ANNUAL REPORT 2017 - luzsaude.pt · Luz - Centro Clínico da Amadora opened and Cliria - Clínica...

ANNUAL REPORT2017

LUZ SAÚDE, S.A.Public Company

Registered Office in Rua Carlos Alberto da Mota Pinto, 17, 9th floor, 1070-313 in LisbonRegistered with the Commercial Registry Office of Lisbon under the same registration and taxpayer number 504 885 367, currently with fully subscribed and paid-up share capital of EUR 95,542,254.

ANNUAL REPORT2017

5

Contents8 01. Luz Saúde

01.1 Identity and Structure01.2 Strategic Positioning01.3 Luz Saúde Key Data

22 02. Management Report02.1 Overview for 201702.2 Luz Saúde overall and business segments performance02.3. Main risks and uncertainties for Luz Saúde02.4 Environmental information02.5 Information about non-financial reporting02.6 2018 outlook02.7 Subsequent events02.8 Profit allocation proposal02.9 Authorizations Granted for Transactions between the Company and its Directors02.10 Annex to the Consolidated Annual Report

36 03. Consolidated Financial Statements

108 04. Corporate Governance Report 04.1 mandatory information on the company’s shareholder structure,

organisation and corporate governance04.2 Corporate governance assessment

164 05. Luz Saúde’s Sustainability and corporate social responsibility report 201705.1 Context05.2 Luz Saúde Group’s commitment to sustainability and social and corporate

responsibility05.3 Environmental Sustainability

186 06. Individual Financial Statements

236 07. Contacts of Luz Saúde Group

5

ANNUAL REPORT 2017

01LUZ SAÚDE

8

ANNUAL REPORT 2017

Luz Saúde01

01.1 Identity and Structure01.1.1 Identity Luz Saúde, SA, a Public Company, is the holding com-pany of one of the largest healthcare services groups, by income, in the currently expanding Portuguese market. The Group provides its services by way of 24 units (including 13 private hospitals, one NHS hospital which is run by Luz Saúde under a Public-Private Part-nership (PPP), eight private outpatient clinics and two senior residences) located in the Northern, Central, Southern-Central and Madeira regions of Portugal. In certain regions, it owns the only private hospital in operation. The Group has a strong presence in two of the national regions with greater buying power: Lisbon, where it operates Hospital da Luz, the largest private hospital in Portugal and, the Porto metropolitan area, where it operates Hospital da Arrábida.

The Group’s structure enables it to operate its health-care units in a complementary and integrated way. This is achieved by referring patients between the various units, sharing know-how (both clinical and related to process management) and facilitating access to some of the best acute hospital care units in the country. The Group stands out in the Portuguese healthcare services market with the specialised complex services it provides. For these, it has the benefit of technologically advanced equipment available in several of its units and which, in some cases, is the only such equipment in the country.

(free translation from the original version in portuguese)

9

01 LUZ SAÚDE

01.1.2 Luz Saúde’s History

2000Luz Saúde acquired a majority shareholding in Cliria - Hospital Privado de Aveiro and in Hospital da Arrábida in Vila Nova de Gaia.

2002Luz Saúde began managing Hospital da Misericórdia de Évora in partnership with third parties.

2003In December 2003, construction work began on the Luz Integrated Healthcare Complex, which includes Hospital da Luz and Casas da Cidade - Residências Sénior.

2004Cliria - Centro Médico de Águeda began its activities and Clube de Repouso Casa dos Leões was fully integrated into Luz Saúde.

In July of that year, construction work began on Hospital do Mar in the county of Loures.

2005In May 2005, construction work began on Hospital da Luz - Clínica de Oeiras (previously known as Clínica Parque dos Poetas) in Oeiras.

2006Hospital do Mar opened. and Luz Saúde acquired the entire share capital of IRIO - Instituto de Radioterapia.

In March of that year, Luz Saúde became sole sharehol-der of Hospor, with its two hospital units − Hospital de Santiago in Setúbal and Clipóvoa - Hospital Privado in Póvoa de Varzim − and three outpatient clinics − Clínica de Cerveira, Clínica de Amarante and Clínica do Porto.

2007Hospital da Luz in Lisbon and Hospital da Luz - Clínica de Oeiras (previously known as Clínica Parque dos Poetas) began their activities.

2009Casas da Cidade - Residências Sénior and Hospital da Luz - Centro Clínico da Amadora opened and Cliria - Clínica de Oiã was acquired.

At the end of that year, a management agreement was entered into for Hospital Beatriz Ângelo in the county of Loures under the Public-Private Partnerships Programme.

2010Hospital da Arrábida doubled its capacity with new wards for outpatient surgery and specialised hospitalisation, namely a new maternity ward.

Cliria - Hospital Privado was also extensively renovated and began operating its second branch, thereby doubling its outpatient care.

Clipóvoa - Hospital Privado in Póvoa de Varzim continued the renovation of its inpatient area, operating rooms and maternity ward. Hospital de Santiago completed construction of its new 24-hour medical care ward.

In January of that year, the ground-breaking ceremony for Hospital Beatriz Ângelo took place.

2011There was a strong focus on the preparation of Hospital Beatriz Ângelo’s opening. This included completing all the final construction work, structuring the hospital’s procedures and recruiting staff.

Since it was founded in 2000, Luz Saúde has built-up an integrated network that includes hospitals, outpatient clinics and senior residences.

10

ANNUAL REPORT 2017

2015In March, Hospital da Luz opened the expansion área of its parking lot to the public, doubling its available capacity.

In July, Luz Saúde became the sole owner of HME’s share capital, the company responsible for the management of Hospital da Misericórdia de Évora.In November, the construction works for the expansion of Hospital da Luz Clínica de Oeiras were initiated.In December, Hospor acquired a real estate property in Vila Real, with the goal to develop a new healthcare unit in order to reinforce the Group’s presence in the North of Portugal.

2016In January, Hospital Privado de Guimarães and Clihotel Gaia began to be explored by the Hospital da Luz Guima-rães, S.A., being renamed to Hospital da Luz Guimarães and Hospital do Mar Cuidados Especializados de Gaia, respectively.

The year 2016 corresponded to the beginning of the expansion works of the Hospital da Luz Lisboa, for an expected capacity increase of 80% in what is already the largest private hospital in the country.

At Hospital da Luz Clínica de Oeiras, work continued on the construction of the expansion of this unit, for a doubling of installed capacity and expansion of clinical services, with an opening scheduled for 2017.

In the Hospital da Luz Arrábida, the works of adaptation of a new ambulatory area of expansion of the unit, whose opening occurred in January of 2017, were completed.

During 2016 Luz Saúde Group acquired a plot of land in Vila Real for the development of a private reference hospital in this region, having advanced to the opening of an ambulatory unit during the period of construction of the hospital. In addition, the Group proceeded to the definitive acquisition of a clinic in Odivelas for the development of an outpatient unit in that region.

Hospital da Luz celebrated its fifth anniversary and opened a new outpatient paediatric ward.

That year was also marked by Luz Saúde winning the Excellence at Work award from Heidrick & Struggles.

2012Hospital Beatriz Ângelo began its activities on 19 January, with its first outpatient paediatric and dermatology appointments, thereby marking the opening of Luz Saúde’s first unit under the Public-Private Partnership. The opening was completed on 27 February with the beginning of activities at the General Emergency Ward.

In March of that year, Hospital do Mar began expansion work to meet the high demand for its specialised services. In July, renovation work began on Cliria - Clínica de Oiã.

2013The expansion work on Hospital do Mar and the reno-vation of Cliria - Clínica de Oiã were completed.

For the third consecutive year, Hospital da Luz received the award for Best Company in the Healthcare Sector from Exame magazine in partnership with Informa D&B and Deloitte.

2014The opening of Hospital do Mar’s expansion took place, as did the opening of Cliria - Clínica de Oiã’s renovated wards.

In February, Luz Saúde entered the capital markets through an initial public offering, thereby becoming the first healthcare provider to be listed on Euronext Lisbon.

In October, Luz Saúde was acquired by Fidelidade – Com-panhia de Seguros, S.A., following a highly competitive takeover.

11

01 LUZ SAÚDE

2017In 2017, Luz Saúde acquired Clínica de Santa Catarina and Policlínica do Caniço, in Madeira Island, and the British Hospital, in Lisbon. Works were initiated in the new ambulatory clinic in Odivelas – Hospital da Luz Clínica de Odivelas –, opened in January 2018.

The works of expansion of Hospital da Luz Oeiras were concluded, the new area being opened to the public, and the renewal and reorganization of services in the original facilities were initiated, namely in the area des-tined to inpatient.

12

ANNUAL REPORT 2017

Public HealthcarePrivate Healthcare Other Activities Financial Holdings

Luz Saúde has a diversified business model organised into three main operational segments: (i) private heal-thcare, which includes the main acute care hospitals and the Group’s network of outpatient clinics; (ii) public healthcare, with the management of Hospital Beatriz Ângelo under the Public-Private Partnership Agreement

(PPP) Agreement and (iii) other activities, including the two senior residences designed to offer an integrated residential solution for independent seniors or those needing assistance with their daily living. In addition, the Corporate Centre provides centralised services to the various units within the Group.

01.1.3 Luz Saúde’s structure and business segments

HOSPITALS• Hospital da Luz Guimarães • Hospital da Luz Póvoa de Varzim • Hospital da Luz Arrábida • Hospital do Mar Cuidados

Especializados Gaia • Hospital da Luz Aveiro • Hospital da Luz Clínica de Oiã• Hospital do Mar Cuidados

Especializados Lisboa • Hospital da Luz Lisboa• British Hospital• Hospital da Luz Clínica de Oeiras• Hospital da Luz Setúbal • Hospital da Misericórdia de Évora• Hospital da Luz Funchal

OUTPATIENT CLINICS• Hospital da Luz Clínica de Cerveira • Hospital da Luz Clínica de Amarante • Hospital da Luz Clínica do Porto • Hospital da Luz Clínica de Águeda • Hospital da Luz Clínica da Amadora • Hospital da Luz Clínica de Odivelas• Hospital da Luz Clínica de Vila Real• Hospital da Luz Instituto

de Radioterapia Lisboa• Hospital da Luz Clínica do Caniço

HOSPITAL• Hospital Beatriz Ângelo (PPP)

SENIOR RESIDENCES• Casas da Cidade Residências

Sénior Lisboa• Casas da Cidade Residências

Sénior Carnaxide

• Genomed (38%)• HL - Sociedade Gestora

do Edifício (10%)

13

01 LUZ SAÚDE

21%

78%

1%

Private Segment

Public Segment

Other ActivitiesConsolidated

Other Activities

Public Segment

Private Segment

Operating Income by Segment (2017) EBITDA margin by segment (2017)

11,1%

2,9%

-3,5%

15,5%

14

ANNUAL REPORT 2017

At the top of the management structure of Luz Saúde, SA, a public company, is the Board of Directors, which is made up of a Chairman and nine Directors. From this group of Directors, four make up the Company’s Executive Committee, which is responsible for the strategy and day-to-day management of the Group’s businesses.

Jorge Manuel Batista Magalhães Correia | Chairman of the Board of DirectorsIsabel Maria Pereira Aníbal Vaz | Chief Executive OfficerChen Qiyu | DirectorJosé Manuel Alvarez Quintero | DirectorRogério Miguel Antunes Campos Henriques | DirectorIvo Joaquim Antão | Member of the Executive Committee João Paulo da Cunha Leite de Abreu Novais | Member of the Executive CommitteeTomás Leitão Branquinho da Fonseca | Member of the Executive Committee

01.1.4 Management ans corporate body structure

From left to right: Ivo Antão, Isabel Vaz, Tomás Branquinho da Fonseca and João Abreu Novais.

15

01 LUZ SAÚDE

The Central Directorates are part of the Group’s holding structure, together with the structure of Luz Saúde - Ser-viços, ACE. Not only do the Central Directorates provide support to the Board of Directors, they also provide services to the Group’s various operational units, thereby benefitting from economies of scale, knowledge and talent. This further ensures homogeneity in terms of strategy and standards in the various units. The Central Directorates are organised into specific areas: Accreditation and Quality Certification (Clinical Audit); Central Imaging Diagnostic; Central Negotiation Procurement; Digital Clinical Center; Commercial; Clinical Operations Design and Control; Finance and Auditing; Training, Research and Innovation; Risk Management; Infrastructures, Main-tenance and Equipment; International Patient Services; Legal and Compliance; Logistics and Operational Support;

Marketing and Communication; Business Development; Organization and Processes; Planning and Business Intelli-gence; Transversal Nursing Programs; Human Resources; Client Experience; Financial and Administrative Services; Information Systems and Technologies.

Luz Saúde, SA also has an Advisory Board, which is com-prised by:

Diogo de Lucena | ChairmanJorge Magalhães CorreiaIsabel VazMaria de Belém RoseiraNuno Fernandes ThomazJosé Caeiro PulidoJosé Araújo e Silva

01.2 Strategic Positioning

• market leadership in Portugal;• a diversified network of healthcare service units that

cover a vast geographical area;• investment in modern hospital facilities; • long-term relationships with the main paying entities

in the Portuguese healthcare sector;

• a model built on the best services and infrastructures in the sector;

• highly qualified, experienced and motivated medical staff;

• integration in the healthcare sector’s Public-Private Partnership Programme;

• an experienced management team, with a track record in growth management based on clinical excellence.

01.2.1 Vision

Luz Saúde’s commitment is absolute and unequivocal: to ensure the best diagnosis and medical treatment that talent, innovation and dedication can provide. Luz

Saúde offers a full range of healthcare services that not only ensures continued care, but also addresses changing healthcare needs throughout life.

Luz Saúde’s competitive advantages allow it to benefit from trends that drive local and regional demand in the Portuguese healthcare services market and to expand by seizing new national and international opportunities. The Group’s competitive advantages are, among others:

To be a benchmark healthcare provider through its excellence and innovation medical practice.

16

ANNUAL REPORT 2017

RELENTLESS PURSUIT OF RESULTS We are determined to achieve ambitious measurable results in the implementation of our mission. We there-fore pursue our ultimate goals with perseverance, even when faced with challenges and obstacles.

INTELLECTUAL RIGOUR We self-assess all we do, approaching each issue and decision rigorously and rationally. We always strive for the best idea or solution.

CONSTANT LEARNING We reflect upon and learn from our experience, in order to improve our future performance.

PERSONAL ACCOUNTABILITYWe give the best of ourselves and are responsible for achieving the best possible results in our sphere of business.

RESPECT AND HUMILITY We respect others and their ideas and welcome their contributions. We acknowledge our experience’s limits and value other views.

POSITIVE ATTITUDEWe have ambitious goals, enthusiastically welcome new ideas and take pride in the results.

INTEGRITYWe are truthful, loyal and serious in all we do. We are always mindful of our shareholders’ values and expec-tations and, above all, those of our clients.

TEAM SPIRITWe believe a group effort is the best way to achieve our goals and enhance the impact of our initiatives on the community.

01.2.3 ValuesEight fundamental values are at the core of Luz Saúde’s culture:

EXCELLENCE• Placing the interests of patients ahead of the personal

interests and of the organization.• Abiding by the highest ethical and professional stan-

dards.• Humanising medicine, creating empathy with patients

and their families.• Developing long-term relationships with our customers

– patients and third party payers – based on efficacy, integrity and trust.

INNOVATION• Providing the best possible healthcare that scientific

and technological advances allow.

• Investing in cutting edge technology for providing innovative treatments.

TALENT• Working with the best professionals and fostering their

continued development through training investment and implementing a culture of highly demanding standards and personnal overcoming.

• Managing an efficient, high-quality healthcare struc-ture made up of competitive and dynamic employees who are strongly committed to the organization, to its mission and values.

01.2.2 MissionAchieve the best health outcomes from the perspective of patients through rapid and effective diagnosis and treatment, with absolute respect for the patients individuality, and to build an organization capable of attracting, developing and retaining exceptional people.In order to fulfil its mission, Luz Saúde, through its employees, is committed to:

17

01 LUZ SAÚDE

18

ANNUAL REPORT 2017

01.3 Luz Saúde Key DataConsolidated Operating IncomeUnit: millions of euros

Consolidated EBITDA and EBITDA margin Unit: millions of euros

Net Income attributable to shareholdersUnit: millions of euros

Net Debt and Net Debt / EBITDAUnit: millions of euros

Net debt Net debt / EBITDA

EBITDA Margin EBITDA

423,6

483,8450,7

2015 20172016 2015

14,3% 11,6% 11,1%

60,752,1 53,7

2016 2017

2015

21,8

17,017,4

2016 2017 2015

3,1 4,54,1

187,3212,6

241,8

2016 2017

19

01 LUZ SAÚDE

Number of medical consultationsUnit: thousands

Number of emergency room visitsUnit: thousands

Number of surgeries and deliveriesUnit: thousands

Number of imaging examsUnit: thousands

0,0

0,5

1,0

1,5

2,0

2015 20172016 2015 2016 2017

1.728 1.827 1.875

552611 610

2015 20172016 2015 2016 2017

60 63 631.023 1.053 1.081

02MANAGEMENT REPORT

22

ANNUAL REPORT 2017

In 2017, the Portuguese economy grew 2.7% (INE data), a figure above the growth observed in the Euro Zone (2.5%). Unemployment in December 2017 stood at 8.9%, in line with the Euro Zone (8.6%).

The health insurance market in Portugal maintained high growth levels in 2017, with a 9.1% increase in the amount of premiums issued compared to the same period of the previous year.

In the healthcare area, at the level of the public sector, 2017 was characterized by the maintenance of budgetary pressure on the basis of system costs. This situation has several implications on levels of access, quality, degree

of modernization of public hospitals and motivation of employees.

With regard to the private healthcare sector, the consoli-dation movement was maintained due to the combined effect of financial pressure on smaller providers, espe-cially those with greater dependence on the State, and preference by payers for large operators with a diversified portfolio of services and focus on innovation and exce-llence. It is estimated that these larger operators, despite the slowdown in some areas of the market, were able to achieve, in general, increases in healthcare activity, through the natural growth of the market and, above all, the capture of market share due to the referred to above.

Management Report02

02.1 Overview for 2017

23

02 MANAGEMENT REPORT

02.2 Luz Saúde overall and business segments performance

In 2017, Luz Saúde consolidated operating revenues in-creased by 7.3% vis-à-vis 2016, reaching €483.8 million, driven by activity growth of 8.0% on the private heal-thcare segment and of 4.5% on the public segment.

EBITDA reached €53.7 million in 2017, representing a 3.1% growth vs. 2016 and EBITDA margin reached 11.1% (0.5 p.p. decrease vis-à-vis 2016). This evolution was reflected on the net income attributable to shareholders of €17.0 million, maintaining 2016 levels.

OVERALL PERFORMANCE

Consolidated Income Statement

(Million Euro)

2016 2017 Var.

Operating revenues 450.7 483.8 7.3%Operating costs, without depreciation and amortization (398.6) (430.1) 7.9%EBITDA 52.1 53.7 3.1%EBITDA margin 11.6% 11.1% -0.5 p.p.Depreciation (24.2) (25.7) 6.2%EBIT 27.9 28.0 0.4%EBIT margin 6.2% 5.8% -0.4 p.p.Financial results (6.0) (7.1) 18.2%EBT 21.9 21.0 -4.4%Taxes (5.0) (3.7) -25.3%Net Income 17.0 17.3 1.6%Non-controlling interests (0.4) 0.3 N.A.Net Income attributable to Shareholders 17.4 17.0 -2.0%EPS (Euro) 0.182 0.178 -2.2%

24

ANNUAL REPORT 2017

Operating revenues by segment

(Million Euro)

2016 2017 Var.

Consolidated operating revenues 450.7 483.8 7.3%Private Healthcare 354.4 382.9 8.0%Public Healthcare 93.1 97.3 4.5%Other businesses 9.9 15.1 51.9%Corporate center 14.2 17.3 21.6%Eliminations (21.0) (28.8) 37.0%

OPERATING REVENUES PERFORMANCE

The private healthcare segment operating revenues totaled €382.9 million, 8.0% above 2016. This growth was mainly fueled by the acquisition of two units in Madeira, by the acquisition of British Hospital in Lisbon, by the turnaround process in Hospital da Luz – Guima-rães (acquired in 2016) and by the organic growth of the existing units, although conditioned by capacity constraints, especially in the units in the Lisbon region.

The public healthcare segment operating revenues increased 4.5% to €97.3 million, as a consequence of price evolution with inflation and of an increase of complexity levels in the Hospital’s activity.

The other businesses segment obtained €15.1 million operating revenues, an increase due to the consolidation of operations of GLSMED Trade, an internal logistics company, as well as the start of GLS Learning Health, a company dedicated to medical training, research and innovation.

25


Consolidated EBITDA and EBITDA margin

(Million Euro)

2016 2017

€ million Margin € million Margin Var.Consolidated results 52.1 11.6% 53.7 11.1% 3.1%Private Healthcare 60.0 16.9% 59.2 15.5% -1.3%Public Healthcare (6.3) -6.8% (3.4) -3.5% 45.9%Other businesses 0.3 2.8% 0.4 2.9% 58.4%Corporate center (1.9) N.A. (2.5) N.A. N.A.

RESULTS PERFORMANCE

In consolidated terms, Luz Saúde’s EBITDA was €53.7 million and EBITDA margin decreased from 11.6% in 2016 to 11.1% in 2017.

On the private healthcare segment, EBITDA was €59.2 million and the EBITDA margin decreased from 16.9% in 2016 to 15.5% in 2017. Part of this evolution was due to a generalized pressure for price reduction by some relevant payers, not always recognizing the high differen-tiation of healthcare provided by the Group units. This evolution was also due to the operational investment, translated in this phase into personnel costs, to reinforce the support structures for the acquisition activities, to the development of new business areas and client ser-vice, specialized training and centralization of services, together with personnel restructuring at the units level, in harmony with the strategy of increasing capacity.

On the public healthcare segment, EBITDA margin evol-ved positively from -6.8% to -3.5%, as a result of the implementation of efficiency improvement initiatives, with impact on drugs and consumables costs as well as personnel costs, and as a result of lower net provision levels regarding management contract related penalties. These improvements were partially offset by an increase of personnel costs (increase in the number of residents and full year effect of personnel expenses growth in 2016) and by the growth in costs with anti-retroviral therapy for HIV.

In relation to the acknowledgment of the right of Hos-pital Beatriz Ângelo to receive payment for additional healthcare services rendered in outpatient context to HIV/AIDS patients, the manager entity of the Hospital has in the past triggered the mechanisms of dispute resolution set out in the Management Contract. This corresponds to a measure with significant impact in the hospitals’ financial performance. In particular, for Hos-pital Beatriz Ângelo, the recognition of this right would represent an estimated impact of € 4.5 million for 2017.

The economic benefit to the Portuguese State of the public private partnership of Hospital Beatriz Ângelo is clear from the comparative analysis of the operational costs per standardized patient of this unit at national level and in particular in the context of the ARSLVT, where it operates.

However, in order for the sustainability of the model and its benefits to the State not to be exhausted in a short-term perspective, it implies that the partnership necessarily involves a balance of benefits between the State and the private operator, as well as an adequate risk sharing, which must necessarily take into account risk control capabilities criteria and on a bona fide basis, as well as fairness of treatment in the context of the National Health Service.

26

ANNUAL REPORT 2017

Consolidated Balance Sheet(Million Euro)

2016 2017 Dec Dec Dec

Fixed assets 377.3 420.6Working capital 50.8 28.6Net debt 212.6 241.8Net debt / EBITDA 4.1 4.5

BALANCE SHEET

In 2017, Luz Saúde consolidated CAPEX was €69 million, of which €50 million corresponded to expansion CAPEX, whether in geographic expansion, through the acquisition of two units in Madeira, the acquisition of British Hospital in Lisbon, the construction of a new unit in Vila Real, the opening of a new unit in Odivelas in the beginning of 2018, and in existing units with the investment in progress in increasing the capacity of Hospital da Luz Lisboa and Hospital da Luz Oeiras, which will allow to respond to current capacity constraints and demand satisfaction. The remainder €19 million corresponded to replacement and technological upgrade CAPEX, distributed across the Group’s facilities, with emphasis on the continued investment in the area of imaging diagnostic.

With this investment, total fixed assets amounted to € 420.6 million at the end of the reporting period, ex-plained by the company’s strategy of detaining most of its assets, with a significant real estate portfolio, which

includes both healthcare units and the land where the said units are located.

Working capital decreased €22.2 million, reaching €28.6 million by the end of 2017, as a result of the reduction of client receivables days and of the increase in supplier payables days.

By the end of 2017, Luz Saúde consolidated financial debt totaled €299.5 million, with €267.0 million in bank loans and €32.5 million in financial leases, with an overall average maturity of 4.4 years. Net debt reached €241.8 million, representing a €29.2 million increase from 2016 EOY value, mainly driven by investments in expansion. This increase combined with the evolution of EBITDA levels led to an increase of Net debt / EBITDA to 4.5 times, comparing to 4.1 in 2016 EOY.

(Jorge Manuel Batista Magalhães Correia)(Isabel Maria Pereira Aníbal Vaz)(Chen Qiyu)(José Manuel Alvarez Quintero)(Rogério Miguel Antunes Campos Henriques)(Tucson Dunn II)(Ivo Joaquim Antão)(João Paulo da Cunha Leite de Abreu Novais)(Tomás Leitão Branquinho da Fonseca)

April 27th 2018

27


The Group is exposed to a number of financial risks as a result of its operations and the use of financial instruments. Luz Saúde, SA as a parent entity of the Luz Saúde Group and whose main activity is the development and par-ticipation in business in the area of Health, is largely dependent on the activity and performance of the other entities that make up the Luz Saúde Group.

The Company relies heavily on the financial structure of its subsidiaries and their ability to generate sufficient cash flow to distribute dividends, interest payments, repayment of loans made by the company and settle-ment of services provided by the Company. In this capacity, the Company is exposed to the risks of the Group in a global way. The table below summarizes the most significant financial risks to which the Group is exposed, as well as its monitoring and management.

These risk factors, as well as their impact on Group operations and management by the Group can be detailed as follows:

Credit risk Credit risk results from the possibility of occurrence of financial losses resulting from the default of a debtor in respect of contractual obligations to the Group as part of its activity. The Group’s exposure to credit risk is related mainly to the Trade and other receivable arising from operating activities and cash funds managed within the Group’s treasury activities. The monitoring of credit risk arising from operating activities is accomplished through an ongoing moni-toring of the debtor portfolio and their outstanding

balances. This approach is complemented by proce-dures in terms of risk assessment in respect of client acceptance, classification and definition of related credit limits, as well as in terms of procedures and process of debt collection. The monitoring of the Group’s credit risk profile, in particular in what concerns to the evolution of credit exposure and monitoring of losses for uncollectible amounts, is performed regularly by the Operational and Financial areas of each unit. At Group level Planning and Control and Financial and Accounting are departments responsible for monitoring this area. In terms of cash and cash equivalents management, as principle, the Group tries to maintain an alignment between the counterparty which takes the deposits of its cash resources, and the financial institutions with used credit lines to finance the operations, in order to create a natural hedge to prevent the risk of a potential

02.3. Main risks and uncertainties for Luz Saúde

Risk Exposure Monitoring Management

Credit risk• Cash and equivalents• Clients and other

receivables

• Analysis of the exposure and risk concentration of the credit portfolio

• Monitoring the aging of the credit portfolio

• Concentration of bank deposits with the Group’s financing entities

• Definition of customer acceptance procedures and credit limits

Liquidity risk• Interest bearing

liabilities• Other payables

• Historical and projected cash flows

• Compliance with financial ratios

• Hiring credit lines to finance the needs of the Company and the Group

Market risk – interest rates

• Interest bearing liabilities • Sensitivity analyses • Hiring of hedging instruments

28

ANNUAL REPORT 2017

credit event that may occur at the level of entity where the funds are deposited.

Liquidity risk Liquidity risk arises from the potential inability to finance the Group’s assets, or to meet the liabilities contracted due dates. Liquidity management is centralized in the Planning and Control and Financial and Accounting departmen-ts. This management aims to maintain a satisfactory level of cash to meet their financial needs in the short, medium and long term. To assess the overall exposure to this type of risk is assessed through reports identifying treasury shortfalls and trigger the mechanisms for their resolution.

Market risk Market risk is the risk that changes in market prices, such as exchange rates of foreign currencies, interest rates or

the evolution of stock markets may affect the Group’s results and its financial position. Since the Group is not exposed to foreign exchange risks or securities markets, the objective set in terms of management of market risk focuses primarily on monitoring the evolution of interest rates that influence financial liabilities that are exposed to floating interest rates subject to market evolution. All credit lines contracted by the Group are based on floating rates given by a market index plus a spread. In 2017 and in order to balance the exposure to changes in interest rates, the Group contracted hedging ins-truments to hedge its cash flow risk, aiming to fix the interest rates of some of the credit lines in use. The instruments contracted came into effect in the fourth quarter of 2017, and considering the level of financial debt that the Group has as at 31 December 2017, and considering the level of effectiveness expec-ted for these instruments (given an expected positive change in interest rates in the European Union from the reporting date onwards) allow to say that the Group will have approximately 60,8% of its financial debt exposed to fixed interest rate (2016: 72%).

Organizations devote special attention to resource and energy efficiency because of concerns with the sustainable development of the environment, so that future generations will be able to meet their needs. Efforts have been made to disseminate information on environmental protection in the Luz Saúde units: energy efficiency; resource efficiency to minimize the environ-mental impact on energy, gas and water; reduction of gas and liquid emissions and the appropriate triage of waste, among others.

The activities of some of Luz Saúde’s subsidiaries are governed by specific waste treatment legislation and all the applicable rules and directives have been complied with at each site and for each specific activity. In addi-

tion, a series of training sessions have taken place for employees of various Luz Saúde units on the separation and treatment of various types of hospital waste.

Where relevant, the subsidiaries outsourced the destruc-tion of medical and toxic waste to specialized companies, as prescribed by law.

In 2017, during the course of business, the Group did not incur significant environmental costs. No environmental liabilities have been recorded in the financial statements, nor has any environmental contingency been disclosed given Management’s belief that, on that date, there are no obligations or contingencies arising from past events with significant material costs for the company.

02.4 Environmental information

29


In 2018, Luz Saúde will maintain its focus on leveraging the high demand for its services in the private heal-th care segment, specifically in response to the high growth of health insurance, by continuously improving the utilization of installed capacity, asset turnover and, consequently, overall profitability.

At the same time, the company will continue its expansion plans, namely the doubling of the installed capacity of Hospital da Luz Lisboa and the development of a new Hospital in Vila Real. In addition, Luz Saúde will be fo-cused in the ramp-up of recently acquired units (British Hospital and Madeira) and of units representing organic growth (capacity increase and service portfolio expan-sion in Hospital da Luz Oeiras and opening of Hospital da Luz Odivelas), in order to potentiate their growth and improve their profitability. Regarding the Idealmed Group, Luz Saúde’s focus will be on the development of its operational activity, as well as on the articulation with the other units, which will consolidate Luz Saúde Group’s position in the Center region. Finally, Luz Saúde

will continue to be active in materializing consolidation opportunities in the domestic market.

On the public healthcare segment, the Group will be focused on maintaining the high standards of quality and clinical effectiveness of the services provided to its patients and on efficiency enhancement initiatives, in particular the referral capacity of patients to the continuous care network and the resolution of social cases that increase pressure the Hospital’s inpatient capacity, in order to improve Hospital Beatriz Ângelo’s profitability levels.

Regarding the international expansion of Luz Saúde, the Group proceeds with the development of a private health unit in Luanda in conjunction with its shareholder Fidelidade already present in this market through the insurance company Fidelidade Angola. At the same time, the active analysis of expansion opportunities for other geographies will be maintained, in the context of the shareholder Fidelidade / Fosun.

Luz Saúde has prepared a report, which is part of its Management Report, which includes non-financial infor-mation, as provided for in article 66-B of the Commercial Societies Code, which is published together with the

Management Report and can be found in Chapters 01 and 05 (“Luz Saúde - Identity and Structure” and “Social and Corporate Responsibility”) of the 2017 Annual Report.

02.6 2018 outlook

02.5 Information about non-financial reporting

30

ANNUAL REPORT 2017

02.7 Subsequent events

02.8 Profit allocation proposal

In October 2014, Fosun International Holdings Ltd, indirectly through Fidelidade – Companhia de Segu-ros, SA, acquired a controlling stake over LUZ SAÚDE. In January 2018, as a consequence of a transaction between Fidelidade – Companhia de Seguros, SA and

Fosun International Ltd, the latter became the direct owner of 49% of LUZ SAUDE share capital and voting rights, with Fidelidade - Companhia de Seguros, SA reducing its stake to 49.7881%.

For the year ended on 31 December 2017, there was a net consolidated profit of €17,013,998 and a net profit in the separate accounts of €10,434,842.44.

In accordance with the applicable accounting standards, the Company recognized in the accounts for the year, a value of €630,000 as an estimate for profit distribution to employees and Executive Directors of the company.

In this context and under the provisions set out by law and bylaws, the Board of Directors proposes that the 2017 net profit in the total amount of €10,434,842.44, determined based on the individual financial statements, be allocated as follows:

(i) Legal Reserve: €521,742.12(ii) Free Reserve: €9,913,100.32

In addition to the above mentioned, it is proposed the distribution to LUZ SAÚDE employees and Executive Directors, a maximum amount of € 630,000 (an amount that, given the applied accounting rules, is already re-flected in the individual net profit for the financial year ended on 31 December 2017) and the Remuneration Committee shall determine the amount to be allocated to Executive Directors.

In the Extraordinary Shareholders Meeting held in April 13th 2018, Luz Saúde’s shareholders voted for the initia-tion of the delisting process of Luz Saúde, S.A., under

the terms of article 27.º, n.º 1, point b) of the Portuguese Securities Code.

In March 2018, Luz Saúde completed the acquisition of 70% of the share capital and voting rights of the company Capital Criativo Healthcare II (a “CCHC2”), which holds the total share capital of Idealmed III, Serviços de

Saúde, S.A., Imacentro – Clínica de Imagiologia Médica do Centro, S.A., and Idealmed Ponte Galante, S.A., com-panies which hold, respectively, Idealmed UHC – Unidade Hospitalar de Coimbra and four outpatient clinics in the city center of Coimbra, in Figueira da Foz, Pombal and Cantanhede (“Idealmed Group”).

02.7.1 Shareholders’ change

02.7.2 Company delisting

02.7.3 Business acquisition in Coimbra region

31


02.9 Authorizations Granted for Transactions between the Company and its Directors

No authorizations have been granted for transactions between the company and its directors under Article 397 of the Portuguese Companies Code.


April 27th 2018

02.10 Annex to the Consolidated Annual ReportInformation on shareholdings of members of the management and supervisory bodies in the company’s share capital as of 31 december 2017

Luz Saúde, SA hereby discloses, pursuant to article 447(5) of the Portuguese Companies Code, the detail about shareholdings in the company held by members of the management and supervisory bodies, as at 31 December 2017.

Shareholdings Shareholdings as at 30 June Additions during Decreases as at 31 December Members of the management and supervisory bodies 2016 the period during the period 2017Isabel Maria Pereira Aníbal Vaz 50,000 - - 50,000João Paulo da Cunha Leite de Abreu Novais 40,000 - - 40,000Tomás Leitão Branquinho da Fonseca 40,000 - - 40,000Ivo Joaquim Antão 40,000 - - 40,000

32

ANNUAL REPORT 2017

STATUTORY AUDITORS

The Statutory Auditors, Ernst & Young Audit & Associados - SROC, S.A., have no shareholding as at 31 December 2017, having made no transactions with any Luz Saúde, SA securities.

LIST OF TRANSACTIONS OF SENIOR OFFICERS AND CLOSELY RELATED PERSONS THEREWITH

Luz Saúde, SA hereby discloses, in accordance with Article 14(7) of CMVM Regulation 5/2008, that no tran-

sactions were made by company managers during the period between 30 June 2017 and 31 December 2017.

LIST OF QUALIFIED SHAREHOLDERS AS AT 31 DECEMBER 2017

The Company’s share capital and voting rights as at 31 December 2017 included the following qualified sha-reholdings of at least 2% of Luz Saúde’s share capital, calculated according to article 20 of the Portuguese Securities Code:

On 31 December 2017, there were no own shares of Luz Saúde, S.A. share capital.

STATEMENT UNDER THE TERMS OF ARTICLE 246, PARAGRAPH 1, C), OF THE SECURITIES CODE

In accordance with Article 246, paragraph 1, c) of the Securities Code, the Board of Directors of Luz Saúde, SA, whose name is listed below, declare that, to their knowledge:

a) The 2017 accounts, were elaborated in compliance with the applicable accounting standards, accurately and truthfully portraying the assets and liabilities, financial position and results, as well as those of the companies included in its consolidation perimeter;

b) The management report faithfully portrays the im-portant events occurred in 2017 and its impact on the accounts and, when applicable, contains a des-cription of the main risks and uncertainties for the following year.


INFORMATION ABOUT OWN SHARES

Under the share-based payment program, the following operations were performed with Luz Saúde shares:

List of qualified shareholders (as at 31.12.2017) Number of Shares Capital (%) Voting rights (%)Fidelidade – Companhia de Seguros, S.A. 94,384,363 98.79 98.79

Number of shares Value

Balance on 30 June 2017 - -Acquisition of own shares - -Distribution of own shares according to the governing bodies’ remuneration plan - -Balance on 31 December 2017 - -

33


03CONSOLIDATED FINANCIAL STATEMENTS

36

ANNUAL REPORT 2017

Consolidated statement of comprehensive income for the year ended 31 December 2017In euros

Notes 31-dec-17 31-dec-16 Income and gains Revenue from services rendered 5 481,924,599 449,370,489 Other operating income 6 1,894,147 1,327,289 Finance income 80,563 61,739 Total income and gains 483,899,309 450,759,517 Expenses and losses Inventories consumed and sold 7 (76,009,755) (69,719,444) Costs of services and materials 8 (217,692,984) (203,270,465) Personnel expenses 9 (132,128,536) (121,952,969) Depreciation and amortisation 13 / 14 (25,703,004) (24,200,997) Other operating expenses 10 (3,262,444) (1,650,481) Provisions, net of reversals 21 (294,367) (1,533,271) Impairment of receivables, net of reversals 16.5 (686,298) (440,753) Finance costs 11 (7,146,198) (6,041,335) Total expenses and losses (462,923,586) (428,809,715) Profit before income tax 20,975,723 21,949,802 Income tax expense 12 (3,711,052) (4,964,650) Profit for the year 17,264,671 16,985,152 Other comprehensive income: Itens that maybe reclassified to results: Cash flow hedges, net of tax 24 1,078,228 (3,062,624)Other comprehensive income for the year 1,078,228 (3,062,624) Comprehensive income for the year 18,342,899 13,922,528 Profit attributable to: Equity holders of the parent 17,013,998 17,368,194 Non-controlling interests 20 250,673 (383,042) Comprehensive income attributable to: Equity holders of the parent 18,092,226 14,305,570 Non-controlling interests 20 250,673 (383,042) Basic earnings per share 26 0.178 0.182Diluted earnings per share 26 0.178 0.182

Notes are an integral part of these consolidated financial statements

03Consolidated Financial Statements(free translation from the original version in portuguese)

37

03 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of financial position as at 31 December 2017In euros

Notes 31-dec-17 31-dec-16 Assets Non-current assets Property, plant and equipment 13 294,142,028 263,142,893 Intangible assets 14 125,484,486 113,101,625 Investments in associates 15 27,063,481 1,007,433 Other receivables 16 1,007,272 1,064,830 Deferred tax assets 12 1,267,038 997,906 Total non-current assets 448,964,305 379,314,687 Current assets Inventories 17 11,538,902 9,828,795 Trade receivables 16 89,903,021 105,570,792 Other receivables 16 51,033,243 45,378,717 Cash and cash equivalents 18 57,778,921 41,486,834 Total current assets 210,254,087 202,265,138 Total assets 659,218,392 581,579,825 Shareholders’ Equity Equity and reserves Share capital 95,542,254 95,542,254 Treasury shares - (656,388) Share premium 61,795,793 61,795,793 Reserves and retained earnings 76,181,659 58,745,821 Total equity attributable to equity holders of the parent 19 233,519,706 215,427,480 Shareholders’ equity attributable to non-controlling interests 20 1,857,794 1,619,692 Total shareholders’ equity 235,377,500 217,047,172 Liabilities Non-current liabilities Provisions 21 10,080,600 8,427,083 Borrowings 23.1 240,598,056 207,655,198 Derivative financial instruments 24 3,109,947 4,731,582 Finance lease liabilities 23.2 27,477,884 22,360,697 Total non-current liabilities 281,266,487 243,174,560 Current liabilities Trade payables 22 42,440,136 34,966,322 Other payables 22 71,420,390 66,805,612 Borrowings and bank overdrafts 23.1 23,290,974 13,501,947 Current income tax payable 12 358,009 221,216 Finance lease liabilities 23.2 5,064,896 5,862,996 Total current liabilities 142,574,405 121,358,093 Total liabilities 423,840,892 364,532,653 Total shareholders’ equity and liabilities 659,218,392 581,579,825


38

ANNUAL REPORT 2017

Consolidated statement of cash flows for the year ended 31 December 2017In euros

Notes 31-dec-17 31-dec-16 Operating activities Receipts from customers 493,974,409 445,350,508 Payments to suppliers (292,860,157) (267,662,665) Payments to employees (73,993,661) (69,468,609) Cash flow generated from operations 127,120,591 108,219,234

Income tax paid 12 (3,594,659) (8,617,159) Other receipts/(payments) related with operating activities (62,787,351) (64,731,443) Net cash flow generated from operating activities 60,738,581 34,870,632

Investing activities Proceeds from: Sale of property, plant and equipment 13 160,505 27,508 Investments in associates 15 90,000 232,000 Investment grants 49,000 - Interest received 33,648 3,646 Payments related with: Purchase of property, plant and equipment 13 (37,392,623) (18,181,531) Purchase of intangible assets 14 (998,832) (16,882,057) Investments in associates 15 (26,105,000) - Acquisition of subsidiary, net of cash acquired 30 (10,022,053) - Net cash flow used in investing activities (74,185,355) (34,800,434)

Financing activities Proceeds from: Borrowings 697,579,067 612,772,335 Subsidiary share capital increase 20 - 375,000 Payments related with: Repayment of borrowings (653,180,170) (588,177,710) Repayment of financial lease liabilities (6,380,703) (5,992,635) Interest and other similar expenses paid 11 (8,095,321) (5,915,045) Other financing payments - (1,053,000) Net cash flow used in financing activities 29,922,873 12,008,945

Change in cash and cash equivalents 18 16,476,099 12,079,143 Changes in perimeter 30 (184,012) - Cash and cash equivalents at the beginning of the year 18 41,486,834 29,407,691 Cash and cash equivalents at the end of the year 18 57,778,921 41,486,834


39


Consolidated statements of changes in shareholders’ equity for the year ended 31 December 2017

In euros Total equity Reserves attributable and to equity Non- Total Share Treasury Share retained holders of controlling shareholders’ capital shares premium earnings the parent interests equity (note 19) (note 20)

Balance as at 1 January 2016 95,542,254 (1,312,777) 61,795,793 45,949,380 201,974,650 1,731,660 203,706,310 Transactions with owners under capacity as owners Acquisition of non-controlling interests - - - (1,034,074) (1,034,074) 271,074 (763,000) Share-based payments Vesting of shares granted - 656,389 - (656,389) - - - Fair value of the services of the year - - - 181,334 181,334 - 181,334 Total direct change in shareholders’ equity - 656,389 - (1,509,129) (852,740) 271,074 (581,666) Profit for the year - - - 17,368,194 17,368,194 (383,042) 16,985,152 Other comprehensive income for the year - - - (3,062,624) (3,062,624) - (3,062,624) Balance as at 31 December 2016 95,542,254 (656,388) 61,795,793 58,745,821 215,427,480 1,619,692 217,047,172 Balance as at 1 January 2017 95,542,254 (656,388) 61,795,793 58,745,821 215,427,480 1,619,692 217,047,172 Transactions with owners under capacity as owners Acquisition of non-controlling interests of a subsidiary (note 30) - - - - - (12,571) (12,571) Share-based payments Vesting of shares granted - 656,388 - (656,388) - - - Total direct change in shareholders’ equity - 656,388 - (656,388) - (12,571) (12,571) Profit for the year - - - 17,013,998 17,013,998 250,673 17,264,671 Other comprehensive income for the year - - - 1,078,228 1,078,228 - 1,078,228 Balance as at 31 December 2017 95,542,254 - 61,795,793 76,181,659 233,519,706 1,857,794 235,377,500


40

ANNUAL REPORT 2017

Hong Kong. This company is held in 100% by Fosun Financial Holdings Limited (Hong Kong), which is owned by Fosun International Limited, a company listed on the Hong Kong Stock Exchange (00656.HK). This company is owned in 71.77% by Fosun Holdings Limited, which is owned by Fosun International Holdings, Ltd. whose ultimate beneficial owner is Mr. Guo Guangchang. In January 2018, as a result of a transaction between Fo-sun International Ltd and Fidelidade - Companhia de Seguros, SA, Fosun International Ltd has acquired 49% of the share capital and voting rights of LUZ SAUDE and Fidelidade - Companhia de Seguros, SA reduced its participation to 49.7881%.

At the Extraordinary General Meeting held on 13 April 2018, the shareholders of LUZ SAÚDE decided to pro-ceed with the necessary acts so that the Company loses its status as a public company, and the shares being removed from trading on BVL.

On 27 April 2018, the Board of Directors approved and authorised the disclosure of these financial statements.

Luz Saúde, SA (hereinafter LUZ SAÚDE, or “Company” and together with its subsidiaries named as “Group”) is a limited liability company, with registered office in Lisbon, in Rua Carlos Alberto Mota Pinto 17 – 9º floor, being the parent company of LUZ SAÚDE Group, the Group is made-up of companies that operate exclusively in the provision of healthcare, including the manage-ment of acute hospitals, outpatient clinics, residential hospitals, senior residences with services and a Natio-nal Health System (NHS) hospital under public private partnerships (PPPs).

LUZ SAÚDE’s shares were admitted to trading on the Lisbon Stock Exchange (“BVL”) on 11 February 2014.

In 15 October 2014, as consequence of a tender offer launched, Fosun International Holdings, Ltd through Fidelidade – Companhia de Seguros, SA acquired control of LUZ SAÚDE (note 29).

Fidelidade – Companhia de Seguros, SA is owned in 84,986% by Longrun Portugal, SGPS, SA which is fully owned by Millennium Gain Limited headquartered in

1. General information on the activities of the group and reporting entity

Notes to the Consolidated Financial Statements (Amounts expressed in Euros)(free translation from the original version in portuguese)

41


Registered Percentage of office share capital held (1) Segment 2017 2016 Parent company: Luz Saúde, SA Lisbon - - Corporate center

Subsidiaries: BMC - British Hospital Management Care, SA (“BMC”) Lisbon 90.41% - PrivateBritish Hospital Lisbon XXI, SA (“BH”) Lisbon 100.00% - PrivateCapital Criativo Health Care Investments, SA (“CCHCI”) Lisbon 100.00% - PrivateCasas da Cidade - Residências Sénior de Carnaxide, SA (“CASAS CARNAXIDE”) Oeiras 100.00% 100.00% Other activitiesCasas da Cidade - Residências Sénior, SA (“CASAS”) Lisbon 100.00% 100.00% Other activitiesCLIRIA - Hospital Privado de Aveiro, SA (“CLIRIA”) Aveiro 93.45% 93.45% PrivateCRB - Clube Residencial da Boavista, SA (“CRB”) Oporto 100.00% 100.00% PrivateGLSMED Learning Health, SA (“GLSLH”) Lisbon 100.00% 100.00% Other activitiesGLSMED Trade, SA (“GLST”) Lisbon 100.00% 100.00% Other activitiesHME - Gestão Hospitalar, SA (“HME”) Évora 100.00% 100.00% PrivateHospital da Arrábida - Gaia, SA (“HAG”) V. N. Gaia 100.00% 100.00% PrivateHospital da Luz, SA (“HL”) Lisbon 100.00% 100.00% PrivateHospital da Luz - Centro Clínico da Amadora, SA (“HL-CCA”) Amadora 100.00% 100.00% PrivateHospital da Luz - Guimarães, SA (“HLG”) Guimarães 100.00% 100.00% PrivateHospital da Luz - Oeiras, SA (“HLO”) Oeiras 100.00% 100.00% PrivateHospital Residencial do Mar, SA (“HRM”) Loures 75.00% 75.00% PrivateHOSPOR - Hospitais Portugueses, SA (“HOSPOR”) Póvoa de Varzim 100.00% 100.00% PrivateInstituto de Radiologia Dr. Idálio de Oliveira - Centro de Radiologia Médica, SA (“IRIO”) Lisbon 100.00% 100.00% PrivateLuz Saúde - Serviços, ACE (“ACE”) (2) Lisbon 100.00% 100.00% Corporate centerLuz Saúde - Unidades de Saúde e de Apoio à Terceira Idade, SA (“USATI”) Lisbon 100.00% 100.00% Mix (3)

Microcular - Centro Microcirurgia Ocular, Laser e Diagnóstico, SA (“CMO”) Lisbon 100.00% - PrivateNID - Núcleo de Imagem Diagnóstica, Lda (“NID”) Funchal 81.35% - PrivateRML - Residência Medicalizada de Loures, SGPS, SA (“RML”) Lisbon 75.00% 75.00% PrivateSCH - Sociedade de Clínica Hospitalar, SA (“SCH”) Funchal 81.35% - PrivateSGHL - Sociedade Gestora do Hospital de Loures, SA (“SGHL”) Lisbon 99.99% 99.99% PublicSurgicare - Unidades de Saúde, SA (“SURGICARE”) Lisbon 100.00% 100.00% PrivateVila Lusitano - Unidades de Saúde, SA (“VLUSITANO”) Lisbon 75.00% 75.00% Private

(1) the percentage of share capital held includes the direct and indirect holding of Luz Saúde in the subsidiaries.(2) Luz Saúde – Serviços, ACE, has no share capital, and agregates twelve companies of the Group. The percentage disclosed refers to the

voting rights held by the Group.(3) Luz Saúde – Unidades de Saúde e de Apoio à Terceira idade, SA is part of the segments Private and Other activities.

1.1. Group composition and changes1.1.1. Group composition as at 31 December 2017

As at 31 December 2017 the entities fully consolidated are:

42

ANNUAL REPORT 2017

Registered Percentage of office share capital held

2017 2016

GENOMED - Diagnósticos de Medicina Molecular, SA (“GENOMED”) Lisbon 37.50% 37.50%

HL - Sociedade Gestora do Edifício, SA (“HL-SGE”) Oeiras 10.00% 10.00%Capital Criativo Health Care Investments II, SA (“CCHCI II”) Lisbon 10.00% -

1.1.2. Changes in the consolidation perimeter

In the years ended December 31, 2017 and 2016, the following operations resulted in changes in the Group’s consolidation perimeter:

1.1.2.1. Acquisition of 81.35% in S.C.H. Sociedade Clínica Hospitalar, SA in 2017

In March 2017, LUZ SAÚDE acquired 81.35% of S.C.H. Sociedade Clínica Hospitalar, SA and Núcleo de Imagem Diagnóstica, Lda (note 30.1).

1.1.2.2. Acquisition of the British Hospital Group in 2017

In July 2017, LUZ SAÚDE acquired the entire share capital and voting rights of Capital Criativo Health Care Invest-ments, SA, British Hospital - Lisbon XXI, SA, Microcular – Centro Microcirurgia Ocular, Laser e Diagnóstico, SA, and 90, 41% of the share capital and voting rights of British Hospital Management Care, SA (all together “British Hospital Group” or “GBH”) (note 30.2).

1.1.2.3. Increase of the participation in Cliria during 2016

On December 28, 2016, LUZ SAÚDE increased its par-ticipation in the subsidiary CLIRIA as a result of the acquisition of 2.86% of the subsidiary’s shares.

1.1.2.4. Capital increase in the subsidiary HLG and consequent dilution of the Group’s interest and subsequent increase of the participation during 2016

In January 2016, following the insolvency proceedings of the company Casa de Saúde de Guimarães, the subsidiary HLG acquired the businesses and assets of the health units previously operated by this company (Hospital Privado de Guimarães and Clihotel of Gaia), starting to operate under Luz Saúde’s brand with the designation of Hospital da Luz Guimarães and Hospital do Mar Gaia (note 30.3). On December 30, 2016, LUZ SAÚDE acquired the remain non-controling interests of the subsidiary HLG (note 30.3).

As at 31 December 2017 associate companies are:

43


The consolidated financial statements have been pre-pared on a going concern basis from the books and accounting records of the companies included in the consolidation (note 1.1.1) based on historical cost, in accordance with the International Financial Reporting Standards (“IFRS”), as adopted by the European Union (EU) as at 31 December 2017, modified by the application of the fair value of the derivative financial instruments. These standards include both the IFRS issued by the International Accounting Standards Board (“IASB”) and the International Accounting Standards (“IAS”) issued by the International Accounting Standards Committee (“IASC”) and their respective interpretations – IFRIC and SIC, respectively issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and the Standing Interpretations Committee (“SIC”). These stan-dards and interpretations are together known as IFRS.

The financial statements are expressed in Euros.

Until 31 December 2005, inclusive, LUZ SAÚDE’s fi-nancial statements were prepared according to the

generally accepted accounting principles used in Por-tugal. Pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 which was transposed into Portuguese law under Decree-Law 35/2005 of 17 February, the Group’s finan-cial statements could be prepared according to IFRS as of the 2006 financial year. Therefore, the Board of Directors decided to prepare the consolidated financial statements as of 1 January 2006 according to IFRS as adopted by the European Union.

Preparing the financial statements according to IFRS requires the Group to make judgments, estimates and assumptions that affect how accounting policies are applied and the amounts presented as income, expenses, assets and liabilities. Changes to these assumptions or differences with respect to the actual reality may have an impact on current estimates and judgments (note 3). The main accounting policies used in the preparation of these financial statements are presented in note 33.

2. Basis of presentation of the financial statements

2.1. Comparability With the acquisition of SCH’s business in March 2017 and the British Hospital Group in July 2017, the consolidated statement of profit and loss and the consolidated sta-tement of cash flows for the year ended 31 December 2017 include the operations of these businesses since the dates of its acquisition (note 30).

With the acquisition of the businesses of Hospital da Luz Guimarães and Hospital do Mar Gaia in January 2016, the consolidated income statement and the consoli-dated cash flow statement includes only 11 months of operation of these businesses.

44

ANNUAL REPORT 2017

2.2. New standards, amendments or interpretationsDuring the year of 2017, accounting standards and inter-pretations were approved and published in the Official Journal of the European Union (OJ). These apply to subsequent financial years, although its early adoption is permitted. The standards and amendments adopted by the Group in preparing its consolidated financial statements, as well as the standards not early adopted are summarised below.

2.2.1. New standards, amendments or interpretations applicable to financial years beginning on or after 1 January 2017

Following endorsement by the European Union (EU), the Group adopted (when applicable) the following standards, revisions, amendments and improvements to the Standards and Interpretations as of 1 January 2017:

The adoption of these standards, interpretations and amendments to standards did not have a material impact on the consolidated financial statements.

2.2.2. New standards, amendments and interpretations issued by the IASB, endorsed by the European Union (“EU”) and applicable to the financial years beginning after 1 January 2017

On 31 December 2017, the following improvements to the Standards and Interpretations issued by the IASB had already been endorsed by the EU. However, their application only becomes mandatory for the financial years beginning after 1 January 2017.

Issued (IASB) IASB Standard or IFRIC Interpretation Mandatory application in the financial years

beginning on or after

January 2016 IAS 12 – Income tax: Recognition of deferred tax assets for unrealised losses (amendment) 1 January 2017

January 2016 IAS 7 – Statement of cash flows (amendment) 1 January 2017



May 2014 IFRS 15 – Revenue from Contracts with Customers (new) 1 January 2018

July 2014 IFRS 9 – Financial Instruments 1 January 2018

January 2016 IFRS 16 – Leases (new) 1 January 2019

April 2016 IFRS 15 – Revenue from contracts with customers (amendment) 1 January 2018

September 2016 IFRS 4 - Applying IFRS 9 Finantial Instruments with IFRS 4 Insurance Contracts (amendment) 1 January 2018

45


2.2.2.1. IFRS 15 Revenue from Contracts with Customers

The new standard IFRS 15 Revenue from Contracts with Customers establishes that the recognition of revenue from contracts entered into with clients must be carried out in accordance with a five-step model, and it must be recognized at the amount that the Group expects to receive from the client in exchange for the goods or services provided.

The adoption of the standard is mandatory for years beginning on or after 1 January 2018, and its adoption must follow the full retrospective method or modified retrospective method.

During 2017, the Group analyzed the implications of its adoption and concluded that the revenue recognition model followed by the different subsidiaries is already in line with the new standard:

• revenue from medical acts, whether performed on an independent basis (consultations, examinations, treatments) or jointly with other medical acts (surge-ries, births, treatments), are treated and recognized independently (ie act by act) , at the specific moment in time when the performance obligations are completed;

• services rendered on a continuous basis over time (surgical internment, non-surgical internment, stays in senior residences, provision of emergency services in the case of the Public-Private Partnership (“PPP”), among others) are recognized time apart as the client receives and consumes the benefits of the service over time.

As such, it is not expected a significant impact on the Group’s Financial Statements, with the most significant changes being those related to the increase in disclo-sures associated with Revenue.

2.2.2.2. IFRS 9 Financial Instruments

The new standard IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Mea-surement, has as main focus the following aspects: i) Classification and measurement;ii) Impairment; andiii) Hedge accounting.

The adoption of the standard is mandatory for periods beginning on or after January 1, 2018. During 2017, the Group analyzed the implications of adopting this new standard and is not expected to have a significant impact on the Financial Statements of the Group.

2.2.2.3. IFRS 16 Leases

IFRS 16 Leases eliminates the classification of leases as operating and financial leases for lessees by introducing a single accounting model, similar to the current model that is used for financial leases by lessees, replacing IAS 17 - Leases and their interpretative guidelines.

This model provides for recognition in the lessees accoun-ts of assets and liabilities in the statement of financial position for all leases lasting more than 12 months and the recording of a depreciation and interest expense in the Income Statement separately.

The adoption of the standard is mandatory for the years beginning on or after 1 January 2019.

At the date of publication of the consolidated financial statements, Luz Saúde has inventoried all existing leasing contracts and is analyzing its technical consideration taking into account the provisions of IFRS 16. At this date it is not possible to estimate the magnitude of the impacts inherent to its adoption

The information in note 20 allows an order of magnitude of the values of the operating leases to be considered.

46

ANNUAL REPORT 2017



June 2016 IFRS 2 – Share based payments (amendment) 1 January 2018

December 2016 Annual improvements 2014–2016 cycle 1 January 2018

December 2016 IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (new) 1 January 2018

December 2016 IAS 40: Transfers of Investmenty Property (amendment) 1 January 2018

May 2017 IFRS 17 Insurance contracts (new) 1 January 2021

June 2017 IFRIC 23 Uncertainty over Income Tax Treatments (new) 1 January 2019

October 2017 IFRS 9: Prepayment Features with Negative Compensation (amendment) 1 January 2019

October 2017 IAS 28: Long-term Interests in Associates and Joint Ventures (amendment) 1 January 2019

December 2017 Annual Improvements 2015-2017 Cycle 1 January 2019

2.2.3. New standards, amendments and interpretations issued by the IASB and not endorsed by the European Union by 31 December 2017

On 31 December 2017, the following standards, revisions, amendments and improvements to the Standards and Interpretations, issued by the IASB were still pending approval by the EU:

The Group has not early adopted the mentioned amend-ments, and the adoption is not expected to have a ma-terial impact on the financial statements of the Group.

47


3. Significant estimates and judgments used in preparing the financial statements

IFRS establish a number of accounting options and require the Board of Directors make the necessary judgments, estimates and decide the most suitable accounting option according to the Group’s operations. The main accounting estimates and judgments used by the Group when applying accounting policies are presented in this note not only for their disclosure, but to improve the understanding of how their application affects LUZ SAÚDE’s reported financial position and results, and have as reference date the reporting date.

Considering that in many situations there are alternati-ves to the accounting policies adopted by the Board of

Directors, the amounts recognized in the consolidated financial statements reported by LUZ SAÚDE could have been different had a different policy been chosen. The Board of Directors believes the choices made are appropriate and the financial statements adequately present the Group’s consolidated financial position, consolidated results and consolidated cash flows of its operations in all material respects.

The options presented are only for a better understan-ding of the financial statements and are not intended to suggest that other options or estimates would be more appropriate.

Depreciations and amortisations are calculated on the acquisition cost on a straight-line basis, as of the month the asset becomes available for use. The depreciation and amortisation rates applied reflect the best estimate

of useful life (notes 33.2.1 and 33.2.2). Residual asset values and the respective useful lives are revised and adjusted when deemed necessary.

Impairment losses on doubtful debts are based on the Group’s assessment of the probability of recovering the outstanding balances owed (note 16). This assessment is based on the duration of the default, the debtor’s credit

history and the deterioration of credit position of the main debtors. Should the debtors’ financial conditions deteriorate, impairment losses may be greater than expected (note 31.1).

3.1. Property, plant and equipment and intangible assets - estimated useful lives

3.2. Impairment on trade and other receivables

48

ANNUAL REPORT 2017

The Group exercises considerable judgement in mea-suring and recognizing provisions. Judgment is indispen-sable to assess the probability of a successful outcome for certain pending litigation. Provisions are accrued when the Group considers an unfavorable outcome in pending litigation to be likely and thereby a reasonably estimated outflow of funds is expected. Due to uncer-

tainties inherent to the assessment process, actual losses may be different from those estimated in the provision. These estimates are subject to change as new information about the proceedings becomes available. Revisions of these estimated losses may affect future earnings (note 21).

Certain interpretations and estimates must be made in order to determine the amount of income tax liability and deferred taxation. There are a number of transac-tions and calculations for which the determination of the final amount of income tax to be paid is uncertain during the normal business cycle. Other interpretations and estimates could result in a different level of income taxes, both current and deferred, to be recognised in the period.

Deferred tax assets are recognized only to the extent that it is expected that there will be future taxable income capable of absorbing deductible temporary differences.

As of December 31, 2017, the Group has tax losses amounting to € 6,900 thousand for which no deferred tax assets were recognized.

The Tax Authorities are entitled to review the Group’s calculation of taxable income for a period of four to ten years, if there are tax losses carried forward (five years for Social Security). Corrections may therefore be made to taxable income, mainly due to different interpretations of tax laws. The Board of Directors believes, however, there will be no significant corrections to the income taxes reported in the financial statements. Note 27 presents the situations that are in dispute with the Tax Authorities.

The Group tests on an annual basis impairment of goodwill recognised as an intangible asset. For this purpose, the Group estimates the recoverable amount of cash-generating units to which goodwill is allocated. The recoverable amount is calculated based on the value in use, which results from the present value of future

estimated cash flows, using a discount rate that reflects the risk associated with the assessed asset.

If future cash flows are found to be less than those es-timated by Luz Saúde’s Board of Directors, significant impairment losses may need to be recognized (note 14).

3.3. Provisions

3.4. Income tax and deferred tax

3.5. Goodwill

49


As described in note 33.2.7, the management agreement for Loures Hospital establishes that the invoicing of me-dical acts rendered is performed monthly for an amount equivalent to 1/12 of 90% of the annual amount agreed. The remainder amounts are invoiced in the following financial year, following the conclusion by the parties of the validation procedure thereof.

At the reporting date, a portion of the services rendered by this business unit have not yet been invoiced and are pending the conclusion of the validation process thereof by the contracting entity.

As at 31 December 2017, and although the payment defined in the management contract has been perfor-

med, there are values related to services rendered in the years from 2012 to 2016, that are under validation by Regional Health Authority of Lisbon and Vale do Tejo (“ARS-LVT”).

In this context, notwithstanding the uncertainty this matter entails, the Board of Directors assumed the best estimate for the amounts recorded in the respective books and accounting records and believes that the closing of accounts with the Regional Health Authority of Lisbon and Vale do Tejo for the period of 2012 to 2016, and the conclusion of the validation processes for the financial year ended 31 December 2017, will not have a material impact on the financial statements (note 16.2).

3.6. Management agreement for Loures Hospital

LUZ SAÚDE Group recognizes on a monthly basis an accrued expense for bonuses, considering the objec-tives agreed with employees, the achievement of said objectives and the Group’s business performance. The variable remuneration of the Board of Directors is deter-mined by the Remuneration Committee based on the

appraisal of the previous year performance. The cost estimated for the period is recorded as a liability under ‘Other payables’ , and is prepared based on the best estimate of management considering the performance of the current period, being the final amount known in the following year.

3.7. Variable remuneration

The Group estimates and recognizes on a monthly basis a liability for professional fees to be paid to the persons that do not have a permanent labor contract with the Group. This liability is estimated based on the historic of the amounts paid monthly, the agreements established with the professionals and the amount of services provided by them. The validation and final

calculation of the amounts to be paid occurs in a period after the date of approval of these financial statements, therefore differences could exist between the liability estimated and the final amounts payable (note 22). The estimate for professional fees payable on 31 December, 2017 amounts to € 25,048 thousand (2016: € 21,575 thousand).

3.8. Accrual for professional fees

LUZ SAÚDE recognizes revenue based on the register of the medical services performed. The valuation of the medical acts considered is estimated based on the price lists agreed with the customers, being the final amount of the revenue determined after the acceptance by the

client, event that for a part of the services rendered only occurs in the period subsequent to the reporting date. The amount of revenue to be invoiced on 31 December 2017 amounts to € 42,217 thousand (2016: € 38,076 thousand) (note 16.2).

3.9. Revenue valuation

50

ANNUAL REPORT 2017

The Group’s main activities are grouped into the following business segments:

• Private healthcare;• Public healthcare;• Other activities;• Corporate center (previously designated as Holding

and shared services).

The private healthcare segment in 2017 includes the following business units:

• Eleven hospitals focused on differentiated acute care, namely surgery, inpatient treatments and specialized diagnostics, which complement each other. They also have strong credentials in primary non-acute healthcare on an outpatient basis. Further activities entail the promotion and protection of health, through check-up exams and other preventive measures.

• Eight outpatient units focused on non-acute primary care, including external consultations for a wide array of medical and surgical specialities, complementary diagnostic and therapeutic procedures (namely for imaging and laboratory testing) and 24-hour medical assistance. One of these units is able to perform all types of surgical procedures on an outpatient basis.

• Two residential hospitals, specialized in healthcare services that involve rehabilitation, medical or post--operative convalescence, neuro-stimulation, general support for dementia (in particular for Alzheimer’s

disease), continued care, palliative and geriatric care on a Day-Centre or Inpatient basis.

• A radiotherapy unit.

The Public healthcare segment includes Hospital Beatriz Ângelo (HBA) in Loures, managed by the subsidiary SGHL under a Partnership with the State, being included in the National Health Service. The partnership agreement has a 10-year duration as of the date in which the hospital opened for business (February 2012). This unit caters to the population of the areas of Loures, Odivelas, Mafra and Sobral de Monte Agraço.

The Other activities segment is where LUZ SAÚDE’s other business areas are found. In this segment, the Group has two senior residence units for individuals of 65 years and older that seek a complete package of services in terms of accommodations, leisure and health. The logic behind these senior residences is to integrate and complement the residential hospitals and acute residences. The units incorporated in 2015 GLST and GLSLH, were included in this segment.

The “Corporate center” segment includes the shared resources that provides management services in the following areas: strategic and operational consulting, human resources, financial services, quality certification, legal support, information systems, maintenance of Infrastructures, training, management of call centers, negotiation and provisioning, marketing and communi-cation to the units of the different segments of business.

4. Segment reporting

51


December 2017

Eliminations Private Public Other Corporate and healthcare healthcare activities center adjustments Consolidated

Operating Income

External clients 379,662,431 96,720,144 5,326,564 - 215,460 481,924,599

Intersegment 1,964,299 - 9,635,293 17,041,886 (28,641,478) -

Other operating income and gains 1,284,768 545,878 137,052 258,577 (332,128) 1,894,147

Total operating income 382,911,498 97,266,022 15,098,909 17,300,463 (28,758,146) 483,818,746

Operating expenses (344,324,782) (104,023,703) (15,618,857) (20,568,192) 28,758,146 (455,777,388)

Operating result by segment 38,586,716 (6,757,681) (519,948) (3,267,729) - 28,041,358

Finance costs (7,146,198)

Finance income 80,563

Financial results (7,065,635)

Profit before income tax 20,975,723

Income tax expense (3,711,052)

Profit/(loss) attributable to non-controlling interests 253,527 (2,854) - - - 250,673

Profit attributable to equity holders of the parent 17,013,998

The financial information on the results for the year ended on 31 December 2017 and 2016 of the various business segments is as follows:

52

ANNUAL REPORT 2017

With respect to the size of the Group’s main clients, only two represent around 30% (2016: 33%) of the operating income of the respective segment. In the private healthcare segment, ADSE (Direção-Geral de Proteção Social aos Trabalhadores em Funções Pública) represents approximately one third of the segment’s operating income. This figure includes co-payments

made directly by clients. In the public healthcare seg-ment, the Contracting Public Entity represents 99% of the segment’s operating income.

Intersegment transactions are carried out at arm’s len-gth under similar terms and conditions as transactions with third parties.

December 2016

Private Public Other Eliminations

healthcare healthcare activities

Corporate

and Consolidated

center adjustments

Operating Income

External clients 352,313,993 92,742,550 3,737,498 - 576,448 449,370,489

Intersegment 933,920 - 6,221,214 14,009,162 (21,164,296) -

Other operating income and gains 1,169,224 364,626 (20,385) 221,073 (407,249) 1,327,289

Total operating income 354,417,137 93,107,176 9,938,327 14,230,235 (20,995,097) 450,697,778

Operating expenses (313,945,720) (102,959,200) (10,099,042) (16,759,515) 20,995,097 (422,768,380)

Operating result by segment 40,471,417 (9,852,024) (160,715) (2,529,280) - 27,929,398

Finance costs (6,041,335)

Finance income 61,739

Financial results (5,979,596)

Profit before income tax 21,949,802

Income tax expense (4,964,650)

Profit + (loss) attributable to non-controlling interests (378,121) (4,921) - - - (383,042)

Profit attributable to equity holders of the parent 17,368,194

53


December 2017

Private Public Other Eliminations


Corporate

and Consolidated

center adjustments

Depreciation and amortisation 20,644,573 3,350,721 957,491 750,219 - 25,703,004Investment in property, plant and equipment 56,712,761 535,480 93,750 514,101 - 57,856,092Investment in intangible assets 12,282,934 31,698 2,750 1,250,638 - 13,568,020

December 2017

Private Public Other

Eliminations


Corporate and Consolidated

center

adjustments

Assets

Property, plant and equipment 251,047,789 5,322,123 36,557,335 1,214,781 - 294,142,028

Intangible assets 121,131,503 56,931 44,715 4,251,337 - 125,484,486

Inventories, trade and other receivables 131,268,195 31,109,003 4,141,545 24,801,517 (37,837,822) 153,482,438

Other assets 52,236,774 7,507,320 429,115 453,998,213 (455,125,463) 59,045,959

Investments in associates - - - 27,063,481 - 27,063,481

Total consolidated assets 659,218,392

Liabilities

Trade and other payables 93,061,653 21,885,474 8,428,195 24,375,138 (33,889,934) 113,860,526

Other liabilities 248,925,494 38,016,896 2,307,831 248,829,860 (228,099,715) 309,980,366

Total consolidated liabilities 423,840,892

Other information

The breakdown of assets and liabilities by business segment and respective reconciliation with the conso-

lidated figures as at 31 December 2017 and 2016 can be presented as follows:

December 2016


Eliminations



center

adjustments

Depreciation and amortisation 19,552,258 3,553,424 437,509 657,806 - 24,200,997Investment in property, plant and equipment 34,273,981 767,564 101,519 537,863 - 35,680,927Investment in intangible assets 16,763,669 50,135 - 1,117,358 - 17,931,162

54

ANNUAL REPORT 2017

5. Revenue from services rendered 31-dec-17 31-dec-16Hospitals and outpatient clinics 368,095,803 340,073,486NHS hospitals 96,720,144 92,742,550Residential hospitals 11,476,486 11,149,512Senior residences with services 4,280,355 4,138,311Other services 1,351,811 1,266,630 481,924,599 449,370,489

The increase in the headings of Hospitals and outpatient clinics and Residential hospitals includes the effects (i) of inclusion of the businesses of SCH and NID (9 months) and the subsidiaries in the British Hospital Group (5 months) (note 30.1 and 30.2) acquired in 2017 and (ii) the full year effect of consolidation of the subsidiary

HLG (note 30.3), which in 2016 contributed with only 11 months of activity.

Other Services includes mainly the amounts related to the operation of the car parks of the Group’s units.

December 2016


Eliminations



center

adjustments

Assets

Property, plant and equipment 212,540,419 8,136,847 38,181,941 989,539 3,294,147 263,142,893

Intangible assets 109,536,649 50,061 66,688 3,462,362 (14,135) 113,101,625

Inventories, trade and other receivables 141,873,750 27,449,127 3,413,365 15,006,910 (25,900,018) 161,843,134

Other assets 31,786,382 10,538,660 388,943 416,078,866 (416,308,111) 42,484,740

Investments in associates - - - 1,007,433 - 1,007,433

Total consolidated assets 581,579,825

Liabilities

Trade and other payables 83,778,359 22,192,636 7,152,921 10,466,441 (21,818,423) 101,771,934

Other liabilities 227,119,257 35,581,717 4,218,690 185,257,129 (189,416,074) 262,760,719

Total consolidated liabilities 364,532,653

55


7. Inventories consumed and sold 31-dec-17 31-dec-16

Inventories on 1 January 9,828,795 8,145,428 Purchases 77,444,960 71,471,671 Consumption adjustments (consumed materials) (101,748) (62,287) Inventory adjustments (637,625) (144,442) Business acquisition (note 30) 1,014,275 137,869Inventories on 31 December (11,538,902) (9,828,795)Costs and consumption for the year 76,009,755 69,719,444

6. Other income 31-dec-17 31-dec-16Other financial income and gains 622,963 393,075Clinical trials 508,960 270,535Public investment grants 162,801 164,509Other operating income and gains 599,423 499,170 1,894,147 1,327,289

56

ANNUAL REPORT 2017

Professional fees and subcontracts captions include mainly the amounts paid to health professionals in the Group’s units. The increase in these captions is related to an increase in the Group’s activity.

Specialised work refers mainly to the outsourcing of external consultants, being most of them related with IT systems, while maintenance and repair costs refer to the main maintenance agreements.

8. Costs of services and materials 31-dec-17 31-dec-16

Subcontracts 97,454,793 92,137,635Professional fees 68,890,932 64,642,365Specialised work 12,533,237 12,484,849Maintenance and repair 9,385,958 8,714,422Rent and leases 9,009,558 7,345,031Electricity 5,953,407 5,338,951Security services 2,644,270 2,375,603Communication 1,676,378 1,617,429Fuel and other fluids 1,433,557 1,476,159Advertising 1,839,569 1,355,972Travel and accommodation 1,858,627 1,314,945Insurance 1,258,841 1,130,237Water 1,011,714 948,613Materials 1,089,736 855,370Other materials and services consumed 1,652,407 1,532,884

217,692,984 203,270,465

57


9. Personnel expenses 31-dec-17 31-dec-16

Corporate body remunerations 3,580,056 3,907,269Personnel wages and salaries 102,512,080 93,691,610Payroll related expenses 22,208,147 20,622,740Indemnities 341,842 205,593Insurance 1,796,430 1,975,832Other personnel expenses 1,689,981 1,549,925 132,128,536 121,952,969

31-dec-17 31-dec-16

Board of Directors 25,500 25,500Supervisory Bodies 51,000 51,000Board of the General Shareholders Meeting 3,398,556 3,725,769Remuneration Committee - -Consultancy Board 115,000 125,000 3,590,056 3,927,269

31-dec-17 31-dec-16

Annual and interim audit 371,940 403,000Other assurance services 40,500 53,500Audit services besides the annual and interim review 16,200 -Tax consultancy - - 428,640 456,500

The average number of Group employees during the year ended 31 December 2017 was of 6,009 (2016: 5,470).

Remuneration paid to the Group’s corporate bodies of the different subsidiaries were as follows:

Part of the remuneration of the Consultancy Board is presented under the caption Specialised work in the heading Costs of services and materials in the consoli-dated income statement (note 8).

The remuneration of the Statutory Auditor contracted in respect of the year of 2017 can be presented as follows:

58

ANNUAL REPORT 2017

10. Other operating expenses 31-dec-17 31-dec-16

Contractual penalties 1,440,272 455,152Taxes 813,664 663,380Levies 194,335 115,250Donations 188,831 134,422Losses on property, plant and equipment 177,322 58,920Inventory losses 51,844 23,747Early settlement discounts granted 30,889 34,385Other operating expenses 365,287 165,225 3,262,444 1,650,481

31-dec-17 31-dec-16

Interest expenses 5,128,145 4,529,318Expenses from derivatives (note 24) 1,299,649 621,486Other financial expenses and losses 718,404 890,531 7,146,198 6,041,335

31-dec 17 31-dec-16

Commercial paper 3,811,584 3,149,838Finance lease liabilities 803,466 737,415Bank loan 513,095 642,065 5,128,145 4,529,318

11. Finance expenses

The item of contractual penalties includes the reconcilia-tion payments of the subsidiary SGHL. These amounts were accrued in prior years and their acceptance in the current year resulted in the simultaneous recognition of an expense for contractual penalties and a reversal of provisions (note 21).

The caption Taxes includes mainly the expenses with real estate municipal tax (“IMI”) and duties and fares inherent to the activity of the Group.

The caption Other financial expenses and losses inclu-des mainly the expenses with commissions in respect of the credit lines of the Group.

The detail of the Interest expenses item can be presen-ted as follows:

59


31-dec-17 31-dec-16

Current tax 4,167,559 6,131,960Deferred tax (456,507) (1,167,310)Income tax in the income statement 3,711,052 4,964,650

31-dec-17 31-dec-16

Income tax in the income statement 4,167,559 6,131,960Income tax accrued by entities within the tax group (3,382,139) (5,617,000)Advance payments (427,411) (293,744)Current income tax in the statement financial position 358,009 221,216

12. Income taxLUZ SAÚDE Group is covered by the special tax regime for corporate groups (tax Group), which covers all entities in which the parent of the Group in Portugal participates, directly or indirectly, in at least 75% of its share capital and, provided they comply with the requirements set forth in the Corporate Income Tax Code (CIT).

Companies included in the tax Group determine and re-gister income tax as if they were taxed on a stand-alone basis. However estimated liabilities are recognized as a balance due to the mother company of the tax Group,

currently Longrun Portugal, SGPS, SA, which is responsible for the global self-assessment and payment of the tax.

Other Group companies, which are not included in the Group’s special tax regime, are taxed on a stand-alone basis, based on their respective taxable income and current tax rates.

The detail of income tax as at 31 December 2017 and 2016 is presented below:

Reconciliation of the current tax in the income state-ment with the CIT estimate presented in the face of the statement of financial position is as follows:

60

ANNUAL REPORT 2017

31-dec-17 31-dec-16

Profit for the year 17,264,671 16,985,152Income tax expense (3,711,052) (4,964,650)Profit before income tax 20,975,723 21,949,802 Group income tax rate 21.00% 21.00% 4,404,902 4,609,458 Municipal and state surcharge 1,558,545 1,756,933Incentives for the companies’ recapitalization (1,519,538) -Tax losses for which no deferred tax has been recognized 1,265,708 -SIFIDE incentive (1,127,738) -Tax benefits (1,083,501) (1,518,125)Autonomous taxes 494,389 455,333Tax from previous years (214,928) (237,483)Goodwill amortisation (168,263) (168,263)Non-deductible expenses 101,476 48,728Other effects - 18,069 3,711,052 4,964,650

Reconciliation of corporate income tax rate can be presented as follows:

61


Charged/(credited) 31-dec-16 to income statement Other 31-dec-17

Deferred tax assets Valuation of property, plant and equipment 1,185,187 (181,242) 183,424 1,187,369 Provisions and impairment losses 3,480,883 (648,520) 219,300 3,051,663 Tax losses carried forward 962,325 (282,116) - 680,209 Derivatives (note 24) 859,483 (286,620) - 572,863 Other 486,973 2,073,076 (590,099) 1,969,950 6,974,851 674,578 (187,375) 7,462,054Deferred tax liabilities Valuation of property, plant and equipment (5,808,682) (49,808) - (5,858,490) Goodwill (168,263) (168,263) - (336,526) (5,976,945) (218,071) - (6,195,016) Deferred tax asset/(liability) 997,906 456,507 (187,375) 1,267,038

Deferred tax assets and liabilities as at 31 December 2017 and 2016 can be analyzed as follows:

The caption “Other deferred tax assets” includes es-sentially the effect of the tax incentive in respect of companies recapitalization, as consequence of the

operations of share capital increase in some of the Group subsidiaries.

Charged/(credited) 31-dec-15 to income statement Other 31-dec-16

Deferred tax assets Valuation of property, plant and equipment 1,371,486 (186,299) - 1,185,187 Provisions and impairment losses 3,682,805 277,877 (479,799) 3,480,883 Tax losses carried forward 45,363 916,962 - 962,325 Derivatives (note 24) - 45,365 814,118 859,483 Other 436,270 50,703 - 486,973 5,535,924 1,104,608 334,319 6,974,851Deferred tax liabilities Valuation of property, plant and equipment (6,039,647) 230,965 - (5,808,682) Goodwill - (168,263) - (168,263) (6,039,647) 62,702 - (5,976,945) Deferred tax asset/(liability) (503,723) 1,167,310 334,319 997,906

62

ANNUAL REPORT 2017

13. Property, plant and equipment Basic and Land and transport Office Assets buildings equipment equipment Other in progress TotalAcquisition cost Balance as at 1 January 2016 295,280,482 162,078,603 11,214,882 4,794,934 27,487,567 500,856,468 Additions 417,699 14,388,116 679,511 510,551 10,018,313 26,014,190 Disposals and write-offs (30,993) (2,627,043) (131,271) (59,899) - (2,849,206) Transfer and adjustments 567,100 1,845,228 14,282 5,183 (2,432,207) (414) Acquisition of control in HLG (note 30.3) 6,438,000 3,041,051 104,955 82,715 - 9,666,721Balance as at 31 December 2016 302,672,288 178,725,955 11,882,359 5,333,484 35,073,673 533,687,759 - Balance as at 1 January 2016 302,672,288 178,725,955 11,882,359 5,333,484 35,073,673 533,687,759 Additions 495,720 14,585,960 654,670 303,441 35,957,096 51,996,887 Disposals and write-offs - (1,481,930) (12,130) (1,862) - (1,495,922) Adjustments (52,511) (72,070) (59,932) (2,314) (967,178) (1,154,005) Transfer and adjustments 3,979,439 207,119 1,443 4,024 (4,192,025) - Business acquisition (note 30.1 and note 30.2) 3,532,050 1,364,944 57,250 2,880 902,081 5,859,205Balance as at 31 December 2016 310,626,986 193,329,978 12,523,660 5,639,653 66,773,647 588,893,924 Accumulated depreciation Balance as at 1 January 2016 94,669,731 136,090,161 9,765,401 4,014,439 - 244,539,732 Depreciation for the financial year 11,505,567 11,055,013 748,886 349,454 - 23,658,920 Disposals and write-offs (1,037) (2,441,340) (130,851) (53,656) - (2,626,884) Transfer and adjustments - (140,997) (558) 141,555 - -Balance as at 31 December 2016 106,174,261 144,562,837 10,382,878 4,451,792 - 265,571,768 - - - - Balance as at 1 January 2016 106,174,261 144,562,837 10,382,878 4,451,792 - 265,571,768 Depreciation for the financial year 11,648,040 11,993,331 751,457 409,931 - 24,802,759 Disposals and write-offs 23,862 (1,294,145) (2,890) (1,862) - (1,275,035) Adjustments (104,339) 39,383 (44,994) (84,192) - (194,142) Transfer and adjustments - (768) 768 - - -Balance as at 31 December 2016 117,741,824 155,300,638 11,087,219 4,775,669 - 288,905,350 - Impairment losses Balance as at 1 January 2016 4,973,098 - - - - 4,973,098Balance as at 31 December 2016 4,973,098 - - - - 4,973,098 Balance as at 1 January 2017 4,973,098 - - - - 4,973,098 Business acquisition (note 30.1) 873,448 - - - - 873,448Balance as at 31 December 2017 5,846,546 - - - - 5,846,546 Net book value As at 31 December 2016 191,524,929 34,163,118 1,499,481 881,692 35,073,673 263,142,893As at 31 December 2017 187,038,616 38,029,340 1,436,441 863,984 66,773,647 294,142,028

63


The Group’s investment during 2017 amounted to appro-ximately €57.9 million (2016: €35.7 million), of which €33.2 million for the expansion/implementation projects of the units based in Lisbon, Oeiras, Vila Real and Odivelas and €5.3 in the acquisition of the new subsidiaries in Madeira and the BH Group, being the remaining amount invested mainly in the acquisition/substitution of basic equipment in the Group units.

Assets in progress caption includes the investments in the expansion of existing units (Hospital da Luz in Lisbon and Oeiras) and the development of new Group units (Hospital da Luz in Odivelas and Vila Real).

During 2017, financial charges amounting to €1,008 thousand were capitalized with respect to assets under construction (2016: €537 thousand).

Some of the Group’s real estate properties, with an approximate net book value as at 31 December 2017 of €169 million (2016: €150.8 million), have been given as guarantee to financial institutions to secure some of the credit lines of the Group (note 28).

The impairment losses can be detailed as follows:

31-dec-17 31-dec-16

Former Hotel Tivoli - Porto 2,904,259 2,904,259Plot of land no. 28 on Av. Marechal Teixeira Rebelo in Lisbon 2,068,839 2,068,839Santa Catarina clinic in Funchal (note 30.1) 873,448 - 5,846,546 4,973,098

64

ANNUAL REPORT 2017

14. Intangible assets Goodwill Software Property rights In progress Total

Acquisition cost Balance as at 1 January 2016 94,481,384 8,562,004 86,549 195,614 103,325,551 Additions - 942,476 - 963,613 1,906,089 Write-offs - - - (8,403) (8,403) Adjustments and transfers - 219,522 - (219,108) 414 Acquisition of control in HLG (nota 30.3) 16,025,075 - - - 16,025,075Balance as at 31 December 2016 110,506,459 9,724,002 86,549 931,716 121,248,726 Balance as at 1 January 2017 110,506,459 9,724,002 86,549 931,716 121,248,726 Additions - 895,852 - 624,747 1,520,599 Adjustments - - - (284,914) (284,914) Transfers - 677,300 - (677,300) - Business acquition (nota 30.1 and note 30.2) 11,846,709 200,712 - - 12,047,421Balance as at 31 December 2017 122,353,168 11,497,866 86,549 594,249 134,531,832 Accumulated amortisation Balance as at 1 January 2016 - 7,581,925 23,099 - 7,605,024 Amortisations of the financial year - 533,130 8,947 - 542,077Balance as at 31 December 2016 - 8,115,055 32,046 - 8,147,101 Balance as at 1 January 2017 - 8,115,055 32,046 - 8,147,101 Amortisations of the financial year - 879,174 21,071 - 900,245Balance as at 31 December 2017 - 8,994,229 53,117 - 9,047,346 Net book value As at 31 December 2016 110,506,459 1,608,947 54,503 931,716 113,101,625As at 31 December 2017 122,353,168 2,503,637 33,432 594,249 125,484,486

65


Goodwill results from the acquisition of new businesses. During the year ended in 31 December 2017, following the acquisition of the businesses of the health units located in Madeira and the British Hospital Group, an increase in goodwill of € 11.8 million was recorded (note 30). During the year ended 31 December 2016, and also as consequence of the acquisition of the businesses

of the healthcare units currently named as Hospital da Luz Guimarães and Hospital do Mar Gaia, there was an increase in goodwill of approximately € 16 million.

Goodwill in the consolidated statement of financial position is presented below:

Goodwill impairment testing

The recoverable amount of goodwill is tested annually in the last quarter of each financial year, or whenever there is an indication of a possible loss of value. As described, the recoverable amount is determined based on the value in use of the assets, which is calculated using discounted cash flow (DCF) methodologies that

take into account the historical performance of the business, market conditions, the future expectations of each business, time value and business risks.

For the purpose of the tests, performed during the fourth quarter of 2017, the Group defined a set of assumptions to determine the recoverable amount of the investments made. The main assumptions were as follows:

The following should be noted:

• Projected cash flows are based on the budgets prepared by the companies and approved by their respective Board of Directors, which represent the first year of cash flows for the period under analysis;

• Medium and long-term projected cash flows are based on historical performance and business plans and are extended in perpetuity;

• The assumptions used in projecting cash flows for each of the cash-generating units are those to which the recoverable amount of the unit is most sensitive;

• The key assumptions used are a reflection of past experience and external sources of information;

• The change in discount rate was largely due to a sig-nificant reduction in the market risk premium because of rising yields on 10-year treasury bonds in recent months; and,

Goodwill

HAG 446,141CLIRIA 3,611,318HME 14,103HOSPOR 89,944,136IRIO 479,789HLG (note 30.3) 16,025,075SCH (preliminar goodwill - note 30.1) 3,126,025GBH (preliminar goodwill - note 31.2) 8,720,684Impairment loss (14,103)Total goodwill recognised 122,353,168

Calculation method Projection period Pre-tax discount rate Perpetuity growth rate

DCF 5 years 4.66% 1.8%

66

ANNUAL REPORT 2017

15. Investments in associates15.1. Changes in investments in associates

31-dec-17 31-dec-16

Balance as at 1 January 1,007,433 1,200,459 Charged/(credited) to the income statement: Equity method 41,048 38,974 41,048 38,974 Other effects Additions 26,105,000 - Decreases (90,000) (232,000) Balance as at 31 December 27,063,481 1,007,433

The equity method refers to the associate GENOMED and is recorded in the caption “Other income and gains” in the consolidated income statement.

The increase occurred in 2017 refers to the acquisition of 10% of the shares in Capital Health Care Investments II, SA and the loans and equity loans performed to this

subsidiary in connection with the acquisition of the operations of Idealmed Group (note 34).

Decreases in 2017 and 2016 refer to the reimbursement of equity loans by the associate “H.L. – Sociedade Ges-tora do Edifício, SA”.

• The growth rate used is in accordance with the avera-ge long-term growth rate for the market in which the unit operates.

The impairment tests performed were subject to a sensi-tivity analysis, namely to the following key assumptions: (i) perpetuity growth rate (-1.00%) and (ii) discount rate

(+0.50%). The results of the sensitivity analysis did not reveal any indications of impairment.

As a result of this impairment testing, the Group con-cluded that as at 31 December 2017 there were no im-pairment losses, and there were no indication in 2018 that lead to the existence of impairment on Goodwill.

67


15.2. Detail of investments in associates31-dec-17

Registered offices

% of share capital

Shares Equity loans Loans Total 31-dec-16

GENOMED Lisbon 37.5% 346,684 - - 346,684 305,636

HL-SGE Oeiras 10.0% 14,400 597,397 - 611,797 701,797

CCHCI II Lisbon 10.0% 5,000 19,950,000 6,150,000 26,105,000 -

366,084 20,547,397 6,150,000 27,063,481 1,007,433

15.3. Summary of financial information of the main associates

GENOMED HL-SGE CCHCI IISummarized net assets Current assets 1,661,531 86,892,712 196,790Current liabilities (597,927) (1,412,030) (635,167)Current net assets/(liabilities) 1,063,604 85,480,682 (438,377) Non-current assets 187,630 3,673,356 29,026,440Non-current liabilities (513,949) (84,826,711) (9,688,250)Net assets/(liabilities) 737,285 4,327,327 18,899,813 Summarized results Total revenue 1,409,335 2,784,245 -Profit before income tax 139,012 2,016,696 (1,100,187)Income tax expense (29,550) (469,512) -Net profit 109,462 1,547,184 (1,100,187) Summarized cash flows Operating cash flow (68,535) 8,217,649 (857)Investment cash flow (39,902) 690 (24,150,000)Financing cash flow 231,016 (7,299,024) 24,151,000Change in cash and cash equivalents 122,579 919,315 143

The summarized unaudited financial information on the main subsidiaries can be presented as follows:

68

ANNUAL REPORT 2017

16. Trade and other receivables 31-dec-17 31-dec-16 Trade receivables 80,907,223 101,277,473Trade receivables - related parties (note 29) 10,808,618 6,166,742Doubtful trade receivables 9,676,593 7,000,725Impairment of trade receivables (11,489,413) (8,874,148) 89,903,021 105,570,792 Accrued income 42,216,828 38,076,241State and other public entities 2,440,712 2,717,246Advances to suppliers 1,996,544 592,222Other debtors 1,931,517 1,734,291Impairment of other debtors (1,658,321) (1,120,341)Deferred expenses 3,700,842 3,154,071Assets available for sale 405,121 224,987 51,033,243 45,378,717 Deferred expenses - non current 1,007,272 1,064,830 141,943,536 152,014,339

Considering the short maturities associated to these balances, their carrying value is deemed to be a reaso-nable estimate of the respective fair value.

The decrease in the trade receivables caption results from a sale of trade receivables balances performed in December 2017 in the scope of a non-recourse fac-toring contract established by the Group, which led to the derecognition of receivables in the amount of approximately € 28.3 million, as the Group transferred credit risk and default risk up to 180 days.

As the Group retains the default risk up to 180 days, receivables in the amount of € 2,412 thousand were not derecognised (note 23).

16.1. Trade receivables

69


Income to be recognised under HBA management contract, refers to the difference between the annual production performed and the amounts invoiced on

monthly basis (1/12 of 90% of the annual amount agreed), in the current year, and the amounts under discussion with the contracting entity from previous years.

31-dec-17 31-dec-16

Clinical services to bill 16,249,883 13,077,750Income to be recognised under HBA management contract 21,036,273 20,783,917Other accrued income 4,930,672 4,214,574 42,216,828 38,076,241

16.2. Accrued income

CIT receivable balance relates to a payment made under the Special Regime for Tax Regularisation (RERD) (this

receivable is fully provided in the heading Impairment of other receivables).

16.3. State and other public entities

The caption Deferred expenses – non-current includes mainly the balances paid in advance in respect (i) of the rental of Cerveira unit and (ii) ) the amounts related to the partnership established with the Portuguese

Catholic University for the creation of the first private medical course in Portugal. This balance is recognized as an expense on a straight-line basis, during the period of the contracts.

16.4. Deferred expenses - non current

31-dec-17 31-dec-16

Value Added Tax (VAT) 1,390,371 1,666,905Corporate Income Tax (CIT) 1,050,341 1,050,341 2,440,712 2,717,246

70

ANNUAL REPORT 2017

17. Inventories 31-dec-17 31-dec-16

Drugs 4,353,039 3,480,914Clinical consumables 6,492,145 5,964,018Other 693,718 383,863 11,538,902 9,828,795

Inventories consist mainly of drugs and medical supplies used by the Group’s various clinical units in their rende-ring of clinical services.

31-dec-17

Trade receivables Other debtors 31-dec-16

Balance of Impairment of trade and other receivables as at 1 January 8,874,148 1,120,341 9,443,680 Charged/(credited) to the income statement: Additional impairment 565,242 537,980 1,024,658 Unused amounts reversed (416,924) - (583,905) 148,318 537,980 440,753 Other effects Business acquisition (note 30) 2,443,266 - - Other 23,681 - 110,056Balance of Impairment of trade and other receivables as at 31 December 11,489,413 1,658,321 9,994,489

Changes in “Impairment of receivables” caption in the year ended 31 December 2017 and 2016 can be pre-sented as follows:

16.5. Impairment of receivables

71


18. Cash and cash equivalents 31-dec-17 31-dec-16

Cash 192,407 310,875Bank deposits 57,283,097 40,778,267Cash equivalents 303,417 397,692 57,778,921 41,486,834

Considering the short maturities associated to these financial instruments, their carrying value is deemed to be a reasonable estimate of the respective fair value.

The company’s share capital is comprised of 95,542,254 ordinary registered shares with a nominal value of €1 (31 December 2016: 95,542,254 shares).

19. Share capital, reserves and retained earnings19.1. Share capital

19.2. Treasury shares

Amount 31-dec-17 31-dec-16

Balance as at 1 January 170,000 340,000

Shares vested in respect of the share based pan (170,000) (170,000)

Balance as at 31 December - 170,000

Under the share-based payment plan, in 2017 was delivered the last installment of treasury shares:

72

ANNUAL REPORT 2017

As at 31 December 2017 and 2016 the amount in re-serves and retained earnings (which include also the

19.3.1. Non-distributable reserves

The non-distributable reserves include essentially the legal reserve created by allocation of results from the parent company until the 2016 financial year.

19.3.1.1. Share based payments

In the Company’s General Shareholders Meeting held on 22 January 2014, a share-based plan for Company directors was created. The beneficiaries of this plan are members of the Company’s Board of Directors that have worked with the Company under an employment agreement or as members of its corporate bodies, since its incorporation on 6 July 2000 and that maintain their role as Directors on each share granting date.

510,000 previously issued shares were granted by the Company under the referred share-based plan, one third of the shares vested on the first business day of 2015, 2016 and 2017.

In January 2017, the last installment of the share-based payment plan was vested and the plan was completed.

comprehensive income for the year) can be presented as follows:

19.3.2. Other reserves

Other reserves relate to the reserves created by the allocation of profits from the parent company from previous years.

19.3.2.1. Appropriation of results

According to the proposal presented and approved at the General Meeting held on May 25, 2017, the individual results LUZ SAÚDE, for the year 2016, had the following application: 2016 Year-end Legal reserve 336,478Unrestricted reserves 6,393,069Statutory profit allocation 6,729,547 19.3.3. Retained earnings

The caption Retained earnings, among other, includes the results obtained by the group in prior years, less the amount of share premiums used to cover losses.

19.3. Reserves and retained earnings

31-dec-17 31-dec-16Non-distributable reserves Legal reserve 2,590,667 2,254,189 Treasury shares reserve - 656,388 Share-based payment plan reserve - 544,001Other reserves 46,793,352 40,400,283Retained earnings 8,705,414 585,390Comprehensive income for the year 18,092,226 14,305,570 76,181,659 58,745,821

73


20. Non-controlling interests20.1. Change in non-controlling interests

20.2. Detail of non-controlling interests

31-dec-17 31-dec-16Balance as at 1 January 1,619,692 1,731,660 Charged/(credited) to the income statement: 250,673 (383,042) Other effects Increase of share capital in subsidiary - 1,250,000 Acquisition of non-controlling interests (note 30) (12,571) (978,926) (12,571) 271,074 Balance as at 31 December 1,857,794 1,619,692

31-dec-17 31-dec-16

CLIRIA 773,497 715,749

RML 1,072,330 922,453

SGHL (21,364) (18,510)

SCH 31,687 -GBH 1,643 - 1,857,794 1,619,692

In 2017, the acquisition of non-controlling interests re-fers to the acquisition of new companies, as explained in note 30.

Increase of share capital in subsidiary refers to the share capital increase carried out by the subsidiary HLG in January 2016 (note 1.1.2.4).

The acquisition of non-controlling interests includes the operations carried out in December 2016 in respect of the subsidiaries CLIRIA (note 1.1.2.3) and HLG (note 1.1.2.4). The difference between the amount paid and the book value of the shares acquired, were considered as equity transactions (as it was a transaction between shareholders of the company in their capacity as owners) and were recorded in shareholder equity (CLIRIA: € 312.7 thousand and HLG: € 666 thousand).

74

ANNUAL REPORT 2017

The changes in “Provisions” caption during the years ended 31 December 2017 and 2016 were as follows:

21. Provisions

Liabilities with Tax non-consolidated Litigation disputes associates Other risks Total

Provisions Balance as at 1 January 2016 64,656 2,998,103 399,999 3,431,259 6,894,017 Charged/(credited) to the income statement: Additional provisions - - - 2,037,021 2,037,021 Unused amounts reversed - - - (503,750) (503,750) - - - 1,533,271 1,533,271Other effects Other - - - (205) (205) - - - (205) (205) Balance as at 31 December 2016 64,656 2,998,103 399,999 4,964,325 8,427,083 Balance as at 1 January 2017 64,656 2,998,103 399,999 4,964,325 8,427,083 Charged/(credited) to the income statement: Additional provisions - - - 1,827,633 1,827,633 Unused amounts reversed - - - (1,533,266) (1,533,266) - - - 294,367 294,367 Other effects Aquisition of control in SCH (note 30.1) - - - 796,071 796,071 Aquisition of control in GBH (nota 30.2) - 144,000 - 419,079 563,079 - 144,000 - 1,215,150 1,359,150 Balance as at 31 December 2017 64,656 3,142,103 399,999 6,473,842 10,080,600

The provision for tax disputes is intended to address the disputes with the Tax Authority, described in note 27.

Other risks refers to the responsibility with risks and contractual penalties considered as probable.

As a result of the acceptance in 2017 by the subsidiary SGHL, of part of the contractual penalties imposed by the contracting entity in previous years, the Group recog-nized in the income statement under “Other operating expenses and losses” (note 10) an expense of € 1,441 thousand, and simultaneous has reversed the provision recorded in previous years.

75


22. Trade and other payables 31-dec-17 31-dec-16Trade payable 36,616,295 29,303,041Trade payable - related entities (note 29) 187,458 84,590Fixed asset suppliers 5,636,383 5,578,691Trade payables total 42,440,136 34,966,322 Professional fees payable 25,047,468 21,575,274Personnel related expenses 24,116,655 21,418,860State and other public entities 4,768,160 4,279,524Deferred income ROUs 3,464,784 3,567,036Advances from clients 2,918,776 5,203,559Accrued expenses ROUs 1,303,212 992,421Interest payable 171,890 67,260Other creditors 1,747,409 2,311,002Other accrued expenses 7,702,634 7,267,094Other deferred income 179,402 123,582Other creditors total 71,420,390 66,805,612 Income tax payable (note 12) 358,009 221,216Current total 114,218,535 101,993,150 Non-current accounts payable 114,218,535 101,993,150

Considering the maturities associated to the balances presented above, their carrying value is deemed to be a reasonable estimate of the respective fair value.

Personnel related expenses includes, in addition to the liability with the employees’ rights to vacation period and holiday pay, an estimate for variable remuneration.

The caption professional fees payable refers to the lia-bility estimated with professionals without permanent contractual relationship with the Group. This liability is recorded based on the historical amounts, the agreemen-ts established with each service provider, the services and medical procedures performed.

Lifetime rights of use (ROUs) are related to the business of Senior Residences with services. The proceeds of sale of those rights to clients are initially recorded under deferred income and are regularly recognised as income during the expected lifetime of each client.

Accrued expenses related to ROUs result from the recognition of costs associated with lifetime rights of use agreements.

76

ANNUAL REPORT 2017

23. Interest-bearing liabilities

22.1. State and other public entities

31-dec-17 31-dec-16Interest-bearing liabilities Non-current Borrowings Commercial paper 207,933,403 189,500,000 Bank loans 32,664,653 18,155,198 240,598,056 207,655,198 Finance lease liabilities 27,477,884 22,360,697 Total non-current 268,075,940 230,015,895 Current Borrowings and bank overdrafts Commercial paper 15,309,777 8,742,787 Bank loan 4,561,427 1,415,417 Factoring (note 16.1) 2,411,875 - Other loans 1,007,895 3,343,743 23,290,974 13,501,947 Finance lease liabilities 5,064,896 5,862,996 Total current 28,355,870 19,364,943 Interest-bearing liabilities 296,431,810 249,380,838 Cash and cash equivalents Cash 192,407 310,875 Bank deposits 57,283,097 40,778,267 Cash equivalents 303,417 397,692Interest-bearing net debt 238,652,889 207,894,004

31-dec-17 31-dec-16Social security contributions 2,632,984 2,244,762Personnel income tax 2,063,724 1,996,021Value added tax (VAT) 71,452 38,741 4,768,160 4,279,524

77


The main credit lines of commercial paper financing that the Group has in place are as follows:

Commercial paper programs that don’t include an underwriting provision are registered under current liabilities, although it is expected that the arranging and dealing bank will be able to obtain the necessary funds through their distribution channels.

Commercial paper programs are classified as non-current when have a maturity of 12 months after the repor-

ting date, and the Group has the ability to unilaterally renew the current emissions until the maturity of the programs and they have guarantee of underwriting subscription by the organizer. Thus although the ou-tstanding instalments as at the reporting date have a maturity less than 12 months, they are classified as non-current for presentation purposes in the statement of financial position.

23.1. Commercial paper

Start date End date UnderwriteAmount available

on 31-dec-17Amount used on 31-dec-17

Amount used on 31-dec-16

10-02-2011 26-04-2025 Yes 150,000,000 150,000,000 150,000,000

22-12-2014 17-03-2022 No 20,000,000 4,020,740 -

12-08-2014 30-09-2022 Yes 30,000,000 30,000,000 30,000,000

15-03-2016 15-03-2021 Yes 5,000,000 5,000,000 -

18-05-2016 18-05-2021 Yes 25,000,000 15,000,000 -

04-08-2017 04-02-2025 Yes 25,000,000 14,500,000 -

22-12-2017 23-12-2018 Yes 5,000,000 5,000,000 -

23-12-2014 12-04-2017 Yes 25,000,000 - 5,000,000

26-06-2013 29-12-2017 Yes - - 7,500,000

12-08-2014 29-12-2017 Yes - - 5,000,000

285,000,000 223,520,740 197,500,000

Interest (277,560) 742,787

223,243,180 198,242,787

78

ANNUAL REPORT 2017

Apart from commercial paper, the main credit lines of the Group are the following:

In addition, the Group has available a bank overdraft in the amount of € 5,000 thousand, which was not used as of 31 December 2017.

23.2. Borrowings

Start date End dateAmount available

on 31-dec-17Amount used on

31-dec-17Amount used on

31-dec-16

04-06-2009 12-12-2022 10,000,000 10,000,000 10,000,000

09-06-2005 19-09-2020 3,500,000 3,500,000 4,375,000

11-02-2016 24-11-2030 2,155,198 2,155,198 2,284,027

09-10-2017 09-10-2022 10,000,000 10,000,000 -

31-10-2017 31-10-2025 11,000,000 11,000,000 -

29-12-2009 30-12-2021 - - 2,500,000

36,655,198 36,655,198 19,159,027

Interest 570,882 411,588

37,226,080 19,570,615

79


Includes the amounts related to trade receivables which in accordance with the factoring without recourse contract in place, at 31 December 2017, according to the Group’s

estimates, did not meet the criteria for derecognition of the consolidated financial position of the Group.

The balance of the caption Other loans includes the amounts of the overdrafts which the Group was using on 31 December 2017.

Liabilities for finance leases have the following maturities:

23.3. Factoring

23.4. Other loans

23.5. Finance lease liability

31-dec-17 31-dec-16

Minimum lease Minimum lease payments Interest Principal payments Interest Principal

Less than one year 5,575,115 510,219 5,064,896 6,501,589 638,593 5,862,996Between one and five years 25,033,309 1,631,392 23,401,917 19,246,111 1,275,588 17,970,523More than 5 years 4,284,310 208,343 4,075,967 4,620,133 229,959 4,390,174

34,892,734 2,349,954 32,542,780 30,367,833 2,144,140 28,223,693

80

ANNUAL REPORT 2017

The fair value of these financial instruments is estimated by discounting the expected principal and interest cash flow, assuming that payments occur on the contractually defined dates. The discount rate used is the one that reflects the current rates obtained by the Group for instruments with similar characteristics.

The credit lines made available to the Group are subject to market rates (Euribor), with periodic rate updates from

1 to 6 months after the reporting date. Therefore there is no relevant difference between the book value and the fair value of the lines in use as at the reporting date.

All of the active credit lines are in Euros and are partially secured by real estate properties of the Group, as dis-closed in note 28.

As at 31 December 2017 and 2016, the balance of this heading included of bank loans and other financing ob-tained at market interest rates. The break down based on

maturity dates of the credit lines in place is as follows:

Most of the financing mentioned above contains financial restrictions/covenants that are standard to financing agree-ments. Typical non-financial restrictions include negative pledge provisions, guarantees provided by members of the Group, in particular restrictions applying to the use of capital resources, acquisition and disposal of assets, pari passu obligations, events of default that include cross default clauses for companies controlled by or in a group relationship with the respective borrower. In terms of financial restrictions, some contracts include obligations to ensure certain debt to equity ratios for working capital.

Some financing agreements contain change of control provisions that require that the controlling shareholder (Fosun Group) maintains a direct or indirect controlling position in the Company.

As of December 31, 2017, the Group complies with the financial ratios to which it is obligated under the financing agreements in force on this date.

23.6. Maturity of the credit lines

23.7. Financial covenants

Up to 12 12-24 24-36 36-48 More than Average months months months months 48 months Total 2017 Total 2016 rate

Commercial paper 15,309,777 27,000,000 27,400,000 47,468,912 106,064,491 223,243,180 198,242,787 2.0%

Bank loan 4,561,427 6,962,788 7,855,271 6,105,271 11,741,323 37,226,080 19,570,615 3.2%

19,871,204 33,962,788 35,255,271 53,574,183 117,805,814 260,469,260 217,813,402

81


31-dec-17 31-dec-16Interest rate swap contracts - cash flow hedges 3,109,947 4,731,582Interest rate swap contracts - held for trading - -Total 3,109,947 4,731,582 Non-current Interest rate swap contracts - cash flow hedges (3,109,947) (4,731,582)Interest rate swap contracts - held for trading - -Current - -

24. Derivative financial instrumentsThe Group began in 2015 the use of derivative financial instruments to hedge interest rate risks affecting the value of the expected future cash flows. The hedged risk is the change in the index that the floating rate in-corporates, being applicable to the Group’s credit lines.

The derivative financial instruments contracted for hedging purposes of interest rate changes in respect of credit lines are considered effective in terms of cash flow hedge.

The fair value of derivate financial instruments can be presented as follows:

The detail of fair value per contract can be presented as follows:

The fair value of these derivatives was determined by banking entities based on models and valuation techniques generally accepted based on observable inputs in the market.

Trading derivatives are classified in current assets or current liabilities according to their fair value at the reporting date. The fair value of the hedging derivative is classified in non-current assets or non-current liabi-lities when the maturity of the hedge target operation is more than 12 months of the reporting date and as current assets or current liabilities if the maturity of the hedge target operation is less than 12 months of the reporting date.

The notional of the interest rate swap contracts outs-tanding at December 31, 2017 amounted to €180 million (2016: €180 million) which are considered as cash flow hedge. These contracts have originated the recognition of a change in fair value in Other comprehensive income of the Group in 2017 in respect of the effective part of the hedging derivatives, of some €1.365 thousand ne-gative (2016: € 3.877 thousand). The portion considered as inefficient in term of hedging was recognized in the income statement as a consequence of the fair value variation of negative €280 thousand (2016: negative €318 thousand), and approximately €303 thousand refers to interests accrued. The amounts presented in the Other comprehensive income, are net of tax.

Instrument covered

Notional Start date MaturityFair value on

31-dec-17Fair value on

31-dec-16

Papel comercial 150,000,000 26-10-2016 28-04-2025 2,727,039 4,161,620

Papel comercial 30,000,000 30-09-2016 30-09-2022 382,908 569,962

3,109,947 4,731,582

82

ANNUAL REPORT 2017

31-dec-17 31-dec-16Less than one year 4,047,200 2,429,876Between one and five years 13,022,953 7,259,355More than 5 years 8,621,973 8,658,844 25,692,126 18,348,075

26. Earnings per share

The average number of shares as at 31 December 2017 and 2016 is as follows:

31-dec-17 31-dec-16Income attributable to equity holders of the parent 17,013,998 17,368,194Average number of shares 95,539,596 95,365,779Basic earnings per share 0.178 0.182

31-dec-17 31-dec-16Shares issued at the beginning of the year 95,542,254 95,542,254Effect of shares issuance during the year - -Average number of paid-up shares 95,542,254 95,542,254Effect of treasury shares (2,658) (176,475)Average number of shares during the year 95,539,596 95,365,779

25. Operating leasesAs at 31 December 2017 and 2016, the Group had lia-bilities under operating leases related to vehicles and equipment, which contained penalty clauses in case

of cancellation. The total amounts of future payments are as follows:

As at 31 December 2017 and 2016, the Group has no financial instruments with a diluting effect. The basic

earnings per share are therefore equal to the diluted earnings per share.

83


27. Disputes and contingent liabilities27.1. Disputes• In the heading Other accounts receivable (note 16), is

recorded a receivable balance of €1,050 thousand in the caption State and other public entities, in respect of a payment made under the Special Regime for Tax Regularisation (RERD), related with a correction of cor-porate income tax received from the Tax Authorities in relation to the acceptance as tax expense of interests supported by the subsidiary Hospor in 2007.

The Board of Directors, with the support of its tax and legal advisers, believes it has acted in accordance with the tax laws and maintains the claims filed against this correction by the Tax Authority, and therefore not wai-ving its legitimate right to appeal and maintaining the expectation of full recovery of the amount paid. Never-theless, the amount paid in advance is fully provisioned.

Apart from other claims and disputes related with the normal operations of the Group, the following disputes are pending, for which management, supported by the advice of its tax and legal advisors, has updated its assessment of the probability of outcome of each dispute, making provisions for the amounts that could represent future disbursements:

• The Tax Authoritiy has not accepted financial expenses in the amount of €11,130 thousand for the years of 2008 until 2011 related with the financing of the operations of the subsidiary Hospor. Management believes there are reasons that support the treatment followed by the subsidiary and as such presented contestation in Court to the correction considered by the Tax Authority.

In 2016, the Court of First Instance decided on this dispute, which was favorable to Luz Saúde, however

this decision was appealed by the Tax Authorities and is currently pending before the Supreme Administrative Court.

As a result of the position of the Tax Authority, and in view of the proposed corrections, additional tax asses-sments were received in 2016 and 2017 in the amounts of €1,121 thousand and €2,028 thousand, respectively. The Group presented the necessary bank guarantees to continue to contest the corrections made by the Tax Authority.

• Several Group companies are part of medical disputes derived from events that occur during the provision of medical services in the normal activity of Group. Compensations for damage that may result from most of the cases in dispute are covered by a liability insurance that each subsidiary has in place, and as such management believes that derived from these disputes no material losses will arise to the Group.

• Following an inspection by the Tax Authority, the cal-culation of the tax benefits in term of job creation by two of the Group companies for the years 2013 and 2014 was questioned, and the Tax Authority identified corrections to the taxable income of € 305 thousand and € 530 thousand, respectively. Management, based on the opinion of its legal and tax advisors, unders-tands that the calculation carried out is in accordance with the requirements of the law and as such it has contested the situations. For the year 2013, following the payment notification received, the Group opted to provide a bank guarantee in the amount of € 240 thousand, in relation to the settlement received.

84

ANNUAL REPORT 2017

27.2. Contingent liabilitiesAs stated in the prospectus for the Initial Public Offering and admission to trading on Euronext, in the Company’s Shareholders General Meeting held on 22 January 2014 and taking into account the continuous management positions held for nearly 15 years by Isabel Maria Pereira Aníbal Vaz, in addition to her role in the promotion of the Group’s business development, an award of €850,000 to the latter was approved in recognition of professional services rendered to the Group. This amount will be paid in one lump sum at the time Isabel Maria Pereira Aníbal

Vaz terminates her role as member of the Company’s Board of Directors, for any reason outside her respon-sibility. The payment of the proposed award is autono-mous and is not intended to substitute any monetary compensations that may be legally or contractually due as a result of the termination of corporate management positions by Isabel Maria Pereira Aníbal Vaz, including in the Company, whatever the cause and the moment of termination thereof.

Additionally, there are mortgages and promissory mor-tgages in favor of financial institutions as security for bank financing whose break-down is as follows:

28. GuaranteesAs at 31 December 2017, the break-down of guarantees granted to third parties is as follows:

Company Beneficiary AmountLuz Saúde, SA AT 2,568,176USATI and CASAS CML 1,500,000CCHCI CEDIAGNO 1,500,000Luz Saúde, SA AT 1,414,839HME SCMÉVORA 300,000HOSPOR Município de Vila Real 250,000Luz Saúde, SA AT 239,958SURGICARE Município de Oeiras 118,320Other guarantees under €100.000 - 215,344 8,106,638

Company - Real estate property AmountUsati – Hospital da Luz e Residência Casas da Cidade 150,000,000Hospor – Hospital de Santiago e Clipóvoa 30,000,000HAG – Hospital da Arrábida 20,000,000VLUSITANO – Hospital do Mar 8,700,000VLUSITANO – Hospital do Mar 500,000 209,200,000

85


29. Related partiesOn 17 October 2014, and following the takeover bid for LUZ SAÚDE’s share capital, Fosun International, Ltd through Fidelidade – Companhia de Seguros SA has taken control over LUZ SAÚDE.

Fidelidade – Companhia de Seguros, SA is owned in 84.986% by Longrun Portugal, SGPS, SA which is fully owned by Millennium Gain Limited headquartered in Hong Kong. This company is held in 100% by Fosun Financial Holdings Limited (Hong Kong), which is owned by Fosun International Limited, a company listed on the Hong Kong Stock Exchange (00656.HK). This company

is owned in 71.768% by Fosun Holdings Limited, which is owned by Fosun International Holdings, Ltd. whose ultimate beneficial owner is Mr. Guo Guangchang. In January 2018, as a result of a transaction between Fo-sun International Ltd and Fidelidade - Companhia de Seguros, SA, Fosun International Ltd has acquired 49% of the share capital and voting rights of LUZ SAUDE and Fidelidade - Companhia de Seguros, SA reduced its participation to 49.7881% (note 34).

Therefore, the following tables present a summary of the balances and transactions with Fosun Group:

As mentioned above, as from 1 January 2016 LUZ SAÚDE and some of its subsidiaries became part of the tax group led by Longrun (Portugal), SGPS, SA. Thus, although of estimating their income tax as if they were taxed on a stand alone basis, companies that meet the criteria for inclusion in the tax group dominated by Longrun (Por-tugal), SGPS, SA, recognise a liability towards Longrun (Portugal), SGPS, SA the parent entity of the tax group, which is the one responsible for the self-assessment and payment of the tax.

Accordingly, the balance with Longrun (Portugal) SGPS, SA includes the net amount between the advance payments made which Group companies are obligated during 2017 (€4,725 thousand) and the estimate for corporate income tax liability recorded by the Fiscal Group (€ 3,382 thousand) (note 12).

31-dec-17 31-dec-16 Assets Liabilities Assets Liabilities

Shareholders Fidelidade - Companhia de Seguros, SA 4,161,776 187,458 2,238,344 84,590Other related parties Multicare 5,303,778 - 3,490,897 - Longrun (Portugal) SGPS, SA 1,343,685 - 432,950 - Via Direta – Companhia de Seguros, SA - - 5,171 - Cares – Companhia de Seguros, SA (621) - (621) - 10,808,618 187,458 6,166,742 84,590

86

ANNUAL REPORT 2017

The amounts reported as income are primarily related to healthcare services provided by LUZ SAÚDE units, namely to insurance companies, at normal market rates.

The amounts reported as expenses are related to the normal business of the respective entities and are

related to insurance used by LUZ SAÚDE and its sub-sidiaries, which are acquired at normal market prices and conditions.

Remuneration paid to corporate bodies is detailed in note 9.

31-dec-17 31-dec-16 Income Expenses Income ExpensesShareholders Fidelidade - Companhia de Seguros, SA 13,999,195 - 3,582,428 2,491,417Other related parties Multicare 38,155,263 - 34,687,526 - Via Direta – Companhia de Seguros, SA - - 5,459 - Cares – Companhia de Seguros, SA - - - - 52,154,458 - 38,275,413 2,491,417

87


On 13 March 2017, LUZ SAÚDE acquired 81.35% of the share capital and voting rights of S.C.H. - Sociedade Clínica Hospitalar, SA, which owns and operates Santa Catarina Hospital, located in Funchal, and a polyclinic in Caniço, private health units operating in the market

of the Autonomous Region of Madeira.

The assets and liabilities recognized as a result of the acquisition are as follows:

Loans and overdrafts at the date of acquisition included bank overdrafts in the amount of € 304,959 which, for the purposes of the statement of cash flows, were considered as part of cash and cash equivalents.

The acquisition value includes a contingent amount depending on the future results that the subsidiary is able to generate. For the purposes of the determi-nation of goodwill, the estimated acquisition value was €3,126,025. At the reporting date, the amount of €111,720 outstanding was settled.

The goodwill calculated is attributable to the market position of the subsidiaries and the staff. The goodwill calculated will not be deductible for tax purposes.

30.1.1. Contribution in terms of revenue and net profit

The amount of revenue included in the consolidated income statement for the year ended 31 December 2017 amounted to € 7,191 thousand, including net income of € 216 thousand.

If the acquisition had occurred on January 1, 2017, the consolidated pro forma income and net income for the year ended 31 December 2017 would be € 483,425 thousand and € 17,227 thousand, respectively.

Trade and notes receivables 899,006Inventories(note 7) 365,929Property, plant and equipment (note 13) 3,832,374Deferred tax assets (note 12) 276,780Intangible assets (nota 14) 1,065Trade and other payables (1,938,653)Borrowings and bank overdrafts (1,185,857)Finance lease liabilities (1,497,212)Provisions (note 21) (796,071)Identifiable assets and liabilities (42,639)Non-controling interests (note 20) 7,952 (34,687)Preliminar Goodwill 3,126,025Acquisition cost 3,091,338

30. Acquisition of subsidiaries30.1. Business acquisition in Madeira (SCH)

88

ANNUAL REPORT 2017

On 31 July 2017, LUZ SAÚDE acquired 100% of the share capital and voting rights of CCHCI - Capital Cria-tivo Health Care Investments, SA, which owns the British Hospital Group (“GBH”), BMC - British Hospital Management Care, SA, British Hospital Lisbon XXI, SA and Microcular - Centro Microcirurgia Ocular, Laser e

Diagnóstico, SA, private health units operating in the Lisbon metropolitan area.

The assets and liabilities recognized as a result of the acquisition are as follows:

The acquisition cost is fully paid.

The goodwill calculated is attributable to the subsidiaries’ market position, the number of employees and opera-tional synergies with the Group. The goodwill calculated will not be deductible for tax purposes. 30.2.1. Contribution in terms of revenue and net

profit

The amount of revenue included in the consolidated income statement for the year ended 31 December 2017 amounted to € 8,340 thousand, including a loss of € 2 thousand.

If the acquisition had occurred on 1 January 2017, the consolidated pro forma income and net income for the year ended December 31, 2017 would be € 495,060 thousand and € 17,362 thousand, respectively.

Cash and bank balances 120,947Trade and notes receivables 8,640,115Inventories (note 7) 648,346Property, plant and equipment (note 13) 1,153,383Deferred tax assets (note 12) 125,944Intangible assets (note 14) 199,647Trade and other payables (11,634,305)Provisions (note 21) (563,079)Finance lease liabilities (252,919)Identifiable assets and liabilities (1,561,921) Non-controling interests (note 20) 4,619Acquired assets and liabilities (1,557,302) Preliminar Goodwill 8,720,684Acquisition cost 7,163,382

30.2 Acquisition of the British Hospital Group (GBH)

89


Following the resolution of Guimarães Court on 19 January 2016, LUZ SAÚDE completed the operation related with the acquisition of the business of Casa de Saúde de Guimarães. With this operation, on one hand, Luz Saúde begin to explore the two healthcare units previously operated by CSG, which were until this date under control management by a professional manager

appointed by the Court where the insolvency process has been filed, and additionally acquired some assets used by CSG on financial and operational lease contracts.

In the following table and preliminarily presents a summary of the operation performed:

During this acquisition, in addition to the identified assets, the Company also acquired the contractual positions with customers, suppliers and personnel of said health units in order to continue the activity that these units already had.

As a result of this operation, the company started ope-rating in operational terms, so that all the revenues recorded in 2016 are the result of this operation.

The amount of HLG’s revenue included in the consolida-ted income statement for the year ended 31 December 2016 (after the acquisition date) amounted to € 12,188 thousand, including a net loss for the period of € 2,350 thousand.

Real estate property (note 13) 6,438,000Medical equipment (note 13) 3,041,051Other tangible fixed assets (note 13) 187,670Inventories (note 7) 137,869Other assets 82,595Liabilities assumed with onerous contracts (557,159)Other liabilities (117,536)Identifiable assets and liabilities 9,212,490 Goodwill 16,025,075Acquisition cost 25,237,565

30.3. Acquisition of the business of Casa de Saúde de Guimarães (CSG)

90

ANNUAL REPORT 2017

31. Financial risk management

31.1 Credit risk

The Group is exposed to the following types of risk as a result of its use of financial instruments:

• Credit risk• Liquidity risk• Market risk This note provides information on the Group’s exposu-re to each of the aforementioned risks, as well as the

31.1.1. Trade receivables and accrued income

The monitoring of credit risk is performed based on the debtor’s portfolios and their outstanding balances on an on-going basis. In addition to this approach, methods and tools used for risk assessment and control of client acceptance, establishment of credit limits, and imple-mentation of debt collection procedures and cycles.

The credit risk profile is monitored regularly by the Operations and Finance Department of each subsidiary, namely with respect to changes in credit exposure and monitoring default losses, being the Group’s consolida-ted credit risk profile monitored by the departments of Finance and Administration and Planning and Manage-

Group’s goals, procedures and practices for measuring and managing these risks. Further disclosures of a quantitative nature are presented throughout these financial statements.

The identified risks are reviewed regularly to remain adherent to the reality of market conditions and the Group’s activities.

ment control. Compliance with approved credit levels is also reviewed regularly at each business unit level.

The Group defined a credit procedure under which each new client is individually assessed from a credit risk standpoint prior to being accepted as a client. This review includes an analysis of external information and, whenever possible, third party references about the entity.

Impairment of trade receivables are estimated accor-ding to estimated losses to the portfolio, based on an analysis of each outstanding balance at the time of assessment.

31-dec-17 31-dec-16

Trade receivables and accrued income 132,119,849 143,647,033Bank deposits and cash equivalents 57,586,514 41,175,959Other receivables 1,931,517 1,734,291 191,637,880 186,557,283

Credit risk arises from the possibility that financial los-ses may occur due to a debtor’s default on contractual obligations with the Group in the course of its business.

The Group’s credit risk exposure essentially arises from accounts receivable from its business activities and

from and monetary funds managed under the Group’s treasury activity.

The following table presents the maximum exposure of the Group to the credit risk:

91


31-dec-17 31-dec-16Trade receivable and accrued income ageing in the healthcare private segment 0-3 months 67,593,331 89,400,474 3-6 months 19,739,899 16,318,972 6-12 months 7,199,375 10,805,050 12-24 months 4,064,655 1,501,381 > 24 months 6,052,802 5,809,798 104,650,062 123,835,675 Accumulated impairment (8,255,680) (7,177,501) 96,394,382 116,658,174

As at 31 December 2017 and 2016, consolidated trade receivable and accrued income balance was detailed as follows:

31.1.1.1. Private healthcare segment

The ageing of trade receivable and accrued income for the private healthcare segment, as of the respective invoice date, was as detailed below:

The majority of trade receivable outstanding, with 12 months overdue, is provided for impairment as at 31 December 2017. 31.1.1.2. Public healthcare

Under the payment system in force at Hospital Beatriz Ângelo, at the beginning of each month, the State pays 90% of 1/12 of the agreed annual production value (regardless of the actual production value reached). The adjustment amount (which include the remaining 10%, plus any additional production above the agreed amount, given that there are areas where the production limit agreed can be surpassed, such as emergency me-

dical care and hospitalisation) is settled in the following financial year.

The amounts receivable from ARSLVT are recorded in the captions Accrued income and Trade receivables in the amounts of €21,036 thousand and €4,614 thou-sand, respectively (2016: €20,784 thousand and €315 thousand, respectively), pending the completion of the respective validation process.

31.1.2. Cash and cash equivalents

The breakdown of the balance of cash and cash equiva-lents, according to the credit risk quality of the financial

31-dec-17 31-dec-16

Trade receivables and accrued income Private healthcare 96,394,382 116,658,174 Public healthcare 28,843,607 24,700,304 Other segments and eliminations 6,881,860 2,288,555 132,119,849 143,647,033

92

ANNUAL REPORT 2017

31-dec-17 31-dec-16Rating A3 - 5,122,758 Baa1 - 2,716,197 Baa2 405,688 - Baa3 23,648,304 - Ba1 6,111,782 - Ba2 - 325,726 Ba3 - 2,997,674 B1 16,245,827 22,774,114 B3 206,164 180,312 Caa1 - 5,740,870 Caa3 10,449,400 - Other 519,349 1,318,308 57,586,514 41,175,959

institutions where assets were deposited on 31 December 2017, can be presented as follows (based on Moody’s rating observable in the market):

As principle, the Group tries to maintain an alignment between the financial institutions in which deposits its cash equivalents, and the financial institutions with used credit lines to finance the operations, in order to create a natural hedge to prevent the risk of a potential credit

event that may occur at the level of the entity where the funds are deposited. Thus, if we consider the net position of the assets and liabilities of the Group with bank entities, the risk of realization of assets amounts to € 612 thousand (2016: € 4,242 thousand).

93


Liquidity risk arises from the possible inability to finance the Group’s assets or to satisfy contractual undertakings when due. Liquidity management is centralised in the Finance and Administration and Planning and Mana-gement control departments of the Group, and seeks to maintain an adequate amount of funds to meet the Group’s short-term, medium and long-term financial needs. To assess overall exposure to this type of risk, reports are drawn up that enable the Group to identify

occasional cash shortages and activate mechanisms intended to cover them.

To finance its business, the Group has the credit lines referred to in note 23.

The liquidity of the financial liabilities will give rise to the following non-discounted cash flows, based on the period remaining until contractual maturity on the reporting date:

31.2 Liquidity risk

31.3. Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates or deve-lopments in the capital markets, may affect the Group’s results and financial position. Because the Group is not exposed to foreign exchange or capital market risks, the goals of its market risk management policies focus mainly on monitoring changes in interest rates that affect interest-bearing liabilities with floating interest rates.

All credit lines contracted by the Group are exposed to floating interest rates, given by the market index con-tracted plus a spread. In the previous year and in order to balance the exposure to changes in interest rates, the Group contracted hedging instruments to address the cash flow risk, in order to fix the interest rates of some of the credit lines that are in place.

With these instruments the level of financial debt that the Group has on 31 December 2017 and considering the effectiveness that these instruments may have (considering a positive evolution for future interest ra-tes in the European Union), the Group will have about 60.8% (2016: 72%) of its financial debt exposed to fixed interest rate.

Considering that the Group’s result is exposed to varia-tions in market interest rates, for illustrative purposes only, an immediate increase or decrease of 0.5% in the reference rates, considering all other variables constant, would impact net income before tax by approximately €595 thousand (2016: €346 thousand).

31-dec-17 31-dec-16

Finance Bank Commercial Other leases Loans paper liabilities (*) Total Total

Under 12 months 5,064,896 4,561,427 15,309,777 111,254,745 136,190,845 109,120,173

12 to 24 months 6,375,759 6,962,788 27,000,000 - 40,338,547 20,786,917

24 to 36 months 5,893,245 7,855,271 27,400,000 - 41,148,516 44,235,615

36 to 48 months 5,610,216 6,105,271 47,468,912 - 59,184,399 33,621,364

49 to 60 months 5,522,697 6,105,271 31,264,491 - 42,892,459 31,041,943

Over 60 months 4,075,967 5,636,052 74,800,000 - 84,512,019 100,330,056

32,542,780 37,226,080 223,243,180 111,254,745 404,266,785 339,136,068

(*) Excludes non-financial liabilities and advances from clients

94

ANNUAL REPORT 2017

32. Financial instruments by category Loans Fair value Other Non-financial and of assets / financial assets / Total As at 31 December 2017 receivables liabilities liabilities liabilities

Assets

Other non current assets - - - 447,957,033 447,957,033

Trade ans other receivables 90,581,338 - - 9,145,370 99,726,708

Accrued income 42,216,828 - - - 42,216,828

Other current assets - - - 11,538,902 11,538,902

Cash and cash equivalents 57,778,921 - - - 57,778,921

190,577,087 - - 468,641,305 659,218,392

Liabilities

Other non current liabilities - - - 10,080,600 10,080,600

Borrowings - - 263,889,030 - 263,889,030

Financial lease aliabilities - - 32,542,780 - 32,542,780

Trade and other payables - - 102,708,806 7,686,936 110,395,742

Derivative financial instruments - 3,109,947 - - 3,109,947

Deferred income and other current liabilities - - 3,464,784 358,009 3,822,793

- 3,109,947 402,605,400 18,125,545 423,840,892

The hierarchy for the purpose of determining fair value should have the following levels and measurement bases:

• Level 1 – inputs based in quoted prices in active marke-ts for identical assets or liabilities that the entity can access at the reporting date;

Loans Fair value Other Non-financial and of assets / financial assets / Total As at 31 December 2016 receivables liabilities liabilities liabilities

Assets

Other non current assets - - - 378,249,857 378,249,857

Trade and other receivables 106,409,729 - - 7,528,369 113,938,098

Accrued income 38,076,241 - - - 38,076,241

Other current assets - - - 9,828,795 9,828,795

Cash and cash equivalents 41,486,834 - - - 41,486,834

185,972,804 - - 395,607,021 581,579,825

Liabilities

Other non current liabilities - - - 8,427,083 8,427,083

Borrowings - - 221,157,145 - 221,157,145

Financial lease liabilities - - 28,223,693 - 28,223,693

Trade and other payables - - 88,598,233 9,483,083 98,081,316

Derivative financial instruments - 4,731,582 - - 4,731,582

Deferred income and other current liabilities - - 3,690,618 221,216 3,911,834

- 4,731,582 341,669,689 18,131,382 364,532,653

95


• Level 2 – inputs based in other than quoted market prices included within Level 1 that are observable in the market;

• Level 3 - valuation models, whose main inputs are not observable in the market.

The only group of financial instruments carried at fair value are disclosed in note 24, with the fair value of these instruments determined by banking entities based on observable inputs on the market and using in models and techniques generally accepted valuation (Level 2).

33. Main accounting policies33.1. Basis of consolidationThe consolidated financial statements presented herein reflect the assets, liabilities, equity, results and cash flows of LUZ SAÚDE and its subsidiaries (together the Group), and the results attributable to the Group from investments in associated companies.

The accounting policies have been applied consistently by all Group companies for all periods covered by these consolidated financial statements.

33.1.1. Subsidiaries

Subsidiaries are all entities over which the group has control. Control is considered when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity, despite its interest in the shareholders equity of the subsidiary is less than 50%.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

Under the full consolidation method, Group company assets, liabilities, income, expenses and cash flows are consolidated, while intra-group transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated in the conso-lidation process. Unrealised losses are also eliminated, unless the transaction shows signs of impairment of the asset thereunder.

The share of shareholders equity and profit for the year in the subsidiaries included in the consolidation owned by non-controlling shareholders of these entities are presented, respectively, in the consolidated statement of financial position in a separate caption in shareholders equity, and in the consolidated statement of comprehen-sive income in the caption “non-controlling interests”.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

For business combinations achieved in stages (step acquisition) in which control is obtained, the associate company is included in the consolidation by the full method, and the fair value of the financial interest previously held by the Group, is considered as part of the acquisition price. The difference between the book value in the associate and its fair value is recognized in results on the date that control is achieved. In a partial sale in which control over a subsidiary is lost, any re-maining interest is remeasured at fair market value on the date of the sale and any gain or loss resulting from that revaluation is recognized under results.

96

ANNUAL REPORT 2017

Acquisition-related costs are expensed as incurred.

Non-controlling interests are presented by the share in the fair value of the assets and liabilities identified. Cumulative losses are attributed to non-controlling interests in accordance with their share of interest in the subsidiary, which may result in the recognition of negative figures for non-controlling interests.

33.1.2. Associate companies

Companies over which the Group has the power to sig-nificantly influence financial and operating policies are classified as associate companies, even in the absence of a controlling interest therein. Normally is assumed that the Group has significant influence when it has the power to exercise more than 20% of the voting rights of the associated company. Even when voting rights are less than 20%, the Group may have significant influence by participating in the associated company’s management or by being an executive member of its board of directors.

Financial investments in associate companies are con-solidated using the equity method from the moment the Group gains significant influence until that influence ceases to exist. Under the equity method, financial in-vestments in associate companies are recognised in the consolidated statement of financial position at cost and are adjusted thereafter to recognise the Group’s share of the associate results. This adjustment is recognized in the consolidated profit and loss. In addition, the fi-nancial investments may also be adjusted through the recognition of impairment losses.

Dividends attributed by the associate entities are recor-ded as a decrease in the carrying value of the financial investments, at the time they are attributed.

When the amount of accumulated losses incurred by an associate company and attributable to the Group is equal to or exceeds the carrying value of the investment and any other medium and long-term interests in that associate company, the equity method is no longer applied, unless the Group has a legal or constructive

obligation to recognise those losses or has made pay-ments on behalf of the associate company.

33.1.3. Investments in joint ventures

A joint venture consists of a contractual agreement in which two or more entities (participants) undertake an economic activity under joint control. Joint control only exists if the relevant financial and operating decisions regarding the business require unanimous approval of all participants. A jointly controlled entity is a joint venture that incorporates the activity of a jointly con-trolled business.

The financial statements of the jointly controlled entities are prepared with reference to the same reporting date as the Group’s financial statements. Unrealized gains in transactions between the Group and these entities are eliminated in the proportion to the Group’s share in the jointly controlled entities. In addition, investments in jointly controlled entities may be adjusted through the recognition of impairment losses. Whenever there are indications of asset impairment, an assessment is carried out. If an impairment loss is found, it is reported as a loss in the consolidated statement of comprehensive income. Adjustments are made to the financial state-ments of the entity as needed to make the accounting policies used consistent with those of the Group.

Financial investments in jointly controlled companies are consolidated using the equity method. According to this method, the investments are initially recorded at cost and are subsequently adjusted by the amount corresponding to their share of the jointly controlled companies’ results, and by variations in their equity under the caption “Retained earnings and reserves”. The classification of financial investments in jointly controlled companies is based on shareholder agreements that show and regulate joint control.

33.1.4. Goodwill

Goodwill from acquisitions made up to 1 January 2005 is recorded as an intangible asset at the carrying value measured on the date of transition to IFRS according

97


to the previous accounting policies. This option is con-sidered in IFRS 1 and was adopted by the Group on the date of transition to IFRS.

The Group records acquisitions of subsidiaries and as-sociated companies that occurred after 1 January 2005 using the acquisition method.

Goodwill represents the excess of the consideration transferred and the fair value of the Group’s share in the identifiable assets and liabilities acquired (note 14). When the acquisition cost is less than the net assets of the entity acquired (negative goodwill), the difference is recognised as a gain in the consolidated income statement.

Goodwill is reported under assets at its cost and is not amortised. For investments in associated companies, goodwill is included in the carrying value determined by the equity method.

The recoverable amount of goodwill is revised annually in the last quarter of each financial year, regardless of signs of impairment. Any impairment loss identified is recognised in the profit and loss.

In testing goodwill for impairment, goodwill is added to the cash-generating unit or units to which it is allocated. The value in use is determined by discounting estimated future cash flows of the cash-generating unit. The reco-verable amount of the cash-generating units to which the goodwill is allocated is determined based on the value in use of the assets. This is calculated using discounted cash flow methodologies that take into account market conditions, time value and business risks. The discount rate used in discounting cash flows reflects the pre-tax weighted average cost of capital (WACC) of the LUZ SAÚDE Group for the business segment to which the cash-generating unit belongs.

33.1.5. Balances and transactions eliminated in the consolidation

Intra-group balances, transactions and cash-flows, as well as any unrealised gains and losses resulting from those transactions are eliminated when preparing the consolidated financial statements. The unrealised gains and losses of transactions with associated companies and jointly controlled entities are eliminated in proportion to the Group’s interests therein.

98

ANNUAL REPORT 2017

The accounting policies presented were applied con-sistently in all periods covered by the present financial statements.

33.2.1. Property, plant and equipment

33.2.1.1. Recognition and valuation

LUZ SAÚDE’s property, plant and equipment is valued at cost less the respective accumulated depreciations and impairment losses. On the date of transition to IFRS, LUZ SAÚDE elected to consider the revalued amount of its property, plant and equipment as cost according to the previous accounting policies. This was generally equivalent to the depreciated cost measured according to IFRS, adjusted to reflect changes in the general price index.

Acquisition/construction costs include the invoice price, transport and installation costs, financing costs and exchange rate differences in bank loans, occurring during the construction period, as well as indirect costs attributable to it during the construction period.

Subsequent costs with property, plant and equipment are only recognised if the Group is likely to obtain eco-nomic benefits therefrom in the future. All ongoing maintenance and repair expenses are recognised in the consolidated profit and loss when incurred, on an accrual basis.

When there are indications that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and an impairment loss should be recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the profit and loss. The recoverable amount is the higher of the asset’s sale value less any cost of disposal and its value in use. The value in use is calculated based on the dis-counted value of the future estimated cash flows that can be expected from the asset’s continued use and its disposal at the end of its useful life.

Gains or losses arising from the write-off or disposal of property, plant and equipment are measured as the difference between the asset’s sale price, less transac-tion costs, and the asset’s carrying amount. They are recorded in the consolidated profit and loss under the caption “Other operating income” or “Other operating expenses”.

Property, plant and equipment in progress represent tangible assets that are still being constructed or installed and are recorded at acquisition cost. Depreciation of these assets begins in the month they become available for use for their intended purpose.

33.2.1.2. Depreciation

Land is not depreciated. Depreciation of the remaining Property, plant and equipment is calculated using the straight-line method, from the month the assets become available for use. The depreciation rates used reflect, on average, the estimated useful lives of the assets:

Years

Buildings 4 – 40Basic and transport equipment 2 – 20Office equipment 2 – 20Other property, plant and equipment 3 – 20

Depreciation ceases when the assets are classified as held for sale.

33.2.2. Intangible assets

Intangible assets are recognised at the acquisition cost less accumulated amortisation and impairment losses, if any. Intangible assets are recognised only when it is likely the Group will obtain economic benefits therefrom in the future that can be reliably measured.

Intangible assets with a definite useful life are amortised using the straight-line method from the month they be-

33.2. Significant accounting policies

99


come available for use and over the life of the agreement. Intangible assets with indefinite useful lives (goodwill) are not amortised, but are tested for impairment in the last quarter of each financial year or whenever there is an indicator of impairment (note 14).

33.2.3. Impairment of property, plant and equipment and intangible assets, except goodwill

Group companies test their property, plant equipment and intangible assets for impairment whenever an event or change occurs that indicates that the carrying value of an asset may not be recoverable. Should such indicators exist, the Group determines the recoverable amount of the asset in order to determine the possible extent of the impairment loss. When it is impossible to determine the recoverable amount of a given asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated.

The recoverable amount of the asset or the cash-gene-rating unit is the greater of (i) its nets sale price and (ii) its value in use. The net sale price is the amount that would be obtained from the disposal of the asset in a transaction between independent and knowledgeable parties, less the direct disposal costs. The value in use is derived from the asset’s future estimated discounted cash flows during its expected useful life. The discount rate used to update discounted cash flows reflects the time value of money and the specific risk of the asset.

Whenever the carrying value of the asset or cash-ge-nerating unit is higher than its recoverable amount, an impairment loss is recognised. The impairment loss is recorded in the profit and loss under the caption “Other operating expenses”.

When an impairment loss is subsequently reversed, the carrying value of the asset is remeasured to its estimated value and is recognised in the consolidated profit and loss as a deduction under the caption “Other operating costs”. However, the reversal of the impairment loss is limited to the amount that would have been recognised (net of amortisation or depreciation) had the impairment loss not been recognised in previous periods.

33.2.4. Financial assets and liabilities

Financial assets and liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the corresponding contractual provisions. A financial asset is any asset that is cash, a contractual right to receive cash or an equity instrument of another entity. A financial liability is a liability that entails a contractual obligation to deliver cash.

The Group’s financial assets are presented in the consoli-dated statement of financial position under the captions “Trade receivables”, “Other receivables” and “Cash and cash equivalents”. The Group’s financial liabilities are presented under “Trade payables”, “Borrowings”, “Fi-nance lease liabilities”, “Other payables” and “Derivative financial instruments”.

Financial assets are initially recognised at their fair value plus transaction costs, except for financial assets at fair value through profit and loss, in which case these tran-saction costs are directly recognised in the consolidated profit and loss.

Financial assets are derecognised when: (i) the Group’s contractual rights to receive their future cash flows ex-pire, (ii) the Group has substantially transferred all the risks and benefits related to their ownership, or (iii) the Group has transferred control of the assets, although it retains a non-substantial part of the risks and benefits associated with their ownership.

Financial liabilities are recorded: (i) initially at their fair value less the transaction costs incurred and (ii) subse-quently at their amortised cost based on the effective interest method; or at fair value if the Group decides, when the liability is initially recognised, to record this financial liability at fair value through profit and loss, under the fair value option.

33.2.4.1. Trade and other receivables

Trade and other receivables classified as current assets have no implicit interest and are presented using the amortised cost method. This is estimated to be equal to

100

ANNUAL REPORT 2017

than 12 months after the reporting date, it is classified as a non-current liability. The liabilities are derecognised when the contractual obligations cease to exist, namely at the time of repayment.

Financial costs are calculated according to the effective interest rate method and are recorded on an accrual basis in the consolidated profit and loss. Financial costs due, but unpaid as at the reporting date are disclosed under “Other payables”.

33.2.4.4. Trade and Other payables

“Trade and other payables” are liabilities related to goods or services acquired by the Group during the normal course of its business. If the payment falls due in one year or less after the reporting date, they are classified as current liabilities; otherwise, they are classified as non-current liabilities.

Balances from “Trade and other payables”, which are considered current liabilities, are measured at their amortised cost, which is estimated to be identical to their carrying value, i.e. at cost.

33.2.4.5. Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into, which is presu-med to be equal to its acquisition cost on that date, and are subsequently re-measured at their fair value, being the gains or losses generated in the remeasurement recognized in the profit and loss, except for derivatives designated as a cash flow hedging instruments.

The fair value of derivative financial instruments is the market value of the instrument, when available, or determined by external entities based on valuations methods generally accepted in the market.

The Group uses financial instruments to hedge the in-terest rate risk from its financing activity. The derivative that don’t qualify for hedging in accordance with IAS 39 are registered as trading instruments.

the carrying value, less any related impairment losses, which are calculated based on two assumptions: the seniority of the receivable and the debtor’s credit profile. If collection is expected within one year or less after the reporting date, the receivable is classified as a current asset. Otherwise, it is classified as a non-current asset.

Impairment losses are recorded in the consolidated profit and loss when there is objective evidence that the Group will not collect the full amount due. If there is a decrease in the amount of the estimated loss, the write-down is reversed in a later period.

Trade and other receivables classified as non-current assets are measured at their respective amortised cost, which is determined according to the effective interest rate method. When there is evidence of impairment, the corresponding loss is recognised in the consolidated profit and loss.

33.2.4.2. Cash and cash equivalents

The amounts included in the caption “Cash and cash equivalents” represent cash, bank deposits, term deposits and others, that mature in or in less than three months and are immediately available, with an insignificant risk of change in value.

For the purpose of the cash flow statement, cash and its equivalents include the amounts recorded in the consolidated statement of financial position that ma-ture within three months of the date of their contract/acquisition. These include cash and funds with credit institutions.

33.2.4.3. Bank loans

Loans are recognised under liabilities at their cost or amortised cost. Amortised cost is calculated according to the effective interest rate method. They are classified as current or non-current liabilities, depending on their maturity date. If the loan matures within one year after the reporting date, it is classified as a current liability; if it matures one year after the reporting date or the renewal of the loan is contractually secured for more

101


Payments made under operating lease agreements are recorded as expenses in the periods to which they pertain (note 25).

33.2.5.2. Finance leases

Finance lease agreements are recognised on their star-ting date, under both assets and liabilities, at the cost of acquisition of the leased property, which is equivalent to the present value of outstanding lease payments. Lease payments are made up of (i) interest charges, which are debited to the consolidated profit and loss and (ii) the financial amortisation of outstanding principal, which is deducted from liabilities. Interest charges are recognised as expenses over the lease period in order to obtain a constant periodic interest rate on the remaining balance of the liability in each period.

33.2.6. Inventories Inventories include subsidiary materials and consumables and are valued at the lower of the acquisition cost and the net realisable value. The acquisition cost includes expenses incurred up to storage of the inventory. Cost of inventory consumed is determined using the weighted average cost.

The net realisable value is the estimated sales price less estimated costs to sell.

If the net realisable value is lower than the acquisition cost, the difference is reported under “Other operating expenses” in the statement of comprehensive income.

33.2.7. Revenue

Revenue is recognised whenever it is probable that the Group will obtain economic benefits that can be relia-bly estimated, being measured by the fair value of the instalments received or receivables, net of discounts given and any taxes. The revenue associated with the transaction is recognised with reference to its stage of completion as at the reporting date.

A hedging relationship exists when:

• At the date of inception there is formal documentation of the hedging relationship;

• The hedge is expected to be highly effective;• The effectiveness of the hedge can be reliably mea-

sured;;• The hedge is assessed on an ongoing basis and deter-

mined actually to have been highly effective throughout the financial reporting period;

• In relation to the hedge of a future transaction, the transaction must be highly probable and must present an exposure to variations in cash flows that could ultimately affect net profit or loss.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.

When a hedging instrument related to a forecast tran-saction is discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

33.2.5. Leases

LUZ SAÚDE classifies lease operations as finance lea-ses or operating leases, with prevalence to substance over legal form, pursuant to the criteria set out in IAS 17 – Leases. Operations in which the risks and benefits inherent to ownership of an asset are transferred to a lessee are classified as finance leases. All other leasing operations are classified as operating leases.

33.2.5.1. Operating leases

102

ANNUAL REPORT 2017

expenses are recognised when generated regardless of when they are collected or paid. Differences between the amounts collected and paid and the corresponding expenses and revenue are reported in the statement of financial position under the captions “Other receivables” or “Other payables”, respectively.

33.2.9. Finance income and costs

Finance income includes interest and financial discounts obtained from third parties and are recognised in the period in which they occur. Dividends are recognised from the moment in which the investee company as-sumes the commitment to distribute them.

Finance costs include interest expenses and other banking expense, being recognised in the financial period in which they occur.

33.2.10. Income tax

Income tax is recognised according to IAS 12 – Income Taxes and includes both current and deferred tax. Taxes on profits are recognised in the consolidated profit and loss, except when related to items directly recognised in equity, in which case they are also reported in equity.

Current taxes are those expected to be paid based on taxable income, calculated according to the tax laws in force and the tax rate approved or substantially approved.

Deferred taxes are calculated by using the balance sheet liability method on temporary differences between the carrying values of assets and liabilities and their tax base, using the tax rates approved or substantially approved as at the reporting date and which are expected to be applied when the temporary differences are reversed.Deferred tax liabilities are recognised for all temporary taxable differences with the exception of non-deductible goodwill for tax purposes, for differences arising from the initial recognition of assets and liabilities that affect neither accounting nor taxable profits, and for differences related to investments in subsidiaries to the extent they are unlikely to be reversed in the future. Deferred tax assets are recognised only to the extent it is likely that

Revenue from activities carried out in the private heal-thcare segment, is recognised based on the services rendered during that period, valued at the prices of those services as set out in a defined price list, regardless of the actual invoice date.

In the case of activities carried out in the public health-care segment (under the PPP), revenue is recognised in accordance with the services provided valued by the contractual prices agreed with the Contracting public entity. Under the agreement, invoicing is monthly for an amount equivalent to 1/12 of 90% of the annual amount agreed for each year. There is an adjustment invoice for services actually provided, during the first six months of the following year. The difference between the amounts invoiced and the actual production is recorded under “Other payables” or “Other receivables” on an accrual basis (33.2.8 below).

Revenue from senior residences is recognised based on lifetime rights of use (ROUs). This recognition is made according to the characteristics of each type of agreement:

• In lifetime ROUs with no conveyance rights, or with the right to only one conveyance, the value of the agreement is initially recognised as deferred income. Once the member moves into the Club, the revenue is recognised for a period that takes into account the age of the member (or of the assignor, if allowed) on the entry date, and the average life expectancy taken from the GRF95 actuarial tables;

• In lifetime ROUs with unlimited conveyance rights, the agreement value is immediately recognised as income and an accrued expense for the unit’s portion of the total cost of the buildings is recorded as a sales cost. The accrued expense is later recognised as revenue in the same period as the depreciation of the corresponding property, plant and equipment.

33.2.8. Accrual basis

The Group companies recognise their revenue and expenses on an accrual basis. Therefore, revenue and

103


When one of these requisites is not met, the Group discloses the event as a contingent liability, unless the possibility of an outflow of funds is highly unlikely.

The amount of provisions corresponds to the present value of the obligation. The financial effect of the dis-count is recorded as a finance cost under the caption “Finance costs” (note 7).

Provisions are revised on the reporting date and are ad-justed to reflect the best estimate on that date (note 21).

When losses in associated companies exceed the in-vestment made in those entities, the investment’s carrying amount is reduced to zero, and future losses are no longer recognised, except to the extent the Group has incurred a legal or constructive obligation to bear those losses on behalf of the associated company, in which case a provision is recorded for impairment of financial assets.

A provision is recognised for litigation in progress when the expenses that will be incurred due to legal procee-dings filed by third parties can be reliably estimated. The estimate is based on an assessment of the likelihood of having a cash outflow, based on the opinion of the Group’s legal advisors.

Contingent assets are not recognised in the consolidated financial statements, but are disclosed when it is likely they will generate a future economic benefit.

33.2.12. Segment reporting

Pursuant to IFRS 8, an operating segment is a compo-nent of the Group: (i) that engages in business activities from which it may earn revenue and incur expenses; (ii) whose operating results are regularly reviewed by the Group’s chief operating decision-maker for the purpose of making decisions about allocating resources to the segment and assessing its performance; and (iii) for which separate financial information is available.

Segment information is reported consistently with the internal management information model used by the

future taxable profit will be able to use the temporary deductible differences.

LUZ SAÚDE falls under the special tax regime for corpo-rate groups, which covers all the companies in which the parent company of the tax group directly or indirectly holds at least 75% of the respective share capital (90% until 2013) and as long as these companies meet the requirements established in the Corporate Income Tax Code. The remaining subsidiaries that do not fall under the Group’s special tax regime are taxed individually, according to their respective taxable income and appli-cable tax rates.

Current taxes are determined based on the accounting results adjusted according to the tax law in force. Cur-rently, companies resident in Portugal are subject to a corporate income tax rate of 21%, plus a municipal surtax of up to a maximum of 1.5% of taxable profits, and a State surtax of 3% of taxable profits between €1.5 million and €7.5 million (€10 million in 2012), 5% on taxable profits greater than €7.5 million, and 7% for taxable profits above €35 million, which has taken effect in 2014.

Pursuant to IAS 12, the Group offsets deferred tax asse-ts and liabilities whenever: (i) the respective company has a legally enforceable right to offset assets against current taxes and liabilities against current taxes; ii) the deferred tax assets and liabilities relate to income taxes levied by the same tax authority and on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously in future periods in which deferred taxes are expected to the settled or recovered.

33.2.11. Provisions, contingent assets and contingent liabilities

Provisions are recognised when (i) the Group has a present obligation, due to past events (legal or cons-tructive), (ii) it is likely that a cash outflow will be requi-red and (iii) when the amount of the obligation can be reliably estimated.

104

ANNUAL REPORT 2017

33.2.17. Employee benefits

33.2.17.1. Liabilities with holidays, subsidies and bonuses

Pursuant to Portuguese legislation, employees are currently entitled to one-month holiday and one-month holiday subsidy. This right is earned in the year prior to the year payment is made.

Under the performance assessment system in place, employees may come to earn a bonus should they attain certain goals. This right is usually earned in the year prior to the year payment is made.

Liabilities are recognised in the consolidated profit and loss in the period in which the employees earn the referred right, regardless of the date of payment. The obligation is recognised under liabilities in the caption “Other payables”.

33.2.17.2. Share-based payment

The Group remunerates some of its employees through a share-based payment plan, settled through equity instruments.

The fair value of the services received is recognised as a cost in the consolidated profit and loss against an increase in equity, throughout the period in which employees earn those rights. The total amount to be recorded as an expense is calculated based on the fair value of the instruments on its granting date.

The vesting conditions are taken into consideration when estimating the number of instruments that will have acquired rights at the end of the vesting period. On each reporting date, the Group reviews the estimate for the number of instruments expected to meet the defined conditions and recognises the impact of the revision of the original estimate in the consolidated profit and loss with the corresponding effect on equity.

The existing plan ended in 2017 with the allocation of the last instalment of shares to the persons that met the vesting conditions.

Group. For reporting purposes, exist four operating segments: private healthcare, public healthcare, other activities and corporate center.33.2.13. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to the company shareholders by the weighted average number of ordinary shares outstan-ding during the period, excluding the average number of treasury shares held.

To calculate diluted earnings per share, the weigh-ted average number of ordinary shares outstanding is adjusted to reflect the impact of all potential diluting effects, such as those resulting from convertible debt or options over own shares granted to employees. The dilution results in lower earnings per share, due to the assumption that convertible instruments are converted or the granted options are exercised.

33.2.14. Dividend distribution

The distribution of dividends is recognised as a liability from the time they are approved by the company’s General Shareholders Meeting until they are paid to shareholders.

33.2.15. Cash flow statement

The statement of cash flows is prepared using the direct method, by which cash inflows and outflows are reported relative to operating, investment and financing activities.

33.2.16. Subsequent events

Events that occur between the closing date and the date in which the financial statements are approved by the Board of Directors, which provide additional information about conditions that existed as at the reporting date are reflected in the financial statements. Any events that occur after the reporting date that are indicative of conditions that arose after the financial reporting date are disclosed in the notes to the financial statements, if considered relevant.

105


At the Extraordinary Shareholders’ Meeting held on April 13, 2018, the Company’s Shareholders decided to initia-

te proceedings for the loss of the publicly-held status, pursuant to Article 27 (1) (b) of the Securities Code.

In March 2018, following the communication from the Competition Authority, Luz Saúde acquired control of the Idealmed Group (formed by the companies Capital Criativo Health Care Investments II, SA, Idealmed III, Health Services, SA, Imacentro - Imaging Clinic Médica do Centro, SA and Idealmed Ponte Galante, SA), which

operates the Idealmed UHC - Coimbra Hospital Unit and four outpatient clinics in the center of Coimbra, Figueira da Foz, Pombal and Cantanhede. The completion of the operation is still ongoing so only after the end of the operation will it be possible to know the investment value.

34. Subsequent events

The Certified Accountant

Sónia Amoedo Matos

The Board of Directors

Jorge Manuel Batista Magalhães Correia

Isabel Maria Pereira Aníbal Vaz

Chen Qiyu

José Manuel Alvarez Quintero

Rogério Miguel Antunes Campos Henriques

Tucson Dunn II

Ivo Joaquim Antão

João Paulo da Cunha Leite de Abreu Novais

Tomás Leitão Branquinho da Fonseca

34.1. Exit of the stock exchange

34.2. Aquisition of IDEALMED Group

106

ANNUAL REPORT 2017

Sociedade Anónima - Capital Social 1.335.000 euros - Inscrição n.º 178 na Ordem dos Revisores Oficiais de Contas - Inscrição N.º 20161480 na Comissão do Mercado de Valores MobiliáriosContribuinte N.º 505 988 283 - C. R. Comercial de Lisboa sob o mesmo númeroA member firm of Ernst & Young Global Limited

Ernst & YoungAudit & Associados - SROC, S.A.Avenida da República, 90-6º1600-206 LisboaPortugal

Tel: +351 217 912 000Fax: +351 217 957 586www.ey.com

(Translation from the original Portuguese language. In case of doubt , the Portuguese version prevails.)

St at ut ory and Audit or ’s Report

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

OpinionWe have audited the accompanying consolidated f inancial statements of Luz Saúde, S.A. (the Group), whichcomprise the Consolidated Statement of Financial Position as at December 31, 2017 (which show a total of659,218,392 euros and a total equity of 235,377,500 euros, including a consolidated net prof it for the yearattributable to the equity holders of the parent of 17,013,998 euros), and the Consolidated Statement ofComprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement ofCash Flows for the year then ended, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies.

In our opinion, the accompanying consolidated f inancial statements present fairly, in all material respects, theconsolidated financial position of Luz Saúde, S.A. as at December 31, 2017, and of its consolidated f inancialperformance and its consolidated cash f lows for the year then ended in accordance with the InternationalFinancial Report ing Standards as endorsed by the European Union.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs) and with other standardsand technical directives of the Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas” ). Ourresponsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of theConsolidated Financial Statements” section below. We are independent of the entit ies that comprise the Group inaccordance with the law and we have fulfilled other ethical requirements in accordance with the Institute ofStatutory Auditors´ code of ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Key audit mat t ersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit ofthe consolidated f inancial statements of the current period. These matters were addressed in the context of ouraudit of the consolidated f inancial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters.

We describe below the key audit matters of the current period.

1. Recognit ion and measurement of revenue and compliance wit h cont ract ual and regulat oryrequirement s of public healt h services

Descript ion of t he most signif icant assessedrisks of material misstatement Summary of our response to the most significant assessed risks

of material misstatement

Sales and services rendered and Otheroperational revenues of the group areessentially related to two business segments:

► Public health services, that represent 20%of total revenue; and

Our approach to the risks of material misstatement included: i) aglobal response with an impact on the way the audit has beenperformed; and ii) a specific response which t ranslated into acombined approach of assessment of controls and substantiveprocedures, namely we:

107


2/6

Luz Saúde, S.AStatutory and Auditor’s Report

December 31, 2017

Descript ion of t he most signif icant assessedrisks of material misstatement Summary of our response to the most significant assessed risks

of material misstatement

► Private health services, that represent79% of total revenue.

The Group manages the services rendered byLoures Hospital. The activity and therevenues of the Hospital are determined inaccordance with the applicable clausesincluded in the Public-Private managementagreement signed with the Regional HealthAdministrat ions, as disclosed in notes 3.6,and 33.2.7 of the Notes to the ConsolidatedFinancial Statements. The materiality, varietyand complexity of the health servicesrendered, associated with the judgmentinherent to the interpretation of the referredagreements represents a significant auditrisk. The fact that the processes related toprior years are not yet closed, as mentionedin note 3.6 of the Notes to the ConsolidatedFinancial Statements, indicates signif icantuncertainty about the acceptance of revenuesrecognized in prior years and in the currentyear, as detailed in note 16.2 of the Notes tothe Consolidated Financial Statements.

Consequently, the recoverability of thebalances related to the accrued income in thescope of the Loures Hospital managementagreement, in the amount of 21 million euros,depends on the success of the ongoingnegotiat ions with the Regional HealthAdministrat ions for each of the indicatedyears.

The recognit ion and measurement of publichealth revenues involve, as per the above,significant judgment from management asdisclosed in note 3.6 of the Notes to theConsolidated Financial Statements,part icularly, in what concerns thedetermination of eligible production and itsmeasurement.

► Assessed the effectiveness of the internal control environmentand executed test of controls and tests related with the i)eligibility of the production, and ii) computation the productionbased on the assumptions defined in the managementagreements;

► Executed analytical review procedures for all sales and servicesrendered subaccounts, including the analysis of the signif icantvariances compared to prior year, compared with expectat ionsand with the agreed / budgeted production with the use of dataanalysis tools (analyt ics);

► Executed tests of detail to validate contractual compliance andeligibility of services rendered related to unbilled production andaccrued revenues, including the recalculat ion of current yearrevenues in accordance with the incurred production, consideringthe rules of the different classes, compared with the contractedproduction;

► Analyzed the correspondence / communications between LouresHospital and the Regional Health Administrat ion related with thematters that are still under validation for the years that remainunder discussion;

► Analyzed of the quarterly reports related to the Monitoring andAssessment of Care Assistance Results, which include therecalculat ion of the performance factor results and the serviceperformance parameters. Recalculated the penalties related tothose parameters;

► Analyzed retrospectively previous years’ sett lement agreements,confirming the consistency of the treatment agreed betweenLoures Hospital and the Regional Health Administrat ions for thoseinstances of production not eligible and we analyzed its coherencein the process of determining the revenue for the years that arestill under discussion.

Our approach also encompassed the analysis of the disclosuresincluded in notes 3.6, 4, 5, 16.2, 21, 31.1.1 and 33.2.7 of the Notesto the Consolidated Financial Statements to ensure that those notesare in accordance with the applicable accounting standards.

2. Recognit ion and measurement of revenues from privat e healt h services

Descript ion of t he most signif icant assessedrisks of material misstatement Summary of our response to the most significant assessed

risks of material misstatement

As mentioned in the previous Key AuditMatter, consolidated revenues related to theprivate health care services comprise a

Our approach to the risk of material misstatement includes: i) a globalresponse with impact on the way the audit has been performed; and ii)

108

ANNUAL REPORT 2017

3/6


December 31, 2017

significant volume of t ransactions, fromvarious health units which render a variety ofcomplex services. The specificity andcomplexity of some of those servicesrendered and the mult iplicity of existingagreements with health insurance companiesand health subsystems organizations increasesignificantly the risk of services rendered notbeing recognized or incorrectly measured.

a specific response which translated in a combined approach ofassessment of controls and substantive procedures, namely we:

► Assessed the effectiveness of internal control environment andexecuted of tests of controls related to revenue recognition;

► Assessed the reconciliat ion between the operational invoicingsystem and the revenue recognized in the general ledger;

► Executed analytical review procedures for all sales and servicesrendered subaccounts, including the analysis of the signif icantvariances compared to prior year, compared with expectat ionsand with the agreed / budgeted production with the use of dataanalysis tools (analyt ics);

► Tested the amounts booked as accrued invoices as at December31, 2017, through the substantive analysis of the processes thatoriginated the deferral of invoicing, as well as through thesubsequent clearance, after the financial year end; and

► Executed data analysis procedures (analytics) to validate thecorrelation of the t ransactions booked i) between the sales andservices rendered accounts and the clients’ accounts and ii)between the clients’ accounts and cash & banks, during the periodfrom January 1, 2017 to December 31, 2017.

Our approach also encompassed the analysis of the disclosuresincluded in notes 3.9, 4, 5, 16, 31.1.1 and 33.2.7 of the Notes to theConsolidated Financial Statements to validate that the disclosures arein accordance with the applicable accounting standards.

109


4/6


December 31, 2017

3. Goodwill impairment

Descript ion of t he most signif icant assessedrisks of material misstatement Summary of our response to the most significant assessed

risks of material misstatement

The amount of Goodwill as at December 31,2017 amounts to 122 million euros and isrelated to the business combinationsdisclosed in note 14 of the Notes to theConsolidated Financial Statements.

An impairment test should be performed inrespect of this asset on an annual basis, whichinvolves a high level of subjectivity inherent(i) to the assumptions taken by managementin forecasting the business plans of each cashgenerating unit, as well as (ii) to theremaining assumptions included in thecalculation of the value in use, determined inaccordance with the discounted cash flowsmethodology, namely the discount rates andforecast performance, including perpetualgrowth, as disclosed in note 14 of the Notesto the Consolidated Financial Statements.

Consequently, the potential impairment ofgoodwill has been considered a relevantmatter because the amount booked for thisasset is material and the impairmentassessment process is complex.

Our procedures included:

► We tested the assumptions used in the valuation models preparedby management, namely the cash flow projections, the discountrate, the inflation rate, the perpetual growth rate and thesensitivity analysis, supported by internal specialists in businessvaluations.

► We tested the consistency of the assumptions used in thebusiness plans with prior years, with historical data and withexternal data.

► We tested the arithmetical calculation of the model used.

► We reviewed the sensit ivity analysis of the impairment testsperformed on the cash generating units.

► We reviewed the requirements of the applicable disclosures (IAS36) in accordance with notes 3.5, 14, 30, and 33.1.4 of the Notesto the Consolidated Financial Statements.

Responsibilit ies of management and supervisory board for t he consolidated f inancialst at ement sManagement is responsible for:

► the preparation and fair presentation of the consolidated f inancial statements in accordance with theInternational Financial Reporting Standards as endorsed by the European Union;

► the preparation of the Management Report, including the Corporate Governance Report in accordance withthe laws and regulations;

► such internal control as management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error;

► adoption of appropriate accounting policies and principles for the circumstances;

► assessment of the Group’s ability to cont inue as a going concern, disclosing, as applicable, matters related togoing concern.

The supervisory board is responsible for overseeing the Group’s f inancial reporting process.

Audit or ’s responsibilit ies for t he audit of t he consolidat ed f inancial st at ement sOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includesour opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if , individually or in the aggregate, they could reasonably be expectedto influence the economic decisions of users taken on the basis of these consolidated f inancial statements.

110

ANNUAL REPORT 2017

5/6


December 31, 2017

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professionalscepticism throughout the audit. We also:

► identify and assess the risks of material misstatement of the consolidated financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is suff icient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement result ing from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentat ions, or the override of internal control;

► obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup’s internal control;

► evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management;

► conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or condit ions thatmay cast signif icant doubt on the Group’s ability to cont inue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditor’s report to the relateddisclosures in the consolidated f inancial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or condit ions may cause the Group to cease to continue as a going concern;

► evaluate the overall presentation, structure and content of the consolidated f inancial statements, includingthe disclosures, and whether the consolidated f inancial statements represent the underlying transactions andevents in a manner that achieves fair presentat ion;

► obtain suff icient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated f inancial statements. We are responsiblefor the direction, supervision and performance of the group audit. We remain solely responsible for our auditopinion;

► communicate with those charged with governance regarding, among other matters, the planned scope andt iming of the audit and significant audit findings, including any significant deficiencies in internal control thatwe identify during our audit;

► from the matters communicated with those charged with governance, including the supervisory board, wedetermine those matters that were of most signif icance in the audit of the consolidated f inancial statementsof the current period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter; and

► provide the supervisory board with a statement that we have complied with relevant ethical requirementsregarding independence, and to communicate with them all relationships and other matters that mayreasonably be thought to bear on our independence, and where applicable, related safeguards.

Our responsibility includes the verif icat ion of the consistency of the consolidated Management Report with theconsolidated financial statements, and the verificat ions under numbers 4 and 5 of art icle 451º of the CommercialCompanies Code, as well as the verif icat ion that the non-financial information was presented.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

About t he Management ReportPursuant to article 451º, nº 3, al. e) of the Commercial Companies Code, it is our opinion that the consolidatedManagement Report was prepared in accordance with laws and regulat ions in force, the information containedtherein is in agreement with the audited consolidated f inancial statements and, taking into consideration ourassessment and understanding of the Group, we have not identif ied any material misstatement.

111


6/6


December 31, 2017

About t he non-financial st at ement provided for in t he art icle 66-B of t he CommercialCompanies Code

Pursuant of art icle 451º, nº 6, of the Commercial Companies Code, we hereby inform that the Entity included inits Annual Report the non-financial information, set forth in art icle 66-B of the Commercial Companies Code.

About t he Corporat e Governance ReportPursuant to article 451º, nº 4, of the Commercial Companies Code, it is our opinion that the CorporateGovernance Report (Information of the shareholders structure, organization and Corporate governance) includesthe items required of the Group in accordance with art icle 245º-A of Securities Market Code, and no materialmisstatements were identified in the information contained therein, complying with the provisions of paragraphc), d), f), h), i) and m) of the referred art icle.

About addit ional it ems set out in art icle 10º of Regulat ion (EU) nº 537/ 2014Pursuant to article 10º of Regulat ion (EU) nº 537/2014 of the European Parliament and of the Council, of 16April 2014, and in addition to the key audit matters mentioned above, we report the following:

► We were appointed as auditors of Luz Saúde, S.A. for the f irst time in the shareholders' general meeting heldon October 1, 2013 for the period between 2012 and 2015, with effects from 2013. We were reappointedfor a second mandate in the shareholders' general meeting held on January 20, 2014 for the period between2014 and 2017.

► The Management has confirmed that they are not aware of any fraud or suspicion of fraud with a materialimpact in f inancial statements. In planning and executing our audit in accordance with ISA we maintained ourprofessional scepticism and we designed audit procedures to address the possibility of a materialmisstatement in f inancial statements due to fraud. As a result of our work, we have not identif ied anymaterial misstatement in the financial statements due to fraud.

► We confirm that our audit opinion is consistent with the addit ional report that was prepared by us and issuedto the supervisory board.

► We declare that we have not provided any prohibited services pursuant to art icle 77º nº 8 of the Statute ofthe Institute of Statutory Auditors and we remained independent of the audited Entity in conducting theaudit.

Lisbon, April 27, 2018

Ernst & Young Audit & Associados – SROC, S.A.Sociedade de Revisores Oficiais de ContasRepresented by:

(Signed)

Rui Abel Serra Mart ins - ROC nº 1119Registered with the Portuguese Securities Market Commission under license nr.º 20160731

112

ANNUAL REPORT 2017

113


04CORPORATE GOVERNANCE REPORT

116

ANNUAL REPORT 2017

LUZ SAÚDE, S.A. (formerly ESPÍRITO SANTO SAÚDE – SGPS, S.A.)Public company

Registered Office: Rua Carlos Alberto da Mota Pinto, 17, 9th floor, 1070-313 LisbonRegistered at the Commercial Registry Office of Lisbon under the sole registration and taxpayer number:

504 885 367Fully subscribed and paid-up share capital: €95,542,254

DEFINITIONS

“Shares” means the registered nominative shares, with a nominal value of €1 each, representing the whole of the share capital of Luz Saúde, at all times;

“Directors” means the members of the Company’s Board of Directors;

“Change in Shareholder” means the change in shareholder that took place in 2014 and that resulted from the competing general takeover offer for the acquisition of the shares representing Luz Saúde’s share capital and launched by Fidelidade – Companhia de Seguros, S.A.

“PSCom” means the Portuguese Securities Commission;

“PSC” means the Portuguese Securities Code, approved by Decree-Law 486/99 of 13 November, as amended;

“Board of Directors” means the Company’s management body;

“PCC” means the Portuguese Companies Code, approved by Decree-Law 262/86 of 2 September, as amended;

“Payers” means private healthcare insurance companies (including EAPS - external administrative companies used by insurance companies to manage healthcare provision networks and to control costs by centralising back office services, request processing and commission, price and payment plan negotiation with healthcare units), public or private healthcare sub-systems and the Portuguese Ministry of Health;

“Fidelidade” means the company “Fidelidade – Companhia de Seguros, S.A.”

“Fosun” means “Fosun International Limited”, a listed company, incorporated in Hong Kong;

“Luz Saúde” or “Company” means the company “Luz Saúde, S.A.”, previously named “Espírito Santo Saúde – SGPS, S.A.”;

“Bylaws” means the Company’s updated bylaws, at all times;

“Euronext” means “Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A.”;

“Euronext Lisbon” means the Euronext Lisbon regulated market managed by Euronext;

“Group” means the Company and companies in a controlling or group relationship with the Company, pursuant to article 21 of the PSC;

04Corporate Governance Report (free translation from the original version in portuguese)

117

04 CORPORATE GOVERNANCE REPORT

04.1 mandatory information on the company’s shareholder structure, organisation and corporate governance

I. CAPITAL STRUCTURE

1 Capital structure (share capital, number of shares, distribution of capital among shareholders, etc.), including shares not admitted to trading, different ca-tegories of shares, their inherent rights and obligations and percentage of share capital that each category represents (art. 245.º-A, n.º1, al. a)).

On 31 December 2017, Luz Saúde’s share capital, in the amount of €95,542,254.00, was fully subscribed and paid up. It is represented by 95,542,254.00 registered nominative shares that are not convertible into bearer shares and have a nominal value of €1 each. The Sha-res were admitted to trading on the regulated market (Euronext Lisbon managed by Euronext) and there are no different categories of shares.

The Company’s shareholder structure as at 31 December 2017 can be briefly represented as follows:

2 Restrictions on share transferability, such as disposal consent clauses or limitations to share ownership (art. 245.º-A, n.º 1, al. b)).

There are currently no restrictions on the transferability of Shares, which are therefore freely transferable.

04.1.1 Shareholder structure

There are as of yet no Bylaw provisions that postpone, defer or prevent a change in control of the Company. The Bylaws do not include, for instance, any limitations on voting rights granted by Shares, although they provide that each 100 Shares are entitled to one vote.

Given that the share capital includes the whole of the Shares, all of which confer the same political and eco-nomic rights, there are no shares with special rights or other privileges or that enable multiple voting.

3 Number of own shares, corresponding percentage of share capital and percentage of voting rights that would correspond to own shares (art. 245-A(1)(a)).

On 31 December 2017, the Company held no own shares.

4 Significant agreements to which the company is a party and that come into effect, are amended or terminated in the event of a change of control in the company following a takeover bid and its respective effects, unless, given their nature, the disclosure the-reof would be seriously prejudicial to the company, unless the company is specifically obliged to disclose that information by force of other legal provisions (Art. 245-A(1)(j)).

Certain financing agreements entered into by the Com-pany and some of its subsidiaries contain change of control provisions that may be enforced if there is a change of direct or indirect control in the Company (and which include, albeit tacitly, changes of control arising from takeover bids).

Fidelidade - Companhia de Seguros, S.A.

Free float

1,22%

98,78%

118

ANNUAL REPORT 2017

For additional information on the referenced agreements, please see C.III.53 in this Report, concerning legal risks.

The Company is not aware of the existence of any defensive measures that would lead to an automatic erosion of its assets in the event of a change of control or a change in the composition of the Board of Directors or that are deemed able to hinder the free transferability of shares and free assessment by shareholders of the performance of members of the Board of Directors.

5 Rules on the renewal or repeal of defensive measures, particularly those limiting the number of votes that may be held or exercised by a single shareholder in-dividually or together with others.

There are no Bylaw limitations on the exercise of voting rights.

6 Shareholder agreements of which the company is aware that may lead to restrictions on the transfer of securities or voting rights (art. 245 -A(1)(g).

The Company is not aware of the existence of sha-reholder agreements regarding itself that may lead to restrictions on the transfer of securities or the exercise of voting rights.

II. SHARE AND BOND HOLDINGS

7 Persons and legal entities that directly or indirectly own qualified holdings (art. 245-A(1)(c) and (d) and art. 16), with a break down of the percentage of share capital and attributable votes and the source and causes of such attribution.

In light of disclosures to the Company, pursuant to article 447 of the PCC, article 16 of the PSC and article 14 of PSCom Regulation 5/2008, as at 31 December 2017, the existing qualified shareholding is as identified in the chart found in A.I.1 above.

8 Number of shares and bonds owned by members of the management and supervisory bodies [Note: the information shall be provided in a way that complies with art. 447(5) of the PCC].

Senior Officer Date Transaction ISIN Code Volume Price (Euros) Location

Isabel Maria Pereira Aníbal Vaz 10.01.2017 Purchase PTEPT0AM0005 50,000 N.A.* Off-market*João Paulo da Cunha Leite de Abreu Novais 05.01.2017 Purchase PTEPT0AM0005 40,000 N.A.* Off-market*Tomás Leitão Branquinho da Fonseca 05.01.2017 Purchase PTEPT0AM0005 40,000 N.A.* Off-market*Ivo Joaquim Antão 05.01.2017 Purchase PTEPT0AM0005 40,000 N.A.* Off-market*

* Shares allocated free of charge within a Company share-based variable remuneration model, approved in a General Shareholders Meeting.

119


9 Special powers of the management body, namely con-cerning share capital increase resolutions (art. 245-A(1)(i), the date on which such powers were granted, the expiration thereof, the maximum quantitative limit of the share capital increase, the amount already issued under the powers granted and the way in which such powers are exercised.

Under article 6 of the Bylaws, the Board of Directors is authorised, following a favourable opinion from the Audit Board, to increase the Company’s share capital by way of one or more new cash contributions up to the limit of €115 million. This authorisation is valid until January 2019.

10 Significant commercial relationships between qualified shareholders and the Company

As at 31 December 2017, Fidelidade held 98.7881% of the Company.

On that date, Fidelidade, in turn, was 84.986% held by Longrun Portugal, SGPS, S.A., which was in turn 100% held by Millenium Gain Limited, based in Hong Kong. The latter was 100% held by Fosun Financial Holdings Limited (Hong Kong), which was 100% held by Fosun International Limited, a company listed on the Hong Kong Stock Exchange (00656.HK). The latter was 71.768% held by Fosun Holdings Limited, which was in turn held by Fosun International Holdings, Ltd., whose ultimate beneficial owner was Mr. Guo Guangchang, with a 64.45% shareholding.

We therefore refer to Note 29 of the consolidated fi-nancial statements for the financial year ended on 31 December 2017, where we present the balances, as at 31 December 2017 and 2016, with the companies that are a part of the Group referenced in the preceding paragraph.

Please note that the indicated transactions are a normal part of the Company’s business and are entered into at arm’s length.

120

ANNUAL REPORT 2017

b) Exercising voting rights

12 Any restrictions on voting rights, such as requiring a certain number or percentage of shares to be able to vote, time frames for the exercise of voting rights or systems for equity rights (art. 245-A(1)(f)).

As regards representation and pursuant to the current wording of the Company’s Bylaws, each 100 shares are entitled to one voting right. The General Shareholders Meeting is comprised of all shareholders with voting rights. Given that the ownership of 100 shares cur-rently corresponds to an approximate shareholding of 0.0001% in the Company’s share capital, the Bylaws do not require too high a number of shares to vote. Voting by correspondence is allowed.

As regards convening notices, an extraordinary General Shareholders Meeting shall be convened whenever the law so requires or when the Board of Directors, Audit Board or shareholders owning Shares that represent at least 2% of the Company’s share capital, deem conve-nient. Pursuant to article 12(2) of the Bylaws, whenever a General Shareholders Meeting is convened as per a shareholder request, such meeting shall not take place if the requesting shareholders are not present.

In order to participate, intervene and vote at a General Shareholders Meeting, a shareholder must have registered

in his individual registered securities account an amount of Shares that entitle him/her to at least one vote as at 0:00 hours (midnight) (GMT) of the fifth business day prior to the date of the General Shareholders Meeting (“Registration Date”). As mentioned above, article 13 of the Bylaws provides that every 100 Shares are entitled to one vote at the General Shareholders Meeting. Sharehol-ders that do not own the minimum number of Shares necessary to vote may come together in order to attain the necessary number of Shares. These Shareholder groups shall elect one member amongst themselves to represent them at the General Shareholders Meeting.

The Bylaws do not provide for systems for equity rights and there are no mechanisms designed to create a mis-match between rights to receive dividends or subscribe new securities and the voting right of each share.

13 Maximum percentage of voting rights that can be exercised by a single shareholder or by shareholders related to them in any of the ways set out in art. 20 (1).

The Company’s Bylaws did not contain provisions es-tablishing a maximum percentage of voting rights that can be exercised by a single shareholder or by sharehol-ders related to them in any of the ways set out in art. 20(1), nor do any such agreements exist, as far as the Company is aware.

I. GENERAL SHAREHOLDERS MEETING

a) Composition of the board of the general sha-reholders meeting throughout the reference year

11 Identification and position held by the members of the board of the general shareholders meeting and respective mandate (beginning and end).

04.1.2 Governing bodies and commissions

Name Position Date of 1st Term of appointment mandate

Luís Miguel Nogueira Freire Cortes Martins Chairman of the Board of the General Meeting 20-01-2014 2014-2017

Francisco Manuel Balixa Tapum Leal Barona Vice-Chairman of the Board of the General Meeting 20-01-2014 2014-2017

Ana Vanessa Guedes Teixeira Secretary of the Board of the General Meeting 20-01-2014 2014-2017

121


14 Shareholder resolutions for which the bylaws require a qualified majority, in addition to those provided by law, and indication of those majorities.

The Bylaws do not provide for a deliberative quorum higher than that prescribed by law (PCC).

Nonetheless, the Company’s Bylaws provide that, in a first call, the General Shareholders Meeting cannot convene unless shareholders representing at least fifty per cent of the share capital are present or represented, regardless of the items on the agenda. On second call, the General Shareholders Meeting may pass resolutions whatever the number of shareholders present or repre-sented and the share capital they represent.

This provision is justified by the Company’s share capital structure, in which more than 98% of the capital (and respective voting rights) were held by a single sharehol-der in 2017 (Fidelidade).

II. MANAGEMENT AND SUPERVISION (Board of Directors, Executive Board of Directors and General and Supervisory Board)

a) Composition throughout the reference year

15 Adopted governance model.

The Company adopted a Latin-inspired corporate gover-nance model (article 9 of the Bylaws). Notwithstanding and given the provisions of article 278(1)(a), 278(2), 278(3) and 413(2)(a) of the PCC, the Company main-tained the Board of Directors as the sole management body. Supervision of the Company is entrusted both to the Audit Board and to an Audit Firm. In this model, the company’s supervisory body (the audit board) is organisationally autonomous from the management body (board of directors).

Within the Company’s Board of Directors, there is an Executive Committee to which the day-to-day mana-gement of the Company has been delegated, as better described in B.II.18 and B.II.21 below. The Company thereby has some similarities to the Anglo-Saxon go-vernance model.

In the following numbers of the present section II, the adopted governance model is presented in greater detail.

16 Bylaw provisions on procedural and material pre-requisites for the appointment and replacement of members of the Board of Directors, the Executive Board of Directors and the General and Supervisory Board, as applicable (art. 245-A(1)(h)).

The Board of Directors is made up of a minimum of five and a maximum of nineteen directors, elected for 4-year periods. They may be re-elected one or more times, unless otherwise provided by law (articles 10 and 16 of the Bylaws). The General Shareholders Meeting will appoint a Chairman of the Board of Directors from among the elected members thereof. It can also appoint one or more Directors as vice-chairpersons. The Board of Directors may substitute the Chairman thereof at any time, subject to the applicable legal provisions.

The General Shareholders Meeting that elects the Direc-tors will determine the number of effective members thereof for the respective mandate. If nothing is expressly stated, the number of Directors elected by the General Shareholders Meeting is considered to be the effective number for that mandate.

Minority shareholders that voted against the winning proposal for the election of Directors are entitled to appoint one Director pursuant to article 392(6)(7) of the PCC, so long as those shareholders represent at least 10% of the share capital.

If there are no special Bylaw provisions concerning the replacement of members of the Board of Directors, the rules provided for in the PCC shall apply, including those regarding the replacement of absent directors by co-option.

The Bylaws further provide that any director who is absent from more than half the meetings held during a given financial year for a reason unacceptable to the management body shall be deemed definitively absent.

17 Composition of the Board of Directors, Executive Board of Directors and General and Supervisory Board,

122

ANNUAL REPORT 2017

as applicable, the minimum and maximum number of members and duration of the mandate, both as provided for in the bylaws, in addition to the number of effective members, the date of first appointment and the term of the mandate for each member.

During 2017, the Company’s Board of Directors was made up of the following members:

Name Position Date of 1st appointment Date of election Term of

mandate Observations

Board of Directors:

Jorge Manuel Batista Magalhães Correia Director (Chairman) 09.02.2015 09.02.2015 2017

Chen Qiyu Director (Vice-Chairman) 25.05.2017 25.05.2017 2017

Isabel Maria Pereira Aníbal Vaz Director (Vice-Chairman) 06.07.2000 20.01.2014 2017

José Manuel Alvarez Quintero Director (Member) 09.02.2015 09.02.2015 2017

Lingjiang Xu Director (Member) 09.02.2015 09.02.2015 2017Tendered

resignation on 22.02.2017

Wei Song Director (Member) 01.12.2015

01.12.2015 (elected to the BoD by co-option,

ratified by the GSM on 20.01.2016 for the mandate underway)

2017Tendered

resignation on 06.12.2016

Ivo Joaquim Antão Director (Member) 16.03.2005 20.01.2014 2017

João Paulo da Cunha Leite de Abreu Novais Director (Member) 16.03.2005 20.01.2014 2017

Tomás Leitão Branquinho da Fonseca Director (Member) 16.03.2005 20.01.2014 2017

Rogério Miguel Antunes Campos Henriques Director (Member) 30.07.2015

30.07.2015 (elected to the BoD by co-option, ratified by the GSM on

20.01.2016)

2017

Tucson Dunn IIDirector

(Member)01.02.2017

01.02.2017 (elected to the BoD by

co-option, ratified by the GSM on

25.05.2017)

2017

123


Article 16(1) of the Bylaws provides that the Board of Directors shall be made up of a minimum of five and maximum of nineteen Directors. It is currently made up of 9 members. Pursuant to article 10 of the Bylaws, each of the Directors shall be elected by the General Shareholders Meeting for an initial 4-year mandate and may be re-elected one or more times, unless otherwise provided by law. The Directors need not be elected on the same date and their respective mandates may thereby be interspersed instead of concurrent.

In 2015, the composition of the Board of Directors was adapted to the Company’s new situation arising from the Change in Shareholder that took place in 2014 and that resulted in Fidelidade coming to hold 98.23% of the Company’s share capital by the end of that year.

Therefore, in the Company’s Extraordinary General Sha-reholders Meeting held on 9 February 2015 sought to simplify the Company’s governance structure following the Change in Shareholder that took place. The com-position of the Board of Directors was adapted to the Company’s new situation, as prescribed furthermore by the PSCom 2013 Corporate Governance Code that stipulates in section II.1.7. that “among the non-executive directors, there should be an adequate proportion of independent members, in light of the adopted gover-nance model, the company’s size and its shareholder structure and respective free float”. Currently, the Board of Directors has no independent members.

19 Professional qualifications and other relevant back-ground of each member of the Board of Directors, General and Supervisory Board and Executive Board of Directors, as applicable.

18 Executive and non-executive members of the Board of Directors and, for non-executive members, those that may be considered independent, or, if applica-ble, the independent members of the General and Supervisory Board.

During 2017, the Executive Committee was made up of the following members:

Professional qualifications and other relevant back-ground of each member of the Board of Directors is presented below:

(a) Jorge Magalhães Correia

Jorge Magalhães Correia is Company Chairman as of 9 February 2015.

He is chairman of the board of directors and chief exe-cutive officer of the insurance company Fidelidade – Companhia de Seguros, S.A., chairman of the board of directors of Fidelidade - Property Europe, S.A. and Fidelidade - Property International, S.A. and member of the board of directors of REN.

His participation in professional associations entails holding the offices of Vice-Chairman of the Portuguese Association of Insurance Companies (Associação Por-tuguesa de Seguradoras) and being a member of The Geneve Association.

He has an undergraduate degree in law from the Law School of Universidade de Lisboa and began his ca-reer as a teacher in that law school. He was head of

Name Position Date of election for the mandate underway Term of mandate

Executive Committee:

Isabel Maria Pereira Aníbal Vaz Chief Executive Officer 23.01.2014 2017

Ivo Joaquim Antão Director (Member) 23.01.2014 2017

João Paulo da Cunha Leite de Abreu Novais Director (Member) 23.01.2014 2017

Tomás Leitão Branquinho da Fonseca Director (Member) 23.01.2014 2017

124

ANNUAL REPORT 2017

(c) Isabel Maria Pereira Aníbal Vaz

Isabel Maria Pereira Aníbal Vaz is a member of the Com-pany’s Board of Directors and Chief Executive Officer since it was founded in 2000. She was cumulatively appointed as Chairwoman of the Company’s Board of Directors in 2012. She has served as a director or chairwoman in several of the Group’s companies, including Hospital da Luz, S.A., Hospital da Arrábida - Gaia, S.A., and SGHL – Sociedade Gestora do Hospital de Loures, S.A..

She has an undergraduate degree in chemical engineering from the Instituto Superior Técnico and an MBA from the Universidade Nova de Lisboa.

She was a researcher at Instituto de Biologia Experi-mental e Tecnológica (1990 to 1991) and worked as a manufacturing project engineer for the Atral Cipan pharmaceutical group in 1992. From 1992 to 1999, she was a senior consultant for McKinsey & Company.

Currently, she is also a council member of Nova School of Business and Economics of Universidade Nova de Lisboa and member of that institution’s International Advisory Board of The Lisbon MBA.

(d) José Manuel Alvarez Quintero

José Manuel Alvarez Quintero is a Company director as of 9 February 2015.

He is vice-chairman of the board of directors and exe-cutive director of the insurance company Fidelidade – Companhia de Seguros, S.A., member of the board of directors and chief executive officer of Fidelidade As-sistência - Companhia de Seguros, S.A and chairman of the board of directors of Fidelidade Angola - Companhia de Seguros, S.A. (Angola).

He is also chairman of the board of directors of CETRA - Centro Técnico de Reparação Automóvel S.A., EAPS - Empresa de Análise, Prevenção e Segurança, S. A., GEP - Gestão de Peritagens, S.A., CARES – Assistência e Reparações, S.A. and FID LatAm, SGPS,S.A.

His participation in professional associations entails hol-ding the office of chairman of the Technical Committee

the General-Inspection of Finance, of the Portuguese Securities Commission and a Lawyer. He carried out various corporate roles in the finance and insurance sector, having been appointed a director of the insuran-ce companies Mundial-Confiança, Fidelidade Mundial, Império Bonança and Via Directa. In the hospital sector, he was a director of USP Hospitales (Barcelona) and director and later chairman of HPP - Hospitais Privados de Portugal SGPS.

(b) Chen Qiyu

Chairman of the Board of Directors of the Fosun Pharma Group and Co-President of the Fosun Group.

He is an Executive Director and Chairman of the Board of Directors of Shanghai Fosun Pharmaceutical (Group) Co., Ltd., executive director and co-president of the Fosun Group. He is also a non-executive director e Vice-Chairman of the Board of Directors of Sinopharm Group Co., Ltd. and director of Zhejiang D.A. Diagnostic Company Limited.

He began his carrier at Fosun Pharma in 1994 in the Research and Development Department of Shanghai RAAS Blood Product Co. Ltd. After joining the Fosun Group, Mr. Chen carried out duties as a manager in the Group’s Industry Development Department, as Vice General Manager, Chief Financial Officer, Secretary to the Board, Executive Vice President and President of Fosun Pharma.

He is Chairman of the Board of Directors of the China Medical Pharmaceutical Material Association, Chairman of the Board of Directors of the Shanghai BioPharmaceu-tics Industry Association, Vice-Chairman of the China Pharmaceutical Industry Research and Development Association, Vice-Chairman of the China Medicinal Biotechnology Association, Vice-Chairman of the Chi-nese Non-government Medical Institutions Association, Delegate of the Chinese People’s Political Consultative Conference Shanghai Committee.

He earned his Bachelor degree in genetic engineering in 1993 from Fudan University and an Executive Master’s in Business Administration in 2005 from the China Europe International Business School.

125


(f) João Paulo da Cunha Leite de Abreu Novais

João Paulo da Cunha Leite de Abreu Novais has been the Company’s Chief Financial Officer since 2000 and was first appointed to the Company’s Board of Direc-tors in 2005. He has served as a director in several of the Group’s companies, including Hospital da Luz, S.A., Hospital da Arrábida - Gaia, S.A., and SGHL – Sociedade Gestora do Hospital de Loures, S.A..

He is also a member of the Board of Directors of Ge-nomed – Diagnósticos de Medicina Molecular, S.A. and has carried out management duties in the Portuguese Association of Private Hospitals (Associação Portuguesa de Hospitalização Privada) since 2004.

He has an undergraduate degree in business manage-ment from Universidade Católica Portuguesa.

He was an analyst at Sociedade Independente Financeira de Corretagem, S.A., (1989 to 1990) and at BFE Dealer – Sociedade Financeira de Corretagem, S.A. (1991 to 1993). He was a portfolio manager at BFE – Gestão de Património, S.A. (1993 to 1997) and a manager at BPI – Serviços Financeiros, S.A. (1997 to 1999) and worked in the corporate finance department of Banco Português de Investimento, S.A. (1999 to 2000). He was also a manager with Esumédica – Prestação de Cuidados Médicos, S.A. (2000).

(g) Tomás Leitão Branquinho da Fonseca

Tomás Leitão Branquinho da Fonseca has been the Company’s Chief Operations Officer since 2000 and was elected to the Company’s Board of Directors for the first time in 2005. He has served as a director in several of the Group’s companies, including Hospital da Luz, S.A., Hospital da Arrábida - Gaia, S.A., and SGHL – Sociedade Gestora do Hospital de Loures, S.A..

He has an undergraduate degree in management from Universidade Católica Portuguesa and an MBA in financial and business studies from the Andersen School of the University of California, Los Angeles.

He was assistant director at Banco Finantia, S.A. (1991 to 1995). He also worked in business development at

for Accidents of the Portuguese Association of Insurance Companies (Associação Portuguesa de Seguradoras).

He has a degree in Economics from Universidade de Santiago de Compostela. He carried out his professional activities always in the insurance sector, having been a director at Médis, Auto-Gere, Império Bonança, Seguro Directo and Multicare, among others. He was also the President of the International Motor Claims Handing Group of Eurapco from 2002 to 2005.

In Spain, he carried out roles of leadership in major companies in the insurance sector, such as Catalana Occidente and Vitalicio Seguros. He further participated in founding new companies such as Império-España and Seguros Universal Asistencia.

(e) Ivo Joaquim Antão

Ivo Joaquim Antão has been the Company’s Chief In-formation and Technology Officer since 2000 and was first appointed to the Company’s Board of Directors in 2005. He has served as a director in several of the Group’s companies, including Hospital da Luz, S.A., Hospital da Arrábida - Gaia, S.A., and SGHL – Sociedade Gestora do Hospital de Loures, S.A..

He holds an undergraduate degree in chemical enginee-ring from the Instituto Superior Técnico and attended lectures of the power engineering and computers mas-ter’s programme at Instituto Superior Técnico. He has an MBA with a specialisation in information management from Universidade Católica Portuguesa.

He was also an IT consultant for Requirements Ma-nagement, Business Process Modelling and Software Configuration Management at SINFIC (1996 to 1999), a consultant with the Portuguese Industrial Association (Associação Industrial Portuguesa) (1999) and a mana-ger at Esumédica – Prestação de Cuidados Médicos, S.A. (2000).

He taught information technology at the School of Science and Technology of Instituto Superior Técnico, Academia Militar, Instituto Politécnico Autónomo and Instituto Superior de Novas Profissões.

126

ANNUAL REPORT 2017

He has been with the Fidelidade Group since 2008, ini-tially with the Information Systems department and as a Director with Multicare, the Group’s healthcare insurer. During that time, he was head of the implementation of the new IT Strategic Plan and led the turnaround and organizational restructuring of the Group’s Information Systems Department.

(i) Tucson Dunn II

Tucson Dunn II is a Company director as of 01 February 2017.

He has a bachelor’s degree in business sciences from Lesley University and post-graduate studies on evidence--based healthcare management from Oxford University.

He is Managing Director of FOSUN Healthcare Holdings since February 2016.

He was Director of Operations at Boston University Me-dical Center (1990-1994), Director of Support Services at HCI International Medical Center Hospital (04/1994-04/1996), Hospital CEO at the Asian Hospital Medical Center (10/1997-08/2001). In 2014 and 2015, he was Hospital Divisions Director for the Medicover Group.

20 Customary and significant relationships of a family, professional or commercial nature of members of the Board of Directors, General and Supervisory Board and Executive Board of Directors, as applicable, with shareholders with qualified holdings greater than 2% of voting rights.

Regarding this point, the only point worth mentioning is that some Luz Saúde directors carry out corporate posi-tions in shareholders to whom a qualified shareholding greater than 2% of Company voting rights is attributable. All those positions are referenced in section B.II.26.

Perimeter Industries (USA) (from June to September 1996), was a consultant for McKinsey & Company (1997 to 1999) and a manager of Esumédica – Prestação de Cuidados Médicos, S.A. (1999 to 2000).

(h) Rogério Miguel Antunes Campos Henriques

Rogério Miguel Antunes Campos Henriques is a Com-pany director as of 30 July 2015.

He is a member of the board of directors and vice-chief executive officer of the insurance company Fidelidade – Companhia de Seguros, S.A., member of the board of directors and chief executive officer of insurance company Multicare – Seguros de Saúde, S.A. and chairman of the board of directors of the insurance company Fidelidade Macau – Companhia de Seguros, S.A. (Macau).

His participation in professional associations entails coordinating the “Segurnet” Technical Committee (the system’s platform) of the Portuguese Association of Insurance Companies (Associação Portuguesa de Seguradoras). He is also part of the Advisory Board of CIONET in Portugal and of IDC CIO Council and is vice--chairman of Management at the Portuguese-Chinese Chamber of Commerce and Industry (CCILC – Câmara de Comércio e Indústria Luso Chinesa).

He has an undergraduate degree in Economics from Universidade Católica Portuguesa and an MBA from INSEAD. Before joining Fidelidade, he worked for various years (1994-2002) with The Boston Consulting Group in Portugal and Spain, as a senior manager in the Telecom-munications and Financial Services practice areas and later in the Portugal Telecom Group (2003-2008), where he lead the areas of Strategy and Business Development in the holding and was later the Chief Marketing Officer for the PT Group’s African Operations.

127


te, the Planning and Business Intelligence Directorate, Overall Nursing Programme Directorate, the Human Resources Directorate, the Customer Service Directorate, Administrative and Financial Services Directorate, the Information Systems and Technology Directorate, the International Patient Services Directorate.

The ACE is part of the Group’s Corporate Centre, which also encompasses the Company’s activities.

General Shareholders Meeting

The General Shareholders Meeting is a governing body made up of the whole of the Company’s shareholders. Its powers, as at 31 December 2017, were those provided for in the PCC.

Board of Directors

According to the Company’s Bylaws, the Board of Direc-tors’ powers are those provided for in the PCC.

company, including information on the delegation of powers, namely the company’s day-to-day ma-nagement.

Shared services for Company subsidiaries (i.e. human resources, finance, marketing, negotiation with Payers and suppliers, maintenance, planning and control, organisation and procedures, IT systems, certification and accreditation, legal and compliance services) are provided by a consortium (agrupamento complementar de empresas) (“ACE”) of Group companies that operate healthcare units (with the exception of SGHL – Sociedade Gestora do Hospital de Loures, S.A.). The ACE includes the following Central Directorates: the Quality Certifi-cation and Accreditation Directorate (Clinical Auditing), the Clinical Operational Design and Control Directorate, the Administration and Finance Directorate, the Imaging Diagnostics Central Directorate, the Negotiation Cen-tral Directorate, the Digital Clinical Centre Directorate, the Commercial and Operational Control Directorate, the Training, Research and Innovation Directorate, the Risk Management Directorate, the Infrastructures, Maintenance and Equipment Directorate, the Legal and Compliance Directorate, the Logistics and Operational Support Directorate, the Marketing and Communication Directorate, the Organization and Procedures Directora-

21 Organisational or functional charts showing the allocation of powers among the various governing bodies, committees and/or departments within the

General Shareholders Meeting

Audit Board

Company Secretary

Board of Directors

Conselho Executivo

Executive Committee

Board of the General Shareholders

Meeting

Remuneration Committee

Chartered Accountant

128

ANNUAL REPORT 2017

strategy, as a part of the Fidelidade Group. It is respon-sible for issuing an opinion on the general aspects of the activities plan and monitoring developments in the implementation of the Luz Saúde Group’s expansion and investment strategy, as a part of the Fidelidade Group. It shall assess the matters put to its consideration by the Board of Directors. The Chairperson of the Board of Directors and Chief Executive Officer are inherently part of the Advisory Board.

The Advisory Board is made up of the following members:

ChairmanProf. Diogo de Lucena;

MembersJorge Magalhães CorreiaIsabel VazMaria de Belém RoseiraNuno Fernandes ThomazJosé Caeiro Pulido and José Araújo e Silva.

b) Operation

22 The existence and place where the internal regulations of the Board of Directors, General and Supervisory Board and Executive Board of Directors, as applicable, are available for consultation.

As at 31 December 2017, the Company’s Board of Direc-tors did not have an Internal Regulation. The Company is currently rethinking its compliance model at the Group level and this document is being drafted therein. The Board of Directors’ Internal Regulation is expected to be approved during 2018.

23 Number of meetings held by the Board of Directors, General and Supervisory Board and Executive Board of Directors, as applicable, and the level of attendance of each member thereto.

In 2017, 10 Board of Directors meetings took place.

Executive Committee

Pursuant to article 18 of the Bylaws and article 407 of the PCC, the Board of Directors has the power to de-legate the Company’s day-to-day management to an Executive Committee. The Board of Directors passed a resolution on 23 January 2014 to delegate the Company’s day-to-day management to an Executive Committee, in order to ensure greater efficiency in managing day--to-day business. Therefore and to the greatest extent permitted by law, all day-to-day management powers of the Company that can by law be delegated to the re-ferenced Executive Committee were delegated thereto, except for those set out in paragraphs (a) to (d), (f), (l) and (m) of article 406 of the PCC.

Supervisory Body (Audit Board)

Pursuant to the Company’s Bylaws, the supervision of the Company is entrusted to the Audit Board, which is made up of three effective members and one alternate member, as well as one chartered accountant or audit firm that is not a member of the Audit Board. The Audit Board’s powers are those provided for in the PCC and the PSC, concerning the verification of the content of the report on corporate governance structure and practices set out in article 245-A of the PSC.

Remuneration Committee

This committee is responsible for determining the re-muneration of members of the Company’s governing bodies. It also has an active role in the performance assessment of executive directors, insofar as it deter-mines the variable remuneration thereof.

Advisory Board

The scope of the Company’s Advisory Board is to su-pport the Company’s and its subsidiaries’ development strategy. It is made up of independent persons of re-cognised merit. The Advisory Board is entrusted with analysing and reflecting on the Luz Saúde Group’s overall

129


The following table shows the number of times each of the directors was in attendance in that total of meetings:

Note: (i) director Chen Qiyu was only appointed on 25 May 2017; (ii) director Lingjiang Xu tendered his resignation on 22 February 2017; (iii) director Wei Song tendered his resignation on 6 December 2016; (iv) director Tucson Dunn II was appointed by co-option on 01.

In 2017, 15 Executive Committee meetings were held. All Executive Committee members were present at all meetings.

24 Governing bodies responsible for assessing the performance of executive directors.

The performance of executive directors is assessed by the Remuneration Committee under its powers to, namely, determine the variable remuneration, among others, of the executive directors. On the other hand, the non-executive directors have an effective ability to supervise, monitor and assess the activities of the executive members.

25 Predefined criteria for assessing the performance of executive directors.

The performance assessment of executive directors is

done according to certain financial and non-financial criteria, as determined by the remuneration policy pre-sented by the Remuneration Committee and approved by the General Shareholders Meeting. The predetermined criteria for the performance assessment of executive directors in the 2017 financial year are set out in number 69 in this Report.

26 The availability of each member of the Board of Directors, General and Supervisory Board and Execu-tive Board of Directors, as applicable, positions held simultaneously in other companies in and outside the group and other relevant activities undertaken by members of those bodies during the financial year.

In addition to the information made available in B.II.17 above (other relevant activities by members of the Board of Directors), in the financial year ended on 31 December 2017, the members of the Board of Directors held the following positions:


A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupFidelidade – Companhia de Seguros, S.A. (Chairman of the Board of Directors and C.E.O.)Fidelidade – Property Europe, S.A. (Chairman of the Board of Directors)Fidelidade – Property International, S.A. (Chairman of the Board of Directors)REN – Redes Energéticas Nacionais, SGPS, S.A. (Member of Board of Directors)Via Directa – Companhia de Seguros, S.A. (Member of the Remuneration Committee)

A.2. Corporate positions held in other Group entities Does not hold positions in other Group entities.

B. Corporate positions held in the last 5 years that are no longer heldFidelidade Assistência - Companhia de Seguros, S.A. (Vice-Chairman of the Board of Directors and C.E.O.)Multicare – Seguros de Saúde, S.A. (Vice-Chairman of the Board of Directors and C.E.O.)

Level of Attendance (present / total Name meetings)Board of Directors: Jorge Manuel Batista Magalhães Correia 10/10Chen Qiyu 1/4Isabel Maria Pereira Aníbal Vaz 10/10José Manuel Alvarez Quintero 10/10Lingjiang Xu 1/3Ivo Joaquim Antão 10/10João Paulo da Cunha Leite de Abreu Novais 10/10Tomás Leitão Branquinho da Fonseca 10/10Rogério Miguel Antunes Campos Henriques 10/10Tucson Dunn II 9/9

130

ANNUAL REPORT 2017

Fosun Southern Investment Management Co.,Ltd. (Director)Chongqing Yao Pharmaceutical Company Limited (Di-rector)Plata Cross (HK) Limited (Director)Filton Inc. (Director)Fosun Atlas Capital Management LLC (Director)Tibet Fosun Investment Management Co., Ltd. (Chair-man of the Board of Directors)Shanghai Fosun Pioneering Investment Management Ltd. (Chairman of the Board of Directors)Shang Pingrun Investment Management Co., Ltd. (Exe-cutive Director)Shanghai Fosun Health Industrial Holdings Limited (Chairman of the Board of Directors)Hangzhou D.A. Medical Laboratory Co., Ltd. (Director)Tianjin Pharmaceuticals Group Co., Ltd. (Vice-Chairman of the Board of Directors)Tongde Equity Investment Management (Shanghai) Co., Ltd. (Director)Shanghai Fosun Hospital Investment (Group) Co., Ltd. (Director)Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd. (Director)Shanghai Fosun Pingyao Investment Management Co., Ltd. (Executive Director)Shanghai Fusheng Pharmaceutical Technology Deve-lopment Co., Ltd. (Executive Director)Shanghai Fukun Pharmaceutical Technology Develop-ment Co., Ltd. (Executive Director)Ample Up Limited (Director)Fosun Industrial Co., Limited (Director)Chongqing Yaoyou Pharmaceuticals Co., Ltd. (Director)Shanghai Fosun Chemical Pharmaceutical Investment Co., Ltd. (Director)Shanghai Henlius Biotech Co. Ltd. (Director)Shanghai Henlius Biopharmaceuticals Co., Ltd. (Director)Jiangsu Wanbang Biopharmaceuticals Co., Ltd. (Director)Jiangsu Wanbang Pharmaceutical Marketing and Distri-bution Co., Ltd. (Director)Xuzhou Wanbang Jinqiao Pharmaceutical Co., Ltd. (Director)Foshan City Chancheng District Central Hospital Co., Ltd. (Director)Sinopharm Medical Investment Management Co., Ltd. (Director)

Universal Seguros, S.A. (Chairman of the Board of Di-rectors)Caixa Seguros e Saúde, SGPS, S.A. (Vice-Chairman of the Board of Directors)HPP – Hospitais Privados de Portugal, SGPS, S.A. (Chair-man of the Board of Directors)

C. Other relevant activitiesPortuguese Association of Insurance Companies (Vice--Chairman of the Management Board)

Chen Qiyu

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupFosun International Limited (Director)Shanghai Fosun Pharmaceutical (Group) Co., Ltd (Chair-man of the Board of Directors)Zhejiang D.A. Diagnostic Company Limited (Chairman of the Board of Directors)Sinopharm Group Co. Ltd. (Vice-Chairman of the Board of Directors)Beijing Sanyuan Food Co., Ltd. (Director)Fosun Tonghao Capital (HK) Limited (Director)Gland Pharma Limited (Director)Fosun Japan Investment Co., Ltd. (Director)HCo I (HK) Limited (Director)HCo II (HK) Limited (Director)Fosun United Health Insurance Company Limited (Di-rector)Beijing Zhongqin Shiji Biological Technology Co.,Ltd. (Director)Beijing xingyuan Innovative Equity Investment Fund Ma-nagement Co.,Ltd. (Chairman of the Board of Directors)Fosun Sinopharm (HK) Logistics Properties Management Company Limited (Director)Fosun Investment Co.,Ltd. (Executive Director)Fosun Fortune Holdings Limited (Director)Fosun Health Holdings Limited (Director)Shanghai Futuo Biological Technology Co.,Ltd. (Execu-tive Director)Gland Pharma Limited (Director)Silver Cross Trading (Shanghai) Limited (Director)Shanghai Fosun Industrial Investment Co.,Ltd. (Chairman of the Board of Directors)

131


Taizhou Municipal Zhedong Healthcare Investment Management Co., Ltd. (Director)Henlius Biopharmaceuticals, Inc. (Director)Chindex Medical Limited (Director)Maxigen Biotech Inc. (Director)Shanghai Fosun High Technology (Group) Co.,Ltd. (Di-rector and Vice Chairman)

C. Other relevant activitiesChina Medical Pharmaceutical Material Association (Chairman)China Pharmaceutical Innovation and Research Deve-lopment Association (Vice-President)Shanghai Biopharmaceutical Industry Association (Chair-man)Shanghai Society of Genetics (Vice Council Chairman)


A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupGenomed – Diagnósticos de Medicina Molecular, S.A. (Director)

A.2. Corporate positions held in other Group entities Hospital da Luz – Centro Clínico da Amadora, S.A. (Chairwoman of the Board of Directors)Hospital da Luz, S.A. (Chairwoman of the Board of Directors)Hospital da Arrábida – Gaia, S.A. (Chairwoman of the Board of Directors)Casas da Cidade – Residências Sénior de Carnaxide, S.A. (Chairwoman of the Board of Directors)Surgicare – Unidades de Saúde, S.A. (Chairwoman of the Board of Directors)Hospital da Luz - Oeiras, S.A. (Chairwoman of the Board of Directors)RML – Residência Medicalizada de Loures, SGPS, S.A. (Chairwoman of the Board of Directors)Vila Lusitano – Unidades de Saúde, S.A. (Chairwoman of the Board of Directors)Hospital Residencial do Mar, S.A. (Chairwoman of the Board of Directors)Hospor – Hospitais Portugueses, S.A. (Chairwoman of the Board of Directors)

Sinopharm Industrial Investment Co., Ltd. (Vice-Chairman of the Board of Directors)Hermed Capital (Director)Hermed Capital Health Care GP Ltd. (Director)Hermed Capital Health Care (RMB) GP Limited (Director)Healthy Harmony Holdings, L.P. (Director)Plata Cross (UK) Limited (Director)Plata Cross (HK) Limited (Director)Health Anchor Limited (Director)Fosun Sinopharm (Hong Kong) Logistics Properties Management Company Limited (Director)Fosun Starlight (BVI) Limited (Director)Kennington Holdings, Inc. (Director)Ashton Rock Holdings Limited (Director)Fosun Starlight (HK) Limited (Director)Hangzhou Kunzhong Yuantong Equity Investment Ma-nagement Co., Ltd. (Director)Shanghai Xingshuangjian Medical Investment Mana-gement Co., Ltd. (Chairman of the Board of Directors)We Doctor Group Limited (Director)Henlix, Inc. (Director)Hengenix Biotech, Inc (Director)Shanghai Fu Er Xing Hospital Management Co., Ltd. (Director)Shanghai Vanke Children’s Hospital Co., Ltd. (Director)

A.2. Corporate positions held in other Group entities Not applicable

B. Corporate positions held in the last 5 years that are no longer heldFosun International Limited (Vice-Chairman)Sinopharm Industrial Investment Co., Ltd. (General Manager)Shanghai Star Ehealth Management Co., Ltd. (Director)Shanghai Forte Land Co., Ltd. (Director)Shanghai Qirong Investment Management Co., Ltd. (Director)Shanghai Qiguang Investment Management Co., Ltd. (Director)Shanghai Fuxuan Pharmaceutical Technology Develo-pment Co., Ltd. (Director)Shanghai Fosun Long March Medical Science Co., Ltd. (Director)Shanghai Fushun Pharmaceutical Technology Develo-pment Co., Ltd. (Director)

132

ANNUAL REPORT 2017

Member of the International Advisory Board of The Lisbon MBA of Nova School of Business and Economics of Universidade Nova de Lisboa


A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupFidelidade – Companhia de Seguros, S.A. (Vice-Chairman of the Board of Directors and Member of the Executive Committee)Fidelidade Assistência - Companhia de Seguros, S.A. (Member of Board of Directors and Chief Executive Officer)CETRA - Centro Técnico de Reparação Automóvel S.A. (Chairman of the Board of Directors)EAPS - Empresa de Análise, Prevenção e Segurança, S.A. (Chairman of the Board of Directors)GEP - Gestão de Peritagens, S.A. (Chairman of the Board of Directors)CARES – Assistência e Reparações, S.A. (Chairman of the Board of Directors)FID LatAm, SGPS,S.A. (Chairman of the Board of Directors)Fidelidade Angola – Companhia de Seguros, S.A. (Chair-man of the Board of Directors)


B. Corporate positions held in the last 5 years that are no longer heldMulticare – Seguros de Saúde, S.A. (Member of Board of Directors)

C. Other relevant activitiesPortuguese Association of Insurance Companies (Chair-man of the Technical Committee for Accidents) Ivo Joaquim Antão

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupHL – Sociedade Gestora do Edifício, S.A. (Chairman of the Board of Directors)

Casas da Cidade – Residências Sénior, S.A. (Chairwoman of the Board of Directors)SGHL – Sociedade Gestora do Hospital de Loures, S.A. (Chairwoman of the Board of Directors)CRB – Clube Residencial da Boavista, S.A. (Chairwoman of the Board of Directors)Luz Saúde – Serviços, ACE (Chairwoman of the Board of Directors)Cliria – Hospital Privado de Aveiro, S.A. (Chairwoman of the Board of Directors)Luz Saúde – Unidades de Saúde e de Apoio à Terceira Idade, S.A. (Chairwoman of the Board of Directors)Hospital da Luz - Guimarães, S.A. (Chairwoman of the Board of Directors)GLSMED Learning Health, S.A. (Chairwoman of the Board of Directors)H.M.E. – Gestão Hospitalar, S.A. (Chairwoman of the Board of Directors)S. C. H. - Sociedade de Clínica Hospitalar S.A. (Director)Núcleo de Imagem Diagnóstica, Unipessoal, Lda. (Ma-nager)BMC - British Hospital Management Care, S.A. (Chairwo-man of the Board of Directors)British Hospital – Lisbon XXI, S.A. (Chairwoman of the Board of Directors)Microcular – Centro Microcirurgia Ocular, Laser e Diag-nóstico, S.A. (Chairwoman of the Board of Directors)Capital Criativo Health Care Investments, S.A. (Chairwo-man of the Board of Directors)Capital Criativo Health Care Investments II, S.A. (Chairwo-man of the Board of Directors)Idealmed III – Serviços de Saúde, S.A. (Chairwoman of the Board of Directors)Imacentro - Clínica de Imagiologia Médica do Centro, S.A. (Chairwoman of the Board of Directors)Idealmed Ponte Galante, S.A. (Chairwoman of the Board of Directors)

B. Corporate positions held in the last 5 years that are no longer heldEsumédica – Prestação de Cuidados Médicos, S.A. (Director) – resignation tendered on 22 December 2014

C. Other relevant activitiesCouncil member of Nova School of Business and Eco-nomics of Universidade Nova de Lisboa

133


A.2. Corporate positions held in other Group entities Hospital da Luz – Centro Clínico da Amadora, S.A. (Di-rector)Hospital da Luz, S.A. (Director)Instituto de Radiologia Dr. Idálio de Oliveira – Centro de Radiologia Médica, S.A. (Chairman of the Board of Directors)Hospital da Arrábida – Gaia, S.A. (Director)HME – Gestão Hospitalar, S.A. (Director)Surgicare – Unidades de Saúde, S.A. (Director)Hospital da Luz - Oeiras, S.A. (Director)Vila Lusitano – Unidades de Saúde, S.A. (Director)Hospital Residencial do Mar, S.A. (Director)Hospor – Hospitais Portugueses, S.A. (Director)Casas da Cidade – Residências Sénior, S.A. (Director)SGHL – Sociedade Gestora do Hospital de Loures, S.A. (Director)CRB – Clube Residencial da Boavista, S.A. (Director)Luz Saúde – Serviços, ACE (Director)Cliria – Hospital Privado de Aveiro, S.A. (Director)Luz Saúde – Unidades de Saúde e de Apoio à Terceira Idade, S.A. (Director)Hospital da Luz - Guimarães, S.A. (Director)GLSMED Learning Health, S.A. (Director)GLSMED Trade, S.A. (Chairman of the Board of Directors)S. C. H. - Sociedade de Clínica Hospitalar S.A. (Director)Núcleo de Imagem Diagnóstica, Unipessoal, Lda. (Ma-nager)BMC - British Hospital Management Care, S.A. (Director)British Hospital – Lisbon XXI, S.A. (Director)Microcular – Centro Microcirurgia Ocular, Laser e Diag-nóstico, S.A. (Director)Capital Criativo Health Care Investments, S.A. (Director)Capital Criativo Health Care Investments II, S.A. (Director)Idealmed III – Serviços de Saúde, S.A. (Director)Imacentro - Clínica de Imagiologia Médica do Centro, S.A. (Director)Idealmed Ponte Galante, S.A. (Director)

B. Corporate positions held in the last 5 years that are no longer heldNot applicable.

C. Other relevant activitiesNot applicable.

A.2. Corporate positions held in other Group entities Hospital da Luz – Centro Clínico da Amadora, S.A. (Di-rector)Hospital da Luz, S.A. (Director)Hospital da Arrábida – Gaia, S.A. (Director)Hospital da Luz - Oeiras, S.A. (Director)Hospor – Hospitais Portugueses, S.A. (Director)Casas da Cidade – Residências Sénior, S.A. (Director)SGHL – Sociedade Gestora do Hospital de Loures, S.A. (Director)CRB – Clube Residencial da Boavista, S.A. (Director)Luz Saúde – Serviços, ACE (Director)Cliria – Hospital Privado de Aveiro, S.A. (Director)Luz Saúde – Unidades de Saúde e de Apoio à Terceira Idade, S.A. (Director)Hospital da Luz - Guimarães, S.A. (Director)GLSMED Learning Health, S.A. (Director)GLSMED Trade, S.A. (Director)H.M.E. – Gestão Hospitalar, S.A. (Director)Núcleo de Imagem Diagnóstica, Unipessoal, Lda. (Ma-nager)Surgicare – Unidades de Saúde, S.A. (Director)British Hospital – Lisbon XXI, S.A. (Director)Microcular – Centro Microcirurgia Ocular, Laser e Diag-nóstico, S.A. (Director)Capital Criativo Health Care Investments, S.A. (Director)Capital Criativo Health Care Investments II, S.A. (Director)Idealmed III – Serviços de Saúde, S.A. (Director)Imacentro - Clínica de Imagiologia Médica do Centro, S.A. (Director)Idealmed Ponte Galante, S.A. (Director)

B. Corporate positions held in the last 5 years that are no longer heldNot applicable

C. Other relevant activitiesNot applicable


A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupGenomed – Diagnósticos de Medicina Molecular, S.A. (Director and Chief Executive Officer)

134

ANNUAL REPORT 2017

Not applicable.



A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupFidelidade – Companhia de Seguros, S.A. (Member of Board of Directors and Vice-Chief Executive Officer)Multicare – Seguros de Saúde, S.A. (Member of Board of Directors and Chief Executive Officer)Fidelidade Macau – Companhia de Seguros, S.A. (Chair-man of the Board of Directors)Garantia – Companhia de Seguros de Cabo Verde, S.A. (Chairman of the Remuneration Committee)


B. Corporate positions held in the last 5 years that are no longer heldFidelidade Assistência - Companhia de Seguros, S.A. (Member of Board of Directors)

C. Other relevant activitiesPortuguese Association of Insurance Companies (As-sociação Portuguesa de Seguradoras) (Coordinates the Technical Committee of “Segurnet” - the APS system’s platform). He is also part of the Advisory Board of CIONET in Por-tugal and of IDC CIO Council.Portuguese-Chinese Chamber of Commerce and Industry (Vice-Chairman of Management)

Tucson Dunn II

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupFosun Healthcare Holdings, Shanghai, China (Executive Director)



A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupDTC Imobiliária-Gestão de Imóveis Lda. (Manager)TTT – Participações e Investimentos Lda. (Manager)

A.2. Corporate positions held in other Group entities Hospital da Luz – Centro Clínico da Amadora, S.A. (Di-rector)Hospital da Luz, S.A. (Director)Hospital da Arrábida – Gaia, S.A. (Director)Casas da Cidade – Residências Sénior de Carnaxide, S.A. (Director)HME – Gestão Hospitalar, S.A. (Director)Surgicare – Unidades de Saúde, S.A. (Director)Hospital da Luz - Oeiras, S.A. (Director)RML – Residência Medicalizada de Loures, SGPS, S.A. (Director)Hospital Residencial do Mar, S.A. (Director)Hospor – Hospitais Portugueses, S.A. (Director)Casas da Cidade – Residências Sénior, S.A. (Director)SGHL – Sociedade Gestora do Hospital de Loures, S.A. (Director)CRB – Clube Residencial da Boavista, S.A. (Director)Luz Saúde – Serviços, ACE (Director)Cliria – Hospital Privado de Aveiro, S.A. (Director)Luz Saúde – Unidades de Saúde e de Apoio à Terceira Idade, S.A. (Director)Hospital da Luz - Guimarães, S.A. (Director)S. C. H. - Sociedade de Clínica Hospitalar S.A. (Director)Núcleo de Imagem Diagnóstica, Unipessoal, Lda. (Ma-nager)BMC - British Hospital Management Care, S.A. (Director)British Hospital – Lisbon XXI, S.A. (Director)Microcular – Centro Microcirurgia Ocular, Laser e Diag-nóstico, S.A. (Director)Capital Criativo Health Care Investments, S.A. (Director)Capital Criativo Health Care Investments II, S.A. (Director)Idealmed III – Serviços de Saúde, S.A. (Director)Imacentro - Clínica de Imagiologia Médica do Centro, S.A. (Director)Idealmed Ponte Galante, S.A. (Director)

B. Corporate positions held in the last 5 years that are no longer held

135


The Advisory Board’s regulation can be consulted at the Company’s registered offices.

28 Composition of the executive committee and/or details of the delegated director(s), if applicable.

In the financial year ended on 31 December 2017, the executive members of the Company’s Board of Directors were those indicated in B.II.18 in this Report.

29 The powers of each of the created committees and a summary of activities performed thereunder.

The powers of the Company’s Executive Committee for the financial year ended on 31 December 2017 and in the financial year underway are detailed in B.II.21 in this Report.

Under those powers, the Executive Committee took on the Company’s day-to-day management by conducting its business, except as set out in paragraphs (a) to (d), (f), (l) and (m) of article 406 of the PCC.

III. SUPERVISION (Audit Board, Audit Committee or General and Su-pervisory Board)

a) Composition throughout the reference year

30 The supervisory body that corresponds to the adop-ted model.

The Company is supervised by an Audit Board and an Audit Firm.

For further detail, please see B.II.15 and B.II.21 in this Report.

31 Composition of the Audit Board, Audit Committee, General and Supervisory Board or Financial Com-mittee, as applicable, the minimum and maximum number of members and duration of the mandate, both as provided for in the bylaws, in addition to

B. Corporate positions held in the last 5 years that are no longer heldMajid Al Futtaim Healthcare, Dubai UAE (Executive Director)Medicover Group, Warsaw, Poland (Director)


As shown in the tables above, in the financial year ending on 31 December 2017, Luz Saúde’s executive directors only held positions in the governing bodies of Luz Saúde’s subsidiaries, in general and save for rare exceptions that are not representative. This shows their total availability and commitment to performing their duties and pursuing the interests of the Company and the Group. This is also demonstrated by their regular attendance at meetings of the Company’s Board of Directors. This has continued to be the case in the current financial year.

As for Luz Saúde’s non-executive directors, they have shown the necessary availability to perform their duties, as evidenced by the work they have done for Luz Saúde.

c) Committees within the management or supervisory bodies and delegated directors

27 Committees created within the Board of Directors, General and Supervisory Board and Executive Board of Directors, as applicable, and place where their internal regulations are made available for consul-tation.

The Board of Directors believes the performance asses-sment procedures are and will be undertaken in a form adequate to the Company’s interests by the Company’s non-executive Directors. The Company also relies on the Remuneration Committee, which has an active role in the performance assessment of Directors.

The approval of the Board of Directors’ Internal Regula-tion is currently underway. It will contain the Executive Committee’s operating rules.

An Advisory Board was also created to support the Com-pany’s and its subsidiaries’ development strategy. It is made up of independent persons of recognised merit.

136

ANNUAL REPORT 2017

accountant or audit firm that is not a part of the Audit Board is proposed by the Audit Board.

Pursuant to 414(4) of the PCC, the Company’s Audit Board shall include at least one member with an un-dergraduate degree suitable to the required duties. In addition to being independent, such member will also have knowledge of auditing or accounting. Article 414(6) provides that the audit boards of companies whose shares have been admitted to trading on the regulated market (as is the case with the Company) should be made up of a majority of independent members.

The following table identifies the members of the Audit Board and their respective dates of appointment and the term of their mandate:

the number of effective members, the date of first appointment and the term of the mandate of each member. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 17.

Pursuant to the Company’s Bylaws, the supervision of the Company is entrusted to the Audit Board, which is made up of three effective members and one alternate member, as well as one chartered accountant or audit firm that is not a member of the Audit Board.

Regarding appointment and pursuant to article 20 of the Bylaws, the members of the Audit Board and their respective chairperson are elected by the General Shareholders Meeting. The election of the chartered

The role of Chartered Accountant is held by the following entity:

Name Position Date of 1st appointment

Date of election for the mandate underway

João Carlos Tovar Jalles Chairman of the Audit Board 20.01.2014 2014-2017

António Luís Castanheira Silva Lopes Chairman of the Audit Board 20.01.2014 2014-2017

Clara José Cruz de Sequeira Viegas Penha Ventura Chairman of the Audit Board 20.01.2014 2014-2017

Luís Manuel Pereira da Silva Alternate Member of the Audit Board 20.01.2014 2014-2017

Name Position Date of 1st appointment

Date of election for the mandate underway

Ernst & Young Audit & Associados – SROC, S.A. registered with the Chamber of Chartered Accountants under number 178 and registered with the PSCom under number 9011, represented by Rui Abel Serra Martins, registered with the Society of Chartered Accountants under number 1119

Audit Firm 01.10.2013 2014-2017

137


Condutores Eléctricos (1989 to 1991), by transforma-tion of the company Álvaro Pinto dos Santos e Filho, where he was also a member of the audit board and assistant to the board of directors (1988 to 1989). In the Banco Comercial Português Group (1990 to 1993), he was a manager in the marketing department of CISF Banco de Investimento, a manager in the marketing department for large companies at BCP and financial manager at Nacional Factoring (1990 to 1992), where he was appointed capital markets representative. He was chairman of the audit board of Novabase (1991 to 1993). He was a financial manager at Allianz Portugal (1993 to 1998) and at A Social and Scottish Union (1996 to 1997) under the merger of those companies into Portugal Previdente. He represented this company with Associação Portuguesa de Seguradores, in the technical committee for financial and tax matters (1993 to 1998) and was chairman of the audit board of Audatex Por-tugal (1994 to 1998). In the Mague Group, he was an executive director of the Hotéis Tivoli Group (1998 to 1999), while also taking on the role of vice-chairman of Associação dos Hotéis de Portugal. He was a member of the executive committee in charge of finance and organisation at IMI, Imagens Médicas Integradas (2001 to 2002). In the Caixa de Crédito Agricola Group, he was portfolio manager at NCO Gestão de Patrimónios (2003). He was an executive director of Mutuamar (2004 to 2009) where he was also initially an advisor to the board of directors.

He is currently a manager of Direct Profit, Lda., a com-pany that provides economic, financial and management advisory services.

(b) António Luís Castanheira Silva Lopes

António Luís Castanheira Silva Lopes was elected as a member of the Company’s Audit Board in 2014.

He has an undergraduate degree in accounting from Instituto Comercial de Luanda and is a Chartered Ac-countant (member no. 970 of the Institute of Chartered Accountants).

He headed the administrative services of the Nuclear Energy Committee (1974 to 1979), he was a member of the Financial Studies Cabinet of Caixa Geral de Depósitos

32 Members of the Audit Board, Audit Committee, Ge-neral and Supervisory Board or Financial Committee, as applicable, who are considered to be independent pursuant to article 414(5) of the PCC. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 18.

All members of the Audit Board are independent pur-suant to article 414(5) of the PCC and comply with all the compatibility rules set forth in article 414-A(1) of the PCC and all comply with the specialisation prerequisites provided for in article 414-A(4).

All members of the Audit Board have the duty to give immediate notice to the Company of any event during their mandate that may cause incompatibility or loss of independence, as provided for by law.

33 Professional qualifications of each member of the Audit Board, Audit Committee, General and Super-visory Board or Financial Committee, as applicable, and any other relevant back round. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 21.

(a) João Carlos Tovar Jalles

João Carlos Tovar Jalles was elected as a member of the Company’s Audit Board in 2014.

He has an undergraduate degree in Business Management and Administration from the School of Economic and Business Sciences of Universidade Católica Portuguesa. At the latter, he attended the MBA – Specialisation in Finance and Financial Investments. He has an undergra-duate degree in Philosophy from the School of Human Sciences of Universidade Católica Portuguesa.

He was an administrative and financial manager at So-ravil - Sociedade de Refrigerantes e Águas do Vidago, while also being in charge of accounting at Adimagri - Administradora Imobiliária e Agrícola (1982 to 1985). In the Sumólis group, he was a financial manager (1985 to 1990) and member of the audit board of Alcobre,

138

ANNUAL REPORT 2017

(1977-82) and an MBA from the School of Economics of Universidade Nova de Lisboa (1983-85).

He was a financial controller for Logoplaste – Consulto-res Técnicos, Lda. (1982 to 1985), a product manager at Siemens (1985 to 1986), a capital markets sub-manager at MDM – Sociedade de Investimento, S.A. (1986 to 1989), a manager of equity research at Socifa & Beta – Sociedade Financeira de Corretagem (Dealiers), S.A. (1989 to 1990), an executive director and delegated director of IP Financeira – Sociedade de Investimen-tos, Estudos e Participações Financeiras, S.A. (1990 to 1992), a director, manager and senior officer at of Caixa Central de Crédito Agrícola Mútuo, C.R.L. (1992 to 2003), a director of António M. de Mello – Sociedade Gestora de Participações Sociais, S.A. and ALL2IT – In-focomunicações, S.A. (2004 to 2008), a non-executive director of Deltamarisco – Produtos Alimentares, S.A. (2006 to 2008), an advisor to the board of directors and commercial coordinating manager of Mutuamar – Mútua de Seguros dos Armadores da Pesca do Arrasto (2006 to 2009), a financial director of Riviera SGPS, S.A. (2009), a non-executive director of JLM – Consultores de Gestão, S.A. (2008 to 2010), an advisor to the board of directors of Farminveste – Investimentos, Participa-ções e Gestão, SGPS - S.A., (2009 to 2011), a manager of Rogério Fernandes Ferreira, Associados, Lda. (2010 to 2012) and an advisor to the chairman of the board of directors of the TAVFER SGPS, S.A. group. (2009 to 2013). He was also a consultant for various companies in the corporate perimeter of the National Association of Pharmacies (ANF - Associação Nacional de Farmá-cias) (2009-2015), Finfarma – Sociedade Financeira de Crédito, S.A. (2016-2018) and chairman of the Audit Board of Glintt – Global Intelligent Technologies, S.A. (Public company) (2011-2017).

He taught in his area of expertise in public and private institutions, namely as a visiting assistant (1986 to 1999) and visiting assistant professor (1999 to 2013) at the School of Economics of Universidade Nova de Lisboa, a visiting professor at the School of Economic and Bu-siness Sciences of Universidade Católica Portuguesa (2004 to 2011) and gave training at JLM Consultores de Gestão (2005 to 2013) and lecturer at the Post-graduate programme in Tax Management at Instituto Superior de Gestão (2010-2013). He was a scientific coordinator and

(1980 to 1989), a financial analyst and manager of the Tax and Reporting Department at Chevron (Angola) (1990 to 1993), a financial manager of Companhia de Seguros Eagle Star Insurance (1994 to 1996), a manager of the assurance and business advisory services da PricewaterhouseCoopers (1997 to 2012).

He is an independent consultant since 2013.

(c) Clara José Cruz de Sequeira Viegas Penha Ventura

Clara José Cruz de Sequeira Viegas Penha Ventura was elected as a member of the Company’s Audit Board in 2014.

She has a bachelor’s degree in accounting and admi-nistration from Instituto Militar dos Pupilos do Exército and an undergraduate degree in education qualification in school and educational management from Instituto Superior de Ciências Educativas.

She taught in her area of expertise in primary and high schools within the public school system (1981 to 2014). Within her teaching career, she was a class director, group delegate, secretary to the managing council, coordinator of courses and training for adult education and an advisor on night classes.

She gave accounting training in the company Santos Silva, in Setúbal.

She was an accountant at Quartex Indústria de Extração Mineira, Lda., Agro Pecuária da Dimba, Lda., Sotecma, Comércio e Carpintaria de Madeiras, Lda., Mave - Es-tudos e Projetos de Construção Civil, Lda., Sadirosa, Sociedade Comercial do Sul, Lda. – Armazenistas de Produtos Alimentares, Higiene - Cash and Carry and teachers syndicate Pró-Ordem.

(d) Luís Manuel Pereira da Silva

Luís Manuel Pereira da Silva was elected as a member of the Company’s Audit Board in 2014.

He has an undergraduate degree in business manage-ment and administration from the School of Social and Human Sciences of Universidade Católica Portuguesa

139


activities undertaken by members of those bodies during the financial year. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 26.

The members of the Audit Board have shown the ne-cessary availability to perform their duties, as evidenced by the work they have done for the Company.

In the financial year ended on 31 December 2017, the members of the Audit Board held the following positions:

João Carlos Tovar Jalles

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupDirect Profit, Lda. (Managing Partner)Danone, S.A. (Member of the Audit Board)


B. Corporate positions held in the last 5 years that are no longer heldGlintt - Global Intelligent Technologies, S.A. (Public Company) (Member of the Audit Board)


António Luís Castanheira Silva Lopes

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupPopular Gestão de Activos – Sociedade Gestora de Fundos de Investimento, S.A. (effective Member of the Audit Board)Abarca Companhia de Seguros, S.A. (Director)Danone, S.A. (effective Member of the Audit Board)


B. Corporate positions held in the last 5 years that are no longer held

member of the jury of several master thesis disserta-tions at the School of Economics of Universidade Nova de Lisboa and the Masters in Tax Management from Instituto Superior de Gestão.

He is currently a consultant of Farminveste Investi-mentos, Participações e Gestão, S.A. (since 2018), managing partner of Sociedade Anglo-Portuguesa de Diatomite, Lda. (since 2002), managing partner of Fonemas Divertidos - Mediação Imobiliária, Lda. (since 2014) and an independent management consultant for economic, financial and tax matters, a tax arbitrator for tax arbitration proceedings promoted by CAAD, an independent expert within tax base reform committees (CIT) and a tax representative of non-resident entities in Portugal (since 1999).

b) Operation

34 The existence of internal regulations of the Audit Board, Audit Committee, General and Supervisory Board or Financial Committee, as applicable, and place where they are made available for consultation. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 22.

The Audit Board’s Internal Regulation is available for consultation at the Company’s registered office.

35 Number of meetings held and the level of attendance of each member of the Audit Board, Audit Committee, General and Supervisory Board or Financial Com-mittee, as applicable. Incorporation by reference to the section of the report where such information is already included can be made pursuant to section 23.

In 2017, 12 Audit Board meetings were held and the res-pective effective members were present at all of them.

36 The availability of each member of the Audit Board, Audit Committee, General and Supervisory Board or Financial Committee, as applicable, indicating the positions held simultaneously in other companies both inside and outside the Group and other relevant

140

ANNUAL REPORT 2017

Glintt – Global Intelligent Technologies, S.A. (Public company) (Chairman of the Audit Board)

C. Other relevant activitiesConsultant for Farminveste – Investimentos, Partici-pações e Gestão, S.A and chairman of the audit board of Glintt – Global Intelligent Technologies, S.A., (public company), manager of Sociedade Anglo-Portuguesa de Diatomite, Lda., manager of Fonemas Divertidos – Me-diação Imobiliária, Lda. and independent management consultant for economic, financial and tax issues for various entities

c) Powers and duties

37 Procedures and criteria applicable to the supervisory body for the purposes of requesting additional ser-vices from the external auditor.

Given the powers of the Audit Board, namely as con-cerns the supervision of the chartered accountant’s independence and the provision of additional services, the Company will oversee the Audit Board’s active intervention in requesting additional services from the external auditor, namely through the prior approval of such additional services.

The main goals of such intervention will be, namely, to ensure that the request for additional services does not affect the External Auditor’s independence, that the tax consulting services and other services are rendered to a high standard of quality, autonomy and independence as regards those rendered under the audit process and that independence and exemption are duly safeguarded.

38 Other duties of the supervisory bodies and, if applicable, the Financial Committee. Please see B.II.21 in this Report.

Terra Peregrin – Participações, SGPS, S.A. (effective member of the Audit Board)Banco Popular Portugal, S.A. (effective member of the Audit Board)

C. Other relevant activitiesIndependent consultant

Clara José Cruz de Sequeira Viegas Penha Ventura

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupDanone, S.A. (effective Member of the Audit Board)


B. Corporate positions held in the last 5 years that are no longer heldNot applicable

C. Other relevant activitiesPrimary and high school teacher in the public school system

Luís Manuel Pereira da Silva

A. Corporate positions held in other entities, in and outside the Group A.1. Corporate positions held in entities outside the GroupSociedade Anglo-Portuguesa de Diatomite, Lda. (Ma-naging Partner)Fonemas Divertidos - Mediação Imobiliária, Lda. (Ma-naging Partner)


B. Corporate positions held in the last 5 years that are no longer heldRogério Fernandes Ferreira, Associados, Lda. (Manager)JLM – Consultores de Gestão, S.A. (Non-Executive Director)

141


The Auditor Ernst & Young Audit & Associados – SROC, S.A. has carried out duties with the Company and /or Group since the last quarter of 2013 and the partner referenced above represents the External Auditor since June 2017.

44 Rotation policy and frequency of rotation of the external auditor and the respective partner who represents the external auditor in carrying out those duties.

The Auditor Ernst & Young Audit & Associados – SROC, S.A. was appointed in 2013 for the 2012-2015 mandate and appointed again for the 2014-2017 mandate. In turn, the respective partner began representing the External Auditor in June 2017. The Company therefore complies with the recommendations presently in force.

45 Name of the governing body responsible for assessing the external auditor and how often the assessment is done.

A resolution electing or removing the Chartered Ac-countant/External Auditor shall be passed in a General Shareholders Meeting, following a proposal by the Audit Board. The latter will further supervise the External Au-ditor’s activities and the works carried out throughout the financial year, as well as globally assess its perfor-mance, namely as regards independence. Thereby, the Company’s General Shareholders Meeting and Audit Board assess the external auditor.

46 Services, other than auditing, carried out by the external auditor for the company and/or companies in a controlling relationship with it, as well as the internal approval procedures for hiring such services and the reasons therefor.

Ernst & Young Audit & Associados – SROC, S.A., also provided assurance services.

As for the additional services requested from the exter-nal auditor in 2017, the following facts were taken into consideration related thereto:

IV. CHARTERED ACCOUNTANT

39 Chartered accountant and the partner who represents the chartered accountant.

Please see B.III.31 in this Report.

40 Number of years the chartered accountant has been consecutively carrying out duties for the company and/or group.

Please see B.III.31 in this Report. Ernst & Young Audit & Associados – SROC, S.A. has been consecutively carrying out duties for the company and/or group since October 2013 (i.e., a little over a year).

41 Description of any other services provided to the company by the chartered accountant.

In addition to carrying out the duties of chartered ac-countant, Ernst & Young Audit & Associados – SROC, S.A. also provided the Company with the services des-cribed in B.V.46.

V. EXTERNAL AUDITOR

42 The external auditor appointed for the purposes of article 8 and the partner who represents the ex-ternal auditor in carrying out those duties and their respective PSCom registration numbers.

During the 2017 financial year, the external auditor was Ernst & Young Audit & Associados – SROC, S.A. registered with the Chamber of Chartered Accountants under number 178 and registered with the PSCom under number 9011, represented by Rui Abel Serra Martins, registered at the Chamber of Chartered Accountants under number 1119.

43 The number of years that the chartered accountant and the respective partner who represents the char-tered accountant have been consecutively carrying out duties for the company and/or group.

142

ANNUAL REPORT 2017

47 Annual remuneration paid by the company and/ or legal entities in a controlling or group relationship with the auditor and other persons or legal entities belonging to the same network and the percentage breakdown for the following services (using for this purpose the “network” concept as set out in Euro-pean Commission Recommendation No. C (2002) 1873 of 16 May):

(i) those services did not affect the Chartered Accoun-tant’s independence and the safeguards applied;

(ii) the Chartered Accountant’s position concerning the provision of those services, namely his experience and knowledge of the company;

(iii) the quality and efficiency with which those duties have been carried out;

(iv) the fact that the value of those services are in ac-cordance with PSCom’s Recommendations.

Ernst & Young Audit & Associados – SROC, S.A.(1)By the Company(2)

Amount for statutory auditing services 11,000 € / 15.5%Amount for assurance services 0 € / 0%Amount for tax consulting services 0 € / 0%Amount for other services non-auditing services 60,000 € / 84.5%

By Group entities(2)Amount for statutory auditing services 317,140.00 € / 89%Amount for assurance services 40,500.00 € / 11%Amount for tax consulting services 0 € / 0%Amount for other services non-auditing services 0 € / 0%Total 428,640.00 €(1) Agreed amounts for 2017. (2) Including individual and consolidated accounts

143


tings. They thereby have a relevant role in reporting irregularities that occur within the Group’s companies and that have an impact on the Company.

III. INTERNAL CONTROL AND RISK MANAGEMENT

50 Persons, bodies or committees responsible for the internal audit and/or implementation of the internal control systems.

The members of the Executive Committee are res-ponsible for the internal auditing of risk control and management. The members of that committee that are simultaneously members of the Board of Directors of Luz Saúde – Serviços, A.C.E. have a particularly important role. This entity provides a set of services to the Group companies (shared services), including those of internal control. Please note that the implementation of a GRC (Governance, Risk and Compliance) system is currently under preparation, a large part of which is expected to be concluded in the present financial year (2018).

51 Explanation of the hierarchical and/or functional re-lationships to other company bodies or committees (an organisational chart may be used).

Please see B.II.15, B.II.18 e B.II.21 of this Report (rela-tionship between the Board of Directors and the Exe-cutive Committee).

52 Other functional areas with risk control duties.

There are no other functional areas with risk control duties beyond those mentioned in C.III.50.

53 Main types of risk (economic, financial and legal) to which the company is exposed in its business activities.

I. BYLAWS

48 Rules that apply to the amendment of the company’s bylaws (art. 245-A(1)(h)).

The Company’s Bylaws provide that, in a first call, the General Shareholders Meeting cannot convene unless shareholders representing at least fifty per cent of the share capital are present or represented, regardless of the items on the agenda. In a second call, the General Shareholders Meeting is allowed to pass resolutions whatever the number of shareholders present or repre-sented and the share capital they represent.

Resolutions at a General Shareholders Meeting are approved by a majority of votes issued, unless the law or Bylaws require a qualified majority. Pursuant to ar-ticle 383 of the PCC and article 15(2) of the Bylaws, in order to approve resolutions on the amendment of the company’s articles of incorporation, merger, demerger, transformation, dissolution or other issues for which the law requires a qualified majority, the respective resolution shall be approved by two-thirds of the votes issued, regardless of whether the General Shareholders Meeting convenes in a first or second call.

II. WHISTLEBLOWING

49 Company whistleblowing channels and policy.

As at 31 December 2017, the Company’s Board of Direc-tors had no written whistleblowing policy or channels approved by the competent governing body, regarding the reporting of irregularities in the Company.

The Company is currently rethinking its compliance model at the Group level and this document is being drafted therein. The Board of Directors’ Internal Regulation is expected to be approved during 2018.

However, some of the Company’s executive directors are members of the Boards of Directors of Luz Saúde’s subsidiaries and therefore attend their respective mee-

04.1.3 Internal organisation

144

ANNUAL REPORT 2017

technicians, is crucial to the Group’s ability to attract and retain clients.

To reinforce its market leadership in a climate of increa-sed competition, the Group must continue to (1) recruit high-quality experienced doctors and other healthcare professionals; as well as to (2) continually improve its facilities with the most technologically advanced diag-nostic and surgical equipment.

On the other hand, the transposition of the European directive on cross-border healthcare into Portuguese law may pose an opportunity for the Luz Saúde Group, insofar as its units may cater to European Union citizens to which it can offer quality medical care at competitive prices, especially when compared to the main European healthcare benchmarks. This directive establishes rules of access and creates a right to reimbursement of heal-thcare costs incurred in another Member State, up to the limit of the costs that State would have borne if the care had been provided within its borders.

Pressure on prices from health insurance companies and healthcare plans

In order to mitigate the pressure from insurance com-panies and healthcare plans, the Luz Saúde Group seeks to remain updated on the most recent technological and medical advances, in order to endow its clinical portfolio with differentiated services, products, equipment and technology of greater added value. This positioning, coupled with the Group’s size and wide geographic breadth, are part of the value proposition it offers its client base. This has enabled the Group to minimise price cuts that have occurred in some of its business areas over the last few years.

Luz Saúde manages Hospital Beatriz Ângelo in part-nership with the State

Luz Saúde manages Hospital Beatriz Ângelo through its subsidiary Sociedade Gestora do Hospital de Loures, SA (“SGHL”) under a Public-Private Partnership agree-ment with the Portuguese State (“PPP Agreement”). HL – Sociedade Gestora do Edifício, S.A., in which the Company has a 10% shareholding, is also a party to the PPP agreement and is responsible for the (now com-

Luz Saúde’s main risks and uncertainties

In its risk management, Luz Saúde’s priority is to detect and hedge risks that may have a material adverse effect on results and equity or that may significantly hinder its ability to conduct business. In order to improve the referenced risk management, the implementation of a GRC (Governance, Risk and Compliance) system is currently under preparation, which is expected to be concluded in the present financial year (2018).

The main identified risks are of an operational and financial nature.

Operational/Economic Risks

With respect to operational risks, please note that all of Luz Saúde’s income comes from operations located in Portugal and therefore operating profits are affected by financial, economic and political events in the country.

Given budget problems in the Healthcare public sector, the State’s expenditure with the National Health Ser-vice continued to suffer strong pressures. Although a substantial part of the Luz Saúde Group’s activity is in the private healthcare segment, it is also exposed to the National Health Service, mainly through Hospital Beatriz Ângelo, which it operates in partnership with the State.

Competition in the Portuguese healthcare services sector

Competition for patients and clients between hospitals and other healthcare providers has intensified over the last few years, due mainly to a certain level of consolidation in the sector. The Group also faces competition from other healthcare providers, such as public hospitals, in-dependent clinics, outpatient centres, diagnostic centres and could face further competition from international healthcare companies offering healthcare services in Portugal in the future.

Hospitals compete based on reputation, clinical exce-llence, technology, client satisfaction and price. The ability to recruit experienced doctors and other heal-thcare professionals, such as high-quality nurses and

145


any additional production above the agreed amount, given that there are areas where the set production limit can be surpassed, such as emergency room visits and hospitalisation) is settled over the course of the following financial year.

Financial Risks

As the Luz Saúde Group’s parent company, Luz Saúde, S.A., whose main activity is the development and parti-cipation in Healthcare businesses, is largely dependent on its subsidiaries’ financial structures and their ability to generate sufficient cash flow to distribute dividends, pay interest, repay loans taken out by the company and settle payment for services provided to the Company.

The Group is exposed to the following types of risk because of its use of financial instruments: (i) Credit risk; (ii) Liquidity risk; (iii) Market risk.

(i) Credit Risk

Credit risk arises from the possibility that financial los-ses may occur due to a debtor’s default on contractual obligations with the Group in the course of its business.

The Group’s credit risk exposure essentially arises from accounts receivable from its business activities and funds managed within the Group’s cash flow activities.

Credit risk arising from business activities is monitored by continuously monitoring debtor portfolios and their outstanding balances. In addition thereto, risk assessment is also conducted according to procedures for vetting, qualifying and setting related credit limits for clients, as well as for debt collection procedures and cycles.

The Group’s credit risk profile is monitored regularly by each unit’s Operations and Finance Department, namely with respect to changes in credit exposure and monitoring default losses. The Finance Department and Management Control Department monitor the credit risk profile at a Group level.

As regards cash flow management, the Group maintains the guideline of aligning the counterparty with which it deposits its funds with the financial entities with which

pleted) construction and the management of Hospital Beatriz Ângelo’s building and facilities.

Under the PPP Agreement, SGHL has undertaken to provide healthcare services within the National Health Service, through Hospital Beatriz Ângelo, for a 10-year period as of the Hospital’s opening date (19 January 2012). The term of the PPP agreement may be renewed for successive periods by mutual agreement and each period cannot exceed 10 years. Notwithstanding, the total duration of the PPP Agreement, including the initial period and any additional periods, cannot exceed 30 years, as of the PPP agreement’s effective date (31 December 2009).

With respect to the Hospital’s management, the PPP Agreement governs the relationship between the State and SGHL, sets prices and payment methods, estab-lishes quality standards, notice and information duties, compliance levels (clinical and non-clinical), hospital operating rules (e.g. human resources) and other duties and undertakings for each party, as well as consequences for default on the contractual obligations.

In addition, the PPP Agreement establishes that annual volumes of patient treatment at Hospital Beatriz Ân-gelo (defined with reference to doctor consultations, emergency room visits and inpatient and outpatient surgical and non-surgical services) shall be agreed by annual negotiation between the Ministry of Health and the Hospital’s management, based on historical data for public healthcare demands by the population in Hospital’s catchment area. However, it should be noted that the aforementioned production level is determined based on historical data on the demand for public healthcare by the population living in the Hospital’s catchment area.

On the other hand, the prices charged by the hospital to the National Health Service have been contractually defined and are adjusted annually according to the growth of the inflation rate.

The PPP Agreement further provides that, at the be-ginning of each month, the State must pay 90% of 1/12 of the agreed annual production value (regardless of the actual production value reached). The adjustment amount (which may include the remaining 10%, plus

146

ANNUAL REPORT 2017

Legal Risks

Certain financing agreements entered into by the Com-pany and some of its subsidiaries contain change of control provisions that may be enforced if there is a change of direct or indirect control in the Company (and which include, albeit tacitly, changes of control arising from takeover bids).

Certain financing agreements entered into by the Com-pany and some of its subsidiaries contain change of control provisions, which require direct or indirect control in the Company to be maintained. As at 31 December 2017, the total amount of debt under these agreements was 249 million Euros. Some of these change of con-trol provisions may be enforced if the direct or indirect shareholding drops below 51% of the Company’s share capital or if the direct or indirect shareholding drops below 51% of the Company’s share capital and voting rights or if a majority of the Company’s share capital and voting rights are no longer directly or indirectly held. Only one agreement contains a change of control provision, whereby the agreement may be terminated if the current majority shareholder ceases to directly or indirectly hold at least two-thirds of Luz Saúde’s share capital and/or voting rights.

If these provisions are enforced and the Company is unable to obtain financing to make early repayment thereon, this could have a material adverse effect on the Company’s business, financial condition, operational results or future outlook. Furthermore, the change of control provisions in these agreements may limit the Company’s ability to raise funds in the future or to seek additional financing, which may limit the Company’s operational flexibility and its future outlook of expansion.

54 Procedure for identifying, assessing, monito-ring, controlling and managing risks. Please see C.III. 50 above.

On 31 December 2017, there was not yet a procedure for the identification, assessment, monitoring, control

it has drawn down facilities, in order to naturally hedge any possible credit event in the entity where the funds are deposited.

(ii) Liquidity Risk

Liquidity risk arises from the possible inability to finance the Group’s assets or to satisfy contractual undertakin-gs when due. Liquidity management is centralised in the Finance Department and Management Control Department. This management seeks to maintain an adequate amount of funds and facilities accessible to meet the Group’s short-term, medium and long-term financial needs.

To assess overall exposure to this type of risk, reports are drawn up that enable the Group to identify occasional cash shortages and activate mechanisms intended to hedge them.

(iii) Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates or deve-lopments in the capital markets may affect the Group’s results and financial position. Because the Group is not exposed to foreign exchange or capital market risks, the goals of its market risk management policies focus mainly on monitoring changes in interest rates that affect interest-bearing financial liabilities with floating interest rates.

All facilities set-up by the company are remunerated through floating rates stipulated by the reference index plus a spread. In previous financial years and in order to balance the exposure to floating interest rates, the Group put in place certain cash flow hedging instruments, in order to fix the interest rates of some of its facilities. As a result of these instruments, the Group’s financial debt as at 31 December 2017 and the level of effecti-veness these instruments are expected to have (given the expected positive future evolution in interest rates), nearly 60.8% of the Group’s financial debt is exposed to a fixed interest rate (72.1% in 2016).

147


The IRD contacts are as follows:Jorge SantosTelephone: +351 21 313 82 60E-mail: [email protected]: Luz Saúde, S.A.To the attention of: Investors Relations DeskRua Carlos Alberto da Mota Pinto, 17, 9th floor (Edifício Amoreiras Square)1070-313 Lisbon, PortugalTelephone: +351 21 313 82 60 I Fax: +351 21 353 02 92

The Investor Relations Desk is primarily responsible for:a) Acting as a Company liaison with shareholders, capital

market investors and financial analysts and ensuring the equal treatment of shareholders;

b) Ensuring full compliance with duties pertaining to the PSCom and other entities;

c) Disclosing information made available by the Group’s companies as regards the disclosure of privileged information and other communications to the market and the publication of periodic financial statements;

d) Keeping the Executive Committee informed of fee-dback from institutional investors;

e) Monitoring the results of analyst research in order to ensure the correct assessment of the Company’s strategy and results;

f) Preparing and continually monitoring financial and operating benchmarks of competitors and peer groups;

g) Attracting the interest of potential institutional inves-tors, as well as a greater number of financial analysts;

h) Planning and preparing IRD activities, such as road shows and visits to investors;

i) Ensuring that the Investor Relations webpage on the Company’s website is kept permanently up-to-date.

57 Market Relations Representative

The Market Relations Representative is João Novais (telephone: +351 21 313 82 60 and e-mail: [email protected]).

58 Proportion and waiting time for information requests made in the year or pending from previous years.

and management of the Company’s risks. The imple-mentation of a GRC (Governance, Risk and Compliance) system is currently under preparation, which is expected to be concluded in the present financial year (2018).

55 Key elements of the internal control and risk ma-nagement systems implemented in the company with respect to the procedure for reporting financial information (article 245-A(1)(m)).

Notwithstanding C.III. 50 above, on 31 December 2017 there was not yet a procedure for the identification, assessment, monitoring, control and management of the Company’s risks whose transparency and reliability would enable the identification and improvement of the preparation and disclosure of financial information. The implementation of a GRC (Governance, Risk and Com-pliance) system is currently under preparation, which is expected to be concluded in the present financial year (2018).

IV. INVESTOR RELATIONS

56 Department responsible for investor relations, its composition, duties, information provided by the department and contact details.

The Company has an Investor Relations Desk (“IRD”) responsible for assisting investors. This department is dedicated to preparing, managing and coordinating all the Company’s activities in order to achieve its objectives with respect to shareholders, investors and analysts. The Investor Relations Desk is entrusted with the task of ensuring adequate communication with the latter in order to facilitate the investment decision-making process and the sustained creation of value for the shareholder, as well as financial markets. The IRD is also responsible for responding to information requests in a timely fashion and clarifying relevant facts about the Company’s business that have been disclosed as required by law, as well as for communicating effectively with shareholders, investors, analysts and financial markets, particularly with Euronext Lisbon and the PSCom.

148

ANNUAL REPORT 2017

The information mentioned herein is available on the Company’s website at www.luzsaude.pt, (link www.luzsaude.pt/en/luz-saude/governo-da-sociedade/) and at the Company’s registered office.

63 Place where financial reporting documents are availa-ble, which should be accessible for at least five years, as well as the half-yearly calendar of Company events, as disclosed at the beginning of each six-month pe-riod, including, among others, general shareholder meetings and disclosure of annual, half-yearly and where applicable, quarterly financial statements.

These documents are available on the Company’s we-bsite at www.luzsaude.pt (linkhttp://www.luzsaude.pt/pt/investidores/informacao-financeira/) and at the Company’s registered office.

64 Place where convening notices for the general sha-reholders meetings and all preparatory and subse-quent information related thereto are available.

The information mentioned herein is available on the Company’s website at www.luzsaude.pt (linkhttp://www.luzsaude.pt/pt/investidores/informacao-acionista/assembleias-gerais/) and at the Company’s registered office.

65 Place where the historical archive of resolutions pas-sed at the company’s general shareholder meetings, the share capital represented and voting results for the preceding three years is available.

The information mentioned herein is available on the Company’s website at www.luzsaude.pt (linkhttp://www.luzsaude.pt/pt/investidores/informacao-acionista/assembleias-gerais/) and at the Company’s registered office.

For the financial year ended on 31 December 2017, information requests received were answered within one business day.

V. WEBSITE

59 Address(es).

Company’s website: www.luzsaude.pt

60 Place where information is available about the name, public company status, registered office and other details referred to in article 171 of the Portuguese Company Code.

The mentioned information is available on the Company’s website at www.luzsaude.pt and at the Company’s registered office.

61 Place where the bylaws and internal regulations of the bodies and/or committees are available.

The Company’s Bylaws are available on the Company’s website at www.luzsaude.pt (link http://www.luzsaude.pt/pt/luz-saude/governo-da-sociedade/estatutos-da--sociedade/) and at the Company’s registered office. The internal regulations of the Company’s Audit Board and Advisory Board are available for consultation at the Company’s registered office. On the present date, there are no other internal regulations for the Company’s bodies and/or committees. As referenced above, the mentioned documents are presently under discussion and are expected to the approved and implemented during the 2018 financial year.

62 Place where information is available on the names of members of the governing bodies, the market relations representative, the investor representative desk or equivalent structure, their respective duties and contact details.

149


to hold 98.23% of the Company’s share capital by the end of that year.

Therefore, the composition of the Remuneration Com-mittee was adapted to the Company’s new situation, namely as regards its governance model, shareholder structure and free float. Following this change, this body ceased to have independent members. Its members are now as follows:• Chairman of the Remuneration Committee: Lan Kang• Member of the Remuneration Committee: Rogério

Campos Henriques• Member of the Remuneration Committee: Jose M.

Alvarez Quintero

The Remuneration Committee therefore came to include two members of another governing body for which it stipulated the respective remuneration.

The three members thereof did not have any family ties with members of those governing bodies, whether as spouses, relatives by blood, marriage or similar, up to and including third-degree relatives.

68 Knowledge and experience of the members of the Remuneration Committee in matters relating to remuneration policy.

The members of the Remuneration Committee have the necessary and adequate knowledge to reflect, manage and decide on all matters entrusted to the Remuneration Committee, given the mentioned below.

The Remuneration Committee is made up of three members with vast professional experience, namely in insurance, finance and consulting. In effect, the members of the Remuneration Committee have held corporate po-sitions in several companies, including listed companies.

I. POWER FOR DETERMINING REMUNERATION

66 Powers for determining the remuneration for the Company’s governing bodies, members of the exe-cutive committee or delegated director and senior officers.

The Remuneration Committee is the body responsible for determining the remuneration of the governing bodies (Board of Directors, Audit Board and members of the Board of the General shareholders meeting), notwiths-tanding other benefits approved by the shareholders in the General Shareholders Meeting.

II. REMUNERATION COMMITTEE

67 Composition of the remuneration committee, in-cluding the persons or legal entities hired to provide support services thereto and a statement on the independence of each of its members and advisors.

Article 23 of the Company’s Bylaws provides that the remuneration of members of the governing bodies is set by a Remuneration Committee made up of three members elected for 4-year period by the General Sha-reholders Meeting. The latter will appoint the respective chairperson from among the committee members. In the case of members of the Board of Directors, a variable remuneration may be added to the fixed remuneration. All or a portion of the variable remuneration may corres-pond to a percentage of the Company’s consolidated profits. In the latter case, the overall percentage alloca-ted to Directors may not exceed, in each financial year, 10% of the consolidated profits of that financial year. Remuneration Committee resolutions will be passed by a simple majority of votes.

In 2015, we sought to simplify the Company’s governance structure due to the Change in Shareholder that took place in 2014 and that resulted in Fidelidade coming

04.1.4 Remuneration

150

ANNUAL REPORT 2017

III. REMUNERATION STRUCTURE

69 Remuneration policy for the management and super-visory bodies referenced in article 2 of Law 28/2009 of 19 June.

The Company’s Remuneration Committee passed a resolution in its meeting held on 30 March 2015 whereby this committee will adapt the Company’s remuneration policy to its new situation, with the assistance of the external consultant “Heidrick & Struggles”, whereby one shareholder held approximately 98% of the share capital and voting rights.

Therefore, the Remuneration Committee approved a new remuneration policy for the Company in its meeting held on 27 November 2015 and was put to the approval of the Company’s General Shareholders Meeting.

Therefore, the Extraordinary General Shareholders Meeting, that took place on 20 January 2016, approved the Luz Saúde Governing Body Remuneration Policy found below.

The Annual General Shareholders Meeting held on 25 May 2017, approved that the Luz Saúde Governing Body Remuneration Policy, approved in the Extraordinary General Shareholders Meeting held on 20 January 2016, be maintained for the year of 2017.

Remuneration policy of the governing bodies of Luz Saúde, S.A., a public company (“Luz Saúde”)

1. Approval process for the Remuneration Policy

a) Approval

The Remuneration Policy for Luz Saúde’s governing bodies (“Remuneration Policy”) was approved by the Remuneration Committee on 27 November 2015.

b) Remuneration Committee’s Mandate

Pursuant to article 23 of the Bylaws, the Remunera-tion Committee is responsible for determining the remuneration of the members of Luz Saúde’s gover-ning bodies.

Under the Short-Term Variable Remuneration and Medium-Term Variable Remuneration Schemes, he-reinafter Schemes, the Remuneration Committee is entrusted with: • Stipulating the rules of the remuneration schemes

and the terms and conditions of the amounts granted thereunder;

• Stipulating the criteria for the allocation of Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) on the vesting date;

• Setting and verifying that performance goals are met in order for RSUs and PSUs to be granted and vested;

• Promoting training to make the terms and intentions of the remuneration scheme rules effective.

The Remuneration Committee is currently made up of 3 members, appointed by the General Shareholders Meeting of 9 February 2015, to carry out their duties until the end of the 2014/2017 mandate.

c) Composition of the Remuneration Committee

Lan Kang - ChairwomanLan Kang is Senior Advisor to the Chairman and Head of Human Resources of the Fosun Group.

Rogério Campos HenriquesCurrently, Chief Information Officer and an Executive Member of the Board of Directors of Fidelidade – Com-panhia de Seguros, S.A.. In addition to Information Te-chnology (IT), he is responsible for Human Resources, Process Improvement and various support areas in the organization. In APS (the Portuguese Association of Insurance Companies (Associação Portuguesa de Seguradoras)), he coordinates the Technical Committee of “Segurnet” - the APS system’s platform that provides services to Portugal’s insurance companies.

Jose M. Alvarez QuinteroHe is an Executive Member of the Board of Directors of Fidelidade – Companhia de Seguros, S.A. and Fi-delidade Assistência – Companhia de Seguros, S.A. and Chairman of other Group companies. He is also Chairman of the Permanent Committee of the Auto Insurance and Accidents of the Portuguese Association of Insurance Companies (Associação Portuguesa de Seguradoras).

151


2. Remuneration of members of the Board of the General Shareholders Meeting

The members of the Board of the General Shareholders Meeting earn a fixed monthly remuneration paid twelve times a year.

3. Members of the Audit Board

The members of the Audit Board earn a fixed monthly remuneration paid twelve times a year.

4. Chairperson and Non-executive Members of the Board of Directors

Currently, the Chairman and non-executive members of the Board of Directors are remunerated by other Group companies, or related entities, and therefore do not earn any remuneration, without prejudice to the right to be reimbursed for costs borne in and for the purpose of performing their duties.

5. Members of the Executive Committee

a) Remuneration

Members of the Executive Committee can earn diffe-rent remunerations, depending on the relevance of the duties performed.

The members that perform executive duties in ma-nagement bodies of companies in a controlling and/or group relationship with Luz Saúde or that perform specific duties by indication of the Board of Directors may be remunerated by those companies, depending on the relevance of the duties performed.

b) Remuneration composition

The remuneration is made up of a fixed component and a variable component.

The remuneration of members of the Executive Commi-ttee is fixed annually by the Remuneration Committee, until the end of April of each year, based on the perfor-mance assessment of the prior financial year.

A Remuneration Committee representative shall be present in every General Shareholders Meeting in which matters of governing body remuneration are dealt with.

d) External consultants

The external consultant used in 2014 to assist the Remu-neration Committee in determining the Remuneration Policy was Heidrick & Struggles.

The referenced consultant does not provide additional human resource services to Luz Saúde.

Heidrick & Struggles performed a study based on its market knowledge and information available from Annual Reports and Corporate Governance Reports of listed PSI 20 com-panies, in light of the following factors - EBITDA, Net results, Net assets and Market capitalization. This analysis enabled it to determine the salary principles and benchmark that may be applied to executive and non-executive management bodies, as well as to members of the supervisory bodies and the Board of the General Shareholders Meeting.

Heidrick & Struggles performed a detailed analysis of the referenced policies, segmenting them according to the following assumptions:• The payment package allocated and the weight of the

various captions on remuneration;• The assessment criteria of the remuneration’s variable

component;• The limitation mechanisms of the variable remuneration;• The possible deferral of the variable component of

the remuneration;• The payment method of the variable remuneration:

in cash and the existence of a share allocation plan or stock options;

• The existence of conditions intended to limit or elimi-nate the payment of the variable remuneration.

e) Company groups used for purposes of comparison

When determining the Remuneration Policy, the Re-muneration Committee took into account the study performed by Heidrick & Struggles, as well as the salary benchmark referenced therein and the remuneration policy assumptions adopted by comparable companies in Portugal, listed and unlisted PSI 20 companies.

152

ANNUAL REPORT 2017

When the variable portion is allocated, the exact amount and its relative weight in the total remuneration will fluc-tuate in each year depending on the level of compliance with the annual goals, detailed in the annual budget, as approved by the Board of Directors.

e) When remuneration is stipulated

Remuneration, in its variable and fixed components in-dicated below, shall be stipulated by the Remuneration Committee and disclosed to each recipient following the individual performance assessments and always within thirty days as of the approval of the accounts relative to the prior financial year by the General Shareholders Meeting.

c) Limitations to remuneration

The fixed portion will be limited as determined by the Remuneration Committee and will represent a minimum of 55% of the Total Annual Remuneration.

As set out in the Bylaws, the variable portion will be limited to a maximum of 10% of the Luz Saúde Group’s consolidated profits in the year it is granted.

d) Balance in the remuneration

The fixed portion will represent nearly 55% of the total remuneration. The remaining percentage will be allo-cated as a variable portion, when the conditions for the respective allocation have been met.

f) Criteria for determining the variable component and time of payment

Annual Total Remuneration

Fixed Portion(c. 55%)

Variable Portion (c. 45%)

Associated to Medium-Term Performance

Medium-Term Variable Remuneration

(MTVR)(c. 15% Total Rem.)

Associated to Short-Term Performance

Annual variable remuneration (AVR)(c. 30%) Total Rem.

Immediate AVR: Cash (c.50%)

Deferred AVR: Cash (c.25%)

PerformanceStock Units

Restricted Stock Units (c.25%)

153


All STVR amounts shall be paid within thirty days as of the passing of a resolution to approve Luz Saúde’s annual accounts by the General Shareholders Meeting.

The STVR is divided into equal parts between the im-mediate portion (“Immediate STVR”), paid in cash, following the approval of that year’s annual accounts, and a portion deferred for a 3-year period (the Deferred Variable Remuneration (“Deferred STVR “).

Deferred STVR is divided into two parts of approximate equal weight, one part in cash, the other in Restricted Stock Units (“RSUs”).

The number of RSUs to be granted is the result of the value associated with this component of the Deferred STVR over the value of the Unit on the granting date. The value of each RSU on the granting date shall be calculated with reference to the Book Value per Luz Saúde share based on the consolidated accounts for the last year.

The granting of RSUs is communicated to each member by way of a Certificate issued by the Company, descri-bing the following:• The granting date;• The total number of awarded RSUs;• The vesting date;• Any other terms and conditions that, in the Remune-

ration Committee’s opinion, are pertinent.

At the time of granting, the members of the Executive Committee may choose to convert into RSUs the deferred

The variable component is divided into two sub-com-ponents.

A) Short-Term Variable Remuneration (“STVR”)

The STVR pertains to Short Term Performance and will weigh-in at approximately 30% of the Total Annual Remuneration.

The STVR shall be calculated by the Remuneration Committee, in light of the following factors: • Fulfilment of the main overall goals set out in the

Annual Budget approved by the Board of Directors for the year to which the STVR, taking into account consolidated EBITDA, the Net Results for the financial year, the Consolidated Revenue and Capital Employed (Net fixed assets + Working capital). These goals will weigh-in at 80% in determining the fulfilment of the annual goals.

• Performance according to non-financial criteria, in-cluding the individual performance of each member of the Executive Committee according to the CEO’s qualitative appraisal of his/her colleagues in the Exe-cutive Committee and the Remuneration Committee’s appraisal of the CEO. This qualitative assessment will weigh-in at 20% in determining the fulfilment of the annual goals and will be assessed on a scale of per-centages (0%-110%). Under this assessment criteria, variable factors such as the fulfilment of goals set out in the strategic plan, company reputation, organisational environment and business sustainability indicators can be taken into account. The factors that shall be asses-sed shall be reviewed and disclosed every year by the Remuneration Committee, in light of the challenges Luz Saúde has faced in that year.

The STVR amount shall be determined in light of the assessment carried out on this set of factors. Possible extraordinary constraints that may have affected these factors will be taken into consideration.

The STVR may vary with the degree of fulfilment of the goals and a mathematical conversion algorithm is applied over the individual fixed remuneration. In this regard, a cap for goal fulfilment levels equal to or greater than 110% and a floor for goal fulfilment levels lower than 90% are provided for. In short:

Thresholds for Level of Fulfilment of Goals

STVR Multiplier (discreet values)

>=

90,0%

92,5%

95,0%

97,5%

102,5%

105,0%

107,5%

110,0%

<

90,0%

92,5%

95,0%

97,5%

102,5%

105,0%

107,5%

110,0%

0%

40%

45%

50%

55%

58%

62%

72%

75%

154

ANNUAL REPORT 2017

The granting of MTVR is communicated to each member by way of a Certificate issued by the Company, descri-bing the following:• The granting date;• The total number of awarded PSUs;• The performance conditions underlying the vesting

of the PSUs on the vesting date;• The performance period underlying the PSUs;• The vesting date;• Any other terms and conditions that, in the Remune-

ration Committee’s opinion, are pertinent.

The number of PSUs to be granted at the end of the performance period (3 years) shall be calculated in terms of average ROE throughout that period. The perfor-mance multiplier shall be associated with the degree of attainment of the performance goal previously defined in the Company’s business plan.

Average ROE at the end of Performance the performance period (3 years) Multiplier[140% target; +∞] 1,5

[120% target; 139% target 1,2

[90% target; 119% target] 1,0

[-∞; 89% target] 0

The Company shall, within the period stipulated by the Board of Directors, but never exceeding 3 months as of the vesting date, pay the holder in cash the amount corresponding to the PSUs, based on their value on the vesting date.

g) Mechanisms to Limit Variable Remuneration

Deferred STVR and MTVR are subject to two general limitations:

a) Its payment is deferred for a 3-year period; and

b) shall only be allocated if sustainable given Luz Saúde’s financial situation.

If a member of the Executive Committee terminates his/her appointment in that body during the Deferred STVR or MTVR deferral period (vesting period), for reasons

cash amounts. The conversion value shall be calculated with reference to the Book Value per Luz Saúde share based on the consolidated accounts for the last year. The Remuneration Committee shall be given notice of this intention by the interested party within thirty days as of the date on which the latter is becomes aware of the RSUs granted to him/her.In each of the following three years, the vesting of 1/3 of the RSUs granted on the date of approval of the year-end account by the General Shareholders Mee-ting. The value of each RSU on the vesting date shall be calculated with reference to the Book Value per Luz Saúde share based on the consolidated accounts for the year prior to vesting, approved by the General Shareholders Meeting. This value shall be adjusted to reflect any possible profit distributions made and other events with an impact on capital between the date of granting and the date of vesting. The RSUs shall be paid in cash within the abovementioned period of thirty days as of the approval of Luz Saúde’s annual accounts by the General Shareholders Meeting.

B) Medium-Term Variable Remuneration (“MTVR”)

The goal of MTVR is to:• Align directors’ interests with those of the Company

by holding Performance Stock Units (“PSUs”);• Retain and incentivise directors to contribute to the

Company’s long-term growth and results.

The MTVR pertains to Medium-Term Performance and will weigh-in at approximately 15% of the whole of the Total Annual Remuneration.

The possible granting of MTVR shall be stipulated by the Remuneration Committee within the period indicated in e) above and will entail an assessment of the overall positive performance with reference to the previous year, through the granting of PSUs with a 3-year vesting period for the all of them. This entails the cost recogni-tion until the time of vesting.

Notwithstanding different vesting mechanisms, the calculation method for the value of the PSUs on the granting and vesting dates and the payment of the amount inherent to those PSUs shall be identical to the above stated for RSUs.

155


i) Performance assessment criteria

The performance assessment of executive directors is based on the following financial and non-financial criteria:• “EBITDA”, an indicator that shows Luz Saúde’s operational

profitability and measures the ability to generate results before interest, tax, depreciations and amortizations of the financial year;

• Net Profit of the Financial Year, an indicator that shows the contribution to shareholders, already with the deduction of elements not captured by EBITDA;

• “Capital Employed” (Net fixed assets + Working capi-tal), an indicator that measures the levels of capital invested in the operation;

• Individual Performance of each member of the Exe-cutive Committee, in order to identify the relative contribution of each executive director to Luz Saúde’s overall results. Under this assessment criteria, variable factors such as the fulfilment of goals set out in the strategic plan, proactivity in promoting the company’s reputation and organisational environment, contribu-tion to business sustainability, among others can be taken into account. The factors that shall be assessed shall be reviewed and disclosed every year by the Remuneration Committee, in light of the challenges Luz Saúde has faced in that year.

Whenever there are significant changes to the annual budget and/or Company Business Plan, those same changes, when deemed justified, should be reflected in the indicators and goals used to assess performance of the members of the Executive Committee.

j) The main parameters and rationale for any annual bonus scheme and any other non-monetary benefits

There are no other forms of remuneration in addition to the fixed and variable remuneration described in the present Remuneration Policy.

k) Remuneration paid in the form of profit sharing or the payment of bonuses and the reasons for which such bonuses and/or share in profits are granted

Notwithstanding the possibility of granting profit shares, calculated for the purpose of stipulated STVR and MTVR payments, there are no other forms of remuneration in

outside his/her control (namely, illness, death, disability, or non-renewal of the mandate as an executive director), the granted amounts will become due on the date of termination of his/her appointment and the previously granted RSUs and PSUs shall be converted and paid in cash on that date.

If during the Deferred STVR or MTVR deferral period, any member of the Executive Committee tenders resig-nation on his/her initiative or if he/she is liable for the termination of his/her appointment, the components shall no longer be due.

In the event of a change of control that results in a change in the Group to which Luz Saúde belongs, the members of the Executive Committee may opt for early payment of the accumulated amounts to the date on which that change takes place and previously granted RSUs and PSUs shall be paid in cash on that date.

It is the Remuneration Committee’s duty to verify that the financial situation’s sustainability conditions that allow payment of the deferred portion of the STVR and MTVR to be carried out are met.

The payment of PSUs is further limited by Return on Equity (ROE) throughout the 3-year performance period according to the previously detailed rule.

h) Rules that apply to the Variable remuneration

Any decisions concerning the regulation of Deferred ASTVR and MTVR, including on the interpretation of its rules, shall be made by the Remuneration Committee.

The RSUs and PSUs or any rights related thereto cannot be sold, assigned, transferred, pledged or encumbered.

The ASTVR and MTVR scheme does not apply in the context of any employment arrangement that may exist between any member of the Executive Committee and Luz Saúde or any of its subsidiaries. The rights and duties of any holder of ASTVR and MTVR, arising from the exercise of executive management duties, shall not be affected by his/her participation in the ASTVR and MTVR Scheme, save as regards the application of the Scheme rules.

156

ANNUAL REPORT 2017

With the exception mentioned in paragraph (m) of the previous number, there are no other payments or com-pensations provided for in the case of the termination of appointment of a director and any termination by mutual agreement requires prior approval of the Remuneration Committee regarding amounts involved.

70 Information on how remuneration is structured so as to align the interests of the management body members with the company’s long-term interests, how it is based on the performance assessment and how it discourages excessive risk taking.

As mentioned in D.II.69 above, non-executive directors are not remunerated by the Company. As a result and as regards these directors, there are no payments de-pendent neither on Luz Saúde’s performance nor value. This is in accordance to the applicable recommendations pertaining to these matters.

The executive director remuneration structure is compri-sed of a fixed component and a variable component. The latter is calculated according to financial and non-financial criteria and there is an adequate proportion between the two components, as detailed in D.III.69 above.

71 Reference, if applicable, to the existence of a variable remuneration component and information on the impact that the performance assessment will have on this component.

The executive director remuneration structure is compri-sed of a fixed component and a variable component. The executive directors’ performance weighs-in on the variable component. For further detail, please see D.III.69 above.

72 Deferred payment of the variable remuneration component and length of the deferral period.

The structure of executive director remuneration is comprised of a fixed component and variable compo-nent. The latter is split into two sub-components: the annual variable remuneration and the medium-term variable remuneration.

addition to the fixed and variable remuneration described in the present Remuneration Policy.

l) Compensations paid or due to former executive members of the management body related to the termination of their appointment during the finan-cial year

No compensation was paid or is due to former members of the Executive Committee related to the termination of their appointment.

m) Contractual limitations to compensation paid for the dismissal without just cause of a director and its relationship with the variable component of the remuneration

Except for the award of recognition referenced below approved in the Company’s General Shareholders Meeting of 22 January 2014, there are no other agreements that stipulate amounts to be paid to Executive Committee members in the case of dismissal without just cause.

In effect, in that Shareholders General shareholders meeting and taking into account the continuous mana-gement positions in the Group held for nearly 15 years by Isabel Maria Pereira Aníbal Vaz, in addition to her role in the promotion of the Group’s business development, an award of €850,000 to the latter was approved in recognition of professional services rendered to the Group. This amount will be paid in one lump sum at the time Isabel Maria Pereira Aníbal Vaz terminates her role as member of the Company’s Board of Directors, for any reason outside her responsibility.

n) Estimate of the amount of relevant non-monetary benefits considered as remuneration that is not covered by the paragraphs above

No relevant non-monetary benefits are attributed to directors.

6. Rules that apply to all members of the management body

a) Payments related to the dismissal or termination by mutual agreement from the duties of director

157


There are no other forms of remuneration, in addition to the fixed and variable remuneration described in the present remuneration policy, save for those referenced in D.III.77.

76 The main characteristics of supplementary pension or early retirement schemes for directors and the date these schemes were individually approved at the general shareholders meeting.

The Company has no supplementary regimes for pen-sions or early retirement for directors. This point is therefore not applicable.

IV. REMUNERATION DISCLOSURE

77 Annual amount of overall and individual remuneration paid by the company to members of its management body, including fixed and variable remuneration and various components on which the latter is based.

All the remunerations paid to members of the Company’s management body in 2017 (including remunerations from the Company, Group companies or the ACE) are listed in the following table:

One of the portions of the annual variable remuneration is deferred for a 3-year period (deferred annual variable remuneration). For further detail, please see D.III.69 above.

73 The criteria used for allocating variable remuneration in the form of shares, as well as the holding period of those shares by executive directors, agreements related to those shares, including hedging or risk transfer agreements, respective limit, and its rela-tionship to the total amount of annual remuneration. Compare with D.III.69 above.

Members of the company’s management body have not entered into agreements with the Company or third parties intended to mitigate the risks inherent to the variability of their remuneration.

74 Criteria on which the allocation of the variable remu-neration in the form of stock options is based, the deferral period and strike price. Please see D.III.69 above.

75 The main parameters and rationale for any annual bo-nus scheme and any additional non-financial benefits.

Annual Total Variable Insurance Total 2016 Remuneration Remuneration and benefits (€ thousands)

Jorge Manuel Batista Magalhães Correia Not remunerated Not remunerated Not remunerated Not remunerated

Chen Qiyu Not remunerated Not remunerated Not remunerated Not remunerated

Isabel Maria Pereira Aníbal Vaz 398.4 280.6 3.1 682.1

José Manuel Alvarez Quintero Not remunerated Not remunerated Not remunerated Not remunerated

Lingjiang Xu Not remunerated Not remunerated Not remunerated Not remunerated

Wei Song Not remunerated Not remunerated Not remunerated Not remunerated

Ivo Joaquim Antão 283.4 211.3 2.9 497.6

João Paulo da Cunha Leite de Abreu Novais 283.4 205.5 2.8 491.7

Tomás Leitão Branquinho da Fonseca 283.4 205.6 2.6 491.6

Rogério Miguel Antunes Campos Henriques Not remunerated Not remunerated Not remunerated Not remunerated

Tucson Dunn II Not remunerated Not remunerated Not remunerated Not remunerated

158

ANNUAL REPORT 2017

81 Annual amount of overall and individual remunera-tion paid to members of the company’s supervisory body, for the purposes of Law 28/2009 of 19 June.

The aggregate remuneration paid to members of the Audit Board in 2017, as set by the Remuneration Com-mittee, was € 51,000.00.

The individual remuneration paid to effective members of the Audit Board in 2017 is as follows: • João Carlos Tovar Jalles: € 1,750.00 per month;• António Luís Castanheira Silva Lopes: € 1,250.00 per

month;• Clara José Cruz de Sequeira Viegas Penha Ventura: €

1,250.00 per month.

The alternate member of the Audit Board was not awar-ded any remuneration (Luís Manuel Pereira da Silva).

82 Remuneration of the chairman of the board of the general shareholders meeting for the reference year.

For the financial year ended on 31 December 2017, the Chairman of the Board of the General Shareholders Meeting was awarded €1,000.00 per month as remune-ration for carrying out those duties, making up a total of € 12,000.00 for the respective year.

V. AGREEMENTS WITH EFFECTS ON REMUNERATION

83 Contractual limitations to compensation paid for the dis-missal without just cause of a director and its relationship with the variable component of the remuneration.

Except for the award of recognition approved in the Company’s General Shareholders Meeting of 22 January 2014, there are no other agreements that set amounts to be paid to Executive Committee members in the case of dismissal without just cause.

In that Shareholders General shareholders meeting and taking into account the continuous management

78 Any amounts paid, for any reason whatsoever, by other companies in a controlling or group relationship or which are under common control.

All of the amounts mentioned in D.IV.77 above were paid by Luz Saúde subsidiaries or by the ACE, except for the following remunerations, which were directly paid by Luz Saúde:• Part of the fixed remuneration of Isabel Maria Pereira

Aníbal Vaz (134.68 thousand Euros);• Part of the variable remuneration of Isabel Maria Pereira

Aníbal Vaz (142.07 thousand Euros);• Part of the fixed remuneration of Ivo Joaquim Antão

(97.16 thousand Euros); • Part of the variable remuneration of Ivo Joaquim Antão

(109.06 thousand Euros); • Part of the fixed remuneration of João Paulo da Cunha

Leite de Abreu Novais (97.16 thousand Euros);• Part of the variable remuneration of João Paulo da

Cunha Leite de Abreu Novais (103.26 thousand Euros);• Part of the fixed remuneration of Tomás Leitão Bran-

quinho da Fonseca (97.16 thousand Euros);• Part of the variable remuneration of Tomás Leitão

Branquinho da Fonseca (103.36 thousand Euros).

79 Remuneration paid in the form of profit sharing and/or the payment of bonuses and the reasons for which such bonuses and/or share in profits are granted.

No remuneration payments to members of the Com-pany’s governing bodies in the form of profit sharing and/or bonuses were made, beyond the variable component of the remuneration described in D. III.69, D.IV.77 and D.IV. 78.

80 Compensation paid or due to former executive di-rectors due to the termination of their appointment during the financial year.

No compensation was paid or is due to former executive directors due to the termination of their appointment during the 2017 financial year.

159


VI. SHARE ALLOCATION OR STOCK OPTION PLANS

85 The plan and its respective beneficiaries. Please see D.III.69 above.

86 Characteristics of the plan (allocation conditions, share lock-up clauses, share price and strike price criteria, exercise period for the options, characteristics of the shares or options to be allocated, incentives to purchase shares and/or exercise options).

The description of the plan is detailed in D.III.69 above.

87 Stock options for company employees and staff.

The Company did not approve any stock option plans for company employees and staff.

88 Control mechanisms provided for in any employee--share ownership scheme, in as much as the voting rights are not directly exercised by those employees (article 245-A(1)(e)).

There are no control mechanisms for employee owner-ship of Company share capital.

positions held for nearly 15 years by Isabel Maria Pereira Aníbal Vaz, in addition to her role in the promotion of the Group’s business development, an award of €850,000 to the latter was approved in recognition of professional services rendered to the Group. This amount will be paid in one lump sum at the time Isabel Maria Pereira Aníbal Vaz terminates her role as member of the Com-pany’s Board of Directors, for any reason outside her responsibility.

84 The existence and description, including sums in-volved, of any agreements between the company and members of the management body and senior officers, pursuant to article 248-B(3) of the Portuguese Securities Code, that provide for compensation in the event of resignation, dismissal without just cause or termination of employment following a change in the control of the company (article 245-A(1)(l)).

To the best of the Company’s knowledge, there are no agreements between the Company and members of the management body or senior officers (pursuant to article 248-B(3) of the PSC) that provide for compensation in the event of resignation or dismissal without just cause or termination of employment following a change in the control of the Company or following a takeover bid.

I. CONTROL MECHANISMS AND PROCEDURES

89 Mechanisms implemented by the company to control related-party transactions (using for this purpose the concept as set out in IAS 24).

According to IFRS, the Company must disclose all transac-tions with related entities, as defined in IAS 24 (“Related Party Disclosures”), which may show that the Company’s business activities, financial position, operating income, profit or loss were affected by the existence of related parties and by transactions and outstanding balances

involving these entities. In addition, the Company and its subsidiaries must comply with laws governing the-se transactions. During the 2017 financial year, Group members entered into transactions with related third parties. The Company believes its transactions with related third parties were conducted under normal market conditions in all material respects.

The Company endeavours to conduct transactions with related parties according to principles of accuracy,

04.1.5 Related party transactions

160

ANNUAL REPORT 2017

transparency and strict observance of market compe-tition rules. These transactions are subject to specific administrative procedures that arise from compulsory laws, namely transfer pricing rules.

On 31 December 2017, the Company had not yet drawn--up a Regulation for Company transactions with quali-fied shareholders (pursuant to articles 16 and 20 of the Portuguese Securities Code) and their related parties (as defined in article 20(1) of the Portuguese Securities Code). The Company is currently rethinking its compliance model at the Group level and this document is being drafted therein. The mentioned document is expected to be approved during the 2018 financial year.

90 Transactions that were subject to control during the respective year.

Please see E.I.89 above. In 2017, given that the Com-pany had not yet drawn-up a Regulation for Company transactions with qualified shareholders and their related parties, there is nothing to report hereunder.

91 A description of the procedures and criteria applicable to the supervisory body’s intervention in the prior assessment of business transactions to be carried out between the company and qualified shareholders or entities related to them in any way, pursuant to article 20 of the Portuguese Securities Code.

Please see E.I.89 above. In 2017, given that the Com-pany had not yet drawn-up a Regulation for Company transactions with qualified shareholders and their related parties, there is nothing to report hereunder.

II. INFORMATION ON BUSINESS TRANSACTIONS

92 Place in the financial reporting documents where information on business transactions with related parties, pursuant to IAS 24, is available or, alterna-tively, where a copy of this information is available.

The main elements of business transactions with related parties, pursuant to IAS 24, are described in the note 29 of the annex to the consolidated financial statements in the 2017 Annual Report.

The Corporate Governance Code that governs the company or that it has voluntarily adhered to, pursuant to article 2 of the present Regulation.

The Company’s Shares were admitted to trading in the regulated market in 2014 and, as provided by law and PSCom Regulation 4/2013, the Company is now required to prepare an annual report on its corporate governance structure and practices, to be disclosed as a chapter of the annual management report or as an annex thereto, within four months of the close of the Company’s financial year.

Thereby, in 2014 and after a resolution was passed by the General Shareholders Meeting on 20 January 2014, as proposed by the Board of Directors, the Company adopted the PSCom Corporate Governance Code, becau-

se it considers this corporate governance code not only enables strict compliance with the applicable rules, but is also in line with the PSCom’s stated goal of standardi-sing these reports in order to facilitate their analysis and consultation by the market, given that it is the corporate governance code most commonly adopted by issuers of shares admitted to trading on the regulated market.

In 2017, the Company continued to be subject to this Code.

Place where the relevant Corporate Governance Code to which the issuer is subject is publically available (article 245-A(1)(p)).

The PSCom Corporate Governance Code adopted by the Company is available online at www.cmvm.pt.

04.2 Corporate governance assessment04.2.1 Adopted corporate governance model

161


Pursuant to article 245-A(1)(o), a statement should be included on the adherence to the selected corporate governance code, specifying any divergence from said code and the reasons for such divergence.

The presented information shall include, for each re-commendation:a) Information that enables a judgment on compliance

with the recommendation or reference to the section

of the report where the issue is discussed in detail (chapter, title, paragraph, page);

b) Grounds for any non-compliance or partial compliance thereof;

c) In the event of non-compliance or partial compliance, any alternative mechanism adopted by the company in pursuit of the same objective as the recommendation.

04.2.2 Compliance analysis of the adopted corporate governance code

No. Recommendation Compliance during the financial year Section beginning on 1 January 2017

I.

I.1.

I.2.

I.3.

Voting and Company Control

Companies shall encourage shareholders to attend and vote at general shareholders meetings, namely by not requiring too high a number of shares to be entitled to one vote, and shall implement the means necessary for voting by correspondence and electronically.

Companies shall not adopt mechanisms that hinder shareholder approval of resolutions, namely by requiring majorities higher than those prescribed by law.

Companies shall not create mechanisms intended to cause a mismatch between the right to receive dividends or subscribe new securities and the voting right of each ordinary share, unless duly justified in light of the long-term interests of shareholders.

Adopted The Company Bylaws provide that each 100 shares are entitled to one voting right. The General Shareholders Meeting is comprised of all shareholders with voting rights. Given that the ownership of 100 shares currently corresponds to an approximate shareholding of less than 0.0001% in the Company’s share capital, the Bylaws do not require too high a number of shares to be entitled to a voting right. Voting by correspondence is allowed.

Adopted Although the Bylaws provide for a constitutive quorum higher than prescribed by law: the Bylaws provide that, in a first call for a General Shareholders Meeting, the meeting cannot be held unless shareholders representing at least fifty per cent of the share capital are present or represented, regardless of the items on the agenda, while the law provides that the General Shareholders Meeting may pass resolutions whatever the number of shareholders present or represented, except to pass resolutions on certain matters, in which case the law requires a quorum of one-third of the share capital.

Adopted

B.I.12

B.I.14

B.I.12

162

ANNUAL REPORT 2017


I.4.

I.5.

II.

II.1.

II.1.1.

II.1.2.

II.1.3.

Company bylaws that limit the number of votes that may be held or exercised by a sole shareholder, either individually or in concert with other shareholders, shall also provide that the general shareholders meeting reassess such bylaw provision at least every five years – without majorities higher than those prescribed by law – and, for that resolution, all votes issued shall be counted regardless of said limitation.

Measures shall not be adopted that require the company to make payments or incur fees in the event of a change of control or a change in the composition of the management body and which are deemed likely to impair the free transferability of shares and the free assessment by shareholders of the performance of members of the management body.

Within the legal limits and unless the company is small in size, the board of directors shall delegate the day-to-day management of the company and those delegated powers shall be identified in the annual report on Corporate Governance.

The Board of Directors shall ensure the company acts in accordance with its objectives and shall not delegate its powers as regards the following: i) the definition of the company’s strategy and general policies; ii) the definition of the group’s corporate structure; iii) decisions that should be regarded as strategic due to their amount, risk or specific characteristics.

The General and Supervisory Board, in addition to its supervisory duties, shall take full responsibility for corporate governance, whereby, through a bylaw provision or its equivalent, it shall be required to issue a statement on the company’s strategy and main policies, the definition of the group’s corporate structure and the decisions considered strategic due to the amount or risk involved. This body shall also assess compliance with the strategic plan and the implementation of the company’s key policies.

Adopted

Adopted

Adopted

Adopted Although delegation is done “to the greatest extent permitted by law”, the Company believes that the Board of Directors retains powers concerning: i) definition of the company’s strategy and general policies; ii) definition of the group’s corporate structure; iii) decisions that should be regarded as strategic due to their amount, risk or specific characteristics, given that these strategic matters go beyond the Company’s “day-to-day management” for which powers are delegated to the Executive Committee.

Not applicable.

B.I.13

A.I.4

B.II.15 B.II.18 B.II.21

B.II.21

Not applicable

163



II.1.4.

II.1.5.

II.1.6.

II.1.7.

II.1.8.

II.1.9.

Unless the company is small in size, the Board of Directors and the General and Supervisory Board, depending on the adopted model, shall create the necessary committees in order to: (a) Ensure a competent and independent

assessment of the executive directors’ performance and its own overall performance, as well as of other committees that may exist;

(b) Reflect on the system structure and governance practices adopted, verify their effectiveness and propose measures for their improvement to the competent bodies.

The Board of Directors or the General and Supervisory Board, depending on the adopted model, shall set risk-taking goals and create control systems to ensure that the risks effectively incurred are consistent with those goals.

The Board of Directors shall include a number of non-executive members that ensure the effective monitoring, supervision and assessment of the activities of the remaining members of the management body.

Non-executive directors shall include an appropriate number of independent members, taking into account the adopted governance model, the size of the company, its shareholder structure and the respective free float .

Directors with executive duties, when so requested by other governing body members, shall provide any information requested in a timely and appropriate manner.

The chairperson of the executive management body or of the executive committee shall submit, as applicable, to the Chairperson of the Board of Directors, the Chairperson of the Audit Board, the Chairperson of the Audit Committee, the Chairperson of the General and Supervisory Board and the Chairperson of the Financial Committee, the convening notices and minutes of the respective meetings.

Not adopted The Board of Directors considers that performance assessment procedures, as well as reflections on the governance system, are and will be carried out in a form adequate to the Company’s interests by the Company’s non-executive Directors. The Company also relies on the Remuneration Committee, which has an active role in the performance assessment of Directors.

Not adopted The implementation of a GRC (Governance, Risk and Compliance) system is currently under preparation, a large part of which is expected to be concluded in the present financial year (2018)

Adopted

Adopted, with the caveat set out in section B.II.18, given the Company’s situation

Adopted Executive directors provide timely and adequate responses to all information requests from other members of the Company’s governing bodies.

Adopted The Executive Committee made timely pertinent information on the meetings held available to the Chairman of the Board of Directors and to the Chairman of the Audit Board.

B.II.27

C.III.54

B.II.18 B.II.24

B.II.18 B.II.24

164

ANNUAL REPORT 2017


II.1.10.

II.2.

II.2.1.

II.2.2.

II.2.3.

II.2.4.

II.2.5.

If the chairperson of the management body carries out executive duties, that body shall appoint from among its members an independent director to ensure the coordination of the work of other non-executive members, the conditions necessary for them to make independent and informed decisions or the existence of an equivalent mechanism for such coordination.

Depending on the adopted model, the Chairman of the Audit Board, the Audit Committee and the Financial Committee shall be independent under the terms defined by law and shall be suitably qualified to carry out his/her duties.

The supervisory body shall be the main liaison of the external auditor and the first recipient of the respective reports, and is responsible, namely, for proposing the respective remuneration and ensuring that the proper conditions for the provision of services are provided within the company.

The supervisory board shall annually assess the external auditor and propose his/her dismissal or the termination of the services agreement to the competent body whenever there is just cause therefor.

The supervisory body shall assess the operation of the internal control and risk management systems and propose adjustments as deemed necessary.

The Audit Committee, General and Supervisory Board and Audit Board shall issue an opinion on the work plans and resources allocated to internal audit services and services that ensure compliance with the rules applicable to the company (compliance services) and should be recipients of reports issued by these services at least when related to matters of financial reporting, the identification or resolution of conflicts of interest and the detection of potential illegalities.

Not applicable.

Adopted The Chairman of the Audit Board is independent and meets the legal qualification prerequisites.

Adopted

Adopted



B.II.18

B.III.32

B.III.37 B.V.45

B.V.45

C.III.55

C.III.55

165



II.3.

II.3.1.

II.3.2.

II.3.3.

II.3.4.

II.3.5.

All members of the Remuneration Committee or its equivalent shall be independent in regard to the executive members of the management bodies and such committee shall include at least one member with knowledge and experience in remuneration policy matters.

Any person or legal entity that provides or has provided services in the past three years to any structure under the management body, to the management body of the company itself or who has a current relationship with the company or company consultant shall not be hired to assist the Remuneration Committee in carrying out its duties. This recommendation also applies to any person or legal entity that is related thereto by an employment or services agreement.

A statement on the remuneration policy of the management and supervisory bodies referred to in article 2 of Law No. 28/2009 of 19 June, shall also contain the following: (a) Identification and details of the criteria for

determining the remuneration to be paid to the members of governing bodies;

(b) Information on the maximum potential amount, in individual terms, and the maximum potential amount, overall, to be paid to members of governing bodies, and the circumstances whereby these maximum amounts may be payable;

(c) Information on the whether or not payments for the dismissal or termination of appointment of directors is due.

A proposal for the approval of share award and / or stock option plans or plans based on share price variation for corporate body members shall be submitted to the General Shareholders Meeting. The proposal shall contain all the necessary information in order to correctly assess said plan.

A proposal for the approval of any retirement benefit scheme established for corporate body members shall be submitted to the General Shareholders Meeting. The proposal shall contain all the necessary information in order to correctly assess said system.

Not adopted, given the Company’s situation, as explained in section D.II.67

Adopted

Adopted

Adopted

Not applicable

D.II.67

D.II.67

D.III.69

D.VI.85

D.III.76

166

ANNUAL REPORT 2017


III.

III.1.

III.2.

III.3.

III.4.

III.5.

III.6.

III.7.

III.8.

The remuneration of the executive members of the management body shall be based on effective performance and shall discourage excessive risk-taking.

The remuneration of non-executive members of the management body and the remuneration of the members of the supervisory body shall not include any component whose value depends on the performance of the company or of its value.

The variable component of remuneration shall be reasonable overall in relation to the fixed component of the remuneration and maximum limits should be set for all components.

A significant part of the variable remuneration shall be deferred for no less than three years and the right to payment shall depend on the continued positive performance of the company throughout that period.

Members of the management body shall not enter into agreements with the company or with third parties, which intend to mitigate the risk inherent to variability of the remuneration set by the company.

Executive directors shall hold until the term of their mandate the company’s shares that were allotted by virtue of variable remuneration schemes, up to twice the value of the total annual remuneration, except for those that need to be disposed of to pay taxes arising from the benefit of said shares.

When the variable remuneration includes the allocation of stock options, the beginning of the exercise period shall be deferred for no less than three years.

When the dismissal of a director is not due to a serious breach of their duties nor to their unsuitability for the normal exercise of their duties, but is nonetheless due to inadequate performance, the company shall be endowed with the adequate and necessary legal mechanisms so that any damages or compensation, beyond that which is legally due, are not required.

Adopted

Adopted

Adopted

Adopted

Adopted

Adopted

Adopted

Adopted

D.III.69 D.III.70 D.III.71

D.III.69 D.IV.77 D.IV.81

D.III.69

D.III.69 D.III.72 D.III.74

D.III.73

D.III.69 D.III.73

D.III.69 D.III.86

D.V.83

167



IV.

IV.1.

IV.2.

IV.3.

V.

V.1.

V.2.

The external auditor shall, within the scope of its powers, verify the implementation of the governing body’s remuneration policies and systems, as well as the efficiency and effectiveness of internal control mechanisms and report any shortcomings to the company’s supervisory body.

The company or any entity with which it maintains a controlling relationship shall not engage the external auditor or any entity in a group relationship with the external auditor or that is part of the same network, for services other than auditing services. If there are reasons for hiring such services - which shall be approved by the supervisory body and detailed in the Annual Report on Corporate Governance - said services should not exceed 30% of the total value of services rendered to the company.

Companies shall promote auditor rotation after two or three mandates, depending on whether those mandates are four or three years long. The auditor’s permanence beyond this period shall be justified in a specific statement issued by the supervisory body where it explicitly addresses the auditor’s independence and the benefits and costs of its replacement.

The company’s business with qualified shareholders or entities with which they are in any relationship pursuant to article 20 of the Portuguese Securities Code, shall be conducted under normal market conditions.

The supervisory or oversight body shall establish procedures and criteria to define the level of relevance of business with holders of qualified shareholdings - or entities with which they are in any of the relationships described in article 20(1) of the Portuguese Securities Code. Entering into relevant business transactions is dependent upon a prior statement issued by that body.

Not adopted The external auditor’s powers are limited to the legal powers set out in article 420 of the PCC and, by reference, to article 446(3) of the PCC.

Adopted

Adopted

Adopted

Not adopted Given the Company’s shareholder structure (and especially since the Change in Shareholder, the respective free float), the referenced procedure was not implemented.

B.III.37 B.V.46

B.IV.40

E.I.89

168

ANNUAL REPORT 2017


VI.

VI.1.

VI.2.

Companies shall provide access to information on their progress and their current economic, financial and governance situation via their websites in both Portuguese and English.

Companies shall ensure the existence of an investor relations desk and market liaison office, which responds to requests from investors in a timely fashion and shall keep a record of the submitted requests and their processing.

Adopted

Adopted

C.V.59 C.V.60 C.V.61 C.V.62 C.V.63 C.V.64 C.V.65

C.IV.56 C.IV.58

3. Other information

The company shall provide any additional data or in-formation that is not included in the foregoing and is relevant to understanding the adopted model and governance practices.

There is no other information or data to report.

169


05SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY REPORT

172

ANNUAL REPORT 2017

05Luz Saúde’s Sustainability and corporate social responsibility report 201705.1 ContextThis chapter answers the legal requirements intro-duced by the Decree of Law number 89/2017, of July 28th, being, under the terms of the article 66 B of the Commercial Societies Code, the non-financial report of Luz Saúde, S.A..

The current frame of reference for social and corporate responsibility of European organizations is based on the principles outlined in the European Union’s Corporate Social Responsibility strategy, as set out in 2012, and the United Nations Agenda 2030 for Sustainable De-velopment, unanimously approved at the UN Summit September 2015, involving governments, companies and civil society.

The European principles recognize the importance of maximizing the value of corporate organizations, pro-moting innovation and integrating social, environmental, ethical and human rights concerns in management. They measure Social Responsibility by assessing the impact of organizations on their stakeholders (em-ployees, customers and families, suppliers, community and shareholders). These principles define as priority intervention areas: acting with transparency, promoting training, education, innovation, raising awareness and encouraging good practices, supporting multi-stakeholder initiatives, cooperating with Member States and consu-mer information. And they adopt as reference the Ten Principles defined by United Nations Global Compact which encourage organizations to intervene responsi-bly in four areas: human rights, labor, environmental protection and fight against corruption.

The United Nations’ 2030 Agenda for Sustainable De-velopment became the new global benchmark for

organizations regarding social responsibility, involving governments, companies and civil society. It sets out 17 Sustainable Development Goals (the SDGs), with 169 targets until the end of the period in the areas of poverty, food safety, health, sustainable consumption and production, economic development, employment, infrastructures, sustainable management of natural resources, climate change, gender equality, fostering peaceful and inclusive societies, access to justice and organizations accountability.

The European Parliament and Council Directive No. 2014/95/UE obliged large companies and parent com-panies of a large group with more than 500 employees to disclose non-financial information. The aim is to help companies to disclose pertinent, useful and more comparable non-financial information (regarding envi-ronmental, social and governance domains) in order to promote more transparency in management, stronger growth and employment, and also provide transparency to stakeholders. It considers that adequate disclosure of non-financial information is a key element in ensuring a sustainable financial situation. In this regard, and in connection with the 2030 Global Agenda, the European Union published in September 2015 a communication entitled “The next steps towards a sustainable European future”, where it is considered that the content of the Directive makes an important contribution to the de-velopment of the Sustainable Development Goals, in particular for SDG 12 (to ensure sustainable consumption and production patterns).

DL 89/2017 of July 2017 transposed into the internal legal order the Community Directive of obligation to communicate non-financial information.

173

05 SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY REPORT

05.2 Luz Saúde Group’s commitment to sustainability and social and corporate responsibility

Luz Saúde Group’s social responsibility commitment -aligned with the aforementioned frame of reference -is based on the transparency of its activity, the res-pect for its stipulated Mission, Vision and Values, the development of an ethical and “positive capitalization” relationship with its stakeholders (employees, customers and families, suppliers, community and shareholders), the continuous promotion of innovation, while integra-ting social, environmental, ethical and human rights concerns, as well as pursuing policies that preserve environmental sustainability, namely energy efficiency, reduction of CO2 emissions and the adequate sorting of waste.

Regarding human rights, equality between men and women, non-discrimination, combat to corruption and bribery, Codes of Conduct are in force at Hospital da Luz Lisboa and Hospital Beatriz Ângelo, with extension planned for all units in 2018. And also in 2018 will enter in force, for all units, a Code of Ethics.

Reflecting the need to communicate reliable and consis-tent information on corporate and social responsibility, which incorporates environmental sustainability, Luz Saúde has been selecting and collecting indicators (non--financial indicators) that demonstrate the relationship with its stakeholders, highlighting, when applicable, the existing “positive capitalization”. In some areas GRI (Glo-bal Report Initiative/ version G3.1) indicators have been used, identified as suitable to the activity developed.

This social and sustainability report of the Luz Saúde’s Group is the first to be drafted under DL 89/2017, which transposed to the internal legal order the Community Directive 2014/95/UE.

Below is presented information concerning the indicators of connection with Luz Saúde’s Group stakeholders, regarding environmental sustainability.

05.2.1 Employees Encouraging the 12,492 group’s employees (as at De-cember 31 2017) with agile communication, a work culture in multidisciplinary teams, the transfer of know-ledge and good practices among employees and units, a stimulating and innovative work environment that enables continuous improvement and the attraction and maintenance of the best professionals, is a permanent and complex challenge.

The following table shows the number of Luz Saúde Group employees divided by gender and by doctors, nurses and other professional groups (which include, for example, health technicians, auxiliary staff and ad-ministrative services).

174

ANNUAL REPORT 2017

There was a very consistent increase in the variation of the number of employees due to the growth in the Group’s operations. This growth is also consistent at gender and professional group levels. The gender divi-sion, with around 70% of female employees and 30% of male employees, reflects what is usual in the health area, with a traditional preponderance of female employees in some functions (nursing, auxiliary staff, receptionists and other support functions).

In any case, it should be noted that Luz Saúde, its ad-ministration and management teams have an absolute commitment to the principles of equality and non-discri-

mination, ensuring, in all respects, access to recruitment and selection, treatment and opportunities for both men and women.

• Training and developing our employees is a strategic focus of the Group. In addition to the training organized by each unit for its own professionals in specific thematic areas, we present in the next chart a summary of the training organized by Luz Saúde’s Group (in 2017 enti-rely by GLSMED Learning Health, Sociedade Anónima, which belongs to the Group), aimed at in-house and outside professionals:

2017 2016Total No. of Employees 12,492 11,419Men 3,864 3,487Women 8,628 7,932No. of Employees by Professional Group Doctors 4,631 4,255Nurses 2,507 2,310Other Professionals 5,354 4,854

175


In 2017, Hospital da Luz Learning Health (HL Learning Health) began to incorporate, in addition to TeAM courses and training in cardiologic resuscitation (CPR), symposia in clinical areas promoted by the group’s units, in order to sound out the market, identify areas of interest and training actions with potential for further development and promotion within the simulation hospital, focusing on the incorporation of new teaching and training me-thodologies that promote effective learning and the transfer to clinical practice.

In 2017, Hospital da Luz Learning Health invested in equipment to improve learning effectiveness, focusing on increasing practical training and simulation, and obtained certification in the Gynecological Endoscopy Surgical Education and Assessment GESEA program of the European Academy of Gynecological Surgery and the European Society for Gynecological Endoscopy (ESGE), becoming the second certified center in Portugal and the first in Lisbon.

During the year, 239 events were organized, attended by a total of 6746 participants (from which 45% belonged to Luz Saúde’s Group), with a training volume of more than 56,000 hours. 55% of all participants were doctors, 19% nurses, 14% health technicians and 12% other professionals. On average, the events promoted by LH had a very positive evaluation (about 3.9 on a scale of 0 to 5). Also noteworthy was the Leaping Forward On-cology, a large congress in the area of Oncology, which was attended by more than 28 renowned speakers in various areas of oncology, 124 from international refe-rence institutions. This important congress was held at

Centro Cultural de Belém for 5 days with 20 sessions on different topics related to oncology, and attended by more than 1,186 people.

• Communication and Group Culture

Luz Saúde’s Information Magazines, including Luz Saú-de Beatriz Ângelo’s information, with 200,000 copies distributed in 2017, the Clinical Case Books with 5,000 copies distributed in 2017, the sites of the Group’s uni-ts, with a number of 3.3 million visits and the various internal events, of which the Luz Saúde Congress is highlighted, with 880 employees participants, constitute instruments and moments of dissemination of projects, innovation, experiences, knowledge and good practices, and promote a Group culture and the improvement in the relationship of trust with all Partners.

• Group’s employees access to health care:

Beginning in 2017, all employees, members of their fami-lies and their parents, have access to the health services provided in the different units, under especially favorable conditions, through a Health Plan for Employees. This Plan is complemented by a health insurance that covers all employees with employment contract.

• Support to the school activity of employees’ children

Continues the granting, at the beginning of the school year, of a monetary allowance for compensation of charges with the opening of the school year.

Seminars, Conferences, Symposiums, Courses and Workshops available to in-house and outside professionals

2016 2017Number of training sessions (Symposiums, conferences, workshops, journeys, other meetings) 266 239Number of participants 7,318 6,746Number of participants from outside the Luz Saúde’s Group 4,433 (61%) 3,682 (55%)Training Volume (hours) 47,998 56,447

176

ANNUAL REPORT 2017

In 2017, three new units (British Hospital in Lisbon and a Hospital and clinic in Madeira) were integrated in Luz Saúde’s Group. The Group thus totaled 24 units (1 public and 23 private), with a total of 1,650 beds (418 public and 1232 private).

For 2017, we highlight, due to their positive impact on customer relationship:

• Information made available on the units’ websites (3.3 million visits) and in Luz Saúde’s magazines (200,000 distributed copies).• Evidence regarding certifications and accreditations of services and units, customer satisfaction assessments (including GRI PR5), compliance with Quality and Safety parameters and the participation and positioning of Luz Saúde’s units in health performance indices and rating/indicators.• Making services and information more user-friendly trough the Customer Portal: an online area with reser-ved personal access, created so our customers can access their health information in a secure confidential environment. Provides a set of online administrative services, scheduling consultations and tests, consul-tation appointments and accessing results of some tests. It is available in Portuguese and English and can be accessed via computer, mobile phone or tablet, and the Hospital da Luz’s App. In 2017, the Customer Portal was available in 9 Luz Saúde Group units (Hospital da Luz Lisboa, Hospital da Luz Arrábida, Hospital da Luz Setúbal, Hospital da Luz Clínica de Oeiras, Hospital da Luz Clínica da Amadora, Hospital da Luz Póvoa de Varzim, Hospital da Luz Clínica de Cerveira, Hospital da Luz Clínica do Porto, Hospital da Luz Clínica de Amarante), and will be expanded to other units (Hospital da Luz Clínica de Odivelas, Hospital da Luz Clínica Vila Real), as planned, in the first half of 2018, along with the development of more functionalities to support our customers in ma-naging their health, such as the possibility of admission to the Hospital prior to their arrival.

05.2.2 Customers The relationship with customers and families is driven by an ongoing effort to improve the care provided, based on effectiveness, integrity, trust and quality of service. We seek to establish and maintain long-term relationships, ensuring that at each step of life, both in health and sickness, suitable services, information and support are offered to patients, family members and caregivers.

05.2.2.1 Production, communication and customer portal indicators

The operational indicators show the following positive evolution from 2016 to 2017:

Luz Saúde TOTAL

2016 2017

Outpatient consultations (thousands) 1,827 1,875

Urgent Care (thousands) 611 610

Surgeries and deliveries (thousands) 63 63

Imaging Testing (thousands) 1,053 1,081

177


05.2.2.2 Accreditations and certifications of services and units.

The evidence demonstration regarding certifications and accreditations of services and units, customer satisfaction assessments, compliance with Quality and Safety parameters and the participation and positioning of Luz Saúde’s units in health performance indices and

rating/indicators is a key element in the relationship with customers and constitutes a permanent work goal inside the Group.

The following table shows a summary of the accredi-tations and certifications of services and units until 31 December 2017:

System Healthcare Unit Certified Services 9001 and 14001

HL Lisboa HL LisboaAnatomic

Pathology LabMolecular Medicine

HL Guimarães

HL Guimarães ImagingTransfusion

medicine

HL Arrábida HL Arrábida Imaging SterilizationTransfusion

medicineClinical

analysesGastroenterology

HL Póvoa de Varzim

HL Póvoa de Varzim

Imaging SterilizationClinical

analysesSpecimen Collection

Gastroenterology

HL Amarante ImagingSpecimen Collection

Gastroenterology

HL Cerveira ImagingClinical


HL Porto ImagingClinical


HBA HBA Imaging Sterilization PharmacyAnatomic

Pathology LabMolecular Medicine

HBA HBA Environmental Management System

HL Torres de Lisboa

HL Torres de Lisboa

Healthcare services, Consultations, Inpatient units, Operating Room

and Diagnostic Exams

Imaging ACE HL Oeiras Imaging

HL Amadora Imaging

HL Lisboa Imaging Lithotripsy

HL Setúbal Imaging

HL Oiã Imaging

HL Aveiro Imaging

System Healthcare Unit Accreditations and other certifications

HBA HBA International Joint Commission Accreditation

HL Lisboa HL LisboaMolecular Medicine Department

accreditation by the European Association of Molecular Medicine

Palliative Care Unit certified by the European Society of

Medical Oncology

Echocardiography Laboratory accreditation from the European

Society of Cardiology

HL Póvoa de Varzim

HL Póvoa de Varzim

Laboratory of Clinical Pathology certified by Portuguese Order of Pharmacists

178

ANNUAL REPORT 2017

In Hospital Beatriz Ângelo, given it is a unit managed under a partnership with the State, we adopted the ECSI (European Customer Satisfaction Index) model that ena-bles results from the Assessment System for Perceived Quality and Patient Satisfaction in the National Health System’s Hospitals (ECSI-Hospitals) to be included, not only overall, but also regionally. It also enables compa-rison with other internationally available satisfaction indicators that use an ECSI and ACSI (American Customer Satisfaction Index) compatible methodology.

With this assessment of the customer’s experience, the Luz Saúde Group intends to identify strength areas and their possible improvement, in order to monitor the evolution of customer needs and expectations.

The following table shows the weighted average of the customer’s satisfaction and recommendation of Luz Saúde Units:

05.2.2.3 Quality and Safety Parameters, qualifying for performance indices/ ratings /indicators

• Assessment of customer satisfaction

Customer satisfaction is monitored through satisfaction surveys and assessing the customer’s experience of in-patient care and Complementary Diagnostic and The-rapeutic Procedures (CDTP), namely: Imaging, Molecular Medicine and Pathology Lab. In 2017, the assessment of customer satisfaction extended to Urgent Care (UC).

To access the customers’ experience and satisfaction with the Group’s private units, we use the H-CAPHS model (Hospital Consumer Assessment of Healthcare Providers and Systems). This model is an international reference and focuses on the customer’s perception of the care provided by healthcare units, enabling com-parison among the group’s units (internal benchmark) and, when possible, international units (international benchmark).

prevalence, the complexity of its diagnosis or treatment and/or high costs thereof. They are able to provide post-graduate training and scientific research in the respective medical areas. Hospital da Luz Lisboa and Hospital Beatriz Ângelo were officially recognized as national Reference Centers in adult oncology/Rectal Cancer. Hospital Beatriz Ângelo was also recognized in adult oncology, Hepatobiliary/Pancreatic Cancer.

• Acknowledgement of REFERENCE CENTERS in Luz Saúde units

Reference Centers are services recognized for offering the highest level of skill in providing quality healthcare, in clinical situations that require a concentration of highly differentiated technical and technological resources, knowledge and experience, due to the disease’s low

Private hospitals and clinics

(HL Lisboa, HL Oeiras, HL Amadora, HL Arrábida, HL Setúbal, HL Póvoa do Varzim, HL Aveiro, HL Oiã, HL Guimarães, HL Amarante, HL Cerveira, HL Porto, Hospital da Misericórdia de Évora)

Weighted average 2017

Inpatient care - % of customers with overall satisfaction(1) 86%

CDTP Imaging - % of customers with overall satisfaction(1) 68%

CDTP Molecular Medicine - % of customers with overall satisfaction(1) 69%

CDTP Gastroenterology - % of customers with overall satisfaction(1) 76%

CDTP Pathological Anathomy Lab - % of customers with overall satisfaction(1) 52%

(1) Satisfaction was deemed to be high when the maximum points on the scale were given: 9, 10.

Hospital managed under a partnership with the State - Inpatient care(Hospital Beatriz Ângelo) 2017

% of customers with overall satisfaction 87%

179


At the end, each assessed area within each provider is qualified according to its respective performance: above average performance of data reporting units (3 stars), average performance (2 stars) and below average per-formance of data reporting units (1 star), thus showing the respective level of performance.

Monitoring performance of Customer Safety, Suitability and Comfort of the Facilities and Customer Focus is carried out via checklists prepared by the Portuguese Health Regulation Authority (enabling comparison with the national average).

In the following subparagraphs, we present the latest available results for several specialty areas in Luz Saúde.

• Quality Component of Clinical Excellence

This component seeks to assess the quality of healthcare (assessing organizational compliance with guidelines and good practices), where the organization’s perfor-mance is assesses in several clinical areas, using a set of specific indicators for each of the areas under analysis. The following table shows the latest available results for several specialty areas in various Luz Saúde units:

• LUZ SAÚDE unit participation in performance indi-ces/ratings/indicators

Participation in accredited national and international indices and ratings enables comparisons among the Group’s different units and national and international external units. In this regard, one or more group units participated in the following comparison systems.

• SINAS:

The process of joining SINAS (Sistema Nacional de Avaliação em Saúde) - a system to assess overall quality of healthcare providers developed by the Portuguese Health Regulation Authority (Entidade Reguladora da Saúde) (together with the International Joint Commis-sion) continued to be developed in 2017, in the module dedicated to providers with in-patient care - SINAS@Hospitais where four quality components are assessed:• Clinical Excellence;• Customer Safety;• Suitability and Comfort of the Facilities;• Customer Focus.

The assessment is based on a “rating system” and en-tails the regular reporting of each provider’s results as compared to a “reference value”, common to all providers and designed based on values provided by each.

180

ANNUAL REPORT 2017

Area under Analysis H. Luz H. Luz H. Luz Póvoa H. Luz H. Luz HBA Lisboa Arrábida do Varzim Aveiro Setúbal

Orthopaedics

Gynaecology – – –

Obstetrics – –

Paediatrics – – – –

Neurology – – – – –

Cardiology – – – – –

Myocardium Revascularization Surgery – – – – –

Valvular Surgery and other non-coronary cardiac surgery – – – – –

Colon Surgery – – –

• Quality Component of Customer Safety

This component seeks to ensure quality healthcare and good outcomes, by striving to ensure a high level on customer safety:

Area under H. Luz H. Luz H. Luz Hospital H. Luz Médiaanalysis Lisboa Aveiro Setúbal Beatriz Ângelo Torres de Lisboa Nacional

Safety Rating 0.99 0.96 0.99 0.97 0.86 0.92

Table 1 - Results for the period from 01/01/2016 to 31/12/2016

Table 2 – Ratings and comparative % of LUZ SAÚDE units and the reference national average for 2017

181


• Quality Component of Suitability and Comfort of the Facilities

This component seeks to assess the level of suitability of (non-medical) spaces and equipment in hospital

• Quality Component of Customer Focus

This component seeks to objectively assess the degree to which healthcare services are geared towards the needs and expectations of the customers and those accompanying them:

facilities for providing healthcare services and the ma-nagement and maintenance thereof. The concept of Comfort encompasses what is considered to be “hos-pital accommodation”, understood as the set of support services to the hospital’s main functions:



Area under H. Luz H. Luz H. Luz Póvoa H. Luz H. Luz H. Beatriz H. Luz H.M. Médiaanalysis Lisboa Arrábida do Varzim Aveiro Setúbal Ângelo Torres Lisboa Évora Nacional

Rating for

Suitability and

Comfort of the

Facilities 0.97 0.94 0.95 0.94 0.90 0.99 0.81 0.87 0.88

Area under H. Luz H. Luz H. Luz Póvoa H. Luz H. Luz H. Beatriz H. Luz H.M. Médiaanalysis Lisboa Arrábida do Varzim Aveiro Setúbal Ângelo Torres Lisboa Évora Nacional

Rating of

Customer

Focus 0.99 0.85 0.94 0.92 0.93 1 0.84 0.93 0.87

182

ANNUAL REPORT 2017

• ICHOM (International Consortium for Health Outco-mes Measurement):

In 2016, the Luz Saúde Group began participating in two pilot data collection projects for International Ben-chmarking with ICHOM in Orthopedics - ICHOM GLOBE HKO (hip and knee prosthesis), represented by Hospital da Luz Arrábida and Hospital da Luz Lisboa, and in Oph-thalmology – ICHOM GLOBE CAT (Cataract Surgery), represented by Hospital da Luz Lisboa; the studies are underway and the final results are expected in 2018.

• ERAS (Enhanced Recovery After Surgery):

Hospital Beatriz Ângelo became part of the ERAS mul-tidisciplinary program, focused in monitoring results of colon and rectal surgeries (since 2016) and in pancreatic surgery (since 2017), with the final aim of reducing

complications and improving the outcomes of surgical patients in these areas.

Currently, Hospital Beatriz Ângelo is the only health-care organization in Portugal credited as Excellence Center by the ERAS® Program. Thereunder, Hospital Beatriz Ângelo is qualified to train, provide advice and consulting towards the implementation of the ERAS® program on other health units. In 2017, Hospital Beatriz Ângelo began the training process to implement the ERAS® program at Hospital da Luz Lisboa and Hospital Fernando da Fonseca.

Hospital Beatriz Ângelo also received an honorable mention from the Healthcare Excellence award as a result for presenting the implementation of the ERAS® Program in its unit.

05.2.3 Suppliers

05.2.4 Shareholders

Suppliers are carefully selected via bi-annual tenders on an electronic platform and with continuous assess-ment of the levels and quality of the service provided, in quarterly monitoring meetings.

The relationships centered on transparency and sharing information, in order to continuously adjust supply to demand, and the pursuit of effective long-term part-nerships that benefit both parties. These relationships surpass normal commercial ties to form new levels of cooperation and initiatives that seek to meet common goals - training, research, screening, monitoring chronic

illness, disclosure of best clinical and other practices. In 2017, this type of team work involved around 100 com-panies out of a total of 650 Luz Saúde Group suppliers.

Regarding the relationship with suppliers, it is important to highlight the pursuit of ensuring quality levels within the value chain, continuing to select the outsourcings of the contracted and certified services (ISO standards and other more suitable standards), such as for clinical pathology labs, imuno-hemotherapy, laundry services, dry cleaning, hospital waste management, security, disinfection, catering, cleaning and patient transport.

The relationship with shareholders is driven by a policy of transparency and disclosure of relevant information and results through suitable communication channels. Luz Saúde, as a company listed on Euronext Lisbon, and

according to the rules set out in the Securities Code and Portuguese Securities Market Commission, scrupulously complies with all duties to disclose information to the market and thereby to shareholders.

183


05.2.5 Community The Group’s relationship with the Community is driven by openness and cooperation, placing the knowledge of the organization and its employees at the service of:– the national and international scientific Community, -– the Healthcare Professional Community (including

students),– Professionals from different areas that carry out their

activity in the area of healthcare and that position themselves as innovative partners,

- Public, private and social organizations from the com-munities we serve, with which we share our strategy and goals, through solidarity and assistance.

The Luz Saúde Group has always been concerned with preventing disease and promoting health in the popu-lation it serves, so people live better, longer, happier, with more dignity and better cared for in their preferred locations.

05.2.5.1 Articulation with the healthcare professional community

Openness and interaction with the Community of Healthcare Professionals (including undergraduates or postgraduates) are part of the Group’s strategic positio-ning; in particular through training events open to both in-house professionals and those outside the Group, including medical interns and trainees.

In 2017, the number of professionals outside the group (including undergraduates or postgraduates) that at-tended open training events, medical internships and traineeships in Luz Saúde Group increased to 5,871.

• Clinical events and continuity education open to professionals from outside the Group

In 2017, GLSMED Learning Health (item 6.b.1) continued the active policy of opening training events to both in-house professionals and those outside the Group. In 2017, we held 169 events open to professionals outside

the Group (mainly doctors and nurses); the large number of external professional participants (3,682) represented 55% of the total attending LH events, which illustrates the interest in this continuous strategy of partnership and knowledge sharing.

• Recognized residence programs in the following medical specialties:

Hospital Beatriz Ângelo Anaesthesiology, Pathological Anatomy, General Surgery, Nephrology, Intensive Care, Gastroenterology, Gynaecology/Obstetrics, Imaging, Internal Medicine, Urology, Neurology, Neuroradiology, Oncology, Orthopaedics, Medical Paediatrics, Psychiatry, Endocrinology and Pulmonology.

Hospital da Luz Lisboa - Anaesthesiology, Pathological Anatomy, Internal Medicine, Molecular Medicine, Neu-rology and Oncology.

Hospital da Luz Arrábida - Internal Medicine.

• Medical Residents and Internships in Luz Saúde units

In 2017, the number of medical residents increased by 30% compared to the previous year, with 144 residents (from which 72% were specialty interns) at Hospital Beatriz Ângelo (81%) and Hospital da Luz Lisboa (17%):

Total Luz Hospital H. Luz H. Luz Saúde Beatriz Lisboa Arrábida ÂngeloMedical Residency (no.) 2017 144 116 25 3Year 1 (general) 40 40 0Specialties years 104 76 25 32016 111 94 15 2

184

ANNUAL REPORT 2017

chologists, auxiliary staff and others). Five units (Hospital Beatriz Ângelo, Hospital da Luz Lisboa, Hospital da Luz Arrábida, Hospital do Mar de Lisboa and Hospital do Mar de Gaia) hosted 90% of the trainees, 58% of them in Hospital Beatriz Ângelo:

incorporation of highly specialized human resources. It promotes formal and informal interaction between the academy and the health professionals, in order to achieve new collaborations; this effort has resulted in the participation of Learning Health in more than 10 research funding competitions at both national (FCT) and international level (Horizonte 2020).

Hospital da Luz Learning Health directly supported heal-th startups, promoting the development of innovative products and services, using the units and specialized human resources of the Luz Saúde Group. For that purpose:– participated in two acceleration programs, Protechting,

promoted by Fosun and Fidelidade, Luz Saúde, and KickUp Sports, which had the participation of several large companies directly or indirectly linked to sports, such as SLB, NOS and Worten, among others.

– and actively works with four startups, in various areas such as medical devices, artificial intelligence and clinical simulation, in the development and testing of products and clinical studies to quantify the positive impact that may result for the health sector and, in particular, to the patient, from the usage of these new technologies.

• Internships

In 2017, Luz Saúde units received 2,045 persons in short and medium-term internships (+11% than the previous year). 54% were doctors, 23% nurses and 23% other profes-sionals (health technicians, psychologists and neuropsy-

05.2.5.2 Initiatives and partnerships in the area of Innovation, research and scientific community

The investment in research and development is a stra-tegic focus of the Luz Saúde Group. Since its creation in September 2016, the group’s company GLSMED Learning Health, Sociedade Anónima has focused its activity on training and has progressively extended its scope to the areas of research and innovation, in the fields of provision and management of health care, with the ultimate goal of creating a center for training, research and innova-tion, containing in its core a simulation hospital, that is, a replica of a real hospital. It is with this framework that GLSMED Learning Health obtained funding from the Portugal 2020 Program to finance the hospital for innovation, starting in 2017 and lasting for three years.

Regarding research, the aim is to stimulate, support and participate in the development of translational and clinical research projects within the Luz Saúde group, but also in partnership with universities and institutions of national and international reference. Thus, in 2017, began in Hospital da Luz Learning Health the development of an area of promotion and support of research, with the

Total H. Beatriz H. Luz H. Luz H. Mar H. Mar Other Luz Saúde Ângelo Lisboa Arrábida Gaia Lisboa unitsInternships 2017 (no.) 2,045 1,190 339 109 103 92 212% Doctors 54% 65% 65% 40% 29% 22%% Nurses 27% 22% 21% 11% 87% 46% 29%% Health technicians 11% 8% 9% 43% 6% 13% 11%% Others 8% 5% 5% 6% 7% 12% 38%2016 (no.) 1,835 1,077 311 75 118 82 172

185


• Screenings

Screening to identify risk factors and promote early de-tection of disease is an important intervention measure, especially when there is a proper follow-up in cases where risk is detected. In many cases, screenings are carried out at in unit. Other times, they are offered in festivities, themed initiatives or sporting eventspromoted by other partners in the community.

In 2017, Luz Saúde Group units offered 3,954 screenings (+ 21% than in the previous year), from which 78%were cardiovascular screenings (blood sugar, blood pressure, cholesterol and body mass index). Five units carried out 94% of the screenings: Hospital da Luz Póvoade Varzim carried out the most (37%), followed by Hospital da Luz Setúbal (18%), Hospital Beatriz Ângelo (14%), Hospital da Luz Guimarães (13%) and Hospital da Luz Oeiras (12%).

05.2.5.3 Coordination with Community organizations

The strategic vector of social responsibility initiativescarried out in Luz Saúde units, in their relationship withcommunity organizations, is essentially based oninformation about preventing illness and managing risk factors, promoting early diagnosis (through health screenings), health education (health literacy), patient empowerment and patient and caregiver support and information. There is a strong emphasis in providing information about disease prevention adapted to school aged children.

In this context, several initiatives have been carried out, with various community partners (namely, localgovernment, schools, sport clubs and other profit ornon-profit organizations) in order to transmit to citizens the experience of our healthcare professionals.

In 2017, the number of participants in these types of initiatives reached 15,306 people (+ 39 % than in the previous year).

Hospital Hospital Hospital Hospital Hospital TOTAL Beatriz da Luz Póvoa da Luz da Luz da Luz Other Ângelo de Varzim Setúbal Guimarães Oeiras Units

Screenings in 2017 3,954 542 1,460 722 493 481 256

Cardiovascular 3,070 141 1,460 507 468 400 94

Dermatology 144 91 35 18

Scoliosis 142 142 0

Other screenings 598 168 0 180 25 81 144

Screenings in 2016 3,266 351 1,699 45 295 857 19

186

ANNUAL REPORT 2017

Hospital H. Luz H. Luz Casas da Total Beatriz Clínica H. Luz H. Luz Póvoa H. Luz Cidade H. Luz No. of participants Ângelo Amadora Setúbal Guimarães Varzim Lisboa Carnaxide Aveiro

Preparation for parenthood 831 491 140 200

School community 2,033 828 94 700 240 100 71

Iniciatives with Family members, caretakers and chronic patients 1,431 1,281 150

Partnerships with autarchies and others 6,887 3,232 3,606 49

International projects 170 170

TOTAL 2017 11,352 6,002 3,700 749 380 200 150 100 71

TOTAL 2016 7,743 5,351 282 49 150 210 340 820

b) Initiatives with the Community

In 2017, Luz Saúde units held several initiatives involving 11,352 citizens (+47% than in 2016), especially Hospital Beatriz Ângelo with a contribution of 53%:

• Initiatives in preparation of parenthood: include pro-grams to prepare for birth as well as assistance during the early life of the baby.

• Initiatives with the school community (students, parents, teachers and auxiliary staff): include, among others, students visits to hospitals, familiarizing them with illness prevention and health issues and combating “white coat fear”; programs developed with profes-sionals from the units in schools, namely in basic life support training, first aid, healthy eating, mindfulness and obesity. We highlight the actions carried out by Hospital da Luz Setúbal (with 700 participants) and Hospital da Luz Clínica da Amadora (with 94 participan-ts). regarding first aid and basic life support training.

• Initiatives developed with Patients, Family members and Caregivers: it should be noticed the decisive contribu-tion of the Hospital Beatriz Ângelo (90%), with actions to inform parents in the context of early intervention (400 participants), sessions with relatives of patients in the psychiatric area (250 participants), sessions with family members of patients followed at day hospital (416 participants), therapeutic intervention programs (144 participants), sessions for parents about the

feeding of children with diabetes, and dissemination of criteria for pediatric consultations.

Also noteworthy was the one-day workshop held at Hospital da Luz Lisboa for patients with cancer and their family members (150 participants), giving them information regarding the illness and strategies to ma-nage treatment.

• Initiatives in partnership with municipalities and other social and health organizations: these involve the largest number of participants (887), with special emphasis on Hospital Beatriz Ângelo (3,232 participants), Hospital da Luz Clínica da Amadora (3,606 participants) and an action held at Hospital da Luz Setúbal regarding obesity prevention (49 participants). They include ac-tions of a very diversified nature, emphasizing medical and nursing care in several sporting events, usually promoted by local autarchies, training in first aid for monitors in holiday camps (training of 56 monitors of children’s and elderly holiday camps from Câmara da Amadora by the Hospital da Luz Clínica da Amadora), and participation in programs and initiatives of seve-ral organizations, in particular promotion of reading, participation in exhibitions and Christmas parties with

187


children and nursing homes. In the case of the Beatriz Ângelo Hospital, it also includes participation in mee-tings with autarchies and groups of health centers in the scope of social and health policy planning in the Hospital’s area of influence.

• Participation in international projects: a mission from the Hospital Beatriz Ângelo to São Tomé and Príncipe involving 170 participants for training in lymphatic drainage and postoperative care and training in first aid (60 participants) orthopedic consultations (33) and surgical interventions (77) in orthopedics.

c) Initiatives with the community - 3rd sector

Among other initiatives with the Community, we hi-ghlight support from outside volunteers in some units, namely in the Palliative Care units of Hospital da Luz Lisboa and Hospital Beatriz Ângelo; the provision of space within our units to disclose and collect funds for more than 50 non-profit organizations in the social and healthcare area; Hospital da Luz Lisboa continuing to join the Zero Waste Movement; and the active partnership with ADVITA - Association to the Development of New Initiatives for Life, in the production and dissemination of educational materials (films and manuals to caregivers).

The Zero Waste Movement, materialized in a partner-ship established between Hospital da Luz Lisboa/ITAU/Associação DAR i Acordar and Associação O Compa-nheiro (neighbor of the Hospital da Luz Lisboa, which runs a soup kitchen recognized by Social Security for people in need): in 2017 were provided (in conditions of health and safety) by the Hospital da Luz Lisboa to O Companheiro 1,620 kg of food, that were used to prepare 4,782 meals.

The active partnership with ADVITA, a recognized non profit association in the health and social areas, has been materialized through a direct support to the as-sociation, with the involvement of professionals of the Group in the production and promotion of films (12) and brochures (7) for support to caregivers, about the basic competences of care-giving; and also in the establishment of partnerships of a charitable nature, embodied in Protocols celebrated by Hospital da Luz Lisboa with the association.

Luz Saúde’s active intervention in Caregiver Support is part of the Group’s strategic concern with monitoring the patient and family across all stages in life, illness and dependency, thus contributing to the improvement of care provided to transient or permanently dependent people, while acknowledging and dignifying the role of the Caregiver and facilitating access to useful information that will help him in its increasingly importance to the aging societies, particularly in Portugal.

Pordata, in the study Retrato Portugal e Europa 2017, presented Portugal as the fourth oldest country in Europe (after Italy, Greece and Germany), with 20.5% of people over 65 years. According to a study published in 2016 by the Portuguese Health Regulatory Entity, “Access, quality and competition in palliative care in Portugal”, we also have the highest rate in Europe of informal home care provided by a resident in the same house (12.4%) as well as the lowest rate in Europe for non-domiciliary care. These indicators show the importance of the role of the caregiver in Portugal. Luz Saúde includes in its social responsibility the involvement in the production of Advita’s films and in the online availability of these, free of charge, on Advita and units’ websites, on Hospital da Luz Lisboa room televisions and on Youtube.

188

ANNUAL REPORT 2017

05.3 Environmental Sustainability Luz Saúde Group continues his strategy of sustainable environmental development, energy efficiency, saving resources and fighting waste. It seeks to minimize the negative environmental impacts of energy and gas con-sumption (to reduce CO2 emissions), water consumption and hospital waste management. The concern with sustainability arose right at the design and construction stage or with the purchase of buildings where units are housed and with their respective energy certification. We continue to implement effective practices to assess, monitor, fight waste, and reduce consumption of gas, power, water and proper waste management, along with raising employee awareness to environmental sustainability.

Over the last two years, the Group has acquired five private health units and has been progressively applying to them, also as a result of the construction works that need to be done, the ten environmental sustainability principles of the Group.

Also over these last two years, mostly, the Group has been developing very significant works of renovation,

modernization and expansion, both in the new units (including units that will open in 2018 or 2019) and in the existing units: in 2017 interventions were made to an area higher than 90,000m2, which corresponds to more than a 1/3 of the hospital area of the Group. The works already carried out and those that are currently in progress affect energy consumption since, in most cases, the inherent consumption is included in the invoices from which the gas, energy and water consumption are extracted for the environmental sustainability indicators.

In 2017, large thermal variations with extremes of tem-perature (prolonged cold/heat peaks) also contributed to increases in gas, energy and water consumption, related to HVAC (heating, ventilation, air conditioning) and boilers (HVAC and DHW).

As a consequence of the above, the GRI (EN) indicators selected as appropriate to the reality of Luz Saúde - ener-gy consumption (gas and electricity), CO2 emissions and water consumption - presented in 2017, and unlike previous years, variations higher than those of activity indicators, as can be seen in the following table and text.

189


GRI (EN) indicators 2016 2017 Var.

EN 3 Energy consumption ( m3)

Propane 2,943 3,027 2,9%

Natural Gas 1,631,891 1,763,093 8,0%

EN 4 Electrical energy consumption ( kwh) 12,044,628 678 12,745,285 327 5,8%

EN 15 e 16 CO2 direct and indirect emissions (ton) 5,940,664 4,352,020 -26,7%

EN 8 Water consumption ( m3) 281 131 328 750 16,9%

EN 22 Hospital residuals (ton)

Hazardous 874 935 7,0%

Non- hazardous 2,937 3,054 4,0%

Total residuals 3,811 3,989 4,7%

Activity indicators

Outpatient consultations (thousands) 1,827 1,875 2,6%

Emergency room visits (thousands) 611 610 -0,2%

Surgeries and deliveries (thousands) 63 63 0,0%

Imaging exams (thousands) 1,053 1,081 2,7%

Number of beds 1,179 1,650 39,9%

Number of facilities 21 24

GRI (EN) and activity indicators for the set of Luz Saúde’s units

190

ANNUAL REPORT 2017

05.3.1 Energy Certification of Buildings

Energy certification began in 2008 with the internal pre-paration of Luz Saúde project and maintenance manuals. Safe for two units acquired in Madeira and Hospital do Mar Cuidados Especializados de Gaia, which are under the process of energy certification, all units are certified:

05.3.2 Hospital Beatriz Ângelo’s Environmental certification (ISO 14001)

Hospital Beatriz Ângelo, the largest of Luz Saúde’s hospital units, with 424 beds, which is managed as a PPP, recei-ved the ISO 14001Environmental Certification in 2013.

05.3.3 Gas and Power consumption and corresponding CO2 emissions

• Gas Consumption (GRI EN3 Indicator)

Measures to fight waste, reduce gas consumption and replace propane gas with natural gas have been adop-ted in all units. We highlight the following: installation of pre-heating systems for domestic hot water (DHW), use of renewable energy via solar panels and thermal panels to feed the DHW systems and Chillers (air con-ditioning), recovery of DHW from Chillers and use of Centralized Technical Management systems suitable to each building’s operational profile.

Natural Gas, that currently represents a total of 99.8% of all gas consumption, saw an 8% rise in 2017. (11.34% in private units and 5.33% in Hospital Beatriz Ângelo).

Power Consumption

We have been making a concerted effort in all units to implement monitoring measures, via local controls or via Centralized Technical Management (CTM) and to fight waste, both in terms of lighting and air conditio-ning, among which: timed lighting circuits, namely in passageways and parking lots; replacing incandescent, fluorescent or halogen bulbs with better performing bul-bs; timed recirculation pumps both domestic hot water (DHW) and in Chiller circuits (HVAC); timed operation of HVAC system components, such as chillers and Air Treatment Units (ATU), for air-conditioning.

The variation of power consumption was 5.8% at the Group level (5.82% in private units and 2.16% in Hospital Beatriz Ângelo).

A B C D

HL- Lisboa HL- Arrábida HL - Clinica do Porto

Casas da Cidade HL - Aveiro (Ed.2) HL - Aveiro (Ed.1) HL - Clínica Amarante Residências Sénior - Lisboa HL- Clínica Águeda HL - Póvoa de Varzim HL - Clínica Cerveira

HL- Clínica de Oiã HL - Oeiras

HMar Cuidados Especializados HL – Clínica da Amadora - Lisboa

H. Beatriz Ângelo HL- Setúbal

Casas da Cidade Residências Hospital Misericórdia Évora Sénior Carnaxide

HL Torres Lisboa HL Torres Lisboa HL Torres Lisboa ( fmr British) Torre E ( fmr British) Torre F ( fmr British) Torres BeD

HL - Guimarães

191


CO2 emissions as a result of gas and power con-sumption

CO2 emissions are calculated by applying a “processing coefficient” to gas and power consumption (in m3). Al-though the coefficient for gas consumption is constant, the “processing coefficient” for power is provided by EDP annually and varies according to EDP’s own consumption in producing power each year.

CO2 emission variation for the Group units should be analyzed in light thereof. In 2017 there was a significant decrease in the “processing coefficient” provided by EDP, following which CO2 emissions also suffered a decrease: -27% in the Group (27% in private units and -21% in Hospital Beatriz Ângelo), which is a very positive outcome regarding environmental sustainability.

However, and only for comparative purposes, if EDP’s “processing coefficient” of the previous year was to be used there would be an increase in CO2 emissions + 5.8% for the Group and a further 2.90% for Hospital Beatriz Ângelo. 05.3.4 Water Consumption

We have been making a concerted effort in all units to implement monitoring measures, fight waste and reduce water consumption, namely by applying flow reducers in taps, optimizing hours in which DHW and chiller (HVAC) pumps operate and controlling leaks in consumption, fire and irrigation plumbing. In previous years we drilled and dug boreholes in some units (mainly for irrigation), with significant savings in water.

In 2017, there was a variation of + 17% in water consump-tion (+15.25% in private units and + 20.7% in Hospital Beatriz Ângelo).

05.3.5 Waste production and management

Some types of waste generated in healthcare units may pose a risk to the safety of patients, employees and society in general.

The management of hospital waste is a complex matter given the different types of waste (types I, II and III, IV), as well as the high amounts involved. This management is carried out in all Luz Saúde units together with an organization certified therefor, in compliance with the standards and directives applicable to the different ca-tegories of waste produced. Each unit develops active policies to reduce waste and adequately and carefully sort and package waste in parallel and together with the certified organization.

As concerns amounts of waste, waste in Group I and II is deemed non-hazardous; and waste from Group III (dangerous hospital waste) and Group IV (specific hospital waste) is deemed hazardous.

In 2017 the evolution of hospital waste production was:• the variation of total waste production, Group level,

was +4.7% (+10.6% in private units and -2.94% in Hospital Beatriz Ângelo).

• the variation of “dangerous” waste production, Group level, was +7% (+10% in private units and +2.4% in Hospital Beatriz Ângelo).

• the variation of “non-hazardous” waste production, Group level, was + 4% (+10.7% in private units and -4.4% in Hospital Beatriz Ângelo).

The variation in total waste production in Hospital Bea-triz Ângelo (-2.94%) doesn’t deviate much from the variation in production, with a reduction in the variation rate of “non-hazardous” waste (-4.4%), which may be related to the environmental certification ISO 14001 in force since 2013.

The variation of waste in the Group’s private units shows values higher than the variation of activity indicators. The reasons for the variations presented are due to a multiplicity of factors, including the entry in 2016 and 2017 of new units in the Group and significant changes in identified units. For the new units, the Group’s principles and policies on waste management are still underway; and for other units with significant variation, appropriate management measures should be taken in time.

06INDIVIDUAL FINANCIAL STATEMENTS

194

ANNUAL REPORT 2017

Statement of financial position as at 31 December 2017

In euros

Notes 31-dec-17 31-dec-16

Assets Non-current assets Property, plant and equipment 10 571,484 354,400 Intangible assets 11 1,295,500 702,521 Investments in associates and associates 12 433,977,818 370,439,275 Deferred tax assets 9 2,917,502 4,065,850 Total non-current assets 438,762,304 375,562,046 Current assets Trade receivables 13 4,296,461 2,275,253 Other receivables 13 20,362,621 14,643,854 Cash and cash equivalents 14 9,494,450 19,818,051 Total current assets 34,153,532 36,737,158 Total assets 472,915,836 412,299,204 Shareholders’ Equity Equity and reserves Share capital 95,542,254 95,542,254 Treasury shares - (656,388) Share premium 61,795,793 61,795,793 Reserves and retained earnings 57,987,209 47,130,526 Total equity attributable to equity holders of the parent 15 215,325,256 203,812,185 Liabilities Non-current liabilities Provisions 20 767,663 767,663 Borrowings 17 230,617,436 183,300,000 Derivative financial instruments 18 3,109,947 4,731,582 Total non-current liabilities 234,495,046 188,799,245 Current liabilities Trade payables 16 1,970,568 1,327,562 Other payables 16 7,471,215 9,823,293 Borrowings and bank overdrafts 17 13,542,304 8,536,919 Current income tax payable 111,447 - Total current liabilities 23,095,534 19,687,774 Total liabilities 257,590,580 208,487,019 Total shareholders’ equity and liabilities 472,915,836 412,299,204

Notes are an integral part of these financial statements

Individual Financial Statements(free translation from the original version in portuguese)

06

195

06 INDIVIDUAL FINANCIAL STATEMENTS

Statement of comprehensive income for the year ended 31 December 2017

In euros


Income and gains Revenue from services rendered 4 2,374,154 1,460,985 Other operating income 52,680 27,850 Financial income 5 36,156,584 28,525,932 Total income and gains 38,583,418 30,014,767 Expenses and losses Costs of services and materials 7 (2,974,481) (1,850,609) Personnel expenses 8 (1,839,329) (1,669,472) Depreciation and amortisation 10 / 11 (401,775) (520,915) Other operating expenses (99,909) (166,105) Provisions, net of reversals 20 - 500,000 Impairment of receivables, net of reversals 13 (40,000) (225,208) Impairment of investments in subsidiaries, net of reversals 12 (16,004,827) (15,335,000) Finance expenses 6 (6,705,787) (4,926,020) Total expenses and losses (28,066,108) (24,193,329) Profit before income tax 10,517,310 5,821,438 Income tax expense 9 (82,468) 908,109 Profit for the year 10,434,842 6,729,547 Other comprehensive income: Items that maybe reclassified to results Cash flow hedges, net of tax 18 1,078,229 (3,062,624)Other comprehensive income for the year 1,078,229 (3,062,624) Comprehensive income for the year 11,513,071 3,666,923


196

ANNUAL REPORT 2017

Statement of cash flows for the year ended 31 December 2017

In euros


Operating activities Receipts from customers 10,490,265 9,946,436 Payments to suppliers (11,433,613) (10,352,143) Payments to employees (1,087,261) (666,710) Cash flow used in operations (2,030,609) (1,072,417)

Income tax paid 1,100,052 986,399 Other receipts/(payments) related with operating activities (2,169,600) (939,555) Net cash flow used in operating activities (3,100,157) (1,025,573)

Investing activities Proceeds from: Investments in associates 12.3 90,000 232,000 Loans to associates 12.4 10,315,674 31,224,866 Interest received 2,066,503 3,532,639 Dividends 5 25,600,000 24,000,000 Payments related with: Purchase of property, plant and equipment (831,050) (310,294) Investments in associates 12.2 / 12.3 (48,573,419) (5,538,000) Loans to subsidiaries and associates 12.4 (41,375,625) (83,787,247) Net cash flow used in investing activities (52,707,917) (30,646,036)

Financing activities Proceeds from: Borrowings 625,815,526 492,426,371 Other financing proceeds 3,200,000 3,200,000 Payments related with: Repayment of borrowings (573,492,705) (452,539,760) Interest and other similar expenses paid (6,838,348) (4,316,855) Other financing payments (3,200,000) - Net cash flow generated in financing activities 45,484,473 38,769,756

Change in cash and cash equivalents (10,323,601) 7,098,147 Cash and cash equivalents at the beginning of the year 19,818,051 12,719,904 Cash and cash equivalents at the end of the year 9,494,450 19,818,051


197


Statement of changes in equity for the year ended 31 December 2017

In euros

Notes Share Treasury Share

Reserves

capital shares premium and retained Total

earnings

Balance as at 1 January 2016 95,542,254 (1,312,777) 61,795,793 43,938,660 199,963,930 Direct change in shareholders’ equity Share-based payments Vesting of shares granted - 656,389 - (656,389) - Fair value of the services of the year - - - 181,332 181,332 Total direct change in shareholders’ equity - 656,389 - (475,057) 181,332 Profit for the year - - - 6,729,547 6,729,547 Other comprehensive income for the year - - - (3,062,624) (3,062,624) Total comprehensive income for the year - - - 3,666,923 3,666,923 Balance as at 31 December 2016 15 95,542,254 (656,388) 61,795,793 47,130,526 203,812,185 Balance as at 1 January 2017 95,542,254 (656,388) 61,795,793 47,130,526 203,812,185 Direct change in shareholders’ equity Share-based payments Vesting of shares granted - 656,388 - (656,388) - Total direct change in shareholders’ equity - 656,388 - (656,388) - Profit for the year - - - 10,434,842 10,434,842 Other comprehensive income for the year - - - 1,078,229 1,078,229 Total comprehensive income for the year - - - 11,513,071 11,513,071 Balance as at 31 December 2017 15 95,542,254 - 61,795,793 57,987,209 215,325,256


198

ANNUAL REPORT 2017

Luz Saúde, SA (hereinafter Luz Saúde or Company) is a limited liability company, with registered office in Lisbon. It’s corporate purpose is the development and participation in healthcare businesses.

Luz Saúde’s shares were admitted to trading on the Lisbon Stock Exchange (“BVL”) on 11 February 2014.

In 15 October 2014, Fosun International, Ltd through Fidelidade – Companhia de Seguros, SA acquired control of Luz Saúde through a takeover bid it had launched (note 23).

Fidelidade – Companhia de Seguros, SA is owned in 84.986% by Longrun Portugal, SGPS, SA which is fully owned by Millennium Gain Limited headquartered in Hong Kong. This company is held in 100% by Fosun Financial Holdings Limited (Hong Kong), which is owned by Fosun International Limited, a company listed on the

Hong Kong Stock Exchange (00656.HK). This company is owned in 71.77% by Fosun Holdings Limited, which is owned by Fosun International Holdings, Ltd, whose ultimate beneficial owner is Mr. Guo Guangchang. In January 2018, as a result of a transaction between Fo-sun International Ltd and Fidelidade - Companhia de Seguros, SA, Fosun International Ltd has acquired 49% of the share capital and voting rights of LUZ SAUDE and Fidelidade - Companhia de Seguros, SA reduced its participation to 49.7881%.

At the Extraordinary General Meeting held on 13 April 2018, the shareholders of LUZ SAÚDE decided to pro-ceed with the necessary acts so that the Company loses its status as a public company, and the shares being removed from trading on BVL.

On 27 April 2018, the Board of Directors approved and authorised the disclosure of these financial statements.

The financial statements have been prepared on a going concern basis from the company’s books and accoun-ting records and based on historical cost, pursuant to International Financial Reporting Standards (“IFRS”), as adopted by the European Union on 31 December 2017, modified by the application of the fair value of the derivative financial instruments. These standards include both the IFRS issued by the International Ac-counting Standards Board (“IASB”) and the International Accounting Standards (“IAS”) issued by the International Accounting Standards Committee (“IASC”) and their respective interpretations – IFRIC and SIC, respecti-vely issued by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (“SIC”). These standards and interpretations are together known as IFRS. The financial statements are expressed in euros.

Preparing the financial statements according to IFRS requires the Company to make judgments, estimates and assumptions that affect how accounting policies are applied and the amounts obtained under income, expenses, assets and liabilities. Changes to these as-sumptions or differences they may show with respect to the actual reality may have an impact on current estimates and judgments (note 3). The main accoun-ting policies used in the preparation of these financial statements are presented in note 26.

During the year of 2017, accounting standards and interpretations were approved and published in the Official Journal of the European Union (OJ). These apply to subsequent financial years, although its early adoption is permitted. The standards and amendments adopted by the Group in preparing its financial state-ments, as well as the standards not early adopted are summarised below.

1. Reporting entity

2. Basis of presentation of financial statements

Notes to the Individual Financial Statements(Amounts in Euros)

199


2.1 New standards, amendments or interpretations applicable to financial years beginning on or after 1 January 2017

Resulting from the endorsement by the European Union (EU), the following issues, revisions, changes and im-provements to the Standards and Interpretations took

place, with effect from 1 January 2017, which, when applicable, were adopted by the Company:

The adoption of these standards, interpretations and amendments to standards did not have a material impact in the Company’s financial statements.

Mandatory application in the financial Issued (IASB) IASB Standard or IFRIC Interpretation years beginning on or after

January 2016 IAS 12 – Income tax: Recognition of deferred tax assets for unrealised losses (amendment) 1 January 2017

January 2016 IAS 7 – Statement of cash flows (amendment) 1 January 2017

200

ANNUAL REPORT 2017

2.2 New standards, amendments and interpretations issued by the IASB, endorsed by the European Union (EU) and applicable to the financial years beginning after 1 January 2017

On 31 December 2017, the following improvements to the Standards and Interpretations issued by the IASB had already been endorsed by the EU. However, their

application only becomes mandatory for the financial years beginning after 1 January 2017.

2.2.1 IFRS 15 Revenue from contracts with customers

The new standard IFRS 15 Revenue from contracts with customers establishes that the recognition of revenue from contracts entered into with clients should be per-formed in accordance with a five-step model. Revenue is recognized by the amount that the company expects to receive from the customer in exchange for goods or services rendered. The application of the standard is mandatory for the periods beginning on or after January 1, 2018, and its adoption must follow the full retrospective adoption or modified retrospective adoption.

During 2017, the company analyzed the implications of its adoption, with no significant impact expected in the Financial Statements, but rather the increase in the disclosures associated with revenue.

The application of IFRS 15 will not have a significant impact on how the Company currently recognizes the revenue from its services.

2.2.2 IFRS 9 Financial instruments

The new IFRS 9 Financial instruments that replaces IAS 39 Financial instruments: Recognition and Measurement, focuses on the following aspects: i) Classification and measurement; ii) Impairment; and iii) Hedge accounting.

The application of the standard is mandatory for periods beginning on or after 1 January 2018. During 2017, the Company analyzed the implications of adopting this new standard and is not expected to have a significant impact on the financial statements of the Company.

2.2.3 IFRS 16 Leases

IFRS 16 Leases eliminates the classification of leases be-tween operating or financial leases contracts for lessees by introducing a single accounting model, similar to the current model that is used for financial leases by lessees.

This model provides for the recognition of assets and liabilities by the lessee in the statement of financial po-


May 2014 IFRS 15 – Revenue from Contracts with Customers (new) 1 January 2018

July 2014 IFRS 9 – Financial Instruments 1 January 2018

January 2016 IFRS 16 – Leases (new) 1 January 2019

April 2016 IFRS 15 – Revenue from contracts with customers (amendment) 1 January 2018

September 2016 IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (amendement) 1 January 2018

201


2.3 New standards, amendments and interpretations issued by the IASB and not endorsed by the European Union by 31 December 2017


June 2016 IFRS 2 – Share based payments (amendment) 1 January 2018

December 2016 Annual improvements 2014–2016 cycle 1 January 2018

December 2016 IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (new) 1 January 2018

December 2016 IAS 40: Transfers of Investmenty Property (amendment) 1 January 2018

May 2017 IFRS 17 Insurance contracts (new) 1 January 2021

June 2017 IFRIC 23 Uncertainty over Income Tax Treatments (new) 1 January 2019

October 2017 IFRS 9: Prepayment Features with Negative Compensation (amendment) 1 January 2019

October 2017 IAS 28: Long-term Interests in Associates and Joint Ventures (amendment) 1 January 2019

December 2017 Annual Improvements to IFRS Standards 2015-2017 Cycle 1 January 2019

On 31 December 2017, the following standards, revisions, amendments and improvements to the Standards and

Interpretations, issued by the IASB were still pending approval by the EU:

The impact of the adoption of these standards and amendments is currently under analysis by the Com-

pany, however, no material impacts are expected to the financial statements.

sition for all leases with period of more than 12 months and the recording of a depreciation and interest expense in the Income Statement separately.

The application of the standard is mandatory for periods beginning on or after January 1, 2019.

The Board of Directors is assessing the implications of adopting this standard, but its adoption is not expected

to have a significant impact on the Company’s Financial Statements, as a result of the recognition of the assets and liabilities associated with the current operating lease agreements.

Information provided in note 19 allows an understanding of the portential impacts resulting from the adoption of the new standard.

202

ANNUAL REPORT 2017

3.1 Tangible and intangible assets / estimated useful livesDepreciations and amortisations are calculated on the acquisition cost on a straight-line basis, as of the month the asset becomes available for use. The depreciation and amortisation rates applied reflect the best esti-

mate of their useful life. Residual asset values and the respective useful lives are revised and adjusted when deemed necessary.

3.2 Impairment on accounts receivableImpairment losses on doubtful debts are based on Luz Saúde’s assessment of the probability of recove-ring the balances owed. This assessment is based on the duration of the default, the counterparties’ credit

history and the deterioration of credit standings of the main debtors. Should the debtors’ financial conditions deteriorate, impairment losses may be greater than expected (note 24.1).

IFRS establish a number of accounting options and require the Board of Directors make the necessary judgments, estimates and decide the most suitable accounting option according to the Company’s operations. Note 26 shows the main accounting policies followed in the preparation of these financial statements. This note presents the main accounting estimates and judgments used by the Company when applying accounting poli-cies. Information presented in this note, is intended to improve the understanding on how the application of the policies affects the Company’s reported financial position and results and their disclosure.

Considering that in many situations there are alternatives to the accounting treatments adopted by the Board of Directors, the financial position and the results reported by the Company could have been different had a different treatment been chosen. The Board of Directors belie-ves the choices made are appropriate and the financial statements adequately show the Company’s financial position, the results and cash flows of its operations in all material respects.

The options presented are only for a better understan-ding of the financial statements and are not intended to suggest that other options or estimates would be more appropriate.

3. Main estimates and judgments used in preparing the Financial Statments

203


3.4 Corporate income tax and differed taxes

3.5 Variable remuneration

3.6 Impairment on financial investments and loans to subsidiaries and associates

3.3 ProvisionsThe Company exercises considerable judgement in measuring and recognising provisions. Judgment is indispensable to assess the probability of a successful outcome for certain pending litigation. Provisions are accrued when the Company considers an unfavourable outcome in pending litigation to be likely and thereby a reasonably estimated outflow of funds plausible. Due

to uncertainties inherent to the assessment process, actual losses may be different from those estimated in the provision. These estimates are subject to change as new information about the proceedings becomes available. Revisions of these estimated losses may affect future results (note 20).

Certain interpretations and estimates must be made in order to determine the amount of tax on profits and deffered taxes. There are a number of transactions and calculations for which the determination of the final amount of tax to be paid is uncertain during the normal business cycle. Other interpretations and estimates could result in a different level of taxes on profits, both current and deferred, being recognised in the period.

The Tax Authorities are entitled to review the Company’s calculation of taxable income for a period of four to six years, if there are tax losses carried forward (five years for Social Security). Corrections may therefore be made to taxable income, mainly due to differing interpretations of tax laws. The Board of Directors believes, however, there will be no significant corrections to the income tax reported in the financial statements.

The Company recognizes on a monthly basis an accrued expense for bonuses and other variable remuneration, considering the objectives agreed with employees, the achievement of said objectives and the Company’s bu-siness performance. The cost estimated for the period

is recorded as a liability under ‘Other payables’ , and is prepared based on the best estimate of management considering the performance of the current period, being the final amount known in the following year.

Usually and according to IFRS, impairment of a financial investment is recorded when the value of that invest-ment exceeds the present value of future cash flows. The calculation of the present value of estimated cash flows and the decision to consider the impairment permanent requires judgment and greatly depends on the analysis of the future progress of the subsidiaries and associates. For the purposes of impairment testing, available market prices or other assessment standards are used, based on the information available concerning

the subsidiaries and associates. In order to determine whether the impairment is permanent, Luz Saúde takes into consideration its ability and intention of maintaining the investment for a reasonable period of time that is sufficient for a forecast on the recoverability of the fair value up to (or above) the carrying value, including an analysis of such factors as the subsidiary’s or associates expected results, the economic and regulatory fra-mework and the state of the sector and market where they operate.

204

ANNUAL REPORT 2017

4. Revenue for services rendered

31-dec-17 31-dec-16

Luz Saúde - Unidades de Saúde e de Apoio à Terceira Idade, SA (“USATI”) 773,588 492,887Surgicare - Unidades de Saúde, SA (“SURGICARE”) 206,316 69,245Hospital da Luz, SA (“HLL”) 132,997 69,124HOSPOR - Hospitais Portugueses, SA (“HOSPOR”) 178,808 182,329Hospital da Arrábida - Gaia, SA (“HAG”) 151,615 200,003SGHL - Sociedade Gestora do Hospital de Loures, SA (“SGHL”) 148,819 97,950Hospital da Luz - Guimarães, SA (“HLG”) 106,094 57,975Luz Saúde - Serviços, ACE (“ACE”) 123,343 56,138GLSMED TRADE, SA (“GLST”) 69,929 28,338GLSMED LEARNING HEALTH, SA (“GLSLE”) 69,675 28,250CLIRIA - Hospital Privado de Aveiro, SA (“CLIRIA”) 61,335 38,498Hospital da Luz - Centro Clínico da Amadora, SA (“HL-CCA”) 57,625 37,525Hospital da Luz - Oeiras, SA (“HLO”) 47,822 19,278HME - Gestão Hospitalar, SA (“HME”) 39,517 19,976Casas da Cidade - Residências Sénior de Carnaxide, SA (“CASAS CARNAXIDE”) 33,028 10,552Casas da Cidade - Residências Sénior, SA (“CASAS”) 29,501 11,100Vila Lusitano - Unidades de Saúde, SA (“VLUSITANO”) 20,221 15,091SCH - Sociedade de Clínica Hospitalar, SA (“SCH”) 17,200 -British Hospital Lisbon XXI, SA (“BHXXI”) 13,500 -Hospital Residencial do Mar, SA (“HRM”) 12,925 8,100Instituto de Radiologia Dr. Idálio de Oliveira - Centro de Radiologia Médica, SA (“IRIO”) 12,424 6,976RML - Residência Medicalizada de Loures, SGPS, SA (“RML”) 12,175 5,850CRB - Clube Residencial da Boavista, SA (“CRB”) 12,175 5,800Other services 43,522 - 2,374,154 1,460,985

The amount of revenue for services provided comes entirely from services provided direct and indirectly to Luz Saúde’s subsidiaries (note 12 and 23), in the areas

of marketing, financial, fiscal, legal and business and strategy development, according to the following detail:

205


5. Other financial income and gains 31-dec-17 31-dec-16Dividends received 25,600,000 24,000,000Interest from loans to subsidiaries and associates 10,534,646 4,525,480Interest from banks 391 452Other interest 21,547 - 36,156,584 28,525,932

31-dec-17 31-dec-16HLL 18,000,000 16,500,000HAG 6,500,000 6,500,000HLO 1,100,000 1,000,000 25,600,000 24,000,000

31-dec-17 31-dec-16HOSPOR 3,717,533 1,967,770USATI 3,033,235 1,187,186HLG 1,153,698 541,079SURGICARE 683,146 145,151HME 625,100 287,381HAG 444,513 97,644HL-CCA 275,480 146,160CASAS CARNAXIDE 131,518 4,181CCHCI II 119,409 -SCH 82,868 -HLL 82,817 66,279RML 78,419 40,044GLST 55,262 27,564CLIRIA 37,039 15,041CCHCI 11,957 -GLSLE 2,652 - 10,534,646 4,525,480

The amount of dividends received has the following detail:

The amount of interest from loans to subsidiaries can be detailed as follows:

Increase in Interest from loans to subsidiaries and asso-ciates is mainly due to the increase in the amounts of financing granted, and to the effect of the interest rate

change related to the financing made to subsidiaries at the beginning of 2017, as a result of an expansion in the financing period up to 24 months after the reporting date.

206

ANNUAL REPORT 2017

7. Materials and services consumed 31-dec-17 31-dec-16

Specialised work 2,220,450 1,186,953Advertising 156,388 59,946Rent and leases 113,724 69,312Transportation and accommodation 111,716 70,204Banking services 103,312 100,875Insurance 102,152 64,960Maintenance and repair 61,829 39,830Other materials and services consumed 104,910 258,529 2,974,481 1,850,609

8. Personnel expenses 31-dec-17 31-dec-16

Corporate body remunerations 1,018,236 1,035,400Personnel wages and salaries 501,646 194,722Payroll related expenses 271,751 216,000Other personnel expenses 47,696 223,350 1,839,329 1,669,472

6. Financial expenses 31-dec-17 31-dec-16Interest expenses with commercial paper 4,564,287 3,421,628Expenses from derivatives financial instruments (note 18) 1,299,649 621,122Interest expenses 94,948 147,699Other financial expenses and losses 746,903 735,571 6,705,787 4,926,020

The caption “Other financial expenses and losses” mainly includes expenses incurred with commissions from financing agreements.

Increase in the Specialised work caption is due to expen-ses incurred with consultancy related with the expasion of scope of the Company’s activity.

The average number of company employees at the close of the 2017 financial year was 10 (2016: 6).

207


31-dec-17 31-dec-16

Audit 71,000 102,500 71,000 102,500

9. Income tax

31-dec-17 31-dec-16

Current tax (111,545) (8,695)Tax from previous years 214,928 195,679Deferred tax (185,851) 721,125Total tax in the income statement (82,468) 908,109

31-dec-17 31-dec-16

Profit for the year 10,434,842 6,729,547Income tax expense (82,468) 908,109Profit before income tax 10,517,310 5,821,438 Tax rate 21.00% 21.00% (2,208,635) (1,222,502) Untaxed dividends 5,376,000 5,040,000Non-deductible provisions (3,361,014) (3,162,644)Tax from previous years 214,928 195,679Autonomous taxes (111,545) (8,695)Other 7,798 66,271 (82,468) 908,109

Since January 1, 2016, the tax group previously hea-ded by Luz Saúde, SA changed its parent company to Longrun Portugal, SGPS, SA, so in the current year Luz Saúde has calculated and recorded income tax on a stand alone basis.

In addition, as a parent company of a group of companies belonging to the tax group led by Longrun Portugal, SGPS, SA, the Company concentrated all the operations

of its subsidiaries within the scope of the tax group, thus recording in its liabilities the amounts received from the investees for the purposes of settlement of their liabilities in respect of tax advance payments and recognizing as an asset the amounts transferred to Lon-grun Portugal, SGPS, SA for the purpose of payment of said tax liabilities, given that Longrun Portugal, SGPS, SA is the entity responsible for the global calculation and self-assessment of corporate income tax.

The detail of income tax in the statement of the com-prehensive income can be presented as follows:

Reconciliation of the income tax rate is shown below:

The fees of the Statutory Auditor can be presented as follows:

208

ANNUAL REPORT 2017

31-dec-15 Income statement Other 31-dec-16

Deferred tax assets Impairment on financial investments 2,306,909 (89,206) - 2,217,703Tax losses carried forward 480,074 747,490 (480,074) 747,490Other 235,837 62,841 801,979 1,100,657 3,022,820 721,125 321,905 4,065,850

31-dec-16 Income statement Other 31-dec-17

Deferred tax assets Impairment on financial investments 2,217,703 - - 2,217,703Tax losses carried forward 747,490 - (747,490) -Other 1,100,657 (185,851) (215,007) 699,799 4,065,850 (185,851) (962,497) 2,917,502

The caption Other includes mainly deferred tax (2017: € 572 thousand and 2016: € 859 thousand) relating to the valuation of derivative financial instruments contracts

(note 18), in the component considered as effective and as such recognized directly in shareholders’ equity .

Changes in the caption “Deferred tax assets” in 2017 and 2016 can be shown as follows:

209


10. Property, plant and equipment

Basic and transport equipment Other In progress Total

Acquisition cost Balance as at 1 January 2016 1,655,622 800 - 1,656,422 Additions 263,181 - 15,280 278,461 Disposals and write-offs (350,919) - - (350,919)Balance as at 31 December 2016 1,567,884 800 15,280 1,583,964 Balance as at 1 January 2017 1,567,884 800 15,280 1,583,964 Additions 205,744 861 142,978 349,583Balance as at 31 December 2017 1,773,628 1,661 158,258 1,933,547 Accumulated depreciation Balance as at 1 January 2016 1,117,301 797 - 1,118,098 Depreciation for the financial year 257,678 3 - 257,681 Disposals and write-offs (146,215) - - (146,215)Balance as at 31 December 2016 1,228,764 800 - 1,229,564 Balance as at 1 January 2017 1,228,764 800 - 1,229,564 Depreciation for the financial year 132,423 76 - 132,499Balance as at 31 December 2017 1,361,187 876 - 1,362,063 Net book value As at 31 December 2016 339,120 - 15,280 354,400As at 31 December 2017 412,441 785 158,258 571,484

The changes in property, plant and equipment can be presented as follows:

210

ANNUAL REPORT 2017

11. Intangible assets Software In progress Total

Acquisition costs Balance as at 1 January 2016 3,026,624 111,931 3,138,555 Additions 520,763 180,157 700,920 Disposal and write-off (682,644) - (682,644)Balance as at 31 December 2016 2,864,743 292,088 3,156,831 Balance as at 1 January 2017 2,864,743 292,088 3,156,831 Additions 672,084 190,171 862,255Balance as at 31 December 2017 3,536,827 482,259 4,019,086 Accumulated amortisation Balance as at 1 January 2016 2,475,511 - 2,475,511 Amortisations of the financial year 263,234 - 263,234 Disposal and write-off (284,435) - (284,435)Balance as at 31 December 2016 2,454,310 - 2,454,310 Balance as at 1 January 2017 2,454,310 - 2,454,310 Amortisations of the financial year 269,276 - 269,276Balance as at 31 December 2017 2,723,586 - 2,723,586 Net book value As at 31 December 2016 410,433 292,088 702,521As at 31 December 2017 813,241 482,259 1,295,500

211


12. Investments in subsidiaries and associates

Financial Supplementary Loans to investments capital subsidiaries Total contributions and associates

Acquisition cost Balance as at 1 January 2016 99,959,570 120,017,772 137,719,863 357,697,205 Additions 5,713,000 700,000 85,764,866 92,177,866 Decrease - (232,000) (31,224,866) (31,456,866)Balance as at 31 December 2016 105,672,570 120,485,772 192,259,863 418,418,205 Balance as at 1 January 2016 105,672,570 120,485,772 192,259,863 418,418,205 Additions 21,873,371 26,700,048 41,375,625 89,949,044 Decrease - (90,000) (10,315,674) (10,405,674)Balance as at 31 December 2016 127,545,941 147,095,820 223,319,814 497,961,575 Accumulated impairment Balance as at 1 January 2016 3,676,420 18,178,375 8,586,308 30,441,103 Additions - 6,865,000 8,470,000 15,335,000 Transfer - - 2,202,827 2,202,827Balance as at 31 December 2016 3,676,420 25,043,375 19,259,135 47,978,930 Balance as at 1 January 2017 3,676,420 25,043,375 19,259,135 47,978,930 Additions 2,059,419 - 13,945,408 16,004,827Balance as at 31 December 2017 5,735,839 25,043,375 33,204,543 63,983,757 Net book value As at 31 December 2016 101,996,150 95,442,397 173,000,728 370,439,275As at 31 December 2017 121,810,102 122,052,445 190,115,271 433,977,818

The caption Investments in subsidiaries and associates can be presented as follows:

212

ANNUAL REPORT 2017

12.1 Financial investments by investees Supplementary Registered % of Financial capital Total Total office shareholding investments contributions Loans 31-dec-17 31-dec-16 (note 12.2) (note 12.3) (note 12.4)Subsidiaries

CASAS CARNAXIDE Oeiras 100.00% 5,345,659 3,000,000 495,000 8,840,659 8,840,659

CASAS Lisbon 100.00% 200,000 490,000 - 690,000 420,000

HLO Oeiras 100.00% 250,000 - - 250,000 250,000

CLIRIA Aveiro 93.45% 4,549,651 - 1,200,000 5,749,651 5,049,651

GLSLH Lisbon 100.00% 50,000 - - 50,000 50,000

GLST Lisbon 100.00% 300,000 - 785,000 1,085,000 1,435,000

HME Évora 100.00% 149,104 - 11,830,000 11,979,104 11,119,104

HAG V. N. Gaia 100.00% 8,240,113 - 3,650,000 11,890,113 14,740,113

HL-CCA Amadora 100.00% 2,100,000 9,200,000 3,504,189 14,804,189 14,473,863

HLG Guimarães 100.00% 7,487,500 - 20,365,000 27,852,500 26,552,500

HLL Lisbon 100.00% 3,000,000 - 800,000 3,800,000 1,000,000

HOSPOR Póvoa de Varzim 100.00% 35,450,000 6,500,000 67,900,000 109,850,000 108,350,000

USATI Lisbon 100.00% 41,800,000 75,200,000 61,150,000 178,150,000 166,300,000

RML Lisbon 75.00% 5,362,500 - 1,495,000 6,857,500 6,437,500

SGHL Loures 100.00% 3,246,737 18,178,375 22,911,716 44,336,828 34,565,693

SURGICARE Lisbon 100.00% 6,087,500 7,500,000 16,900,000 30,487,500 17,887,500

SCH Funchal 81.35% 2,979,618 - 1,133,899 4,113,517 -

CCHCI Lisbon 100.00% 683,334 6,480,048 3,050,010 10,213,392 -

127,281,716 126,548,423 217,169,814 470,999,953 417,471,583

Associates

GENOMED - Diagnósticos de Medicina Molecular, SA (“GENOMED”) Lisbon 37.50% 244,825 - - 244,825 244,825

HL - Sociedade Gestora do Edifício, SA (“HL-SGE”) Oeiras 10.00% 14,400 597,397 - 611,797 701,797

CCHCI II Lisbon 10.00% 5,000 19,950,000 6,150,000 26,105,000 -

264,225 20,547,397 6,150,000 26,961,622 946,622

Total investments in subsidiaries and associates – acquisition cost 127,545,941 147,095,820 223,319,814 497,961,575 418,418,205

Impairment in investments in subsidiaries and associates (note 12,5) (5,735,839) (25,043,375) (33,204,543) (63,983,757) (47,978,930)

Total investments in subsidiaries and associates – net book value 121,810,102 122,052,445 190,115,271 433,977,818 370,439,275

213


12.2 Changes in financial investments 31-dec-16 Increases Decreases 31-dec-17

Subsidiaries CASAS CARNAXIDE 3,349,659 1,996,000 - 5,345,659CASAS 200,000 - - 200,000HLO 250,000 - - 250,000CLIRIA 4,549,651 - - 4,549,651GLSLH 50,000 - - 50,000GSLT 50,000 250,000 - 300,000HME 149,104 - - 149,104HAG 6,240,113 2,000,000 - 8,240,113HL-CCA 100,000 2,000,000 - 2,100,000HLG 5,487,500 2,000,000 - 7,487,500HLL 1,000,000 2,000,000 - 3,000,000HOSPOR 33,450,000 2,000,000 - 35,450,000USATI 39,800,000 2,000,000 - 41,800,000RML 5,362,500 - - 5,362,500SGHL 1,287,318 1,959,419 - 3,246,737SURGICARE 4,087,500 2,000,000 - 6,087,500SCH - 2,979,618 - 2,979,618CCHCI - 683,334 - 683,334 105,413,345 21,868,371 - 127,281,716Associated companies GENOMED 244,825 - - 244,825HL-SGE 14,400 - - 14,400CCHCI II - 5,000 - 5,000 259,225 5,000 - 264,225 Total financial investments 105,672,570 21,873,371 - 127,545,941

In 2017, the Company strengthened the share capital of some of its subsidiaries through several share capital increase operations. In respect of SCH and CCHCI, the

company acquired the shares in these companies on March 15, 2017 and July 31, 2017, respectively.

214

ANNUAL REPORT 2017

31-dec-16 Increases Decreases 31-dec-17Subsidiaries CASAS CARNAXIDE 2,491,000 - (1,996,000) 495,000CLIRIA 500,000 700,000 - 1,200,000GLST 1,385,000 - (600,000) 785,000HME 10,970,000 860,000 - 11,830,000HAG 8,500,000 - (4,850,000) 3,650,000HL-CCA 5,173,863 - (1,669,674) 3,504,189HLG 21,065,000 - (700,000) 20,365,000HLL - 800,000 - 800,000HOSPOR 68,400,000 - (500,000) 67,900,000USATI 51,300,000 9,850,000 - 61,150,000RML 1,075,000 420,000 - 1,495,000SGHL 15,100,000 7,811,716 - 22,911,716SURGICARE 6,300,000 10,600,000 - 16,900,000SCH - 1,133,899 - 1,133,899CCHCI - 3,050,010 - 3,050,010 192,259,863 35,225,625 (10,315,674) 217,169,814Associated companies CCHCI II - 6,150,000 - 6,150,000 - 6,150,000 - 6,150,000 Total loans 192,259,863 41,375,625 (10,315,674) 223,319,814

12.4 Changes in loans to subsidiaries and associates

12.3 Changes in supplementary capital contributions 31-dec-16 Increases Decreases 31-dec-17Subsidiaries CASAS CARNAXIDE 3,000,000 - - 3,000,000CASAS 220,000 270,000 - 490,000HL-CCA 9,200,000 - - 9,200,000HOSPOR 6,500,000 - - 6,500,000USATI 75,200,000 - - 75,200,000SGHL 18,178,375 - - 18,178,375SURGICARE 7,500,000 - - 7,500,000CCHCI - 6,480,048 - 6,480,048 119,798,375 6,750,048 - 126,548,423Associated companies HL-SGE 687,397 - (90,000) 597,397CCHCI II - 19,950,000 - 19,950,000 687,397 19,950,000 (90,000) 20,547,397 Total supplementary capital contributions 120,485,772 26,700,048 (90,000) 147,095,820

215


31-dec-16 Increases Decreases 31-dec-17

Subsidiaries CASAS CARNAXIDE 2,250,000 - - 2,250,000HME 10,431,930 - - 10,431,930SGHL 28,332,000 16,004,827 - 44,336,827HL-CCA 6,965,000 - - 6,965,000Total impairment 47,978,930 16,004,827 - 63,983,757

12.5 Changes in impairment of investments in subsidiaries and associates

12.6 Summarised financial information on the main subsidiaries

HAG HLL HOSPOR SGHL

Summarised net assets Current assets 27,118,444 58,473,518 32,770,444 36,260,575 Current liabilities (16,677,967) (35,876,299) (22,968,800) (24,516,195) Current net assets/(liabilities) 10,440,477 22,597,219 9,801,644 11,744,380 Non-current assets 31,323,748 34,648 135,049,350 9,691,297 Shareholder loans (3,650,000) (800,000) (67,900,000) (22,911,716) Non-current liabilities (9,525,895) - (11,085,669) (12,471,546) Net assets/(liabilities) 28,588,330 21,831,867 65,865,325 (13,947,585) Summarised results Total revenue 57,948,542 155,008,459 76,986,046 96,720,144 Profit before income tax 8,185,122 20,504,425 3,787,715 (7,265,091) Expenses (1,877,194) (4,632,444) (671,335) 2,917,766 Net profit 6,307,928 15,871,981 3,116,380 (4,347,325) Summarised cash flows Operating cash flow 19,449,399 4,191,382 19,599,864 (4,369,300) Investment cash flow (2,151,404) - (4,302,305) (502,417) Financing cash flow (10,084,563) (3,153,923) (6,834,801) 3,860,892 Change in cash and cash equivalents 7,213,432 1,037,459 8,462,758 (1,010,825)

216

ANNUAL REPORT 2017

13. Trade and other receivables

31-dec-17 31-dec-16Trade receivables 121,160 98,566Trade receivables - related entities (note 13.1) 4,215,301 2,176,687Impairment of trade receivables (note 13.2) (40,000) - 4,296,461 2,275,253 Other debtors - related entities (note 13.1) 17,934,594 11,467,931Deferred expenses 1,051,958 1,738,608State and other public entities 632,275 626,594Accrued income 503,236 486,987Other debtors 195,215 307,009Prepayments 45,343 16,725 20,362,621 14,643,854 24,659,082 16,919,107

The caption trade and other receivables can be presen-ted as follows:


The balance with State and other public entities refers to VAT to be recovered.

217


13.1 Trade and other debtors - related parties 31-dec-17 31-dec-16

Other debtors Other debtors

Trade Other Trade Other receivables Tax group debtors Total receivables Tax group debtors Total

Subsidiaries and associates USATI 1,501,493 - 4,962,002 6,463,495 554,269 - 1,928,768 2,483,037HOSPOR 248,080 - 3,719,183 3,967,263 291,827 - 1,967,770 2,259,597HLG 125,367 - 1,164,547 1,289,914 55,255 - 546,279 601,534SURGICARE 364,638 - 683,146 1,047,784 165,039 - 145,151 310,190HME 111,370 - 825,550 936,920 34,302 - 287,381 321,683ACE 671,144 - 150 671,294 283,996 - 150 284,146HAG 126,222 58,039 445,113 629,374 132,280 58,039 97,644 287,963CLIRIA 445,088 - 72,525 517,613 123,463 - 15,041 138,504HL-CCA 50,140 - 275,480 325,620 81,416 - 146,161 227,577GLSLH 21,033 - 275,863 296,896 26,753 - 448 27,201HLL 159,389 - 83,567 242,956 27,275 - 66,279 93,554RML 27,275 - 214,126 241,401 13,192 - 135,707 148,899GLST 120,299 - 82,826 203,125 33,123 - 27,564 60,687CCHCI II - - 152,213 152,213 - - - -CASAS CARNAXIDE 9,787 - 131,518 141,305 7,900 - 4,181 12,081SGHL 127,396 - - 127,396 280,978 - - 280,978SCH 11,015 - 50,063 61,078 - - - -VLUSITANO 36,017 - - 36,017 28,560 - - 28,560HLO 20,849 - 750 21,599 12,562 - - 12,562HRM 13,866 - 150 14,016 8,248 - - 8,248CCHCI - - 11,959 11,959 - - - -CASAS 9,852 - - 9,852 6,950 - - 6,950CRB 8,795 - - 8,795 4,674 - - 4,674IRIO 4,408 - - 4,408 4,625 - - 4,625BH 1,778 - - 1,778 - - - -

4,215,301 58,039 13,150,731 17,424,071 2,176,687 58,039 5,368,524 7,603,250

Other related parties LONGRUN - 4,725,824 - 4,725,824 - 6,041,368 - 6,041,368

Total 4,215,301 4,783,863 13,150,731 22,149,895 2,176,687 6,099,407 5,368,524 13,644,618

218

ANNUAL REPORT 2017

31-dec-17 31-dec-16

Cash 500 500Immediately available bank deposits 9,493,950 19,817,551 9,494,450 19,818,051

14. Cash and cash equivalents


15.1 Share capital15. Share capital, reserves and retained earnings

Luz Saúde’s Share Capital is comprised of 95,542,254 ordinary registered shares with a nominal value of €1 (31 December 2016: 95,542,254 shares).

13.2 Impairment of receivables 31-dec-17 31-dec-16

Impairment of receivables as at 1 January - 1,977,619 Effect in results Increase 40,000 225,208 Other effects Other effects - (2,202,827)Impairment of receivables as at 31 December 40,000 -

The balance of the impairment of accounts receivable relates to the subsidiary HME during the year 2016 was transferred to the financial investments account,

taking into account the non-current nature of accounts receivable. The balance took over.

219


15.2 Treasury shares

Amount 31-dec-17 31-dec-16

Balance as at 1 January 170,000 340,000Acquired shares - -Shares delivered as bonus payments (170,000) (170,000)Balance as at 31 December - 170,000

Under the share-based payment plan changes in LUZ SAÚDE’ treasury shares caption, can be presented as follows:

15.3 Share premiumsShare premiums are related to the share capital increases undertaken by the company in 2004, 2005 and 2006 in the amounts of €12,500 thousand, €7,500 thousand and €61,600 thousand, respectively. During the 2011 finan-cial year, these funds were partially used €33,870,082, following a Shareholder resolution, to cover losses carried forward, leaving a balance of €47,729,918.

In the share capital increase that took place in February 2014, €15,492,959 was recorded as share premiums from which €1,427,084 were deduced for transaction costs with the share capital increase. The caption therefore presents a total balance of €61,795,793.

15.4 Reserves and retained earningsAs at 31 December 2017 and 2016 the amount in re-serves and retained earnings (which include also the

comprehensive income for the year) can be presented as follows:

31-dec-17 31-dec-16

Non-distributable reserves Legal reserve 2,590,667 2,254,189 Treasury shares reserve - 656,388 Share-based payment plan reserve - 544,001Other reserves 47,449,740 40,229,621Retained earnings (3,566,269) (220,596)Comprehensive income for the year 11,513,071 3,666,923 57,987,209 47,130,526

220

ANNUAL REPORT 2017

15.4.1 Non-distributable reserves

The non-distributable reserves include the legal reserve created by allocation of results of each financial year from the parent company.

15.4.1.1 Share-based payments

In the Company’s General Shareholders Meeting held on 22 January 2014, a share-based plan for Company directors was created. The beneficiaries of this plan are members of the Company’s Board of Directors that have worked with the Company under an employment agreement or as members of its corporate bodies, since its incorporation on 6 July 2000 and that are Directors on each share granting date. 510,000 previously issued shares were granted by the Company under the referred share-based plan, by

transfer to the securities account indicated by the be-neficiary-directors of the share-based plan. One third of the shares vested on the first business day of 2015, 2016 and 2017. The third and last share tranche was delivered in January 2017, reaching the end of its plan.

15.4.2 Other reserves

Other reserves relate to the reserves created by the allocation of profits from the parent company from previous years.

15.4.2.1 Appropriation of results

According to the proposal presented and approved at the General Meeting held on May 25, 2017, the individual results LUZ SAÚDE, for the year 2016, had the following application:

2016 Year-end

Legal reserve 336,478Unrestricted reserves 6,393,069Statutory profit allocation 6,729,547

15.4.3 Retained earnings

The caption of retained earnings includes, among other, the ineffectiveness of derivative financial instruments and

the result generated from the purchase and disposal of treasury shares held under the stock compensation plan.

221


31-dec-17 31-dec-16

Trade payables - current 1,967,068 1,327,562Trade payables - related entities (note 23) 3,500 -Total trade payables 1,970,568 1,327,562 State and other public entities 64,497 70,192Personnel 1,887,934 1,565,472Other accrued expenses 598,853 757,741Other payables 1,516 9,338Other payable - related entities (note 23) 4,918,415 7,420,550Total other payables 7,471,215 9,823,293 9,441,783 11,150,855

16. Trade and other payables

Considering the maturities associated to these financial instruments, their carrying value is deemed to be a reasonable estimate of the respective fair value.

31-dec-17 31-dec-16

Interest-bearing liabilities Non-current Borrowings and bank overdrafts Commercial paper 212,242,436 183,300,000 Borrowings 18,375,000 - 230,617,436 183,300,000 Current Borrowings and bank overdrafts Commercial paper 11,000,744 5,731,299 Borrowings 2,541,560 - Other loans - 2,805,620 13,542,304 8,536,919 Interest-bearing liabilities 244,159,740 191,836,919 Cash and cash equivalents Cash 500 500 Bank deposits 9,493,950 19,817,551Intest-bearing liabilities, net 234,665,290 172,018,868

17. Interest-bearing liabilities

222

ANNUAL REPORT 2017

The main commercial paper financing lines that the Company has are the following:

17.1 Commercial papper

Commercial paper program that does not contain an underwriting provision is registered under current lia-bilities, although it is expected that the arranging and dealing bank will be able to obtain the necessary funds through their distribution channels.

Commercial paper programs are classified as non-current when have a maturity of 12 months after the reporting date, the Group has the ability to unilaterally renew the current emissions until the maturity of the programs and they have guarantee of underwriting subscription

by the organizer. Although the active instalments as at the reporting date have a maturity less than 12 months, were classified as non-current for presentation purposes in the statement of financial position.

The commercial paper programs maturing in 2025, 2024 and 2022 are guaranteed by the mortgages of Hospital da Luz (USATI), Arrábida Hospital, Casas de Carnaxide, Clínica da Amadora (HAG, CASAS and HL-CCA) and of the buildings of Clipóvoa and Hospital de Santiago (HOSPOR).

Begin End Underwriting Amount available Amount used in Amount used in rights in 31-dec-17 31-dec-17 31-dec-16

12-08-2014 28-12-2017 Yes - - 3,300,00023-12-2014 12-04-2017 Yes - - 5,000,00010-02-2011 26-04-2025 Yes 150,000,000 150,000,000 150,000,00022-12-2014 17-03-2022 No 20,000,000 4,000,000 -12-08-2014 30-09-2022 Yes 30,000,000 30,000,000 30,000,00015-03-2016 15-03-2021 Yes 5,000,000 5,000,000 -18-05-2016 18-05-2021 Yes 25,000,000 15,000,000 -04-08-2017 04-08-2024 Yes 25,000,000 14,500,000 -22-12-2017 23-12-2018 Yes 5,000,000 5,000,000 - 260,000,000 223,500,000 188,300,000 Current interest (256,820) 731,299 223,243,180 189,031,299

223


The main lines of financing in addition to the commercial paper that the Company has are the following:

At December 31, 2017 and 2016, the balance of this caption corresponded to commercial paper, bank loans and other financing obtained with interest at market

rates, the detail of which is based on the maturity of the contracted lines, as follows:

Most of the interest-bearing liabilities mentioned above contain financial restrictions/covenants that are standard to financing agreements. Typical non-financial restrictions include negative pledge provisions, guarantees provided by members of the Group and by the Company, in parti-

cular restrictions applying to the use of capital resources, acquisition and disposal of assets, pari passu obligations, events of default that include cross default clauses for companies controlled by or in a group relationship with the respective borrower. In terms of financial restrictions,

17.2 Bank loans

17.3 Maturity of the banking financing lines

17.4 Financial covenants

In addition, the Company has a credit line in the form of bank overdraft amounting to € 3,500 thousand, which on December 31, 2017 was not used (2016 € 2,806 thousand).

The financing line maturing in 2025 has as collateral the mortgage of the Hospital da Luz - Oeiras (SURGICARE) building.

Begin End Amount available in Amount used in Amount used in 31-dec-17 31-dec-17 31-dec-16

09-10-2017 09-10-2022 10,000,000 10,000,000 -31-10-2017 31-10-2025 11,000,000 11,000,000 - 21,000,000 21,000,000 - Current interest (83,440) - 20,916,560 -

31-dec-17 31-dec-16

Commercial Borrowings Other loans Commercial Borrowings Other loans paper paper

Up 12 months 11,000,744 2,541,560 - 5,731,299 - 2,805,620

12-24 months 27,311,029 3,875,000 - 6,800,000 - -

24-36 months 27,400,000 3,875,000 - 29,900,000 - -

36-48 months 47,468,912 3,875,000 - 27,400,000 - -

More than 48 months 110,062,495 6,750,000 - 119,200,000 - -

223,243,180 20,916,560 - 189,031,299 - 2,805,620

224

ANNUAL REPORT 2017

The Company uses derivative financial instruments to hedge interest rate risks affecting the value of the ex-pected future cash flows. The hedged risk is the change in the index that the floating rate incorporates, being applicable to all the Company’s credit lines.

The derivative financial instruments contracted for hedging purposes of interest rate changes in respect

of credit lines are considered effective in terms of cash flow hedge.

The fair value of these instruments have been deter-mined by banking entities based on observable inputs on the market and used in models and techniques ge-nerally accepted valuation (Level 2), can be presented as follows:

Trading derivatives are classified in current assets or current liabilities according to their fair value at the reporting date.

The fair value of the hedging derivative is classified in non-current assets or non-current liabilities when the maturity of the hedge target operation is more than 12 months of the reporting date and as current assets or current liabilities if the maturity of the hedge target operation is less than 12 months of the reporting date.

The notional interest rate swap contracts outstanding at December 31, 2017 amounted to € 180 million (2016: € 180 million), all of which are considered as cash flow hedges. These contracts resulted in the recognition of a change in the fair value of the Company’s equity in 2017 arising from the part considered as efficient for hedging purposes of approximately € 1,365 thousand negative (2016: € 3,877 thousand, negative). (2016: € 318 thousand, negative), relating to the part considered as trading or inefficient in terms of hedging, and approxi-mately € 303 thousand relate to matured interest. In the statement of comprehensive income, these amounts are presented net of the tax effect.

The detail of fair value per contract can be presented as follows:

18. Derivative financial instruments

31-dec-17 31-dec-16

Interest rate swap contracts - cash flow hedges 3,109,947 4,731,582Interest rate swap contracts - held for trading - -Total 3,109,947 4,731,582

Covered instrument Notional Begin End Fair value Counterpart

Commercial paper 150,000,000 26-10-2016 28-04-2025 2,727,039 BCPCommercial paper 30,000,000 30-09-2016 30-09-2022 382,908 Santander 3,109,947

some contracts include obligations to ensure certain debt to equity ratios for working capital.

As of December 31, 2017, the Company complies with the financial ratios in force on that date.

Certain financing agreements contain clauses of change of control provisions that require the controlling shareholder (Fosun Group) to maintain a controlling or direct control position in the Company.

225


20. Provisions

Risks and charges

Provisions Balance as at 1 January 2016 1,267,663 Effect on results Additions - Reversals (500,000) (500,000) Balance as at 31 December 2016 767,663 Balance as at 1 January 2017 767,663 Effect on results Additional provisions - Unused amounts reversed - - Balance as at 31 December 2017 767,663

Changes in the the caption provisions during 2017 and 2016 can be presented as follows:

The decrease in the provisions caption reflects the re-vision of the estimate previously formulated, based on

information available at the closing date of the accounts. In 2017 this item did not register any movements.

31-dec-17 31-dec-16

Operational leasing Less than 12 months 516,857 426,947Between 1 and 5 years 1,180,237 1,292,645Over 5 years 436,454 696,575 2,133,548 2,416,167

19. Operating leases In December 31, 2017 and 2016, the Company had responsibilities with operating leases, with penalty

clauses in case of cancellation. The total amounts of future payments are as follows:

226

ANNUAL REPORT 2017

21.2 Contingent liabilitiesAs disclosed in the prospectus for the Initial Public Offering and admission to trading on Euronext, in the Company’s Shareholders General Meeting held on 22 January 2014 and taking into account the continuous management positions held for nearly 15 years by Isabel Maria Pereira Aníbal Vaz, in addition to her role in the promotion of the Group’s business development, an award of €850,000 to the latter was approved in recog-nition of professional services rendered to the Group. This amount will be paid in one lump sum at the time

Isabel Maria Pereira Aníbal Vaz terminates her role as member of the Company’s Board of Directors, for any reason outside her responsibility. The payment of the proposed award is autonomous and is not intended to substitute any monetary compensations that may be legally or contractually due as a result of the termination of corporate management positions by Isabel Maria Pereira Aníbal Vaz, including in the Company, whatever the cause and the moment of termination thereof.

21. Contingent liabilities and liabilities21.1 DisputesThe following issues are pending resolution, for which the board, based on the opinion of its tax and legal advisors, evaluates the likelihood of the outcome of each of the processes, and recognized provisions for the amounts estimated to represent future disbursements:

• Luz Saúde as the parent company of the Tax Group has pending resolution of a dispute with the Tax Authority regarding the deductibility of financial charges in the amount of € 11,130 thousand relating to the period from 2008 to 2011 arising from financing of its subsidiary HOSPOR. The Administration with the support of its legal and tax consultants. Believes there are reasons as to the reason for the treatment followed by the company and as such filed a challenge.

In 2016, the Court of First Instance decided on this dis-pute, and it was favorable to Luz Saúde. Decision was appealed by the Public Finance Office and is currently pending in the Supreme Administrative Court.

As a result of the position of the Tax Authority, and in view of the proposed corrections, additional tax assessments were received in 2016 and 2017 in the amounts of € 1,121 thousand and € 2,028 thousand, respectively. The Company presented the necessary bank guarantees to continue to contest the corrections made by the Tax Authority.

• Following an inspection, the Tax Authority questioned the calculation of the tax benefits considered by two companies for the years 2013 and 2014, and identified corrections to Luz Saúde’s taxable income (as the parent company of the Tax Group ) of € 305 thousand and € 530 thousand, respectively. Board, based on the opinion of its legal and tax advisors, understands that the calculation performed is in accordance with the requirements of the law and as such it has complained about all situations. For the year 2013, following the payment notification received, the Group opted to provide a bank guarantee in the amount of € 240 thousand.

227


23. Related partiesThe Company’s financial statements are included in the consolidated financial statements of Fidelidade – Com-panhia de Seguros, SA with its headquarters in Largo do Calhariz nr 30, in Lisbon.

On 17 October 2014, and following the takeover bid for LUZ SAÚDE’s share capital, Fosun International, Ltd through Fidelidade – Companhia de Seguros S.A. has taken control over LUZ SAÚDE.

Fosun International Ltd, a company listed on the Hong Kong Stock Exchange, established in Hong Kong, based in Room 808, ICBC Tower , 3 Garden Road, Central, Hong Kong, registered in the Commercial Register of Hong Kong under number 942 079 and the registered capital of HK $42,428,475,138.57, controls Fidelidade. Fosun Group is controlled by Mr. Guo Guangchang.

Additionally, the following guarantees were granted for subsidiaries:

• Guarantee of the loan to the subsidiary HAG in the amount of €10,000 thousand (amount used as at the reporting date);

• Guarantee of the loan to the subsidiary RML in the amount of €4,375 thousand (amount used as at the reporting date);

• Financial pledge over the shares of the subsidiary SGHL – Sociedade Gestora do Hospital de Loures, S.A., to secure a credit line of €2,500 thousand granted to this subsidiary, and that as at 31 December 2016 was integrally used;

• Comfort letter, for the satisfaction of obligations under a €31 thousand loan (amount used as at the reporting date), granted to the subsidiary HOSPOR;

• Comfort letter for the satisfaction of obligations under the loans granted to RML in the amount of €575 thou-sand (amount used as at the reporting date);

• Some of the loans granted to subsidiaries contain Luz Saúde ownership clauses, whereby the banks may request early repayment of the respective loans although there are no financial obligations for Luz Saúde thereunder;

The company is guarantor of its subsidiaries in respect of the majority of the finance leases established by these entities (€32,543 thousand).

22. Guarantees

Amount used by Entities the subsidiaries Total amount used

Luz Saúde, HLL e USATI - 30,000,000Luz Saúde e HLL - 5,000,000 - 35,000,000

In December 31, 2017 the company had three bank guarantees provided to the Tax Authority in the total amount of € 4,222,973.

Some of the Commercial Paper agreements are entered into both by the Company and some of its subsidiaries,

and therefore there is joint responsibility of issuers for the payment of amounts underwritten by any of the parties under those programmes. On 31 December 2017, the programmes in force, respective issuers and amounts used by the subsidiaries, were the following:

228

ANNUAL REPORT 2017

In the following tables are presented the balances and transactions as of December 31, 2017 and 2016 with the companies in the Fosun Group.

Remuneration paid to corporate bodies is detailed in note 8.

For this purpose the balances and transactions with the companies included in Luz Saúde Group are presented in a separate section for the full years of 2017 and 2016.

Balances and transactions with Group related entities as at December 31 are as follows:

Fosun Group 31-dec-17 31-dec-16

Current Current Current Current Assets liabilities Revenue Expenses Assets liabilities Revenue Expenses

Longrun (Portugal) SGPS, SA 4,725,824 956 - - 6,041,368 - - - 4,725,824 956 - - 6,041,368 - - -

Luz Saúde Group 31-dec-17 31-dec-16

Current Current Current Current Assets liabilities Revenue Expenses Assets liabilities Revenue Expenses

HLL 242,956 2,735,499 18,215,813 - 93,554 3,438,000 16,635,403 -USATI 6,463,495 - 3,806,823 - 2,483,037 - 1,680,073 -HAG 629,374 1,050,297 7,096,128 - 287,963 1,401,000 6,797,647 -HOSPOR 3,967,263 810,994 3,896,341 - 2,259,597 888,000 2,150,099 -HLG 1,289,914 - 1,259,792 - 601,534 875,000 599,055 -SURGICARE 1,047,784 - 889,462 - 310,190 - 214,396 -HME 936,920 - 664,616 - 321,683 - 307,357 -CPP 21,599 131,305 1,147,822 - 12,562 181,500 1,019,278 -ACE 671,294 - 123,343 - 284,146 252,634 56,138 -HL-CCA 325,620 - 333,105 - 227,577 - 183,685 -CLIRIA 517,613 - 98,374 - 138,504 - 53,539 -GLSLH 296,896 3,500 72,326 450,000 27,201 - 28,250 -RML 241,401 - 90,594 - 148,899 - 45,894 -GLST 203,125 - 125,191 - 60,687 - 55,902 -CASAS CARNAXIDE 141,305 - 164,546 - 12,081 - 14,733 -CCHCI II 152,213 - 119,409 - - - - -SGHL 127,396 - 148,819 - 280,978 - 97,950 -CRB 8,795 189,364 12,175 94,948 4,674 384,416 5,800 92,844SCH 61,078 - 100,068 - - - - -VLUSITANO 36,017 - 20,221 - 28,560 - 15,091 -CASAS 9,852 - 29,501 - 6,950 - 11,100 -HRM 14,016 - 12,925 - 8,248 - 8,100 -CCHCI 11,959 - 11,957 - - - - -IRIO 4,408 - 12,424 - 4,625 - 6,976 -BH 1,778 - 13,500 - - - - - 17,424,071 4,920,959 38,465,275 544,948 7,603,250 7,420,550 29,986,466 92,844

229


The amounts reported as income are the services ren-dered to related entitites within the normal business, at normal market rates. The amounts reported as expenses are related to the normal business of the respective entities and are related to materials and services con-sumed and from interests related with the loans to the

subsidiaries. The balances are due to regular maturity or as established in the financing ageements.

In addition to the information presented above, balances and transactions with Group entities are presented in the notes 4, 5, 8, 12, 13, 15, 16 and 22.

230

ANNUAL REPORT 2017

24. Financial risk management

24.1 Credit risk

Luz Saúde, SA whose main activity is the development and participation in businesses in the health care area, is largely dependent on the financial structure of its subsidiaries and their ability to generate sufficient cash flow to carry out distribution of dividends, payment of interest, repayment of loans made by the company and liquidation of the services rendered by the Company.

The Company is exposed to the following types of risk as a result of its use of financial instruments:

• Credit risk• Liquidity risk• Market risk

This note provides information the Company’s exposure to each of the aforementioned risks, as well as its goals, proceadures and practices for measuring and managing these risks. Further disclosures of a quantitative nature are presented throughout these financial statements.

The indentified risks are reviewed regularly to ensure they reflect real market conditions and are consistent with the Company’s activities.

Credit risk arises from the possibility that financial los-ses may occur due to a client’s default on contractual obligations with Luz Saúde in the course of its business.

The Group’s credit risk exposure essentially arises from accounts receivable from its business activities and

from and monetary funds managed under the Group’s treasury activity.

The following table presents the maximum exposure of the Group to the credit risk:

31-dec-17 31-dec-16Trade receivables and accrued income 4,799,697 2,762,240Loans to associates 190,115,271 173,000,728Other receivables 18,129,809 11,766,150 213,044,777 187,529,118Bank deposits and cash equivalents 9,493,950 19,817,551 222,538,727 207,346,669

24.1.1 Trade receivables and accrued income

In terms of monitoring of the credit risk arising from operating and investment activities, relevant credit risk is limited to transactions with related entities of the Company, as these entities represent around 99.9% of the receivables balance.

Monitoring the activity of the subsidiaries by the Com-pany’s management enables a detailed monitoring of this risk.

231


24.2 Liquidity riskLiquidity risk arises from the possible inability to fi-nance the Company’s assets or to satisfy contractual undertakings when due. The management goal is to maintain an adequate amount of funds to meet the Group’s short-term, medium and long-term financial needs. To assess overall exposure to this type of risk, reports are drawn up that enable the company to identify occasional cash shortages and activate mechanisms intended to cover them.

To finance its business, the Company has the credit lines referred to in note 17.

The liquidity of the financial liabilities will give rise to the following non-discounted cash flows, based on the period remaining until contractual maturity on the reporting date:

31-dec-17 31-dec-16

Bank Commercial Other Loans paper liabilities (*) Total Total Under 12 months 2,541,560 11,000,744 9,441,783 22,984,087 19,687,77412 to 24 months 3,875,000 27,311,029 - 31,186,029 6,800,00024 to 36 months 3,875,000 27,400,000 - 31,275,000 29,900,00036 to 48 months 3,875,000 47,468,912 - 51,343,912 27,400,00049 to 60 months 2,625,000 35,262,495 - 37,887,495 27,400,000Over 60 months 4,125,000 74,800,000 - 78,925,000 91,800,000 20,916,560 223,243,180 9,441,783 253,601,523 202,987,774

(*) Excludes non-financial liabilities and advances from clients

24.1.2 Bank deposits and cash equivalents

The breakdown of the balance of bank and equivalent deposits, according to the credit risk quality of the fi-

nancial institutions where assets were deposited, can be presented as follows (taking as based on Moody’s rating observable in the market):

As principle, the company tries to maintain an alignment between the financial institutions which deposits its cash equivalents, and the financial institutions with used credit lines to finance the operations, in order to

create a natural hedge to prevent the risk of a potential credit event that may occur at the level of entity where the funds are deposited.

31-dec-17 31-dec-16

Rating A3 - 3,439,686Baa3 554,302 -Ba1 421,606 -Ba2 - 41,687Ba3 - 52,283B1 7,800,390 16,073,664Caa2 601,719 -Other 115,933 210,231 9,493,950 19,817,551

232

ANNUAL REPORT 2017

24.3 Market risk

25. Financial instruments by category

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates or developments in the capital markets, may affect the Company’s results and financial position. Because the Company is not exposed to foreign exchange or capital market risks, the goals of its market risk management policies focus mainly on monitoring changes in interest rates that affect interest-bearing liabilities with floating interest rates.

All credit lines contracted by the Company are exposed to floating interest rates, given by the market index contracted plus a spread. In previous years in order to balance the exposure to changes in interest rates,

the Company has contracted hedging instruments to address the cash flow risk, in order to fix the interest rates of some of the credit lines that are in place.

The instruments employed will take effect in the fourth quarter of 2016. With these instruments the level of financial debt that the Company has on 31 December 2017 and considering the effectiveness that these ins-truments may have (considering a positive evolution for future interest rates in the European Union), the Company will have about 73.87% of its financial debt exposed to fixed interest rate (2016: 93.8%).

Receivable Fair value Other Non-financial balances of assets / financial assets / As at 31 December 2017 liabilities liabilities liabilities Total

Assets Other non current assets 190,115,271 - - 248,647,033 438,762,304 Trade ans other receivables 22,929,506 - - 1,729,576 24,659,082 Cash and cash equivalents 9,494,450 - - - 9,494,450 222,539,227 - - 250,376,609 472,915,836Liabilities Other non current liabilities - - - 767,663 767,663 Borrowings - - 244,159,740 - 244,159,740 Trade and other payables - - 9,377,286 175,944 9,553,230 Derivative financial instruments - 3,109,947 - - 3,109,947 - 3,109,947 253,537,026 943,607 257,590,580

233


Receivable Fair value Other Non-financial balances of assets / financial assets / As at 31 December 2016 liabilities liabilities liabilities Total

Assets Other non current assets 173,000,728 - - 202,561,318 375,562,046 Trade ans other receivables 14,537,180 - - 2,381,927 16,919,107 Cash and cash equivalents 19,818,051 - - - 19,818,051 207,355,959 - - 204,943,245 412,299,204Liabilities Other non current liabilities - - - 767,663 767,663 Borrowings - - 191,836,919 - 191,836,919 Trade and other payables - - 11,080,663 70,192 11,150,855 Derivative financial instruments - 4,731,582 - - 4,731,582 - 4,731,582 202,917,582 837,855 208,487,019

The presented accounting policies were applied con-sistently in all periods covered by the present financial statements.

26.1.1 Recognition and valuation

Tangible assets are valued at cost less the respective accumulated depreciations and impairment losses.

Acquisition/construction costs include the invoice price, transport and instalment costs, financing costs and other related expenses, occurring during the construction period, as well as indirect costs attributable to it during the construction period.

Subsequent expenses with property, plant and equi-pment are only recognised if the company is likely to obtain economic benefits therefrom in the future. All ongoing maintenance and repair expenses are recog-nised as costs incurred, in keeping with the principles of accrual accounting.

When there is indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and an impairment loss recognised whenever the book

26. Main accounting principles

26.1 Property, plant and equipment

The hierarchy for the purpose of determining fair value should have the following levels and measurement bases:

• Level 1 – inputs based in quoted prices in active marke-ts for identical assets or liabilities that the entity can access at the reporting date;

• Level 2 – inputs based in other than quoted market prices included within Level 1 that are observable in the market;

• Level 3 - valuation models, whose main inputs are not observable in the market.

The only group of financial instruments carried at fair value are disclosed in note 18. The fair value of these instruments was determined by banks based on market observable inputs and used in generally accepted valua-tion models and techniques (level 2).

234

ANNUAL REPORT 2017

Intangible assets are recognised at the acquisition cost less accumulated amortisation and impairment losses, if any. Intangible assets are recognised only when it is likely Luz Saúde will obtain economic benefits therefrom in the future that can be reliably measured. Intangible assets with a definite useful life are amortised using

the straight-line method from the month they become available for use and over the life of the agreement. Intangible assets with indefinite useful lives (goodwill) are not amortised, but are tested for impairment in the last quarter of each financial year or whenever there is an indicator of impairment.

Luz Saúde tests its tangible and intangible fixed assets for impairment whenever an event or change occurs that indicates that the carrying value of an asset may not be recoverable. Should such indications arise, Luz Saúde determines the recoverable amount of the asset in order to determine the possible extent of the im-pairment loss. When it is impossible to determine the recoverable amount of a given asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated.

The recoverable amount of the asset or the cash-gene-rating unit is the greater of (i) its nets sales price and (ii) its value in use. The net sales price is the amount that would be obtained from the disposal of the asset in a transaction between independent and knowledgeable parties, less the direct sales costs. The value in use is derived from the asset’s future estimated discounted cash flows during its expected useful life. The discount rate used to update discounted cash flows reflects the time value of money and the specific risk of the asset.

value of an asset exceeds its recoverable amount. Im-pairment losses are recognised in the income statement

The recoverable amount is the higher of the asset’s sales price less any sales costs and its value in use. The value in use is calculated based on the current value of the future estimated cash flow that can be expected from the asset’s continued use and its disposal at the end of its useful life.

Gains or losses arising from the write-off or disposal of property, plant and equipment are measured as the difference between the asset’s proceeds of sale, less transaction costs, and the asset’s carrying value. They are recorded in the income statement under the caption “Other operating income and gains” or “Other operating expenses”.

Property, plant and equipment underway represent tan-gible assets that are still being constructed or installed

and are recorded at acquisition cost. Depreciation of these assets begins in the month they become available for use for their intended purpose.

26.1.2 Depreciation

Depreciation of tangible assets is calculated using the straight-line method, from the month the assets available for use. The depreciation rates used reflect, on average, the estimated useful lives of the assets:

YearsBasic equipment 2-20Other tangible assets 3-20

Depreciation ceases when the assets are classified as assets held for sale.

26.2 Intangible assets

26.3 Impairment of tangible and intangible assets

235


Whenever the carrying value of the asset or cash-ge-nerating unit is higher than its recoverable amount, an impairment loss is recognised. The impairment loss is recorded in the comprehensive income statement for the applicable financial year under the caption “Other operating expenses”.

When an impairment loss is subsequently reversed, the carrying value of the asset is updated to its estimated

value and is recognised in the comprehensive income statement as a deduction under the caption “Other operating expenses and losses”. However, reversing the impairment loss is limited to the amount that would have been recognised (net of amortisation or depre-ciation) had the impairment loss not been recognised in previous years.

Financial investments in subsidiaries are presented at their acquisition cost less impairment losses, when applicable.

Financial assets and liabilities are recognised in the fi-nancial position statement when the Company becomes a party to the corresponding contractual provisions. A financial asset is any asset that is cash, a contractual right to receive cash or an equity instrument of ano-ther entity. A financial liability is a liability that entails a contractual obligation to deliver cash. The Company’s financial assets are shown in the financial position sta-tement under the captions “Trade receivable”, “Other receivables” and “Cash and cash equivalents”. Financial liabilities are presented under “Trade payable”, “Bank loans and overdrafts”, “Other payables” and “Derivative financial instruments”.

Financial assets are initially recognised at their fair value plus transaction costs, except for financial assets at fair value through profit and loss, in which case these transaction costs are directly recognised in the income statement. Financial assets are derecognised when: (i) the Company’s contractual rights to receive their future cash flows expire, (ii) the Company has substantially transferred all the risks and benefits related to their ownership, or (iii) the Company has transferred control of the assets, although it retains a non-substantial part

of the risks and benefits associated with their ownership. Financial liabilities are recorded: (i) initially at their fair value less the transaction costs incurred and (ii) subse-quently at their amortised cost based on the effective interest method; or at fair value if the Company decides, when the liability is initially recognised, to record this financial liability at fair value through profit and loss, under the fair value option.

26.5.1 Trade and other receivables

Balances on trade and other receivables classified as current assets have no implicit interest and are presen-ted using the amortised cost method. This is equal to the carrying value, less any related impairment losses, which is calculated based on two assumptions: the se-niority of the receivable and the debtor’s credit profile. If collection is expected within one year or less, the receivable is classified as a current asset. Otherwise, it is classified as a non-current asset. Impairment losses are recorded in the income statement when there is objective evidence that the Company will not collect the full amount due. If there is a decrease in the amount of the estimated loss, the write-down is reversed in a

26.4 Financial investments in subsidiaries

26.5 Financial assets and liabilities

236

ANNUAL REPORT 2017

later period. Trade and other receivables classified as non-current assets are measured at their respective amortised cost, which is determined according to the effective interest rate method. When there is evidence of impairment, the corresponding loss is recognised in the income statement.

26.5.2 Cash and cash equivalents

The amounts included in the caption “Cash and cash equivalents” represent cash, bank deposits, term deposits and others, that mature in or in less than three months and are immediately available, with an insignificant risk of change in value. For the purpose of the cash flow statement, cash and its equivalents include the amounts recorded in the financial position statement that mature within three months of the date of their contract/acquisition. These include cash and funds with credit institutions.

26.5.3 Bank loans

Loans are recognised under liabilities at their cost or amortised cost. Amortised cost is calculated according to the effective interest rate method. They are shown in current or non-current liabilities, depending on their maturity date. A loan that matures within one year is classified as a current liability and when the loan matu-res in more than one year it is treated as a non-current liability. The liabilities are derecognised when the con-tractual obligations cease to exist, namely at the time of repayment.Financial costs are calculated according to the effective interest rate method and are recorded on an accrual basis in the income statement.

26.5.4 Trade and other payables

The caption “Trade payables” and “Other payables” shows liabilities related to goods or services acquired by the company during the normal course of its busi-ness. If the payment falls due in one year or less, they are classified as current liabilities; otherwise, they are classified as non-current liabilities.

Balances from “Trade and other payables”, which are considered current liabilities, are measured at their

amortised cost, which is identical to their carrying value, i.e. at cost.

26.5.5 Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into, wich is presu-med to be equal to its acquisition cost on that date, and are subsequently re-measured at their fair value, being the gains or losses generated in the remeasurement recognized in the profit and loss, except for derivatives designated as a cash flow hedging instruments.

The fair value of derivative financial instruments is the market value of the instrument, when available, or determined by external entities based on valuations methods generally accepted in the market.

The Company uses financial instruments to hedge the interest rate risk from its financing activity. The derivative that don’t qualify for hdging in accordance with IAS 39 are registered as trading instruments.

A hedging relationship exists when:

• At the date of inception there is formal documentation of the hedging relationship;

• The hedge is expected to be highly effective;• The effectivenss of the hedge can be reliably measured;• The hedge is assessed on an ongoing basis and deter-

mined actually to have been higly effective thoughout the financial reporting period;

• In relation to the hedge of a future transaction, the transaction must be highly probable and must present an exposure to variations in cash flows that could ultimately affect net profit or loss.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement wi-thin ‘Other operating income/(expenses)’. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.

237


When a hedging instrument related to a forecast tran-saction is discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately

recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Revenue is recognised whenever it is likely that the company will obtain economic benefits that can be reliably measured.

Revenue is recognised with reference to its stage of completion as at the transaction date, based on the activities performed in the period, valued in accordance with the prices established for each service, indepen-dently of the moment of invoicing.

As a service Company and the Parent Company of a Group, the Company enters into agreements with su-ppliers that provide services across the various Group companies. Costs invoiced by suppliers directly to Luz Saúde under these agreements are entirely transferred to the subsidiaries and are recorded in the income sta-tement as a reduction of Luz Saúde’s costs.

Dividends are recognised from the moment in which the right to receive payment is granted.

The Group companies recognise their revenue and expenses on an accrual basis. Therefore, revenue and expenses are recognised when generated regardless of when they are collected or paid. Differences between

the amounts collected and paid and the corresponding expenses and revenue are reported in the statement of financial position under the captions “Other receivables” or “Other payables”, respectively.

26.6 Revenue

26.7 Accrual basis

238

ANNUAL REPORT 2017

Income tax for the financial period is recognised accor-ding to IAS 12 – Income Taxes and includes both current and deferred tax. Taxes on profits are recognised in the income statement, except when related to items directly recognised as equity, in which case they are also reported as equity.

Current taxes are those expected to be paid based on taxable income, calculated according to the tax laws in force and the tax rate approved or substantially approved in each jurisdiction.

Deferred taxes are calculated according to the liabi-lity method com base in the statement of financial position based on the reporting date, on temporary differences between the carrying amounts of assets and liabilities and their tax base using the tax rates approved or substantially approved at the reporting date And are expected to be applied when temporary differences reverse.

Deferred taxes are calculated by using the balance sheet liability method on temporary differences between the

26.9 Finance income and costsFinance income includes interest and financial discounts obtained from third parties and are recognised in the period in which they occur.

Finance costs include interest expenses and other banking expense, being recognised in the financial

period in which they occur, using the amortised cost method, through which the initial costs, commissions and stamp duty incurred with medium/long term loans are deferred for the period estimated of the loans and recognized according to the respective interest.

26.10 Income tax

26.8.1 Liabilities with holidays, subsidies and bonuses

Pursuant to Portuguese legislation, employees are currently entitled to one-month holiday and one-month holiday subsidy. This right is earned in the year prior to the year payment is made.

Under the performance assessment system in place, employees may come to earn a bonus should they attain certain goals. This right is usually earned in the year prior to the year payment is made.

Liabilities are recognised in the consolidated profit and loss in the period in which the employees earn the referred right, regardless of the date of payment. The obligation is recognised under liabilities in the caption “Other payables”.

26.8.2 Share-based payment

The Company remunerates some of its employees through a share-based payment plan, settled through equity instruments. The fair value of the services recei-ved is recognised as a cost in the profit and loss against an increase in equity, throughout the period in which employees earn those rights. The total amount to be recorded as an expense is calculated based on the fair value of the instruments granted on the granting date.

The vesting conditions are taken into consideration when estimating the number of instruments that will have acquired rights at the end of the vesting period. On each reporting date, the Company reviews the estimate for the number of instruments expected to meet the defined conditions and recognises the impact of the revision of the original estimate in the consolidated profit and loss with the corresponding effect on equity.

26.8 Employee benefits

239


carrying values of assets and liabilities and their tax base, using the tax rates approved or substantially approved as at the balance sheet date in each jurisdiction and which are expected to be applied when the temporary differences are reversed.

Deferred tax liabilities are recognised for all temporary taxable differences with the exception of non-deductible for differences arising from the initial recognition of assets and liabilities that affect neither accounting nor taxable profits, and for differences related to invest-ments in subsidiaries to the extent they are unlikely to be reversed in the future. Deferred tax assets are recognised only to the extent it is likely that future taxable profit will be able to absorb the temporary deductible differences.

LUZ SAÚDE has been included in the tax group that has Longrun SGPS, SA as dominant company for the purposes of the Special Regime of Taxation of Groups of Companies (RETGS)

Current taxes are determined based on the accounting results adjusted according to the tax law in force. Cur-rently, companies resident in Portugal are subject to a corporate income tax rate of 21%, plus a municipal surtax of up to a maximum of 1.5% of taxable profits, and a State surtax of 3% of taxable profits between

€1.5 million and €7.5 million and 5% on taxable profits between €7.5 million and €35 million, 7% on taxable profits above €35 million.

Pursuant to IAS 12, the company offsets assets and liabilities against deferred tax whenever: (i) the respec-tive company has a legally enforceable right to offset assets against current taxes and liabilities against cur-rent taxes; ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority and on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously in future periods in which deferred taxes are expected to the settled or recovered.

The payment of the income tax is made on the basis of self-assessment statements that are subject to inspections and possible adjustment by the tax autho-rities during the period of four years from the year to which they relate. The tax losses of a particular year, also subject to inspection and adjustment for a period of ten years, could be deducted from taxable profits in the following five years (six years until 2009 and four years from 2010 to 2011 inclusive) until 2013. From 2014, the deadline was changed to twelve years.

26.11 Provisions, contingent assets and contingent liabilitiesProvisions are recognised when (i) Luz Saúde has a pre-sent obligation (legal or constructive), (ii) it is likely that its payment will be required and (iii) when the amount of the obligation can be reliably estimated.

When one of these conditions is not met, the Company discloses the event as a contingent liability, unless the possibility of an outflow of funds is highly unlikely.

The amount of provisions corresponds to the present value of the obligation. The updating of the financial effect is recorded as a financial expense under the caption “Financial expenses”.

Provisions are revised on the reporting date and are adjusted to reflect the best estimate on that date.

A provision is accrued for litigation underway when the costs that will be incurred due to legal proceedings filed by third parties can be reliably estimated. The estimate is based on an assessment of the likelihood of having to make payment, based on the opinion of the Company’s legal advisors.

Contingent assets are not recognised in the financial statements, but are disclosed when it is likely they will generate a future economic benefit.

240

ANNUAL REPORT 2017

26.12 Share capital

26.13 Dividend distribution

26.14 Cash flow statement

26.15 Subsequent events

Share capital refers to the nominal value of ordinary share issued. Share premiums are recognised, when the share issue value exceeds the nominal value of each share, by the amount of the excess referred, net of the expenses related with the new shares issued.

Treasury shares acquired are valued at their acquisition price and recorded as a decrease in equity. At the time of disposal, the amount received, less any direct tran-saction costs, is recognised directly in equity.

26.12.1 Non distributable reserve

Legal Reserves

According to the commercial legislation in force, at least 5% of the result must be allocated to the constitution or reinforcement of the legal reserve until it represents at least 20% of the share capital.The legal reserve is not distributable except in the event of liquidation and can only be used to absorb losses, after all other reserves have been exhausted, or for incorporation in the share capital.

The distribution of dividends is recognised as a liability from the time they are approved by the Company’s

General Shareholders Meeting until they are paid to the shareholder.

The Cash flow statement is prepared using the direct method, by which cash inflows and outflows relative

to operating, investment and financing activities are reported.

Events that occur between the closing date and the date in which the financial statements are approved by the Board of Directors and which provide additional infor-mation about conditions that existed as at the reporting date are reflected in the financial statements. Any events

that occur after the closing date that are indicative of conditions that arose after the financial reporting date are disclosed in the notes to the financial statements, if considered material.

241


At the Extraordinary Shareholders’ Meeting held on April 13, 2018, the Company’s Shareholders decided to initia-

te proceedings for the loss of the publicly-held status, pursuant to Article 27 (1) (b) of the Securities Code.

27. Subsequent events27.1 Exit stock exchange

In March 2018, following the communication from the Competition Authority, Luz Saúde acquired control of the Idealmed Group (formed by the companies Capital Criativo Health Care Investments II, SA, Idealmed III, Health Services, SA, Imacentro - Imaging Clinic Médica do Centro, SA and Idealmed Ponte Galante, SA), which

operates the Idealmed UHC - Coimbra Hospital Unit and four outpatient clinics in the center of Coimbra, Figueira da Foz, Pombal and Cantanhede. The completion of the operation is still ongoing so only after the end of the operation will it be possible to know the investment value.

27.2 Aquisition of IDEALMED Group

The Certified Accountant

Sónia Amoedo Matos

The Board of Directors



Chen Qiyu



Tucson Dunn II

Ivo Joaquim Antão



242

ANNUAL REPORT 2017

Sociedade Anónima - Capital Social 1.335.000 euros - Inscrição n.º 178 na Ordem dos Revisores Oficiais de Contas - Inscrição N.º 20161480 na Comissão do Mercado de Valores MobiliáriosContribuinte N.º 505 988 283 - C. R. Comercial de Lisboa sob o mesmo númeroA member firm of Ernst & Young Global Limited

Ernst & YoungAudit & Associados - SROC, S.A.Avenida da República, 90-6º1600-206 LisboaPortugal

Tel: +351 217 912 000Fax: +351 217 957 586www.ey.com

(Translation from the original Portuguese language. In case of doubt , the Portuguese version prevails.)

St at ut ory and Audit or ’s Report

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OpinionWe have audited the accompanying financial statements of Luz Saúde, S.A. (the Entity), which comprise theStatement of Financial Posit ion as at December 31, 2017 (which show a total of 472,915,836 euros and a totalequity of 215,325,256 euros, including a net prof it for the year of 10,434,842 euros), and the Statement ofComprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows for the year thenended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial posit ionof Luz Saúde, S.A. as at December 31, 2017, and its financial performance and its cash flows for the year thenended in accordance with International Financial Report ing Standards as endorsed by the European Union.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs) and with other standardsand technical directives of the Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas” ). Ourresponsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of theFinancial Statements” section of our report. We are independent of the Entity in accordance with the law and wehave fulf illed other ethical requirements in accordance with the Institute of Statutory Auditors´ code of ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Key audit mat t ersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit ofthe financial statements of the current period. These matters were addressed in the context of our audit of thefinancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion onthese matters.

We describe below the key audit matters of the current period:

1. Impairment of Invest ment s in Subsidiaries and Affiliat es

Descript ion of t he most signif icant assessedrisks of material misstatement

Summary of our response to the most significant assessed risks ofmaterial misstatement

The amount presented in Investments insubsidiaries and affiliates as at December 31,2017, is approximately 434 million euros,representing 92% of the total assets of theEntity.

The possible impairment of investments insubsidiaries and affiliates measured at costand the recognit ion of provisions for possibleaddit ional responsibilit ies in subsidiaries andaffiliates with negative equity has beenconsidered a key matter because the carryingamount of those assets is significant and the

u Our procedures included:We tested the assumptions used onthe valuation models prepared by management, namely thecash flows projections, the discount rate, the inflation rate,the perpetual growth rate and the sensitivity analysis,supported by internal specialists in business valuations.

u We tested the consistency of the assumptions used in thebusiness plans with prior years, with historical data and withexternal data.

u We tested the arithmetical calculation of the model used.

u We assessed the need to book and / or to maintain provisionsfor possible additional liabilities deriving from affiliates with

243


2/4


December 31, 2017

Descript ion of t he most signif icant assessedrisks of material misstatement

Summary of our response to the most significant assessed risks ofmaterial misstatement

impairment testing process is complex,including the use of estimations andassumpt ions, namely future market andeconomic conditions, as disclosed in note 3.6of the Notes to the f inancial statements.

negative equity that may not be able to solve theircommitments.

u We focused specifically on the sensitivity analysis preparedfor the various affiliates, to ensure the disclosures included inNotes 3.6, 12 and 26.4 to the financial statements reflect theresults of the impairment tests performed.

u We confirmed the applicable disclosure requirements (IAS 36and IAS 37).

Responsibilit ies of management and supervisory board for t he f inancial st at ement sManagement is responsible for:

► the preparation and fair presentation of the f inancial statements in accordance with the internationalFinancial Report ing Standards as endorsed by the European Union;

► the preparation of the Management Report, including the Corporate Governance Report in accordancewith the laws and regulations;

► such internal control as management determines to be necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error;

► adoption of accounting policies and principles appropriate for the circumstances;

► assessment of the Entity’s ability to continue as a going concern, disclosing, as applicable, mattersrelated to going concern.

The supervisory board is responsible for overseeing the Entity’s financial report ing process.

Audit or ’s responsibilit ies for t he audit of t he f inancial st at ement sOur objectives are to obtain reasonable assurance about whether the f inancial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if , individually or in the aggregate, they could reasonably be expectedto influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professionalscepticism throughout the audit. We also:

► identify and assess the risks of material misstatement of the financial statements, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidence that issuff icient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement result ing from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

► obtain an understanding of internal control relevant to the audit in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Entity’s internal control;

► evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management;

244

ANNUAL REPORT 2017

3/4


December 31, 2017

► conclude on the appropriateness of management’s use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orcondit ions that may cast signif icant doubt on the Entity’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report tothe related disclosures in the financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or condit ions may cause the Entity to cease to continue as a going concern;

► evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the f inancial statements represent the underlying transactions and events in amanner that achieves fair presentat ion;

► communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit f indings, including any signif icant deficiencies in internalcontrol that we identify during our audit;

► from the matters communicated with those charged with governance, including the supervisory board,we determine those matters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in our auditor’s reportunless law or regulat ion precludes public disclosure about the matter; and

► provide the supervisory board with a statement that we have complied with relevant ethical requirementsregarding independence, and to communicate with them all relationships and other matters that mayreasonably be thought to bear on our independence, and where applicable, related safeguards.

Our responsibility includes the verif icat ion of the consistency of the Management Report with the financialstatements, and the verif icat ions under numbers 4 and 5 of art icle 451º of the Commercial Companies Code, aswell as the verification that the non-f inancial information was presented.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

About t he Management ReportPursuant of art icle 451º, nº 3, al. e) of the Commercial Companies Code, it is our opinion that the ManagementReport, that discloses essentially consolidated f inancial information which includes the Entity, was prepared inaccordance with laws and regulat ions in force, the information contained therein is in agreement with the auditedfinancial statements and, taking into consideration our assessment and understanding of the Entity, we have notidentified any material misstatement.

About t he non-financial st at ement provided for in t he art icle 66-B of t he CommercialCompanies Code

Pursuant of art icle 451º, nº 6, of the Commercial Companies Code, we hereby inform that the Entity included inits Annual Report the non-financial information, set forth in art icle 66-B of the Commercial Companies Code.

About t he Corporat e Governance ReportPursuant of art icle 451º, nº 4, of the Commercial Companies Code, it is our opinion that the CorporateGovernance Report includes the items required to the Entity in accordance with art icle 245º-A of SecuritiesMarket Code, no material misstatements were identif ied in the information contained therein, complying with theprovisions of paragraph c), d), f), h), i) and m) of the referred art icle.

About addit ional it ems set out in art icle 10º of Regulat ion (EU) nº 537/ 2014Pursuant of art icle 10º of Regulation (EU) nº 537/ 2014 of the European Parliament and of the Council, of 16April 2014, and in addition to the key audit matters mentioned above, we report the following:

► We were appointed as auditors of Luz Saúde, S.A. for the f irst t ime in the shareholders' general meetingheld on October 1, 2013 for the period between 2012 and 2015, with effects from 2013. We werereappointed for a second mandate in the shareholders' general meeting held on January 20, 2014 forthe period between 2014 and 2017.

245


4/4


December 31, 2017

► The Management has confirmed that they are not aware of any fraud or suspicion of fraud with amaterial impact in financial statements. In planning and executing our audit in accordance with ISA wemaintained our professional scepticism and we designed audit procedures to address the possibility of amaterial misstatement in financial statements due to fraud. As a result of our work, we have notidentified any material misstatement in the f inancial statements due to fraud.

► We confirm that our audit opinion is consistent with the addit ional report that was prepared by us andissued to the supervisory board.

► We declare that we have not provided any prohibited services pursuant to art icle 77º nº 8 of the Statuteof the Inst itute of Statutory Auditors and we remained independent of the audited Entity in conductingthe audit.

Lisbon, April 27, 2018

Ernst & Young Audit & Associados – SROC, S.A.Sociedade de Revisores Oficiais de ContasRepresented by:

(Signed)

Rui Abel Serra Mart ins - ROC nº 1119Registered with the Portuguese Securities Market Commission under license nr.º 20160731

246

ANNUAL REPORT 2017

247


07CONTACTS OF LUZ SAÚDE GROUP

250

ANNUAL REPORT 2017

07Contacts of Luz Saúde GroupHOSPITALS

Hospital da Luz Arrábida Praceta Henrique Moreira, 1504400-346 Vila Nova de GaiaT. +351 223 776 800 | F. +351 223 776 899E. [email protected] hospitaldaluz.pt/arrabida

Hospital da Luz AveiroRua do Brasil, 213800-009 AveiroT. +351 234 400 700 | F. +351 234 400 739E. [email protected] hospitaldaluz.pt/aveiro

Hospital da Luz Coimbra(Idealmed Unidade Hospitalar de Coimbra)Praceta Prof. Robalo Cordeiro, Circular Externa de Coimbra3020-479 CoimbraT. +351 239 096 900 • F. +351 239 091 300E. [email protected]

Hospital da Luz Funchal(Clínica de Santa Catarina)Rua 5 de Outubro, 115 e 1169000-216 FunchalT. +351 291 700 000 • F. +351 291 742 057E. [email protected] www.clinicasantacatarinafunchal.com

Hospital da Luz GuimarãesAlameda dos Desportos, Santiago de Candoso 4835-235 GuimarãesT. +351 253 420 300 | F. +351 253 420 309E. [email protected] hospitaldaluz.pt/guimaraes

Hospital da Luz LisboaAvenida Lusíada, 1001500-650 LisboaT. +351 217 104 400 | F. +351 217 104 409E. [email protected]/lisboa

Hospital da Luz Oeiras Rua Coro de Santo Amaro de Oeiras, 122780-379 OeirasT. +351 217 104 800 | F. +351 217 104 809E. [email protected] hospitaldaluz.pt/oeiras

Hospital da Luz Póvoa de VarzimRua D. Manuel I, 1834490-592 Póvoa de VarzimT. +351 252 690 900 | F. +351 252 615 353E. [email protected]/povoa

Hospital da Luz SetúbalEstrada Nacional 10, km 372900-722 SetúbalT. +351 265 509 200 | F. +351 265 509 399E. [email protected] hospitaldaluz.pt/setubal

Hospital da Luz Torres de Lisboa(British Hospital Torres de Lisboa)Rua Tomás da Fonseca, Edifícios B, E e F1600-209 LisboaT. +351 217 104 600 | F. +351 217 213 465E. [email protected]

Hospital da Misericórdia de ÉvoraRecolhimento Ramalho Barahona,Avenida Sanches de Miranda, 307006-805 ÉvoraT +351 266 760 630 | F +351 266 760 [email protected]

Hospital do Mar Cuidados Especializados GaiaRua Comendador Inácio de Sousa776 4430-362 Vila Nova de GaiaT. +351 220 404 440 | F. +351 220 404 449E. [email protected]/gaia

(free translation from the original version in portuguese)

251

07 CONTACTS OF LUZ SAÚDE GROUP

Hospital do Mar Cuidados Especializados LisboaRua dos Girassóis, 6 e 6A2695-458 BobadelaT. +351 219 948 660 | F. +351 219 948 679E. [email protected]/lisboa

Hospital Beatriz ÂngeloAvenida Carlos Teixeira, 32674-514 LouresT +351 219 847 200 | F +351 219 847 [email protected] www.hbeatrizangelo.pt

OUTPACIENT CLINICS

Hospital da Luz Clínica da AmadoraPraça Ernesto Melo Antunes, 1, Venteira2700-339 AmadoraT. +351 211 209 900 | F. +351 211 209 909E. [email protected]/amadora

Hospital da Luz Clínica de ÁguedaAvenida Calouste Gulbenkian, 163750-102 ÁguedaT. +351 234 611 250 | F. +351 234 611 256E. [email protected]/agueda

Hospital da Luz Clínica de AmaranteAvenida General Vitorino Laranjeira4600-018 AmaranteT. +351 255 410 200 • F. +351 255 432 383E. [email protected]/amarante

Hospital da Luz Clínica de CerveiraAvenida Manuel Jose Lebrão 4920-280 Vila Nova de CerveiraT. +351 251 706 100 | F. +351 251 795 028E. [email protected] hospitaldaluz.pt/cerveira

Hospital da Luz Clínica do Caniço (Policlínica do Caniço)Rua Dr. Francisco Peres, Edifício Alfa, R/C 9125-014 CaniçoT. +351 291 934 504E. [email protected] www.clinicasantacatarinafunchal.com

Hospital da Luz Clínica de Cantanhede(Idealmed Clínica Ponte Galante)Freixial Shopping, Loja 25 Lugar do Freixial3060-228 CantanhedeT. +351 231 027 053E. [email protected]

Hospital da Luz Clínica de Coimbra(Idealmed Clínica Solum)Praça 25 de Abril, 33030-322 CoimbraT. +351 239 780 450 | F. +351 239 780 409E. [email protected]

Hospital da Luz Clínica da Figueira da Foz(Idealmed Clínica Ponte Galante)Rua Alto do Viso, 50, R/C3080-164 Figueira da FozT. +351 233 411 410 | F. +351 233 418 944E. [email protected]

252

ANNUAL REPORT 2017

SENIOR RESIDENCES Casas da Cidade Residências Sénior CarnaxideAvenida Prof. Dr. Reinaldo dos Santos, 30 2790-470 CarnaxideT. +351 214 181 006 | F. +351 214 189 510E. [email protected] casasdacidade.pt/carnaxide

Casas da Cidade Residências Sénior LisboaAvenida Marechal Teixeira Rebelo, 20 1500-427 LisboaT. +351 217 104 700 | F. +351 217 104 709E. [email protected] casasdacidade.pt/lisboa

HOLDING

Luz SaúdeRua Carlos Alberto da Mota Pinto, 17 – 9º 1070-313 LisboaT +351 213 138 260 | F +351 213 530 [email protected] luzsaude.pt

Hospital da Luz Clínica de OiãRua Dr. Angelo Graça 3770-908 OiãT. +351 234 729 450 | F. +351 234 722 654E. [email protected] hospitaldaluz.pt/oia

Hospital da Luz Clínica de OdivelasRua Pulido Valente, 39D, Urbanização Colinas do Cruzeiro2675-671 OdivelasT. +351 217 104 540 | F. +351 217 104 549E. [email protected]/odivelas

Hospital da Luz Clínica de Pombal(Idealmed Clínica Pombal)Avenida Heróis do Ultramar, 303100-462 PombalT. +351 236 217 090| F. +351 236 217 091E. [email protected]

Hospital da Luz Clínica do PortoRua Beato Inácio Azevedo, 61/85 4100-284 PortoT. +351 226 150 600 | F. +351 226 150 690E. [email protected] hospitaldaluz.pt/porto

Hospital da Luz Clínica de Vila Real Praça Nossa Senhora da Conceição, Lote 4 5000-446 Vila RealT. +351 259 043 970 • F. +351 259 043 979E. [email protected] hospitaldaluz.pt/vilareal

253

07 CONTACTS OF LUZ SAÚDE GROUP

Date post:	29-Aug-2018
Category:	Documents
Upload:	phungkhue
View:	221 times
Download:	0 times

ANNUAL REPORT 2017 - luzsaude.pt · Luz - Centro Clínico da Amadora opened and Cliria - Clínica...

Documents