2010 - annual report · 10 prim s.a. annual report 2010 and dependent companies consolidated...

2010 - Annual Report

www.prim.eswww.prim.es

20

10

- A

nnua

l R

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t

Date of year-end: 31/12/2010 Tax ID number: A-28165587 Name: PRIM, S.A.

Edition: Prim, S.A.Design and production: Comuniland, S.L.Legal Deposit: M-16691-2011

HEADQUARTERS 28938 Móstoles (Madrid)

Polígono Industrial Nº 1 – Calle F, 15Tel.: 34 91 334 24 00Fax: 34 91 334 24 94

FACTORY28938 Móstoles (Madrid)

Polígono Industrial Nº 1 – Calle C, 20Tel.: 34 91 334 25 20Fax: 34 91 334 25 62

CATALUÑA 08012 BarcelonaNilo Fabra, 34-38

Tel.: 34 93 415 58 35Fax: 34 93 237 91 03

NORTH48014 Bilbao

Avda. Madariaga, 1 – 2ºTel.: 34 94 476 33 36Fax: 34 94 475 01 09

NORTHWEST 15004 La Coruña

Rey Abdullah, 7-9-11Tel.: 34 98 114 02 50Fax: 34 98 114 02 46

CANARY ISLANDS 35010 Las Palmas de Gran Canaria

Habana, 27 – BajoTel.: 34 928 22 03 28Fax.: 34 928 22 89 62

SOUTH41011 Sevilla

Juan Ramón Jiménez, 5Tel.: 34 95 427 46 00Fax.: 34 95 428 15 64

EAST46015 Valencia

Avda. Maestro Rodrigo, 89-91Tel.: 34 96 348 62 69Fax.: 34 96 340 54 27

BALEARIC ISLANDS07008 Palma de Mallorca

San Ignacio, 77Tel.: 34 971 278 291Fax: 34 971 278 291

www.prim.es

2010

ANNUAL REPORT

INdEX

PRIM, S.A. AND DEPENDENT COMPANIES

Consolidated financial statement of finantial position ..................................... 8

Consolidated income statement ................................................................................. 9

Consolidated statement of comprehensive income.......................................... 10

Consolidated statements of changes in equity ................................................... 11

Consolidated cash flow statements ........................................................................ 13

Notes to finantial statements ................................................................................... 15

Directors’ report .............................................................................................................. 77

Auditors’ report ............................................................................................................... 85

PRIM, S.A.

Balance sheets ................................................................................................................. 92

Profit & Loss Account ................................................................................................... 95

Cash flow statements ................................................................................................... 98

Notes to financial statements ................................................................................. 101

Directors’ report ............................................................................................................ 167

Auditors’ report ............................................................................................................. 173

2010

CONSOLIdATEd gROUP

Consolidated Financial statement

of finantial position

Consolidated income statement

Consolidated statement

of comprehensive income

Consolidated statements of changes in equity

Consolidated cash flow statements

8

Annual Report 2010PRIM S.A.

and dependent companies

Consolidated statement of financial position

At 31 December 2010 and 2009ExprEssEd in Euro

The Consolidated Statement of Financial Position for 2009 is presented solely and exclusively for comparison purposes.

Consolidated statement of financial position

NOTAS 2010 2009

ASSETS 110,751,071.64 99,975,414.66

Non-current assets 32,958,716.51 32,931,560.50

Intangible assets 5 299,118.06 111,886.93

Tangible fixed assets 6 11,573,408.95 11,401,096.49

Investment property 7 3,859,115.60 4,111,098.44

Investment in associates 8 481,641.67 5,505,824.75

Other non-current financial assets 9 4,814,861.18 1,855,510.16

Goodwill 10 2,228,931.00 2,228,931.00

Long-term accounts receivable 12 9,701,640.05 7,717,212.73

Current assets 77,792,355.13 67,043,854.16

Inventories 11 22,120,518.38 20,371,982.68

Trade and other accounts receivable 12 54,078,487.40 43,610,744.91

Other current financial assets 145,497.66 591,104.13

Cash and cash equivalents 14 1,447,851.69 2,470,022.44

LIABILITIES 110,751,071.64 99,975,414.66

Net equity 15 67,478,350.49 62,218,541.95

Parent company 67,478,350.49 62,218,134.95

Share capital 4,336,781.00 4,336,781.00

Share premium 1,227,059.19 1,227,059.19

Own shares -3,103,609.93 -2,520,146.45

Interim dividend paid during the year 0.00 -867,356.20

Revaluation reserve 578,507.47 578,507.47

Income in the year 8,531,960.72 10,034,922.35

Other reserves 55,907,652.04 49,428,367.59

Minority interests 0.00 407.00

Non-current liabilities 16,387,233.63 10,533,556.62

Interest-bearing debt 16 13,423,553.50 9,890,903.72

Other liabilities 17 2,796,361.60 464,800.40

Deferred tax liabilities 18 167,318.53 177,852.50

Current liabilities 26,885,487.52 27,223,316.09

Trade and other accounts payable 19 14,609,308.36 15,984,143.21

Interest-bearing debt 16 10,434,719.44 9,618,211.04

Corporate income tax payable 20 1,841,459.72 1,620,961.84

Index

9


At 31 December 2010 and 2009ExprEssEd in Euro

The Consolidated Statement of Income for 2009 is presented solely and exclusively for compari-son purposes.


NOTAS 2010 2009

Net sales 23.1 95,111,840.84 95,496,618.85

Other revenues 438,867.89 401,013.93

Change in finished goods and work-in-process inventories -78,205.65 -316,300.06

OPERATING REVENUES 95,472,503.08 95,581,332.72

Cost of goods sold and other external expenses 23.2 -38,609,824.82 -39,042,134.06

External and operating expenses 23.3 -13,071,130.42 -13,106,656.90

Personnel expenses 23.4 -25,775,661.61 -25,523,105.02

Depreciation and amortisation expense 5, 6 & 7 -2,563,283.77 -2,540,109.58

Provisions to reversion fund 0.00 0.00

Variation in operating provisions 23.7 -594,526.51 -527,062.94

OPERATING EXPENSES -80,614,427.13 -80,739,068.50

NET OPERATING INCOME 14,858,075.95 14,842,264.22

Income from investments accounted for using the equity method 8 50,551.00 565,883.00

Financial revenues 23.5 2,442,540.62 972,979.38

Financial expenses 23.5 -745,724.79 -694,746.87

Impairment of other financial assets 23.8 -1,631,642.22 -1,767,777.24

Other revenues 23.1 112,957.80 99,972.50

Other expenses -2,034.20 -784.38

FINANCIAL INCOME 226,648.21 -824,473.61 INCOME BEFORE TAXES 15,084,724.16 14,017,790.61

Corporate income tax 20 -6,552,763.44 -3,922,376.26

NET INCOME FOR THE YEAR 8,531,960.72 10,095,414.35

Net income attributable to the parent company 8,531,960.72 10,034,922.35

Net income attributable to minority interests 0.00 60,492.00

Net loss attributable to minority interests 0.00 0.00

Earnings per share 23.6

Basic earnings per share attributable to equity holders of the parent 0.50 0.59

Diluted earnings per share attributable to equity holders of the parent 0.50 0.59

Index

10



Consolidated statement of comprehensive income

For the years ended 31 December 2010 and 2009 (*)ExprEssEd in Euro

Consolidated statement of comprehensive income

NET INCOME RECOGNISED DIRECTLY IN EQUITY

2010 2009

Parentcompany

Minorityinterests

Total

Parentcompany

Minorityinterests

Total

IN OTHER RESERVES

Fair value impairment of available-for-sale finan-cial assets (Note 9)

-695,968.93 - -695,968.93 -1,203,576.87 - -1,203,576.87

Tax effect (Note 9) 208,790.68 - 208,790.68 361,073.61 - 361,073.61

TOTAL NET INCOME RECOGNISED DIRECTLY IN EQUITY

-487,178.25 - -487,178.25 -842,503.26 - -842,503.26

Transfers to Consolidated Income Statement 487,178.25 - 487,178.25 842,503.26 - 842,503.26

NET INCOME FOR THE YEAR 8,531,960.72 0.00 8,531,960.72 10,034,922.35 60,492.00 10,095,414.35

TOTAL RECOGNISED REVENUES AND EXPENSES 8,531,960.72 0.00 8,531,960.72 10,034,922.35 60,492.00 10,095,414.35

(*) The Consolidated Statement of Comprehensive Income for 2009 is presented solely and exclusively for comparison purposes.

Index

11

Cons

olid

ated

sta

tem

ents

of c

hang

es in

equ

ity

The

com

posi

tion

of, a

nd c

hang

es in

, the

Gro

up’s

equi

ty a

t 31

Dec

embe

r 201

0 an

d 20

09 is

as

follo

ws:

a) Y

ear e

nded

31

Dec

embe

r 201

0

Expr

EssE

d in

Euro

Bala

nce

at31

.12.

09

Own

shar

es

Inco

me

from

trans

actio

ns

with

own

shar

es

Othe

rch

ange

s

Oblig

atio

nsw

ith re

spec

t to

hold

ings

Dist

ribut

ion

of 2

009

inco

me

Inco

me

in th

e ye

arBa

lanc

eat

31.1

2.10

Divi

dend

sRe

serv

esEq

uity

-hol

ders

of

pare

nt c

ompa

ny

Shar

e ca

pita

l4,

336,

781.

00

4,33

6,78

1.00

Shar

e pr

emiu

m1,

227,

059.

19

1,22

7,05

9.19

Pare

nt C

ompa

ny s

hare

s-2

,520

,146

.45

-583

,463

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-3,1

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3

Inte

rim d

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end

-867

,356

.20

867,

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20

0.00

Reva

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rese

rve

578,

507.

47

578,

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47

Inco

me

in th

e ye

ar

Equ

ity h

olde

rs o

f the

par

ent c

ompa

ny10

,034

,922

.35

-3,3

00,0

00.0

0 -6

,734

,922

.35

8,53

1,96

0.72

8,

531,

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72

Min

ority

inte

rest

0.00

0.

00

Othe

r res

erve

s

Leg

al re

serv

e1,

153,

637.

59

1,15

3,63

7.59

Res

erve

for a

mor

tised

cap

ital

1,25

6,81

4.96

1,

256,

814.

96

Oth

er re

serv

es42

,031

,759

.05

-128

,370

.71

1,58

4,54

4.00

93

8,32

4.00

6,

683,

046.

15

51,1

09,3

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9

Res

erve

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ts a

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0.00

(*

)0.

00

Rese

rves

at

Ful

ly c

onso

lidat

ed c

ompa

nies

3,58

4,89

0.66

-1

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5 -9

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0 -2

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1 2,

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00

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ity-a

ccou

nted

affi

liate

s1,

401,

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33

-1,5

89,8

30.7

4 26

0,41

9.41

71

,854

.00

Equi

ty o

f equ

ity h

olde

rs o

f the

par

ent

com

pany

62,2

18,1

34.9

5 -5

83,4

63.4

8 -1

28,3

70.7

1 -1

27,2

67.1

9 0.

00

-2,4

32,6

43.8

0 0.

00

8,53

1,96

0.72

67

,478

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.49

Equi

ty o

f min

ority

inte

rest

s40

7.00

-4

07.0

0 0.

00

Tota

l 62

,218

,541

.95

-583

,463

.48

-128

,370

.71

-127

,674

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0.00

-2

,432

,643

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0.00

8,

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72

67,4

78,3

50.4

9

(*) T

he fu

ll am

ount

of t

he c

hang

es in

fair

valu

e of

fina

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l ass

ets

avai

labl

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r sal

e (6

95,6

98.9

3 eu

ro) h

as b

een

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ged

to e

quity

and

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its

entir

ety

in th

e St

atem

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f Com

preh

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ve In

com

e, w

ith a

net

ef

fect

of 0

.00

euro

on

Cons

olid

ated

Gro

up E

quity

.

Index

12



Consolidated statements of changes in equity

b) Y

ear e

nded

31

Dec

embe

r 200

9

Ex

prEs

sEd in

Euro

Bala

nce

at31

.12.

0820

09 in

terim

di

vide

ndOw

n sh

ares

Capi

tal

incr

ease

out

of

rese

rves

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me

from

tra

nsac

tions

w

ith o

wn

shar

es

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r ch

arge

s

Oblig

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ns

with

rega

rd to

ho

ldin

gs

Dist

ribut

ion

of 2

008

inco

me

Inco

me

for t

he y

ear

Bala

nce

at

31.1

2.09

To d

ivid

ens

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serv

esEq

uity

hol

ders

of

par

ent

Min

ority

in

tere

sts

Shar

e ca

pita

l4,

336,

781.

00

4,33

6,78

1.00

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e pr

emiu

m1,

227,

059.

26

-0.0

7 1,

227,

059.

19

Pare

nt C

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ny s

hare

s-3

,364

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065.

95

-2,5

20,1

46.4

5

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rim d

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end

-867

,356

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356.

20

-867

,356

.20

Reva

luat

ion

rese

rve

578,

507.

47

578,

507.

47

Inco

me

for t

he y

ear

Equ

ity h

olde

rs o

f the

par

ent

com

pany

9,90

3,88

9.28

-3

,000

,000

.00

-6,9

03,8

89.2

8 10

,034

,922

.35

10,0

34,9

22.3

5

Min

ority

inte

rest

0.00

0.

00

Othe

r res

erve

s

Leg

al re

serv

e1,

153,

637.

59

1,15

3,63

7.59

Res

erve

for a

mor

tised

cap

ital

1,25

6,81

4.96

1,

256,

814.

96

Oth

er re

serv

es36

,049

,208

.76

-376

,758

.90

675,

994.

69

5,68

3,31

4.50

42

,031

,759

.05

Res

erve

for r

eval

uatio

n of

u

nrea

lised

ass

ets a

nd li

abili

ties

0.00

( *

)0.

00

Rese

rves

at

Ful

ly c

onso

lidat

ed c

ompa

nies

3,00

8,67

1.00

-2

55,8

04.1

2 83

2,02

3.78

3,

584,

890.

66

Equ

ity-a

ccou

nted

affi

liate

s1,

105,

770.

57

327,

134.

33

-420

,190

.57

388,

551.

00

1,40

1,26

5.33

Equi

ty o

f equ

ity h

olde

rs o

f the

pa

rent

com

pany

54,3

88,7

71.2

9 -8

67,3

56.2

0 84

4,06

5.95

0.

00

-376

,758

.90

327,

134.

26

0.00

-2

,132

,643

.80

0.00

10

,034

,922

.35

0.00

62

,218

,134

.95

Equi

ty o

f min

ority

inte

rest

s48

9.00

-8

2.00

-6

0,49

2.00

60

,492

.00

407.

00

Tota

l 54

,389

,260

.29

-867

,356

.20

844,

065.

95

0.00

-3

76,7

58.9

0 32

7,05

2.26

-6

0,49

2.00

-2

,132

,643

.80

0.00

10

,095

,414

.35

0.00

62

,218

,541

.95

(*) T

he fu

ll am

ount

of t

he c

hang

es in

fair

valu

e of

fina

ncia

l ass

ets

avai

labl

e fo

r sal

e (1

,203

,576

.87

euro

) has

bee

n ch

arge

d to

equ

ity a

nd re

cogn

ised

in it

s en

tiret

y in

the

Stat

emen

t of C

ompr

ehen

sive

Inco

me,

with

a

net e

ffec

t of 0

.00

euro

on

Cons

olid

ated

Gro

up E

quity

.

Index Ir al índice

13

Consolidated cash flow statementsFor the years ended 31 December 2010 and 2009ExprEssEd in Euro

Notes 20102009

(restated)

Collections from customers and other debtors 89,575,819.82 96,236,732.52

Payments to suppliers and other creditors -58,165,427.31 -56,429,038.76

Payments to employees -25,475,928.37 -25,366,336.84

Net VAT settlements -3,155,946.82 -3,039,616.36

Other taxes -563,342.56 -208,405.08

Corporate income tax -3,765,151.60 -3,980,538.18

Net cash from operating activities -1,549,976.84 7,212,797.30

Acquisitions of property, plant and equipment -2,348,049.33 -2,305,272.66

Acquisitions of intangible assets -317,900.57 -125,213.98

Acquisition of investment property -29,266.64 0.00

Acquisitions of other non-current financial assets -318,547.00 0.00

Other current financial assets 450,000.00 -395,412.76

Acquisitions of group companies net of acquired cash -140,717.04 -488,000.00

Acquisitions of associated companies 594,200.35 0.00

Deposits provided -5,612.86 -3,266.34

Cash subsidies received 18,749.61 25,992.44

Interest received 1,578,615.17 481,650.95

Dividends received 29,572.72 420,190.45

Net investment cash flow -488,955.59 -2,389,331.90

Refund of share premium 0.00 0.00

Reserves 0.00 684.90

Net cash on transactions with own shares -711,834.19 467,991.95

Cash inflows/outflows due to long-term loans 7,265,869.98 -722,679.11

Cash inflows due to long-term loans 47,078,570.36 18,353,921.26

Cash outflows due to long-term loans -39,812,700.38 -19,076,600.37

Cash inflows/outflows due to short-term loans -3,393,848.37 632,046.91

Cash inflows due to short-term loans 34,477,100.65 19,082,093.08

Cash outflows due to short-term loans -37,870,949.02 -18,450,046.17

Dividends paid -2,482,643.80 -3,917,986.73

Interest paid -114,761.23 -106,000.29

Net financing cash flow 562,782.39 -3,646,627.27

Net increase in cash and cash equivalents -1,476,150.04 1,176,838.13

Net exchange differences 453,979.29 379,928.23

Change in cash in year -1,022,170.75 1,556,766.36

Beginning cash and cash equivalents 2,470,022.44 913,256.08

14 Ending cash and cash equivalents 1,447,851.69 2,470,022.44

Consolidated cash flow statements

Index

2010

CONSOLIdATEd gROUP

Notes to Financial Statements

16



Cross references enable the reader to connect the information contained in these notes to consolidated financial statements with the various line-items of the Consolidated Income Statement, Consolidated Statement of Financial Position, cash flow statement and statement of changes in equity.

1. Description of consolidated companies and their business activity

PRIM, S.A. has its registered offices at Polígono Industrial 1, Calle F, 15, Móstoles, Madrid, and it has seven regional offices and a factory at the following locations:

FactoryMóstoles - Polígono Industrial Nº 1; Calle C, Nº 20

Regional officesBarcelona - Nilo Fabra, 38Bilbao - Avda. Madariaga, 1La Coruña - Rey Abdullah, 7-9-11Sevilla - Juan Ramón Jiménez, 5Valencia - Maestro Rodrigo, 89-91Las Palmas de Gran Canaria - Habana, 27Palma de Mallorca – San Ignacio, 77

Although the Parent Company’s business has been carried on since 1870, it was incorporated on 21 July 1966 by means of a public instrument executed before the Madrid notary Mr. José Luis Álvarez Álvarez, with number 3.480 of his protocol, and registered at the Madrid Mercantile Register on 9 January 1967 on sheet 11.844, folio 158, tome 2.075 general 1.456 of section 3 of the Companies Book.

The Articles of Association establish that the Parent Company has indefinite duration and that its purpose is to engage in all types of legal transactions of commerce or industry relating to the manufacture, sale or distribution of orthopaedic, medical, surgical or similar material, and the construction, operation and management of retirement homes and any type of real estate transaction.

On 29 June 1992, before the Madrid notary, Mr. Enrique Arauz Arauz, with number 1053 of his protocol, the Articles of Association were adapted to the New Corporations Act of 1989, and that adaptation was registered with the Madrid Mercantile Register in Tome 3652, Folio 1, Sec-tion 8, Sheet M-61451, Inscription 36, dated 7 October 1992.

The companies owned directly or indirectly by PRIM, S.A. which form part of the consolidated group are as follows:

|1|Description of consolidated companies and their business activity

DEPENDENT COMPANIES DOMICILE GROSS COST OF OWNERSHIP %

ESTABLECIMIENTOS ORTOPÉDICOS PRIM, S.A.

Conde de Peñalver, 24 Madrid 1,322,102.77 100.00

ENRAF NONIUS IBÉRICA, S.A.C/ F, nº 15. Polígono Industrial Nº 1, Móstoles (Madrid)

690,461.45 100.00

SIDITEMEDIC, S.L. (SOCIEDAD UNIPERSONAL)

D. Ramón de la Cruz, 83, Madrid

3,035.06 100.00

NETWORK MEDICAL PRODUCTS LTD.

North Yorkshire, Reino Unido 379,331.01 48.39

INMOBILIARIA CATHARSIS S.A. (SOCIEDAD UNIPERSONAL)

C/ F, nº 15. Polígono Industrial nº 1, Móstoles (Madrid)

2,494,204.13 100.00

Index

17

(1) The stake increased in 2010 after the Group acquired the remaining 10% that it did not own (9% was acquired by Prim, S.A. and 1% by Inmobiliaria Catharsis, S.A.).

In 2010, RESIDENCIAL CDV-16, S.A. performed two capital increases, approved by the General Meeting on 26 April 2010 and 22 December 2010 (registered at the Mercantile Register on 30 June 2010 and 10 March 2011, respectively); no Group company participated. The first capi-tal increase reduced the stake from 48.26% to 29.20%, and the second reduced it further, to 10.98%. Accordingly, at the end of 2009 the stake in RESIDENCIAL CDV-16, S.A. was recognised as an investment in associated companies and, therefore, was carried by the equity method. However, as a result of the change in the stake and the loss of significant influence over the company, the investment is recognised under Other non-current financial assets in the Consoli-dated Statement of Financial Position.

(2) The stake in ENRAF NONIUS IBÉRICA PORTUGAL LDA. is held through ENRAF NONIUS IBÉRICA, S.A., which owns 99.99%, and PRIM S.A., which owns 0.01%.

In 2010, the company disposed of the 29.57% stake it held in Irish company BBE HealthCare Ltd, whose cost of acquisition amounted to 594,200.35 euro.

None of the companies directly or indirectly owned by PRIM, S.A. is listed on an organised securities market.

The dependent companies engage in the following activities:

The corporate purpose of ESTABLECIMIENTOS ORTOPÉDICOS PRIM, S.A. is to engage in all types of transactions of commerce or industry relating to the manufacture, purchase, sale, import, export, adaptation, placement and distribution of orthopaedic, medical, surgical and similar material.

The corporate purpose of ENRAF NONIUS IBÉRICA, S.A. is the distribution, sale and installation of products in the area of physiotherapy, home medical care and rehabilitation.

The corporate purpose of ENRAF NONIUS IBÉRICA, PORTUGAL, LDA. is the distribution, sale and installation of products in the area of physiotherapy, home medical care and rehabilitation.

The corporate purpose of INMOBILIARIA CATHARSIS S.A. (SOCIEDAD UNIPERSONAL) is to en-gage in all types of real estate transactions involving the purchase and sale of rural and urban properties, exploiting properties, repairing and refurbishing buildings, construction of industrial buildings, and the sale of properties of all types.

The corporate purpose of SIDITEMEDIC, S.L. (SOCIEDAD UNIPERSONAL), formerly called MEDI-PRIM, S.L., is to engage in the marketing, sale, distribution, import and export of all types of orthopaedic, medical, surgical and similar equipment, and the holding and purchase and sale of assets of all types.

DEPENDENT COMPANIES DOMICILE GROSS COST OF OWNERSHIP %

ENRAF NONIUS IBÉRICA PORTUGAL, LDA (3)

Rua Aquiles Machado –Lisboa- Portugal

100.000,00 100.00

LUGA SUMINISTROS MÉDICOS, S.L. (1)

Polígono Industrial Monte Boyal, Avda. Constitución, Parcela 221, Casarrubios del Monte –Toledo

5.749.110,42 100.00


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The corporate purpose of RESIDENCIAL CDV - 16, S.A. is the operation and management of retirement homes.

The corporate purpose of NETWORK MEDICAL PRODUCTS LTD. is the marketing, distribution and sale of medical products.

The corporate purpose of LUGA SUMINISTROS MÉDICOS, S.L. is the sale, manufacture, pac-kaging, packing, sealing, import and export of all types of medical and surgical instruments, orthopaedic devices, dressings, bandages, podology equipment and materials of therapy and hygiene, podology chairs and instrumentation.

The corporate purpose of BBE HEALTHCARE LTD. is the manufacture and sale of medical and surgical equipment.

The companies forming part of the consolidated group closed their financial year, which has a duration of one year, at 31 December 2010.

2. Basis of presentation of the Consolidated Financial Statements

2.1. Accounting standards appliedThe Consolidated Financial Statements of the PRIM Group for 2010, which the Directors authorised on 30 March 2010, are presented in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union in conformity with (EC) Regulation no. 1606/2002 of the European Parliament and of the Council. The directors of PRIM expect the Shareholders’ Meeting to approve these Consolidated Financial Statements without changes.

These Consolidated Financial Statements have been prepared on a historical cost basis, except for available-for-sale financial assets, which have been measured at fair value. The carrying amounts of assets and liabilities hedged by fair value hedges are restated to reflect variations in their fair value as a result of the hedged risk.

Prim Group has adopted the latest version of all rules issued by the European Union’s Regula-tory Committee (hereinafter EU-IFRS) that are mandatory at 31 December 2010.

The 2010 separate financial statements 2010 of the Group companies will be submitted for approval by their respective General Meetings of Shareholders within the deadlines established by the regulation in force. The directors of the parent Company do not expect changes to arise that would significantly impact the 2010 consolidated financial statements. The consolidated financial statements of Prim Group for 2010 were authorised by the parent Company’s Board of Directors on 31 March 2011. It is expected that they will be approved without changes by the General Meeting of Shareholders of the parent Company.

The amounts contained in the documents comprising these consolidated financial statements are expressed in euro, except where noted otherwise.

|2|Basis of presentation of the Consolidated Financial Statements


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2.1.1. Improvements to IFRS2.1.1.1. Standards and interpretations approved by the European Union that are applicable this yearThe accounting policies used in preparing the consolidated financial statements for the year ended 31 December 2010 are the same as those applied in the consolidated financial statements for the year ended 31 December 2009, except for the following rules and interpretations:

IFRS 2 “Share-based payments - Group cash-settled share-based payment transactions”: The standard was modified to clarify the accounting rules for group cash-settled share-based payment transactions. This modification replaces IFRIC 8 and IFRIC 11. This modification has had no impact on the Group’s financial position or results.

IFRS 3 “Business combinations (Revised)” and IAS 27 “Consolidated and separate financial statements (Modified)”: IFRS 3 (revised) introduces significant changes in the accounting of business combinations. The changes affect the measurement of non-controlling stakes, the accounting of transaction costs, the initial recognition and subsequent measurement of con-tingent liabilities and business combinations achieved in stages.The amendments to IAS 27 specify the conditions in which an entity must prepare consolida-ted financial statements, how to account for changes in the controlling company’s ownership interest, and how to distribute a subsidiary’s losses between controlling and non-controlling interests. This modification has had no impact on the Group’s financial position or results. IFRS 7: “Financial instruments: Recognition and measurement – Eligible hedged items”. This modification clarifies that an entity can designate part of the changes in fair value or of the variation in cash flows of a financial instrument as a hedged item. This also covers the designation of inflation, or part of it, as a hedged risk in special situations. This modification has had no impact on the Group’s financial position or results. IFRIC 12. “Service Concession Arrangements”. The interpretation clarifies how to apply the IFRIC provisions adopted by the Commission to service concession arrangements. IFRIC 12 explains how to recognise the infrastructure in the service concession agreement in the concessionaire’s financial statements. It also clarifies the distinction between the different phases of a service concession agreement (construction/operation) and how they are recognised in revenues and expenses in each case.It distinguishes two ways of recognising revenues and expenses related to the infrastruc-ture (as a financial asset or an intangible asset) according to the uncertainty regarding the concessionaire’s future revenues.No group company performed transactions of this type; accordingly, this interpretation has had no impact on the Group’s financial position or results. IFRIC 15 “Agreements for the construction of real estate”.The interpretation explains when revenues from the construction of residential real estate must be recognised in the financial statements, and, in particular, if the construction agree-ments are included in the scope of IAS 11 “Construction Contracts” or IAS 18 “Revenue” This interpretation has had no impact on the financial position or the earnings of the Group. IFRIC 16 “Hedges of a net investment in a foreign operation”.The interpretation should be applied prospectively. IFRIC 16 provides guidelines on recog-nising hedges of a net investment. It contains guidelines for identifying exchange rate risks that qualify for hedge accounting of an investment and how an entity should determine the amount of exchange gain or loss in relation both to the net investment and the hedging instrument, which will be reclassified to profit or loss upon disposal of the net investment. The adoption of this interpretation had no impact on the Group’s financial position or results.


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IFRIC 17 “Distribution of non-cash assets to owners”.This interpretation clarifies and provides guidance for the accounting treatment of distribu-tions of non-cash assets to owners, whether as a distribution of reserves or as a scrip dividend. The adoption of this interpretation had no impact on the Group’s financial position or results. IFRIC 18. “Transfers of assets from customers”.This interpretation clarifies and provides guidance for accounting for the transfer of property, plant and equipment or cash from a customer for the purpose of acquiring or building an item of property, plant and equipment. The adoption of this interpretation had no impact on the Group’s financial position or results. Improvements to International Financial Reporting Standards 2008.In May 2008, the IASB issued the first Standard published under its annual improvements pro-cess, which is intended to eliminate inconsistencies and clarify the standards. All the amend-ments were adopted as of 31 December 2009 except for:

IFRS 5 “Assets Held for Sale and Discontinued Operations”: Clarification of when a subsidiary should be classified as held for sale, even where the parent retains a non-controlling interest after the sale. This amendment is applicable prospectively and did not have an impact on the Group’s financial position or results.

Improvements to IFRS in 2009.In April 2009, the IASB published the second set of modifications to the standards in the framework of the annual improvement process aimed at eliminating inconsistencies and clari-fying the standards, including specific transitory provisions for each standard. The adoption of the following modifications represents a change in accounting policies, but had no impact on the Group’s financial position or the results.

IFRS 8 “Operating segments”: Clarification that a segment’s assets and liabilities need only be disclosed when they are regularly reported to the chief operating decision maker.

IAS 7 “Cash flow statement”: Clarification that only expenditures that result in recognition of an asset can be classified as investing cash flow.

IAS 36 “Impairment of assets”: Amendment to clarify that the largest cash-generating unit to which goodwill can be allocated following acquisition in a business combination is an operating segment as defined by IFRS 8 before the aggregation of segments for disclosure purposes. The adoption of this amendment had no impact on the Group since an annual impairment test is performed before aggregation.

Other amendments contained in the Improvements to IFRSs 2009 (April 2009) that did not have any impact on the Group’s accounting policies, financial position or results are as follows:

- IFRS 2 “Share-based payments”.- IFRS 5 “Assets held for sale and discontinued operations”.- IAS 1 “Presentation of financial statements”.- IAS 17 “Leases”.- IAS 38 “Intangible assets”.- IFRS 39 “Financial instruments: Recognition and measurement”.- IFRIC 9 “Reassessment of embedded derivatives”.- IFRIC 16 “Hedges of a net investment in a foreign operation”.


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2.1.1.2. Standards and interpretations approved by the European Union that are not obligatory in this yearThe Group did not adopt early any standard, interpretation or amendment that has been publis-hed but has not yet come into force.

The Group is evaluating the effect on the Group’s accounting policies, financial situation and results of the following standards and interpretations that have been published by the IASB and approved by the European Union but are not yet applicable:

IAS 32: “Classification of rights issues”: In force for annual periods beginning on or after 1 February 2010.

IAS 24 “Related party disclosures”: In force for annual periods beginning on or after 1 January 2010. These changes led to the amendment of IFRS 8.

IFRIC 19 “Extinguishing financial liabilities with equity instruments”: In force for annual pe-riods beginning on or after 1 July 2010.

IFRIC 14 “Advance payment of a minimum funding requirement”: In force for annual periods beginning on or after 1 January 2011.

2.1.1.3. Standards and interpretations published by the IASB but not yet approved by the European UnionAt the date of publication of these consolidated financial statements, the following IFRSs and amendments had been published by the IASB but were not obligatory and had not been appro-ved by the European Union.

IFRS 9 “Financial instruments”: In force for annual periods beginning on or after 1 January 2013.

Improvements to IFRSs 2010 In force for annual periods beginning on or after 1 January 2011, except for the amendments to IFRS 3 (2008) relating to the measurement of non-controlling interests and share-based payment plans, and the changes to IAS 27 (2008) and the amend-ment to IFRS 3 (2008) relating to contingent consideration from a business combination that occurred before the effective date of the revised IFRS, which are in force for annual periods beginning on or after 1 July 2010.

Amendment to IFRS 7 “Disclosures - Transfer of financial assets”: In force for annual periods beginning on or after 1 July 2011.

Amendment to IAS 12 “Deferred tax: Recovery of underlying assets”, in force for annual pe-riods beginning on or after 1 January 2012.

PRIM Group is currently analysing the impact of the standards approved by the European Union at the date of authorisation of these Consolidated Financial Statements whose approval date is subsequent to 31 December 2010, although it does not expect the majority of those standards to have a material impact on the Group.

Based on the analyses performed to date, the Group estimates that their application will not have a material impact on the consolidated financial statements in the period of initial appli-cation. In any event, the changes to IFRS 9 will affect financial instruments and future transac-tions with same from 1 January 2013.

Additionally, there are allowed alternatives under the IFRS, most notably the following:

Intangible assets and assets under “Property, plant and equipment” and “Investment property” may be measured at market value or acquisition cost corrected for accumulated amortisation and depreciation and any impairments. PRIM Group has chosen to measure those assets at corrected acquisition cost.


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2.2. True and fair viewThe Consolidated Financial Statements were prepared from the accounting records of the Con-trolling company and its Dependent companies and associates by applying the current legisla-tion on accounting in order to present a true and fair view of the equity, financial position and income of the Group Companies. The consolidated cash flow statement was prepared in order to provide an accurate picture of the source and application of the monetary flows representing the Group’s cash and other liquid assets.

2.3. Comparative informationAs required by mercantile legislation, for comparison purposes the figures for 2009 are presen-ted in addition to the figures for 2010 for each item in the consolidated statement of financial position, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement. The notes also include quantitative information for the preceding year, except where an accounting standard states specifically that it is not necessary.

As required by IAS 1, the information in these consolidated financial statements referring to 2009 is presented for comparison with the information for 2010 and, therefore, does not in itself constitute the Consolidated Group’s financial statements for 2009.

The resolution of the Spanish Institute of Accounting and Auditing (ICAC) dated 29 December 2010 on information to be included in the notes to the consolidated financial statements regar-ding deferred payments to suppliers in commercial transactions was applied for the first time in 2010. By virtue of the Second Temporary Provision, in the first year of applying this resolution, the Group provided only the information related to the amount pending payment to suppliers, which, at the end of the period, exceeded the legal payment period; the company does not pre-sent comparative information as regards this new obligation and the financial statements are classified as initial statements, for these purposes only, with regard to the principle of unifor-mity and the comparability requirement. That information is included only for the companies based in Spain that are fully consolidated.

The amounts contained in the consolidated financial statements are expressed in euro.

2.4. Correction of errorsIn the consolidated cash flow statement contained in the 2009 financial statements, the in-terim dividend paid by the Company at the end of the year was calculated incorrectly, as the amount was subtracted from Changes in working capital (Accounts payable) under Cash flow from operating activities, instead of being recognised as Dividend payments under Financing cash flow.

This error, which was reported to the CNMV following its demand for information dated 27 August 2010, has been corrected in the figures for the 2009 cash flow statement which are included in the 2010 financial statements for comparison.

So as to present information that is comparable with 2010 and rectify the error, the following changes were made to the 2009 financial statements.

2009 FINANCIAL STATEMENTS

CORRECTIONCOMPARATIVE FIGURES IN THE 2010 FINANCIAL STATEMENTS

Payments to suppliers and other creditors

(57,347,025.49) 917,986.73 (56,429,038.76)

Net operating cash flow 6,294,810.57 917,986.73 7,212,797.30

Dividend payments (3,000,000) (917,986.73) (3,917,986.73)

Financing cash flow (2,728,640.54) (917,986.73) (3,646,627.27)


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The company also presented a breakdown of data on the draw-downs and application of loans and credit lines used to finance the Company, classified as Cash inflows/outflows due to short-/long-term loans, instead of presenting this item as a net amount, as expressed in the 2009 consolidated financial statements.

2.5. EstimatesIn preparing the accompanying consolidated financial statements, estimates by Group Manage-ment have occasionally been used to quantify certain assets, liabilities, revenues and expenses. Those estimates refer basically to:

Measurement of assets and goodwill to determine the existence of impairment losses (see note 3.7).

The useful life of intangible assets, property, plant & equipment, and real estate (see note 3). Non-current trade accounts payable that were estimated on the basis of current data about average collection periods (balances expected to be collected within more than one year are classified as non-current).

These estimates were based on the best available information at the time of authorisation of these consolidated financial statements.

The Prim Group of Companies recognised provisions for risks in line with the accounting policy set out in section 3.21 of these notes. The Prim Group of Companies made judgements and estimates as to the probability that those risks will occur and the amount of those risks, and recognised a provision when the risk was considered to be probable, estimating the costs the Company would incur for such risks.

2.6. Consolidation methodsThe consolidated financial statements include those of Prim, S.A. and its dependent companies. The dependent companies’ financial statements are authorised for the same accounting year as those of the Parent Company, using the same accounting policies. Where necessary, adjustments are made to homogenise any differences between accounting policies.

The dependent companies controlled by the PRIM Group are fully consolidated except where they are not material for the purposes of presenting a true and fair view of the PRIM Group. The PRIM Group considers that it exercises control over a company when it has sufficient power to govern its financial and operating policies so as to obtain profits from its activities.

Dependent companies are consolidated from the date they are acquired by the group and they cease to be consolidated when control is transferred outside of the Group. Where there is a loss of control of a dependent company, the consolidated financial statements include the results for the part of the year that the Group maintained control.

Associated companies over which the PRIM Group does not exercise control but in which it does have a significant influence are accounted for by the equity method in the Consolidated Statement of Financial Position. For the purposes of preparing these Consolidated Financial Sta-tements, significant influence is generally presumed to exist when an interest of at least 20% is held, except where there is evidence to the contrary.

The closing date of the financial statements of dependent, multi-group and associated compa-nies is 31 December. Those companies’ accounting policies are the same as or have been stan-dardised with those of the PRIM Group in preparing these Consolidated Financial Statements.


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The financial statements of each of the foreign companies were prepared in their functional currency, i.e. the currency of the economic area in which each company operates and in which it generates and uses its cash.

The operations of PRIM and the consolidated dependent and associated companies are consoli-dated in accordance with the following basic principles:

1) Business combinations and goodwill:

a. Business combinations since 1 January 2010.

The business combinations are accounted for by the acquisition method.

The identifiable assets acquired and the liabilities assumed are carried initially at their fair value on the acquisition date. For each business combination, the acquirer may elect to measure minority interest at fair value or at the proportionate share of identifiable net assets of the acquiree. Acquisition-related costs are recognised in profit or loss.

When the Group acquires a business, it will classify or designate the identifiable assets acqui-red and liabilities assumed as needed based on contractual arrangements, economic condi-tions, accounting and operating policies and other relevant conditions at the acquisition date.

If the business combination is created in stages, the Group will reassess its equity interests in the acquired company which were previously recognised at fair value on the acquisition date, and it will recognise any resulting gains or losses in profit or loss.

Any contingent consideration which the Group transfers will be recognised at fair value on the acquisition date. Subsequent changes in the fair value of contingent consideration classified as an asset or liability will be recognised in accordance with IAS 39, recognising any resulting gain or loss in income or in other comprehensive income. If the contingent consideration is classified under equity, it should not be measured again, and subsequent settlement should be recognised under equity.

Goodwill acquired in a business combination will be recognised initially (upon acquisition) at cost as the difference between the consideration transferred plus any non-controlling stake in the acquired company and the amount of the identifiable assets acquired and the liabilities assumed. If the consideration is less than the fair value of the acquired company’s assets, the difference is recognised directly in profit or loss.

After initial recognition, goodwill will be recognised at cost less accumulated impairment losses. Impairment testing of goodwill is performed annually and more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For impairment testing, goodwill acquired in a business combination is allocated, from the acquisition date, to each Cash Generative Unit (CGU) or group of CGUs expected to benefit from the synergies of the combination, independently of any other assets or liabilities of the Group assigned to those units or groups of units.


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Goodwill impairment is determined by evaluating the recoverable amount of the CGU or group of CGUs to which the goodwill is related. If the recoverable amount of the CGU(s) is less than the carrying value, the Group recognises an impairment loss.

Impairment losses on goodwill may not be reversed in future periods.

If goodwill has been distributed to a CGU and the entity sells or otherwise disposes of an acti-vity within that unit, the goodwill associated with the activity will be included in the activity’s carrying amount when determining the result from the sale or disposal by other means and will be measured using the relative values of the activity that was sold or otherwise disposed of and the part of the CGU that is retained.

b. Business combinations prior to 1 January 2010.

In contrast with the above-mentioned requirements, the following differences apply:

Transaction costs directly related to the acquisition are part of the acquisition cost. The non-controlling interest in the acquiree (previously called minority interest) is recognised according to the proportion of identifiable net assets of the acquiree.

When a the cost of the combination is adjusted on the basis of future events, the Group must include that adjustment amount in the cost of the combination at the acquisition date, provided that the adjustment is probable and may be reliably measured. Adjustments following the contingent consideration are considered part of goodwill.

The results of dependent companies acquired or disposed of in the year are included in the Consolidated Income Statement from their effective date of acquisition or until the effective date of disposal.

2) Goodwill arising on business combinations has not been amortised since 1 January 2004, the date of transition to IFRS; however, it is reviewed to detect impairment at least once per year.

3) The result of measuring the holdings by the equity method (after eliminating the result of intra-group transactions) is recognised under “Other reserves” and “Income of equity-accounted affiliates - net of taxes” in the Consolidated Statement of Financial Position and Consolidated Income Statement, respectively.

4) The value of minority interests in the equity and income of fully consolidated dependent com-panies is presented, respectively, under “Equity – minority interests” on the Liabilities side of the Consolidated Statement of Financial Position y “Minority interests” in the Consolidated Income Statement.

5) Purchases of holdings from minority interests in companies over which the Company exerci-ses control and sales of holdings that do not result in a loss of control are treated as tran-sactions between owners and, therefore, the income is recognised as a debit or credit against reserves.


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6) Foreign companies’ financial statements are translated at the year-end closing exchange rate. Under this method, all the assets, rights and obligations are translated to euro using the exchange rates prevailing at the closing date of the Consolidated Financial Statements, while the average exchange rates for the year are applied to items in the Consolidated Income Statement, and equity is translated at the historical exchange rates at the date of acquisition (or the average exchange rate in the year of origin in the case of retained earnings, provided that there are no significant transactions that make the use of the average exchange rates inappropriate). The resulting translation difference is recognised in Reserves.

7) All balances and transactions between fully consolidated companies are eliminated in conso-lidation.

2.7. Consolidated Cash Flow StatementThe following terms are used in the Consolidated Cash Flow Statements, which were prepared using the direct method, with the meanings indicated below:

Cash flows: Inflows and outflows of cash and cash equivalents, the latter being short-term, highly liquid investments with a low risk of changes in value. Operating activities: The normal revenue-producing activities of Group companies and other acti-vities that cannot be classified as investing or financing activities. Investing activities: The acquisition, sale or disposal by other means of long-term assets and other investments not included in cash and cash equivalents. Financing activities: Activities that result in changes in the size and composition of the equity and borrowings of the Company that are not operating activities.

3. Valuation standards

3.1. Intangible assetsIntangible assets acquired individually are carried initially at the acquisition price. After initial recognition, intangible assets are recognised at cost less accumulated amortisation and any impairment in value. Interest costs are expensed in the year in which they are incurred.

The useful life of these assets is assessed to determine whether it is finite or indefinite. Intangi-ble assets with a finite life-span are amortised over their economic useful life and impairment is measured whenever there is any indication that the intangible asset may have been impaired. The amortisation period and amortisation method of intangible assets with a finite life-span are reviewed at least once at the end of each year. Intangible assets with an indefinite lifetime are not amortised but are measured for impairment each year. The amortisation expense for in-tangible assets with finite life-spans is recognised in the Consolidated Income Statement under amortisation.

Concessions, patents, licenses, brands and similar are measured at the acquisition price. Where operating and distribution rights have a specific term, they are amortised on a straight-line basis over that period. Other rights are amortised on a straight-line basis over five years.

Computer software is carried at acquisition cost. It is amortised on a straight-line basis over four years.

Distribution rights are carried at the acquisition or payment price and are amortised on a straight-line basis over ten years, which is their validity period.

|3|Valuation standards


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3.2. GoodwillGoodwill in consolidation represents the future economic benefits from assets that cannot be identified individually and recognised separately.

Goodwill acquired since 1 January 2004 is carried at acquisition cost. Goodwill is not amortised; at each year-end, goodwill is measured to assess if there has been any impairment that reduced its recoverable value, in which case it is written down.

3.3. Property, plant & equipmentProperty, plant and equipment are carried at the acquisition or production cost, net of accumu-lated depreciation and any impairment, and include the value of legal revaluations under Royal-Decree Law 7/1996. In addition to the amount invoiced by the supplier, the acquisition price includes any additional expenses incurred up until the asset comes into service. Interest costs incurred until property, plant and equipment become operational are capitalised in accordance with the mandatory accounting treatment under IAS 23 (revised in 2009).

Depreciation is taken using constant percentages determined on the basis of the asset’s estima-ted useful life.

The depreciation rates applied by the Group, which are reviewed each year, are as follows:

Fixed asset maintenance and repair expenses are charged to profit or loss in the year in which they are incurred unless they entail an improvement or expansion, in which case they are capi-talised.

Leased assets where substantially all the risks and benefits of ownership are assumed by the Group under the contract terms are classified as finance leases. Assets acquired under such lea-ses are carried at the lower of their fair value or the present value of the minimum payments at commencement of the lease contract, less accumulated depreciation and any impairment loss.

3.4. Investment propertyInvestment property is carried at acquisition price less accumulated depreciation and any im-pairment. The acquisition price includes the amount paid to the seller plus additional expenses and interest incurred until the asset becomes operational, in accordance with the mandatory accounting treatment under IAS 23 (revised in 2009).

Depreciation is taken using constant percentages determined on the basis of the asset’s estima-ted useful life.

Asset Annual percentage

Buildings and other structures 2% - 3%

Machinery, fixtures and tools 8% - 20 %

Transport equipment 16%

Furniture and fixtures 8% - 10%

Computer hardware 25%


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The depreciation rates applied by the Group are as follows:

Investment property maintenance and repair expenses are charged to profit or loss in the year in which they are incurred unless they entail an improvement or expansion, in which case they are capitalised.

3.5. Investment in associated companiesThe Group’s investment in associates is carried by the equity method. To this end, a company is classified as an associate if the parent company has a significant influence but it is not a dependent company.

Under the equity method, the investment in the associate is carried on the Consolidated Sta-tement of Financial Position at cost plus any post-acquisition changes in the Group’s interest in the associate’s net assets. Goodwill in an associate is included in the carrying value of the investment and is not amortised. After applying the equity method, the Group determines if it is necessary to recognise additional impairment with respect to the Group’s net investment in the associate. The Consolidated Statement of Financial Position reflects the share in income from the associate. Where changes are recognised directly by the associate in its equity, the Group recognises its share in that change, disclosing it in the statement of changes in equity, if appropriate.

The Group and the associates close their accounts on the same date and the accounting policies applied by associates are in conformity with the those used by the Group for similar transac-tions and events in similar circumstances.

THE COMPANIES CARRIED BY THE EQUITY METHOD AT 2009 YEAR-END WERE RESIDENCIAL CDV-16, S.A AND NETWORK MEDICAL PRODUCTS LTD. At 2010 year-end, only the latter was carried by the equity method, since the former ceased to be classified as an associated company due to the reduction in the Company’s stake in 2010.

3.6. Financial instruments

Financial assetsThe Group measures current and non-current financial assets as follows:

Loans and receivables: These are initially recognized in the Consolidated Statement of Financial Position at market value and are subsequently measured at amortized cost using the effective interest rate.

The PRIM Group provisions the difference between the amount of the receivables considered recoverable and their carrying amount.

Available-for-sale assets: All assets that are not classified in any of the preceding categories (i.e. almost entirely equity interests).

These investments are also included in the Consolidated Statement of Financial Position at fair value on the closing date; in the case of unlisted companies, the fair value is obtained through alternative methods such as comparison with similar transactions or, if sufficient information is available, by discounting expected cash flows. Changes in fair value are

Asset Annual percentage

Buildings 2%

Plant 8% - 12 %


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recognised in the “Reserve for revaluation of unrealised assets and liabilities” in the Consoli-dated Statement of Financial Position until these investments are disposed of or impaired, at which time the accumulated balance of this account is recognised entirely in the Consolida-ted Income Statement.

Equity interests in unlisted companies whose market value can not be measured reliably are valued at acquisition cost.

The PRIM Group determines the most appropriate classification for each asset at the time of acquisition and reviews it at the end of each year.

The PRIM Group recognizes conventional purchases and sales of financial assets on the transaction date.

Debentures, bonds and bank debt: Loans, debentures and similar items are recorded initia-lly at the amount received, net of transaction costs. In subsequent periods, all these debts are measured at amortised cost, using the effective interest rate, except for hedged transac-tions, which are measured using the method described below in this same Note.

Also, obligations under finance leases are recognised at the present value of the lease payments under “Bank debt – Loans and others” in the Consolidated Statement of Financial Position.

Trade and other accounts payable: Trade accounts payable arising in the ordinary course of business are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate method.

Derecognition of financial assets and liabilities: A financial asset is derecognised when:

The contractual rights to receive cash flows from the asset have expired. The PRIM Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full to a third party and has transferred substantially all the asset’s benefits and risks or does not retain them substantially.

The PRIM Group has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither trans-ferred nor retained substantially all risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assetsThe Company adjusts the carrying amount of financial assets against the Consolidated Inco-me Statement when there is objective evidence of impairment.

To determine impairment loss, the Company assesses the potential loss of individual assets as well as groups of assets with similar risk characteristics.

Debt instrumentsThere is objective evidence of impairment of debt instruments (i.e. accounts receivable, debt claims and debt securities) when, after initial recognition, an event occurs with a negative impact on estimated future cash flows.

The Company classifies as impaired (doubtful) assets those debt instruments for which there is objective evidence of impairment, basically the existence of bad debts, default, breach, refinancing and the existence of data evidencing that the agreed future flows may not be collected in full or that there may be a delay in collection.


Index

30



For financial assets carried at amortized cost, the amount of impairment losses is equal to the difference between the carrying amount and the present value of future cash flows that it is estimated they will generate, discounted at the effective interest rate existing at the time of initial recognition of the assets. For financial assets at floating rates, the effective interest rate at the closing date of the financial statements is used. Trade and other recei-vables where the balances are more than six months past due and there is no assurance of recovery, and balances of companies that have declared themselves to be insolvent are classified as doubtful assets. In particular, accounts receivable from private customers are classified as doubtful and provisioned once they are six months past due. Accounts recei-vable from public authorities are provisioned only where there are reasonable doubts as to recovery, regardless of the age of the debt.

In the case of listed instruments, the Company uses market value instead of the present value of future cash flows, provided that it is sufficiently reliable. In the case of “Financial assets available for sale”, where there is objective evidence that a reduction in fair value is due to impairment, the unrealised capital loss recognised as “Im-pairment loss” in equity is transferred to profit or loss.

The reversal of impairment is recognised as a revenue in profit or loss and is limited to the carrying amount that would have been recognised at the reversal date had no impairment loss been recognised for the asset.

Equity instrumentsThere is objective evidence of impairment of equity instruments when, after initial recogni-tion, an event or combination of events occurs with the result that the carrying value will not be recovered due to a prolonged or significant decline in their fair value. For these pur-poses, the Company considers in any event that listed equity instruments are impaired when their value has decreased over 18 months and by 40% of their initial quoted price without having recovered their initial value.

In the case of equity instruments measured at fair value and classified under “Financial assets available for sale”, impairment loss is measured as the difference between acquisition cost and fair value less previously-recognised impairment losses. Unrealised capital losses recognised directly as “Impairment losses” in equity are transferred immediately to the Consolidated Income Statement if it is determined that the decline in fair value is due to impairment. If part or all of the impairment losses are subsequently recovered, their amount is recognised in “Value adjustments” in equity.

In the case of equity instruments recognised at cost that are categorised as “Financial assets available for sale”, and of investments in the equity of group and associated companies, the impairment loss is calculated as the difference between the carrying value and the recovera-ble amount, which is the higher of the fair value less the cost of sale and the present value of the future cash flows arising from the investment. Except where there is better evidence, the impairment is estimated taking account of the investee company’s net equity corrected for any unrealised capital gains existing at the measurement date.

The reversal of impairment is recognised in the Consolidated Income Statement and is limited to the carrying amount that would have been recognised at the reversal date had no impairment loss been recognised for the asset; in the case of investments in group and associated companies; impairment recognised in previous years on financial assets available for sale cannot be reversed.


Index

31

Reclassification of financial assetsWhen an investment in the equity of a company of the group, multi-group or associate is no longer classified as such, the investment in that company is measured according to the rules on financial assets available for sale.

Specifically, the stake in Residencial CDV-16, S.A. was reclassified in 2010 as a financial asset available for sale after the stake in that company was diluted, as described in Notes 8 and 9 of these Notes to the financial statements.

3.7. Financial liabilities

a) Trade and other accounts payableThese are carried at the fair value of the consideration received.

b) Interest-bearing loansThese debts are recognised initially at the fair value of the consideration received, net of the costs directly attributable to the transaction. In subsequent measurements, they are measured at amortised cost based on the effective interest method. Any difference between the cash received (net of transaction costs) and the reimbursement value is recognised in profit or loss over the contract period.

Financial debts are presented as non-current liabilities when they mature at over twelve months or the Prim Group has an unconditional right to defer settlement for at least twelve months from the accounting close.

Financial liabilities are derecognised in the Consolidated Statement of Financial Position when the corresponding obligation is settled or cancelled or it expires. When a financial liability is replaced by another in substantially different terms, the change is treated as a derecognition of the original liability and the recognition of the new liability, the difference between the respec-tive carrying values being recognised in profit or loss.

c) Commitments under contractual obligations to buy out minority interestsContractual obligations to buy minority interests are recognised as the present value of the planned future payments. The difference between the amount payable and the value of the minority interests and any subsequent variations in the amount payable is recognised in equity attributable to equity holders of the parent company. Interest expenses accruing on these liabi-lities are recognised as a financial expense in the Consolidated Income Statement.

3.8. InventoriesInventories are valued at the average acquisition or production cost, or at net realisable value (if lower).

For these purposes, the acquisition cost of merchandise, raw materials and ancillary materials is taken to be that on the supplier invoice plus all additional expenses incurred until the goods are in the warehouse.

The production cost of finished and semi-finished products is the acquisition cost of the raw materials and other consumables plus the costs directly allocable to the product and the rea-sonably allocable part of indirect costs, insofar as such costs correspond to the manufacturing period.


Index

32



The impairment of inventories is measured at year-end, taking account of expired, obsolete or slow-moving items.

The Parent Company has licence contracts for some of the products it manufactures.

3.9. Cash and cash equivalentsCash and cash equivalents recognised in the Consolidated Statement of Financial Position com-prise cash on hand and at bank, demand deposits and other highly-liquid investments maturing at under three months from the date of arrangement. These items are carried at historical cost, which does not differ materially from realisable value.

For the purposes of the consolidated cash flow statement, the balance of cash and cash equiva-lents defined in the preceding paragraph is presented net of any bank overdrafts.

3.10. Impairment lossesAt the end of each year, or whenever it considers it to be necessary, the Group assesses whether there are signs of asset impairment loss. If there are any such signs, or when an annual impair-ment test is required, the Group estimates the asset’s recoverable value.

An asset’s recoverable amount is the greater of the market value less the necessary cost for its sale and the value in use, i.e. the present value of estimated future cash flows.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired and its carrying value is written down to its recoverable amount. When assessing the value in use, future cash flows are discounted to present value using a discount rate before taxes that reflects the assessment of the value of money over time in the current market and of the asset’s specific risks.

Impairment losses are recognised in the income statement under the expense heading that corresponds to the function of the impaired asset.

3.11. Impairment of non-financial assets At the end of each year, the PRIM Group assesses its non-financial assets to measure whether there are any signs of impairment. If there are any such signs, it estimates the asset’s recove-rable value to determine the amount by which to write it down, where necessary. In the case of identifiable assets that do not generate cash flows when considered independently, the PRIM Group estimates the recoverability of the Cash Generative Unit (CGU) to which the asset belongs.

In the case of goodwill and other intangible assets which are either not operational or have an indefinite useful life, the PRIM Group systematically analyses recoverability at the end of each year.

For the purposes of this recoverability analysis, goodwill is allocated to the CGUs in which it is controlled for internal management purposes. In no instance are these CGUs bigger than the operating segments defined by the PRIM Group and detailed in Note 4.


Index

33

An asset’s recoverable amount is the greater of the market value less selling costs and the value in use, i.e. the present value of estimated future cash flows. The assumptions used in estima-ting value in use include discount rates, growth rates and expected changes in selling prices and direct costs. The discount rates reflect the time value of money and the risks specific to the CGU. The growth rates and the changes in prices and direct costs are based on contractual commitments that have already been signed, information in the public domain, sector forecasts and the experience of the PRIM Group.

If the recoverable amount of an asset is less than its carrying amount, the difference is recogni-sed with a charge to “Impairment and Income from asset disposals” in the Consolidated Income Statement. Impairment losses recognised for an asset are reversed with a credit to the afore-mentioned account when there is a change in the estimates concerning the recoverable amount such as to increase the carrying amount of the asset, capped at the carrying amount that would have been determined had no impairment loss been recognised, except in the case of the im-pairment of goodwill, which is not reversible.

3.12. Treasury sharesAt year-end, the PRIM Group’s treasury shares are recognised as a reduction of “Equity-Treasury shares” in the Consolidated Statement of Financial Position and are measured at acquisition cost.

Gains and losses obtained by the companies on disposal of treasury shares are recognised in “Other reserves” in the Consolidated Statement of Financial Position.

3.13. DividendsThe interim dividends declared by the Board of Directors are presented as a deduction from PRIM Group equity.

3.14. Recognition of revenues and expensesRevenues and expenses are generally recognised in accordance with the accrual principle, i.e. when the actual related flow of goods and services arises. Sales are considered to be completed upon physical delivery and acceptance by the customer.

3.15. Corporate income taxCorporate income tax is recognised in the Consolidated Income Statement or in equity in the Consolidated Statement of Financial Position depending on where the gains or losses leading to it arose. Differences between the carrying value of assets and liabilities and their tax base lead to deferred tax asset or liability accounts, which are calculated using the tax rates that are expected to be in force when the assets and liabilities are realised.

Variations during the year in deferred tax assets and liabilities not arising from business combi-nations are recognised in the Consolidated Income Statement or in equity in the Consolidated Statement of Financial Position, as appropriate.

Deferred tax assets are recognised only when it is expected that there will be sufficient future taxable income against which to offset the tax credits arising from timing differences or there are offsetting deferred tax liabilities.

The Group companies pay tax on an individual basis.


Index

34



3.16. Earnings per shareEarnings per share are calculated as the ratio between net income in the period attributable to the Parent Company and the weighted average number of ordinary shares that were outs-tanding in that period, not including shares of the PRIM Parent Company held by PRIM Group companies.

Diluted earnings per share are calculated by dividing the net income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, adjusted by the weighted average number of ordinary shares that would be issued if all potential ordinary shares were converted into ordinary shares of PRIM. For these purposes, shares are assumed to be converted at the beginning of the year (or at the date of issue, in the case of potential ordinary shares issued during the current year).

In the Consolidated Financial Statements of the PRIM Group for the years ended 31 December 2010 and 2009, basic earnings per share coincide with diluted earnings per share since there were no potential shares outstanding during these years that could be converted into ordinary shares.

3.17. Transactions and balances in foreign currencyTransactions in foreign currency are recorded in euro at the exchange rate in force at the tran-saction date. Exchange differences resulting from foreign currency transactions are recognised as financial income in the Consolidated Financial Statements when they arise.

Accounts receivable and payable in foreign currency are valued at year-end at the exchange rate in force at the time. Exchange gains and losses that arise are recognised as financial income in the Consolidated Income Statement.

3.18. Classification of current and non-current assets and liabilitiesAssets and liabilities are classified in the Consolidated Statement of Financial Position as current or non-current. Assets and liabilities are classified as current when they are associated with the Company’s normal operating cycle and it is expected that they will be sold, consumed, realised or settled within the normal course of that cycle; if they differ from the aforementioned assets, and are expected to mature, to be sold or settled within one year; if they are held for trading or are cash and cash equivalents whose use is not restricted for more than one year.

The normal operating cycle for all activities is one year.

3.19. Environmental assets and liabilitiesEnvironmental expenses correspond to the company’s environmental activities and are registe-red under “Other operating expenses” in the Consolidated Income Statement in accordance with the accrual principle.

Environmental assets are recorded at acquisition price or production cost, and are depreciated over their useful lives.


Index

35

3.20. Related-party transactionsRelated-party transactions are measured as described above.

The prices of related-party transactions are properly documented; accordingly, the Company’s directors do not consider it likely that significant tax liabilities will arise.

3.21. Provisions Provisions are recognised in the Consolidated Statement of Financial Position when the Com-pany has a present obligation (derived from law, a contract, or an implicit or tacit commitment) as a result of past events and it is considered likely that a quantifiable outflow of resources will be required to settle the obligation.

Provisions are measured at the present value of the best estimate of the amount required to settle the obligation or transfer it to a third party, and adjustments arising due to updating the provision are recognised as a financial expense as they accrue. Provisions falling due within one year that do not have a material financial effect are not discounted. Provisions are reviewed at each closing date of the Consolidated Statement of Financial Position and are adjusted to reflect the current best estimate of the related liability.

3.22. Leases Leases are considered to be financial leases when, based on the economic terms of the arrange-ment, substantially all risks and rewards inherent to ownership of the leased item are transfe-rred to the lessee. All other lease arrangements are classified as operating leases.

The Company as lesseeAssets acquired under financial lease arrangements are recognised, based on their nature, at the fair value of the leased item or, if lower, the present value at the commencement of the lease of the minimum lease payments. A financial liability is recorded for the same amount. Lease pay-ments are apportioned between finance charges and reduction of the lease liability. These assets are depreciated, impaired, and derecognised using the same criteria applied to other assets of a similar nature.Operating lease payments are recognised as expenses in the Consolidated Income Statement when accrued. The Company’s main operating leases relate to vehicles, structures and furniture.

The Company as lessorOperating lease revenues are recognised in consolidated profit and loss when accrued. Direct costs attributable to the contract are recognised as an increase in the value of the leased asset and as an expense over the term of the contract using the same method as for recognising lease revenues.


Index

36



4. Segment reporting

The Group’s information is reported, primarily, by business segment and, secondarily, by geogra-phical segment.

The operating businesses are organised and managed separately in accordance with the nature of the products and services they sell, so that each business segment represents a strategic business unit offering different products and supplying different markets.

There are no other segments in the Consolidated Financial Statements apart from the ones that are identified.

As regards the Medical and Orthopaedic Supplies segment, the Group adopts all strategic and operating decisions on a joint basis for all activities in this area; accordingly, there is no additio-nal breakdown for this segment.

4.1. Business segments

a) Medical and orthopaedic suppliesThe “medical supplies” business focuses on selling a number of products grouped into the following families:

Cardiovascular. Reconstructive plastic surgery. Critical. Endosurgery. Otorhinolaryngology. Prim Spa. Prim products. Traumatology and neurosurgery.

The “orthopaedic supplies” business consists of the production and distribution of orthopaedic products and technical aids and the sale of applied orthopaedic products and technical aids of different types, including articulated electric beds, trolleys, patient hoists, chairs, cupboards and all types of accessories and furniture, particularly geriatric.

As a result, there is a clear difference between the Medical Supplies and Orthopaedic Supplies activities.

Although internally the two activities are not considered to be separate segments, we do have separate information on revenues for each one.

|4|Segment reporting

Index

37

The breakdown is as follows:

We do not have the necessary information to distinguish between the assets and results of the Medical-Hospital and the Medical and Orthopaedic Supplies segments.

b) Real estate segmentThe real estate business involves all types of real estate transactions relating to the purchase and sale of rural and urban properties, exploitation of properties, repair and refurbishment of buildings, construction of industrial buildings, and the sale of properties of all types.

The only Group-owned property in the real estate segment is the property owned by the parent company located at avenida Llano Castellano, 43 (Madrid).This property, which is the former headquarters of the parent company, was refurbished for lease to third parties and became operational in the year ended 31 December 2006.

4.2. Geographical segmentsThe Group’s geographical segments are based on the customers’ location.

There are two geographical segments:

a) Spain: This includes commercial activity with customers in Spain.b) International: This includes commercial activity with customers in European Union countries other than Spain, and in other non-EU countries.

4.3. Segment figuresThe table below presents information about the revenues and income and certain assets and liabilities corresponding to the Group’s business segments in the years ended 31 December 2010 and 2009.

31.12.2010 31.12.2009

Segment I. (Medical-Hospital) 94,007,348.58 94,318,752.13

Medical Supply Activity 73,784,427.87 70,416,476.07

Orthopaedic Supply Activity 20,222,920.71 23,902,276.06

Segment II. (Real Estate) 1,104,492.36 1,177,866.72

REVENUES 95,111,840.84 95,496,618.85


Index

38



a) Year ended 31 December 2010:

Segment I: Medical-hospital segment

Segment II: Real estate segment

(euro) Segment I Segment II Total

Net sales

External customers 94,007,348.58 1,104,492.26 95,111,840.84

Between segments -178,335.51 178,335.51 0.00

Other revenues 128,611.73 310,256.16 438,867.89

Change in inventories -78,205.65 0.00 -78,205.65

Segment revenues 93,879,419.15 1,593,083.93 95,472,503.08

Segment net operating income 14,041,773.59 816,302.36 14,858,075.95

Net financial income 1,696,815.83 0.00 1,696,815.83

Impairment of other financial assets -1,631,642.22 0.00 -1,631,642.22

Share in income of companies 50,551.00 0.00 50,551.00

carried by the equity method 110,923.60 0.00 110,923.60

Other revenues and expenses 14,268,421.80 816,302.36 15,084,724.16

Corporate income tax -6,552,763.44

Minority interest 0.00

Income for the year attributableto the parent company

8,531,960.72

Segment assets and liabilities

Investment in associated companies 481,641.67 0.00 481,641.67

Other assets of the segment 106,410,314.37 3,859,115.60 110,269,429.97

Total assets 106,891,956.04 3,859,115.60 110,751,071.64

Total liabilities 40,537,843.16 2,734,877.99 43,272,721.15

Other segment information

Investment in assets

Intangible assets 317,900.57 0.00 317,900.57

Property, plant & equipment 2,354,378.13 0.00 2,354,378.13

Investment property 0.00 29,266.64 29,266.64


Period depreciation -2,259,912.05 -303,371.72 -2,563,283.77


Index

39

b) Year ended 31 December 2009:

Segment I: Medical-hospital segment

Segment II: Real estate segment


Net sales


Between segments -176,351.64 176,351.64 0.00

Other revenues 119,376.77 281,637.16 401,013.93



Segment net operating income 13,987,226.82 855,037.40 14,842,264.22

Net financial income 278,232.51 0.00 278,232.51


Segment I Segment II Total

Share in income of companies carried by the equity method

565,883.00 0.00 565,883.00

Other revenues and expenses 99,188.12 0.00 99,188.12

Income before taxes 13,162,753.21 855,037.40 14,017,790.61

Corporate income tax -3,922,376.26

Minority interest -60,492.00

Income for the year attributableto the parent company

10,034,922.35

Segment assets and liabilities

Investment in associated companies 5,505,824.75 0.00 5,505,824.75

Other assets of the segment 90,358,491.47 4,111,098.44 94,469,589.91

Total assets 95,864,316.22 4,111,098.44 99,975,414.66

Total liabilities 33,693,186.42 4,063,686.29 37,756,872.71



Intangible assets 115,213.98 0.00 115,213.98

Property, plant & equipment 2,393,389.11 0.00 2,393,389.11

Investment property 0.00 0.00 0.00


Period depreciation -2,238,107.77 -302,001.81 -2,540,109.58


Index

40



4.4. Geographical segmentsThe table below presents information about the revenues and income and certain assets and liabilities corresponding to the Group’s geographical segments in the years ended 31 December 2010 and 2009.

a) Year ended 31 December 2010

b) Year ended 31 December 2009

Segment I: Spain

Segment II: Rest of European Union and other countries


Net sales


Between segments 0.00 0.00 0.00

Other operating revenues 438,867.89 0.00 438,867.89



Segment assets

Total assets 107,293,719.53 3,457,352.11 110,751,071.64



Intangible assets (Note 5) 317,900.57 0.00 317,900.57

Property, plant & equipment (Note 6) 2,354,378.13 0.00 2,354,378.13

Investment property (Note 7) 29,266.64 0.00 29,266.64

Total 2,701,545.34 0.00 2,701,545.34

Segment I: Spain

Segment II: Rest of European Union and other countries


Net sales


Between segments 0.00 0.00 0.00

Other operating revenues 401,013.93 0.00 401,013.93



Segment assets

Total assets 96,972,465.38 3,002,949.28 99,975,414.66



Intangible assets (Note 5) 115,213.98 0.00 115,213.98

Property, plant & equipment (Note 6) 2,393,389.11 0.00 2,393,389.11

Investment property 0.00 0.00 0.00

Total 2,508,603.09 0.00 2,508,603.09


Index

41

5. Intangible assets

The variations in 2010 and 2009 are as follows:



The fully amortised items in use under this heading amounted to 1,387,238.16 euro at 31 December 2010 and 1,328,520.54 euro at 31 December 2009.

|5|Intangible assets

(euro) BALANCE31.12.09

RECOGNITION /PROVISION

DERECOGNI-TION

BALANCE31.12.10

COST

Computer software 429,793.13 247,900.57 -2,200.53 675,493.17

Concessions, patents, licences, brands and similar

970,664.05 - - 970,664.05

Distribution rights 703,184.16 - - 703,184.16

Other intangible assets 121,425.00 70,000.00 -76,425.00 115,000.00

TOTAL 2,225,066.34 317,900.57 -78,625.23 2,464,341.38

AMORTISATION

Computer software -367,493.20 -60,669.44 2,200.53 -425,962.11


-966,077.05 - - -966,077.05

Distribution rights -703,184.16 - - -703,184.16

Other intangible assets -76,425.00 -70,000.00 76,425.00 -70,000.00

TOTAL -2,113,179.41 -130,669.44 78,625.53 -2,165,223.32

NET INTANGIBLE ASSETS 111,886.93 299,118.06

(euro) BALANCE31.12.08

RECOGNITION /PROVISION

DERECOGNI-TION

BALANCE31.12.09

COST

Computer software 401,004.15 28,788.98 - 429,793.13


960,664.05 10,000 - 970,664.05

Distribution rights 703,184.16 - - 703,184.16

Other intangible assets 128,859.00 76,425.00 -83,859.00 121,425.00

TOTAL 2,193,711.36 115,213.98 -83,859.00 2,225,066.34

AMORTISATION

Computer software -333,152.91 -34,340.29 - -367,493.20


-949,680.05 -16,397.00 - -966,077.05

Distribution rights -703,184.16 - - -703,184.16

Other intangible assets -83,859.00 -76,425.00 83,859.00 -76,425.00

TOTAL -2,069,876.12 -127,162.29 83,859.00 -2,113,179.41

NET INTANGIBLE ASSETS 123,835.24 111,886.93

Index

42



6. Property, plant and equipment




|6|Property, plant and equipment

(euro)BALANCE31.12.09

TRANSFERSRECOGNITION /

PROVISIONS

DERECOGNI-TION /

REDUCTIONS

BALANCE31.12.10

COST

Land and other structures 7,175,285.71 0.00 0.00 0.00 7,175,285.71

Plant and machinery 1,382,078.15 0.00 266,321.48 -510.86 1,647,888.77

Other installations, tools and furniture

17,249,390.01 0.00 2,013,564.56 -36,758.97 19,226,195.6

Other assets 1,423,367.88 0.00 74,492.09 -47,117.23 1,450,742.74

TOTAL 27,230,121.75 0.00 2,354,378.13 -84,387.06 29,500,112.82

DEPRECIATION 0.0

Land and other structures -1,705,936.71 0.00 -117,565.45 0.00 -1,823,502.16

Plant and machinery -950,766.71 0.00 -74,338.29 0.00 -1,025,105.00


-12,016,295.10 0.00 -1,851,026.42 10,364.01 -13,856,957.51

Other assets -1,156,026.74 0.00 -108,434.69 43,322.23 -1,221,139.20

TOTAL -15,829,025.26 0.00 -2,151,364.85 53,686.24 -17,926,703.87

PROPERTY, PLANT AND EQUIPMENT, NET

11,401,096.49 11,573,408.95

(euro)BALANCE31.12.08

TRANSFERSRECOGNITION /

PROVISIONS

DERECOGNI-TION /

REDUCTIONS

BALANCE31.12.09

COST

Land and other structures 7,175,285.71 0.00 0.00 0.00 7,175,285.71

Plant and machinery 1,308,440.61 0.00 73,637.54 0.00 1,382,078.15


15,094,696.80 0.00 2,248,001.25 -93,308.04 17,249,390.01

Other assets 1,390,854.89 0.00 71,750.32 -39,237.33 1,423,367.88

TOTAL 24,969,278.01 0.00 2,393,389.11 -132,545.37 27,230,121.75

DEPRECIATION

Land and other structures -1,581,065.95 0.00 -124,870.76 0.00 -1,705,936.71

Plant and machinery -876,167.50 0.00 -74,599.21 0.00 -950,766.71


-10,286,842.81 0.00 -1,822,760.33 93,308.04 -12,016,295.10

Other assets -1,059,316.23 0.00 -135,947.84 39,237.33 -1,156,026.74

TOTAL -13,803,392.49 0.00 -2,158,178.14 132,545.37 -15,829,025.26

PROPERTY, PLANT AND EQUIPMENT, NET

11,165,885.52 11,401,096.49

Index

43

6.1. Revaluation of property, plant and equipment The Parent Company availed itself of the asset revaluations allowed under Royal Decree-Law 7/1996, dated 7 June, and included the corresponding revaluation entries in the 1996 Consoli-dated Statement of Financial Position. The increase in value or net capital gain was calculated using the revaluation coefficients de-pending on the year of acquisition of the asset. Those coefficients were applied to both the cost and the accumulated depreciation, and the following values were obtained:

The undepreciated amount of the revaluation was 81,977.19 euro at 31 December 2010 and 93,420,51 euro at 31 December 2009. The effect of the revaluation on the following year’s depreciation is not material.

6.2. Items under finance leaseAt 31 December 2009, the Group had certain assets under finance lease. Those leases expired in 2010, with the result that the company did not have any assets under finance lease at 31 December 2010.

Lease amounts at the end of 2009 were as follows:

The foregoing amounts relate to contracts signed by LUGA SUMINISTROS MÉDICOS, S.L. in con-nection with the land and building where it carries on its activity. Under IFRS, those amounts are presented in the financial statements on the basis of their nature, for which reason they are disclosed here under property, plant and equipment.

In November 2010, the call option envisaged in that contract was exercised for the amount of 575,035.30 euro. As a result, no group company had any assets under finance lease at 31 December 2010.

Future finance lease payments at 31 December 2009 were as follows:

The present value of the minimum net payments was follows:

The discount rate used to obtain the present value was the equivalent annual rate of each of the Group’s lease contracts.

(euro)

Revaluation of cost 1,673,663

Revaluation of depreciation -301,322

Net capital gain (before tax charge) 1,372,341

31 December 2009 (euro)

Cost Accum. depreciation Net value

Land and structures 312,543.47 -78,262.47 234,281.00

TOTAL 312,543.47 -78,262.47 234,281.00

Under 1 year 1 to 5 years Over 5 years TOTAL

At 31 December 2009 46,425.64 0.00 0.00 46,425.64


At 31 December 2009 44,922.21 0.00 0.00 44,922.21


Index

44



6.3. Fully depreciated assetsThe Company has a number of fully depreciated items of property, plant and equipment which are not obsolete and are still in use.

The detail of the amount is as follows:

6.4. Impairment analysisAt 31 December 2010, the Group analysed whether there were any indicators of asset impair-ment. Since no such indicators were observed, it was not considered necessary to perform impairment tests.

7. Investment property




|7|Investment property

(euro)

2010 2009

Structures 653,404.99 422,684.54

Installations, machinery, tools and furniture 9,439,307.24 8,321,623.09

Other property, plant and equipment 82,768.07 86,140.06

TOTAL 10,175,480.30 8,830,447.69

BALANCE31.12.09

RECOGNITION /PROVISIONS

DERECOGNI-TION /

REDUCTIONS

BALANCE31.12.10

COST

Land and other structures 4,235,065.34 0.00 0.00 4,235,065.34

Other installations, tools and furniture 1,703,374.11 29,266.64 0.00 1,732,640.75

TOTAL 5,938,439.45 29,266.64 0.0 5,967,706.09

DEPRECIATION

Land and other structures -606,860.80 -75,688.56 0.00 -682,549.36

Other installations, tools and furniture -1,220,480.21 -205,560.92 0.00 -1,426,041.13

TOTAL -1,827,341.01 -281,249.48 0.00 -2,108,590.49

INVESTMENT PROPERTY 4,111,098.44 3,859,115.60

BALANCE31.12.08

RECOGNITION /PROVISIONS

DERECOGNI-TION /

REDUCTIONS

BALANCE31.12.09

COST

Land and other structures 4,235,065.34 0.00 0.00 4,235,065.34

Other installations, tools and furniture 1,792,488.25 0.00 -89,114.14 1,703,374.11

TOTAL 6,027,553.59 0.00 -89,114.14 5,938,439.45

DEPRECIATION

Land and other structures -531,172.24 -75,688.56 0.00 -606,860.80

Other installations, tools and furniture -1,041,399.62 -179,080.59 0.00 -1,220,480.21

TOTAL -1,572,571.86 -254,769.15 0.00 -1,827,341.01

INVESTMENT PROPERTY 4,457,981.73 4,111,098.44


Index

45

The Group’s real estate assets correspond to a building in Avenida de Llano Castellano nº 43 (Madrid) that is for lease to third parties.

The latest available appraisal valued that property at 20,133 thousand euro and there are no indications of any loss in value since that date.

In 2003, the Parent Company arranged a mortgage loan for 12,020,240 euro using that property as collateral (see note 16).

Analysis of impairment and fair value estimate at year-endAs a result of annual revenues generated by the property (1,104 thousand euro in 2010 and 1,178 thousand euro in 2009) through leases currently in force, based on the maturity of and rent from those contracts and the difference between the property’s carrying value (3,859,115.60 euro at 31 December 2010 and 4,111,098.44 euro at December 31, 2011) and the last appraisal (20,133 thousand euro), another appraisal was not considered necessary.

The previous appraisal (20,133 thousand euro) was performed by an independent expert on 25 November 2002. That appraisal was performed by Mr Jesús Ortega López, who drafted the appraisal report with number 2002-041615-01-01/2002-011759/00, which conforms to the re-gulation on property valuation under the Ministerial Order of 30 November 1994; the appraisal value was obtained by applying the cost method and the comparison method established under the regulation.

The Group makes estimates and assumptions about the future, and those accounting estimates may differ from actual results.

To determine the fair value of Investment property, the following variables are considered: profile of lessees, future revenue flows, value of the building and its fixed installations, the building’s current condition, and estimates of necessary repairs in the future.

All of this data is collected in the context of the local market where the investment property is located. The compilation of local market data is based primarily on historical series.

Methods and assumptions used to determine the fair value of investment propertyThe main methods and assumptions used to determine the fair value of investment property are detailed below:

The fair value of investment property was estimated at 31 December 2010 using the revenue capitalisation approach. That estimate is based on a number of factors, including current lease terms and estimates of normal market rent and capitalisation rates, using figures based on com-parable data obtained in the real estate market, where figures are available.

Due to the decline in transactions, and, as a result, in the market data available for 2010, esti-mating the fair value of investment property required greater reliance on our market knowled-ge and professional judgement and we did not base our estimate exclusively on comparable historical data.


Index

46



Disclosure of operating costs from property investmentsOperating costs associated with the property which generated rent revenues in 2010 totalled 160,013.58 euro (162,017.19 euro in 2009), and operating costs on property which did not generate rent revenues totalled 483,432.48 euro in 2010 (442,449.29 euro in 2009).

Operating costs which generate revenues are costs related to the specific property and, while they are originally borne by Prim, S.A., they are later passed on to tenants (security, cleaning, etc.).

Operating costs which do not generate revenues are those costs related to the specific property, which are originally borne by Prim, S.A. and are not passed on to tenants; the most significant cost is depreciation of the property.

Recognition of accrued revenues from Investment propertiesPrim Group recognises rent revenues on a straight-line basis, in accordance with the rental amounts agreed with the tenants. Information related to the Company’s operating leases is detailed in note 23.1 and 4.3 of these Consolidated Financial Statements.

8. Investment in associates

The detail of the Group’s associates, carried by the equity method, and the variations in 2010 and 2009 are as follows:


“Others” reflects the decline due to the sale of the stake in BBE Healthcare, Ltd. in 2010. The stake was disposed of in November 2010 for 488,533.16 euro.

At that time, the carrying value of the stake at Prim was 275,653.35 euro. As a result, Prim recognised a gain of 212,879.81 euro (Note 23.8)

The decrease in “Others” regarding RESIDENCIAL CDV-16, S.A. is discussed in Note 9 since the investment was reclassified as a non-current financial asset in 2010.

|8|Investment in associates

(euro)

COMPANY Balance31.12.09

Income inthe year

Other Balance31.12.10

Residencial CDV-16, S. A. 4,751,093.74 0.00 -4,751,093.74 0.00

Network Medical Products, Ltd. 458,073.01 50,551.00 -26,982.34 481,641.67

BBE Healthcare, Ltd 296,658.00 0.00 -296,658.00 0.00

TOTAL 5,505,824.75 50,551.00 -5,074,734.08 481,641.67


Index

47


The reduction under “Other” relating to BBE Healthcare Ltd. is due to an impairment loss re-cognised by the parent company amounting to 318,547.00 euro, whereas the figure relating to Residencial CDV-16, S.A. is due mainly to the distribution of dividends out of 2008 income.

The main information about the associates is as follows:



(*) The 2009 income is the best estimate for Residencial CDV-16, S.A. and its subsidiary, E.G. Valmonte, S.L. taken together.

(euro)

COMPANY Balance31.12.08

Income inthe year

Other Balance31.12.09

Residencial CDV-16, S. A. 4,634,112.74 513,134.00 -396,153.00 4,751,093.74

Network Medical Products, Ltd. 426,526.00 50,580.00 -19,032.99 458,073.01

BBE Healthcare, Ltd 607,132.01 2,169.00 -312,643.01 296,658.00

TOTAL 5,667,770.75 565,883.00 -727,829.00 5,505,824.75

(euro)

NetworkHealthcare, Ltd

Assets 1,202,937.53

Liabilities 387,855.30

Income in the year 114,695.00

Revenues 3,630,678.04

(euro)

ResidencialCDV-16, S. A.

BBEHealthcare, Ltd

NetworkHealthcare, Ltd

Assets 11,258,290.00 589,372.00 1,129,784.67

Goodwill 311,152.74 463,503.00 142,499.00

Liabilities 2,730,377.00 76,343.00 477,664.77

Income in the year (*) 1,054,096.00 121,222.00 104,520.62

Revenues 1,662,647.50 437,549.00 2,204,459.05

|8|Investment in associates

Index

48



9. Other non-current financial assets


Prim, S.A. maintains a stake in Residencial DCV-16, S.A. whose acquisition cost was 4,807,636.82 euro.

In 2010, RESIDENCIAL CDV-16, S.A. performed two capital increases, approved by the General Meetings on 26 April 2010 and 22 December 2010 (registered at the Mercantile Register on 22 December 2010 and 10 March 2011, respectively); no Prim Group company participated. Prim’s stake declined from 48.68% to 29.20% as a result of the first increase, and to 10.98% as a result of the second. Consequently, the CDV-16, S.A. stake was reclassified from Investment in associa-ted companies in 2009 to Available-for-sale investment at fair value at 2010 year-end.

As a result of the dilution caused by abstaining from the capital increases, the following valuation adjustments were recognised: 552,441.17 euro from the first capital increase, and 576,017.25 euro from the second, for a total value adjustment of 1,128,458.42 euro.

The amount of these available-for-sale investments was reduced by 1,824,427.35 euro in 2010 as a result of value adjustments by the parent company, as follows:

(*) The 233,372 shares of Scient’X owned by Prim, S.A. were replaced by 397,000 shares of Alphatec as a result of the acquisition of Scient’X by Alphatec on 26 March 2010.

|9|Other non-current financial assets

(euro)

Investmentsavailable for sale

Loans and accountsreceivable

Correction forimpairment

Total

Balance at 31.12.08 2,758,610.76 553,993.24 0.00 3,312,604.00

Recognitions/Provisions 0.00

Period provisions -1,203,576.87 -1,203,576.87

Derecognitions -253,516.97 -253,516.97

Balance at 31.12.09 2,758,610.76 300,476.27 -1,203,576.87 1,855,510.16

Recognitions/Provisions 4,807,636.82 4,807,636.82

Period provisions -1,824,427.35 -1,824,427.35

Derecognitions -23,858.45 -23,858.45

Balance at 31.12.10 7,566,247.58 276,617.82 -3,028,004.22 4,814,861.18

(euro)

Investment to which correction refers Cost of investment 2009 Correction

(Note 23.8)2010 Impairment

(Note 23.8) 2010 Dilution Net carrying value

Acciones Huarte 760.69 0.00 0.00 0.00 760.69

Hesperis Chirurgical 2,400.00 -2,400.00 0.00 0.00 0.00

Alphatec (*) 1,999,998.04 -528,402.87 -669,394.90 0.00 802,200.27

Esta HealthCare 7,500.00 0.00 0.00 0.00 7,500.00

SAS SAFE 166,000.00 -148,984.00 -17,016.00 0.00 0.00

Choice Therapeutics 305,250.31 -268,086.00 0.00 0.00 37,164.31

Tissuemed 276,701.72 -255,704.00 -9,558.03 0.00 11,439.69

Residencial CDV-16 4,807,636.82 0.00 0.00 -1,128,458.42 3,679,178.40

Total 7,566,247.58 -1,203,576.87 -695,968.93 -1,128,458.42 4,538,243.36

Index

49

Valuation adjustments for impairment on equity interests that are available for sale are genera-lly recognised with reference to the net carrying amount of the investees’ equity. The Alphatec stake was calculated by using the company’s share price on the NASDAQ as its fair value.

The amount of these available-for-sale investments was reduced by 1,203,576.87 euro in 2009 as a result of value adjustments by the parent company, as follows:

Valuation adjustments for impairment on equity interests that are available for sale were gene-rally recognised with reference to the net carrying amount of the investees’ equity. In the case of Scient’x, the fair value is taken to be the price of the most recent trade in the share.

The loans and receivables are long-term deposits and guarantees provided by different compa-nies within the Group, primarily Prim, S.A.

This item also includes loans provided to third parties in 2007 by Prim, S.A. (245,500.00 euro for 4 years at 4.5% interest) and Enraf Nonius Ibérica, S.A. (70,407.70 euro for 10 years at interest refe-renced to Euribor).

The balance of the loan granted by Prim in 2007 was reduced by 245,400.00 euro in 2009; the loan was then reclassified to short term and impaired as the company was in bankruptcy proceedings.

10. Goodwill and business combinations

The detail of goodwill in the various CGUs to which it is assigned, and the variations in 2010 and 2009, are as follows:

|10|Goodwill and business combinations

(euro)

Investment to which correction refers Cost of investment Amount of correction Net carrying value

Acciones Huarte 760.69 -0.00 760.69

Hesperis Chirurgical 2,400.00 -2,400.00 0.00

Scientx 1,999,998.04 -528,402.87 1,471,595.17

Esta HealthCare 7,500.00 -0.00 7,500.00

SAS SAFE 166,000.00 -148,984.00 17,016.00

Choice Therapeutics 305,250.31 -268,086.00 37,164.31

Tissuemed 276,701.72 -255,704.00 20,997.72

Total 2,758,610.76 -1,203,576.87 1,555,033.89

GOODWILL (euro)

BALANCE 31.12.09 RECOGNITIONS BALANCE 31.12.10

Luga Suministros Médicos, S.L. 2,228,931.00 - 2,228,931.00

Goodwill 2,228,931.00 - 2,228,931.00

GOODWILL (euro)

BALANCE 31.12.08 RECOGNITIONS BALANCE 31.12.09

Luga Suministros Médicos, S.L. 2,228,931.00 - 2,228,931.00

Goodwill 2,228,931.00 - 2,228,931.00

|9|Other non-current financial assets

Index

50



The goodwill relates entirely to the company Luga Suministros Médicos, S.L., which was acquired at the end of 2005.

The premium paid for the stake in Luga Suministros Médicos, S.L. could not be assigned to spe-cific assets and liabilities of that company and is justified by the synergy that is expected to be obtained. That synergy is due basically to:

Luga Suministros Médicos, S.L. has commercial relations basically with Prim, S.A. and Establecimien-tos Ortopédicos Prim, S.A. They engage in activities that are expected to be complementary in the future. They share many customers, both actual and potential.

Additionally, the Parent Company made a commitment to buy the remainder of Luga’s capital (amounting to 40% at the time of the acquisition). Under the conditions established in the sha-re purchase agreement, the Parent Company is obliged to buy those shares if the sellers exercise their put option within the established times and limits, which are as follows:

The price at which the option was exercised is determined by the previous year’s income and the net asset position of Luga Suministros Médicos, S.L.

In 2010, the company acquired 10% of share capital of Luga Suministros Médicos, S.L. Specifica-lly, Prim, S.A. (parent company) acquired a 9% stake in that company for 517,531.77 euro and its dependent company, Inmobiliaria Catharsis, acquired a 1% stake for 57,503.53 euro.

At year-end, an impairment test of that goodwill was performed by estimating its value in use from projections of cash flow based on the operating results and business projections of Luga Suministros Médicos, S.L. The future operating cash flow for 2011-2015 is estimated assuming a negative growth situation until 2013 and a moderate economic recovery thereafter. Those cash flows were discounted using the weighted average cost of capital (WACC), i.e. 9.00% (8.12% in 2009), based on market interest rates and the risk premium associated with the company’s bu-siness; it is not necessary (in accordance with IFRS) to recognise a provision for the investment in Luga Suministros Médicos, S.L.

The growth rate used to extrapolate projected cash flow beyond the period covered by the most recent budgets is 1.9%.

Estimates were based on projections for the coming years, in view of the current economic si-tuation. The Management of Prim considers an adverse change in the assumptions that would reduce future cash flows to less than the carrying value to be unlikely.

Period maximum % of capital that can be sold in the period

From 1/1/2007 to 30/6/2007 10% (Purchase option already exercised)




TOTAL 40%

|10|Goodwill and business combinations

Index

51

11. Inventories

The detail of this caption at 31 December 2010 and 2009 is as follows:

The variation in the inventory value adjustments was included in the Consolidated Income Statement under “Variation in operating provisions”.

12. Trade and other accounts receivable


The “Trade receivables for sales and services” item contains the collection rights arising from the group’s commercial activity. Customer receivables generally do not earn interest. Nevertheless, where government entities significantly delay the settlement of their debts, interest is claimed, in accordance with current legislation, and is collected in execution of court decision.

The long-term debt is based on the Company’s best estimate of the part of the balance recei-vable from various public health services which is expected to be collected more than one year from the balance sheet date, based on experience and the current difficulties experienced by the regional governments, particularly since the end of 2009. The average periods for collection from various administrations was observed to increase in 2010, which notably increased the amount of debt classified as non-current in comparison with 2009.

|11|Inventories

|12|Trade and other accounts receivable

(euro) BALANCE 31.12.10 BALANCE 31.12.09

Commercial inventories 21,156,024.05 19,624,975.06

Raw materials and other procurements 1,606,626.93 1,760,541.99

Semi-finished products and products in process 529,234.68 528,978.15

Finished products 1,255,032.87 1,333,495.05

Byproducts and waste 0.00 0.00

Supplier advances 760,483.44 362,468.77

Value adjustments -3,186,883.59 -3,238,476.34

Total 22,120,518.38 20,371,982.68


Trade receivables for sales and services 9,701,640.05 7,717,212.73

Total non-current 9,701,640.05 7,717,212.73

Trade receivables for sales and services 56,432,872.92 45,274,339.70

Other receivables -402.42 14,225.90

Personnel receivables 91,271.69 100,588.17

Public authorities (Note 20.3) 58,618.47 116,399.23

Value adjustments -2,503,873.26 -1,894,808.09

Accrual adjustments 0.00 0.00

Total current 54,078,487.40 43,610,744.91

Total 63,780,127.45 51,327,957.64

Index

52



The changes in the value corrections in 2010 are as follows:

13. Other current financial assets

The detail of this caption in the Consolidated Financial Statements at 31 December 2010 and 2009 is as follows:

The largest item is “Other financial assets”. It includes Short-term deposits at various credit institu-tions maturing at over 3 months from the dates they were arranged, which justifies their inclusion under this section of the Consolidated Statement of Financial Position and not under Cash and cash equivalents.

14. Cash and cash equivalents


15. Equity

15.1. Share capitalAll the shares are listed on the Madrid Stock Exchange; they have also been listed on the Valen-cia Stock Exchange since 8 February 2005.

On 14 March 2005, the National Securities Market Commission (CNMV) notified Prim that it had decided that Prim’s shares will be traded by the fixing mechanism. The change of trading method took effect on 1 April 2005.

|13|Other current financial assets

|14|Cash and cash equivalents

|15|Equity

Beginning balance -1,894,808.09

Provisions -626,929.02

Releases 17,863.85

Ending balance -2,503,873.26


Short-term financial assets 107,291.93 557,116.49

Loans to companies 11,198.93 11,023.49

Debt securities 11,093.00 11,093.00

Other financial assets 85,000.00 535,000.00

Short-term accruals 38,205.73 33,987.64

Total 145,497.66 591,104.13


Cash on hand in domestic currency 49,078.15 48,458.18

Cash on hand in foreign currency 1,047.00 24,265.11

Cash at banks in domestic currency 805,974.40 1,527,292.60

Cash at banks in foreign currency 591,752.14 870,006.55

Total 1,447,851.69 2,470,022.44

|12|Trade and other accounts receivable

Index

53

On 1 June 2005, PRIM, S.A.’s shares commenced trading on the electronic market.

As of 31 December 2010 and 2009, the capital stock of Prim, S.A. amounted to 4,336,781.00 euro, represented by 17,347,124 shares of 0.25 euro par value each, all of which were fully paid and had the same rights and obligations. The shares are represented by book entries.

Resolutions by the Company’s governing bodies in 2010 and 2009 that affected equity were as follows:

30 March 2009The Board of Directors approved the Annual Corporate Governance Report and authorised the Company’s separate and consolidated financial statements.

20 June 2009The General Shareholders’ Meeting adopted the following resolutions:

Approve the financial statement and directors’ report for the parent company and consolida-ted group and discharge the Board of Directors from liability with respect to its performance in the year.

Approve the allocation of 8,143,519.85 euro to the Parent Company’s reserves and distribute a dividend in the amount of 3,000,000 euro. Pay a supplementary dividend of 0.125858 euro gross on 10 July.

Re-appoint Mr Carlos Rodríguez Álvarez as director for 6 years. Appoint auditors of the company and the consolidated group. Authorise the Board of Directors to acquire own shares and subsidiaries to acquire shares of the parent company, in accordance with legislation in force.

26 November 2009The Board of Directors of the parent company declared a dividend of 0.05 euro gross per share out of 2009 earnings, payable to the 17,347,124 shares outstanding at that time. It was decided to pay the dividend on 29 December 2009. The dividend amounts to less than the maximum limit established by current law with regard to income that is distributable after year-end.

The provisional accounting statement drawn up by the Directors in compliance with Article 215 of the Consolidated Text of the Corporations Law, evidencing the existence of sufficient liquidity to distribute that dividend, is as follows:

(euro)

Cash and cash equivalents at 29 December 2009 1,625,207.20

Balance available in credit lines 7,278,520.67

Projected collections less projected payments in the period 2,998,295.42

Projected cash and cash equivalents and credit lines at 29 December 2010 11,902,023.29

Proposed dividend 867,356.20

Income obtained since last year (January-December 2009) 12,744,877.88

Estimated tax payable on that income -3,603,537.00

Total 9,141,340.88

Proposed dividend 867,356.20

|15|Equity

Index

54



25 March 2010The Board of Directors approved the full text of the Annual Corporate Governance Report for 2009.

It also authorised the financial statements, directors’ report, and distribution of income for the Company and the Consolidated Group, for 2009, and proposed to submit them to the General Meeting of Shareholders for approval. It also approved the delivery of all documents to the appointed auditors.

19 June 2010The General Meeting of Shareholders resolved:

To approve the Separate financial statements (balance sheet, income statement, cash flow statement, and notes to the financial statements) the Separate Directors’ Report, the Consoli-dated financial statements for 2009, and a gross dividend payment of 3,300,000.00 euro. The interim dividend was paid in December 2009 and the remainder (2,432,643.80) will be paid on 9 July 2010. The remaining profit (5,841,341.12 euro) will be allocated to Voluntary reserves.

To approve the Board of Directors’ performance in 2009. To reappoint Bartal Inversiones, S.L., represented by Mr Andrés Estaire Álvarez, as member of the Board for a 6-year term.

To reappoint Mr Juan José Pérez de Mendezona as a member of the Board for a 6-year term. To amend article 24 of the Articles of Association. To authorise the Board of Directors to acquire own shares and to authorise subsidiaries to acquire, by any legal means, shares of the Parent company, in line with the limits and require-ments set out in article 75 and additional provision 1.2 of the consolidated text of the Spanish Corporations Act and other related legislation. The maximum number of shares to be acquired was set at 10% of capital stock, at a price of at least 1 euro and at most 50 euro.

To appoint auditors of the Company and the Consolidated group for 2010.

15.2. Reserve for amortised capitalIn compliance with current legislation, the Group has recognised reserves for the amount by which capital was reduced in preceding years. Under current legislation, this reserve is restricted. The detail of the reserve, in terms of the years in which it was recorded, is as follows:

15.3. Legal reserve and Reserve for own sharesThis reserve has reached the required level of 20% of capital stock. In accordance with the Spanish Capital Companies Act, the balance of this reserve may only be used to offset losses in the income statement if there are no other unrestricted reserves available for this purpose, or to increase capital stock, provided that its balance is not reduced to less than 10% of the increased amount of capital stock.

Year of capital reduction (euro)

1997 774,103.96

2001 362,861.00

2002 119,850.00

TOTAL 1,256,814.96

|15|Equity

Index

55

15.4. Revaluation reserveThe balance of this item is the Revaluation Reserve under Royal Decree-Law 7/1996, dated 7 June, which was included in the 1996 Consolidated Statement of Financial Position and is the result of revaluing the Parent Company’s property, plant and equipment in accordance with the regulations governing those transactions, less the 3% tax charge applied to the revaluations.

The revaluation entries and the balance of this reserve were approved by the tax inspection authorities on 24 November 1998. From the date of approval of the reserve, it may be used to offset book losses, increase capital stock at the company, or, from 31 December 2006 (ten years after the date of the balance sheet disclosing the revaluation), it may be transferred to unres-tricted reserves.

The detail of the Revaluation Reserve is as follows:

15.5. Own shares




Own shares represented the following percentages of total outstanding shares at 31 December 2010 and 2009:

(euro) BALANCE 31.12.09 CHANGES BALANCE 31.12.10

Revaluation of property, plant and equipment (note 6) 596,399.45 0.00 596,399.45

Tax charge (3% of the revaluation) -17,891.98 0.00 -17,891.98

Total 578,507.47 0.00 578,507.47

(euro)

Number of securities Measured at cost

Situation at 31 December 2009 305,412.00 2,520,146.45

Acquisitions 202,525.00 1,341,968.18

Decreases -95,843.00 -758,504.70


(euro)

Number of securities Measured at cost


Acquisitions 163,200.00 1,108,287.29

Decreases -230,195.00 -1,952,353.24


31.12.2009 31.12.2010

No. of treasury shares 305,412 412,094

Total no. of outstanding shares 17,347,124 17,347,124

Treasury shares as % of total 1.76% 2.38%

|15|Equity

Index

56



Own shares were sold at a loss of 376,758.90 euro in 2009 and a loss of 128,370.71 euro in 2010.

15.6. Reserves at fully consolidated companiesThe detail of this item for the years ended 31 December 2010 and 2009 is as follows:



Reserves at fully consolidated companies include the legal reserve of fully consolidated compa-nies, which cannot be treated as unrestricted.

15.7. Distribution of income for the year attributed to equity holders of the parent

The Parent Company will propose that its Shareholders’ Meeting approve the following distribu-tion of income:

(euro)

E.O.P.S. A.

Enraf NoniusIbérica . S. A.

SiditemedicS. L.

Enraf NoniusIbérica Portugal.

Lda

Luga SuministrosMédicos S. L.

InmobiliariaCatharsis. S. A.

Total

Legal reserve 102,170.03 79,333.60 607.01 15,124.85 1,202.02 23,642.25 222,079.76

Other reserves -680,907.03 2,907,605.40 574,070.99 287,382.15 -1,121,038.02 126,849.75 2,093,963.24

TOTAL -578,737.00 2,986,939.00 574,678.00 302,507.00 -1,119,836.00 150,492.00 2,316,043.00

(euro)

E.O.P.S. A.

Enraf NoniusIbérica . S. A.

SiditemedicS. L.

Enraf NoniusIbérica Portugal.

Lda

Luga SuministrosMédicos S. L.

InmobiliariaCatharsis. S. A.

Total

Legal reserve 102,170.03 79,333.60 607.01 9,171.37 1,202.02 23,642.25 216,126.28

Other reserves 149,501.97 2,892,164.40 574,363.99 242,617.63 -616,733.36 126,849.75 3,368,764.38

TOTAL 251,672.00 2,971,498.00 574,971.00 251,789.00 -615,531.34 150,492.00 3,584,890.66

DISTRIBUTION BASIS DISTRIBUTION

Income for the year 8,531,960.72 Dividends 3,300,000.00

Voluntary reserve 5,231,960.72

TOTAL 8,531,960.72 8,531,960.72

|15|Equity

Index

57

16. Interest-bearing debt

16.1. Non-current debtThe detail of, and net changes in, the non-current loans during 2010 and 2009 are as follows:



16.1.1. Credit linesThese are credit lines in euro arranged with various banks, which accrue interest at Euribor plus a spread.

The total amount not drawn against these long-term credit lines was 1,813,134.97 euro at 31 December 2010 and 3,484,652.70 euro at 31 December 2009.

At 31 December 2010, the total limit of the credit lines is 6,803,030.25 euro, which will be redu-ced according to the following schedule:

16.1.2. Mortgage loanOn 31 July 2001, the Parent Company arranged a mortgage loan for 7,212,145.25 euro, provi-ding the building described in Note 7 as collateral. That loan was expanded by 4,808,095 euro in January 2003, which is also secured by that property, so that the available limit increased to 12,020,240 euro.

Other significant features of the loan are as follows:

|16|Interest-bearing debt

(euro) 31/12/09 Recognitions Decreases 31/12/10

Credit lines 2,515,347.30 42,286,511.26 -39,811,963.28 4,989,895.28

Mortgage loan 4,063,686.29 0.00 -1,328,808.30 2,734,877.99

Other loans 3,311,870.13 4,792,059.10 -2,405,149.00 5,698,780.23

Total 9,890,903.72 47,078,570.36 -43,545,920.58 13,423,553.50

(euro) 31/12/08 Recognitions Decreases 31/12/09

Credit lines 4,853,397.05 16,717,023.87 -19,055,073.62 2,515,347.30

Mortgage loan 5,367,388.49 0.00 -1,303,702.20 4,063,686.29

Other loans 3,607,130.34 2,000,000.00 -2,295,260.21 3,311,870.13

Total 13,827,915.88 18,717,023.87 -22,654,036.03 9,890,903.72

Year (euro)

2012 4,803,030.25

2013 1,000,000.00

2014 and thereafter 1,000,000.00

TOTAL 6,803,030.25

Repayment period - The repayment deadline is 147 months after the date of signature, with a grace period from that date until 31 October 2003.

- Repayment is to be in 40 quarterly instalments from 31 October 2003.

Interests - The interest rate in the first year was 3.517% per annum.- For the remainder of the loan period, the interest rate is established at the

one-year interbank reference rate in euro plus 0.5 points.

Index

58



The detail of maturity of this loan at 31 December 2010 is as follows:

16.1.3. Other non-current interest-bearing loansIn 2005, this liability item in the Consolidated Statement of Financial Position was increased considerably as Prim, S.A. arranged two loans, for 4,500,000 euro each, with different banks, to finance operations. An amount of 1,370,275.45 euro was repaid against these loans in 2009 and 1,381,730.93 euro in 2010.

In 2008, another loan was arranged for 1,500,000 euro repayable over the following years, 2009, 2010 and 2011; 487,009.86 were repaid in 2009 and 503,105.98 euro in 2010.

In 2009, another loan was arranged for 2,000,000 euro repayable between 2009 and 2014; 190,086.17 euro were repaid in 2009 and 390,915.13 euro in 2010.

Three loans were arranged in 2010 for 2,500,000.00 euro, 592,500.00 euro and 2,500,000.00 euro with different banks, to finance operations. Repayment will begin in 2011.

The detail of these payments made during the year and the amounts payable in future years is as follows:

At 31 December 2010, the “Interest-bearing loans” item under non-current liabilities included 697,678.20 euro relating to loan I, 1,022,590.69 euro relating to loan IV, 1,688,848.39 euro re-lating to loan V, 592,500.00 euro relating to loan VI, and 1,697,162.95 euro relating to loan VII, making a total of 5,698,780.23 euro.

Year (euro)

2012 1,354,397.85

2013 1,380,480.14

TOTAL 2,734,877.99

Loan I Loans II Loans III Loans IV Loans V Loans VI Loans VII TotalInitial principal 4.500.000,00 4.500.000,00 1.500.000,00 2.000.000,00 2.500.000,00 592.500,00 2.500.000,00 18.092.500,00

Starting date 2005 2005 2008 2009 2011 2012 2011

Maturity date 2012 2010 2011 2014 2013 2017 2013

Instalments Quarterly Half-yearly Quarterly Quarterly Quarterly Monthly Quarterly

InterestEuribor plus a

spreadEuribor plus a






spread

2006 584,595.25 1,687,500.00 0.00 0.00 0.00 0.00 0.00 2,272,095.25

2007 583,877.10 703,125.00 0.00 0.00 0.00 0.00 0.00 1,287,002.10

2008 601,124.95 703,125.00 0.00 0.00 0.00 0.00 0.00 1,304,249.95

2009 667,150.45 703,125.00 487,009.86 190,086.17 0.00 0.00 0.00 2,047,371.48

2010 678,605.93 703,125.00 503,105.98 390,915.13 0.00 0.00 0.00 2,275,752.04

I. Amount repaid 3,115,353.68 4,500,000.00 990,115.84 581,001.30 0.00 0.00 0.00 9,186,470.82

2011 686,968.12 0.00 509,884.16 396,408.01 811,151.61 0.00 802,837.05 3,207,248.95

II. Maturing in the short term

686,968.12 0.00 509,884.16 396,408.01 811,151.61 0.00 802,837.05 3,207,248.95

2012 697,678.20 0.00 0.00 403,773.45 833,134.76 19,750.00 832,956.73 2,787,293.14

2013 0.00 0.00 0.00 410,472.96 855,713.63 118,500.00 864,206.22 2,248,892.81

2014 0.00 0.00 0.00 208,344.28 0.00 118,500.00 0.00 326,844.28

2015 and thereafter 0.00 0.00 0.00 0.00 0.00 335,750.00 0.00 335,750.00

III. Maturing in the long term

697,678.20 0.00 0.00 1,022,590.69 1,688,848.39 592,500.00 1,697,162.95 5,698,780.23

Total (I+II+III) 4,500,000.00 4,500,000.00 1,500,000.00 2,000,000.00 2,500,000.00 592,500.00 2,500,000.00 18,092,500.00


Index

59

At 31 December 2009, the “Interest-bearing loans” item under non-current liabilities included 1,382,837.36 euro relating to loan I, 509,819.61 euro relating to loan III and 1,419,213.16 euro relating to loan IV, making a total of 3,311,870.13 euro. Those amounts are shown in the line entitled “III. Long-term maturities” in the preceding table.

16.2. Current debtsThis item basically includes the amounts maturing in the short term of the aforementioned loans and unmatured discounted bills and the amounts drawn on short-term credit lines, the latter amounting to 4,407,368.94 euro in 2009 and 4,095,339.15 euro in 2010 (Note 21.1).

The amount not drawn on short-term credit lines was 3,795,661.31 euro at 31 December 2009 and 2,804,660.85 euro at 31 December 2010.

The interest accrued but not matured on bank loans amounted to 43,427.17 euro at 31 Dec-ember 2009 and 71,667.80 euro at 31 December 2010, and is classified under “Interest-bearing loans” under current liabilities.

The breakdown of short-term debt, as shown also in point 19.1, is as follows:

17. Other non-current liabilities

The detail of, and changes in, this caption in 2010 and 2009 is as follows:

17.1. Other liabilitiesThe balance at 31 December 2009 (273,756.75 euro) included the debt to a third party for the acquisition of distribution rights by Enraf Nonius Ibérica, S.A.; it matures in at most 10 years from the date of the agreement (17 November 1997). Since it matured, this agreement has been renewed tacitly each year. The outstanding balance at 31 December 2010 was 223,596.95 euro.

This item in the Consolidated Statement of Financial Position also includes 172,764.60 euro of long-term deposits received by the Parent Company in connection with leases of its investment property (the outstanding balance at 31 December 2009 was 191,043.60 euro).

In 2010 there were no significant additions in the Other liabilities heading.

|17|Other non-current liabilities

(euro) 31/12/2009 31/12/2010

Short-term credit lines 4,407,368.94 4,095,339.15

Mortgage loan 1,303,702.20 1,328,808.30

Discounted notes 1,243,480.80 1,731,655.24

Short-term interest on debt 43,427.17 71,667.80

Other loans 2,620,231.93 3,207,248.95

9,618,211.04 10,434,719.44

(euro) Other liabilities(17.1)

Provision for taxes(17.3)

Future payments for the purchase of shares (17.2)

TOTAL

Balance at 31.12.08 504,546.11 0.00 894,695.62 1,399,241.73

Recognitions 15,649.20 0.00 0.00 15,649.20

Decreases -55,394.91 0.00 -894,695.62 -950,090.53

Balance at 31.12.09 464,800.40 0.00 0.00 464,800.40

Recognitions 0.00 2,400,000.00 0.00 2,400,000.00

Decreases -68,438.80 0.00 0.00 -68,438.80

Balance at 31.12.10 393,361.60 2,400,000.00 0.00 2,796,361.60


Index

60



17.2. Future payments for the purchase of sharesThe balance of this item at the end of 2008 is the estimated present value of the pay-ments to be made between 2009 and 2010 under the minority shareholders’ put option on 20% of Luga Suministros Médicos, S.L., which was exercised in both years (see note 10). No long-term debt was recognised under this heading at 2009 year-end since the 2009 payment was made and the amount payable in 2010, which was actually paid in 2010, was reclassified to current liabilities in the Statement of Consolidated Financial Position for the year ended 31 December 2009.

17.3. Provisions for taxesThe tax audit for the fiscal years 2006 and 2007 has not yet concluded, which may have an impact on Prim, S.A. and Enraf Nonius Ibérica, S.A. However, in view of possible contingencies, the Board of Directors adopted a diligent approach to risk management and recognised a pro-vision to cover incidents arising in connection with the above-mentioned years and any other years open for tax inspection. The provision for all of the above-mentioned years amounts to 1,900,000.00 euro for Prim, S.A. and 500,000.00 euro for Enraf Nonius Ibérica, S.A.

The provision in 2010, amounting to 2,400,000.00 euro, is booked under Income tax in the Con-solidated Financial Statement together with the tax expense accrued in 2010.

18. Non-current deferred tax liabilities

This caption refers to outstanding corporate income tax which has been deferred under the regulations governing the reinvestment of capital gains on the disposal of intangible assets and financial investments in 1996, 1997 and 1999.

In accordance with the applicable tax legislation, future payments of this deferred debt to the Administration will be made in accordance with the depreciation of the assets in which the gains were reinvested, in some cases, and by an increase of one-seventh on the originally defe-rred amount, in other cases. It is estimated that approximately 11,965.09 euro will be paid next year.

The net increase in 2010 (37,749.50 euro) is attributable to the decline in liabilities described above (10,533.97 euro).

|18|Non-current deferred tax liabilities (euro)

Reinvestment TOTALBalance at 31.12.08 216,184.33 216,184.33

Recognitions

Decreases -38,331.83 -38,331.83

Balance at 31.12.09 177,852.50 177,852.50

Recognitions

Decreases -10,533.97 -10,533.97

Balance at 31.12.10 167,318.53 167,318.53

|17|Other non-current liabilities

Index

61

19. Trade and other accounts payable

20. Tax situation

The corporate income tax expense is calculated as follows:

(1) The tax rate in 2010 and 2009 was 30.00% for all companies except ENRAF NONIUS IBÉRICA PORTUGAL, LDA, which was subject to tax at 26.5%.(2) The “Other variations” item includes the provisions for taxes in 2010, and detailed informa-tion can be found in Note 17.3

|19|Trade and other accounts payable

|20|Tax situation

(euro)31/12/10 31/12/09

Short-term provisions 7,398.25 0.00

Short-term debt 398,914.19 838,407.06

Other financial liabilities 398,914.19 838,407.06

Trade and other accounts payable 14,202,995.92 15,145,736.15

Suppliers 6,939,999.51 7,480,228.45

Sundry creditors 2,843,141.64 2,610,599.99

Personnel (compensation payable) 2,736,464.39 2,900,057.04

Other debt to public authorities 1,391,753.58 1,396,254.90

Customer advances 291,636.80 758,595.77

Total trade and other accounts payable 14,609,308.36 15,984,143.21

(euro)31.12.10 31.12.09

INCOME BEFORE TAXES 15,084,724.16 14,017,790.61

Permanent differences at the individual companies -29,572.72 -73,579.19

Permanent differences in consolidation -309,423.00 -1,029,386.43

Timing differences 35,113.23

Losses not capitalised at individual companies 48,591.67 830,824.60

Tax losses offset by the individual companies 0.00 0.00

Taxable income at the individual companies 14,829,433.34 13,745,649.59

Tax: 30% of taxable income (1) 4,448,830.01 4,121,676.55

Tax credits -285,532.59 -199,300.29

Timing differences -10,533.97

Other variations (2) 2,400,000.00 0.00

Consolidated corporate income tax expense 6,552,763.45 3,922,376.26

Index

62



The net amount of corporate income tax payable is as follows:

Corporate income tax payable is disclosed in “Current tax liabilities” in the Consolidated State-ment of Financial Position.

The detail of permanent differences in consolidation is as follows:

20.1. Years open for reviewUnder current legislation, tax settlements cannot be considered final until they have been audi-ted by the tax authorities or the statute of limitations period (currently four years) has elapsed. The Company has the last four years open for inspection by the tax authorities for all applicable taxes.

As part of its periodic audit policy, the Tax Authority commenced an audit of Prim, S.A. and Enraf Nonius Ibérica, S.A. on 25 November 2009. The audit covers those companies’ corporate income tax, VAT, and personal income tax for 2006 and 2007.

20.2. Tax losses at individual companiesAdditionally, the current legislation establishes that tax losses may be offset against taxable inco-me in the following fifteen years. At 31 December 2010, the unused tax losses were as follows:

2010 2009

(euro) Profit and loss account

Recognised directly in equity

Profit and loss account

Recognised directly in equity

Taxable income 14,829,433.34 13,745,649.59

Current tax 4,448,830.01 4,121,676.55

Credits -285,532.59 -199,300.06

Timing differences

Withholdings and prepayments

-2,321,837.70 -2,301,414.65

Corporate income tax payable

1,841,459.72 1,620,961.84

(euro)31.12.10 31.12.09

Equity-accounted affiliates -50,551.00 -565,883.00

Value corrections in portfolio of group companies -1,201,196.00 -1,139,498.00

Tax deductible expenses on disposal of own shares

Dividends received from group and associated companies 942,324.00 675,994.57

Intragroup financial revenues and expenses

TOTAL -309,423.00 -1,029,386.43

|20|Tax situation

Index

63

20.3. Assets and liabilities with public authoritiesThe assets and liabilities with public authorities are detailed below (except for non-current defe-rred tax liabilities, covered in Note 18):

Year Amount (euro) Expires inESTABLECIMIENTOS ORTOPÉDICOS PRIM. S.A.

1996 709,340.00 2011

1997 195,860.00 2012

2004 386,373.00 2019

2005 31,705.00 2020

2006 203,679.00 2021

2007 21,204.00 2022

2008 17,065.11 2023

2009 830,531.12 2024

2010 14,298.71 2025

2,413,055.94

SIDITEMEDIC, S. L. (SOCIEDAD UNIPERSONAL)

2005 6,119.00 2020

2006 3,991.00 2021

2009 293.48 2024

2010 346.12 2025

10,749.60

ENRAF NONIUS IBÉRICA PORTUGAL, LDA

2010 33,946.84 2025

33,946.84

31.12.2010 31.12.2009Assets Current assets

Current tax assets 0.00 0.00

Other receivables from public authorities

VAT 38,866.96 61,787.29

IGIC 0.00 305.99

Corporate income tax 4,310.06 3,102.29

Withholdings and prepayments 15,441.45 51,203.66

58,618.47 116,399.23

Liabilities Current liabilities

Current tax liabilities

Current tax liabilities 1,841,459.72 1,620,961.84

Other debt to public authorities

VAT 297,540.86 268,171.42

Tax withholdings 699,408.35 735,707.03

IGIC 9,482.30 4,877.88

Social Security 385,322.07 387,498.57

1,391,753.58 1,396,254.90

|20|Tax situation

Index

64



20.4. Provision for taxesNote 17.3 provides details on the provision for taxes in 2010.

As a result, the amount recognised under Income tax is 6,552,763.44 euro, of which 2,400,000.00 correspond to the provision and 4,152,763.44 euro to the tax expense accrued in 2010.

21. Financial risk management objectives and policies

The Group’s main financial instruments are bank loans, demand deposits and short-term depo-sits. The main purpose of these financial instruments is to finance the Group’s operations. The Group has other financial assets and liabilities, such as trade accounts receivable and payable, which arise directly in its operations.

The general risk policy commits all the Group’s capacities to appropriately identify, measure, manage and control the risks of all types based on the following principles:

Separation of functions, at operating level, between the areas of decision-making, on the one hand, and analysis, control and supervision, on the other.

Assurance of short- and long-term business and financial stability by maintaining an appro-priate balance between risk, value and profit.

Compliance with the current legislation regarding control, management and supervision of risks.

Transparency in reporting on the Group’s risks and the working of its risk control systems.

Group policy, which was maintained in 2010 and 2009, is not to negotiate financial instruments.

The main risks deriving from the Group’s financial instruments are the interest rate risk of cash flows, liquidity risk, exchange rate risk, and credit risk. The directors review and agree upon policies for managing these risks, which are summarised below. 21.1. Interest rate risks on cash flowsThe Group is exposed to the risk of changes in the market interest rate, since its loans are at floating rates (see note 16).

The reference index of these bank loans is the interbank market rate plus a spread. That refe-rence index has not changed significantly in recent years and, consequently, it is not considered that such changes will have a material impact on the Group’s consolidated income statement.

|21|Financial risk management objectives and policies

|20|Tax situation

Index

65

The debt structure at 31 December 2010 and 2009 is as follows:

The sensitivity of earnings to variations in interest rates is as follows: (assuming a variation of +/-25% with respect to current reference indices).

The sensitivity of equity is not analysed since interest rate fluctuations have no impact on equi-ty as they are reflected directly in profit or loss. 21.2. Exchange rate riskThe Group makes sales and purchases in currencies other than the euro. Nevertheless, most foreign currency transactions are made in currencies whose fluctuations against the euro are small, and with short collection or payment periods; consequently, the potential impact of this risk on the consolidated income statement is not material.

The main transactions in 2010 and 2009 in currencies other than the euro are purchases from suppliers, mainly of raw materials and merchandise as detailed below:

31.12.2009 31.12.2010 Interest rate BenchmarkLong-term debt

Long-term credit lines 2,515,347.30 4,989,895.28 Floating-rate Euribor

Mortgage loan 4,063,686.29 2,734,877.99 Floating-rate Interbank rate

Other loans 3,311,870.13 5,698,780.23 Floating-rate Euribor

TOTAL 9,890,903.72 13,423,553.50

Short-term debt

Short-term credit lines 4,407,368.94 4,095,339.15 Floating-rate Euribor

Mortgage loan 1,303,702.20 1,328,808.30 Floating-rate Interbank rate

Discounted notes 1,243,480.80 1,731,655.24 Floating-rate 1-month Euribor

Short-term interest on debt 43,427.17 71,667.80 Does not accrue Does not apply

Other loans 2,620,231.93 3,207,248.95 Floating-rate Euribor

TOTAL 9,618,211.04 10,434,719.44

+ 25% -25% + 25% -25%Effect on income Effect on income

31.12.2009 31.12.2009 31.12.2010 31.12.2010Long-term debt

Long-term credit lines -40,046.17 40,046.17 -18,622.38 18,622.38

Mortgage loan -60,959.21 60,959.21 -33,992.82 33,992.82

Other loans -49,931.86 49,931.86 -36,267.87 36,267.87

TOTAL -150,937.24 150,937.24 -88,883.07 88,883.07

Short-term debt

Short-term credit lines -17,081.48 17,081.48 -14,852.47 14,852.47

Mortgage loan -11,667.17 11,667.17 -12,302.52 12,302.52

Discounted notes -6,302.37 6,302.37 -2,815.40 2,815.40

Short-term interest on debt 0.00 0.00 0.00 0.00

Other loans -19,460.03 19,460.03 -28,674.27 28,674.27

TOTAL -54,511.05 54,511.05 -58,644.66 58,644.66

Equivalent value in euro

Purchases from suppliers 2010 2009

Total purchases in foreign currency 7,208,755.70 7,697,555.62


Index

66



The following items may be affected by exchange rate risk:

Bank current accounts in currencies other than the local or functional currency of the Prim Group companies: The balance of the group’s foreign currency current accounts was 870,006.55 euro at 31 December 2009 and 591,752.14 euro at 31 December 2010. Those balances in both years were entirely in US dollars.

Payments for supplies or services in currencies other than the euro. Foreign currency pay-ments by the Group amounted to 7,391,150.22 euro in 2009 and 7,430,380.28 euro in 2010.

The main non-euro currency in which the Prim Group operates is the US dollar. The sensitivity of the Prim Group’s earnings and equity to variations in the euro/dollar exchange rate is as follows:

There are no financial debts in currencies other than the euro.

21.3. Credit riskThe Group’s main customers are public and private entities of acknowledged solvency. Any cus-tomer wishing to buy on credit is screened using the Group’s procedures for assessing solvency. Additionally, accounts receivable are monitored continuously, analysing customer balances and trends by customer type and region. As a result of intensive management of receivables, the Group’s doubtful accounts receivable are not material.

At 31 December 2010, the Prim Group did not have a significant concentration of credit risk.

The analysis of financial assets by age at 31 December 2010 and 2009 is as follows:

Year ended 31 December 2010:

Year ended 31 December 2009:

Much of the debt is from the health departments of Spain’s Autonomous Regional Govern-ments. Although invoices are generally paid in 90 days, some regions regularly delay payment by over two years. This does not represent a bad debt risk as practically all the amount past-due is recovered. Moreover, interest is claimed on past-due debts and collected by court order after the principal has been collected.

(euro)Changes in the dollar/euro exchange rate Effect on income before taxes

2009 +5% 328,611.43

-5% -363,202.10

2010 +5% 301,429.45

-5% -333,158.87

Customer type Not yet matured Under 90 90-180 180-360 Over 360 Total

Long-term custo-mer receivables

959,170.93 2,390,745.31 1,560,206.99 2,232,669.15 574,420.35 7,717,212.73

Short-term custo-mer receivables

6,391,278.17 13,778,644.97 8,236,614.57 11,543,656.06 3,429,337.84 43,379,531.61

Customer type Not yet matured Under 90 90-180 180-360 Over 360 Total

Long-term custo-mer receivables

1,422,458.23 2,234,139.09 1,382,823.34 2,454,129.08 2,208,090.31 9,701,640.05

Short-term custo-mer receivables

8,784,076.66 13,764,289.99 7,487,114.09 12,510,431.83 11,383,087.09 53,928,999.66


Index

67

The amount under customer receivables, both short- and long-term, refers solely to balances with companies outside the group, since balances with group companies are eliminated in con-solidation and we understand that it is not possible to speak of credit risk between companies in the same consolidated group.

21.4. Liquidity riskThe Group’s goal is to strike a balance between continuity and flexibility in financing, mainly by using bank loans.

The maturity of those financial instruments coincides in time with the cash flows generated by the Group’s ordinary activities, which minimises the liquidity risk and ensures the continuity of operations.

The following aspects are noteworthy:

The group has positive working capital amounting to 50,906,867.61 euro (39,820,538.07 euro at the end of the preceding year), which assures the cancellation of current liabilities. The group has a significant amount available in credit lines which it has not yet used. Speci-fically, the amount not drawn on the credit lines at 2010 year-end was 1,813,134.97 euro in long-term credit lines and 2,804,660.85 euro in short-term credit lines; accordingly, the group has sufficient liquidity to address any difficulty that may arise in future years. In 2010, the parent company collected a sizeable amount of debt plus default interest from certain government administrations, totalling 1,507,609.91 euro.

21.5. Capital managementThe Board of Directors of Prim, S.A., which is responsible for managing the Group’s capital, considers the following aspects to be vital for determining the consolidated Group’s capital structure:

Consideration of the cost of capital at all times, in search of an optimal balance between debt and equity to optimise the cost of capital.

Maintaining a level of working capital and a leverage ratio that enables Prim, S.A. to obtain and maintain the desired credit rating over the medium term, and enables it to combine cash flow with other alternative uses that may arise from time to time in pursuit of business growth.

The equity/debt ratio declined from 1.65 in 2009 to 1.56 in 2010, and this is considered appro-priate to cover the structural and operating needs that have been detected. As a result, all of the assets are financed. Fixed assets represent approximately 30% and current assets approxi-mately 70%, thereby achieving the desired structure in relation to working capital.

These objectives are completed with other factors that the Board of Directors takes into con-sideration when determining the Company’s financial structure, such as managing collections from government agencies, tax efficiency, and the use of a range of short- and long-term financial liabilities.


Index

68



22. Financial instruments

Below is a comparison of the carrying and market values of all the financial assets and liabilities disclosed in the Group’s consolidated financial statements.

No differences were detected between the market and carrying values of the financial instru-ments in assets and liabilities.

23. Revenues and expenses

The detail of the principal line items of the Consolidated Income Statement for 2010 and 2009 is as follows:

23.1. Net sales

Sales were broken down as follows:

|22|Financial instruments

|23|Revenues and expenses

Financial instruments 2010 2009

Carrying value Market value Carrying value Market valueNon-current assets

Trade and other accounts receivable

9,701,640.05 9,701,640.05 7,717,212.73 7,717,212.73

Other financial assets 4,814,861.18 4,814,861.18 1,855,510.16 1,855,510.16

Current assets

Trade and other accounts receivable

54,078,487.40 54,078,487.40 43,610,744.91 43,610,744.91

Other current financial assets 145,497.66 145,497.66 591,104.13 591,104.13

Cash and cash equivalents 1,447,851.69 1,447,851.69 2,470,022.44 2,470,022.44

Non-current liabilities

Interest-bearing loans 13,423,553.50 13,423,553.50 9,890,903.72 9,890,903.72

Other liabilities 2,796,361.60 2,796,361.60 464,800.40 464,800.40

Current liabilities

Trade and other accounts payable 14,609,308.36 14,609,308.36 15,984,143.21 15,984,143.21

Interest-bearing loans 10,434,719.44 10,434,719.44 9,618,211.04 9,618,211.04

2010 2009

Sales 93,797,135.61 94,198,411.56

Services provided 1,448,282.27 1,366,751.08

Sales returns and volume discounts -133,577.04 -68,543.79

Total 95,111,840.84 95,496,618.85

2010 2009

Spain 83,103,876.73 83,968,013.53

Exports 12,007,964.11 11,528,605.32

Total 95,111,840.84 95,496,618.85

Index

69

Since the object of Prim, S.A. includes “performing any type of real estate transaction”, it was considered advisable to include revenues obtained by the parent company from leasing the for-mer headquarters as part of revenues. Those revenues amounted to 1,104,492.26 euro in 2010 (1,177,866.72 euro in 2009), as disclosed in section 4.3 “Segment disclosures”.

The Other operating revenues item includes subsidies received, as follows:

There are no contingencies related to the foregoing subsidies, and the conditions required to collect them have been complied with.

23.2. Cost of sales and other external expensesThe detail of “Consumables” and other outside expenses” for the years ended 31 December 2009 and 2010 is as follows:

(The effect of variation in inventories is presented separately from in-house consumption in the tables).

23.3. External and operating expenses

(euro)

BALANCE 31.12.10 BALANCE 31.12.09

Training 40,929.83 42,752.16

Export subsidies 16,201.95 14,037.57

Operating subsidies 2,547.66 9,698.87

TOTAL 59,679.44 66,488.60

31 December 2010

Purchases Change in inventories Total consumption

Merchandise consumed 35,152,791.50 -1,531,048.99 33,621,742.51

Raw materials and other consumables consumed

4,384,963.60 153,915.06 4,538,878.66

Other external expenses 449,203.65 0.00 449,203.65

TOTAL 39,986,958.75 -1,377,133.93 38,609,824.82

31 December 2009

Purchases Change in inventories Total consumption

Merchandise consumed 33,297,052.12 784,118.97 34,081,171.09

Raw materials and other consumables consumed

4,055,647.14 575,464.77 4,631,111.91

Other external expenses 329,851.06 0.00 329,851.06

TOTAL 37,682,550.32 1,359,583.74 39,042,134.06

2010 2009

Outside services 12,592,473.94 12,630,884.22

Taxes 241,096.29 214,671.20

Other current operating expenses 237,560.19 261,101.48

Total external and operating expenses 13,071,130.42 13,106,656.90


Index

70



23.4. Personnel expenses

Employee welfare expenses consist mainly of employer social security payments by the group companies. There are no commitments relating to pensions or similar.

The Group’s average workforce, by gender, is as follows:

The workforce at 31 December did not differ materially from those average figures.

The Company’s Board of Directors comprises six members, all male.

23.5. Financial revenues and expensesThe detail of financial revenues is as follows:

The other financial revenues include basically default interest on long-standing accounts recei-vable from a number of public authorities. That amount was 446,450.59 at 2009 year-end, and 1,507,609.91 euro at 2010 year-end.

The detail of financial expenses is as follows:

23.6. Earnings per shareThe amount of basic earnings per share is calculated by dividing net income for the year attri-butable to equity holders of the parent company by the weighted average number of ordinary shares outstanding in that year. Outstanding shares are those which are tradeable on an orga-nised market; accordingly, shares of the parent company held by the parent itself or any of its dependent companies are excluded.

2010 2009

Wages, salaries and similar 21,457,901.80 21,214,027.14

Employee welfare expenses 4,317,759.81 4,309,077.88

Total personnel expenses 25,775,661.61 25,523,105.02

2010 2009

Men Women Total Men Women Total

Sales and technical staff 124.50 36.75 161.25 126.50 39.75 166.25

Clerical staff 63.00 93.75 156.75 63.00 80.75 143.75

Plant staff 79.00 108.33 187.33 84.00 108.33 192.33

Total 266.50 238.83 505.33 273.50 228.83 502.33

2010 2009

Revenues from shareholdings 29,572.31 0.00

Other financial revenues 1,580,325.91 499,202.93

Exchange gains 832,642.40 473,776.45

FINANCIAL REVENUES 2,442,540.62 972,979.38

2010 2009

Financial expenses 416,735.35 631,083.34

Exchange losses 328,989.44 63,663.53

FINANCIAL EXPENSES 745,724.79 694,746.87


Index

71

The amount of diluted earnings per share is calculated by dividing the net income for the year attributable to shareholders by the weighted average number of ordinary shares in that year (adjusting for the effect of any options and convertible bonds). At year-end, no bonds converti-ble into shares had been issued, so the basic earnings per share is equal to the diluted earnings per share.

The table below shows the income and share numbers used to calculate basic and diluted ear-nings per share:

No transactions affecting ordinary shares arose between the closing date and the date on which these financial statements were completed.

23.7. Variation in operating provisions

23.8. Impairment of other financial assetsImpairment recognised in the Consolidated Income Statement at 31 December is as follows:


Net income attributable to equity holders of the parent

8,531,960.72 10,034,922.35

Weighted average of ordinary shares (excluding treasury shares)

16,976,534.16 16,958,996.76

Earnings per share

Basic 0.50 0.59

Diluted 0.50 0.59

Figures in euro BALANCE 31.12.10 BALANCE 31.12.09

Impairment of merchandise, raw materials and other procurements

51,592.75 -263,119.97

Losses, impairment and change in trade provisions -646,119.26 -264,400.86

Overprovision 0.00 457.89

TOTAL CHANGE IN OPERATING PROVISIONS -594,526.51 -527,062.94


Impairment of available-for-sale assets (Note 9) -1,824,427.35 -1,203,576.87

Impairment at associated companies (Note 8) -20,094.68 -318,547.00

Impairment of loans - -245,653.37

Gains on disposal of associated companies (Note 8) 212,879.81 -

TOTAL -1,631,642.22 -1,767,777.24


Index

72



24. Balances and transactions with related parties

24.1. Director and senior executive remuneration and other information

The remuneration of the Directors of the Parent Company arises from their functions as mana-gers of the functional areas within the Group for which they are responsible.

There is also a provision of 420,000.00 euro in 2010 for members of the Board of Directors as a share in Company income. That provision amounted to 500,000.00 euro in 2009.

The Company’s Articles of Association authorise the Board of Directors to receive remuneration of up to 10% of the Company’s net profits.

During the last two years, director remuneration was much lower than the maximum set out in the Articles of Association. Based on a recommendation by the Remuneration and Appo-intments Committee, the Board of Directors proposes the remuneration amount, which is submitted to the General Meeting of Shareholders for approval.

The amount, which is provisioned at the end of the year, is paid the following year after the General Meeting of Shareholders is held.

The last payment was made on 14 July 2010.

In accordance with articles 229 and 230 of the Capital Companies Act, the directors have confirmed the following conflicts of interest in connection with holding positions or functions in companies whose activity is the same as, similar or analogous to, that of the Company’s cor-porate purpose, or with the performance, for their own account or that of third parties, of the same, similar or analogous activity as that constituting the Company’s corporate purpose.

|24|Balances and transactions with related parties

(euro)

31.12.10 31.12.09

Remuneration 1,131,063.00 944,645.00

Share in income 420,000.00 500,000.00

TOTAL 1,551,063.00 1,444,645.00

Index

73

In accordance with article 114 of the Securities Market Law, it is disclosed that neither the Directors of the Parent Company nor persons acting on their behalf performed transactions with the Parent Company (or other companies in its Group) other than in the normal course of business or other than on an arm’s-length basis. The Parent Company’s Directors have stated that they do not hold shares or stakes in any company whose corporate purpose is similar to that of Prim, S.A.

24.2. Information about the shareholdersThere were no transactions with shareholders or related parties apart from the declared divi-dends.

There was no interim dividend in 2010. However, an interim dividend amounting to 867,356.20 euro was paid out of 2010 income at the beginning of 2011.

24.3. Information about associatesThere were no material transactions with associates.

24.4. Senior management remunerationThe remuneration of the members of the Board of Directors arising from their status as heads of the various functional areas for which they are responsible amounted in 2010 to 574,527.00 euro, while senior management remuneration amounted to 556,536.00 euro. In 2009, the com-bined amount of this remuneration was 556,645.00 euro and 388,000.00 euro, respectively.

There is also a provision amounting to 420,000.00 euro at 31 December 2010 for members of the Board of Directors as a share in Company income. That provision amounted to 500,000.00 euro in 2009.

Director Position/Function Company

Victoriano Prim González Chairman ENRAF NONIUS IBÉRICA, S.A.

Victoriano Prim González Joint and Several Administrator ESTABLECIMIENTOS ORTOPÉDICOS PRIM, S.A

Victoriano Prim González Joint and Several Administrator LUGA SUMINISTROS MÉDICOS, S. L.

Victoriano Prim González Joint and Several Administrator INMOBILIARIA CATHARSIS, S.A. (SOCIEDAD UNIPERSONAL)

Victoriano Prim González Joint and Several Administrator SIDITEMEDIC, S.L. (SOCIEDAD UNIPERSONAL)

Victoriano Prim González Director ENRAF NONIUS I. PORTUGAL LDA

Carlos J. Rodríguez Álvarez Director and Secretary ENRAF NONIUS IBÉRICA, S.A.

Carlos J. Rodríguez Álvarez Joint and Several Administrator ESTABLECIMIENTOS ORTOPÉDICOS PRIM, S.A

Carlos J. Rodríguez Álvarez Joint and Several Administrator LUGA SUMINISTROS MÉDICOS, S. L.

Carlos J. Rodríguez Álvarez Joint and Several Administrator INMOBILIARIA CATHARSIS, S.A. (SOCIEDAD UNIPERSONAL)

Carlos J. Rodríguez Álvarez Joint and Several Administrator SIDITEMEDIC, S.L. (SOCIEDAD UNIPERSONAL)

José Luis Meijide García Joint and Several Administrator ESTABLECIMIENTOS ORTOPÉDICOS PRIM, S.A

José Luis Meijide García Joint and Several Administrator LUGA SUMINISTROS MÉDICOS, S. L.

|24|Balances and transactions with related parties

Index

74



25. Guarantees to third parties

25.1. SuretiesAt 31 December 2009, the Group had provided sureties to third parties in guarantee of supplies (government tenders) for a total of 1,184,129.78 euro in the case of Prim, S.A. (306,052.73 euro at 31 December 2009), 144,526.16 euro in the case of Enraf Nonius Ibérica, S.A. (59,625.84 euro at 31 December 2009) and 82,654.74 euro in the case of Establecimientos Ortopédicos Prim, S.A. (84,316.28 euro at 31 December 2009).

Also, at 31 December 2010, the Company had posted a bond of 47,107 euro with the Madrid Central Economic-Administrative Tribunal for appeals against tax assessments in 1985 (the same amount as at 31 December 2009).

25.2. Operating leasesThe Group has operating leases on certain vehicles and items of computer hardware. Those leases have an average term of 3-5 years and the contracts do not contain renewal clauses. The lessee is not subject to any restrictions in arranging those leases.

Additionally, the Group has certain premises, which are used as sales offices, under operating lease.

The operating lease payments recognised as expenses in the year are as follows:

Because the leases of structures represent large amounts, the following tables detail the mini-mum future payments to be made under those operating leases (both discounted and undis-counted). (This information is not disclosed for the other classes of lease since an individual lease contract is signed for each leased vehicle, leading to such a large number of contracts as to render it impractical to detail the future payments and present value of net minimum pay-ments for lease contracts other than those for structures).

Future payments for leases of structures are as follows:

The present value of the minimum net payments is as follows:

The present value of the net minimum payments was calculated using a 3% nominal annual discount rate.

|25|Guarantees to third parties

Description (euro)

31.12.10 31.12.09

Lease of structures 566,556.48 523,171.99

Lease of vehicles 1,147,091.67 1,162,086.13

Lease of furniture 58,819.27 29,997.28

Lease of office equipment 41,791.77 25,953.09

Other leases 96,260.79 112,467.45

TOTAL 1,910,520.16 1,853,675.94


At 31 December 2010 362,095.55 1,193,462.35 235,242.20 1,790,800.10

At 31 December 2009 310,545.45 821,471.00 399,690.54 1,531,706.99


At 31 December 2010 356,358.77 1,094,868.93 197,606.30 1,648,834.01

At 31 December 2009 305,954.07 751,860.43 331,097.01 1,388,911.51

Index

75

The main operating lease contracts in force are as follows:

Apart from the foregoing contracts, specific leases are arranged for premises at which presen-tations of our products are given. Because of their nature, those leases are not predictable and there are no future commitments in connection with them.

26. Environmental aspects

During the year, the Group did not incorporate systems, equipment or installations and did not recognise material expenses in connection with environmental protection and improvement.

The accompanying Consolidated Statement of Financial Position does not contain any provi-sions for environmental matters since the Directors of the Parent Company consider that, at year-end, there were no liabilities to be settled in the future arising from actions to prevent, abate or repair damage to the environment, and that any such liabilities would be non-material.

27. Information on deferral of payments to suppliers. Third additional provision. “Disclosure obligation” of act 15/2010 of 5 july

The resolution of 29 December 2010, of the Spanish Institute of Accounting and Auditing (ICAC), on information to be included in the notes to the financial statements regarding defe-rred payments to suppliers in commercial transactions was applied for the first time in 2010.

In accordance with the Second Temporary Provision, only the information on the outstanding balance with suppliers for which payment had exceeded the legal period at the end of 2010, amounting to 1,243,990.13 euro, was provided.

|26|Environmental aspects

|27|Information on deferral of payments to suppliers. Third additional provision. “Disclosure obligation” of act 15/2010 of 5 july

Company Location

Prim, S. A Avenida Madariaga, 1 - Bilbao

Prim, S. A. Calle Islas Timor 22 - Madrid

Prim, S. A. Juan Ramón Jiménez, 5 – Sevilla

Prim, S. A. Maestro Rodrigo, 89-91 – Valencia

Prim, S. A. Habana, 27 - Las Palmas de Gran Canaria

Prim, S. A. San Ignacio, 77 – Palma de Mallorca

Establecimientos Ortopédicos Prim, S. A. Conde de Peñalver, 24 – Madrid

Establecimientos Ortopédicos Prim, S. A. Rey Abdullah, 7-9-11 - La Coruña

Establecimientos Ortopédicos Prim, S. A. Don Ramón de la Cruz, 83 – Madrid

Establecimientos Ortopédicos Prim, S. A. Zamora, 94 – Vigo

Establecimientos Ortopédicos Prim, S. A. Cruceiro Quebrado, 10 – Orense

Establecimientos Ortopédicos Prim, S. A. Fernando III El Santo, 32 - Santiago de Compostela

Establecimientos Ortopédicos Prim, S. A. Antonio Robles 4, locales 2 y 3 – Madrid

Establecimientos Ortopédicos Prim, S. A. Avenida de Córdoba, 10 – Madrid

Enraf Nonius Ibérica Portugal, Lda Aquiles Machado, 5-J - Lisboa – Portugal

|25|Guarantees to third parties

Index

76



This amount does not include subsidiary Enraf Nonius Ibérica Portugal Lda. since it is based outside Spain.

These Notes to the Consolidated Financial Statements do not include comparative information for this new disclosure obligation as these financial statements are classified as initial financial statements, for these purposes only, with regard to the principle of uniformity and the compa-rability requirement.

28. Auditors’ fees

The fees paid to the main auditor for the audit of the consolidated financial statements for 2010 and 2009, which include the parent company and the dependent companies, amounted to 95,590.00 euro each year.

29. Events after the reporting period

An interim dividend out of 2010 income amounting to 0.05 euro gross per share was paid on 21 January 2011.

This document was authorised by the Board of Directors on 30 March 2011.

The composition of the Company’s Board of Directors is as follows:

|28|Auditors’ fees

|29|Events after the reporting period

VICTORIANO PRIM GONZÁLEZ Chairman

BARTAL INVERSIONES, S.L. represented by:ANDRÉS ESTAIRE ÁLVAREZ

Vice-Chairman

CARLOS J. RODRÍGUEZ ÁLVAREZ Director and Secretary

JUAN J. PÉREZ DE MENDEZONA Director

JOSÉ LUIS MEIJIDE GARCÍA Director and Vice-Secretary

FRANCISCO FERNÁNDEZ-FLORES FUNES Director

|27|Information on deferral of payments to suppliers. Third additional provision. “Disclosure obligation” of act 15/2010 of 5 july

Index

2010

PRIM S.A. ANd dEPENdENT COMPANIES

Directors’ report

78



1. Significant figures and business performance

1.1. Significant figures

ExprEssEd in Euro

|1|Significant figures and business performance

2010 Change 2009

Net sales

Continuing activities 95,111,840.84 -0.40% 95,496,618.85

Discontinued activities 0 0.00% 0

Total 95,111,840.84 -0.40% 95,496,618.85

Net operating income 14,858,075.95 14,842,264.22

Period depreciation and amortisation 2,563,283.77 2,540,109.58

Variation in operating provisions 594,526.51 527,062.94

EBITDA 18,015,886.23 0.59% 17,909,436.74

Consolidated income before tax

Continuing activities 15,084,724.16 14,017,790.61

Discontinued activities 0.00 0.00

Total 15,084,724.16 7.61% 14,017,790.61

Income for the year attributable to

to the parent company 8,531,960.72 -14.98% 10,034,922.35

minority interest 0.00 -100.00% 60,492.00

Net equity

Attributable to equity holders of the parent company 67,478,350.49 8.45% 62,218,134.95

Minority interest 0.00 -100.00% 407.00

Average workforce in the year

Sales and technical staff 161.25 -3.01% 166.25

Clerical staff 156.75 9.04% 143.75

Plant staff 187.33 -2.60% 192.33

Total 505.33 0.60% 502.33

Earnings per share (*)

Income in the year 8,531,960.72 -14.98% 10,034,922.35

No. of shares 16,976,534.16 0.10% 16,958,996.76

Basic 0.50 -15.25% 0.59

Income in the year 8,531,960.72 -14.98% 10,034,922.35

No. of shares 16,976,534.16 0.10% 16,958,996.76

Diluted 0.50 -15.25% 0.59

(*) The number of shares was calculated on the basis of IAS 33 (Earnings per share).

Debt ratio

Total debt 43,272,721.15 14.61% 37,756,872.71

Total assets 110,751,071.64 10.78% 99,975,414.66

0.39 2.63% 0.38

Gearing

Long-term interest-bearing debt 13,423,553.50 35.72% 9,890,903.72

Short-term interest-bearing debt 10,434,719.44 8.49% 9,618,211.04

Total interest-bearing debt 23,858,272.94 22.29% 19,509,114.76

Total assets 110,751,071.64 10.78% 99,975,414.66

0.215 10.39% 0.195

Index

79

1.2. Business performance and changes in the economic environmentThe Spanish economy seemed to show signs of a slight recovery in 2010. The most recent data shows that GDP expanded in the fourth quarter, by 0.2% q/q and 0.6% y/y; as a result, GDP declined in the full year by 0.1%. These figures are still well below those of other European countries, evidencing the greater impact of the crisis on Spain.

Domestic demand remained weak, although it declined in 2010 (-1.2%) by much less than in 2009 (-6%), due primarily to an improvement in industrial investment and household consump-tion expenditure. In contrast, greater budgetary control led to a decline in government capital expenditure. Exports expanded by 1%.

On the supply side, the modest improvement in output was not enough to generate net emplo-yment. According to Eurostat, in 2010 Spain remained the European country with the highest unemployment rate: 20.2%, i.e. double the EU average (9.6%). There were 4,231,003 unemplo-yed persons in January 2011, the highest figure in the comparable historical series (which dates back to 1996) and the highest level in Spain during the last three years of the crisis. Inflation accelerated in 2010, reaching 3% year-on-year in December, due primarily to rising oil prices at the end of the year and higher taxes imposed to restore Spain’s public accounts.

Outside Spain, economic activity continued to recover, in particular due to the strength of emerging countries. The implementation of additional expansionary monetary policies in the US provided an extra boost to the global recovery; however, there is still uncertainty that US de-mand will be sustainable once the stimuli are withdrawn. Tension was palpable in government debt markets in 2010. Ireland was in the eye of the storm because of its weak financial system, and the ECB and IMF were forced to bail it out in November. Fears that the situation would spread to other euro area countries (including Spain) led their risk premiums to soar, notably increasing sovereign spreads.

Global financial market performance was affected by concerns about the sustainability of the fiscal situation in some euro area economies. Accordingly, performance by the main equities indices was disparate, impacted by the perception of each country’s risk premium. The IBEX 35, which was the index most affected by increasing country risk, shed 17.4%, faring much worse than the EURO STOXX 50 (-5.8%) and contrasting with the positive performance by the S&P500 (+12.8%).

1.3. Segment performanceBelow is a summary of the changes in the main figures relating to the identified business segments, which are the principal segments identified for drafting the consolidated financial statements.


Index

80



Note 4 to the consolidated financial statements provides detailed information about the busi-ness and geographical segments.

1.4. TaxesThe corporate income tax expense is analysed in note 20 to the consolidated financial state-ments. The table below analyses the variation in the effective tax rate.

The notable increase in “Corporate income tax” in the Consolidated Income Statement is attributable to the recognition of a provision for taxes amounting to 2,400,000.00 euro (1,900,000.00 euro for Prim, S.A. and 500,000.00 euro for Enraf Nonius Ibérica, S.A.).

1.5. Capital remunerationSee note 15.1 to the Consolidated Financial Statements.

1.6. Liquidity and capitalThe Consolidated Cash Flow Statement shows a positive variation of 1,022,170.75 euro in cash and cash equivalents in the year ended 31 December 2010 (1,556,766.36 euro in 2009).

1.7. Gearing and indebtednessThe calculation of Gearing Ratio does not include non-interest-bearing liabilities.

The Group’s gearing is within the acceptable limits established by management; as shown in the table at the beginning of this report, leverage rose from 0.195 in 2009 to 0.215 in 2010, a 10.39% increase.

The table also shows that Consolidated Group indebtedness declined from 0.38 in 2009 to 0.39 in 2007, a 2.63% decrease, while remaining within the limits which Consolidated Group mana-gement considers to be acceptable.

2010 Change 2009

Total revenues in the segment

Medical-hospital segment 93,879,419.15 -0.07% 93,945,477.20

Real estate segment 1,593,083.93 -2.61% 1,635,855.52

95,472,503.08 -0.11% 95,581,332.72

Net operating income

Medical-hospital segment 14,041,773.59 0.39% 13,987,226.82

Real estate segment 816,302.36 -4.53% 855,037.40

14,858,075.95 0.11% 14,842,264.22

Total asset volume

Medical-hospital segment 106,891,956.04 11.50% 95,864,316.22

Real estate segment 3,859,115.60 -6.13% 4,111,098.44

110,751,071.64 10.78% 99,975,414.66

Effective tax rate 2010 Change 2009

Consolidated income before tax 15,084,724.16 7.61% 14,017,790.61

Corporate income tax 6,552,763.44 67.06% 3,922,376.26

Effective tax rate 43.44% 55.24% 27.98%


Index

81

2. Research and development

PRIM, S.A. maintains ongoing relations with the R&D departments of the manufacturers whose products it distributes in Spain and other countries in order to exchange feedback and sugges-tions.Significant events in 2010 were as follows:

Completion of the project to design a new family of semi-rigid torso braces. The project com-menced in 2009. The new braces went on sale in May 2010 under the Camp One brand, with expected annual sales of 350,000.00 euro.

The project to update the Elcross Gold brace family commenced, with market launch schedu-led for July 2010.

The project to update the Camp XXI brace family started, and the launch is expected in May 2011.

3. Transactions with own shares

The Company had 305,412 own shares at 31 December 2009.

During 2010, it purchased and sold own shares, ending the year with 412,094 shares, i.e. 2.38% of capital stock.

4. Events after the reporting period

An interim dividend out of 2010 income amounting to 0.05 euro gross per share was paid on 21 January 2011.

5. Disclosures under article 116 bis of the securities market law

5.1. Capital structureCapital stock is represented by 17,347,124 shares of 0.25 euro par value each, all of which are fully paid and have the same rights and obligations; accordingly, the total par value is 4,336,781.00 euro. The shares are represented by book entries.

5.2. Restrictions on share transferThere are no legal restrictions on the acquisition or transfer of shares in capital.

|2|Research and development

|3|Transactions with own shares

|4|Events after the reporting period

|5|Disclosures under article 116 bis of the securities market law

Index

82



5.3. Significant holdings in capital, both direct and indirectIn accordance with the information reported by the CNMV, the significant holdings in the capi-tal of Prim, S.A. are as follows:

5.4. Restrictions on voting rightsThere no restrictions on shareholders’ voting rights under either the law or the Articles of Asso-ciation.

5.5. Shareholder agreementsThere are no shareholder agreements.

5.6. Rules governing the appointment and removal of members of the Board of Directors and amendments to its Articles of Association

5.6.1. Rules governing the appointment and removal of members of the Board of DirectorsThere must be at least 4 and at most 10 directors.

Based on recommendations from the Appointments and Remuneration Committee, the Board of Directors makes proposals to the Shareholders’ Meeting for the appointment and removal of directors and their number, based on the Company’s circumstances. The Board of Directors determines, at any given time, the procedures for appointing, re-appointing, evaluating and removing directors.

Under article 13 of the Board of Directors Regulation, directors’ duties include the obligation to resign if their continuance on the Board might jeopardise the Board’s operations or the Company’s credit and reputation.

There is no age limit for directors in either the Articles of Association or the Board of Directors Regulation. There are no term limits.

None of the members of Board of Directors has a golden handshake clause in the event of removal. Such clauses require authorisation by the Board of Directors but the Shareholders’ Meeting need not be notified.

5.6.2. Rules governing amendments to the Articles of AssociationArticle 13 of the Articles of Association provides that the Ordinary or Extraordinary Share-holders’ Meeting may validly decide to issue bonds, increase or decrease capital, change the company’s corporate form or merge or demerge it and, generally, make any other amendment to the Articles of Association; in general, to make any amendment to the Articles of Association, the meeting must be attended at first call by at last 50% of the subscribed voting capital.

Shareholder% of direct voting

rights% of indirect

voting % of total voting

rights

Fid Low Priced Stock Fund 5.950 0.000 5.950

FMR LLC 0.000 5.950 5.950

González de la Fuente, María Dolores 12.916 0.000 12.916

Prim Bartomeu, Elisa 2.361 7.568 9.929

Ruiz de Alda Rodri, Francisco Javier 4.519 0.000 4.519


Index

83

At second call, 25% will suffice although, if the shareholders in attendance represent less than 50% of the subscribed voting capital, the resolutions referred to in this paragraph may only be validly adopted with the favourable vote of two-thirds of the capital present or represented at the Meeting.

Article 11.3 of the Shareholders’ Meeting Regulation establishes that, if any items in the agenda require a special majority and that majority is not present, the agenda will be reduced to the items which do not require such a majority.

Also, article 11.14 establishes that the Chairman will put motions that have been debated in the Shareholders’ Meeting to the vote, voting being cast individually on each motion. Article 11.15 establishes that votes may be cast by shareholders of record by any of the electronic or postal means that may be accepted in the future for the purpose of voting. 5.7. Powers of the members of the Board of Directors, particularly with res-pect to the issuance and repurchase of sharesThe Shareholders’ Meeting of 19 June 2010 authorised the Board of Directors to acquire own shares and authorised subsidiaries to acquire, by any legal means, shares of the Parent company, in line with the limits and requirements set out in article 75 and additional provision 1.2 of the consolidated text of the Spanish Corporations Act and other related legislation. The maximum number of shares to be acquired was set at 10% of capital stock, at a price of at least 1 euro and at most 50 euro.

Regarding the Board’s power to issue shares, it is subservient to the Shareholders’ Meeting as provided in article 13 of the Articles of Association, which is reproduced above in section 5.6.2 (Rules governing amendments to the Articles of Association).

6. Information under royal decree 1362/2007

Article 8.b).1 of Royal Decree 1362/2007 makes it obligatory to disclose the risks and uncertain-ties facing the company.

The risks are defined in sufficient detail in note 21 of the Notes to the Consolidated Financial Statements.

6.1. Interest rate risks on cash flowsSee note 21.1 of the Notes to the Consolidated Financial Statements.

6.2. Exchange rate riskSee note 21.2 of the Notes to the Consolidated Financial Statements.

6.3. Credit riskSee note 21.3 of the Notes to the Consolidated Financial Statements.

6.4. Liquidity riskSee note 21.4 of the Notes to the Consolidated Financial Statements.

6.5. Capital managementSee note 21.5 of the Notes to the Consolidated Financial Statements.

|6|Information under royal decree 1362/2007


Index

84



7. Corporate governance report

The accompanying Annual Corporate Governance Report, in accordance with Directive 206/46 of the CNMV on Financial Statements, is a part of this Consolidated Directors’ Report and was authorised by the Directors together with the Consolidated Financial Statements and Consolida-ted Directors’ Report of PRIM, S.A. and its subsidiaries for the year ended 31 December 2010.

This document was authorised by the Board of Directors on 30 March 2011.

The composition of the Company’s Board of Directors is as follows:

|7|Corporate governance report

VICTORIANO PRIM GONZÁLEZ Chairman

BARTAL INVERSIONES, S.L. represented by:ANDRÉS ESTAIRE ÁLVAREZ

Vice-Chairman

CARLOS J. RODRÍGUEZ ÁLVAREZ Director and Secretary

JUAN J. PÉREZ DE MENDEZONA Director

JOSÉ LUIS MEIJIDE GARCÍA Director and Vice-Secretary

FRANCISCO FERNÁNDEZ-FLORES FUNES Director

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2010

CONSOLIdATEd gROUP

Auditors’ report

(Free translation of a report and annual accounts originally issued in Spanish. In the event of a discre-pancy, the Spanish-language version prevails)

AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders of PRIM, S.A.

1. We have audited the consolidated financial statements of PRIM, S.A. (Parent company) and depen-dent companies (the Group) consisting of the consolidated balance sheet as at 31 December 2010 and the consolidated statement of income, the consolidated statement of comprehensive income, the statement of changes in consolidated equity, the consolidated statement of cash flow, and the notes to the consolidated financial statements for the year then ended. As indicated in Note 2 in the accom-panying notes to the consolidated financial statements, the directors of the Parent company are res-ponsible for authorising the Group's consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and the other provisions of the finan-cial reporting regulatory framework that are applicable to the Group. Our responsibility is to express an opinion on those consolidated financial statements taken as a whole, based on work performed. Except for the qualification mentioned in paragraph 2 below, our work was performed in accordance with the auditing regulations in force in Spain, which require the examination, by selective tests, of the evidence supporting the consolidated financial statements and the evaluation of whether their pre-sentation, the accounting principles and standards applied and the estimates made are in conformity with the applicable financial reporting regulatory framework. Our work did not include the examination of the 2010 financial statements of Luga Suministros Médicos, S.L., in which PRIM, S.A. has a 99% interest, and whose assets and net income represent 4.0% and 6.2%, respectively, of the correspon-ding consolidated figures. The financial statements of Luga Suministros Médicos, S.L. were examined by audit firm BDO Audiberia Auditores, S.L. and our opinion expressed in this report on the consolida-ted financial statements of PRIM, S.A. and dependent companies is based solely on the report of that auditor where the holding in Luga Suministros Médicos, S.L. is concerned.

2. The "Other non-current financial assets" item in the accompanying consolidated statement of finan-cial position includes a 10.98% interest (48.68% at 31 December 2009) that Grupo Prim, S.A. has in the capital of Residencial CDV-16, S.A., with a net carrying value of 3,679 thousand euro at 31 Decem-ber 2010 (4,807 thousand euro at 31 December 2009). Since we do not have that company's audited financial statements, we were unable to determine the stake's recoverable value at 31 December 2010 or, therefore, the reasonableness of the carrying amount and of the information disclosed in Note 9 of the accompanying Notes to the Consolidated Financial Statements. Our audit opinion on the financial statements for the previous year included a qualification related to this issue.

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3. In our opinion, based on our audit work and the report by BDO Audiberia Auditores, S.L., and ex-cept for the effects of the adjustments that might have been considered necessary had we had access to the information referred to in paragraph 2 above, the accompanying consolidated financial state-ments for the year 2010 give, in all material respects, a true and fair view of the consolidated equity and consolidated financial position of PRIM, S.A. and Dependent Companies as at 31 December 2010 and the consolidated results of its operations, the changes in consolidated equity and the consolidated cash flow in the year then ended, in accordance with the International Financial Reporting Standards adopted by the European Union and the other provisions of the financial reporting regulatory fra-mework that are applicable.

4. The accompanying consolidated Directors' Report for the year 2010 contains such explanations on the state of the Group's affairs, business performance and other matters as the Directors of PRIM, S.A. consider appropriate and does not form an integral part of the consolidated financial statements. We verified that the financial information contained in the consolidated Directors’ Report matches that in the accompanying 2010 consolidated financial statements. Our work as auditors is limited to checking the directors’ report with the scope set out in this paragraph and it does not include the review of in-formation not derived from the accounting records of PRIM, S.A. and dependent companies.

ERNST & YOUNG, S.L.(Registered in the Official Register of Auditors with no. S0530)

(original in Spanish signed by Carlos Hidalgo Andrés)

Carlos Hidalgo Andrés

25 April 2011

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Date of year-end: 31/12/2010 Tax ID number: A-28165587 Name: PRIM, S.A.

Edition: Prim, S.A.Design and production: Comuniland, S.L.Legal Deposit: M-16691-2011

HEADQUARTERS 28938 Móstoles (Madrid)

Polígono Industrial Nº 1 – Calle F, 15Tel.: 34 91 334 24 00Fax: 34 91 334 24 94

FACTORY28938 Móstoles (Madrid)

Polígono Industrial Nº 1 – Calle C, 20Tel.: 34 91 334 25 20Fax: 34 91 334 25 62

CATALUÑA 08012 BarcelonaNilo Fabra, 34-38

Tel.: 34 93 415 58 35Fax: 34 93 237 91 03

NORTH48014 Bilbao

Avda. Madariaga, 1 – 2ºTel.: 34 94 476 33 36Fax: 34 94 475 01 09

NORTHWEST 15004 La Coruña

Rey Abdullah, 7-9-11Tel.: 34 98 114 02 50Fax: 34 98 114 02 46

CANARY ISLANDS 35010 Las Palmas de Gran Canaria

Habana, 27 – BajoTel.: 34 928 22 03 28Fax.: 34 928 22 89 62

SOUTH41011 Sevilla

Juan Ramón Jiménez, 5Tel.: 34 95 427 46 00Fax.: 34 95 428 15 64

EAST46015 Valencia

Avda. Maestro Rodrigo, 89-91Tel.: 34 96 348 62 69Fax.: 34 96 340 54 27

BALEARIC ISLANDS07008 Palma de Mallorca

San Ignacio, 77Tel.: 34 971 278 291Fax: 34 971 278 291

www.prim.es

2010 - Annual Report

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