outstanding shares

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2016	4,038,570		58,575
Acquisition of Class B shares	1,628,893		23,720
Non Cash Disposal Class B shares	(936,728	)	(13,585	)
Balance at 31 December 2016	4,730,735		68,710

	No. of Class B shares		Thousands of Euros
Balance at 1 January 2017	4,730,735		68,710
Disposal Class B shares	(432,929	)	(6,288	)
Balance at 31 December 2017	4,297,806		62,422

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share

Earnings Per Share

Details of the calculation of basic earnings per share are as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding	684,197,276	683,225,815	683,549,316
Basic earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average of the ordinary shares outstanding (basic) has been calculated taking into consideration the share split carried out on 4 January 2016 as follows:

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,516,338		683,610,378
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (basic) at 31 December	684,197,276	683,225,815		683,549,316

The RSU Plan granted by the Group and payable in shares, assumes the existence of dilutive potential shares. Diluted earnings per share have been calculated as follows:

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Profit for the year attributable to shareholders of the Parent (thousands of Euros)	662,700	545,456	532,145
Weighted average number of ordinary shares outstanding (diluted)	684,243,891	684,170,887	683,924,426
Diluted earnings per share (Euros per share)	0.97	0.80	0.78

The weighted average number of ordinary shares outstanding diluted has been calculated as follows:

	Number of shares
	31/12/2017	31/12/2016		31/12/2015
Issued shares outstanding at 1 January	683,854,491	683,988,460		683,610,378
Effect of RSU shares	46,615	472,950		375,110
Effect of shares issued	—	—		—
Effect of treasury stock	342,785	(290,523	)	(61,062	)
Average weighted number of ordinary shares outstanding (diluted) at 31 December	684,243,891	684,170,887		683,924,426

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Non-Controlling Interests (Tables)

12 Months Ended

Dec. 31, 2017

Non-Controlling Interests

Details of non-controlling interests and movement

Details of non-controlling interests and movement at 31 December 2016 are as follows:

	Thousands of Euros
	Balance at 31/12/2015		Additions		Disposals		Capital increases	Translation differences		Balance at 31/12/2016
Grifols (Thailand) Pte Ltd	2,664		778		(215	)	—	127		3,354
Grifols Malaysia Sdn Bhd	1,040		144		—		—	(12	)	1,172
Araclon Biotech, S.A.	183		(1,819	)	—		1,776	—		140
Medion Grifols Diagnostic AG	(406	)	—		406		—	—		—
GRI-CEI S/A Productos para transfusao	1,146		—		(1,146	)	—	—		—
Progenika Biopharma, S.A.	1,093		165		—		—	(47	)	1,211
Brainco Biopharma, S.L.	(373	)	—		373		—	—		—
Abyntek Biopharma, S.L.	(93	)	20		—		—	—		(73	)
VCN Bioscience, S.L	(67	)	(201	)	—		961	—		693
	5,187		(913	)	(582	)	2,737	68		6,497
					(see note 2(b))

Details of non-controlling interests and movement at 31 December 2017 are as follows:

	Thousands of Euros
	Balance at 31/12/2016		Additions		Disposals		Business Combination / Additions to Consolidated Group	Translation differences		Balance at 31/12/2017
Grifols (Thailand) Pte Ltd	3,354		433		(77	)	—	(131	)	3,579
Grifols Malaysia Sdn Bhd	1,172		229		—		—	(29	)	1,372
Araclon Biotech, S.A.	140		(1,617	)	—		—	—		(1,477	)
Progenika Biopharma, S.A.	1,211		(60	)	(297	)	—	27		881
Abyntek Biopharma, S.L.	(73	)	45		28		—	—		—
VCN Bioscience, S.L	693		(272	)	—		—	—		421
Kiro Grifols , S.L.	—		(144	)	—		254	—		110
	6,497		(1,386	)	(346	)	254	(133	)	4,886

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Grants (Tables)

12 Months Ended

Dec. 31, 2017

Grants

Summary of details of grants

	Thousands of Euros
	31/12/2017	31/12/2016
Capital grants	11,010	11,311
Interest rate grants (preference loans) (See note 20 ( e))	812	885
	11,822	12,196

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Provision (Tables)

12 Months Ended

Dec. 31, 2017

Provisions

Schedule of details of provisions

	Thousands of Euros
	31/12/2017	31/12/2016
Non-current provisions (a)
Provisions for pensions and similar obligations	4,742	4,195
Other provisions	1,021	923
Non-current provisions	5,763	5,118

	Thousands of Euros
	31/12/2017	31/12/2016
Current provisions (b)
Trade provisions	106,995	89,588
Current provisions	106,995	89,588

Schedule of movement in provisions

Non-current provisions

	Thousand s of Euros
	Balance at 31/12/2014	Net Charge	Cancellations		Reclassifications		Translation differences		Balance at 31/12/2015
Non-current provisions	6,953	376	(1,598	)	(600	)	(151	)	4,980
	6,953	376	(1,598	)	(600	)	(151	)	4,980

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Reclassifications	Translation differences	Balance at 31/12/2016
Non-current provisions	4,980	(399	)	(281	)	814	4	5,118
	4,980	(399	)	(281	)	814	4	5,118

	Thousands of Euros
	Balance at 31/12/2016	Business Combination	Net Charge	Cancellations		Reclassifications	Translation differences		Balance at 31/12/2017
Non-current provisions	5,118	23	422	(23	)	290	(67	)	5,763
	5,118	23	422	(23	)	290	(67	)	5,763

Current provisions

	Thousands of Euros
	Balance at 31/12/2014	Net Charge		Cancellations		Reclasifications	Translation differences	Balance at 31/12/2015
Trade provisions	115,985	(2,562	)	(6,123	)	492	15,257	123,049
	115,985	(2,562	)	(6,123	)	492	15,257	123,049

	Thousands of Euros
	Balance at 31/12/2015	Net Charge		Cancellations		Translation differences	Balance at 31/12/2016
Trade provisions	123,049	(28,481	)	(6,417	)	1,437	89,588
	123,049	(28,481	)	(6,417	)	1,437	89,588

	Thousands of Euros
	Balance at 31/12/2016	Business combination	Net Charge		Cancellations		Reclasifications		Translation differences		Balance at 31/12/2017
Trade provisions	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
	89,588	41,841	(4,812	)	(2,886	)	(2,600	)	(14,136	)	106,995
		(See note 3(a))

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Financial Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Financial Liabilities

Schedule of financial liabilities

	Thousands of Euros
Financial liabilities	31/12/2017	31/12/2016
Non-current obligations (a)	853,667	831,417
Senior secured debt (b)	4,849,882	3,728,695
Other loans (b)	169,214	114,898
Finance lease liabilities (c)	5,415	6,086
Other non-current financial liabilities (e)	23,637	30,975
Total non-current financial liabilities	5,901,815	4,712,071
Current obligations (a)	95,538	95,524
Senior secured debt (b)	4,057	81,273
Other loans (b)	29,527	23,288
Finance lease liabilities (c)	3,945	3,859
Other current financial liabilities (e)	22,003	26,121
Total current financial liabilities	155,070	230,065

Schedule of details of movement in the Senior Unsecured Notes

	Thousands of Euros
	Opening outstanding balance 01/01/16	Translation differences	Closing outstanding balance 31/12/16
Senior Unsecured Notes (nominal amount)	918,527	30,150	948,677
Total	918,527	30,150	948,677

	Thousands of Euros
	Opening outstanding balance 01/01/17	Refinancing	Repayments		Translation differences		Closing outstanding balance 31/12/17
Senior Unsecured Notes (nominal amount)	948,677	108,597	(26,618	)	(30,656	)	1,000,000
Total	948,677	108,597	(26,618	)	(30,656	)	1,000,000

Schedule of current obligation captions including issue of bearer promissory notes to Group employees

	31/12/2016
						Promissory
			Nominal			notes			Interest
			amount of			subscribed	Buy back		pending accrual
		Maturity	promissory	Interest		(Thousands of	(Thousands		(Thousands of
	Issue date	date	notes (Euros)	rate		Euros)	of Euros)		Euros)
Issue of bearer promissory notes	05/05/16	04/05/17	3,000	4.00	%	84,966	(789	)	(1,104	)

31/12/2017

Promissory

Nominal

notes

Interest

amount of

subscribed

Buy back

pending accrual

Maturity

promissory

Interest

(Thousands of

(Thousands

(Thousands of

Issue date

date

notes (Euros)

rate

Euros)

of Euros)

Euros)

Issue of bearer promissory notes

05/05/17

04/05/18

3,000

3.00

%

92,109

(906

)

(909

)

Schedule of details of loans and borrowings

					Thousands of Euros
					31/12/2017			31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended	Carrying amount		Amount extended	Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	1,959,476	1,959,476		—	—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	607,000	607,000		—	—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	2,501,459	2,457,684		—	—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—	—		400,000	385,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—	—		664,074	527,108
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—	—		3,055,168	2,967,574
Total senior debt					5,067,935	5,024,160		4,119,242	3,879,682
EIB Loan	Euros	2.70%	20/11/2015	20/11/2025	100,000	74,375		100,000	100,000
EIB Loan	Euros	2.02%	22/12/2017	22/12/2027	85,000	85,000
Total EIB Loan					185,000	159,375		100,000	100,000
Revolving Credit	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	250,146	—		—	—
Revolving Credit	US Dollars	Libor + 2.5%	27/02/2014	27/02/2019	—	—		284,603	—
Total Revolving Credit					250,146	—		284,603	—
Other non-current loans	Euros	Euribor- Euribor+4%	19/03/2013	30/09/2024	33,180	9,839		33,000	14,898
Loan transaction costs					—	(174,278	)	—	(150,987	)
Non-current loans and borrowings					5,536,261	5,019,096		4,536,845	3,843,593

					Thousands of Euros
					31/12/2017				31/12/2016
Credit	Currency	Interest rate	Date awarded	Maturity date	Amount extended		Carrying amount		Amount extended		Carrying amount
Senior debt - Tranche A	US Dollars	Libor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche A	Euros	Euribor + 1.75%	31/01/2017	31/01/2023	(*	)	—		—		—
Senior debt - Tranche B	US Dollars	Libor + 2.25%	31/01/2017	31/01/2025	(*	)	25,015		—		—
Senior debt - Tranche B	Euros	Euribor + 3%	27/02/2014	28/02/2021	—		—		(*	)	4,000
Senior debt - Tranche A	US Dollars	Libor + 2.5%	27/02/2014	29/02/2020	—		—		(*	)	49,806
Senior debt - Tranche B	US Dollars	Libor + 3%	27/02/2014	28/02/2021	—		—		(*	)	30,832
Total senior debt					—		25,015		—		84,638
BEI Loan	Euros	2.70%	20/11/2015	20/11/2025	(*	)	10,625		—		—
Total BEI Loan					—		10,625		—		—
Other current loans		0.1%-3.74%			131,700		18,902		208,105		23,288
Loan transaction costs					—		(20,958	)	—		(3,365	)
Current loans and borrowings					131,700		33,584		208,105		104,561

(*) See amount granted under non-current debt

Schedule of details of minimum payments and the present value of finance lease liabilities, by maturity date

	Thousands of Euros
	31/12/2017			31/12/2016
	Minimum payments	Interest	Present Value	Minimum payments	Interest	Present Value
Maturity at:
Less than one year	4,305	360	3,945	4,267	408	3,859
Two years	2,636	179	2,457	3,636	263	3,373
Three years	1,461	88	1,373	1,792	88	1,704
Four years	814	60	754	672	16	656
Five years	369	42	327	306	5	301
More than five years	550	46	504	53	1	52
Total	10,135	775	9,360	10,726	781	9,945

Schedule of details of maturity of other financial liabilities

	Thousands of Euros
	31/12/2017	31/12/2016
Maturity at:
Up to one year	22,003	26,121
Two years	10,818	11,468
Three years	3,787	6,203
Four years	2,794	5,802
Five years	2,247	2,490
Over five years	3,991	5,012
	45,640	57,096

Senior Debt Tranche A Maturing in 2023

Financial Liabilities

Schedule of senior secured debt by maturity

Details of Tranche A by maturity at 31 December 2017 are as follows:

	US Tranche A			Tranche A in Euros
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros	Currency	Principal in thousands of Euros
2019	US Dollars	117,500	97,974	Euros	30,350
2020	US Dollars	235,000	195,948	Euros	60,700
2021	US Dollars	235,000	195,948	Euros	60,700
2022	US Dollars	1,321,875	1,102,204	Euros	341,437
2023	US Dollars	440,625	367,402	Euros	113,813
Total	US Dollars	2,350,000	1,959,476	Euros	607,000

Senior Debt Tranche B, Maturing in 2025

Financial Liabilities

Schedule of senior secured debt by maturity

Details of Tranche B by maturity at 31 December 2017 are as follows:

	US Tranche B
Maturity	Currency	Principal in thousands of US Dollars	Principal in thousands of Euros
2018	US Dollars	30,000	25,015
2019	US Dollars	30,000	25,015
2020	US Dollars	30,000	25,015
2021	US Dollars	30,000	25,015
2022	US Dollars	30,000	25,015
2023	US Dollars	30,000	25,015
2024	US Dollars	30,000	25,015
2025	US Dollars	2,767,500	2,307,594
Total	US Dollars	2,977,500	2,482,699

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Trade and Other Payables (Tables)

12 Months Ended

Dec. 31, 2017

Trade and Other Payables

Schedule of trade and other payables

	Thousands of Euros
	31/12/2017	31/12/2016
Suppliers	423,096	461,073
VAT payable	8,827	10,048
Taxation authorities, withholdings payable	24,084	23,700
Social security payable	11,741	11,422
Other public entities	97,068	97,724
Other payables	141,720	142,894
Current income tax liabilities	6,709	7,957
	571,525	611,924

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Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Other Current Liabilities

Schedule of other current liabilities

	Thousands of Euros
	31/12/2017	31/12/2016
Salaries payable	129,519	132,755
Other payables	649	427
Deferred income	4,284	441
Advances received	9,945	6,563
Other current liabilities	144,397	140,186

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Net Revenues (Tables)

12 Months Ended

Dec. 31, 2017

Net Revenues

Schedule of distribution of net consolidated revenues by segment

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Bioscience	3,429,785		3,195,424		3,032,111
Diagnostic	732,369		691,701		716,838
Hospital	105,649		102,251		96,245
Bio supplies	66,791		57,239		24,466
Others	18,263		34,601		90,289
Intersegments	(34,784	)	(31,386	)	(25,386	)
	4,318,073		4,049,830		3,934,563

Schedule of geographical distribution of net consolidated revenues

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
USA and Canada	2,896,505	2,707,579	2,604,315
Spain	242,894	225,273	216,548
European Union	444,089	426,223	456,919
Rest of the world	734,585	690,755	656,781
Consolidated	4,318,073	4,049,830	3,934,563

Schedule of discounts and other reductions in gross income

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Gross sales	5,322,618		4,882,615		4,579,759
Chargebacks	(826,775	)	(652,564	)	(488,072	)
Cash discounts	(57,512	)	(51,953	)	(46,150	)
Volume rebates	(43,274	)	(51,242	)	(49,458	)
Medicare and Medicaid	(41,722	)	(47,820	)	(25,710	)
Other discounts	(35,262	)	(29,206	)	(35,806	)
Net sales	4,318,073		4,049,830		3,934,563

Schedule of movement in discounts and other reductions in gross income

Movement in discounts and other reductions to gross income during 2015 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2014	58,431		4,738		21,030		14,823		3,174		102,196
Current estimate related to sales made in current and prior year	488,072		46,150		49,458		25,710		35,806		645,196	(1)
(Actual returns or credits in current period related to sales made in current period)	(428,041	)	(44,867	)	(18,211	)	(18,402	)	(34,059	)	(543,580	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(246	)	(25,051	)	(11,257	)	(1,791	)	(38,345	)(3)
Translation differences	7,716		127		2,454		1,594		2,237		14,128
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595

Movement in discounts and other reductions to gross income during 2016 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2015	126,178		5,902		29,680		12,468		5,367		179,595
Current estimate related to sales made in current and prior year	652,564		51,953		51,242		47,820		29,206		832,785	(1)
(Actual returns or credits in current period related to sales made in current period)	(693,458	)	(51,733	)	(27,409	)	(24,988	)	(27,243	)	(824,831	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	—		(248	)	(27,732	)	(14,401	)	(2,986	)	(45,367	)(3)
Translation differences	1,965		758		726		858		98		4,405
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587

Movement in discounts and other reductions to gross income during 2017 were as follows:

	Thousands of Euros
	Chargebacks		Cash discounts		Volume rebates		Medicare / Medicaid		Other discounts		Total
Balance at 31 December 2016	87,249		6,632		26,507		21,757		4,442		146,587
Current estimate related to sales made in current and prior year	826,775		57,512		43,274		41,722		35,262		1,004,545
(Actual returns or credits in current period related to sales made in current period)	(795,449	)	(52,270	)	(28,976	)	(28,198	)	(26,072	)	(930,965	)(2)
(Actual returns or credits in current period related to sales made in prior periods)	31		(6,024	)	(20,210	)	(16,659	)	(2,864	)	(45,726	)(3)
Translation differences	(12,716	)	(736	)	(2,604	)	(2,418	)	(625	)	(19,099	)
Balance at 31 December 2017	105,890		5,114		17,991		16,204		10,143		155,342

(1) Net impact in income statement: estimate for the current year plus prior years’ adjustments. Adjustments made during the year corresponding to prior years’ estimates have not been significant.

(2) Amounts credited and posted against provisions for current period

(3) Amounts credited and posted against provisions for prior period

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Personnel Expenses (Tables)

12 Months Ended

Dec. 31, 2017

Personnel Expenses

Schedule of personnel expenses by function

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	731,192	635,577	592,037
Research and development	90,495	77,988	76,780
Selling general & administration expenses	323,880	314,348	269,718
	1,145,567	1,027,913	938,535

Schedule of personnel expenses by nature

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Wages and salaries	917,810	822,384	756,570
Contributions to pension plans (see note 29)	20,347	18,486	14,587
Other social charges	27,679	25,074	22,071
Social Security	179,731	161,969	145,307
	1,145,567	1,027,913	938,535

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Expenses by Nature (Tables)

12 Months Ended

Dec. 31, 2017

Expenses by Nature

Schedule of amortization and depreciation expense classified by functions

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	135,186	126,998	110,898
Research and development	14,721	13,050	13,654
Selling, general & administration expenses	65,583	61,821	65,203
	215,490	201,869	189,755

Schedule of other operating income and expenses by function

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Cost of sales	416,020	454,097	426,531
Research and development	129,579	113,078	118,667
Selling, general & administration expenses	460,959	393,523	403,944
	1,006,558	960,698	949,142

Schedule of other operating income and expenses by nature

	Thousands of Euros
	31/12/2017	31/12/2016		31/12/2015
Changes in trade provisions	3,648	(22,069	)	(763	)
Professional services	211,579	190,003		173,990
Commissions	18,473	20,147		20,474
Supplies and auxiliary materials	131,932	119,014		115,471
Operating leases (note 28)	80,136	74,945		70,496
Freight	105,292	96,680		83,352
Repair and maintenance expenses	103,518	89,797		81,087
Advertising	49,893	51,233		47,860
Insurance	21,529	20,008		19,501
Royalties	11,241	9,217		9,386
Travel expenses	58,171	53,239		52,606
External services	82,699	43,231		56,743
R&D Expenses	89,977	78,379		81,319
Other	38,470	136,874		137,620
Other operating income&expenses	1,006,558	960,698		949,142

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Finance Result (Tables)

12 Months Ended

Dec. 31, 2017

Finance Result

Schedule of finance result

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Finance income	9,678		9,934		5,841
Finance cost from Senior Unsecured Notes	(65,189	)	(73,491	)	(72,783	)
Finance cost from senior debt	(193,183	)	(168,332	)	(161,624	)
Finance cost from sale of receivables (note 13)	(3,973	)	(4,885	)	(6,512	)
Capitalized interest	8,839		13,019		9,795
Other finance costs	(9,838	)	(11,140	)	(9,211	)
Finance costs	(263,344	)	(244,829	)	(240,335	)
Change in fair value of financial derivatives (note 30)	(3,752	)	(7,610	)	(25,206	)
Impairment and gains / (losses) on disposal of financial instruments (note 11)	(18,844	)	—		—
Exchange differences	(11,472	)	8,916		(12,140	)
Finance result	(287,734	)	(233,589	)	(271,840	)

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Taxation (Tables)

12 Months Ended

Dec. 31, 2017

Taxation

Schedule of income tax expense and income tax related to profit

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Profit before income tax from continuing operations	695,722		712,752		690,250
Tax at 25% (28% for 2015)	173,931		178,188		193,270
Permanent differences	17,163		8,019		(2,709	)
Effect of different tax rates	40,981		14,509		(24,524	)
Tax credits (deductions)	(16,092	)	(20,163	)	(19,487	)
Impact related to the US tax legistation modific	(171,169	)	—		—
Prior year income tax expense	(8,614	)	928		2,723
Other income tax expenses/(income)	(1,792	)	(13,272	)	9,536
Total income tax expense	34,408		168,209		158,809
Deferred tax	(149,443	)	(40,161	)	24,357
Current tax	183,851		208,370		134,452
Total income tax expense	34,408		168,209		158,809

Schedule of deferred tax assets and liabilities

	Thousands of Euros
	Tax effect
	31/12/2017		31/12/2016		31/12/2015
Assets
Provisions	4,564		3,696		38,004
Inventories	35,619		39,297		37,141
Tax credits (deductions)	49,467		37,685		42,533
Tax loss carry forwards	6,179		10,717		30,668
Other	7,513		3,393		6,961
Subtotal, assets	103,342		94,788		155,307
Goodwill	(22,346	)	(19,136	)	(77,755	)
Fixed assets, amortisation and depreciation	(7,780	)	(7,062	)	(10,409	)
Intangible assets	(7,059	)	(1,371	)	(349	)
Subtotal, net liabilities	(37,185	)	(27,569	)	(88,513	)
Deferred assets, net	66,157		67,219		66,794
Liabilities
Goodwill	(105,963	)	(131,039	)	(35,877	)
Intangible assets	(201,921	)	(392,388	)	(404,617	)
Fixed assets	(95,029	)	(158,060	)	(119,858	)
Debt cancellation costs	(70,503	)	(64,762	)	(77,514	)
Inventories	5,063		(1,175	)	(32,351	)
Cash flow hedges	—		—		(982	)
Subtotal, liabilities	(468,353	)	(747,424	)	(671,199	)
Tax loss carry forwards	15,384		40,358		7,097
Provisions	47,404		61,252		22,085
Other	16,653		45,168		10,452
Subtotal, net assets	79,441		146,778		39,634
Net deferred Liabilities	(388,912	)	(600,646	)	(631,565	)

Schedule of movement in deferred tax assets and liabilities

	Thousands of Euros
Deferred tax assets and liabilities	31/12/2017		31/12/2016		31/12/2015
Balance at 1 January	(533,427	)	(564,771	)	(456,341	)
Movements during the year	149,443		40,161		(24,357	)
Movements in equity during the year	—		—		(10,960	)
Business combination (note 3)	16,736		—		—
Translation differences	44,493		(8,817	)	(73,113	)
Balance at 31 December	(322,755	)	(533,427	)	(564,771	)

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Operating Leases (Tables)

12 Months Ended

Dec. 31, 2017

Operating Leases

Schedule of future minimum payments on non-cancellable operating leases

	Thousands of Euros
	31/12/2017	31/12/2016	31/12/2015
Maturity at:
Up to 1 year	46,541	56,869	77,951
Between 1 and 5 years	156,897	181,076	126,644
More than 5 years	58,905	112,986	101,319
Total future minimum payments	262,343	350,931	305,914

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Other Commitments with Third Parties and Other Contingent Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Other Commitments with Third Parties and Other Contingent Liabilities

Schedule of Group's purchase commitments

Details of the Group’s commitments at 31 December 2017 are as follows:

	Thousands of Euros
2018	83,782
2019	62,510
2020	56,183
2021	39,765
2022	9,249
2023	780
2024	780

XML

Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Financial Instruments

Schedule of financial instruments by nature, category and fair value

	Thousand of Euros
	31/12/2016
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	15,201	—	29,998	—		45,199		29,998		15,201		—	45,199
Financial derivatives	—	13,665	—	—		13,665		—		—		13,665	13,665
Financial assets measured at fair value	15,201	13,665	29,998	—		58,864
Non-current financial assets	30,681	—	—	—		30,681
Other current financial assets	2,582	—	—	—		2,582
Trade and other receivables	434,136	—	—	—		434,136
Cash and cash equivalents	895,009	—	—	—		895,009
Financial assets not measured at fair value	1,362,408	—	—	—		1,362,408
Senior Unsecured Notes	—	—	—	(843,868	)	(843,868	)	(904,377	)	—		—	(904,377	)
Promissory Notes	—	—	—	(83,073	)	(83,073	)
Senior secured debt	—	—	—	(3,809,968	)	(3,809,968	)	—		(3,811,970	)	—	(3,811,970	)
Other bank loans	—	—	—	(138,186	)	(138,186	)
Finance lease payables	—	—	—	(9,945	)	(9,945	)
Other financial liabilities	—	—	—	(57,096	)	(57,096	)
Trade and other payables	—	—	—	(461,073	)	(461,073	)
Other current liabilities	—	—	—	(7,431	)	(7,431	)
Financial liabilities not measured at fair value	—	—	—	(5,410,640	)	(5,410,640	)
	1,377,609	13,665	29,998	(5,410,640	)	(3,989,368	)

	Thousand of Euros
	31/12/2017
	Carrying amount							Fair Value
	Loans and receivables	Financial instruments held for trading	Available for sale financial assets	Debts and payables		Total		Level 1		Level 2		Level 3	Total
Non-current financial assets	—	—	38,708	—		38,708		38,708		—		—	38,708
Financial derivatives	—	8,338	—	—		8,338		—		—		8,338	8,338
Financial assets measured at fair value	—	8,338	38,708	—		47,046
Non-current financial assets	22,843	—	—	—		22,843
Other current financial assets	10,738	—	—	—		10,738
Trade and other receivables	304,864	—	—	—		304,864
Cash and cash equivalents	886,521	—	—	—		886,521
Financial assets not measured at fair value	1,224,966	—	—	—		1,224,966
Senior Unsecured Notes	—	—	—	(858,911	)	(858,911	)	(1,018,130	)	—		—	(1,018,130	)
Promissory Notes	—	—	—	(90,294	)	(90,294	)
Senior secured debt	—	—	—	(4,853,939	)	(4,853,939	)	—		(5,063,769	)	—	(5,063,769	)
Other bank loans	—	—	—	(198,741	)	(198,741	)
Finance lease payables	—	—	—	(9,360	)	(9,360	)
Other financial liabilities	—	—	—	(45,640	)	(45,640	)
Trade and other payables	—	—	—	(423,096	)	(423,096	)
Other current liabilities	—	—	—	(14,879	)	(14,879	)
Financial liabilities not measured at fair value	—	—	—	(6,494,860	)	(6,494,860	)
	1,224,966	8,338	38,708	(6,494,860	)	(5,222,848	)

Schedule of financial derivatives

		Notional	Notional	Thousands of Euros
		amount at	amount at	Value at	Value at
Financial derivatives	Currency	31/12/2017	31/12/2016	31/12/17	31/12/16	Maturity
Call Option	US Dollar	N/A	N/A	8,338	9,487	30/04/2019
Embedded derivative	US Dollar	N/A	N/A	—	4,178	31/05/2021
Total				8,338	13,665
Total Assets (notes 10 and 11)				8,338	13,665

Schedule of maximum level of exposure to credit risk

		Thousands of Euros
Carrying amount	Note	31/12/2017	31/12/2016
Non-current financial assets	11	69,889	89,545
Other current financial assets	11	10,738	2,582
Trade receivables	13	286,198	413,656
Other receivables	13	18,666	20,480
Cash and cash equivalents	14	886,521	895,009
		1,272,012	1,421,272

Schedule of balances receivable by country

	Thousands of Euros
Carrying amount	31/12/2017	31/12/2016
Spain	63,505	56,104
EU countries	53,403	52,034
United States of America	65,068	196,885
Other European countries	5,761	13,428
Other regions	117,127	115,685
	304,864	434,136

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		425	—	(137	)	288
Italy	7,188	2,077	—		12,196	7,375	(3,098	)	16,286
Spain	23,281	3,287	—		27,316	9,595	(249	)	50,348
Portugal	2,734	1,205	(356	)	129	78	(27	)	2,480
	33,203	6,569	(356	)	40,066	17,048	(3,511	)	69,402

	Thousands of Euros
	Balances with public entities				Balance with third parties
	Balance (1)	Balance past due	Provision for doubtful receivables (2)		Balance (3)	Balance past due	Provision for doubtful receivables (4)		Net debt (1)+(2)+(3)+(4)
Greece	—	—	—		745	—	—		745
Italy	4,020	2,348	—		10,614	6,342	(4,016	)	10,618
Spain	33,702	7,785	—		23,444	8,926	(136	)	57,010
Portugal	1,078	490	(296	)	1,972	1,085	(126	)	2,628
	38,800	10,623	(296	)	36,775	16,353	(4,278	)	71,001

Schedule of maturity of trade receivables, net of impairment provisions

	Thousands of Euros
	31/12/2017	31/12/2016
Not matured	249,652	360,018
Less than 1 month	24,302	24,650
1 to 4 months	18,717	29,318
4 months to 1 year	8,092	10,045
More than one year	4,101	10,105
	304,864	434,136

Schedule of movement in the bad debt provision

	Thousands of Euros
	31/12/2017		31/12/2016		31/12/2015
Opening balance	17,987		13,210		14,092
Net charges for the year	8,003		6,411		1,800
Net cancellations for the year	(4,732	)	(2,217	)	(2,984	)
Translation differences	(1,552	)	583		302
Closing balance	19,706		17,987		13,210

Schedule of contractual maturity dates of financial liabilities

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/16	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	3,948,154	4,669,325	134,918	119,476	192,059	4,183,259	39,613
Other financial liabilities	20	57,096	57,096	23,082	3,039	11,468	16,686	2,821
Bonds and other marketable securities	20	926,941	1,305,680	107,975	24,903	49,806	1,122,996	—
Finance lease payables	20	9,945	10,725	2,195	2,072	3,630	2,828	—
Payable to suppliers	21	461,073	461,073	461,029	44	—	—	—
Other current liabilities	22	7,431	7,431	7,118	313	—	—	—
Total		5,410,640	6,511,330	736,317	149,847	256,963	5,325,769	42,434

		Thousands of Euros
Carrying amount	Note	Carrying amount at 31/12/17	Contractual flows	6 months or less	6 - 12 months	1-2 years	2- 5 years	More than 5 years
Financial liabilities
Bank loans	20	5,052,680	6,138,673	105,584	106,492	322,421	3,115,887	2,488,289
Other financial liabilities	20	45,640	45,642	19,393	2,610	10,758	10,497	2,384
Bonds and other marketable securities	20	949,205	1,331,203	107,203	16,000	32,000	128,000	1,048,000
Finance lease payables	20	9,360	10,136	2,192	2,113	2,602	2,790	439
Payable to suppliers	21	423,096	423,096	423,020	76	—	—	—
Other current liabilities	22	14,878	14,878	14,462	416	—	—	—
Total		6,494,859	7,963,628	671,854	127,707	367,781	3,257,174	3,539,112

Schedule of Group's exposure to currency risk

	Thousands of Euros
	31/12/2016
	Euros (*)		Dollars (**)
Trade receivables	5,576		7,520
Receivables from Group companies	33,792		37,740
Loans to Group companies	597,897		1,854
Cash and cash equivalents	32,255		21,254
Trade payables	(11,188	)	(5,062	)
Payables to Group companies	(42,395	)	(32,159	)
Loans from Group companies	(268,040	)	(4,295	)
Bank loans	(489,000	)	—
Balance sheet exposure	(141,103	)	26,852

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

	Thousands of Euros
	31/12/2017
	Euros (*)		Dollars (**)
Trade receivables	3,596		22,936
Receivables from Group companies	103,338		7,619
Loans to Group companies	34,140		91,566
Cash and cash equivalents	63,981		2,172
Trade payables	(14,213	)	(3,582	)
Payables to Group companies	(42,296	)	(11,241	)
Loans from Group companies	(22,913	)	(3,953	)
Bank loans	(85,000	)	—
Balance sheet exposure	40,633		105,517

(*) Balances in Euros in subsidiaries with US Dollars functional currency

(**) Balances in US Dollars in subsidiaries with Euros functional currency

	Closing exchange rate
Euros	31/12/2017	31/12/2016
US Dollars	1.1993	1.0541

Schedule of profile of interest on interest-bearing financial instruments

	Thousands of Euros
	31/12/2017		31/12/2016
Fixed-interest financial instruments
Financial liabilities	(1,170,000	)	(1,048,676	)
	(1,170,000	)	(1,048,676	)
Variable-interest financial instruments	(5,049,382	)	(3,964,320	)
Financial liabilities	(5,049,382	)	(3,964,320	)
	(6,219,382	)	(5,012,996	)

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Balances and Transactions with Related Parties (Tables)

12 Months Ended

Dec. 31, 2017

Balances and Transactions with Related Parties

Schedule of details of balances with related parties

	Thousands of Euros
	31/12/2017		31/12/2016
Receivables from associates (note 13)	3,219		133
Trade payables associates	(4,583	)	(4,221	)
Loans to associates (note 11)	26,654		15,994
Debts with associates	—		—
Debts with key management personnel	(6,164	)	(6,662	)
Payables to members of the board of directors	(463	)	—
Payables to other related parties	(9,187	)	(8,473	)
	9,476		(3,229	)

Schedule of group transactions with related parties

Group transactions with related parties during 2015 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	317		—		—		—
Other service expenses	(361	)	—		(6,938	)	(845	)
Operating lease expense	—		—		(4,900	)	—
Remuneration	—		(9,447	)	—		(3,443	)
R&D agreements	(18,400	)	—		—		—
Purchase of Fixed Assets	—		—		(276,457	)	—
Sale of Fixed Assets	—		—		12,000		—
Finance Income	1,916		—		—		—
	(16,528	)	(9,447	)	(276,295	)	(4,288	)

Group transactions with related parties during 2016 were as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	193		—		—		—
Purchases	(35,569	)	—		—		—
Other service expenses	(7,591	)	—		(5,325	)	(905	)
Operating lease expense	—		—		(5,281	)	—
Remuneration	—		(10,287	)	—		(3,668	)
R&D agreements	(10,188	)	—		—		—
Finance Income	1,946		—		—		—
	(51,209	)	(10,287	)	(10,606	)	(4,573	)

Group transactions with related parties during 2017 are as follows:

	Thousands of Euros
	Associates		Key management personnel		Other related parties		Board of directors of the Company
Net sales	3,009		—		—		—
Purchases	(68,335	)	—		—		—
Other service expenses	(11,798	)	—		(7,100	)	(939	)
Operating lease expense	—		—		(5,426	)	—
Remuneration	—		(13,672	)	—		(5,755	)
R&D agreements	(164	)	—		—		—
Finance Income	152		—		—		—
	(77,136	)	(13,672	)	(12,526	)	(6,694	)

XML

Appendix I (Tables)

12 Months Ended

Dec. 31, 2017

Appendix I

Schedule of information on group companies associates and others

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Diagnostic Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Development and manufacture of diagnostic equipment, instruments and reagents.	—		100.000	%	—		100.000	%	99.998	%	0.002	%
Instituto Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Industrial	Plasma fractioning and the manufacture of haemoderivative pharmaceutical products.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Worldwide Operations Spain, S.A (formerly Logister, S.A.)	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Services	Manufacture, sale and purchase, commercialisation and distribution of all types of computer products and materials.	—		100.000	%	—		100.000	%	—		100.000	%
Laboratorios Grifols, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1989	Industrial	Production of glass- and plastic-packaged parenteral solutions, parenteral and enteral nutrition products and blood extraction equipment and bags.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Biomat, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1991	Industrial	Analysis and certification of the quality of plasma used by Instituto Grifols, S.A. It also provides transfusion centres with plasma virus inactivation services (I.P.T.H).	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Grifols Engineering, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	2000	Industrial	Design and development of the Group’s manufacturing installations and part of the equipment and machinery used at these premises. The company also renders engineering services to external companies.	99.950	%	0.050	%	99.950	%	0.050	%	99.950	%	0.050	%
Biomat USA, Inc.	2410 Lillyvale Avenue Los Angeles (California) United States	2002	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Biologicals LLC.	5555 Valley Boulevard Los Angeles (California) United States	2003	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Australia Pty Ltd.	Unit 5/80 Fairbank Clayton South Victoria 3149 Australia	2009	Industrial	Distribution of pharmaceutical products and the development and manufacture of reagents for diagnostics.	100.000	%	—		100.000	%	—		100.000	%	—
Medion Grifols Diagnostic AG	Bonnstrasse,9 3186 Dügingen Switzerland	2009	Industrial	Development and manufacturing activities in the area of biotechnology and diagnostics.	—		100.000	%	—		100.000	%	80.000	%	—
Grifols Therapeutics LLC.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Plasma fractioning and the production of haemoderivatives.	—		100.000	%	—		100.000	%	—		100.000	%
Talecris Plasma Resources, Inc.	4101 Research Commons (Principal Address), 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 277709, United States	2011	Industrial	Procuring human plasma.	—		100.000	%	—		100.000	%	—		100.000	%
GRI-CEI, S/A Produtos para transfusao (merged with Grifols Brasil, Lda. in 2016)	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	2012	Industrial	Production of bags for the extraction, separation, conservation and transfusion of blood components.	—		—		—		—		60.000	%	—
Grifols Worldwide Operations Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2012	Industrial	Packaging, labelling, storage, distribution, manufacture and development of pharmaceutical products and rendering of financial services to Group companies.	100.000	%	—		100.000	%	—		100.000	%	—
Progenika Biopharma, S.A.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		90.230	%	—		89.250	%	56.150	%	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Progenika Latina, S.A. de CV	Periferico Sur Nº 4118 Int 8 Col. Jardines del Pedregal CP 01900 Alvaro Obregon DF Mexico	2013	Industrial	Development, production and commercialisation of biotechnological solutions.	—		—		—		89.250	%	—		56.150	%
Progenika Inc. (Merged with Grifols Diagnostic Solutions Inc. in 2017)	Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808 United States	2013	Industrial	Development, production and commercialisation of genetic tools, diagnostic equipment and therapeutic systems and products for personalised medicine and the highest quality healthcare in general.	—		—		—		89.250	%	—		56.150	%
Brainco Biopharma, S.L. (merged with Progenika Biopharma, S.A in 2016)	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Development of products for the treatment and diagnosis of psychiatric illnesses	—		—		—		—		—		28.423	%
Abyntek Biopharma, S.L.	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Research, development and transfer of biotechnological products and processes, as well as the commercialiation of products and services related to the biosciences.	—		—		—		80.370	%	—		45.129	%
Asociación I+D Progenika	Parque Tecnológico de Vizcaya, Edificio 504 48160 Derio (Vizcaya) Spain	2013	Industrial	Coordination, representation, management and promotion of the common interests of associated companies, in addition to contributing to the development, growth and internationalisation of its associates and of the biosciences sector in the Basque Country.	—		90.230	%	—		89.250	%	—		55.336	%
Grifols Diagnostics Solutions Inc (formerly G-C Diagnostics Corp.)	4560 Horton Street 94608 Emeryville, California United States	2013	Industrial	Manufacture and sale of blood testing products	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Worldwide Operations USA Inc.	13111 Temple Avenue, City of Industry, California 91746-1510 Estados Unidos	2014	Industrial	The manufacture, warehousing, and logistical support for biological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Asia Pacific Pte, Ltd	501 Orchard Road nº20-01 238880 Wheelock Place, Singapore	2003	Commercial	Distribution and sale of medical and pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Movaco, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1987	Commercial	Distribution and sale of reagents, chemical products and other pharmaceutical specialities, and of medical and surgical materials, equipment and instruments for use by laboratories and health centres.	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%
Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda.	Rua de Sao Sebastiao,2 Zona Industrial Cabra Figa 2635-448 Rio de Mouro Portugal	1988	Commercial	Import, export and commercialisation of pharmaceutical and hospital equipment and products, particularly Grifols products.	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%
Grifols Chile, S.A.	Avda. Americo Vespucio, 2242 Comuna de Conchali Santiago de Chile Chile	1990	Commercial	Development of pharmaceutical businesses, which can involve the import, production, commercialisation and export of related products.	99.000	%	—		99.000	%	—		99.000	%	—
Grifols USA, LLC.	2410 Lillyvale Avenue Los Angeles (California) Estados Unidos	1990	Commercial	Distribution and marketing of company products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Argentina, S.A.	Bartolomé Mitre 3690/3790, CPB1605BUT Munro Partido de Vicente Lopez Argentina	1991	Commercial	Clinical and biological research. Preparation of reagents and therapeutic and diet products. Manufacture and commercialisation of other pharmaceutical specialities.	95.010	%	4.990	%	95.010	%	4.990	%	95.010	%	4.990	%
Grifols s.r.o.	Calle Zitna,2 Prague Czech Republic	1992	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products, including human plasma.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (Thailand) Ltd	191 Silom Complex Building, 21st Follor, Silom Road, Silom, Bangrak 10500 Bangkok Thailand	2003	Commercial	Import, export and distribution of pharmaceutical products.	—		48.000	%	—		48.000	%	—		48.000	%
Grifols Malaysia Sdn Bhd	Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia	2003	Commercial	Distribution and sale of pharmaceutical products.	—		30.000	%	—		30.000	%	—		30.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols International, S.A.	Polígono Levante Calle Can Guasch, s/n 08150 Parets del Vallès (Barcelona) Spain	1997	Commercial	Coordination of the marketing, sales and logistics for all the Group’s subsidiaries operating in other countries.	99.998	%	0.002	%	99.998	%	0.002	%	99.998	%	0.002	%
Grifols Italia S.p.A	Via Carducci, 62d 56010 Ghezzano Pisa, Italy	1997	Commercial	Purchase, sale and distribution of chemical-pharmaceutical products.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols UK Ltd.	Gregory Rowcliffe & Milners, 1 Bedford Row, London WC1R 4BZ United Kingdom	1997	Commercial	Distribution and sale of therapeutic and other pharmaceutical products, especially haemoderivatives.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Brasil, Lda.	Rua Umuarama, 263 Condominio Portal da Serra Vila Perneta CEP 83.325-000 Pinhais Paraná, Brazil	1998	Commercial	Import and export, preparation, distribution and sale of pharmaceutical and chemical products for laboratory and hospital use, and medical-surgical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols France, S.A.R.L.	Arteparc, Rue de la Belle du Canet, Bât. D, Route de la Côte d’Azur, 13590 Meyreuil France	1999	Commercial	Commercialisation of chemical and healthcare products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Polska Sp.z.o.o.	Grzybowska 87 street00-844 Warsaw, Poland	2003	Commercial	Distribution and sale of pharmaceutical, cosmetic and other products.	100.000	%	—		100.000	%	—		100.000	%	—
Logística Grifols, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	2008	Commercial	Manufacture and commercialisation of pharmaceutical products for human and veterinary use.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols México, S.A. de C.V.	Calle Eugenio Cuzin, nº 909-913 Parque Industrial Belenes Norte 45150 Zapopán Jalisco, Mexico	1993	Commercial	Production, manufacture, adaptation, conditioning, sale and purchase, commissioning, representation and consignment of all kinds of pharmaceutical products and the acquisition of machinery, equipment, raw materials, tools, movable goods and property for the aforementioned purposes.	99.980	%	0.020	%	99.980	%	0.020	%	99.980	%	0.020	%
Medion Diagnostics GmbH	Lochamer Schlag, 12D 82166 Gräfelfing Germany	2009	Commercial	Distribution and sale of biotechnological and diagnostic products.	—		100.000	%	—		100.000	%	—		80.000	%
Grifols Nordic, AB	Sveavägen 166 11346 Stockholm Sweden	2010	Commercial	Research and development, production and marketing of pharmaceutical products, medical devices and any other asset deriving from the aforementioned activities.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Colombia, Ltda	Carrera 7 No. 71 52 Torre B piso 9 Bogotá. D.C. Colombia	2010	Commercial	Sale, commercialisation and distribution of medicines, pharmaceutical (including but not limited to haemoderivatives) and hospital products, medical devices, biomedical equipment, laboratory instruments and reagents for diagnosis and/or healthcare software.	99.000	%	1.000	%	99.000	%	1.000	%	99.000	%	1.000	%
Grifols Deutschland GmbH	Lyoner Strasse 15, D- 60528 Frankfurt am Main Germany	2011	Commercial	Procurement of the official permits and necessary approval for the production, commercialisation and distribution of products deriving from blood plasma, as well as the import, export, distribution and sale of reagents and chemical and pharmaceutical products, especially for laboratories and health centres and surgical and medical equipment and instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Canada, Ltd.	5060 Spectrum Way, Suite 405 (Principal Address) Mississauga, Ontario L4W 5N5 Canada	2011	Commercial	Distribution and sale of biotechnological products.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Pharmaceutical Technology (Shanghai) Co., Ltd. (formerly Grifols Pharmaceutical Consulting (Shanghai) Co., Ltd.)	Unit 901-902, Tower 2, No. 1539, West Nanjing Rd., Jing’an District, Shanghai 200040 China	2013	Commercial	Pharmaceutical consultancy services (except for diagnosis), technical and logistical consultancy services, business management and marketing consultancy services.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols Switzerland AG	Steinengraben, 5 40003 Basel Switzerland	2013	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols (H.K.), Limited	Units 1505-7 Bershire House, 25 Westlands Road Hong Kong	2014	Commercial	Distribution and sale of diagnostic products.	—		100.000	%	—		100.000	%	—		100.000	%

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016				31/12/2015
	Registered	Incorporation			% shares				% shares				% shares
Name	Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct		Indirect		Direct		Indirect
Fully Consolidated Companies
Grifols Japan K.K.	Hilton Plaza West Office Tower, 19th floor. 2-2, Umeda 2-chome, Kita-ku Osaka-shi Japan	2014	Commercial	Research, development, import and export and commercialisation of pharmaceutical products, devices and diagnostic instruments.	100.000	%	—		100.000	%	—		100.000	%	—
Grifols India Healthcare Private Ltd	Regus Business Centre Pvt.Ltd.,Level15,Dev Corpora, Plot No.463,Nr. Khajana East.Exp.Highway,Thane (W), Mumbai - 400604, Maharashtra India	2014	Commercial	Distribution and sale of pharmaceutical products.	99.990	%	0.010	%	99.990	%	0.010	%	99.990	%	0.010	%
Grifols Diagnostics Equipment Taiwan Limited	8F., No.367, Fuxing N. RD., Songshang Dist., Taipei City 10543, Taiwan	2016	Commercial	Distribution and sale of diagnostic products.	100.000	%	—		100.000	%	—		—		—
Grifols Viajes, S.A.	Can Guasch, 2 08150 Parets del Vallès Barcelona, Spain	1995	Services	Travel agency exclusively serving Group companies.	99.900	%	0.100	%	99.900	%	0.100	%	99.900	%	0.100	%
Squadron Reinsurance Designated Activity Company (formerly Squadron Reinsurance Ltd.)	The Metropolitan Building, 3rd Fl. James Joyce Street, Dublin Ireland	2003	Services	Reinsurance of Group companies’ insurance policies.	—		100.000	%	—		100.000	%	—		100.000	%
Grifols Shared Services North America, Inc. (formerly Grifols Inc.)	2410 Lillivale Avenue 90032 Los Angeles, California United States	2011	Services	Support services for the collection, manufacture, sale and distribution of plasma derivatives and related products.	100.000	%	—		100.000	%	—		100.000	%	—
Gripdan Invest, S.L	Avenida Diagonal 477 Barcelona, Spain	2015	Services	Manufacturing buildings for rent	100.000	%	—		100.000	%	—		100.000	%	—
Gri-Cel, S.A.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2009	Research	Research and development in the field of regenerative medicine, awarding of research grants, subscription to collaboration agreements with entities and participation in projects in the area of regenerative medicine.	0.001	%	99.999	%	0.001	%	99.999	%	0.001	%	99.999	%
Araclon Biotech, S.L.	Paseo de Sagasta, 17 2º izqda. Zaragoza, Spain	2012	Research	Creation and commercialisation of a blood diagnosis kit for the detection of Alzheimer’s and development of effective immunotherapy (vaccine) against this disease.	—		73.220	%	—		73.220	%	—		70.830	%
VCN Bioscience, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2012	Research	Research and development of therapeutic approaches for tumours for which there is currently no effective treatment.	—		81.340	%	—		81.340	%	—		68.010	%
Grifols Innovation and New Technologies Limited	Grange Castle Business Park, Grange Castle , Clondalkin, Dublin 22, Ireland	2016	Research	Research and experimental development on biotechnology	—		100.000	%	—		100.000	%	—		—
PBS Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, New Castle County United States	2016	Services	Engage in any lawful act or activity for which corporations may be organized under the DGCL (Delaware Code)	—		100.000	%	—		100.000	%	—		—
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	90.000	%	—		—		—		—		—
Chiquito Acquisition Corp.	2711 Centerville Road Suite 400, Wilmington, Delaware, County of New Castle, United States	2017	Corporate	Engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”).	—		100.000	%	—		—		—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017			31/12/2016				31/12/2015
		Incorporation			% shares			% shares				% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct	Indirect		Direct		Indirect		Direct		Indirect
Equity Method consolidated companies and others
Nanotherapix, S.L.	Avenida de la Generalitat 152 Sant Cugat del Valles (Barcelona) Spain	2010	Research	Development, validation and production of the technology required to implement the use of genetic and cellular therapy for the treatment of human and animal pathologies.	—	—		—		—		—		51.000	%
Aradigm Corporation	3929 Point Eden Way Hayward, California United States	2013	Research	Development and commercialisation of drugs delivered by inhalation for the prevention and treatment of severe respiratory diseases.	—	35.130	%	—		35.130	%	35.000	%	—
TiGenix N.V.	Romeinse straat 12 bus 2, 3001 Leuven, Belgium	2013	Research	Research and development of therapies based on stem cells taken from adipose tissue.	—	14.180	%	—		16.130	%	—		19.280	%
Mecwins, S.L.	Avenida Fernandos Casas Novoa, 37 Santiago de Compostela Spain	2013	Research	Research and production of nanotechnological, biotechnological and chemical solutions.	—	8.420	%	—		8.420	%	—		8.420	%
Kiro Grifols S.L (formerly Kiro Robotics S.L)	Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa Spain	2014	Research	Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes.	—	—		50.000	%	—		50.000	%	—
Alkahest, Inc.	3500 South DuPont Hwy, Dover, County of Kent United States	2015	Research	Development novel plasma-based products for the treatment of cognitive decline in aging and disorders of the central nervous system (CNS).	—	47.580	%	—		47.580	%	—		47.580	%
Albajuna Therapeutics, S.L	Hospital Germans Trias i Pujol, carretera de Canyet, s/n, Badalona Spain	2016	Research	Development and manufacture of therapeutic antibodies against HIV.	—	30.000	%	—		30.000	%	—		—
Interstate Blood Bank, Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	49.190	%	—		49.190	%	—		—
Bio Blood Components Inc.	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.972	%	—		48.972	%	—		—
Plasma Biological Services, LLC	5700 Pleasantville Road Memphis, Tennessee United States	2016	Industrial	Procuring human plasma.	—	48.900	%	—		48.900	%	—		—
Singulex, Inc.	4041 Forest Park Avenue St. Louis, Missouri United States	2016	Research	Development of the Single Molecule Counting (SMC™) technology for clinical diagnostic and scientific discovery.	—	19.330	%	—		20.000	%	—		—

This appendix forms an integral part of note 2 to the consolidated financial statements.

		Acquisition /			31/12/2017				31/12/2016		31/12/2015
		Incorporation			% shares				% shares		% shares
Name	Registered Offices	date	Activity	Statutory Activity	Direct		Indirect		Direct	Indirect	Direct	Indirect
Equity Method consolidated companies and others
Aigües Minerals de Vilajuiga, S.A.	Carrer Sant Sebastià, 2, 17493 Vilajuïga, Girona	2017	Industrial	Collection and use of mineral-medicinal waters and achievement of all necessary administrative concessions in order to facilitate their industrial extraction and find the best way to take advantage of them.	50.000	%	—		—	—	—	—
Access Biologicals, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Biologicals IC-DISC, Inc.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Cell Culture, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Manufacturing, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
Access Plasma, LLC.	995 Park Center Dr, Vista, CA 92081, USA	2017	Industrial	Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field.	—		49.000	%	—	—	—	—
GigaGen Inc.	407 Cabot Road South San Francisco, CA 94080, USA	2017	Industrial	Engage in any lawful act or activity for which corporations may be organized under General Corporation Law.	—		43.960	%	—	—	—	—

This appendix forms an integral part of note 2 to the consolidated financial statements.

XML

Appendix II (Tables)

12 Months Ended

Dec. 31, 2017

Appendix II

Schedule of operating segments

(Expressed in thousands of Euros)

	Bioscience					Hospital						Diagnostic					Bio Supplies			Others						Intersegments						Consolidated
	2017		2016		2015	2017		2016		2015		2017		2016		2015	2017	2016	2015	2017		2016		2015		2017		2016		2015		2017		2016		2015
Revenues from external customers	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Total operating income	3,429,785		3,195,424		3,032,111	105,649		102,251		96,245		732,369		691,701		716,838	66,791	57,239	24,466	18,263		34,601		90,289		(34,784	)	(31,386	)	(25,386	)	4,318,073		4,049,830		3,934,563
Profit/(Loss) for the segment	985,495		913,840		896,032	(9,766	)	(8,765	)	(4,299	)	248,080		97,320		96,268	35,598	33,794	3,660	(9,632	)	44,324		77,982		(12,305	)	(1,316	)	(305	)	1,237,470		1,079,197		1,069,338
Unallocated expenses																																(234,127	)	(139,789	)	(98,968	)
Operating profit																																1,003,343		939,408		970,370
Finance result																																(287,734	)	(233,589	)	(271,840	)
Share of profit/(loss) of equity accounted investee	(10,434	)	(9,396	)	—	2,112		(5,611	)	—		(9,335	)	—		—	1,830	—	—	(4,060	)	21,940		(8,280	)	—		—		—		(19,887	)	6,933		(8,280	)
Income tax expense																																(34,408	)	(168,209	)	(158,809	)
Profit for the year after tax																																661,314		544,543		531,441
Segment assets	6,007,153		6,524,922		6,085,211	145,477		86,590		91,877		3,356,185		1,909,447		1,794,389	7,409	8,378	1,321	60,449		40,160		106,374		(22,196	)	(11,964	)	(10,240	)	9,554,477		8,557,533		8,068,932
Equity accounted investments	83,905		104,996		—	—		13,888		—		29,322		43,330		—	44,220	—	—	61,562		39,131		76,728		—		—		—		219,009		201,345		76,728
Unallocated assets	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		1,146,778		1,370,894		1,456,055
Total assets																																10,920,264		10,129,772		9,601,715
Segment liabilities	423,415		411,604		387,086	13,560		8,415		3,159		192,720		186,389		192,730	—	—	—	26,903		1,843		209,405		—		—		—		656,598		608,251		792,380
Unallocated liabilities	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		6,629,701		5,793,543		5,507,946
Total liabilities																																7,286,299		6,401,794		6,300,326
Other information:
Amortisation and depreciation allocated	157,478		152,821		137,870	6,436		5,915		5,710		40,815		32,180		31,875	—	—	—	2,237		3,445		6,946		—		—		—		206,966		194,361		182,401
Amortisation and depreciation unallocated			—		—			—		—				—		—	—	—	—	—		—		—		—		—		—		8,524		7,508		7,354
Expenses that do not requirecash payments allocated	7,049		16,219		627	(514	)	306		108		(4,423	)	(2,001	)	4,630	—	—	—	—		(32,534	)	—		—		—		—		2,112		(18,010	)	5,365
Expenses that do not require cash payments unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		(58,752	)	4,608		4,794
Additions for the year of property, plant & equipment and intangible assets allocated	227,635		197,741		421,020	10,429		9,193		7,972		70,032		89,760		68,740	198	84	—	20,911		13,313		—		—		—		—		329,205		310,091		497,732
Additions for the year of property, plant & equipment and intangible assets unallocated	—		—		—	—		—		—		—		—		—	—	—	—	—		—		—		—		—		—		11,268		12,011		79,082

* As a result of the creation of Bio Supplies segment and intersegments, the Group has reviewed the allocation of balances and transactions by segments. The comparative figures for years 2016 and 2015 have been restated accordingly.

This appendix forms an integral part of note 6 to the consolidated financial statements

Schedule of reporting by geographical area

(Expressed in thousands of Euros)

	Spain			Rest of European Union			USA + Canada			Rest of World			Consolidated
	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net Revenue	242,894	225,273	216,548	444,089	426,223	456,919	2,896,505	2,707,579	2,604,315	734,585	690,755	656,781	4,318,073	4,049,830	3,934,563
Assets by geographical area	899,223	847,467	719,557	2,397,200	2,467,295	2,407,178	7,341,174	6,535,420	6,176,548	282,667	279,590	298,432	10,920,264	10,129,772	9,601,715
Other information:
Additions for the year of property, plant & equipment and intangible assets	62,271	73,365	113,652	80,910	39,603	51,943	188,557	190,358	400,065	8,735	18,776	11,154	340,473	322,102	576,814

This appendix forms an integral part of note 6 to the consolidated financial statements

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Appendix III (Tables)

12 Months Ended

Dec. 31, 2017

Appendix III

Schedule of changes in other intangible assets

(Expressed in thousands of Euros)

	Balances at				Business				Translation		Balances at
	31/12/2016		Additions		combinations *	Transfers	Disposals		differences		31/12/2017
Development costs	142,693		43,152		142,529	—	(81	)	(16,599	)	311,694
Concessions, patents, licenses brands & similar	60,471		—		142,174	—	—		(19,760	)	182,885
Computer software	168,623		19,626		26	529	(126	)	(13,733	)	174,945
Currently marketed products	1,162,204		—		—	—	—		(137,828	)	1,024,376
Other intangible assets	148,682		17,348		—	—	—		(18,723	)	147,307
Total cost of intangible assets	1,682,673		80,126		284,729	529	(207	)	(206,643	)	1,841,207
Accum. amort. of development costs	(72,073	)	(5,834	)	—	—	—		(1,442	)	(79,349	)
Accum. amort of concessions, patents, licenses, brands & similar	(24,994	)	(6,004	)	—	—	—		1,215		(29,783	)
Accum. amort. of computer software	(99,927	)	(13,549	)	—	—	111		7,046		(106,319	)
Accum. amort. of currently marketed products	(220,988	)	(38,216	)	—	—	—		28,136		(231,068	)
Accum. amort. of other intangible assets	(69,389	)	(865	)	—	—	—		8,288		(61,966	)
Total accum. amort intangible assets	(487,371	)	(64,468	)	—	—	111		43,243		(508,485	)
Impairment of other intangible assets	—		(64,734	)	—	—	—		1,354		(63,380	)
Carrying amount of intangible assets	1,195,302		(49,076	)	284,729	529	(96	)	(162,046	)	1,269,342

(See note 3)

This appendix forms an integral part of note 8 to the consolidated financial statements.

(Expressed in thousands of Euros)

	Balances at								Translation		Balances at
	31/12/2015		Additions		Transfers		Disposals		differences		31/12/2016
Development costs	112,688		29,126		—		(79	)	958		142,693
Concessions, patents, licenses brands & similar	59,249		—		—		—		1,222		60,471
Computer software	144,976		18,919		1,460		(420	)	3,688		168,623
Currently marketed products	1,126,024		—		—		—		36,180		1,162,204
Other intangible assets	134,068		10,469		—		(651	)	4,796		148,682
Total cost of intangible assets	1,577,005		58,514		1,460		(1,150	)	46,844		1,682,673
Accum. amort. of development costs	(67,551	)	(4,473	)	—		—		(49	)	(72,073	)
Accum. amort of concessions, patents, licenses, brands & similar	(23,957	)	(806	)	—		—		(231	)	(24,994	)
Accum. amort. of computer software	(83,197	)	(15,136	)	(99	)	419		(1,914	)	(99,927	)
Accum. amort. of currently marketed products	(175,135	)	(38,441	)	—		—		(7,412	)	(220,988	)
Accum. amort. of other intangible assets	(65,627	)	(2,117	)	—		544		(2,189	)	(69,389	)
Total accum. amort intangible assets	(415,467	)	(60,973	)	(99	)	963		(11,795	)	(487,371	)
Impairment of other intangible assets	34		—		—		(34	)	—		—
Carrying amount of intangible assets	1,161,572		(2,459	)	1,361		(221	)	35,049		1,195,302

This appendix forms an integral part of note 8 to the consolidated financial statements.

XML

Appendix IV (Tables)

12 Months Ended

Dec. 31, 2017

Appendix IV

Schedule of movement in property, plant and equipment

(Expressed in thousands of Euros)

	Balances at 31/12/2016		Additions		Business combination	Transfers		Disposals		Translation differences		Balances at 31/12/2017
Cost:
Land and buildings	687,856		28,503		19,628	12,694		(823	)	(74,324	)	673,534
Plant and machinery	1,655,837		82,234		9,068	123,816		(10,098	)	(156,178	)	1,704,679
Fixed Assets under construction	275,003		149,610		555	(137,073	)	—		(25,976	)	262,119
	2,618,696		260,347		29,251	(563	)	(10,921	)	(256,478	)	2,640,332
Accumulated depreciation:
Buildings	(59,376	)	(14,708	)	—	—		710		6,609		(66,765	)
Plant and machinery	(746,268	)	(136,314	)	—	34		7,993		63,773		(810,782	)
	(805,644	)	(151,022	)	—	34		8,703		70,382		(877,547	)
Impairment of other property, plant and equipment	(3,200	)	258		—	—		—		210		(2,732	)
Carrying amount	1,809,852		109,583		29,251	(529	)	(2,218	)	(185,886	)	1,760,053
					(See note 3)

This appendix forms an integral part of note 9 to the consolidated financial statements.

(Expressed in thousands of Euros)

	Balances at 31/12/2015		Additions		Transfers		Disposals		Translation differences		Balances at 31/12/2016
Cost:
Land and buildings	613,476		12,993		44,060		(780	)	18,107		687,856
Plant and machinery	1,431,030		87,536		116,724		(19,515	)	40,062		1,655,837
Fixed Assets under construction	263,610		163,059		(162,292	)	—		10,626		275,003
	2,308,116		263,588		(1,508	)	(20,295	)	68,795		2,618,696
Accumulated depreciation:
Buildings	(44,057	)	(13,777	)	(2	)	178		(1,718	)	(59,376	)
Plant and machinery	(616,369	)	(127,119	)	149		13,605		(16,534	)	(746,268	)
	(660,426	)	(140,896	)	147		13,783		(18,252	)	(805,644	)
Impairment of other property, plant and equipment	(3,288	)	147		—		—		(59	)	(3,200	)
Carrying amount	1,644,402		122,839		(1,361	)	(6,512	)	50,484		1,809,852

This appendix forms an integral part of note 9 to the consolidated financial statements.

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Appendix V (Tables)

12 Months Ended

Dec. 31, 2017

Appendix V

Schedule of Liquidity for Distribution of Interim Dividend

(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2017:
Projected profits net of taxes until 31/12/2017	273,472
Less, charge required to legal reserve	—
Estimated profits distributable for 2017	273,472
Interim dividend distributed	122,986
Forecast cash for the period 15 December 2017 to 15 December 2018:
Cash balances at 15 December 2017	—
Projected amounts collected	475,209
Projected payments, including interim dividend	468,117
Projected cash balances at 15 December 2018	7,092

This appendix forms an integral part of note 15 to the consolidated financial statements.

(Expressed in thousands of Euros)

	Thousands of Euros
Forecast profits distributable for 2016:
Projected profits net of taxes until 31/12/2016	319,133
Less, charge required to legal reserve	—
Estimated profits distributable for 2016	319,133
Interim dividend distributed	122,908
Forecast cash for the period 07 December 2016 to 07 December 2017:
Cash balances at 07 December 2016	5,521
Projected amounts collected	497,058
Projected payments, including interim dividend	471,686
Projected cash balances at 07 December 2017	30,893

This appendix forms an integral part of note 15 to the consolidated financial statements.

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Nature, Principal Activities and Subsidiaries (Details) - IPO € / shares in Units, € in Millions	May 17, 2006 EUR (€) € / shares shares
Nature, principal activities and subsidiaries
Number of ordinary shares issued through public offering | shares	71,000,000
Par value (in Euros per share)	€ 0.50
Share premium	€ 3.90
Total capital increase (including the share premium) | €	€ 312.4
Issue price	€ 4.40

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Basis of Presentation (Details) € in Thousands, $ in Millions					1 Months Ended			3 Months Ended	5 Months Ended	10 Months Ended	12 Months Ended
	Mar. 03, 2016 EUR (€) EquityInstruments	Dec. 12, 2015 EUR (€)	Nov. 16, 2015 EUR (€)	Feb. 09, 2015 EUR (€)	Aug. 31, 2016 EUR (€) EquityInstruments	Jul. 31, 2015 EUR (€) EquityInstruments	Jun. 30, 2015 EUR (€)	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017 shares	Dec. 31, 2016	Oct. 11, 2017 EUR (€)	Jul. 24, 2017 EUR (€)	Jan. 31, 2017 USD ($)	Jul. 31, 2016 EquityInstruments
Grifols Malaysia Sdn Bhd
Basis of presentation
Ownership in subsidiary ( as a percent)											30.00%
Grifols (Thailand) Ltd
Basis of presentation
Number of classes of shares | shares											2
VCN Bioscience S.L
Basis of presentation
Ownership in subsidiary ( as a percent)												81.34%
VCN Bioscience S.L | Grifols Innovation and New Technologies Limited
Basis of presentation
Share capital increase		€ 5,000
VCN Bioscience S.L | Gri-cel S.A
Basis of presentation
Share capital increase			€ 2,549
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L)
Basis of presentation
Ownership in subsidiary ( as a percent)									90.00%
Additional stake acquired (as a percent)														40.00%
Consideration transferred														€ 12,800
Araclon Biotech S.L
Basis of presentation
Ownership in subsidiary ( as a percent)												73.22%
Share capital increase					€ 6,700	€ 6,000	€ 6,000
Number of share capital increases | EquityInstruments					2	2
Medion Diagnostics AG
Basis of presentation
Ownership in subsidiary ( as a percent)												100.00%
Additional stake acquired (as a percent)																20.00%
Medion Diagnostics AG | Treasury stock
Basis of presentation
Consideration transferred, in shares | EquityInstruments																59,951
Progenika Biopharma, S.A. (Spain)
Basis of presentation
Ownership in subsidiary ( as a percent)								90.23%		89.25%
Additional stake acquired (as a percent)	32.93%
Consideration transferred	€ 25,000
Consideration transferred, in cash (as a percent)	50.00%
Progenika Biopharma, S.A. (Spain) | Class B Shares
Basis of presentation
Consideration transferred, in shares | EquityInstruments	876,777
Consideration transferred, in shares (as a percent)	50.00%
Number of days available to selling shareholders to repurchase the shares	5 days
Progenika Biopharma, S.A. (Spain) | Grifols Diagnostics Solutions, Inc.
Basis of presentation
Additional stake acquired (as a percent)													0.98%
Consideration transferred, in cash													€ 644
Hologic acquisition
Basis of presentation
Consideration transferred, in cash | $															$ 1,865
Gripdan Invest
Basis of presentation
Ownership in subsidiary ( as a percent)				100.00%
Consideration transferred, in cash				€ 46,000

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Basis of Presentation - IFRS 9 Financial Instruments (Details) - EUR (€) € in Thousands	Jan. 01, 2018	Dec. 31, 2017	Dec. 31, 2016
IFRS 9 Financial Instruments
Total Debt		€ 5,901,815	€ 4,712,071
Impact on Total Debt	€ (2,579)
Impact on Deferred Expenses	(22,056)
Increase (decrease) due to changes in accounting policy required by IFRSs
IFRS 9 Financial Instruments
(Positive) Negative Impact on Reserves	(24,636)
Senior Unsecured Notes
IFRS 9 Financial Instruments
Impact on Total Debt	146,334
Impact on Deferred Expenses	(41,036)
Senior Unsecured Notes | Increase (decrease) due to changes in accounting policy required by IFRSs
IFRS 9 Financial Instruments
(Positive) Negative Impact on Reserves	105,298
Senior Debt
IFRS 9 Financial Instruments
Impact on Total Debt	(148,913)
Impact on Deferred Expenses	18,979
Senior Debt | Increase (decrease) due to changes in accounting policy required by IFRSs
IFRS 9 Financial Instruments
(Positive) Negative Impact on Reserves	(129,934)
Debts and payables
IFRS 9 Financial Instruments
Total Debt		4,228,823
Debts and payables | Senior Unsecured Notes
IFRS 9 Financial Instruments
Total Debt		853,667
Debts and payables | Senior Debt
IFRS 9 Financial Instruments
Total Debt		€ 3,375,157
IFRS 9
IFRS 9 Financial Instruments
Total Debt	4,226,244
IFRS 9 | Senior Unsecured Notes
IFRS 9 Financial Instruments
Total Debt	1,000,000
IFRS 9 | Senior Debt
IFRS 9 Financial Instruments
Total Debt	€ 3,226,244

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Business Combinations (Details) € in Thousands, $ in Thousands		12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2015 EUR (€)	Jul. 25, 2017 EUR (€)	Feb. 28, 2017 USD ($)	Feb. 28, 2017 EUR (€)	Jan. 31, 2017 USD ($)	Jan. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 27, 2016 Center	Sep. 30, 2016 EUR (€)	Nov. 16, 2015 EUR (€)	Feb. 14, 2014 EUR (€)
Disclosure of detailed information about business combination [line items]
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)		€ 4,590,498	€ 3,532,359						€ 3,643,995
Hologic acquisition
Disclosure of detailed information about business combination [line items]
Payment in cash							$ 1,865,000	€ 1,734,077
Result of the cancellation of the existing contract							45,057	41,894
Total business combination cost							1,910,057	1,775,971
Fair value of net assets acquired							332,923	309,551
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)							1,577,134	1,466,420
Expenses incurred for acquisition		13,000							€ 5,100
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Property, plant and equipment							26,424	24,569
Deferred tax assets							18,000	16,736
Inventories							32,434	30,157
Total assets							377,923	351,392
Current provisions							45,000	41,841
Total liabilities and contingent liabilities							45,000	41,841
Total net assets acquired							332,923	309,551
Hologic acquisition | R&D in progress
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Intangible assets							148,157	137,756
Hologic acquisition | Other Intangible assets
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Intangible assets							$ 152,908	€ 142,174
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L)
Disclosure of detailed information about business combination [line items]
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)		€ 26,510
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Share capital increase				€ 12,800							€ 21,000
Additional stake acquired (as a percent)				40.00%							50.00%
Ownership in subsidiary ( as a percent)		90.00%
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L) | Socios Fundadores Kiro, S.L.
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Ownership in subsidiary held by noncontrolling interests (as a percent)		10.00%
Kedplamsa acquisition
Disclosure of detailed information about business combination [line items]
Payment in cash					$ 47,083	€ 44,238
Total business combination cost					47,083	44,238
Fair value of net assets acquired					4,403	4,137
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired)					42,680	40,101
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Property, plant and equipment						3,698
Total net assets acquired					$ 4,403	€ 4,137
Number of Plasma Donor Centers acquired | Center										6
Advance paid for acquisition | $	$ 15,000
VCN Bioscience S.L
Amounts determined at the date of acquisition of assets, liabilities and contingent liabilities acquired
Ownership in subsidiary ( as a percent)			68.01%
Increase in share capital due to investments in projects												€ 2,549	€ 700

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Significant Accounting Policies - Property, plant and equipment (Details)	12 Months Ended
	Dec. 31, 2017
Buildings | Minimum
Property, Plant and Equipment
Depreciation rates	1.00%
Buildings | Maximum
Property, Plant and Equipment
Depreciation rates	3.00%
Other property, technical equipment and machinery | Minimum
Property, Plant and Equipment
Depreciation rates	4.00%
Other property, technical equipment and machinery | Maximum
Property, Plant and Equipment
Depreciation rates	10.00%
Other property, plant and equipment | Minimum
Property, Plant and Equipment
Depreciation rates	7.00%
Other property, plant and equipment | Maximum
Property, Plant and Equipment
Depreciation rates	33.00%

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Significant Accounting Policies - Intangible assets (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Other Intangible Assets
Impairment loss	$ 0
Development costs
Other Intangible Assets
Amortization rates	10.00%
Computer software
Other Intangible Assets
Amortization rates	33.00%
Minimum | Concessions, patents, licenses brands & similar
Other Intangible Assets
Amortization rates	7.00%
Minimum | Currently marketed products
Other Intangible Assets
Amortization rates	3.00%
Maximum | Concessions, patents, licenses brands & similar
Other Intangible Assets
Amortization rates	20.00%
Maximum | Currently marketed products
Other Intangible Assets
Amortization rates	10.00%

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Significant Accounting Policies - Financial instruments (Details)	Dec. 31, 2017
Significant Accounting Policies
Interest rate used as a threshold to determine if there has been a substantial modification to the initially recognized financial liability	10.00%

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Financial Risk Management Policy - Liquidity Risk and Interest Rate Risk (Details) € in Thousands, $ in Millions		12 Months Ended
	Dec. 05, 2017 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 EUR (€)	Dec. 31, 2017 EUR (€)	Apr. 18, 2017 EUR (€)	Feb. 06, 2017 USD ($)	Feb. 06, 2017 EUR (€)	Dec. 31, 2015 EUR (€)	Oct. 28, 2015 EUR (€)	Dec. 31, 2014 EUR (€)
Financial Risk Management Policy
Amount of debt refinanced						$ 6,300	€ 5,800,000
Cash and cash equivalents			€ 895,009	€ 886,521				€ 1,142,500		€ 1,079,146
Senior Debt
Financial Risk Management Policy
Principal amount | $						6,000
Maximum borrowings available			4,119,242	5,067,935
Senior Debt | Hologic acquisition
Financial Risk Management Policy
Principal amount | $						1,816
Senior Unsecured Notes
Financial Risk Management Policy
Principal amount			948,677	1,000,000	€ 1,000,000			€ 918,527
EIB Loan
Financial Risk Management Policy
Maximum borrowings available			100,000	185,000
Debt term	10 years
Grace period	2 years
EIB Loan, Maturing in 2027
Financial Risk Management Policy
Maximum borrowings available	€ 85,000
EIB Loan, Maturing in 2027 | Euros
Financial Risk Management Policy
Maximum borrowings available				85,000
EIB Loan, Maturing in 2025
Financial Risk Management Policy
Maximum borrowings available									€ 100,000
EIB Loan, Maturing in 2025 | Euros
Financial Risk Management Policy
Maximum borrowings available			100,000	100,000
Revolving Credit
Financial Risk Management Policy
Maximum borrowings available			284,603	250,146
Liquidity risk
Financial Risk Management Policy
Amount of debt refinanced						6,300	€ 5,800,000
Cash and cash equivalents			€ 895,000	887,000
Unused credit facility				381,000
Liquidity risk | Senior Debt
Financial Risk Management Policy
Principal amount | $						6,000
Liquidity risk | Senior Debt | Hologic acquisition
Financial Risk Management Policy
Principal amount | $						1,816
Liquidity risk | Senior Unsecured Notes
Financial Risk Management Policy
Principal amount					€ 1,000,000
Liquidity risk | EIB Loan, Maturing in 2027
Financial Risk Management Policy
Maximum borrowings available	€ 85,000
Debt term	10 years
Grace period	2 years
Liquidity risk | EIB Loan, Maturing in 2025
Financial Risk Management Policy
Principal amount				85,000
Maximum borrowings available									€ 100,000
Liquidity risk | Revolving Credit
Financial Risk Management Policy
Unused credit facility				250,000		$ 300
Interest rate risk | Fixed-interest
Financial Risk Management Policy
Percentage of fixed rate interest debt of the total debt		19.00%	21.00%
Interest rate risk | Senior Debt | Euros
Financial Risk Management Policy
Percentage of total senior debt		12.00%	12.00%
Interest rate risk | Senior Unsecured Notes
Financial Risk Management Policy
Principal amount | $		$ 1,000
Interest rate risk | Senior Unsecured Notes | Euros
Financial Risk Management Policy
Percentage of fixed rate interest debt of the total debt		56.00%
Interest rate risk | EIB Loan
Financial Risk Management Policy
Principal amount				€ 170,000
Interest rate risk | EIB Loan | Euros
Financial Risk Management Policy
Percentage of total debt		10.00%

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Financial Risk Management Policy - Capital Management (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financial Risk Management Policy
Profit attributable to the Parent	€ 662,700	€ 545,456	€ 532,145
Equity attributable to the Parent	€ 3,629,079	€ 3,721,481
Return on equity	18.00%	15.00%
Preference shares, treasury stock as a percentage of capital, held by parent	0.60%	0.70%

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Segment Reporting - Additional Information (Details)	12 Months Ended
	Dec. 31, 2017 location area
Segment Reporting
Number of areas Group companies are divided into | area	4
Geographical information
Number of geographical areas | location	4

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Segment Reporting - Net Sales by Groups of Products (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting
Net revenue	€ 4,318,073	€ 4,049,830	€ 3,934,563
Bio supplies
Segment Reporting
Net revenue	66,791	24,387	24,466
Others
Segment Reporting
Net revenue	18,263	34,602	90,289
Haemoderivatives | Bioscience
Segment Reporting
Net revenue	3,429,785	3,228,275	3,032,111
Transfusional medicine | Diagnostic
Segment Reporting
Net revenue	679,692	640,443	667,886
Other diagnostic | Diagnostic
Segment Reporting
Net revenue	23,377	23,540	23,566
Fluid therapy and nutrition | Hospital
Segment Reporting
Net revenue	47,699	46,210	45,621
Hospital supplies | Hospital
Segment Reporting
Net revenue	€ 52,466	€ 52,373	€ 50,624

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Segment Reporting - Main Customer (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Bioscience | Customer
Disclosure of major customers
Percentage of entity's revenue	11.00%	10.70%	10.10%

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Goodwill - Details of and movement in goodwill (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill
Goodwill at beginning of the year	€ 3,643,995	€ 3,532,359
Business Combination	1,533,031
Translation differences	(586,528)	111,636
Goodwill at end of the year	4,590,498	3,643,995
Grifols UK Ltd. (UK)
Goodwill
Goodwill at beginning of the year	8,025	9,362
Translation differences	(280)	(1,337)
Goodwill at end of the year	7,745	8,025
Grifols Italia S.p.A. (Italy)
Goodwill
Goodwill at beginning of the year	6,118	6,118
Goodwill at end of the year	6,118	6,118
Biomat USA, Inc.
Goodwill
Goodwill at beginning of the year	193,039	186,907
Business Combination	40,101
Translation differences	(27,886)	6,132
Goodwill at end of the year	205,254	193,039
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland)
Goodwill
Goodwill at beginning of the year	10,134	9,961
Translation differences	(591)	173
Goodwill at end of the year	9,543	10,134
Grifols Therapeutics, Inc. (USA)
Goodwill
Goodwill at beginning of the year	2,108,139	2,041,137
Translation differences	(255,234)	67,002
Goodwill at end of the year	1,852,905	2,108,139
Araclon Biotech, S.L. (Spain)
Goodwill
Goodwill at beginning of the year	6,000	6,000
Goodwill at end of the year	6,000	6,000
Progenika Biopharma, S.A. (Spain)
Goodwill
Goodwill at beginning of the year	40,516	40,516
Goodwill at end of the year	40,516	40,516
Grifols Diagnostic (Novartis) (USA, Switzerland and Hong Kong)
Goodwill
Goodwill at beginning of the year	1,272,024	1,232,358
Business Combination	1,466,420
Translation differences	(302,537)	39,666
Goodwill at end of the year	2,435,907	€ 1,272,024
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L)
Goodwill
Business Combination	26,510
Goodwill at end of the year	€ 26,510

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Goodwill - Impairment testing (Details) - EUR (€) € in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Jul. 25, 2017	Sep. 30, 2016
Impairment Testing
Length of cash flow projections used in assumptions and calculations of impairment	5 years	5 years
Stock market capitalization	€ 15,379	€ 12,020
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L)
Impairment Testing
Additional stake acquired (as a percent)			40.00%	50.00%
Bioscience
Impairment Testing
Perpetual growth rate	2.00%	2.00%
Pre-tax discount rate	9.50%	8.60%
Diagnostic
Impairment Testing
Perpetual growth rate	2.00%	2.00%
Pre-tax discount rate	10.60%	10.30%
Hospital
Impairment Testing
Perpetual growth rate	1.40%
Pre-tax discount rate	13.30%

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Other Intangible Assets - Currently marketed products acquired from Talecris and Progenika (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Other Intangible Assets
Intangible assets at beginning of the year	€ 1,195,302	€ 1,161,572
Additions	284,729
Translation differences	(162,046)	35,049
Intangible assets at end of the year	1,269,342	1,195,302
Gross carrying amount
Other Intangible Assets
Intangible assets at beginning of the year	1,682,673	1,577,005
Additions	284,729
Translation differences	(206,643)	46,844
Intangible assets at end of the year	1,841,207	1,682,673
Accumulated depreciation and amortisation
Other Intangible Assets
Intangible assets at beginning of the year	(487,371)	(415,467)
Translation differences	43,243	(11,795)
Intangible assets at end of the year	(508,485)	(487,371)
Currently marketed products
Other Intangible Assets
Intangible assets at beginning of the year	941,216	950,889
Additions	(38,216)	(38,441)
Translation differences	(109,692)	28,768
Intangible assets at end of the year	793,308	941,216
Currently marketed products | Gross carrying amount
Other Intangible Assets
Intangible assets at beginning of the year	1,162,204	1,126,024
Translation differences	(137,828)	36,180
Intangible assets at end of the year	1,024,376	1,162,204
Currently marketed products | Accumulated depreciation and amortisation
Other Intangible Assets
Intangible assets at beginning of the year	(220,988)	(175,135)
Translation differences	28,136	(7,412)
Intangible assets at end of the year	€ (231,068)	€ (220,988)
Talecris | Currently marketed products
Other Intangible Assets
Estimated useful life	30 years	30 years
Residual useful life	23 years 5 months	24 years 5 months
Talecris | Currently marketed products | Gross carrying amount
Other Intangible Assets
Intangible assets at beginning of the year	€ 1,138,412	€ 1,102,232
Translation differences	(137,828)	36,180
Intangible assets at end of the year	1,000,584	1,138,412
Talecris | Currently marketed products | Accumulated depreciation and amortisation
Other Intangible Assets
Intangible assets at beginning of the year	(211,871)	(168,397)
Additions	(35,837)	(36,062)
Translation differences	28,136	(7,412)
Intangible assets at end of the year	€ (219,572)	€ (211,871)
Progenika Biopharma, S.A. (Spain) | Currently marketed products
Other Intangible Assets
Estimated useful life	10 years	10 years
Residual useful life	5 years 2 months	6 years 2 months
Progenika Biopharma, S.A. (Spain) | Currently marketed products | Gross carrying amount
Other Intangible Assets
Intangible assets at beginning of the year	€ 23,792	€ 23,792
Intangible assets at end of the year	23,792	23,792
Progenika Biopharma, S.A. (Spain) | Currently marketed products | Accumulated depreciation and amortisation
Other Intangible Assets
Intangible assets at beginning of the year	(9,117)	(6,738)
Additions	(2,379)	(2,379)
Intangible assets at end of the year	€ (11,496)	€ (9,117)

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Other Intangible Assets - Others (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other Intangible Assets
Other intangible assets	€ 1,269,342	€ 1,195,302	€ 1,161,572
Intangible asset purchase commitments	1,199	639
Profit (loss) incurred on disposals of intangible assets	(83)	7,198
Impairment loss	63,675
Plasma center licenses
Other Intangible Assets
Other intangible assets	26,631	30,075
Development costs
Other Intangible Assets
Other intangible assets	183,281	52,272
License rights
Other Intangible Assets
Other intangible assets	4,235	0
Self-constructed
Other Intangible Assets
Other intangible assets	€ 49,782	€ 29,034

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Property, Plant and Equipment - Activity (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment
Capitalized interests	€ 8,839	€ 13,019
Losses on disposals of property, plant and equipment	€ 1,468	€ 4,021

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Property, Plant and Equipment - Assets under finance leases (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fixed assets
Assets under finance lease
Assets under finance lease	€ 9,415	€ 9,344
Land and buildings
Assets under finance lease
Assets under finance lease	1,730	792
Plant and machinery
Assets under finance lease
Assets under finance lease	7,685	8,552
Gross carrying amount | Fixed assets
Assets under finance lease
Assets under finance lease	16,794	15,549
Gross carrying amount | Land and buildings
Assets under finance lease
Assets under finance lease	2,545	2,213
Gross carrying amount | Plant and machinery
Assets under finance lease
Assets under finance lease	14,249	13,336
Accumulated depreciation and amortisation | Fixed assets
Assets under finance lease
Assets under finance lease	(7,379)	(6,205)
Accumulated depreciation and amortisation | Land and buildings
Assets under finance lease
Assets under finance lease	(815)	(1,421)
Accumulated depreciation and amortisation | Plant and machinery
Assets under finance lease
Assets under finance lease	€ (6,564)	€ (4,784)

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Property, Plant and Equipment - Self Constructed PP&E and Commitments (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment
Property, plant and equipment	€ 1,760,053	€ 1,809,852	€ 1,644,402
Purchase commitments	39,675	39,773
Self-constructed property, plant and equipment
Property, Plant and Equipment
Property, plant and equipment	€ 52,218	€ 68,529

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Property, Plant and Equipment - Impairment (Details) - Specific Group of Assets Hospital Segment - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Impairment
Impairment	€ 0
Pre-tax discount rate	12.20%	10.30%
Perpetual growth rate	2.00%	2.00%

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Equity Accounted Investees - Ownership and Carrying Amount (Details) - EUR (€) € in Thousands				1 Months Ended		12 Months Ended
	Jan. 12, 2017	May 17, 2016	May 11, 2016	Dec. 31, 2017	Jan. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Equity Accounted Investees
Carrying value				€ 219,009		€ 219,009	€ 201,345	€ 76,728	€ 54,296
Aradigm Corporation
Equity Accounted Investees
Ownership (as a percent)						35.13%	35.13%
Carrying value							€ 9,291
Kiro Grifols , S.L.
Equity Accounted Investees
Ownership (as a percent)						90.00%	50.00%
Carrying value							€ 13,888
Alkahest, Inc.
Equity Accounted Investees
Ownership (as a percent)						47.58%	47.58%
Carrying value				30,559		€ 30,559	€ 35,955
Albajuna Therapeutics, S.L.
Equity Accounted Investees
Ownership (as a percent)					30.00%	30.00%	30.00%
Carrying value				1,956		€ 1,956	€ 3,177
Interstate Blood Bank, Inc.
Equity Accounted Investees
Ownership (as a percent)			49.19%			49.19%	49.19%
Carrying value				27,936		€ 27,936	€ 31,090
Bio Blood Components Inc.
Equity Accounted Investees
Ownership (as a percent)			48.97%			48.97%	48.97%
Carrying value				32,960		€ 32,960	€ 38,725
Plasma Biological Services, LLC
Equity Accounted Investees
Ownership (as a percent)			48.90%			48.90%	48.90%
Carrying value				€ 23,010		€ 23,010	€ 25,890
Singulex, Inc.
Equity Accounted Investees
Ownership (as a percent)		20.00%		19.33%		19.33%	20.00%
Carrying value				€ 29,322		€ 29,322	€ 43,329
GigaGen, Inc
Equity Accounted Investees
Ownership (as a percent)						43.96%
Carrying value				29,047		€ 29,047
Access Biologic Acquisition
Equity Accounted Investees
Ownership (as a percent)	49.00%					49.00%
Carrying value				€ 44,219		€ 44,219
Aigues de Vilajuiga S.A.
Equity Accounted Investees
Ownership (as a percent)						50.00%

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Equity Accounted Investees - Movements in Investments Carrying Amount (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Movement in the investments in equity-accounted investees
Balance	€ 201,345	€ 76,728	€ 54,296
Acquisitions	80,685	136,072	33,039
Transfers	(16,000)	(29,059)
Share of profit/(losses)	(13,195)	6,933	(8,280)
Share of other comprehensive income / translation differences	(27,134)	10,671	2,673
Losses for impairment	(6,692)
Collected dividends			(5,000)
Balance	€ 219,009	€ 201,345	€ 76,728

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Equity Accounted Investees - GigaGen Inc (Details) € in Thousands, $ in Thousands		12 Months Ended
	Jul. 05, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)
Equity Accounted Investees
Non-current assets						€ 7,974,948	€ 7,007,258
Current assets						2,945,316	3,122,514
Current liabilities						(977,987)	(1,071,763)
Profit from continuing operations (100%)			€ 661,314	€ 544,543	€ 531,441
Reconciliation of summarized financial information with carrying amount
Equity method accounted investment			201,345	76,728	54,296	219,009	€ 201,345
Movement in the investments in equity-accounted investees
Balance			201,345	76,728	54,296
Acquisitions			80,685	136,072	33,039
Share of profit / (losses)			(19,887)	6,933	(8,280)
Share of other comprehensive income / translation differences			(27,134)	10,671	2,673
Impairment losses			(6,692)
Balance			€ 219,009	€ 201,345	€ 76,728
GigaGen, Inc
Equity Accounted Investees
Ownership interest (as a percent)		43.96%	43.96%
Non-current assets		$ 484				404
Current assets		26,277				21,910
Current liabilities		(216)				(180)
Total net assets (100%)		26,545				22,134
Group's share of net assets		11,669				9,730
Profit from continuing operations (100%)		(2,183)	€ (1,830)
Group's share of total comprehensive income		(960)	(804)
Reconciliation of summarized financial information with carrying amount
Group's share of net assets		$ 11,669				9,730
Goodwill of equity method investment						19,317
Equity method accounted investment			29,047			€ 29,047
Movement in the investments in equity-accounted investees
Acquisitions			31,752
Share of profit / (losses)			(804)
Share of other comprehensive income / translation differences			(1,595)
Impairment losses			(306)
Balance			€ 29,047
Grifols Innovation and New Technologies Limited
Equity Accounted Investees
Ownership in subsidiary ( as a percent)	100.00%
Grifols Innovation and New Technologies Limited | GigaGen, Inc
Equity Accounted Investees
Ownership interest (as a percent)	43.96%
Collaboration fee | $	$ 15,000
Movement in the investments in equity-accounted investees
Acquisitions | $	$ 35,000

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Equity Accounted Investees - Access Biologicals LLC (Details) € in Thousands, $ in Thousands		12 Months Ended
	Jan. 12, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)
Equity Accounted Investees
Non-current assets						€ 7,974,948	€ 7,007,258
Current assets						2,945,316	3,122,514
Non-current liabilities						(6,308,312)	(5,330,031)
Current liabilities						(977,987)	(1,071,763)
Profit from continuing operations (100%)			€ 661,314	€ 544,543	€ 531,441
Reconciliation of summarized financial information with carrying amount
Equity method accounted investment			201,345	76,728	54,296	219,009	€ 201,345
Movement in the investments in equity-accounted investees
Balance			201,345	76,728	54,296
Acquisitions			80,685	136,072	33,039
Share of profit / (losses)			(19,887)	6,933	(8,280)
Share of other comprehensive income / translation differences			(27,134)	10,671	2,673
Balance			€ 219,009	€ 201,345	€ 76,728
Access Biologic Acquisition
Equity Accounted Investees
Ownership interest (as a percent)	49.00%	49.00%	49.00%
Option to purchase remaining voting rights (as a percent)	51.00%
Option to purchase remaining voting rights, term (in years)	5 years
Non-current assets		$ 1,464				1,221
Current assets		17,296				14,422
Non-current liabilities		(1,540)				(1,284)
Current liabilities		(3,626)				(3,023)
Total net assets (100%)		13,594				11,336
Group's share of net assets		6,661				5,555
Profit from continuing operations (100%)		4,129	€ 3,734
Group's share of total comprehensive income		2,023	1,830
Reconciliation of summarized financial information with carrying amount
Group's share of net assets		$ 6,661				5,555
Goodwill of equity method investment						38,664
Equity method accounted investment			44,219			€ 44,219
Movement in the investments in equity-accounted investees
Acquisitions	$ 51,000		48,383
Share of profit / (losses)			1,830
Share of other comprehensive income / translation differences			(5,994)
Balance			€ 44,219

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Equity Accounted Investees - Aradigm (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Movement in the investments in equity-accounted investees
Balance	€ 201,345	€ 76,728	€ 54,296
Share of profit / (losses)	(19,887)	6,933	(8,280)
Share of other comprehensive income / translation differences	(27,134)	10,671	2,673
Impairment losses	(6,692)
Balance	219,009	201,345	76,728
Aradigm
Movement in the investments in equity-accounted investees
Balance	9,291	19,799
Share of profit / (losses)	(4,324)	(10,185)
Share of other comprehensive income / translation differences	869	(323)
Impairment losses	€ (5,836)
Balance		€ 9,291	€ 19,799

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Equity Accounted Investees - Singulex (Details) € in Thousands, $ in Millions			1 Months Ended	12 Months Ended
	May 17, 2016 USD ($)	May 17, 2016 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	May 16, 2016 USD ($)
Movement in the investments in equity-accounted investees
Balance				€ 201,345	€ 76,728	€ 54,296
Acquisitions				80,685	136,072	33,039
Share of profit / (losses)				(19,887)	6,933	(8,280)
Share of other comprehensive income / translation differences				(27,134)	10,671	2,673
Balance			€ 219,009	€ 219,009	€ 201,345	€ 76,728
Singulex, Inc.
Equity Accounted Investees
Ownership interest (as a percent)	20.00%	20.00%	19.33%	19.33%	20.00%
Pre-money valuation | $							$ 200
Movement in the investments in equity-accounted investees
Balance				€ 43,329
Acquisitions	$ 50	€ 44,107			€ 44,107
Share of profit / (losses)				(9,335)	(3,890)
Share of other comprehensive income / translation differences				(4,672)	3,112
Balance			€ 29,322	€ 29,322	€ 43,329

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Equity Accounted Investees - Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LLC (Details) € in Thousands, $ in Millions			12 Months Ended
	May 11, 2016 USD ($) facility Center	May 11, 2016 EUR (€) facility	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)
Movement in the investments in equity-accounted investees
Balance			€ 201,345	€ 76,728	€ 54,296
Acquisitions			80,685	136,072	33,039
Share of profit / (losses)			(19,887)	6,933	(8,280)
Share of other comprehensive income / translation differences			(27,134)	10,671	2,673
Balance			€ 219,009	€ 201,345	€ 76,728
Interstate Blood Bank, Inc.
Equity Accounted Investees
Ownership interest (as a percent)	49.19%	49.19%	49.19%	49.19%
Movement in the investments in equity-accounted investees
Balance			€ 31,090
Acquisitions				€ 28,229
Share of profit / (losses)			635	695
Share of other comprehensive income / translation differences			(3,789)	2,166
Balance			€ 27,936	€ 31,090
Bio Blood Components Inc.
Equity Accounted Investees
Ownership interest (as a percent)	48.97%	48.97%	48.97%	48.97%
Movement in the investments in equity-accounted investees
Balance			€ 38,725
Acquisitions				€ 36,168
Share of profit / (losses)			(1,181)	(166)
Share of other comprehensive income / translation differences			(4,584)	2,723
Balance			€ 32,960	€ 38,725
Plasma Biological Services, LLC
Equity Accounted Investees
Ownership interest (as a percent)	48.90%	48.90%	48.90%	48.90%
Movement in the investments in equity-accounted investees
Balance			€ 25,890
Acquisitions				€ 23,818
Share of profit / (losses)			270	260
Share of other comprehensive income / translation differences			(3,150)	1,812
Balance			€ 23,010	€ 25,890
Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LLC
Equity Accounted Investees
Number of plasma collection centers | Center	23
Number of blood donation centers | Center	9
Number of laboratories | facility	1	1
Movement in the investments in equity-accounted investees
Acquisitions	$ 100	€ 88,215
Call option | Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LLC
Equity Accounted Investees
Purchase price for the remaining stakes | $	100
Price of option to purchase remaining stakes	$ 10	€ 9,007

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Equity Accounted Investees - Other Significant Investments (Details) € in Thousands		1 Months Ended	12 Months Ended
	Jul. 25, 2017 EUR (€)	Jan. 31, 2016 EUR (€) installment	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)
Equity Accounted Investees
Acquisitions			€ 80,685	€ 136,072	€ 33,039
Dividends received					€ 5,000
Albajuna Therapeutics, S.L.
Equity Accounted Investees
Ownership interest (as a percent)		30.00%	30.00%	30.00%
Acquisitions		€ 3,750
Number of payments for increase in initial investment | installment		2
Total amount of increase in initial investment upon achievements of agreed development milestones		€ 7,250
Kiro Grifols S. L (formerly Kiro Robotics S.L)
Equity Accounted Investees
Share capital increase	€ 12,800
Additional stake acquired (as a percent)	40.00%
Ownership in subsidiary ( as a percent)	90.00%

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Financial Assets - Non current financial assets (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial Assets
Convertible Bond		€ 15,201
Non-current derivatives	€ 8,338	13,665
Non-current investment in quoted shares	38,708	29,998
Total Non-current financial assets measured at fair value	47,046	58,864
Convertible Bond		25,000
Non-current guarantee deposits	4,820	4,603
Other non-current financial assets	1,346	1,078
Non-current loans to EEAA	16,677
Total Non-current financial assets measured at amortized cost	€ 22,843	€ 30,681

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Financial Assets - Other current financial assets (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial Assets
Deposits and guarantees	€ 702	€ 957
Current loans to third parties	59	832
Current loans to associates	9,977	793
Total other current financial assets	€ 10,738	€ 2,582

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Financial Assets - Convertible bond, Non-current derivatives and loans (Details) € in Thousands, $ in Thousands			12 Months Ended
	Oct. 02, 2017 USD ($)	Feb. 02, 2017 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Oct. 02, 2017 EUR (€)	Apr. 22, 2016 USD ($)	Apr. 22, 2016 EUR (€)
Financial Assets
Settlement amount		€ 20,500
Loss on settlement		€ 5,500
Non-current derivatives				€ 8,338	€ 13,665
Aradigm
Financial Assets
Indirect ownership interest (as a percent)			35.13%	35.13%
Impairment loss of financial assets related to convertible bond				€ 14,477
Impairment loss on implicit derivative to the right of convertible bond				3,672
Aradigm | Convertible Bonds, Maturing in 2021
Financial Assets
Notional amount							$ 19,950	€ 17,997
interest rate on non-current loans (as a percent)							9.00%	9.00%
Amount repaid on loan				€ 1,601	€ 839
Convertible bonds, conversion ratio					191.94
Principal amount of convertible bonds that is used in conversion calculations | $			$ 1,000
Singulex, Inc.
Financial Assets
Notional amount	$ 20,000					€ 16,676
interest rate on non-current loans (as a percent)	5.00%					5.00%
Indirect ownership interest (as a percent)	19.33%

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Inventories (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Details of inventories
Goods for resale	€ 105,013	€ 166,272
Raw materials and supplies	454,371	423,326
Work in progress and semi-finished goods	592,612	584,279
Finished goods	477,297	469,054
Total inventories	1,629,293	1,642,931
Inventory provision
Movement in the inventory provision
Balance at 1 January	33,069	22,614	€ 15,888
Net charge for the year	8,232	8,878	6,099
Cancellations for the year	(357)	(20)	(195)
Translation differences	(5,180)	1,597	822
Balance at 31 December	€ 35,764	€ 33,069	€ 22,614

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Trade and Other Receivables - Summary (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Trade and Other Receivables
Trade receivables	€ 302,685	€ 431,510
Receivables from associates	3,219	133
Bad debt provision	(19,706)	(17,987)	€ (13,210)	€ (14,092)
Trade receivables	286,198	413,656
Other receivables	7,485	13,705
Personnel	566	280
Advance payments	11,181	6,775
Taxation authorities, VAT recoverable	20,105	17,768
Other public entities	1,344	3,771
Other receivables	40,681	42,299
Current income tax assets	59,531	77,713
Total trade and other receivables	€ 386,410	€ 533,668

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Trade and Other Receivables - Other Receivables (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Trade and Other Receivables
Initial payment usually received under some contracts, expressed as a percentage of the nominal amount of receivables sold less associated sale and purchase costs	90.00%	90.00%	90.00%
Amount due from financial institutions relating to the deferred collection of the remaining nominal amount of the sold receivables from several public entities	€ 1,800	€ 2,560
Amount of receivables sold without recourse to financial institutions	912,000	870,000
Finance costs from sale of receivables	€ 3,973	€ 4,885	€ 6,512

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Cash and Cash Equivalents (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 07, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash and Cash Equivalents
Current deposits	€ 655,463	€ 470,298
Cash in hand and at banks	231,058	424,711	€ 5,521
Total cash and cash equivalents	€ 886,521	€ 895,009		€ 1,142,500	€ 1,079,146

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Equity - Share Capital - General Information (Details) - EUR (€)	Dec. 31, 2017	Dec. 31, 2016
Equity
Share capital	€ 119,604,000	€ 119,604,000
Share capital
Equity
Share capital	€ 119,603,705	€ 119,603,705
Class A, Ordinary shares
Equity
Number of shares issued (in shares)	426,129,798	426,129,798
Par value (in Euros per share)	€ 0.25	€ 0.25
Class B, Preference shares
Equity
Number of shares issued (in shares)	261,425,110	261,425,110
Par value (in Euros per share)	€ 0.05	€ 0.05

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Equity - Share Capital - Class B Shares (Details)	Dec. 31, 2017 item € / shares	Dec. 31, 2016 item € / shares	Jul. 23, 2012	Jul. 22, 2012
Equity
Preference shares, annual preferred dividend, minimum (in Euros per share) | € / shares	€ 0.01	€ 0.01
Exchange ratio			1	2
Interests representing more than 10% of total capital | item	0	0

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Equity - Share Capital - Movement in Outstanding Shares (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Class A, Ordinary shares
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	426,129,798
Number of shares outstanding at end of the year	426,129,798	426,129,798
Class B, Preference shares
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	256,694,375
(Acquisition) / disposal of treasury stock	432,929
Number of shares outstanding at end of the year	257,127,304	256,694,375
Scenario, Previously Reported | Class A, Ordinary shares
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	426,129,798	426,129,798
Number of shares outstanding at end of the year		426,129,798
Scenario, Previously Reported | Class B, Preference shares
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	256,694,375	257,386,540
(Acquisition) / disposal of treasury stock		(692,165)
Number of shares outstanding at end of the year		256,694,375

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Equity - Reserves - Drawdown of Accumulated Gains (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Equity
Restricted reserves	€ 40,061	€ 50,680

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Equity - Reserves - Treasury Stock (Details) - EUR (€) € in Thousands	1 Months Ended	12 Months Ended
	May 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity
Net change in treasury stock		€ 6,288	€ (10,317)	€ 12,695
Treasury stock
Equity
Net change in treasury stock		€ 6,288	€ (10,135)	€ 10,677
Reserves
Equity
Net change in treasury stock	€ 2,000
Class A, Ordinary shares | Treasury stock
Equity
(Acquisition) / disposal of treasury stock	1,967,265

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Equity - Reserves - Subsidiaries (Details) € in Thousands		1 Months Ended							12 Months Ended
	Dec. 12, 2016 EUR (€)	Oct. 31, 2017 EUR (€) shares	Sep. 30, 2017	Aug. 31, 2016 EUR (€)	Jul. 31, 2016 EUR (€) EquityInstruments	Jul. 31, 2015 EUR (€)	Jun. 30, 2015 EUR (€)	May 31, 2015	Dec. 31, 2017 EUR (€)	Dec. 31, 2015 EUR (€)	Mar. 03, 2016
Equity
Decrease in reserves									€ 389	€ 3
Araclon Biotech S.L
Equity
Increased capital				€ 6,700		€ 6,000	€ 6,000
Indirect (as a percent)				73.22%	70.83%		70.83%	66.15%
Araclon Biotech S.L | Reserves
Equity
Decrease in reserves				€ 1,700			€ 1,770
Medion Diagnostics AG
Equity
Indirect (as a percent)					100.00%
Additional stake acquired (as a percent)					20.00%
Medion Diagnostics AG | Treasury stock
Equity
Consideration transferred, in shares | EquityInstruments					59,951
Medion Diagnostics AG | Reserves
Equity
Decrease in reserves					€ 600
VCN Bioscience, S.L. (Spain)
Equity
Increased capital	€ 5,000
Indirect (as a percent)	81.34%
VCN Bioscience, S.L. (Spain) | Reserves
Equity
Decrease in reserves	€ 1,000
Progenika Biopharma, S.A. (Spain)
Equity
Acquired Capital (in shares) | shares		12,020
Indirect (as a percent)		90.23%	89.25%
Additional stake acquired (as a percent)											32.93%
Progenika Biopharma, S.A. (Spain) | Reserves
Equity
Decrease in reserves		€ 374,000
Medion Diagnostics AG
Equity
Additional stake acquired (as a percent)					20.00%
Medion Diagnostics AG | Treasury stock
Equity
Consideration transferred, in shares | EquityInstruments					59,951

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Equity - Reserves - Legal Reserve (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Equity
Percentage of annual profits to transfer to legal reserve (as a percent)	10.00%
Limit to transfers to legal reserve as a percentage of share capital (as a percent)	20.00%
Nominal value of the total share capital after the increase (as a percent)	10.00%
Legal reserve	€ 23,921	€ 23,921
Spanish companies other than parent
Equity
Legal reserve	2,416	1,485
Foreign companies other than Spanish companies and parent
Equity
Legal reserve	€ 731	€ 650

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Equity - Treasury Stock - Class A Treasury Stock (Details) - Class A, Ordinary shares - shares	Dec. 31, 2017	Dec. 31, 2016
Equity
Number of shares outstanding	426,129,798	426,129,798
Treasury stock
Equity
Number of shares outstanding	0	0

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Equity - Treasury Stock - Tabular Disclosure - Shares (Details) - Class B, Preference shares - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	(256,694,375)
Number of shares outstanding at end of the year	(257,127,304)	(256,694,375)
Treasury stock
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	4,730,735
Non Cash Disposal of shares	(432,929)
Number of shares outstanding at end of the year	4,297,806	4,730,735
Scenario, Previously Reported
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	(256,694,375)	(257,386,540)
Number of shares outstanding at end of the year		(256,694,375)
Scenario, Previously Reported | Treasury stock
Reconciliation of number of shares outstanding
Number of shares outstanding at beginning of the year	4,730,735	4,038,570
Acquisition of shares		1,628,893
Disposal of shares		(936,728)
Number of shares outstanding at end of the year		4,730,735

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Equity - Treasury Stock - Tabular Disclosure - Value (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Equity
Balance at beginning of the year	€ (3,727,978)	€ (3,301,390)
Balance at end of the year	(3,633,965)	(3,727,978)
Treasury stock
Equity
Balance at beginning of the year	68,710	58,575
Balance at end of the year	62,422	68,710
Treasury stock | Class B, Preference shares
Equity
Balance at beginning of the year	68,710	58,575
Acquisition of shares		23,720
Non Cash Disposal of shares	(6,288)
Disposal of shares		(13,585)
Balance at end of the year	€ 62,422	€ 68,710

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Equity - Treasury Stock - Non-controlling Interests (Details) € in Thousands	1 Months Ended	12 Months Ended
	Mar. 31, 2016 EUR (€) EquityInstruments	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Mar. 31, 2017 EquityInstruments	Jul. 31, 2016 EquityInstruments
Equity
Group companies, associates and business units | €		€ 1,857,210	€ 202,727	€ 58,609
Treasury stock | Restricted share unit retention plan
Equity
Consideration transferred, in shares					432,929
Medion Diagnostics AG
Equity
Additional stake acquired (as a percent)						20.00%
Medion Diagnostics AG | Treasury stock
Equity
Consideration transferred, in shares						59,951
Progenika Biopharma, S.A. (Spain)
Equity
Additional stake acquired (as a percent)	16.46%
Group companies, associates and business units | €	€ 11,035
Progenika Biopharma, S.A. (Spain) | Treasury stock
Equity
Consideration transferred, in shares	876,777

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Equity - Treasury Stock - Additional Information (Details)	Dec. 31, 2017	Dec. 31, 2016
Equity
Preference shares, treasury stock as a percentage of capital, held by parent (as a percent)	0.60%	0.70%

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Equity - Distribution of Profit - Proposed Distribution of Profit (Details) € in Thousands	12 Months Ended
	Dec. 31, 2017 EUR (€)
Equity
Voluntary reserve	€ 76,247
Dividends	265,080
Profit of the Parent	€ 341,327

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Equity - Distribution of Profit - Approved Distribution of Profit (Details) € in Thousands	12 Months Ended
	Dec. 31, 2016 EUR (€)
Equity
Voluntary reserve	€ 103,611
Dividends	218,182
Profit of the Parent	€ 321,793

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Equity - Distribution of Profit - Dividends Paid (Details) - EUR (€) € / shares in Units, € in Thousands		12 Months Ended
	May 26, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity
Dividends paid		€ 95,274	€ 93,243
Interim dividends paid		122,986	122,908
Dividends paid		€ 218,260	€ 216,151	€ 221,772
Class A, Ordinary shares
Equity
Dividends paid, % of par value (as a percent)		54.00%	53.00%
Dividends paid, per share (in Euros per share)		€ 0.14	€ 0.13
Dividends paid		€ 57,790	€ 56,493
Interim dividends paid, % of par value (as a percent)		72.00%	72.00%
Interim dividends paid, per share (in Euros per share)		€ 0.18	€ 0.18
Interim dividends paid		€ 76,703	€ 76,703
Class B, Preference shares
Equity
Interim dividends paid, % of par value (as a percent)		360.00%	360.00%
Interim dividends paid, per share (in Euros per share)		€ 0.18	€ 0.18
Interim dividends paid		€ 46,283	€ 46,205
Preference shares, no preferred dividend
Equity
Dividends paid, % of par value (as a percent)		271.00%	265.00%
Dividends paid, per share (in Euros per share)		€ 0.14	€ 0.13
Dividends paid		€ 34,870	€ 34,136
Preference shares, preferred dividend
Equity
Dividends paid, % of par value (as a percent)		20.00%	20.00%
Dividends paid, per share (in Euros per share)	€ 0.01	€ 0.01	€ 0.01
Dividends paid		€ 2,614	€ 2,614

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Equity - Distribution of Profit - Interim Dividend (Details) - EUR (€) € / shares in Units, € in Thousands			12 Months Ended
	Oct. 27, 2017	Oct. 28, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity
Interim dividend	€ 122,986	€ 122,908	€ 122,986	€ 122,908	€ 119,615
Class A, Ordinary shares
Equity
Dividend approved (in Euros per share)	€ 0.18	€ 0.18
Class B, Preference shares
Equity
Dividend approved (in Euros per share)	€ 0.18	€ 0.18

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Equity - Distribution of Profit - Additional Information (Details) - € / shares		12 Months Ended
	May 26, 2017	Dec. 31, 2017	Dec. 31, 2016
Preference shares, preferred dividend
Equity
Dividends paid, per share (in Euros per share)	€ 0.01	€ 0.01	€ 0.01

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Equity - Restricted Share Unit Compensation (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Equity
Cumulative accrual amount	€ 13,871	€ 7,946

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Earnings Per Share - Calculation of Basic Earnings per Share (Details) - EUR (€) € / shares in Units, € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share
Profit for the year attributable to shareholders of the Parent	€ 662,700	€ 545,456	€ 532,145
Weighted average number of ordinary shares outstanding (in shares)	684,197,276	683,225,815	683,549,316
Basic earnings per share (in Euros per share)	€ 0.97	€ 0.80	€ 0.78

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Earnings Per Share - Weighted Average Ordinary Shares Outstanding Basic (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Weighted average ordinary shares and adjusted weighted average ordinary shares [abstract]
Issued shares outstanding at 1 January (in shares)	683,854,491	683,516,338	683,610,378
Effect of treasury stock (in shares)	342,785	(290,523)	(61,062)
Average weighted number of ordinary shares outstanding (basic) at 31 December (in shares)	684,197,276	683,225,815	683,549,316

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Earnings Per Share - Calculation of Diluted Earnings per Share (Details) - EUR (€) € / shares in Units, € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Profit (loss), attributable to ordinary equity holders of parent entity [abstract]
Profit for the year attributable to shareholders of the Parent	€ 662,700	€ 545,456	€ 532,145
Weighted average number of ordinary shares outstanding (diluted) (in shares)	684,243,891	684,170,887	683,924,426
Diluted earnings per share (in Euros per share)	€ 0.97	€ 0.80	€ 0.78

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Earnings Per Share - Weighted Average Ordinary Shares Outstanding Diluted (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Weighted average ordinary shares and adjusted weighted average ordinary shares [abstract]
Issued shares outstanding at 1 January (in shares)	683,854,491	683,988,460	683,610,378
Effect of RSU shares (in shares)	46,615	472,950	375,110
Effect of treasury stock (in shares)	342,785	(290,523)	(61,062)
Average weighted number of ordinary shares outstanding (diluted) at 31 December (in shares)	684,243,891	684,170,887	683,924,426

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Non-Controlling Interests (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of subsidiaries [line items]
Balance at beginning of the year	€ 3,727,978	€ 3,301,390	€ 2,662,888
Profit/(loss) for the year	661,314	544,543	531,441
Disposals	6,426	6,234	252
Capital increases	(389)		(3)
Balance at end of the year	3,633,965	3,727,978	3,301,390
Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	6,497	5,187	4,765
Profit/(loss) for the year	(1,386)	(913)	(704)
Disposals	(49)	(582)	(72)
Disposals	(346)
Business combinations/ Additions to consolidated Group	254
Capital increases	(43)	2,737	1,767
Translation differences	(133)	68
Balance at end of the year	4,886	6,497	5,187
Grifols (Thailand) Ltd | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	3,354	2,664
Profit/(loss) for the year	433	778
Disposals		(215)
Disposals	(77)
Translation differences	(131)	127
Balance at end of the year	3,579	3,354	2,664
Grifols Malaysia Sdn Bhd | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	1,172	1,040
Profit/(loss) for the year	229	144
Translation differences	(29)	(12)
Balance at end of the year	1,372	1,172	1,040
Araclon Biotech S.L | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	140	183
Profit/(loss) for the year	(1,617)	(1,819)
Capital increases		1,776
Balance at end of the year	(1,477)	140	183
Medion Diagnostics AG | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year		(406)
Disposals		406
Balance at end of the year			(406)
GRI-CEI S/A Productos para transfusao | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year		1,146
Disposals		(1,146)
Balance at end of the year			1,146
Progenika Biopharma, S.A. (Spain) | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	1,211	1,093
Profit/(loss) for the year	(60)	165
Disposals	(297)
Translation differences	27	(47)
Balance at end of the year	881	1,211	1,093
Brainco Biopharma, S.L. (merged with Progenika Biopharma, S.A in 2016) | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year		(373)
Disposals		373
Balance at end of the year			(373)
Abyntek Biopharma, S.L. | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	(73)	(93)
Profit/(loss) for the year	45	20
Disposals	28
Balance at end of the year		(73)	(93)
VCN Bioscience, S.L. (Spain) | Non-controlling interests
Disclosure of subsidiaries [line items]
Balance at beginning of the year	693	(67)
Profit/(loss) for the year	(272)	(201)
Capital increases		961
Balance at end of the year	421	€ 693	€ (67)
Kiro Grifols , S.L. | Non-controlling interests
Disclosure of subsidiaries [line items]
Profit/(loss) for the year	(144)
Business combinations/ Additions to consolidated Group	254
Balance at end of the year	€ 110

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Grants (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Grants
Capital grants	€ 11,010	€ 11,311
Interest rate grants (preference loans)	812	885
Total Grants	11,822	12,196
Grants transferred to consolidated statement of profit and loss	€ 323	€ 1,154	€ 1,227

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Provisions - Summary (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Non-current provisions
Provisions for pensions and similar obligations	€ 4,742	€ 4,195
Other provisions	1,021	923
Non-current provisions	5,763	5,118	€ 4,980	€ 6,953
Current provisions
Trade provisions	106,995	89,588
Current Provisions	€ 106,995	€ 89,588	€ 123,049	€ 115,985

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Provisions - Non-current provisions (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Non-current provisions
Beginning balance, Non-current provisions	€ 5,118	€ 4,980	€ 6,953
Business combinations	23
Net charge	422	(399)	376
Cancellations	(23)	(281)	(1,598)
Reclassifications	290	814	(600)
Translation differences	(67)	4	(151)
Ending balance, Non-current provisions	€ 5,763	€ 5,118	€ 4,980

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Provisions - Current provisions (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current provisions
Beginning balance, Trade provisions	€ 89,588	€ 123,049	€ 115,985
Business combinations	41,841
Net charges	(4,812)	(28,481)	(2,562)
Cancellations	(2,886)	(6,417)	(6,123)
Reclassifications	(2,600)		492
Translation differences	(14,136)	1,437	15,257
Ending balance, Trade provisions	€ 106,995	€ 89,588	€ 123,049

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Financial Liabilities - Summary (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial Liabilities
Non-current obligations	€ 853,667	€ 831,417
Senior secured debt, non-current	4,849,882	3,728,695
Other loans, non-current	169,214	114,898
Finance lease liabilities, non-current	5,415	6,086
Other non-current financial liabilities	23,637	30,975
Total non-current financial liabilities	5,901,815	4,712,071
Current obligations	95,538	95,524
Senior secured debt, current	4,057	81,273
Other loans, current	29,527	23,288
Finance lease liabilities, current	3,945	3,859
Other current financial liabilities	22,003	26,121
Total current financial liabilities	€ 155,070	€ 230,065

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Financial Liabilities - Other (Details) € in Thousands, $ in Millions	Dec. 05, 2017 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Apr. 18, 2017 EUR (€)	Feb. 06, 2017 USD ($)	Feb. 06, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Oct. 28, 2015 EUR (€)
Borrowings
Amount of debt refinanced					$ 6,300	€ 5,800,000
Senior Debt
Borrowings
Face amount | $					6,000
Maximum borrowings available			€ 5,067,935				€ 4,119,242
Revolving Credit Facility, Maturing in 2023
Borrowings
Maximum borrowing capacity | $		$ 300			300
Senior Unsecured Notes
Borrowings
Face amount			1,000,000	€ 1,000,000			948,677	€ 918,527
EIB Loan
Borrowings
Maximum borrowings available			€ 185,000				€ 100,000
Debt term	10 years
Grace period	2 years
EIB Loan, Maturing in 2027
Borrowings
Maximum borrowings available	€ 85,000
EIB Loan, Maturing in 2025
Borrowings
Maximum borrowings available									€ 100,000
Hologic acquisition | Senior Debt
Borrowings
Face amount | $					$ 1,816

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Financial Liabilities - Senior Unsecured Notes (Details) € in Thousands, $ in Millions			8 Months Ended	12 Months Ended
	Apr. 18, 2017 USD ($)	Apr. 18, 2017 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Dec. 31, 2011
Borrowings
Refinance costs				€ 263,344	€ 244,829	€ 240,335
Senior Unsecured Notes
Borrowings
Face amount		€ 1,000,000	€ 1,000,000	1,000,000	948,677	€ 918,527
Value of notes replaced				(108,597)
Value of notes redeemed				26,618
Unamortized financing costs			146,000	€ 146,000	€ 117,000
Senior Unsecured Notes Due 2022
Borrowings
Borrowings, interest rate							5.25%
Percentage of notes replaced	97.1	97.1
Value of notes replaced | $	$ 1,000
Percentage of notes redeemed	2.9	2.9
Value of notes redeemed		€ 26,618
Secured unsecured notes, maturing in 2025
Borrowings
Face amount		€ 1,000,000
Borrowings, interest rate		3.20%
Refinance costs			€ 57,500

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Financial Liabilities - Movement in Senior Unsecured Notes (Details) - EUR (€) € in Thousands		12 Months Ended
	Apr. 18, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Borrowings
Translation differences		€ 11,472	€ (8,916)	€ 12,140
Senior Unsecured Notes
Borrowings
Nominal amount, beginning balance		948,677	918,527
Refinancing		(108,597)
Repayments		(26,618)
Translation differences		(30,656)	30,150
Nominal amount, ending balance	€ 1,000,000	€ 1,000,000	€ 948,677	€ 918,527

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Financial Liabilities - Promissory Notes (Details) - EUR (€)	Dec. 31, 2017	Dec. 31, 2016
Promissory Notes Maturing May 2017
Borrowings
Nominal amount of promissory notes		€ 3,000
Borrowings, interest rate		4.00%
Promissory notes subscribed		€ 84,966,000
Buy back		(789,000)
Interest pending accrual		€ (1,104,000)
Promissory Notes Maturing May 2018
Borrowings
Nominal amount of promissory notes	€ 3,000
Borrowings, interest rate	3.00%
Promissory notes subscribed	€ 92,109,000
Buy back	(906,000)
Interest pending accrual	€ (909,000)

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Financial Liabilities - Loans and Borrowings (Details) - EUR (€) € in Thousands	Feb. 06, 2017	Dec. 31, 2017	Dec. 05, 2017	Dec. 31, 2016	Oct. 28, 2015
Borrowings
Amount extended		€ 131,700		€ 208,105
Non-current, Loan transaction costs		(174,278)		(150,987)
Current loans, Loan transaction costs		(20,958)		(3,365)
Current loans and borrowings		33,584		104,561
Current loans and borrowings, accrued interest		1,713		596
Senior Debt
Borrowings
Amount extended		5,067,935		4,119,242
Non-current loans and borrowings, Carrying amount		5,024,160		3,879,682
Current loans and borrowings, Carrying Amount		25,015		84,638
EIB Loan
Borrowings
Amount extended		185,000		100,000
Non-current loans and borrowings, Carrying amount		159,375		100,000
EIB Loan, Maturing in 2025
Borrowings
Amount extended					€ 100,000
EIB Loan, Maturing in 2027
Borrowings
Amount extended			€ 85,000
Revolving Credit
Borrowings
Amount extended		250,146		284,603
Other Non-current Loans
Borrowings
Amount extended		5,536,261		4,536,845
Non-current loans and borrowings		5,019,096		3,843,593
BEI Loan
Borrowings
Current loans and borrowings, Carrying Amount		10,625
Other Current Loans
Borrowings
Amount extended		131,700		208,105
Current loans and borrowings, Carrying Amount		€ 18,902		€ 23,288
Other Current Loans | Minimum
Borrowings
Borrowings, interest rate		0.10%		0.10%
Other Current Loans | Maximum
Borrowings
Borrowings, interest rate		3.74%		3.74%
US Dollars | Senior Debt Tranche A Maturing in 2023
Borrowings
Interest rate basis	Libor
Adjustment to interest rate basis (as a percent)	1.75%	1.75%		1.75%
Amount extended		€ 1,959,476
Non-current loans and borrowings, Carrying amount		€ 1,959,476
US Dollars | Senior Debt Tranche B, Maturing in 2025
Borrowings
Interest rate basis	Libor
Adjustment to interest rate basis (as a percent)		2.25%		2.25%
Amount extended		€ 2,501,459
Non-current loans and borrowings, Carrying amount		2,457,684
Current loans and borrowings, Carrying Amount		€ 25,015
US Dollars | Senior Debt, Tranche B, Maturing in 2021
Borrowings
Adjustment to interest rate basis (as a percent)		3.00%		3.00%
Amount extended				€ 3,055,168
Non-current loans and borrowings, Carrying amount				2,967,574
Current loans and borrowings, Carrying Amount				€ 30,832
US Dollars | Senior Debt, Tranche A, Maturing in 2020
Borrowings
Adjustment to interest rate basis (as a percent)		2.50%		2.50%
Borrowings, interest rate				2.50%
Amount extended				€ 664,074
Non-current loans and borrowings, Carrying amount				527,108
Current loans and borrowings, Carrying Amount				€ 49,806
US Dollars | Revolving Credit Facility, Maturing in 2023
Borrowings
Adjustment to interest rate basis (as a percent)		1.75%		1.75%
Amount extended		€ 250,146
US Dollars | Revolving Credit Facility, Maturing in 2019
Borrowings
Adjustment to interest rate basis (as a percent)		2.50%		2.50%
Amount extended				€ 284,603
Euros | Senior Debt Tranche A Maturing in 2023
Borrowings
Interest rate basis	Euribor
Adjustment to interest rate basis (as a percent)	1.75%	1.75%		1.75%
Amount extended		€ 607,000
Non-current loans and borrowings, Carrying amount		€ 607,000
Euros | Senior Debt Tranche B, Maturing in 2025
Borrowings
Adjustment to interest rate basis (as a percent)	2.25%
Euros | Senior Debt, Tranche B, Maturing in 2021
Borrowings
Adjustment to interest rate basis (as a percent)		3.00%		3.00%
Amount extended				€ 400,000
Non-current loans and borrowings, Carrying amount				385,000
Current loans and borrowings, Carrying Amount				4,000
Euros | EIB Loan, Maturing in 2025
Borrowings
Borrowings, interest rate		2.70%
Amount extended		€ 100,000		100,000
Non-current loans and borrowings, Carrying amount		€ 74,375		€ 100,000
Euros | EIB Loan, Maturing in 2027
Borrowings
Borrowings, interest rate		2.02%
Amount extended		€ 85,000
Non-current loans and borrowings, Carrying amount		€ 85,000
Euros | Other Non-current Loans
Borrowings
Adjustment to interest rate basis (as a percent)		4.00%		4.00%
Amount extended		€ 33,180		€ 33,000
Non-current loans and borrowings, Carrying amount		€ 9,839		€ 14,898
Euros | BEI Loan
Borrowings
Borrowings, interest rate		2.70%
Current loans and borrowings, Carrying Amount		€ 10,625

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Financial Liabilities - Senior Secured Debt (Details) € in Thousands, $ in Thousands		12 Months Ended
	Feb. 06, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 EUR (€)	Dec. 31, 2017 USD ($) tranche	Dec. 31, 2017 EUR (€) tranche	Feb. 06, 2017 EUR (€)
Disclosure of detailed information about borrowings [line items]
Refinance costs		€ 263,344	€ 244,829	€ 240,335
Senior Debt
Disclosure of detailed information about borrowings [line items]
Principal amount | $	$ 6,000,000
Refinance costs		€ 84,800
Unamortized financing costs			€ 154,000			€ 195,000
Details by maturity:
Principal amount | $	6,000,000
Senior Debt Tranche A Maturing in 2023
Disclosure of detailed information about borrowings [line items]
Debt term		6 years
Number of tranches | tranche					2	2
Senior Debt Tranche B, Maturing in 2025
Disclosure of detailed information about borrowings [line items]
Debt term		8 years
US Dollars | Senior Debt Tranche A Maturing in 2023
Disclosure of detailed information about borrowings [line items]
Principal amount	$ 2,350,000				$ 2,350,000	€ 1,959,476
Adjustment to interest rate basis (as a percent)	1.75%		1.75%		1.75%	1.75%	1.75%
Interest rate basis	Libor
Details by maturity:
Principal amount	$ 2,350,000				$ 2,350,000	€ 1,959,476
US Dollars | Senior Debt Tranche A Maturing in 2023 | Not later than one year
Disclosure of detailed information about borrowings [line items]
Principal amount					117,500	97,974
Details by maturity:
Principal amount					117,500	97,974
US Dollars | Senior Debt Tranche A Maturing in 2023 | Later than one year and not later than two years
Disclosure of detailed information about borrowings [line items]
Principal amount					235,000	195,948
Details by maturity:
Principal amount					235,000	195,948
US Dollars | Senior Debt Tranche A Maturing in 2023 | Later than two years and not later than three years
Disclosure of detailed information about borrowings [line items]
Principal amount					235,000	195,948
Details by maturity:
Principal amount					235,000	195,948
US Dollars | Senior Debt Tranche A Maturing in 2023 | Later than three years and not later than four years
Disclosure of detailed information about borrowings [line items]
Principal amount					1,321,875	1,102,204
Details by maturity:
Principal amount					1,321,875	1,102,204
US Dollars | Senior Debt Tranche A Maturing in 2023 | Later than four years and not later than five years
Disclosure of detailed information about borrowings [line items]
Principal amount					440,625	367,402
Details by maturity:
Principal amount					$ 440,625	€ 367,402
US Dollars | Senior Debt, Tranche A, Maturing in 2020
Disclosure of detailed information about borrowings [line items]
Adjustment to interest rate basis (as a percent)			2.50%		2.50%	2.50%
US Dollars | Senior Debt Tranche B, Maturing in 2025
Disclosure of detailed information about borrowings [line items]
Principal amount	$ 3,000,000				$ 2,977,500	€ 2,482,699
Adjustment to interest rate basis (as a percent)			2.25%		2.25%	2.25%
Interest rate basis	Libor
Details by maturity:
Principal amount	$ 3,000,000				$ 2,977,500	€ 2,482,699
US Dollars | Senior Debt Tranche B, Maturing in 2025 | Not later than one year
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | Later than one year and not later than two years
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | Later than two years and not later than three years
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | Later than three years and not later than four years
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | Later than four years and not later than five years
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | 2023
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | 2024
Disclosure of detailed information about borrowings [line items]
Principal amount					30,000	25,015
Details by maturity:
Principal amount					30,000	25,015
US Dollars | Senior Debt Tranche B, Maturing in 2025 | 2025
Disclosure of detailed information about borrowings [line items]
Principal amount					2,767,500	2,307,594
Details by maturity:
Principal amount					$ 2,767,500	€ 2,307,594
US Dollars | Senior Debt, Tranche B, Maturing in 2021
Disclosure of detailed information about borrowings [line items]
Adjustment to interest rate basis (as a percent)			3.00%		3.00%	3.00%
Euros | Senior Debt Tranche A Maturing in 2023
Disclosure of detailed information about borrowings [line items]
Principal amount						€ 607,000	€ 607,000
Adjustment to interest rate basis (as a percent)	1.75%		1.75%		1.75%	1.75%	1.75%
Interest rate basis	Euribor
Details by maturity:
Principal amount						€ 607,000	€ 607,000
Euros | Senior Debt Tranche A Maturing in 2023 | Not later than one year
Disclosure of detailed information about borrowings [line items]
Principal amount						30,350
Details by maturity:
Principal amount						30,350
Euros | Senior Debt Tranche A Maturing in 2023 | Later than one year and not later than two years
Disclosure of detailed information about borrowings [line items]
Principal amount						60,700
Details by maturity:
Principal amount						60,700
Euros | Senior Debt Tranche A Maturing in 2023 | Later than two years and not later than three years
Disclosure of detailed information about borrowings [line items]
Principal amount						60,700
Details by maturity:
Principal amount						60,700
Euros | Senior Debt Tranche A Maturing in 2023 | Later than three years and not later than four years
Disclosure of detailed information about borrowings [line items]
Principal amount						341,437
Details by maturity:
Principal amount						341,437
Euros | Senior Debt Tranche A Maturing in 2023 | Later than four years and not later than five years
Disclosure of detailed information about borrowings [line items]
Principal amount						113,813
Details by maturity:
Principal amount						€ 113,813
Euros | Senior Debt Tranche B, Maturing in 2025
Disclosure of detailed information about borrowings [line items]
Adjustment to interest rate basis (as a percent)	2.25%						2.25%
Euros | Senior Debt, Tranche B, Maturing in 2021
Disclosure of detailed information about borrowings [line items]
Adjustment to interest rate basis (as a percent)			3.00%		3.00%	3.00%

XML

Financial Liabilities - Revolving Facility and Other (Details) - Revolving Credit Facility, Maturing in 2023 - USD ($) $ in Millions	Dec. 31, 2017	Feb. 06, 2017
Disclosure of detailed information about borrowings [line items]
Maximum borrowing capacity	$ 300	$ 300
Borrowings	$ 0

XML

Financial Liabilities - Finance Lease Liabilities (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Finance Lease Liabilities
Minimum payments	€ 10,135	€ 10,726
Interest	775	781
Present value	9,360	9,945
Not later than one year
Finance Lease Liabilities
Minimum payments	4,305	4,267
Interest	360	408
Present value	3,945	3,859
Later than one year and not later than two years
Finance Lease Liabilities
Minimum payments	2,636	3,636
Interest	179	263
Present value	2,457	3,373
Later than two years and not later than three years
Finance Lease Liabilities
Minimum payments	1,461	1,792
Interest	88	88
Present value	1,373	1,704
Later than three years and not later than four years
Finance Lease Liabilities
Minimum payments	814	672
Interest	60	16
Present value	754	656
Later than four years and not later than five years
Finance Lease Liabilities
Minimum payments	369	306
Interest	42	5
Present value	327	301
More than 5 years
Finance Lease Liabilities
Minimum payments	550	53
Interest	46	1
Present value	€ 504	€ 52

XML

Financial Liabilities - Other Financial Liabilities (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Mar. 03, 2016
Financial Liabilities
Amount of interest free loans extended by governmental institutions	€ 20,306	€ 20,543
Portion of interest-free loans extended by governmental institutions that is considered a grant	812	885
Call option included in other financial liabilities	5,000
Amount collected directly from Spanish Social Security affiliated bodies and transferred to financial institutions included in other current financial liabilities	3,056	17,578
Other financial liabilities	45,640	57,096
Not later than one year
Financial Liabilities
Other financial liabilities	22,003	26,121
Later than one year and not later than two years
Financial Liabilities
Other financial liabilities	10,818	11,468
Later than two years and not later than three years
Financial Liabilities
Other financial liabilities	3,787	6,203
Later than three years and not later than four years
Financial Liabilities
Other financial liabilities	2,794	5,802
Later than four years and not later than five years
Financial Liabilities
Other financial liabilities	2,247	2,490
More than 5 years
Financial Liabilities
Other financial liabilities	€ 3,991	€ 5,012
Progenika Biopharma, S.A. (Spain)
Financial Liabilities
Additional stake acquired (as a percent)			32.93%

XML

Trade and Other Payables (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Trade and Other Payables
Suppliers	€ 423,096	€ 461,073
VAT payable	8,827	10,048
Taxation authorities, withholdings payable	24,084	23,700
Social security payable	11,741	11,422
Other public entities	97,068	97,724
Other payables	141,720	142,894
Current income tax liabilities	6,709	7,957
Total trade and other payables	€ 571,525	€ 611,924

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Other Current Liabilities (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Current Liabilities
Salaries payable	€ 129,519	€ 132,755
Other payables	649	427
Deferred income	4,284	441
Advances received	9,945	6,563
Total other current liabilities	€ 144,397	€ 140,186

XML

Net Revenues - Distribution by Segment (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Distribution of net consolidated revenues by segment
Net revenue	€ 4,318,073	€ 4,049,830	€ 3,934,563
Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	4,318,073	4,049,830	3,934,563
Intersegments
Distribution of net consolidated revenues by segment
Net revenue	(34,784)	(31,386)	(25,386)
Bioscience | Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	3,429,785	3,195,424	3,032,111
Diagnostic | Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	732,369	691,701	716,838
Hospital | Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	105,649	102,251	96,245
Bio supplies
Distribution of net consolidated revenues by segment
Net revenue	66,791	24,387	24,466
Bio supplies | Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	66,791	57,239	24,466
Others
Distribution of net consolidated revenues by segment
Net revenue	18,263	34,602	90,289
Others | Operating Segments
Distribution of net consolidated revenues by segment
Net revenue	€ 18,263	€ 34,601	€ 90,289

XML

Net Revenues - Geographical Distribution (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Geographical distribution of net consolidated revenues
Net revenue	€ 4,318,073	€ 4,049,830	€ 3,934,563
USA and Canada
Geographical distribution of net consolidated revenues
Net revenue	2,896,505	2,707,579	2,604,315
Spain
Geographical distribution of net consolidated revenues
Net revenue	242,894	225,273	216,548
European Union
Geographical distribution of net consolidated revenues
Net revenue	444,089	426,223	456,919
Rest of the world
Geographical distribution of net consolidated revenues
Net revenue	€ 734,585	€ 690,755	€ 656,781

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Net Revenues - Discounts and Other Reductions (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Discounts and other reductions in gross income
Gross sales	€ 5,322,618	€ 4,882,615	€ 4,579,759
Chargebacks	(826,775)	(652,564)	(488,072)
Cash discounts	(57,512)	(51,953)	(46,150)
Volume rebates	(43,274)	(51,242)	(49,458)
Medicare and Medicaid	(41,722)	(47,820)	(25,710)
Other discounts	(35,262)	(29,206)	(35,806)
Total net sales	€ 4,318,073	€ 4,049,830	€ 3,934,563

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Net Revenues - Movement in Discounts and Other Reductions (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Movement in Chargebacks
Balance at beginning of year	€ 87,249	€ 126,178	€ 58,431
Current estimate related to sales made in current and prior year	826,775	652,564	488,072
(Actual returns or credits in current period related to sales made in current period)	(795,449)	(693,458)	(428,041)
(Actual returns or credits in current period related to sales made in prior periods)	31
Translation differences	(12,716)	1,965	7,716
Balance at end of year	105,890	87,249	126,178
Movement in Cash discounts
Balance at beginning of year	6,632	5,902	4,738
Current estimate related to sales made in current and prior year	57,512	51,953	46,150
(Actual returns or credits in current period related to sales made in current period)	(52,270)	(51,733)	(44,867)
(Actual returns or credits in current period related to sales made in prior periods)	(6,024)	(248)	(246)
Translation differences	(736)	758	127
Balance at end of year	5,114	6,632	5,902
Movement in Volume rebates
Balance at beginning of year	26,507	29,680	21,030
Current estimate related to sales made in current and prior year	43,274	51,242	49,458
(Actual returns or credits in current period related to sales made in current period)	(28,976)	(27,409)	(18,211)
(Actual returns or credits in current period related to sales made in prior periods)	(20,210)	(27,732)	(25,051)
Translation differences	(2,604)	726	2,454
Balance at end of year	17,991	26,507	29,680
Movement in Medicare / Medicaid
Balance at beginning of year	21,757	12,468	14,823
Current estimate related to sales made in current and prior year	41,722	47,820	25,710
(Actual returns or credits in current period related to sales made in current period)	(28,198)	(24,988)	(18,402)
(Actual returns or credits in current period related to sales made in prior periods)	(16,659)	(14,401)	(11,257)
Translation differences	(2,418)	858	1,594
Balance at end of year	16,204	21,757	12,468
Movement in Other discounts
Balance at beginning of year	4,442	5,367	3,174
Current estimate related to sales made in current and prior year	35,262	29,206	35,806
(Actual returns or credits in current period related to sales made in current period)	(26,072)	(27,243)	(34,059)
(Actual returns or credits in current period related to sales made in prior periods)	(2,864)	(2,986)	(1,791)
Translation differences	(625)	98	2,237
Balance at end of year	10,143	4,442	5,367
Total movement in discounts and other reductions
Balance at beginning of year	146,587	179,595	102,196
Current estimate related to sales made in current and prior year	1,004,545	832,785	645,196
(Actual returns or credits in current period related to sales made in current period)	(930,965)	(824,831)	(543,580)
(Actual returns or credits in current period related to sales made in prior periods)	(45,726)	(45,367)	(38,345)
Translation differences	(19,099)	4,405	14,128
Balance at end of year	€ 155,342	€ 146,587	€ 179,595

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Personnel Expenses (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Details of personnel expenses by function:
Cost of sales	€ 731,192	€ 635,577	€ 592,037
Research and development	90,495	77,988	76,780
Selling, general & administration expenses	323,880	314,348	269,718
Total personnel expenses	1,145,567	1,027,913	938,535
Details by nature:
Wages and salaries	917,810	822,384	756,570
Contributions to pension plans (see note 29)	20,347	18,486	14,587
Other social charges	27,679	25,074	22,071
Social Security	179,731	161,969	145,307
Total personnel expenses	€ 1,145,567	€ 1,027,913	€ 938,535

XML

Expenses by Nature - Amortization and Depreciation (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Amortization and depreciation
Amortization and depreciation, cost of sales	€ 135,186	€ 126,998	€ 110,898
Amortization and depreciation, research and development	14,721	13,050	13,654
Amortization and depreciation, selling, general & administration expenses	65,583	61,821	65,203
Total amortization and depreciation	€ 215,490	€ 201,869	€ 189,755

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Expenses by Nature - Other Operating Income and Expenses (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other operating income and expenses by function
Other operating income and expenses, cost of sales	€ 416,020	€ 454,097	€ 426,531
Other operating income and expenses, research and development	129,579	113,078	118,667
Other operating income and expenses, selling, general & administration expenses	460,959	393,523	403,944
Total other operating income and expenses	€ 1,006,558	€ 960,698	€ 949,142

XML

Expenses by Nature - Other Operating Income and Expenses, Components (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Details by nature:
Changes in trade provisions	€ 3,648	€ (22,069)	€ (763)
Professional services	211,579	190,003	173,990
Commissions	18,473	20,147	20,474
Supplies and auxiliary materials	131,932	119,014	115,471
Operating leases (note 28)	80,136	74,945	70,496
Freight	105,292	96,680	83,352
Repair and maintenance expenses	103,518	89,797	81,087
Advertising	49,893	51,233	47,860
Insurance	21,529	20,008	19,501
Royalties	11,241	9,217	9,386
Travel expenses	58,171	53,239	52,606
External services	82,699	43,231	56,743
R&D Expenses	89,977	78,379	81,319
Other	38,470	136,874	137,620
Total other operating income and expenses	€ 1,006,558	€ 960,698	€ 949,142

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Finance Result (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finance Result
Finance income	€ 9,678	€ 9,934	€ 5,841
Finance cost from Senior Unsecured Notes	(65,189)	(73,491)	(72,783)
Finance cost from senior debt	(193,183)	(168,332)	(161,624)
Finance cost from sale of receivables (note 13)	(3,973)	(4,885)	(6,512)
Capitalized interest	8,839	13,019	9,795
Other finance costs	(9,838)	(11,140)	(9,211)
Finance costs	(263,344)	(244,829)	(240,335)
Change in fair value of financial derivatives (note 30)	(3,752)	(7,610)	(25,206)
Impairment and gains / (losses) on disposal of financial instruments	(18,844)
Exchange differences	(11,472)	8,916	(12,140)
Finance result	€ (287,734)	€ (233,589)	€ (271,840)
Minimum
Finance Result
Capitalized interest rate (as a percent)	4.26%	4.80%
Maximum
Finance Result
Capitalized interest rate (as a percent)	4.87%	5.20%

XML

Taxation - Reconciliation of Accounting and Taxable Income (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of accounting and taxable income
Profit before income tax from continuing operations	€ 695,722	€ 712,752	€ 690,250
Tax at 25% (28% 2015)	173,931	178,188	193,270
Permanent differences	17,163	8,019	(2,709)
Effect of different tax rates	40,981	14,509	(24,524)
Tax credits (deductions)	(16,092)	(20,163)	(19,487)
Impact related to the US tax legislation modifications	(171,169)
Prior year income tax expense	(8,614)	928	2,723
Other income tax expenses/(income)	(1,792)	(13,272)	9,536
Total income tax expense	€ 34,408	€ 168,209	€ 158,809
United States
Taxation
Tax rate of the companies domiciled in the U.S.A (as a percent)	36.50%
Reconciliation of accounting and taxable income
Tax rate (as a percent)	35.00%
Impact related to the US tax legislation modifications	€ 171,000
Spain
Reconciliation of accounting and taxable income
Tax rate (as a percent)	25.00%		28.00%

XML

Taxation - Income Tax Expense - Deferred Tax Assets and Liabilities (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of accounting and taxable income
Deferred tax		€ (149,443)	€ (40,161)	€ 24,357
Current tax		183,851	208,370	134,452
Total income tax expense		34,408	€ 168,209	€ 158,809
Impact registered in income tax expense due to change in tax rate		€ (171,169)
United States
Reconciliation of accounting and taxable income
Tax rate (as a percent)		35.00%
Impact registered in income tax expense due to change in tax rate		€ 171,000
United States | Forecast
Reconciliation of accounting and taxable income
Tax rate (as a percent)	21.00%

XML

Taxation - Deferred Tax Assets and Liabilities (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets and liabilities
Deferred assets, net	€ 66,157	€ 67,219	€ 66,794
Net deferred Liabilities	(388,912)	(600,646)	(631,565)
Assets
Deferred tax assets and liabilities
Deferred assets, net	103,342	94,788	155,307
Net deferred Liabilities	79,441	146,778	39,634
Assets | Provisions
Deferred tax assets and liabilities
Deferred assets, net	4,564	3,696	38,004
Net deferred Liabilities	47,404	61,252	22,085
Assets | Inventories
Deferred tax assets and liabilities
Deferred assets, net	35,619	39,297	37,141
Assets | Tax credits (deductions)
Deferred tax assets and liabilities
Deferred assets, net	49,467	37,685	42,533
Assets | Tax loss carryforwards
Deferred tax assets and liabilities
Deferred assets, net	6,179	10,717	30,668
Net deferred Liabilities	15,384	40,358	7,097
Assets | Other
Deferred tax assets and liabilities
Deferred assets, net	7,513	3,393	6,961
Net deferred Liabilities	16,653	45,168	10,452
Liabilities
Deferred tax assets and liabilities
Deferred assets, net	(37,185)	(27,569)	(88,513)
Net deferred Liabilities	(468,353)	(747,424)	(671,199)
Liabilities | Inventories
Deferred tax assets and liabilities
Net deferred Liabilities	5,063	(1,175)	(32,351)
Liabilities | Goodwill
Deferred tax assets and liabilities
Deferred assets, net	(22,346)	(19,136)	(77,755)
Net deferred Liabilities	(105,963)	(131,039)	(35,877)
Liabilities | Fixed assets
Deferred tax assets and liabilities
Deferred assets, net	(7,780)	(7,062)	(10,409)
Net deferred Liabilities	(95,029)	(158,060)	(119,858)
Liabilities | Intangible assets
Deferred tax assets and liabilities
Deferred assets, net	(7,059)	(1,371)	(349)
Net deferred Liabilities	(201,921)	(392,388)	(404,617)
Liabilities | Debt cancellation costs
Deferred tax assets and liabilities
Net deferred Liabilities	€ (70,503)	€ (64,762)	(77,514)
Liabilities | Cash flow hedges
Deferred tax assets and liabilities
Net deferred Liabilities			€ (982)

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Taxation - Movement in Deferred Tax Assets and Liabilities (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets and liabilities
Balance at 1 January	€ (533,427)	€ (564,771)	€ (456,341)
Movements during the year	149,443	40,161	(24,357)
Movements in equity during the year			(10,960)
Business combination (note 3)	16,736
Translation differences	44,493	(8,817)	(73,113)
Balance at 31 December	€ (322,755)	€ (533,427)	€ (564,771)

XML

Taxation - Deferred Tax Assets and Liabilities, Others (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets and liabilities
Net deferred tax assets	€ 66,157	€ 67,219	€ 66,794
Unrecognized deferred tax assets	51,169	67,044
Not later than one year
Deferred tax assets and liabilities
Net deferred tax assets	€ 51,930	€ 99,897
Spain
Deferred tax assets and liabilities
Tax deduction maturity term	18 years
Tax credit carryforward (in years)	15 years
United States
Deferred tax assets and liabilities
Tax credit carryforward (in years)	20 years

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Operating Leases (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating leases (as lessee)
Operating leases instalments recognized as an expense	€ 80,136	€ 74,945	€ 70,496
Future minimum payments on non-cancellable operating leases	262,343	350,931	305,914
Operating leases (as lessor)
Operating leases (as lessor)	0	0	0
Not later than one year
Operating leases (as lessee)
Future minimum payments on non-cancellable operating leases	46,541	56,869	77,951
Between 1 and 5 years
Operating leases (as lessee)
Future minimum payments on non-cancellable operating leases	156,897	181,076	126,644
More than 5 years
Operating leases (as lessee)
Future minimum payments on non-cancellable operating leases	€ 58,905	€ 112,986	€ 101,319

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Other Commitments with Third Parties and Other Contingent Liabilities (Details) € in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) Y item director	Dec. 31, 2017 EUR (€) Y item director	Dec. 31, 2016 USD ($)	Dec. 31, 2016 EUR (€)
Other Commitments with Third Parties and Other Contingent Liabilities
Annual contribution to defined contribution pension plans | €		€ 725		€ 674
Agreements with employees/directors | director	73	73
Number of executives with whom contract entered | item	9	9
Percentage of annual bonus in Grifols Class B Shares or Grifols ADS	50.00%	50.00%
Matching percentage to the employees contribution	50.00%	50.00%
Vesting Period	2 years 1 day	2 years 1 day
Exchange ratio	1	1
Amount settled under RSU plan | €		€ 7,303
Equity-settled commitment | €		€ 13,871		€ 10,594
Percentage of groups contribution to match first 3% of employees	100.00%	100.00%
Percentage of groups contribution to match the next 2% of employees	50.00%	50.00%
Total cost of matching contributions | $	$ 18.9		$ 17.0
Minimum
Other Commitments with Third Parties and Other Contingent Liabilities
Number of years of salary for employees/directors	2	2
Number of years of salary for executives	1	1
Maximum
Other Commitments with Third Parties and Other Contingent Liabilities
Number of years of salary for employees/directors	5	5
Number of years of salary for executives	4	4

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Other Commitments with Third Parties and Other Contingent Liabilities - Purchase commitments (Details) € in Thousands	12 Months Ended
	Dec. 31, 2017 EUR (€) employee
Other Commitments with Third Parties and Other Contingent Liabilities
Number of employees against whom investigation was opened | employee	5
Number of employees against whom judicial process was discharged | employee	3
Number of employees against whom judicial process continued | employee	2
Not later than one year
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	€ 83,782
Later than one year and not later than two years
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	62,510
Later than two years and not later than three years
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	56,183
Later than three years and not later than four years
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	39,765
Later than four years and not later than five years
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	9,249
2023
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	780
2024
Other Commitments with Third Parties and Other Contingent Liabilities
Purchase commitments	€ 780

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Financial Instruments - Classification by Nature, Category and Fair Value (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial instruments
Net financial liabilities	€ (5,222,848)	€ (3,989,368)
Trade and other receivables
Financial instruments
Financial assets	304,864	434,136
Measured at fair value
Financial instruments
Financial assets	47,046	58,864
Measured at fair value | Non-current financial assets
Financial instruments
Financial assets	38,708	45,199
Financial assets, at fair value	38,708	45,199
Measured at fair value | Financial derivatives
Financial instruments
Financial assets	8,338	13,665
Financial assets, at fair value	8,338	13,665
Measured at fair value | Level 1 | Non-current financial assets
Financial instruments
Financial assets, at fair value	38,708	29,998
Measured at fair value | Level 2 | Non-current financial assets
Financial instruments
Financial assets, at fair value		15,201
Measured at fair value | Level 3 | Financial derivatives
Financial instruments
Financial assets, at fair value	8,338	13,665
Not measured at fair value
Financial instruments
Financial assets	1,224,966	1,362,408
Financial liabilities	(6,494,860)	(5,410,640)
Not measured at fair value | Senior Unsecured Notes
Financial instruments
Financial liabilities	(858,911)	(843,868)
Financial liabilities, at fair value	(1,018,130)	(904,377)
Not measured at fair value | Promissory Notes
Financial instruments
Financial liabilities	(90,294)	(83,073)
Not measured at fair value | Senior secured debt
Financial instruments
Financial liabilities	(4,853,939)	(3,809,968)
Financial liabilities, at fair value	(5,063,769)	(3,811,970)
Not measured at fair value | Other bank loans
Financial instruments
Financial liabilities	(198,741)	(138,186)
Not measured at fair value | Finance lease payable
Financial instruments
Financial liabilities	(9,360)	(9,945)
Not measured at fair value | Other financial liabilities
Financial instruments
Financial liabilities	(45,640)	(57,096)
Not measured at fair value | Trade payables
Financial instruments
Financial liabilities	(423,096)	(461,073)
Not measured at fair value | Other current liabilities
Financial instruments
Financial liabilities	(14,879)	(7,431)
Not measured at fair value | Non-current financial assets
Financial instruments
Financial assets	22,843	30,681
Not measured at fair value | Other current financial assets
Financial instruments
Financial assets	10,738	2,582
Not measured at fair value | Trade and other receivables
Financial instruments
Financial assets	304,864	434,136
Not measured at fair value | Cash and cash equivalents
Financial instruments
Financial assets	886,521	895,009
Not measured at fair value | Level 1 | Senior Unsecured Notes
Financial instruments
Financial liabilities, at fair value	(1,018,130)	(904,377)
Not measured at fair value | Level 2 | Senior secured debt
Financial instruments
Financial liabilities, at fair value	(5,063,769)	(3,811,970)
Loans and receivables
Financial instruments
Financial assets	1,224,966	1,377,609
Loans and receivables | Measured at fair value
Financial instruments
Financial assets		15,201
Loans and receivables | Measured at fair value | Non-current financial assets
Financial instruments
Financial assets		15,201
Loans and receivables | Not measured at fair value
Financial instruments
Financial assets	1,224,966	1,362,408
Loans and receivables | Not measured at fair value | Non-current financial assets
Financial instruments
Financial assets	22,843	30,681
Loans and receivables | Not measured at fair value | Other current financial assets
Financial instruments
Financial assets	10,738	2,582
Loans and receivables | Not measured at fair value | Trade and other receivables
Financial instruments
Financial assets	304,864	434,136
Loans and receivables | Not measured at fair value | Cash and cash equivalents
Financial instruments
Financial assets	886,521	895,009
Financial instruments held for trading
Financial instruments
Financial assets	8,338	13,665
Financial instruments held for trading | Measured at fair value
Financial instruments
Financial assets	8,338	13,665
Financial instruments held for trading | Measured at fair value | Financial derivatives
Financial instruments
Financial assets	8,338	13,665
Available for sale financial assets
Financial instruments
Financial assets	38,708	29,998
Available for sale financial assets | Measured at fair value
Financial instruments
Financial assets	38,708	29,998
Available for sale financial assets | Measured at fair value | Non-current financial assets
Financial instruments
Financial assets	38,708	29,998
Debts and payables
Financial instruments
Financial liabilities	(6,494,860)	(5,410,640)
Debts and payables | Not measured at fair value
Financial instruments
Financial liabilities	(6,494,860)	(5,410,640)
Debts and payables | Not measured at fair value | Senior Unsecured Notes
Financial instruments
Financial liabilities	(858,911)	(843,868)
Debts and payables | Not measured at fair value | Promissory Notes
Financial instruments
Financial liabilities	(90,294)	(83,073)
Debts and payables | Not measured at fair value | Senior secured debt
Financial instruments
Financial liabilities	(4,853,939)	(3,809,968)
Debts and payables | Not measured at fair value | Other bank loans
Financial instruments
Financial liabilities	(198,741)	(138,186)
Debts and payables | Not measured at fair value | Finance lease payable
Financial instruments
Financial liabilities	(9,360)	(9,945)
Debts and payables | Not measured at fair value | Other financial liabilities
Financial instruments
Financial liabilities	(45,640)	(57,096)
Debts and payables | Not measured at fair value | Trade payables
Financial instruments
Financial liabilities	(423,096)	(461,073)
Debts and payables | Not measured at fair value | Other current liabilities
Financial instruments
Financial liabilities	€ (14,879)	€ (7,431)

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Financial Instruments - Financial Derivatives (Details) € in Thousands, $ in Millions	May 11, 2016 USD ($)	May 11, 2016 EUR (€)	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 EUR (€)
Financial derivatives
Financial instruments
Financial assets			€ 8,338	€ 13,665
Call Option
Financial instruments
Amount paid for call right	$ 10	€ 8,960
US Dollars | Call Option
Financial instruments
Financial assets			€ 8,338	9,487
US Dollars | Embedded derivative
Financial instruments
Financial assets				€ 4,178

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Financial Instruments - Maximum Level of Exposure to Credit Risk (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Credit risk
Maximum exposure to credit risk	€ 1,272,012	€ 1,421,272
Non-current financial assets
Credit risk
Maximum exposure to credit risk	69,889	89,545
Other current financial assets
Credit risk
Maximum exposure to credit risk	10,738	2,582
Trade and other receivables
Credit risk
Maximum exposure to credit risk	304,864	434,136
Trade and other receivables | Spain
Credit risk
Maximum exposure to credit risk	63,505	56,104
Trade and other receivables | Rest of European Union
Credit risk
Maximum exposure to credit risk	53,403	52,034
Trade and other receivables | United States
Credit risk
Maximum exposure to credit risk	65,068	196,885
Trade and other receivables | Other European countries
Credit risk
Maximum exposure to credit risk	5,761	13,428
Trade and other receivables | Other regions
Credit risk
Maximum exposure to credit risk	117,127	115,685
Trade receivables
Credit risk
Maximum exposure to credit risk	286,198	413,656
Other receivables
Credit risk
Maximum exposure to credit risk	18,666	20,480
Cash and cash equivalents
Credit risk
Maximum exposure to credit risk	€ 886,521	€ 895,009

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Financial Instruments - Credit Risk - Balances Receivable by Country (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Credit risk
Trade receivables	€ 286,198	€ 413,656
Greece, Italy, Spain and Portugal
Credit risk
Trade receivables	71,001	69,402
Greece
Credit risk
Trade receivables	745	288
Italy
Credit risk
Trade receivables	10,618	16,286
Spain
Credit risk
Trade receivables	57,010	50,348
Portugal
Credit risk
Trade receivables	2,628	2,480
Gross carrying amount | Balances with public entities | Greece, Italy, Spain and Portugal
Credit risk
Trade receivables	38,800	33,203
Gross carrying amount | Balances with public entities | Greece, Italy, Spain and Portugal | Past due
Credit risk
Trade receivables	10,623	6,569
Gross carrying amount | Balances with public entities | Italy
Credit risk
Trade receivables	4,020	7,188
Gross carrying amount | Balances with public entities | Italy | Past due
Credit risk
Trade receivables	2,348	2,077
Gross carrying amount | Balances with public entities | Spain
Credit risk
Trade receivables	33,702	23,281
Gross carrying amount | Balances with public entities | Spain | Past due
Credit risk
Trade receivables	7,785	3,287
Gross carrying amount | Balances with public entities | Portugal
Credit risk
Trade receivables	1,078	2,734
Gross carrying amount | Balances with public entities | Portugal | Past due
Credit risk
Trade receivables	490	1,205
Gross carrying amount | Balance with third parties | Greece, Italy, Spain and Portugal
Credit risk
Trade receivables	36,775	40,066
Gross carrying amount | Balance with third parties | Greece, Italy, Spain and Portugal | Past due
Credit risk
Trade receivables	16,353	17,048
Gross carrying amount | Balance with third parties | Greece
Credit risk
Trade receivables	745	425
Gross carrying amount | Balance with third parties | Italy
Credit risk
Trade receivables	10,614	12,196
Gross carrying amount | Balance with third parties | Italy | Past due
Credit risk
Trade receivables	6,342	7,375
Gross carrying amount | Balance with third parties | Spain
Credit risk
Trade receivables	23,444	27,316
Gross carrying amount | Balance with third parties | Spain | Past due
Credit risk
Trade receivables	8,926	9,595
Gross carrying amount | Balance with third parties | Portugal
Credit risk
Trade receivables	1,972	129
Gross carrying amount | Balance with third parties | Portugal | Past due
Credit risk
Trade receivables	1,085	78
Accumulated impairment | Balances with public entities | Greece, Italy, Spain and Portugal
Credit risk
Trade receivables	(296)	(356)
Accumulated impairment | Balances with public entities | Portugal
Credit risk
Trade receivables	(296)	(356)
Accumulated impairment | Balance with third parties | Greece, Italy, Spain and Portugal
Credit risk
Trade receivables	(4,278)	(3,511)
Accumulated impairment | Balance with third parties | Greece
Credit risk
Trade receivables		(137)
Accumulated impairment | Balance with third parties | Italy
Credit risk
Trade receivables	(4,016)	(3,098)
Accumulated impairment | Balance with third parties | Spain
Credit risk
Trade receivables	(136)	(249)
Accumulated impairment | Balance with third parties | Portugal
Credit risk
Trade receivables	€ (126)	€ (27)

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Financial Instruments - Trade Receivables - Maturity and Bad Debt Provision (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Movement in the bad debt provision
Opening balance	€ 17,987	€ 13,210	€ 14,092
Net charges for the year	8,003	6,411	1,800
Net cancellations for the year	(4,732)	(2,217)	(2,984)
Translation differences	(1,552)	583	302
Closing balance	19,706	17,987	€ 13,210
Trade and other receivables
Financial Assets
Financial assets	304,864	434,136
Not matured | Trade and other receivables
Financial Assets
Financial assets	249,652	360,018
Less than 1 month | Trade and other receivables
Financial Assets
Financial assets	24,302	24,650
1 to 4 months | Trade and other receivables
Financial Assets
Financial assets	18,717	29,318
4 months to 1 year | Trade and other receivables
Financial Assets
Financial assets	8,092	10,045
More than one year | Trade and other receivables
Financial Assets
Financial assets	€ 4,101	€ 10,105

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Financial Instruments - Contractual Maturity Dates of Financial Liabilities (Details) - EUR (€) € in Thousands	Dec. 31, 2017	Dec. 31, 2016
Carrying amount at
Bank loans	€ 5,052,680	€ 3,948,154
Other financial liabilities	45,640	57,096
Bonds and other marketable securities	949,205	926,941
Finance lease payables	9,360	9,945
Payable to suppliers	423,096	461,073
Other current liabilities	14,878	7,431
Total carrying amount	6,494,859	5,410,640
Contractual flows
Bank loans	6,138,673	4,669,325
Other financial liabilities	45,642	57,096
Bonds and other marketable securities	1,331,203	1,305,680
Finance lease payables	10,136	10,725
Payable to suppliers	423,096	461,073
Other current liabilities	14,878	7,431
Total contractual flows	7,963,628	6,511,330
6 months or less
Contractual flows
Bank loans	105,584	134,918
Other financial liabilities	19,393	23,082
Bonds and other marketable securities	107,203	107,975
Finance lease payables	2,192	2,195
Payable to suppliers	423,020	461,029
Other current liabilities	14,462	7,118
Total contractual flows	671,854	736,317
6 - 12 months
Contractual flows
Bank loans	106,492	119,476
Other financial liabilities	2,610	3,039
Bonds and other marketable securities	16,000	24,903
Finance lease payables	2,113	2,072
Payable to suppliers	76	44
Other current liabilities	416	313
Total contractual flows	127,707	149,847
Later than one year and not later than two years
Carrying amount at
Other financial liabilities	10,818	11,468
Contractual flows
Bank loans	322,421	192,059
Other financial liabilities	10,758	11,468
Bonds and other marketable securities	32,000	49,806
Finance lease payables	2,602	3,630
Total contractual flows	367,781	256,963
2-5 years
Contractual flows
Bank loans	3,115,887	4,183,259
Other financial liabilities	10,497	16,686
Bonds and other marketable securities	128,000	1,122,996
Finance lease payables	2,790	2,828
Total contractual flows	3,257,174	5,325,769
More than 5 years
Carrying amount at
Other financial liabilities	3,991	5,012
Contractual flows
Bank loans	2,488,289	39,613
Other financial liabilities	2,384	2,821
Bonds and other marketable securities	1,048,000
Finance lease payables	439
Total contractual flows	€ 3,539,112	€ 42,434

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Financial Instruments - Currency Risk (Details) € in Thousands	Dec. 31, 2017 EUR (€) $ / €	Dec. 31, 2016 EUR (€) $ / €
US Dollars
Sensitivity analysis
Closing foreign exchange rate | $ / €	1.1993	1.0541
Currency risk
Sensitivity analysis
Rate increase (as a percent)	10.00%	10.00%
Increase in equity if exchange rate strengthened	€ 416,116	€ 318,528
Increase (decrease) in profit due to foreign exchange differences if exchange rate strengthened	€ 14,615	€ (11,425)
Rate decrease (as a percent)	10.00%	10.00%
Decrease in equity if exchange rate weakened	€ (416,116)	€ (318,528)
Increase (decrease) in profit due to foreign exchange differences if exchange rate weakened	(14,615)	11,425
Currency risk | Euros
Financial instrument risk
Balance sheet exposure	40,633	(141,103)
Currency risk | Euros | Trade receivables
Financial instrument risk
Balance sheet exposure	3,596	5,576
Currency risk | Euros | Receivables from Group companies
Financial instrument risk
Balance sheet exposure	103,338	33,792
Currency risk | Euros | Loans to Group companies
Financial instrument risk
Balance sheet exposure	34,140	597,897
Currency risk | Euros | Cash and cash equivalents
Financial instrument risk
Balance sheet exposure	63,981	32,255
Currency risk | Euros | Trade payables
Financial instrument risk
Balance sheet exposure	(14,213)	(11,188)
Currency risk | Euros | Payables to Group companies
Financial instrument risk
Balance sheet exposure	(42,296)	(42,395)
Currency risk | Euros | Loans from Group companies
Financial instrument risk
Balance sheet exposure	(22,913)	(268,040)
Currency risk | Euros | Bank loans
Financial instrument risk
Balance sheet exposure	(85,000)	(489,000)
Currency risk | US Dollars
Financial instrument risk
Balance sheet exposure	105,517	26,852
Currency risk | US Dollars | Trade receivables
Financial instrument risk
Balance sheet exposure	22,936	7,520
Currency risk | US Dollars | Receivables from Group companies
Financial instrument risk
Balance sheet exposure	7,619	37,740
Currency risk | US Dollars | Loans to Group companies
Financial instrument risk
Balance sheet exposure	91,566	1,854
Currency risk | US Dollars | Cash and cash equivalents
Financial instrument risk
Balance sheet exposure	2,172	21,254
Currency risk | US Dollars | Trade payables
Financial instrument risk
Balance sheet exposure	(3,582)	(5,062)
Currency risk | US Dollars | Payables to Group companies
Financial instrument risk
Balance sheet exposure	(11,241)	(32,159)
Currency risk | US Dollars | Loans from Group companies
Financial instrument risk
Balance sheet exposure	€ (3,953)	€ (4,295)

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Financial Instruments - Interest Rate Risk (Details) - Interest rate risk - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Financial instrument risk
Financial liabilities	€ (6,219,382)	€ (5,012,996)
Sensitivity analysis
Higher rate increment (as a percent)	1.00%	1.00%
Increase in interest expense if rate had been higher	€ 53,000	€ 40,700
Lower finance costs due to changes in the value of derivatives if rate had been higher		2,600
Net increase in cash interest payments if rate had been higher	53,000	38,100
Fixed-interest
Financial instrument risk
Financial liabilities	(1,170,000)	(1,048,676)
Variable-interest
Financial instrument risk
Financial liabilities	€ (5,049,382)	€ (3,964,320)

XML

Balances and Transactions with Related Parties (Details) € in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2017 EUR (€)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 EUR (€)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 EUR (€)	Dec. 31, 2014 USD ($)	Dec. 31, 2011 USD ($) director
Details of balances with related parties
Net receivable (payable)	€ 9,476		€ (3,229)
Group transactions with related parties
Percentage of profit before tax contribution to non profit organization	0.70%	0.70%	0.70%	0.70%	0.70%
Contributions to non-profit organization	€ 7,100		€ 5,325		€ 5,224
Number of directors involved in consulting services contract | director							1
Term of consulting services contract (in years)							3 years
Consulting services fee | $		$ 1		$ 1		$ 1	$ 1
Additional bonus | $							$ 2
Extension for consulting services contract (in years)				2 years	2 years
Remuneration of directors representing shareholders interest	1,881				€ 50
Associates
Details of balances with related parties
Receivables	3,219		133
Trade payables	(4,583)		(4,221)
Loans	26,654		15,994
Group transactions with related parties
Net sales	3,009		193		317
Purchases	(68,335)		(35,569)
Other service expenses	(11,798)		(7,591)		(361)
R&D agreements	(164)		(10,188)		(18,400)
Finance Income	152		1,946		1,916
Total income (expense)	(77,136)		(51,209)		(16,528)
Key management personnel
Details of balances with related parties
Debts	(6,164)		(6,662)
Group transactions with related parties
Remuneration	(13,672)		(10,287)		(9,447)
Total income (expense)	(13,672)		(10,287)		(9,447)
Other related parties
Details of balances with related parties
Trade payables	(9,187)		(8,473)
Group transactions with related parties
Other service expenses	(7,100)		(5,325)		(6,938)
Operating lease expense	(5,426)		(5,281)		(4,900)
Purchase of Fixed Assets					(276,457)
Sale of Fixed Assets					12,000
Total income (expense)	(12,526)		(10,606)		(276,295)
Board of directors of the Company
Details of balances with related parties
Trade payables	(463)
Group transactions with related parties
Other service expenses	(939)		(905)		(845)
Remuneration	(5,755)		(3,668)		(3,443)
Total income (expense)	€ (6,694)		€ (4,573)		€ (4,288)

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Events after the Reporting Period (Details) - Business combination € in Millions, item in Millions, $ in Millions	Mar. 20, 2018 EUR (€) m² employee item Center l	Jan. 26, 2018 USD ($)
Goetech, LLC. ("MedKeeper")
Events after the Reporting Period
Proportion of ownership interest in subsidiary		51.00%
Option to purchase remaining voting rights (as a percent)		49.00%
Option to purchase remaining voting rights, term (in years)		3 years
Goetech, LLC. ("MedKeeper") | Grifols Shared Services North America, Inc. (formerly Grifols Inc.)
Events after the Reporting Period
Share capital increase | $		$ 98
Haema AG | Forecast
Events after the Reporting Period
Proportion of ownership interest in subsidiary	100.00%
Consideration transferred | €	€ 220
Number of Plasma Collection Centers	35
Number of plasma collection centers under construction	3
Area of headquarters (in square metre) | m²	24,000
Number of people in operations | employee	1,100
Plasma collected in preceding financial year (in litres) | l	800,000
Number of plasma donations collected | item	1

XML

Appendix I - Information on Group Companies, Associates and others(Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Diagnostic Grifols, S.A.
Information on group companies associates and others
Proportion of direct ownership interest			99.998%
Proportion of indirect ownership interest	100.00%	100.00%	0.002%
Instituto Grifols, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.998%	99.998%	99.998%
Proportion of indirect ownership interest	0.002%	0.002%	0.002%
Grifols Worldwide Operations Spain, S.A (formerly Logister, S.A.)
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Laboratorios Grifols, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.999%	99.999%	99.999%
Proportion of indirect ownership interest	0.001%	0.001%	0.001%
Biomat, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.90%	99.90%	99.90%
Proportion of indirect ownership interest	0.10%	0.10%	0.10%
Grifols Engineering, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.95%	99.95%	99.95%
Proportion of indirect ownership interest	0.05%	0.05%	0.05%
Biomat USA, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Biologicals LLC
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Australia Pty Ltd.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Medion Grifols Diagnostic AG
Information on group companies associates and others
Proportion of direct ownership interest			80.00%
Proportion of indirect ownership interest	100.00%	100.00%
Grifols Therapeutics LLC
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Talecris Plasma Resources, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
GRI-CEI, S/A Produtos para transfusao (merged with Grifols Brasil, Lda. in 2016)
Information on group companies associates and others
Proportion of direct ownership interest			60.00%
Grifols Worldwide Operations Limited
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Progenika Biopharma, S.A.
Information on group companies associates and others
Proportion of direct ownership interest			56.15%
Proportion of indirect ownership interest	90.23%	89.25%
Progenika Latina, S.A. de CV
Information on group companies associates and others
Proportion of indirect ownership interest		89.25%	56.15%
Progenika Inc. (merged with Grifols Diagnostic Solutions Inc. in 2017)
Information on group companies associates and others
Proportion of indirect ownership interest		89.25%	56.15%
Brainco Biopharma, S.L. (merged with Progenika Biopharma, S.A in 2016)
Information on group companies associates and others
Proportion of indirect ownership interest			28.423%
Abyntek Biopharma, S.L.
Information on group companies associates and others
Proportion of indirect ownership interest		80.37%	45.129%
Asociacion I+D Progenika
Information on group companies associates and others
Proportion of indirect ownership interest	90.23%	89.25%	55.336%
Grifols Diagnostics Solutions Inc (formerly G-C Diagnostics Corp.)
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Worldwide Operations USA Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Asia Pacific Pte, Ltd
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Movaco, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.999%	99.999%	99.999%
Proportion of indirect ownership interest	0.001%	0.001%	0.001%
Grifols Portugal Productos Farmacuticos e Hospitalares, Lda.
Information on group companies associates and others
Proportion of direct ownership interest	0.01%	0.01%	0.01%
Proportion of indirect ownership interest	99.99%	99.99%	99.99%
Grifols Chile, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.00%	99.00%	99.00%
Grifols USA, LLC.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Argentina, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	95.01%	95.01%	95.01%
Proportion of indirect ownership interest	4.99%	4.99%	4.99%
Grifols s.r.o.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols (Thailand) Ltd
Information on group companies associates and others
Proportion of indirect ownership interest	48.00%	48.00%	48.00%
Grifols Malaysia Sdn Bhd
Information on group companies associates and others
Proportion of indirect ownership interest	30.00%	30.00%	30.00%
Grifols International, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.998%	99.998%	99.998%
Proportion of indirect ownership interest	0.002%	0.002%	0.002%
Grifols Italia S.p.A
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols UK Ltd.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Brasil, Lda.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols France, S.A.R.L.
Information on group companies associates and others
Proportion of direct ownership interest	99.99%	99.99%	99.99%
Proportion of indirect ownership interest	0.01%	0.01%	0.01%
Grifols Polska Sp.z.o.o.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Logstica Grifols, S.A. de C.V.
Information on group companies associates and others
Proportion of direct ownership interest	99.99%	99.99%	99.99%
Proportion of indirect ownership interest	0.01%	0.01%	0.01%
Grifols Mexico, S.A. de C.V.
Information on group companies associates and others
Proportion of direct ownership interest	99.98%	99.98%	99.98%
Proportion of indirect ownership interest	0.02%	0.02%	0.02%
Medion Diagnostics GmbH
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	80.00%
Grifols Nordic, AB
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Colombia, Ltda
Information on group companies associates and others
Proportion of direct ownership interest	99.00%	99.00%	99.00%
Proportion of indirect ownership interest	1.00%	1.00%	1.00%
Grifols Deutschland GmbH
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Canada, Ltd.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Pharmaceutical Technology (Shanghai) Co., Ltd. (formerly Grifols Pharmaceutical Consulting (Shanghai) Co., Ltd.)
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols Switzerland AG
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols (H.K.), Limited
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Japan K.K.
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Grifols India Healthcare Private Ltd
Information on group companies associates and others
Proportion of direct ownership interest	99.99%	99.99%	99.99%
Proportion of indirect ownership interest	0.01%	0.01%	0.01%
Grifols Diagnostics Equipment Taiwan Limited
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%
Grifols Viajes, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	99.90%	99.90%	99.90%
Proportion of indirect ownership interest	0.10%	0.10%	0.10%
Squadron Reinsurance Designated Activity Company (formerly Squadron Reinsurance Ltd.)
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%	100.00%
Grifols Shared Services North America, Inc. (formerly Grifols Inc.)
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Gripdan Invest, S.L
Information on group companies associates and others
Proportion of direct ownership interest	100.00%	100.00%	100.00%
Gri-Cel, S.A.
Information on group companies associates and others
Proportion of direct ownership interest	0.001%	0.001%	0.001%
Proportion of indirect ownership interest	99.999%	99.999%	99.999%
Araclon Biotech, S.L.
Information on group companies associates and others
Proportion of indirect ownership interest	73.22%	73.22%	70.83%
VCN Bioscience, S.L.
Information on group companies associates and others
Proportion of indirect ownership interest	81.34%	81.34%	68.01%
Grifols Innovation and New Technologies Limited
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%
PBS Acquisition Corp.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%	100.00%
Kiro Grifols S. L (formerly Kiro Robotics S.L)
Information on group companies associates and others
Proportion of direct ownership interest	90.00%
Chiquito Acquisition Corp.
Information on group companies associates and others
Proportion of indirect ownership interest	100.00%
Nanotherapix, S.L.
Information on group companies associates and others
Proportion of indirect ownership interest			51.00%
Aradigm Corporation
Information on group companies associates and others
Proportion of direct ownership interest			35.00%
Proportion of indirect ownership interest	35.13%	35.13%
TiGenix N.V.
Information on group companies associates and others
Proportion of indirect ownership interest	14.18%	16.13%	19.28%
Mecwins, S.L.
Information on group companies associates and others
Proportion of indirect ownership interest	8.42%	8.42%	8.42%
Kiro Grifols S.L (Spain) (formerly Kiro Robotics S.L)
Information on group companies associates and others
Proportion of direct ownership interest		50.00%	50.00%
Alkahest, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	47.58%	47.58%	47.58%
Albajuna Therapeutics, S.L
Information on group companies associates and others
Proportion of indirect ownership interest	30.00%	30.00%
Interstate Blood Bank, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	49.19%	49.19%
Bio Blood Components Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	48.972%	48.972%
Plasma Biological Services, LLC
Information on group companies associates and others
Proportion of indirect ownership interest	48.90%	48.90%
Singulex, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	19.33%	20.00%
Aigues Minerals de Vilajuiga S. A.
Information on group companies associates and others
Proportion of direct ownership interest	50.00%
Access Biologicals, LLC
Information on group companies associates and others
Proportion of indirect ownership interest	49.00%
Access Biologicals IC - DISC, Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	49.00%
Access Cell Culture, LLC.
Information on group companies associates and others
Proportion of indirect ownership interest	49.00%
Access Manufacturing, LLC.
Information on group companies associates and others
Proportion of indirect ownership interest	49.00%
Access Plasma, LLC.
Information on group companies associates and others
Proportion of indirect ownership interest	49.00%
GigaGen Inc.
Information on group companies associates and others
Proportion of indirect ownership interest	43.96%

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Appendix II - Operating Segments (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting
Revenues from external customers	€ 4,318,073	€ 4,049,830	€ 3,934,563
Profit /(loss)	1,003,343	939,408	970,370
Finance result	(287,734)	(233,589)	(271,840)
Share of profit / (losses)	(19,887)	6,933	(8,280)
Income tax expense	(34,408)	(168,209)	(158,809)
Profit/(loss) for the year	661,314	544,543	531,441
Investments in equity-accounted investees	219,009	201,345	76,728	€ 54,296
Assets	10,920,264	10,129,772	9,601,715
Liabilities	7,286,299	6,401,794	6,300,326
Other Information:
Depreciation and amortisation expense	215,490	201,869	189,755
Additions for the year of property, plant and equipment and intangible assets	340,473	322,102	576,814
Operating Segments
Segment Reporting
Revenues from external customers	4,318,073	4,049,830	3,934,563
Total operating income	4,318,073	4,049,830	3,934,563
Profit /(loss)	1,237,470	1,079,197	1,069,338
Segment assets	9,554,477	8,557,533	8,068,932
Liabilities	656,598	608,251	792,380
Other Information:
Depreciation and amortisation expense	206,966	194,361	182,401
Expenses that do not require cash payments	2,112	(18,010)	5,365
Additions for the year of property, plant and equipment and intangible assets	329,205	310,091	497,732
Unallocated
Segment Reporting
Profit /(loss)	(234,127)	(139,789)	(98,968)
Assets	1,146,778	1,370,894	1,456,055
Liabilities	6,629,701	5,793,543	5,507,946
Other Information:
Depreciation and amortisation expense	8,524	7,508	7,354
Expenses that do not require cash payments	(58,752)	4,608	4,794
Additions for the year of property, plant and equipment and intangible assets	11,268	12,011	79,082
Intersegments
Segment Reporting
Revenues from external customers	(34,784)	(31,386)	(25,386)
Total operating income	(34,784)	(31,386)	(25,386)
Profit /(loss)	(12,305)	(1,316)	(305)
Segment assets	(22,196)	(11,964)	(10,240)
Bioscience
Segment Reporting
Share of profit / (losses)	(10,434)	(9,396)
Investments in equity-accounted investees	83,905	104,996
Bioscience | Operating Segments
Segment Reporting
Revenues from external customers	3,429,785	3,195,424	3,032,111
Total operating income	3,429,785	3,195,424	3,032,111
Profit /(loss)	985,495	913,840	896,032
Segment assets	6,007,153	6,524,922	6,085,211
Liabilities	423,415	411,604	387,086
Other Information:
Depreciation and amortisation expense	157,478	152,821	137,870
Expenses that do not require cash payments	7,049	16,219	627
Additions for the year of property, plant and equipment and intangible assets	227,635	197,741	421,020
Hospital
Segment Reporting
Share of profit / (losses)	2,112	(5,611)
Investments in equity-accounted investees		13,888
Hospital | Operating Segments
Segment Reporting
Revenues from external customers	105,649	102,251	96,245
Total operating income	105,649	102,251	96,245
Profit /(loss)	(9,766)	(8,765)	(4,299)
Segment assets	145,477	86,590	91,877
Liabilities	13,560	8,415	3,159
Other Information:
Depreciation and amortisation expense	6,436	5,915	5,710
Expenses that do not require cash payments	(514)	306	108
Additions for the year of property, plant and equipment and intangible assets	10,429	9,193	7,972
Diagnostic
Segment Reporting
Share of profit / (losses)		(9,335)
Investments in equity-accounted investees	29,322	43,330
Diagnostic | Operating Segments
Segment Reporting
Revenues from external customers	732,369	691,701	716,838
Total operating income	732,369	691,701	716,838
Profit /(loss)	248,080	97,320	96,268
Segment assets	3,356,185	1,909,447	1,794,389
Liabilities	192,720	186,389	192,730
Other Information:
Depreciation and amortisation expense	40,815	32,180	31,875
Expenses that do not require cash payments	(4,423)	(2,001)	4,630
Additions for the year of property, plant and equipment and intangible assets	70,032	89,760	68,740
Bio supplies
Segment Reporting
Revenues from external customers	66,791	24,387	24,466
Share of profit / (losses)	1,830
Investments in equity-accounted investees	44,220
Bio supplies | Operating Segments
Segment Reporting
Revenues from external customers	66,791	57,239	24,466
Total operating income	66,791	57,239	24,466
Profit /(loss)	35,598	33,794	3,660
Segment assets	7,409	8,378	1,321
Other Information:
Additions for the year of property, plant and equipment and intangible assets	198	84
Others
Segment Reporting
Revenues from external customers	18,263	34,602	90,289
Share of profit / (losses)	(4,060)	21,940	(8,280)
Investments in equity-accounted investees	61,562	39,131	76,728
Others | Operating Segments
Segment Reporting
Revenues from external customers	18,263	34,601	90,289
Total operating income	18,263	34,601	90,289
Profit /(loss)	(9,632)	44,324	77,982
Segment assets	60,449	40,160	106,374
Liabilities	26,903	1,843	209,405
Other Information:
Depreciation and amortisation expense	2,237	3,445	€ 6,946
Expenses that do not require cash payments		(32,534)
Additions for the year of property, plant and equipment and intangible assets	€ 20,911	€ 13,313

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Appendix II - Reporting by Geographical Area (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of products and services
Net revenue	€ 4,318,073	€ 4,049,830	€ 3,934,563
Assets by geographical area	10,920,264	10,129,772	9,601,715
Other Information:
Additions for the year of property, plant and equipment and intangible assets	340,473	322,102	576,814
Spain
Disclosure of products and services
Net revenue	242,894	225,273	216,548
Assets by geographical area	899,223	847,467	719,557
Other Information:
Additions for the year of property, plant and equipment and intangible assets	62,271	73,365	113,652
Rest of European Union
Disclosure of products and services
Net revenue	444,089	426,223	456,919
Assets by geographical area	2,397,200	2,467,295	2,407,178
Other Information:
Additions for the year of property, plant and equipment and intangible assets	80,910	39,603	51,943
USA and Canada
Disclosure of products and services
Net revenue	2,896,505	2,707,579	2,604,315
Assets by geographical area	7,341,174	6,535,420	6,176,548
Other Information:
Additions for the year of property, plant and equipment and intangible assets	188,557	190,358	400,065
Rest of the world
Disclosure of products and services
Net revenue	734,585	690,755	656,781
Assets by geographical area	282,667	279,590	298,432
Other Information:
Additions for the year of property, plant and equipment and intangible assets	8,735	18,776	11,154
Operating Segments
Disclosure of products and services
Net revenue	4,318,073	4,049,830	3,934,563
Other Information:
Additions for the year of property, plant and equipment and intangible assets	€ 329,205	€ 310,091	€ 497,732

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Appendix III - Changes in Other Intangible Assets (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Changes in Other Intangible Assets
Intangible assets at beginning of the year	€ 1,195,302	€ 1,161,572
Additions	(49,076)	(2,459)
Business combinations	284,729
Transfers	529	1,361
Disposals	(96)	(221)
Translation differences	(162,046)	35,049
Intangible assets at end of the year	1,269,342	1,195,302
Development costs
Changes in Other Intangible Assets
Intangible assets at beginning of the year	52,272
Intangible assets at end of the year	183,281	52,272
Currently marketed products
Changes in Other Intangible Assets
Intangible assets at beginning of the year	941,216	950,889
Business combinations	(38,216)	(38,441)
Translation differences	(109,692)	28,768
Intangible assets at end of the year	793,308	941,216
Gross carrying amount
Changes in Other Intangible Assets
Intangible assets at beginning of the year	1,682,673	1,577,005
Additions	80,126	58,514
Business combinations	284,729
Transfers	529	1,460
Disposals	(207)	(1,150)
Translation differences	(206,643)	46,844
Intangible assets at end of the year	1,841,207	1,682,673
Gross carrying amount | Development costs
Changes in Other Intangible Assets
Intangible assets at beginning of the year	142,693	112,688
Additions	43,152	29,126
Business combinations	142,529
Disposals	(81)	(79)
Translation differences	(16,599)	958
Intangible assets at end of the year	311,694	142,693
Gross carrying amount | Concessions, patents, licenses brands & similar
Changes in Other Intangible Assets
Intangible assets at beginning of the year	60,471	59,249
Business combinations	142,174
Translation differences	(19,760)	1,222
Intangible assets at end of the year	182,885	60,471
Gross carrying amount | Computer software
Changes in Other Intangible Assets
Intangible assets at beginning of the year	168,623	144,976
Additions	19,626	18,919
Business combinations	26
Transfers	529	1,460
Disposals	(126)	(420)
Translation differences	(13,733)	3,688
Intangible assets at end of the year	174,945	168,623
Gross carrying amount | Currently marketed products
Changes in Other Intangible Assets
Intangible assets at beginning of the year	1,162,204	1,126,024
Translation differences	(137,828)	36,180
Intangible assets at end of the year	1,024,376	1,162,204
Gross carrying amount | Other Intangible assets
Changes in Other Intangible Assets
Intangible assets at beginning of the year	148,682	134,068
Additions	17,348	10,469
Disposals		(651)
Translation differences	(18,723)	4,796
Intangible assets at end of the year	147,307	148,682
Accumulated depreciation and amortisation
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(487,371)	(415,467)
Additions	(64,468)	(60,973)
Transfers		(99)
Disposals	111	963
Translation differences	43,243	(11,795)
Intangible assets at end of the year	(508,485)	(487,371)
Accumulated depreciation and amortisation | Development costs
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(72,073)	(67,551)
Additions	(5,834)	(4,473)
Translation differences	(1,442)	(49)
Intangible assets at end of the year	(79,349)	(72,073)
Accumulated depreciation and amortisation | Concessions, patents, licenses brands & similar
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(24,994)	(23,957)
Additions	(6,004)	(806)
Translation differences	1,215	(231)
Intangible assets at end of the year	(29,783)	(24,994)
Accumulated depreciation and amortisation | Computer software
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(99,927)	(83,197)
Additions	(13,549)	(15,136)
Transfers		(99)
Disposals	111	419
Translation differences	7,046	(1,914)
Intangible assets at end of the year	(106,319)	(99,927)
Accumulated depreciation and amortisation | Currently marketed products
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(220,988)	(175,135)
Additions	(38,216)	(38,441)
Translation differences	28,136	(7,412)
Intangible assets at end of the year	(231,068)	(220,988)
Accumulated depreciation and amortisation | Other Intangible assets
Changes in Other Intangible Assets
Intangible assets at beginning of the year	(69,389)	(65,627)
Additions	(865)	(2,117)
Disposals		544
Translation differences	8,288	(2,189)
Intangible assets at end of the year	(61,966)	(69,389)
Accumulated impairment | Other Intangible assets
Changes in Other Intangible Assets
Intangible assets at beginning of the year		34
Additions	(64,734)
Disposals		€ (34)
Translation differences	1,354
Intangible assets at end of the year	€ (63,380)

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Appendix IV - Movement in Property, Plant and Equipment (Details) - EUR (€) € in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	€ 1,809,852	€ 1,644,402
Additions	109,583	122,839
Business combination	29,251
Transfers	(529)	(1,361)
Disposals	(2,218)	(6,512)
Translation differences	(185,886)	50,484
Property, plant and equipment at end of period	1,760,053	1,809,852
Gross carrying amount
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	2,618,696	2,308,116
Additions	260,347	263,588
Business combination	29,251
Transfers	(563)	(1,508)
Disposals	(10,921)	(20,295)
Translation differences	(256,478)	68,795
Property, plant and equipment at end of period	2,640,332	2,618,696
Gross carrying amount | Land and buildings
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	687,856	613,476
Additions	28,503	12,993
Business combination	19,628
Transfers	12,694	44,060
Disposals	(823)	(780)
Translation differences	(74,324)	18,107
Property, plant and equipment at end of period	673,534	687,856
Gross carrying amount | Plant and machinery
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	1,655,837	1,431,030
Additions	82,234	87,536
Business combination	9,068
Transfers	123,816	116,724
Disposals	(10,098)	(19,515)
Translation differences	(156,178)	40,062
Property, plant and equipment at end of period	1,704,679	1,655,837
Gross carrying amount | Under construction
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	275,003	263,610
Additions	149,610	163,059
Business combination	555
Transfers	(137,073)	(162,292)
Translation differences	(25,976)	10,626
Property, plant and equipment at end of period	262,119	275,003
Accumulated depreciation and amortisation
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	(805,644)	(660,426)
Additions	(151,022)	(140,896)
Transfers	34	147
Disposals	8,703	13,783
Translation differences	70,382	(18,252)
Property, plant and equipment at end of period	(877,547)	(805,644)
Accumulated depreciation and amortisation | Buildings
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	(59,376)	(44,057)
Additions	(14,708)	(13,777)
Transfers		(2)
Disposals	710	178
Translation differences	6,609	(1,718)
Property, plant and equipment at end of period	(66,765)	(59,376)
Accumulated depreciation and amortisation | Plant and machinery
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	(746,268)	(616,369)
Additions	(136,314)	(127,119)
Transfers	34	149
Disposals	7,993	13,605
Translation differences	63,773	(16,534)
Property, plant and equipment at end of period	(810,782)	(746,268)
Accumulated impairment
Movement in Property, Plant and Equipment
Property, plant and equipment at beginning of period	(3,200)	(3,288)
Additions	258	147
Translation differences	210	(59)
Property, plant and equipment at end of period	€ (2,732)	€ (3,200)

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Appendix V - Statement of Liquidity for Distribution of Interim Dividend (Details) - EUR (€) € in Thousands	12 Months Ended		13 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 07, 2017	Dec. 07, 2016
Appendix V
Projected profits net of taxes	€ 273,472	€ 319,133
Estimated profits distributable	273,472	319,133
Interim dividend distributed	122,986	122,908
Cash balances	231,058	€ 424,711	€ 231,058		€ 5,521
Projected amounts collected	475,209		497,058
Projected payments, including interim dividend	468,117		471,686
Projected cash balances	€ 7,092		€ 7,092	€ 30,893